SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549

                                    FORM 10-Q
(Mark One)

/ X /  Quarterly  Report  Pursuant  to Section 13 or 15(d) of the  Securities
       Exchange Act of 1934 for the Quarterly Period Ended April 30, 1998

                                       OR

/   /  Transition  Report  Pursuant  to  Section  13 or 15(d) of the  Securities
       Exchange Act of 1934 for the Transition Period From  ____________________
       to _________________


Commission File Number             1-13683 

                        Delco Remy International, Inc. 
             (Exact name of registrant as specified in its charter)

             Delaware                                 35-1909253
--------------------------------------------------------------------------------
(State or other jurisdiction of                    (I.R.S. Employer
incorporation or organization)                   Identification Number)

 2902 Enterprise Drive, Anderson, Indiana                 46013    
--------------------------------------------------------------------------------
(Address of principal executive offices)                 (Zip Code)

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

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

     Indicate  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 the filing  requirements for
the past 90 days. 

                               Yes _X_    No ___

     Indicate the number of shares  outstanding of each of the issuer's  classes
of common stock, as of the latest practicable date:

                                         Number of common shares outstanding
             Class                              as of May 29, 1998
     Common Stock - Class A                         16,712,839
     Common Stock - Class B                          7,733,674

                                        1
<PAGE>
                          PART I. FINANCIAL INFORMATION

                              FINANCIAL STATEMENTS

                 Condensed Consolidated Statements of Operations
                 Delco Remy International, Inc. and Subsidiaries
                                    Unaudited

<TABLE>
<CAPTION>
                                                                          -----------------------------------------------------
                                                                             Three Month Period           Nine Month Period
                                                                               Ended April 30               Ended April 30
                                                                          -----------------------------------------------------
                                                                             1998          1997           1998          1997
                                                                          =====================================================
              (in thousands of dollars, except per share amounts )
<S>                                                                       <C>           <C>            <C>            <C>      
Net sales                                                                 $ 217,083     $ 177,727      $ 619,362      $ 509,717
Cost of goods sold                                                          172,349       139,639        497,287        401,681
                                                                          ---------     ---------      ---------      ---------
Gross profit                                                                 44,734        38,088        122,075        108,036
Selling, engineering, and administrative expenses                            24,461        22,713         66,627         65,782
                                                                          ---------     ---------      ---------      ---------
Operating income                                                             20,273        15,375         55,448         42,254
Interest expense                                                              9,748        10,124         30,398         28,839
                                                                          ---------     ---------      ---------      ---------

Income from continuing operations before minority interest,
     income taxes, deemed dividend on preferred stock conversion,
     and preferred dividend requirements of subsidiary                       10,525         5,251         25,050         13,415
Minority interest in income of subsidiaries                                     524           383          1,545            628
Income taxes                                                                  4,074         1,917          9,769          5,264
Deemed dividend on preferred stock conversion                                    --            --          1,639             --
Preferred dividend requirement of subsidiary                                     --           410            645          1,236
                                                                          ---------     ---------      ---------      ---------
Income from continuing operations                                             5,927         2,541         11,452          6,287
Discontinued operations:
     Loss from operations of discontinued businesses
     (net of  applicable tax benefit)                                            --           194             --            520
                                                                          ---------     ---------      ---------      ---------
Income before extraordinary items                                             5,927         2,347         11,452          5,767

Extraordinary item:
     Write-off of debt issuance costs (net of applicable tax benefit)            --            --          1,803          2,351
                                                                          ---------     ---------      ---------      ---------
Net  income                                                               $   5,927     $   2,347      $   9,649      $   3,416
                                                                          =========     =========      =========      =========


Basic Earnings Per Common Share:
     Income from continuing operations                                    $    0.25     $    0.18      $    0.70      $    0.44
     Discontinued operations                                                     --         (0.01)            --          (0.04)
     Extraordinary items                                                         --            --          (0.11)         (0.16)
                                                                          ---------     ---------      ---------      ---------
     Net income                                                           $    0.25     $    0.16      $    0.59      $    0.24
                                                                          =========     =========      =========      =========

Diluted Earnings Per Common Share:
     Income from continuing operations                                    $    0.23     $    0.15      $    0.61      $    0.37
     Discontinued operations                                                     --         (0.01)            --          (0.03)
     Extraordinary items                                                         --            --          (0.10)         (0.14)
                                                                          ---------     ---------      ---------      ---------
     Net income                                                           $    0.23     $    0.14      $    0.51      $    0.20
                                                                          =========     =========      =========      =========
</TABLE>

            See notes to condensed consolidated financial statements

                                       2
<PAGE>
                      Condensed Consolidated Balance Sheets
                 Delco Remy International, Inc. and Subsidiaries
                                    Unaudited

<TABLE>
<CAPTION>
                                                                 -------------------------
                                                                   April 30,      July 31,
                                                                     1998           1997
                                                                 =========================
                                                                 (in thousands of dollars)
<S>                                                               <C>            <C>      
                           ASSETS

Current assets:
     Cash and cash equivalents                                    $   9,127      $  10,050
     Trade accounts receivable, net                                 144,933        110,184
     Other receivables                                                8,227         13,376
     Inventories                                                    195,654        164,417
     Deferred income taxes                                           21,246         21,474
     Other current assets                                             7,053          4,643
                                                                  ---------      ---------
               Total current assets                                 386,240        324,144

Property and equipment                                              198,020        147,222
Less accumulated depreciation                                        53,357         26,858
                                                                  ---------      ---------
                                                                    144,663        120,364

Deferred financing costs                                             11,637          8,803
Goodwill (less accumulated amortization)                            110,086         86,612
Net assets held for disposal                                         23,521         25,279
Investment in affiliates                                             11,160          3,119
Other assets                                                          7,893          2,248
                                                                  ---------      ---------
               Total assets                                       $ 695,200      $ 570,569
                                                                  =========      =========

            LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Account payable                                              $  93,924      $  88,578
     Accrued restructuring charges                                   26,498         37,377
     Liabilities related to discontinued operations                   1,909          3,324
     Other liabilities and accrued expenses                          52,794         40,317
     Current portion of long-term debt                                  595            507
                                                                  ---------      ---------
                 Total current liabilities                          175,720        170,103

Long-term debt                                                      378,462        363,261
Other noncurrent liabilities                                         33,033         22,899
Minority interest in subsidiaries                                     9,299          8,032
Redeemable exchangeable preferred stock of subsidiary                    --         16,071
Stockholders' equity:
     Common Stock:
          Class A shares                                                167             88
          Class B shares                                                 77             65
     Paid-in capital                                                106,216          6,677
     Retained earnings (deficit)                                     (2,525)       (12,174)
     Cumulative translation adjustment                               (2,949)        (1,752)
     Stock purchase plan                                             (2,300)        (2,701)
                                                                  ---------      ---------

                   Total stockholders' equity                        98,686         (9,797)
                                                                  ---------      ---------

                   Total liabilities and stockholders' equity     $ 695,200      $ 570,569
                                                                  =========      =========
</TABLE>

            See notes to condensed consolidated financial statements

                                       3
<PAGE>
                 Condensed Consolidated Statements of Cash Flows
                 Delco Remy International, Inc. and Subsidiaries
                                    Unaudited

<TABLE>
<CAPTION>
                                                                                  -------------------------
                                                                                      Nine Month Period
                                                                                        Ended April 30
                                                                                  -------------------------
                                                                                     1998           1997
                                                                                  =========================
                                                                                  (in thousands of dollars)
<S>                                                                               <C>            <C>      
Operating activities:
Net income                                                                        $   9,649      $   3,416
Extraordinary items                                                                   1,803          2,351
Adjustments to reconcile net income to net cash used in operating activities:
     Depreciation and amortization                                                   12,355         15,810
     Deferred income taxes                                                            1,379           (410)
     Non-cash interest expense                                                        2,024          4,101
     Minority interest in subsidiaries                                                1,545            628
     Preferred dividend requirement of subsidiary                                       645          1,236
     Deemed dividend on preferred stock conversion                                    1,639             --
     Changes in operating assets and liabilities, net of acquisitions:
        Accounts receivable                                                         (28,962)       (30,594)
        Inventories                                                                 (17,078)        (2,986)
        Accounts payable                                                              2,518        (10,747)
        Other current assets and liabilities                                          9,791         (2,131)
        Accrued restructuring charges                                               (10,879)          (907)
        Other non-current assets and liabilities, net                                 6,396         18,713
                                                                                  ---------      ---------

Net cash used in operating activities                                                (7,175)        (1,520)

Investing activities:
Acquisitions, net of cash acquired                                                  (59,581)            --
Purchase of property and equipment                                                  (15,039)       (29,065)
Investment in affiliates                                                             (4,326)            --
                                                                                  ---------      ---------

Net cash used in investing activities                                               (78,946)       (29,065)

Financing activities:
Proceeds from issuances of long-term debt                                           145,000        140,000
Payments on long-term debt                                                         (153,500)      (112,669)
Initial public offering of common stock                                              71,944             --
Other financing activities                                                           22,951          3,258
                                                                                  ---------      ---------

Net cash provided by financing activities                                            86,395         30,589

Effect of exchange rate changes on cash                                              (1,197)            86
                                                                                  ---------      ---------

Net increase (decrease) in cash and cash equivalents                                   (923)            90
Cash and cash equivalents at beginning of period                                     10,050          3,406
                                                                                  ---------      ---------

Cash and cash equivalents at end of period                                        $   9,127      $   3,496
                                                                                  =========      =========
</TABLE>

            See notes to condensed consolidated financial statements

                                       4
<PAGE>
                         DELCO REMY INTERNATIONAL, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                   (Unaudited)
                            (in thousands of dollars)


1.   Basis of Presentation

The accompanying 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
footnotes  required by generally  accepted  accounting  principles  for complete
financial statements. In the opinion of management,  all adjustments (consisting
of normal recurring accruals)  considered necessary for a fair presentation have
been included.  Operating  results for the three- and  nine-month  periods ended
April  30,  1998  are not  necessarily  indicative  of the  results  that may be
expected for the full fiscal year.  The balance  sheet at July 31, 1997 has been
derived from the audited financial  statements at that date but does not include
all of the information and footnotes required by generally  accepted  accounting
principles for complete financial statements. For further information,  refer to
the consolidated  financial  statements and footnotes thereto for the year ended
July 31, 1997.

2.   Inventories

Inventories consist of the following:

          -----------------------------------------
                              April 30,    July 31,
                                1998         1997
          -----------------------------------------
          Raw material        $ 85,503     $ 84,583
          Work-in-process       35,073       20,168
          Finished goods        75,078       59,666
                              --------     --------
          Total               $195,654     $164,417
          =========================================

3.   Offerings

On December  22, 1997,  the Company  issued  4,000,000  shares of Class A Common
Stock in an initial  public  offering at $12.00 per share.  Also, on January 16,
1998, the Company issued an additional 600,000 shares of Class A Common Stock at
$12.00  per  share  as  a  result  of  the   underwriters'   exercise  of  their
over-allotment  option.  In addition,  on December 22, 1997,  the Company issued
$145,000  of Senior  Notes Due 2007 (the  Senior  Notes).  Net  proceeds  to the
Company from such  Offerings,  after  deduction  of  associated  expenses,  were
approximately $192,700.

On January 29, 1998, the Company consummated the exchange of its unregistered 10
5/8% Senior  Subordinated  Notes Due 2006 with  registered  debt having the same
terms. There was no cash impact from this exchange.

                                        5
<PAGE>
4.   Acquisitions

On  December  22,  1997,  the  Company  acquired  all of the  capital  stock  of
Ballantrae  Corporation  ("Ballantrae")  for $53,900,  including assumed debt, a
working capital  adjustment and fees and expenses.  Ballantrae  operates through
two subsidiaries:  Tractech,  a leading producer of traction control systems for
heavy duty original equipment  manufacturers and the aftermarket;  and Kraftube,
Inc.,  a  tubing   assembly   business   which  sells   products  to  compressor
manufacturers for commercial air conditioners and refrigeration  equipment.  The
Company  exchanged  shares of its  common  stock  with a value of  approximately
$23,000  for the  equity of  Ballantrae  and  repaid  approximately  $30,000  of
Ballantrae's  debt.  The  acquisition  was treated as a purchase for  accounting
purposes and resulted in goodwill of $24,495  which is being  amortized  over 35
years.

The unaudited pro forma  consolidated  results of operations for the nine months
ended April 30, 1998 and 1997,  assuming the acquisition had been consummated on
the first day of each such period, are as follows:

--------------------------------------------------------------------------------
                                           Nine Months Ended   Nine Months Ended
                                             April 30, 1998     April 30, 1997
--------------------------------------------------------------------------------
         Revenues                                $634,216          $587,700
         Income from continuing operations         14,810            12,894
         Net income                                13,007            10,023
--------------------------------------------------------------------------------

The pro forma  consolidated  financial  information  does not purport to present
what the Company's  consolidated  results of operations would actually have been
if the acquisition had occurred on the first day of the periods presented and is
not intended to project future results of operations.

On March 5,  1998,  the  Company  acquired  Atlantic  Reman  Limited  which is a
Canadian Ford Authorized Remanufacturer for the Maritime Provinces in Canada. It
remanufactures and distributes engines, starters, alternators and water pumps to
Ford dealers as well as General Motors and Chrysler dealers in Canada. Pro forma
consolidated  results are not presented for this acquisition  because the effect
on the Company is not material.

The Company also acquired the starter and alternator  operations of Lucas Varity
in March,  1998. Located in England,  the Lucas line of remanufactured  starters
and alternators is the market leader in the U.K.  independent  aftermarket.  Pro
forma  consolidated  results are not presented for this acquisition  because the
effect on the Company is not material.

In  addition,  in March,  1998,  the Company  acquired 37% of Sahney Paris Rohne
Ltd., an Indian remanufacturer of starters and alternators who sells principally
to the Indian market. Pro forma consolidated  results are not presented for this
acquisition because the effect on the Company is not material.

5.   Recapitalization

In  connection  with  the  above-mentioned  offerings  and  the  acquisition  of
Ballantrae,  the Company completed  several related  transactions to restructure
its  outstanding  debt and preferred stock (the  Recapitalization).  Significant
components  of the  Recapitalization,  together with the  applicable  accounting
effects were as follows:

                                        6
<PAGE>
     o    The payment of the World Note: The early  extinguishment  of the World
          Note resulted in a write-off of the unamortized debt issuance costs of
          $1,803,   net  of  income  taxes,   which  was  accounted  for  as  an
          extraordinary loss.
     o    The payment in full of the GM Acquisition Note.
     o    The exchange of the Junior  Subordinated Notes for 2,358,490 shares of
          Class A Common Stock.
     o    The conversion of the  outstanding  shares of 8% preferred  stock of a
          subsidiary  into an 8%  subordinated  debenture of a subsidiary.  This
          transaction  resulted in deemed dividend on preferred stock conversion
          of $1,639 as shown on the face of the Condensed Consolidated Statement
          of Operations.
     o    The payment in full of $11,800 principal amount of subordinated  notes
          payable to certain former stockholders of acquired subsidiaries.
     o    The  amendment of the senior credit  facility in  connection  with the
          consummation of the Offerings.
     o    Payment of certain of the Ballantrae debt assumed in the Acquisition.

6.   Share and Per Share Information

On December 17, 1997,  the Company  authorized a  16.8-to-one  stock split which
occurred  on  December  19,  1997.  All share and per  share  amounts  have been
adjusted to reflect  this split.  The basic and diluted  earnings  per share are
determined using the numerator and denominator calculated as follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
                                                                       Three-Month Period     Nine-Month Period
                                                                         Ended April 30,       Ended April 30,
-----------------------------------------------------------------------------------------------------------------
                                                                        1998       1997        1998         1997
                                                                      -------------------------------------------
<S>                                                                   <C>         <C>         <C>         <C>    
Numerator:
Income from continuing operations                                     $ 5,927     $ 2,541     $11,452     $ 6,287
Loss from operations of discontinued businesses                            --         194          --         520
Extraordinary items                                                        --          --       1,803       2,351
                                                                      -------------------------------------------
Numerator for basic and diluted earnings per share                    $ 5,927     $ 2,347     $ 9,649     $ 3,416

Denominator:
Denominator for basic earnings per share (weighted                     23,463      14,279      16,339      14,273
average shares)
Effect of dilutive securities:
    Warrants                                                            1,680       1,680       1,680       1,680
    Employee stock options                                                 62          --          24          --
    Stock purchase plan                                                   840       1,004         831         944
                                                                      -------------------------------------------
Denominator for diluted earnings per share
  (weighted average shares and assumed conversions)                    26,045      16,963      18,874      16,897
=================================================================================================================
</TABLE>

                                       7
<PAGE>

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

The Company conducts a significant portion of its business through subsidiaries.
The Senior Notes and the Senior Subordinated Notes are fully and unconditionally
guaranteed,  jointly and severally,  by certain direct and indirect subsidiaries
(the Subsidiary Guarantors). The Company owns directly or indirectly 100% of the
voting securities of each of 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 April
30, 1998 and July 31, 1997 and for the three- and nine-month periods ended April
30, 1998 and 1997.

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 each of the  Subsidiary  Guarantors  are not presented  based on
management's  determination that they do not provide additional information that
is material to investors.

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

--------------------------------------------------------------------------------
    Guarantor Subsidiaries                   Non-Guarantor Subsidiaries
--------------------------------------------------------------------------------
Delco Remy America, Inc.              Autovill RT Ltd.
Remy International, Inc.              Power Investments Canada Ltd.
Reman Holdings, Inc.                  Remy UK Limited
Nabco, Inc.                           Delco Remy International (Europe) GmbH
The A & B Group, Inc.                 Remy India Holdings, Inc.
A & B Enterprises, Inc.               Remy Korea Holdings, Inc.
Dalex, Inc.                           681287 Alberta Ltd.
A & B Cores, Inc.                     World Wide Automotive Distributors, Inc.
R & L Tool Company, Inc.              Autovill Holdings, Inc.
MCA, Inc. of Mississippi              Tractech (Ireland) Ltd.
Power Investments, Inc.               Kraftube, Inc.
Franklin Power Products, Inc.         Delco Remy U.K. Ltd.
International Fuel Systems, Inc.      Central Precision - Atlantic Reman Limited
Marine Drive Systems, Inc.
Marine Corporation of America
Powrbilt Products, Inc.
World Wide Automotive, Inc.
Ballantrae Corporation
Tractech Inc.
--------------------------------------------------------------------------------

                                        8
<PAGE>
                         Delco Remy International, Inc.
                 Condensed Consolidated Statement of Operations
                    For the Three Months Ended April 30, 1998
                            (in thousands of dollars)
<TABLE>
<CAPTION>
                                                         Delco Remy
                                                       International,
                                                            Inc.                         Non-
                                                          (Parent      Subsidiary     Guarantor
                                                       Company Only)   Guarantors    Subsidiaries      Eliminations    Consolidated
                                                       -----------------------------------------------------------------------------
<S>                                                     <C>             <C>            <C>             <C>                <C>     
Net sales                                               $     --        $220,557       $ 40,372        $(43,846)(a)       $217,083
Cost of goods sold                                            --         182,453         33,742         (43,846)(a)        172,349
                                                       -----------------------------------------------------------------------------

Gross profit                                                  --          38,104          6,630              --             44,734

Selling, engineering, and administrative expenses           (706)         22,008          3,159              --             24,461
                                                       -----------------------------------------------------------------------------
Operating income                                             706          16,096          3,471              --             20,273
Interest expense (income)                                  7,154           2,625            (31)             --              9,748
                                                       -----------------------------------------------------------------------------

Income (loss) from continuing operations
   before income taxes, preferred dividend
   requirements of subsidiary, minority
   interest and deemed dividend on preferred
   stock conversion                                       (6,448)         13,471          3,502              --             10,525
Minority interest in income of subsidiaries                   --             446             78              --                524
Equity in earnings of subsidiaries                         9,285              --             --          (9,285)(b)             --
Income tax expense (benefit)                              (3,090)          6,071          1,093              --              4,074
                                                       -----------------------------------------------------------------------------
Income from continuing operations                          5,927           6,954          2,331          (9,285)             5,927
                                                       -----------------------------------------------------------------------------

Net income                                              $  5,927        $  6,954       $  2,331        $ (9,285)          $  5,927
                                                       =============================================================================
<FN>
------------------------------
(a)  Elimination of intercompany sales and cost of sales.
(b)  Elimination of equity in net income from consolidated subsidiaries.
</FN>
</TABLE>

                                       9
<PAGE>
                         Delco Remy International, Inc.
                 Condensed Consolidated Statement of Operations
                    For the Nine Months Ended April 30, 1998
                            (in thousands of dollars)
<TABLE>
<CAPTION>
                                                       Delco Remy
                                                     International,
                                                           Inc.                             Non-
                                                         (Parent         Subsidiary      Guarantor
                                                      Company Only)      Guarantors     Subsidiaries     Eliminations   Consolidated
                                                    --------------------------------------------------------------------------------
<S>                                                     <C>              <C>             <C>             <C>              <C>      
Net sales                                               $      --        $ 633,797       $  94,312       $(108,747)(a)    $ 619,362
Cost of goods sold                                             --          526,630          79,404        (108,747)(a)      497,287
                                                    --------------------------------------------------------------------------------

Gross profit                                                   --          107,167          14,908              --          122,075

Selling, engineering, and administrative expenses             807           57,943           7,877              --           66,627
                                                    --------------------------------------------------------------------------------
Operating income (loss)                                      (807)          49,224           7,031              --           55,448
Interest expense (income)                                  17,722           12,617              59              --           30,398
                                                    --------------------------------------------------------------------------------

Income (loss) from continuing operations before
   income taxes, preferred dividend
   requirements of subsidiary, minority
   interest and deemed dividend on preferred
   stock conversion                                       (18,529)          36,607           6,972              --           25,050
Minority interest in income of subsidiaries                    --            1,390             155              --            1,545
Equity in earnings of subsidiaries                         20,350               --              --         (20,350)(b)           --
 Income tax expense (benefit)                              (7,828)          15,143           2,454              --            9,769
Deemed dividend on preferred stock conversion                  --               --              --           1,639 (c)        1,639
Preferred dividend requirement of subsidiary                   --               --              --             645 (c)          645
                                                    --------------------------------------------------------------------------------

Income from continuing operations                           9,649           20,074           4,363         (22,634)          11,452

Extraordinary item:
   Write-off of debt issuance costs
   (net of applicable income tax benefit)                      --            1,803              --              --            1,803
                                                    ================================================================================

Net income                                              $   9,649        $  18,271       $   4,363       $ (22,634)       $   9,649
                                                    ================================================================================
<FN>
----------------------
(a)  Elimination of intercompany sales and cost of sales.
(b)  Elimination of equity in net income from consolidated subsidiaries.
(c)  Recording  of  preferred  dividend  requirement  of  subsidiary  and deemed
     dividend on preferred stock conversion.
</FN>
</TABLE>

                                       10
<PAGE>
                         Delco Remy International, Inc.
                 Condensed Consolidated Statement of Operations
                    For the Three Months Ended April 30, 1997
                            (in thousands of dollars)
<TABLE>
<CAPTION>
                                                         Delco Remy
                                                       International,
                                                            Inc.                          Non-
                                                          (Parent        Subsidiary    Guarantor
                                                       Company Only)     Guarantors   Subsidiaries     Eliminations   Consolidated
                                                      ------------------------------------------------------------------------------
<S>                                                      <C>             <C>            <C>             <C>             <C>     
Net sales                                                $     --        $182,398       $ 15,989        $(20,660)(a)    $177,727
Cost of goods sold                                             --         146,594         13,705         (20,660)(a)     139,639
                                                      ------------------------------------------------------------------------------

Gross profit                                                   --          35,804          2,284              --          38,088

Selling, engineering, and administrative expenses           1,081          18,867          2,765              --          22,713
                                                      ------------------------------------------------------------------------------
Operating income (loss)                                    (1,081)         16,937           (481)             --          15,375
Interest expense                                            4,705           5,309            110              --          10,124
                                                      ------------------------------------------------------------------------------

Income (loss) from continuing operations
   before income taxes, preferred dividend
   requirements of subsidiary, minority interest           (5,786)         11,628           (591)             --           5,251
Minority interest in income (loss) of subsidiaries             --             410            (27)             --             383
Equity in earnings of subsidiaries                          5,554              --             --          (5,554)(b)          --
Income tax expense (benefit)                               (2,587)          4,428             76              --           1,917
Preferred dividend requirement of subsidiary                   --              --             --             410 (c)         410
                                                      ------------------------------------------------------------------------------

Income (loss) from continuing operations                    2,355           6,790           (640)         (5,964)          2,541

Discontinued operations:
   Loss from operations of discontinued businesses
   (net of applicable income tax benefit)                       8             186             --              --             194
                                                      ------------------------------------------------------------------------------

Net income (loss)                                        $  2,347        $  6,604       $   (640)       $ (5,964)       $  2,347
                                                      ==============================================================================

<FN>
--------------------------------
(a)  Elimination of intercompany sales and cost of sales.
(b)  Elimination of equity in net income (loss) from consolidated subsidiaries.
(c)  Recording of preferred dividend requirement of subsidiary.
</FN>
</TABLE>

                                       11
<PAGE>
                         Delco Remy International, Inc.
                 Condensed Consolidated Statement of Operations
                    For the Nine Months Ended April 30, 1997
                            (in thousands of dollars)
<TABLE>
<CAPTION>
                                                         Delco Remy
                                                       International,
                                                            Inc.                       Non-
                                                          (Parent      Subsidiary   Guarantor
                                                       Company Only)   Guarantors  Subsidiaries  Eliminations    Consolidated
                                                       ----------------------------------------------------------------------
<S>                                                     <C>            <C>           <C>            <C>            <C>     
Net sales                                               $     --       $522,751      $ 45,089       $(58,123)(a)   $509,717
Cost of goods sold                                            --        423,615        36,189        (58,123)(a)    401,681
                                                       ----------------------------------------------------------------------

Gross profit                                                  --         99,136         8,900             --        108,036

Selling, engineering, and administrative expenses          2,556         55,796         7,430             --         65,782
                                                       ----------------------------------------------------------------------
Operating income (loss)                                   (2,556)        43,340         1,470             --         42,254
Interest expense                                          14,093         14,563           183             --         28,839
                                                       ----------------------------------------------------------------------

Income (loss) from continuing operations before
  income taxes, preferred dividend
  requirements of subsidiary, minority
  interest and deemed dividend on preferred
  stock conversion                                       (16,649)        28,777         1,287             --         13,415
Minority interest in income (loss) of subsidiaries            --            655           (27)            --            628
Equity in earnings of subsidiaries                        13,753             --            --        (13,753)(b)         --
Income tax expense (benefit)                              (6,564)        11,158           670             --          5,264
Preferred dividend requirement of subsidiary                  --             --            --          1,236 (c)      1,236
                                                       ----------------------------------------------------------------------

Income from continuing operations                          3,668         16,964           644        (14,989)         6,287

Discontinued operations:
  Loss from operations of discontinued businesses
  (net of applicable income tax benefit)                      --            520             --            --            520
Extraordinary item:
  Write-off of debt issuance costs
  (net of applicable income tax benefit)                     252          2,099            --             --          2,351
                                                       ----------------------------------------------------------------------

Net income                                              $  3,416       $ 14,345      $    644       $(14,989)      $  3,416
                                                       ----------------------------------------------------------------------
<FN>
--------------------
(a)  Elimination of intercompany sales and cost of sales.
(b)  Elimination of equity in net income from consolidated subsidiaries.
(c)  Recording of preferred dividend requirement of subsidiary.
</FN>
</TABLE>

                                       12

<PAGE>
                         Delco Remy International, Inc.
                     Condensed Consolidating Balance Sheet
                                 April 30, 1998
                           (in thousands of dollars)
<TABLE>
<CAPTION>
                                                         Delco Remy
                                                       International,
                                                            Inc.                           Non-
                                                          (Parent       Subsidiary      Guarantor
                                                        Company Only)   Guarantors     Subsidiaries     Eliminations    Consolidated
                                                      ------------------------------------------------------------------------------
<S>                                                      <C>             <C>             <C>             <C>              <C>      
Assets:
Current assets:
     Cash and cash equivalents                           $      --       $     177       $   8,950       $      --        $   9,127
     Trade accounts receivable, net                             --         127,770          17,163              --          144,933
     Affiliate accounts receivable                         114,524          46,996           7,349        (168,869)(a)           --
     Other receivables                                          --           3,921           4,306              --            8,227
     Inventories                                                --         164,000          31,654              --          195,654
     Deferred income taxes                                   4,838          16,260             148              --           21,246
     Other current assets                                       --           6,526             527              --            7,053
                                                      ------------------------------------------------------------------------------
         Total current assets                              119,362         365,650          70,097        (168,869)         386,240
Property and equipment                                          20         167,505          30,495              --          198,020
Less accumulated depreciation                                  (13)        (50,645)         (2,699)             --          (53,357)
                                                      ------------------------------------------------------------------------------
                                                                 7         116,860          27,796              --          144,663
Deferred financing costs, net                                9,592           1,523             522              --           11,637
Goodwill, net                                                   --          93,121          16,965              --          110,086
Net assets held for disposal                                    --          23,521              --              --           23,521
Investment in affiliates                                   256,190              --              --        (245,030)(b)(c)    11,160
Other assets                                                 9,912          (3,164)          1,145                            7,893
                                                      ------------------------------------------------------------------------------
         Total assets                                    $ 395,063       $ 597,511       $ 116,525       $(413,899)       $ 695,200
                                                      ==============================================================================


Liabilities and shareholders' equity:
Current liabilities:
     Accounts payable                                    $     130       $  81,435       $  12,359       $      --        $  93,924
     Affiliate accounts payable                                 --         149,734          19,135        (168,869)(a)           --
     Accrued restructuring charges                              --          26,498              --              --           26,498
     Liabilities related to discontinued operations             --           1,909              --              --            1,909
     Other liabilities and accrued expenses                 (6,708)         49,817           9,685              --           52,794
     Current portion of long-term debt                          --             595              --              --              595
                                                      ------------------------------------------------------------------------------
         Total current liabilities                          (6,578)        309,988          41,179        (168,869)         175,720
Long-term debt, less current portion                       285,000          92,814             648              --          378,462
Other non-current liabilities                               15,007          18,026              --              --           33,033
Minority interest in subsidiaries                               --           7,858           1,441              --            9,299
Shareholders' equity:
     Common stock:
         Class A shares                                        167              --              --              --              167
         Class B shares                                         77              --              --              --               77
     Paid-in capital                                       106,216              --              --              --          106,216
     Subsidiary investments                                     --         154,625          66,504        (221,129)(b)           --
     Retained earnings (deficit)                            (2,526)         14,200           9,702         (23,901)(c)       (2,525)
     Cumulative translation adjustment                          --              --          (2,949)             --           (2,949)
     Stock purchase plan                                    (2,300)             --              --              --           (2,300)
                                                      ------------------------------------------------------------------------------
         Total shareholders' equity                        101,634         168,825          73,257        (245,030)          98,686
                                                      ------------------------------------------------------------------------------
         Total liabilities and shareholders' equity      $ 395,063       $ 597,511       $ 116,525       $(413,899)       $ 695,200
                                                      ==============================================================================
<FN>

-----------------------------------------------
(a)  Eliminations of intercompany receivables and payables.
(b)  Elimination of investments in subsidiaries.
(c)  Elimination of investments in subsidiaries' earnings.
</FN>
</TABLE>

                                       13
<PAGE>
                         Delco Remy International, Inc.
                      Condensed Consolidating Balance Sheet
                                  July 31, 1997
                            (in thousands of dollars)

<TABLE>
<CAPTION>
                                                         Delco Remy
                                                       International,
                                                            Inc.                          Non-
                                                          (Parent      Subsidiary      Guarantor
                                                       Company Only)   Guarantors     Subsidiaries      Eliminations   Consolidated
                                                     -------------------------------------------------------------------------------
<S>                                                     <C>             <C>             <C>             <C>               <C>      
Assets:
Current assets:
     Cash and cash equivalents                          $      --       $   1,504       $   8,546       $      --         $  10,050
     Trade accounts receivable                                 --          99,745          10,439              --           110,184
     Affiliate accounts receivable, net                        --          33,409               2         (33,411)(a)            --
     Other receivables                                         --          12,494             882              --            13,376
     Inventories                                               --         145,035          19,382              --           164,417
     Deferred income taxes                                  4,315          17,159              --              --            21,474
     Other current assets                                      --           4,163             480              --             4,643
                                                     -------------------------------------------------------------------------------
          Total current assets                              4,315         313,509          39,731         (33,411)          324,144
Property and equipment                                         20         133,769          13,433              --           147,222
Less accumulated depreciation                                 (13)        (22,353)         (4,492)             --           (26,858)
                                                     -------------------------------------------------------------------------------
                                                                7         111,416           8,941              --           120,364
Deferred financing costs                                    5,148           3,655              --              --             8,803
Goodwill, net                                                  --          76,437          10,175              --            86,612
Net assets held for disposal                                   --          25,279              --              --            25,279
Investment in affiliates                                  171,614              --              --        (168,495)(b)(c)      3,119
Other assets                                                1,953          (1,463)          1,758              --             2,248
                                                     -------------------------------------------------------------------------------
          Total assets                                  $ 183,037       $ 528,833       $  60,605       $(201,906)        $ 570,569
                                                     ===============================================================================

Liabilities and shareholders' equity:
Current Liabilities:
     Accounts payable                                   $     195       $  82,585       $   5,798       $      --         $  88,578
     Affiliate accounts payable                            15,684           6,152          11,575         (33,411)(a)            --
     Accrued restructuring charges                             --          37,377              --              --            37,377
     Liabilities related to discontinued operations            --           3,324              --              --             3,324
     Other liabilities and accrued expenses                (9,815)         44,141           5,991              --            40,317
     Current portion of long-term debt                         --             506               1              --               507
                                                     -------------------------------------------------------------------------------
          Total current liabilities                         6,064         174,085          23,365         (33,411)          170,103
Long-term debt, less current portion                      173,511         189,669              81              --           363,261
Other non-current liabilities                              11,507          11,336              56              --            22,899
Redeemable convertible preferred stock                         --          16,071              --              --            16,071
Minority interest in subsidiaries                              --           6,504           1,528              --             8,032
Shareholders' equity (deficit):
     Common stock:
          Class A shares                                       88              --              --              --                88
          Class B shares                                       65              --              --              --                65
     Paid-in capital                                        6,677              --              --              --             6,677
     Subsidiary investments                                    --         127,665          31,970        (159,635)(b)            --
     Retained earnings (deficit)                          (12,174)          3,503           5,357          (8,860)(c)       (12,174)
     Cumulative translation adjustment                         --              --          (1,752)             --            (1,752)
     Stock purchase plan                                   (2,701)             --              --              --            (2,701)
                                                     -------------------------------------------------------------------------------
          Total shareholders' equity (deficit)             (8,045)        131,168          35,575        (168,495)           (9,797)
                                                     -------------------------------------------------------------------------------
          Total liabilities and shareholders' equity    $ 183,037       $ 528,833       $  60,605       $(201,906)        $ 570,569
                                                     ===============================================================================
<FN>
----------------------------
(a)  Eliminations of intercompany receivables and payables.
(b)  Elimination of investments in subsidiaries.
(c)  Elimination of investments in subsidiaries' earnings.
</FN>
</TABLE>

                                       14
<PAGE>
                         Delco Remy International, Inc.
                 Condensed Consolidating Statement of Cash Flows
                    For the Nine Months Ended April 30, 1998
                            (in thousands of dollars)

<TABLE>
<CAPTION>
                                                          Delco Remy
                                                        International,
                                                              Inc.                         Non-
                                                            (Parent     Subsidiary      Guarantor
                                                         Company Only)  Guarantors     Subsidiaries   Eliminations   Consolidated
                                                        --------------------------------------------------------------------------
<S>                                                       <C>            <C>            <C>            <C>            <C>      
Operating Activities:
Net income                                                $   9,649      $  18,271      $   4,363      $ (22,634)     $   9,649
Extraordinary item                                               --          1,803             --             --          1,803
Adjustments to reconcile  net income to net
     cash provided by (used in) operating activities:
          Depreciation and amortization                          --         11,248          1,107             --         12,355
          Equity in earnings of subsidiaries                (20,350)            --             --         20,350 (a)         --
          Deferred income taxes                              (4,990)         7,457         (1,088)            --          1,379
          Non-cash interest expense                           1,705            319             --             --          2,024
          Minority interest in subsidiaries                      --          1,390            155             --          1,545
          Preferred dividend requirement of
            subsidiary                                           --             --             --            645 (b)        645
          Deemed dividend on preferred
            stock conversion                                     --             --             --          1,639 (b)      1,639
          Changes in operating assets and
            liabilities, net of acquisitions:
             Accounts receivable                                 --        (24,711)        (4,251)            --        (28,962)
             Inventories                                         --        (12,230)        (4,848)            --        (17,078)
             Accounts payable                                   (65)        (2,721)         5,304             --          2,518
             Intercompany accounts                         (130,208)       123,666          6,542             --             --
             Other current assets and liabilities             3,082          3,944          2,765             --          9,791
             Accrued restructuring                               --        (10,879)            --             --        (10,879)
             Other non-current assets and
               liabilities, net                              (4,924)        11,992           (672)            --          6,396
                                                        --------------------------------------------------------------------------
Net cash (used in) provided by operating activities        (146,101)       129,549          9,377             --         (7,175)

Investing activities:
Acquisitions, net of cash acquired                          (58,217)            --         (1,364)            --        (59,581)
Purchase of property and equipment                               --         (8,641)        (6,398)            --        (15,039)
Investments in affiliates                                    (4,326)            --             --             --         (4,326)
                                                        --------------------------------------------------------------------------
Net cash used in investing activities                       (62,543)        (8,641)        (7,762)            --        (78,946)

Financing activities:

Proceeds from issurance of long term debt                   145,000             --             --             --        145,000
Payments on long-term debt                                   (8,300)      (145,186)           (14)            --       (153,500)
Proceeds from initial public offering                        71,944             --             --             --         71,944
Other financing activities                                       --         22,951             --             --         22,951
                                                        --------------------------------------------------------------------------
Net cash provided by (used in) financing activities         208,644       (122,235)           (14)            --         86,395

Effect of exhange rate changes on cash                           --             --         (1,197)            --         (1,197)
                                                        --------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents             --         (1,327)           404             --           (923)

Cash and cash equivalents at beginning of period                 --          1,504          8,546             --         10,050
                                                        --------------------------------------------------------------------------
Cash and cash equivalents at end of period                $      --      $     177      $   8,950      $      --      $   9,127
                                                        ==========================================================================
<FN>
----------------------------------
(a)  Elimination of equity in earnings of subsidiary.
(b)  Recording  of  preferred  dividend  requirement  of  subsidiary  and deemed
     dividend on preferred stock conversion.
</FN>
</TABLE>

                                       15
<PAGE>
                         Delco Remy International, Inc.
                 Condensed Consolidating Statement of Cash Flows
                    For the Nine Months Ended April 30, 1998
                            (in thousands of dollars)
<TABLE>
<CAPTION>
                                                        Delco Remy
                                                      International,
                                                            Inc.                          Non-
                                                          (Parent      Subsidiary      Guarantor
                                                       Company Only)   Guarantors    Subsidiaries    Eliminations   Consolidated
                                                      ----------------------------------------------------------------------------
<S>                                                      <C>            <C>            <C>            <C>            <C>      
Operating Activities:
Net income                                               $   3,416      $  14,345      $     644      $ (14,989)     $   3,416
Extraordinary item                                             252          2,099             --             --          2,351
Adjustments to reconcile  net income to net cash
  provided by (used in) operating activities:
     Depreciation and amortization                              --         15,855            (45)            --         15,810
     Equity in earnings of subsidiaries                    (13,753)            --             --         13,753 (a)         --
     Deferred income taxes                                   7,614         (7,065)          (959)            --           (410)
     Non-cash interest expense                               1,721          2,380             --             --          4,101
     Minority interest in subsidiaries                          --            655            (27)            --            628
     Preferred dividend requirement of
        subsidiary                                              --             --             --          1,236 (b)      1,236
     Changes in operating assets and
        liabilities, net of acquisitions:
             Accounts receivable                                --        (28,582)        (2,012)            --        (30,594)
             Inventories                                        --         (1,194)        (1,792)            --         (2,986)
             Accounts payable                                  (67)       (12,567)         1,887             --        (10,747)
             Intercompany accounts                        (103,690)       103,563            127             --             --
             Other current assets and liabilities           (5,056)         2,884             41             --         (2,131)
             Accrued restructuring                              --           (907)            --             --           (907)
             Other non-current assets and
               liabilities, net                            (14,505)        30,763          2,455             --         18,713
                                                      ----------------------------------------------------------------------------
Net cash provided by (used in) operating activities       (124,068)       122,229            319             --         (1,520)

Investing activities:
Purchasing of property and equipment                            --        (24,566)        (4,499)            --        (29,065)
                                                      ----------------------------------------------------------------------------
Net cash used in investing activities                           --        (24,566)        (4,499)            --        (29,065)

Financing activities:

Proceeds from issurance of long term debt                  140,000             --             --             --        140,000
Payments on long term debt                                 (16,000)       (96,669)            --             --       (112,669)
Other financing activities                                      --          3,170             88             --          3,258
                                                      ----------------------------------------------------------------------------
Net cash provided by (used in) financing activities        124,000        (93,499)            88             --         30,589

Effect of exhange rate changes on cash                          --             --             86             --             86
                                                      ----------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents           (68)         4,164         (4,006)            --             90

Cash and cash equivalents at beginning  of period               68          1,434          1,904             --          3,406
                                                      ----------------------------------------------------------------------------
Cash and cash equivalents at end of period               $      --      $   5,598      $  (2,102)     $      --      $   3,496
                                                      ============================================================================
<FN>
------------------
(a)  Elimination of equity in earnings of subsidiary.
(b)  Recording of preferred dividend requirement of subsidiary.
</FN>
</TABLE>

                                       16
<PAGE>
                                     ITEM 2

                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

<TABLE>
<CAPTION>
Results of Operations:

                                                           Three Month Period                         Nine Month Period
                                                             Ended April 30                            Ended April 30
                                                --------------------------------------  ----------------------------------------
                                                        1998                1997                 1998                 1997
                                                ------------------ -------------------  -------------------- -------------------
                                                 Amount       %      Amount        %      Amount       %       Amount        %
                                                ================== ===================  ==================== ===================
                                                                (in thousands of dollars, except per share amounts )

<S>                                             <C>        <C>      <C>         <C>      <C>         <C>      <C>         <C>   
Net sales                                       $217,083   100.0%   $177,727    100.0%   $619,362    100.0%   $509,717    100.0%

Cost of goods sold                               172,349    79.4%    139,639     78.6%    497,287     80.3%    401,681     78.8%
                                                ------------------ -------------------  -------------------- -------------------

Gross profit                                      44,734    20.6%     38,088     21.4%    122,075     19.7%    108,036     21.2%

Selling, engineering, and administrative          24,461    11.3%     22,713     12.8%     66,627     10.8%     65,782     12.9%
                                                ------------------ -------------------  -------------------- -------------------

Operating income                                  20,273     9.3%     15,375      8.7%     55,448      9.0%     42,254      8.3%

Interest expense                                   9,748     4.5%     10,124      5.7%     30,398      4.9%     28,839      5.7%

Minority interest in income of subsidiaries          524     0.2%        383      0.2%      1,545      0.2%        628      0.1%

Income taxes                                       4,074     1.9%      1,917      1.1%      9,769      1.6%      5,264      1.0%

Deemed dividend on preferred stock conversion         --                  --                1,639                   --

Preferred dividend requirement of subsidiary          --                 410      0.2%        645      0.1%      1,236      0.2%
                                                ------------------ -------------------  -------------------- -------------------

Income from continuing operations                  5,927     2.7%      2,541      1.4%     11,452      1.8%      6,287      1.2%

Discontinued operations:
  Loss from discontinued businesses
  (net of  applicable tax benefit)                    --                 194      0.1%         --      0.0%        520      0.1%
Extraordinary item:
  Write-off of debt issuance costs net of tax         --                  --                1,803                2,351
                                                ------------------ -------------------  -------------------- -------------------

Net  income                                      $ 5,927     2.7%    $ 2,347      1.3%    $ 9,649      1.6%    $ 3,416      0.7%
                                                ================== ===================  ==================== ===================


Adjusted net income
  Net income                                     $ 5,927             $ 2,347              $ 9,649              $ 3,416
  Non-recurring deemed dividend on preferred
    stock conversion   (A)                            --                  --                1,639                   --
  Loss from discontinued operations                   --                 194                   --                  520
  Extraordinary items                                 --                  --                1,803                2,351
                                                 -------             -------             --------              -------
  Adjusted net income                            $ 5,927             $ 2,541             $ 13,091              $ 6,287
                                                 =======             =======             ========              =======

Adjusted earnings per share
  Adjusted net income                            $  0.23             $  0.10             $   0.50              $  0.24

  Adjusted weighted shares outstanding (B)        26,087              26,087               26,087               26,087

<FN>

Notes:

(A)  Non-recurring, non-cash charge resulting from the offerings.

(B)  Adjusted weighted shares  outstanding  assumes the exercise of all warrants
     and all  shares  outstanding  at April 30,  1998 were  outstanding  for all
     periods.
</FN>
</TABLE>

                                       17
<PAGE>
Three Months Ended April 30, 1998 Compared to Three Months Ended April 30, 1997

     Net Sales Net sales were $217.1 for the three  months ended April 30, 1998,
an increase of $39.4, or 22.2%,  from $177.7 for the comparable  period of 1997.
Part of the increase resulted from the inclusion of World Wide and Ballantrae in
the amount of $28.3.  Additionally a strong market for heavy duty OEM electrical
products as well as automotive OEM demand from General Motors contributed to the
net sales increase.

     Gross  Profit  Gross  profit was $44.7 for the three months ended April 30,
1998, an increase of $6.6,  or 17.3%,  from $38.1 for the same period last year.
The increase was attributable to the inclusion of World Wide  Automotive,  which
was purchased in May, 1997 and Ballantrae, purchased in December, 1997. If World
Wide and Ballantrae  had not been included,  the Gross Profit percent would have
been  20.3%,  or  about a 1.1  percentage  point  decrease  from  21.4%  for the
comparable period in 1997. The primary factors  contributing to this change were
start-up costs for new focus factories and the reclassification of certain costs
included in SE&A in the prior year but charged to cost of sales in fiscal  1998.
These charges were  partially  offset by continued  strong OEM volume as well as
cost reductions in the focus factories.

     Selling,  Engineering and Administrative Expenses Selling,  engineering and
administrative  (SE&A)  expenses were $24.5 for the three months ended April 30,
1998, an increase of $1.8, or 7.9%,  from $22.7 for the prior year. As a percent
of net sales,  SE&A  expenses  were  reduced to 11.3% for the three months ended
April 30, 1998 from 12.8% for the  comparable  period of 1997.  The  increase in
SE&A  expense was  attributable  to the  addition  of World Wide and  Ballantrae
offset by the  reclassification  of certain  SE&A  expenses  to cost of sales as
noted above.

     Operating  Income  Operating  income was $20.3 for the three  months  ended
April 30,  1998,  an  increase of $4.9 from $15.4 for the  comparable  period of
1997. As a percentage of net sales,  operating  income increased to 9.3% for the
three  months  ended  April 30, 1998 from 8.7% for the same period of last year.
The increase in operating  income was  primarily  the result of the inclusion of
World Wide Automotive and Ballantrae in the current period.  Operating income as
a percent of net sales,  excluding  World Wide and  Ballantrae  was 9.1% for the
three  months  ended  April 30, 1998  compared  to 8.7% for the prior year.  The
increase was due to the  additional  volume and cost  improvements  as discussed
above.

     Interest Expense Interest expense for the three months ended April 30, 1998
was $9.7,  a decrease of $0.4,  or 4.0%,  compared  to $10.1 for the  comparable
period of 1997. The reduction in interest  expense is primarily  attributable to
the  recapitalization of the Company in December 1997. At that time, the Company
raised  $51.3  million with an initial  public  offering of its common stock and
used the funds to repay debt. Concurrently with the initial public offering, the
Company  issued $145 million 8 5/8% senior notes to  refinance  higher  interest
rate debt.

     Income  Taxes  Income  taxes for the three months ended April 30, 1998 were
$4.1 and $1.9 for the same  period of 1997.  The  Company's  effective  tax rate
varies  between 39% to 40%,  based on income levels and other factors  involving
the states and countries in which the company does business.

                                       18
<PAGE>

     Loss from Discontinued Operations While there was no loss from discontinued
operations  in 1998,  the  Company  did incur  such a loss of $0.2 for the three
months  ended  April 30,  1997  relating  to the  Company's  Powder  Metal Forge
Business (PMF).

     Net Income Net income was $5.9 for the three  months  ended April 30, 1998,
an increase of $3.6,  from the $2.3 reported for the comparable  period of 1997.
The increase in net income was  principally the result of the inclusion of World
Wide and  Ballantrae  partially  offset by  start-up  costs at the two new focus
factories.

Nine Months Ended April 30, 1998 Compared to Nine Months Ended April 30, 1997

     Net Sales Net sales were $619.4 for the nine months  ended April 30,  1998,
an increase of $109.7,  or 21.5%,  from $509.7 for the same period of 1997.  The
increase resulted from the inclusion of World Wide and Ballantrae's net sales of
$63.5. The sales  improvement was attributable to the acquisitions of World Wide
and  Ballantrae  and gains in the  Powertrain  /  Drivetrain  operations  of the
Company's  aftermarket  business.  Additionally,  the Company experienced strong
demand from the heavy duty OEM market and increased GM volume compared to 1997.

     Gross  Profit  Gross  profit was $122.1 for the nine months ended April 30,
1998,  an increase  of $14.1,  or 13.1%,  from $108.0 for the nine months  ended
April 30,  1997.  As a  percentage  of net sales,  gross profit was lower by 1.5
percentage  points for the nine  months  ended April 30, 1998 from 21.2% for the
comparable period of 1997. This change was primarily  attributable to a shift in
aftermarket  sales  volume from higher  margin  heavy duty to lower margin light
duty product lines,  in addition to  reclassification  of certain  expenses from
SE&A to  overhead  and the  startup  costs  associated  with the four new  focus
factories.

     Selling,  Engineering and Administrative  Expenses SE&A expenses were $66.6
for the nine months ended April 30,  1998,  an increase of $0.8,  or 1.2%,  from
$65.8 for the prior year.  As a percentage  of net sales,  SE&A expenses fell to
10.8% for the nine months  ended  April 30,  1998 from 12.9% for the  comparable
period  of  1997.  The  reduction  in  expenses  occurred  principally  from the
reclassification  of certain expenses to cost of sales,  partially offset by the
inclusion of World Wide and Ballantrae in the current period.

     Operating Income Operating income was $55.4 for the nine months ended April
30, 1998,  an increase of $13.1,  or 31.0%,  from $42.3 for the same period last
year. The improvement in operating income reflects the acquisition of World Wide
and  Ballantrae  in the  current  period,  as well as the higher  volume and the
impact of the relocation to focus factories discussed above. Operating income as
a percentage of net sales  excluding  World Wide and Ballantrae was 8.9% for the
nine months ended April 30, 1998,  compared to 8.3% in the comparable  period of
1997.

     Interest  Expense Interest expense for the nine months ended April 30, 1998
was $30.4,  an increase of $1.6, or 5.6%,  compared to $28.8 for the  comparable
period of 1997. The increase was primarily due to the  additional  debt incurred
to finance the  acquisitions of World Wide and  Ballantrae.  The additional debt
was partially offset by the recapitalization initiatives in December, 1997.

     Income Taxes Income taxes for the nine months ended April 30, 1998 of $9.8,
and $5.3 for the  comparable  period of 1997,  represent  effective tax rates of
39.2% and 39.6%, respectively.

                                       19

<PAGE>

     Non-recurring  Deemed Dividend on Preferred Stock  Conversion.  In December
1997,  a  deemed  dividend  of a  subsidiary  arose  from  the  exchange  of the
redeemable exchangeable preferred stock of subsidiary for the excess of the fair
value of the 8% Subordinated Debenture over the carrying value of the redeemable
exchangeable  preferred stock of subsidiary  resulting in a non-recurring charge
of $1.6 for the nine month period ending April 30, 1998.

     Loss from Discontinued Operations While there was no loss from discontinued
operations  in 1998,  the  Company  did  incur  such a loss of $0.5 for the same
period of 1997. The loss relates to the Company's PMF business.

     Write Off of Debt Issuance Costs In December 1997, certain debt was retired
out of the proceeds from the issuance of the senior notes and the initial public
offering of stock.  Unamortized  issuance  costs,  net of income taxes,  of $1.8
relating to the retired  debt was  written  off in the nine month  period  ended
April 30,  1998.  In August  1996,  certain debt was retired out of the proceeds
from the 10 5/8% senior subordinated notes due 2006. Unamortized issuance costs,
net of income taxes, of $2.4 relating to the retired debt was written off in the
nine month period ended April 30, 1997.

     Net Income Net income was $9.6 for the nine months ended April 30, 1998, an
increase of $6.2,  from $3.4 for the  comparable  period of 1997.  Adjusted  net
income  before  non-recurring  charges was $13.1 for the nine months ended April
30, 1998 compared to $6.3 for the same period last year.

Liquidity and Capital Resources

     The  Company's  liquidity  needs include  required  debt  service,  working
capital needs and the funding of capital  expenditures.  The Company anticipates
lower working  capital  requirements  from a reduction in the inventory that was
increased to provide for the  relocation  to the focus  factories as well as the
shut down of the Meridian, Mississippi and Anderson, Indiana OEM facilities.

     Interest   payments  under  the  Company's   indebtedness  will  result  in
significant liquidity requirements for the Company.

     Cash interest expense for the nine months ended April 30, 1998 and the nine
months ended April 30, 1997 was $27.1 and $22.3, respectively. Non-cash interest
accrued  during the nine months  ended April 30, 1998 and the nine months  ended
April 30,1997 was $3.3 and $6.5, respectively, or 10.8% and 22.5%, respectively,
of total  interest  expense.  The Company has no  significant  requirements  for
principal payments until the year 2006.

     The  Company's  capital  expenditures  were $15.0 for the nine months ended
April 30, 1998, a reduction of $14.1 from the $29.1 reported for the same period
last year. The Company has budgeted capital  expenditures of approximately  $9.0
for the  remainder of fiscal year 1998.  Planned  capital  expenditures  consist
primarily of production  equipment for the Company's new focus  factories,  cost
reduction and quality initiatives, as well as upgrades in machinery,  technology
and environmental compliance.

                                       20

<PAGE>

     The Company's principal sources of cash to fund its liquidity needs will be
net cash from  operating  activities  and  borrowings  under the  Senior  Credit
Facility.  The Senior Credit Facility  provides $180.0 of revolving loans. As of
April 30, 1998 there were $48.3 in borrowings  outstanding,  net of cash,  under
the Senior Credit Facility.

     The  Company's  initial  public  offering of 4.6 million  shares of Class A
Common Stock in December 1997 and January 1998  generated net proceeds of $51.3.
The Company  also issued 8 5/8% Senior  Subordinated  Notes with net proceeds of
$141.4 in December  1997.  These  proceeds were used to pay off debt with higher
interest  rates and less  favorable  terms.  On April 30, 1998 the debt to total
capitalization of the Company was 77.8% as compared to 92.5% on April 30, 1997.

     The Company believes that cash generated from operations, together with the
amounts available under the Senior Credit Facility, will be adequate to meet its
debt service  requirements,  capital  expenditures and working capital needs for
the foreseeable  future,  although no assurance can be given in this regard. The
Company's  future  operating  performance  and  ability to service,  extend,  or
refinance its indebtedness will be subject to future economic  conditions and to
financial, business and other factors that are beyond the Company's control.

Seasonality

     The Company's business is moderately  seasonal,  as its major OEM customers
historically  have one- to two-week  summer  shutdowns of operations  during the
fourth fiscal quarter. In addition,  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 second and fourth quarter results reflect
the effects of these shutdowns.

Year 2000

     The  Company  has  developed  a plan to  modify  the  existing  information
technology to recognize the year 2000 and has begun converting its critical data
processing systems. The Company currently expect the project to be substantially
complete by early  calendar year 1999.  The estimated cost of this plan includes
internal  costs,  but  excludes  the cost to upgrade and replace  systems in the
normal  course of  business.  The Company does not expect this project to have a
material effect on operations.

Effects of Inflation

     The Company believes that the relatively  moderate  inflation over the last
few  years  has  not had a  significant  impact  on the  Company's  revenues  or
profitability  and that it has been able to offset the effects of  inflation  by
increasing  prices or by realizing  improvements  in operating  efficiency.  The
Company  has  provisions  in many of its  contracts  which  provide for the pass
through of  fluctuations  in the price of certain raw materials,  such as copper
and aluminum.



                                       21
<PAGE>

Foreign Sales

     Approximately  20.0% of the  Company's net sales is 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.

Forward-Looking Statements

     Statements  in  this  Form  10 Q,  which  are  not  historical  facts,  are
forward-looking   statements  that  involve  certain  risks  and  uncertainties,
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  detailed in the Company's
other filings with the Securities and Exchange Commission.


                                       22
<PAGE>

                           PART II. OTHER INFORMATION


Item 1.   Legal Proceedings.

          None

Item 2.   Changes in Securities.

          None

Item 3.   Defaults Upon Senior Securities.

          None

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

          None

Item 5.   Other Information.

          None

Item 6.   Exhibits and Reports on Form 8-K.

          (a) Reports on Form 8-K. The Company has not filed any reports on Form
          8-K during the quarterly period ended April 30, 1998.



                                       23
<PAGE>
                                   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.


                                           DELCO REMY INTERNATIONAL, INC.
                                           (Registrant)




Date:    June 12, 1998                      By: /s/ David L. Harbert
                                                 David L. Harbert
                                                 Executive Vice President and
                                                 Chief Financial Officer





Date:    June 12, 1998                      By:  /s/ David E. Stoll
                                                  David E. Stoll
                                                  Vice President and Controller
                                                  Principal Accounting Officer



                                       24