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		UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549   FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS

PURSUANT TO SECTION 13 OR 15(d) of the

SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2003

or

For the Transition Period from              to             .

Commission File Number 1-13683

DELCO REMY INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE: (765) 778-6499

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE

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

YES  x                           NO  ¨                          

INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE BEST OF REGISTRANT’S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K. x

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

YES  ¨                           NO  x                          

STATE THE AGGREGATE MARKET VALUE OF THE VOTING AND NON-VOTING COMMON EQUITY HELD BY NON-AFFILIATES COMPUTED BY REFERENCE TO THE PRICE AT WHICH THE COMMON EQUITY WAS LAST SOLD, OR THE AVERAGE BID AND ASKED PRICE OF SUCH COMMON EQUITY, AS OF THE LAST BUSINESS DAY OF THE REGISTRANT’S MOST RECENTLY COMPLETED SECOND FISCAL QUARTER. Not Applicable

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

DOCUMENTS INCORPORATED BY REFERENCE: None.

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DELCO REMY INTERNATIONAL, INC.

FORM 10-K

DECEMBER 31, 2003

TABLE OF CONTENTS

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PART I

From time to time, Delco Remy International, Inc., which we refer to as the Company, makes oral and written statements that may constitute “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995, which we refer to as the Act, or by the Securities and Exchange Commission, which we refer to as the SEC, in its rules, regulations and releases. We desire to take advantage of the “safe harbor” provisions in the Act for forward-looking statements made from time to time, including, but not limited to, the forward-looking statements relating to our future performance contained in this Form 10-K and in other filings with the SEC.

Any statements set forth below or otherwise made in writing or orally by us with regard to our expectations as to financial results and other aspects of our business may constitute forward-looking statements. These statements relate to our future plans, objectives, expectations and intentions and may be identified by words like “believe,” “expect,” “may,” “will,” “should,” “seek,” or “anticipate,” and similar expressions.

We caution readers that any such forward-looking statements are based on assumptions that we believe are reasonable, but are subject to a wide range of risks including, but not limited to, risks associated with the uncertainty of future financial results, acquisitions, additional financing requirements, development of new products and services, the effect of competitive products or pricing, pending and future legal proceedings, reliance upon or loss of a major customer, international operating and supply risks, raw material costs and availability, foreign exchange rate changes, effectiveness of restructuring and cost saving initiatives, labor relations, our substantial indebtedness and limitations under debt agreements, costs for pension and post retirement benefit plans, the effect of economic conditions and other uncertainties. Due to these uncertainties, we cannot assure readers that any forward-looking statements will prove to have been correct.

We are a leading global manufacturer and remanufacturer of aftermarket and original equipment electrical components and aftermarket powertrain/drivetrain components for automobiles, light trucks, heavy duty trucks and other heavy duty vehicles. We sell our products worldwide primarily under the “Delco Remy” brand name, first used in 1918, the “World Wide Automotive” brand name, first used in 1986, and our customers’ widely recognized private label brand names. Our products include starter motors, alternators, engines, transmissions, torque converters and fuel systems. We also provide exchange services for used components, commonly known as cores, for remanufacturers. In 2003, approximately 61% of our sales were to the aftermarket and approximately 39% were to the original equipment market. We supply numerous highly-engineered products to over 3,500 customers, principally in North America, Europe, Latin America and Asia.

We believe we are North America’s largest producer of remanufactured starters and alternators for the aftermarket. Remanufacturing is a process through which cores are disassembled into their sub-components, cleaned, inspected, combined with new subcomponents, reassembled into finished products and tested to original equipment specifications. Remanufactured products can be produced at a substantially lower cost than a traditionally manufactured product, and with substantially higher quality than an individually repaired product. Our expanding aftermarket business benefits from the non-deferrable nature of the repairs for which many of our products are used. We believe we are also North America’s largest supplier of original equipment starters for automobiles and light trucks and starters and alternators for heavy duty vehicles.

At the time of our separation from General Motors Corporation, which we refer to as GM, in August 1994, we were predominantly a North American original equipment manufacturer, with over 56% of our fiscal year 1995 sales derived from GM. Through strategic capital investments, acquisitions, joint ventures and facility and workforce rationalization, we have become a low cost, global manufacturer and remanufacturer with a more balanced business and product mix between the aftermarket and original equipment market. Since fiscal year 1995, we have increased our sales, broadened our product line, expanded our manufacturing and remanufacturing capabilities, diversified our customer base and end markets, lowered our cost base and extended our participation in international markets.

During 2003, we completed the acquisition of certain parts of Delphi Corporation’s light duty alternator business for cash payments totaling $6.1 million, including cash acquired of $3.6 million. This acquisition included 51% of Hubei Delphi Automotive Generators Company, Ltd., a manufacturer of automotive generators for the original equipment market and aftermarket based in China, which we refer to as Hubei ($3.6 million); Delphi Automotive Systems Poland ($1.5 million); and other assets ($1.0 million).

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With the completion of this acquisition, we believe we have now established the principal capabilities, geographic positions, cost base and customer base that we sought to achieve following our separation from GM nearly ten years ago. We are now well-positioned to capitalize on our achievements by increasing our sales through organic growth, pursuing cost-savings opportunities and focusing on cash flow generation.

We changed our fiscal year end to December 31, effective August 1, 2000. Prior to August 1, 2000, our fiscal year ended on July 31. References to “fiscal year” other than fiscal year 2003, 2002 and 2001 pertain to years ending July 31 of such year.

Industry Overview

In general, our business is influenced by the underlying trends in the automobile, light truck, and heavy duty truck, construction and industrial markets. However, we believe that we are reducing our dependence on the cyclical original equipment manufacturer, we refer to as OEM, business by focusing on expanding our remanufacturing capabilities and placing greater importance on our aftermarket business.

Aftermarket

The aftermarket consists of the production and sale of both new and remanufactured parts used in the maintenance and repair of automobiles, trucks and other vehicles.

Remanufacturing is a process through which cores are disassembled into their sub-components, cleaned, inspected, combined with new subcomponents, reassembled into finished products and tested to original equipment specifications. A remanufactured product can be produced at a substantially lower cost than an originally manufactured product and with substantially higher quality than an individually repaired product due to effective salvage technology methods, high volume precision manufacturing techniques and rigorous inspection and testing procedures. The ability to procure cores is critical to the remanufacturing process.

Aftermarket parts are supplied principally through three distribution channels:

We believe that the aftermarket and our opportunity in the aftermarket have been, and will continue to be, impacted by the following trends:

Recently, large retail automotive parts chains offering a broad range of new and remanufactured products have experienced rapid growth at the expense of small, independent retail and wholesale stores. Our sales to these large retail channels have increased, and we believe that further increasing our sales to retail chains offers a significant opportunity for growth. We believe retail chains generally prefer to deal with large, national suppliers capable of meeting their cost, quality, volume and service requirements.

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OEM Markets

The OEM market consists of the production and sale of new component parts for use in the manufacture of new vehicles. The OEM market includes two major classes of customers:

The OEM market has been impacted by fundamental changes in the OEMs’ sourcing strategies. OEMs are consolidating their supplier base, demanding that their suppliers provide technologically advanced product lines, greater systems engineering support and management capabilities, just-in-time sequenced delivery and lower system costs. OEMs are increasingly requiring that their preferred suppliers establish global production capabilities to meet their needs as they expand internationally and increase platform standardization across multiple markets. As OEM global alliances increase, global pricing for automotive components is becoming the norm.

OEMs continue to outsource component manufacturing in response to competitive pressures on OEMs to improve quality and reduce capital outlays, production costs, overhead and inventory levels. In addition, OEMs are increasingly purchasing integrated systems from suppliers who provide the design, engineering, manufacturing and project management support for a complete package of integrated products. By purchasing complete systems, OEMs are able to shift design, engineering and product management to fewer and more capable suppliers. Integrated systems suppliers are generally able to design, manufacture and deliver components at a lower cost than the OEMs due to:

Business Strategy

Focus on Operating Efficiency and Cash Flow Generation

We continue to pursue cost savings opportunities and to focus on generating cash flow. In 2003, we closed six manufacturing facilities and transferred production to existing lower cost facilities primarily in Mexico, South Korea and Hungary. As a result of these actions, we estimate that we will realize approximately $25.0 million in cost savings in 2004. We also intend to continue implementing lean manufacturing principles and global purchasing initiatives to provide additional opportunities to improve our operating cash flow. Over the last three years, our cash flows have been impacted by payments of $65.1 million relating to our acquisitions (excluding joint venture payments of $11.8 million). In 2004, we estimate that we will pay an additional $30.0 to $35.0 million in acquisition payments, which will satisfy substantially all our remaining obligations relating to these acquisitions. We believe our cost savings efforts, combined with organic sales growth and the payment in 2004 of substantially all our remaining contingent acquisition costs, will position us to generate improved cash flow.

Enhance our Share In the Growing Remanufacturing Market

We intend to leverage our leading position as a supplier of remanufactured components to the automotive aftermarket. Remanufactured products have significant advantages over traditionally manufactured and individually repaired products. A remanufactured product can be produced at a substantially lower cost than a traditionally manufactured product and with substantially higher quality than an individually repaired product. The use of remanufactured components for warranty and extended service repairs has increased in recent years as OEMs have sought to reduce warranty and extended service costs by using remanufactured components, which generally offer the same degree of quality and reliability as OEM products at a lower cost. This trend has also resulted in independent aftermarket customers requiring higher quality standards for remanufactured products. Remanufactured products accounted for 53% of our total sales, and 87% of our sales to the aftermarket in 2003. We plan to exploit our leading position and to strengthen our customer relationships in the remanufacturing market.

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Increase our Share in the Global Light Vehicle Original Equipment Market

Following the 2003 acquisition of Delphi Corporation’s light vehicle alternator business, we believe we have significant opportunities to expand our share in the original equipment market, particularly in the European and Asian light vehicle markets, where customers increasingly look for suppliers with both starter and alternator technology. Our manufacturing base is well-positioned to support our anticipated growth, with facilities in twelve countries and on five continents. We are in the process of developing and expanding our sales infrastructure in Europe and Asia to support additional business. We also expect to benefit from anticipated growth in Latin America, Eastern Europe and Asia Pacific, where demand for light vehicles is expected to increase at a compounded annual rate of almost 15% from 2004 to 2005 (JD Power). In 2003, we generated 7.2% of our sales from these emerging markets. Globally, light vehicle original equipment components accounted for 25% of our total sales in 2003.

Capitalize on Growth in the Heavy Duty Truck Market

We intend to capitalize on the expected growth in the original equipment market and aftermarket for heavy duty truck components. North American heavy duty truck (Class 5 through 8) production is expected to increase 61%, from 381,000 units to 614,000 units, between 2003 and 2006 based on industry forecasts (JD Power). In 2003, we launched new heavy duty alternator and starter motor products and are continuing to work to expand our truck product line to take advantage of the rebound in heavy duty truck production. We believe that the demand for original equipment heavy duty truck replacement components is expected to grow over the next few years. Original equipment heavy duty truck components accounted for 6.3% of our total sales in 2003. As the largest supplier of original equipment and aftermarket starters and alternators to the North American heavy duty truck market, we believe we are well-positioned to benefit from these positive trends.

Increase Focus on Technologically Advanced Products

We continue to produce technologically advanced products by regularly updating and enhancing our product line which helps us to compete successfully in our markets. In 2003, we launched a new family of next-generation starters and alternators. We are also in various stages of development on a number of new products including:

Products

Our product line includes a diverse range of manufactured and remanufactured products for the aftermarket and OEM markets, which we sell under the “Delco Remy” brand name, the “World Wide Automotive” brand name or under our customers’ private-label brand names. We also provide core acquisition services for third party aftermarket remanufacturers as well as our own subsidiaries. Our product line is classified into two product categories: electrical systems and powertrain/drivetrain. Third-party sales for core acquisition services are included in the “other” category.

The following table sets forth the approximate composition by product category of our revenues for the fiscal years ended December 31, 2003, 2002 and 2001*:

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Products within the electrical systems category include manufactured and remanufactured starters and alternators. Our starters and alternators are used in cars and light trucks manufactured by OEMs globally and are also used in marine and industrial applications. Additionally, we manufacture and remanufacture a full line of heavy duty starters and alternators for use primarily with large diesel engines. Most North American heavy duty truck and engine manufacturers specify our starters and alternators as part of their standard electrical system. We are North America’s largest supplier of remanufactured starters and alternators for the aftermarket. We are also North America’s largest supplier of original equipment starters for automobiles and light trucks and starters and alternators for heavy duty vehicles.

Products within the powertrain/drivetrain category include diesel and marine engines, fuel injectors, injection pumps and turbo chargers (fuel systems), transmissions, torque converters, water pumps, rack and pinions, power steering pumps, and gears.

Customers

Our principal customers include automotive and heavy duty OEMs, OEM dealer networks, leading automotive parts retail chains and warehouse distributors. Our major customers include GM, International Truck and Engine Corporation, Advance Auto Parts, DaimlerChrysler, AutoZone, Caterpillar, Ford, Delphi, PACCAR, Cummins, Volvo/Mack Trucks, Pep Boys and Mazda.

We have long-term agreements, with terms typically ranging from three to five years, to supply heavy duty starters and alternators to GM, DaimlerChrysler Commercial Trucks, PACCAR, Volvo/Mack Trucks and Cummins. Total sales to GM and related affiliates accounted for approximately 26% of our sales, of which approximately 20% were OEM sales, in 2003. No other customer accounted for more than 10% of consolidated net sales.

In connection with our separation from GM in July 1994, GM entered into long-term contracts with us to purchase 100% of its North American requirements for automotive starters (other than for Saturn and Geo) and 100% of its U.S. and Canadian requirements for heavy duty starters and alternators, at fixed prices which are scheduled to decline over the life of the contracts. GM’s obligations to purchase our automotive starters and heavy duty starters and alternators under these agreements are subject to those products remaining competitive as to price, technology and design. In fiscal year 1999, we and GM extended the terms of these agreements for us to supply automotive starting motors to August 31, 2008. We currently provide 92% of the starters for GM’s North American light vehicle production. The amendment also provides that Delco Remy America and its international operations will be the supplier of starting motors for the life of production of engines covered under these agreements. In April 2002, in connection with the extension of our exclusivity agreement with GM, we reduced our prices in accordance with the competitive clause of the original agreement. The supply agreement relating to heavy duty products terminated on July 31, 2000.

In 1994, GM also entered into a long-term contract with us to distribute exclusively our automotive aftermarket products. The market drives prices we may charge to GM under this agreement. This agreement terminates on July 31, 2009.

Distribution

Our products are distributed to our customers primarily by common carrier. However, we have an extensive distribution and logistics network to supply our global manufacturing footprint.

We employ our own direct sales force, which develops and maintains sales relationships with major North American truck fleet operators as well as our OEM, retail, warehouse, distributor and aftermarket customers. A network of field service engineers and product service engineers supplements these sales efforts.

Competition

The automotive parts market is highly competitive. Competition is based primarily on quality of products, service, delivery, technical support and price. Most OEMs and aftermarket distributors source parts from one or two suppliers and we compete with a number of companies who supply automobile manufacturers throughout the world. In the automotive market, our principal competitors include Denso, Valeo, Mitsubishi, Bosch, Visteon, Rayloc, Unit Parts, Aftermarket Technologies and Motorcar Parts & Accessories. In the heavy duty truck market, our competitors include Mitsubishi, Hitachi, Denso, Prestolite, Visteon and Bosch.

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Patents, Trademarks and Licenses

Pursuant to a Trademark License Agreement between us and GM, GM has granted us an exclusive license to use the “Delco Remy” trademark on and in connection with automotive starters and heavy duty starters and alternators until July 31, 2004, extendable indefinitely at our option upon payment of a fixed $100,000 annual licensing fee to GM. We have also been granted a perpetual, royalty-free license to use the “Remy” trademark. The “Delco Remy” and “Remy” trademarks are registered in the United States, Canada and Mexico and in most major markets worldwide. GM has agreed with us that, upon our request, GM will register the trademarks in any jurisdiction where they are not currently registered.

We have also been granted an exclusive license to use the “Delco Remy” name as a tradename and corporate name worldwide until July 31, 2004 pursuant to a Tradename License Agreement between us and GM. Our right to use “Delco” as part of our company’s name expires on July 31, 2004. The continued use of “Delco” as part of our name after this date depends on GM granting us permission to do so. In addition, GM has granted us a perpetual license to use the “Remy” name as a tradename and corporate name worldwide.

We own and/or have obtained licenses to various domestic and foreign patents and patent applications related to our products and processes. The patents expire at various times over the next 18 years. While these patents and patent applications in the aggregate are important to our competitive position, no single patent or patent application is material to us.

As part of our acquisition of Delphi’s light duty alternator business, we and Delphi Technologies, Inc., which we refer to as Delphi Technologies, entered into a license agreement dated November 30, 2002, by which we licensed from Delphi Technologies certain patents and technical information used in the manufacture and remanufacture of belt-driven automotive generators and alternators.

Purchased Materials

Principal purchased materials for our business include: aluminum castings, gray and ductile iron castings, armatures, solenoids, copper wire, injectors, electronics, steel shafts, forgings, bearings, commutators, pumps and carbon brushes. All materials are readily available from a number of suppliers, and we do not foresee any difficulty in obtaining adequate inventory supplies. We generally follow the North American industry practice of passing on to our customers the costs or benefits of fluctuation in copper and aluminum prices on an annual or semi-annual basis.

Employees

As of December 31, 2003, we employed 6,159 people, 1,559 of whom were salaried and administrative employees and 4,600 of whom were hourly employees. Approximately 2,700 of our employees are based in the United States, none of whom are unionized.

As of December 31, 2003, approximately 262 of our hourly employees at Delco Remy Hungary are affiliated with the Hungarian Steel Industry Workers Union. The agreement was signed July 17, 1996 and is perpetual, subject to termination upon three months notice from either party.

As of December 31, 2003, approximately 458 of our hourly workers at our Polish facilities are affiliated with the Intercompany Trade Union or the Intercompany Union Organization NSZZ. Agreements with these unions were signed on August 23, 2000 and are perpetual.

As of December 31, 2003, approximately 578 of our hourly employees at Delco Remy Remanufacturing de Mexico are affiliated with the Confederacion Regional Obrera Mexicana. Agreements with this union expire on February 15, 2006.

As of December 31, 2003, approximately 332 hourly employees at Delco Remy Mexico S. de R.L. de C.V. are affiliated with the Confederacion Regional Obrera Mexicana. These are not our employees, but are contracted from a service company that has union agreements expiring on January 31, 2005.

As of December 31, 2003, approximately 678 hourly employees at Remy Componentes S. de R.L. de C.V. are affiliated with the Confederacion Regional Obrera Mexicana. Of these employees, 264 are our employees and have union

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agreements that expire on February 15, 2006. The other 414 are not our employees, but are contracted from a service company that has union agreements expiring on January 31, 2005.

Our other facilities are primarily non-union. We are not aware of any current efforts to organize the employees in our other facilities. There can be no assurance that there will not be any labor union efforts to organize employees at facilities that are not currently unionized. At the present time, we believe that our relations with our employees are satisfactory.

Research and Development

Our engineering staff works independently and with OEMs to design new products, improve performance and technical features of existing products and develop methods to lower manufacturing costs. In support of our engineering efforts, we have formed technical alliances with a select number of engineering and technology firms to identify long-term engineering advances and opportunities. We are a participant in Electricore Incorporated, a consortium for advanced transportation technologies. Through this participation, we are implementing technical alliances to develop next generation motors and alternators. We are developing a family of belt driven alternator starters, which we refer to as BAS, for mild hybrid gas applications.

We obtained new business with Allison Electric Drive, a unit of GM Powertrain, for the electric machine integral to the development of the transmission used in hybrid vehicles and have begun low volume production. We have plans to expand this product line to include similar products for higher volume automotive applications.

We plan to launch an ultra-capacitor module for the delivery vehicle market. The ultra-capacitor module is an energy storage device, which eliminates jump-starts, improves battery life and improves cold start capability. This product has potential use in a variety of over the road applications.

Consistent with our strategy to introduce technologically advanced and improved products, we spent approximately $17.5 million in 2003, $15.2 million in 2002, and $15.5 million in 2001 on research and development activities. All expenditures were funded by us.

Foreign Operations

Information about our foreign operations is set forth in tables relating to geographic information in Note 17 to our consolidated financial statements, “Business Segments and Geographic Area Information” in Item 8.

Environmental Regulation

Our subsidiaries’ facilities and operations are subject to a wide variety of federal, state, local and foreign environmental laws, regulations, ordinances and directives, including those related to air emissions, wastewater discharges and chemical and hazardous waste management and disposal, which we refer to as environmental laws. Our subsidiaries’ operations also are governed by laws relating to workplace safety and worker health, primarily the Occupational Safety and Health Act, and foreign counterparts to such laws, which we refer to as employee safety laws. We believe that we and our subsidiaries’ operations are in compliance with current requirements under environmental laws and employee safety laws, except for non-compliance where the cost that might be incurred to resolve the non-compliance would not have a material adverse effect on our results of operations, business or financial condition. The nature of our and our subsidiaries’ operations, however, exposes us to the risk of liabilities or claims with respect to environmental and worker health and safety matters. There can be no assurance that such costs will not be incurred in connection with such liabilities or claims.

Based on our experience to date, we believe that the future cost of compliance with existing environmental laws (or liability for known environmental claims) will not have a material adverse effect on our business, financial condition or results of operations. However, future events, such as changes in existing environmental laws or their interpretation or the discovery of presently unknown conditions, may give rise to additional compliance costs or liabilities for the subsidiaries that could have a material adverse effect on our business, financial condition or results of operations.

Certain environmental laws hold current owners or operators of land or businesses liable for their own and for previous owners’ or operators’ releases of hazardous substances. Because of their operations, the long history of industrial uses at some of our facilities, the operations of predecessor owners or operators of certain of the businesses, and the use,

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production and release of hazardous substances at these sites, our subsidiaries are affected by such liability provisions of environmental laws. Various of our subsidiaries’ facilities have experienced in the past or are currently undergoing some level of regulatory scrutiny and are, or may become, subject to further regulatory inspections, future requests for investigation or liability for past disposal practices.

For example, Franklin Power Products, Inc. (our subsidiary) in Franklin, Indiana has been undergoing a Resource Conservation and Recovery Act (RCRA) site investigation and clean-up of volatile organic compounds in the soil and groundwater pursuant to an Environmental Protection Agency Administrative Order on Consent, which we refer to as the EPA order, issued to both Franklin Power Products and Amphenol Corporation, a prior owner of the property. Pursuant to the EPA order, Franklin Power Products and Amphenol Corporation are jointly addressing this matter. Amphenol indemnified Franklin Power Products for certain liabilities associated with the EPA order and Amphenol has satisfied and continues to satisfy the requirements of the EPA order. Based on our experience to date and the indemnities from Amphenol and the sellers of Franklin Power Products to us, we believe that future costs associated with this site will not have a material adverse effect on our results of operations, business or financial condition.

Nabco Inc.’s (our subsidiary) Marion, Michigan facility was listed on Michigan’s state list of contaminated sites since 1993 because of hazardous substances in the soils and groundwater at the facility. Based on recent sampling results submitted to the Michigan environmental authority in September 2001, Nabco believes that no further work will be required and requested that the site be removed from the state list. The Michigan environmental authority has not responded to that request. Even if the Michigan environmental authority was to require further investigation or remedial action with respect to this matter, we do not believe that costs in connection with this matter will have a material adverse effect on our results of operations, business or financial condition.

During the environmental due diligence performed in connection with the separation from GM, GM and we identified certain on-site pre-closing environmental conditions, including the presence of certain hazardous substances in the soil at the former GM Meridian, Mississippi facility and in the soil and groundwater at the former GM Anderson, Indiana facilities. At the time, GM reported the presence of these substances in the groundwater to the EPA and the Indiana Department of Environmental Management, and we understand that GM continues to be responsible for working with the EPA to resolve these issues. We have vacated one of the former GM Anderson facilities and the former GM Meridian, Mississippi facility and have ceased manufacturing at the other former GM Anderson facility. We are in the process of decommissioning the other former GM Anderson facility in preparation for its demolition and return to GM. In connection with the decommissioning, we are also investigating and remediating contamination caused by our operations. Pursuant to our agreement with GM, we are responsible for contamination we created and certain decommissioning costs, and GM is responsible for certain pre-existing contamination. We do not believe the cost to decommission and demolish the facility would have a material adverse effect on our operations, business or financial condition.

We have commenced a series of environmental, health and safety reviews to enable our subsidiaries to confirm their compliance with environmental laws and employee safety laws. The Remy Reman facilities in Mississippi and the World Wide Automotive, Inc., which we refer to as World Wide, facility in Virginia identified certain possible violations of state air laws and notified the applicable state agencies under the state voluntary audit disclosure rules. The Mississippi Department of Environmental Quality (MDEQ) issued Notices of Violation regarding two of the facilities and MDEQ and the subsidiaries have agreed to a resolution where by the subsidiaries would enter into Agreed Orders requiring the subsidiaries to pay approximately $60,000 in penalties and spend approximately $110,000 in supplemental environmental projects.

In September 2000, one of Franklin Power Products, Inc.’s Indiana facilities received a Finding of Violation and Order for Compliance from the EPA requiring the facility to correct violations of its wastewater discharge permits. Franklin Power Products, Inc. has installed waste water treatment equipment and is in compliance with the terms of the Order.

Backlog

The majority of our products are not on a backlog status.

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Seasonality

Our business is seasonal, as our major OEM customers historically have one to two week shutdowns of operations during July and December. Our sales results in the third and fourth quarters reflect the effects of these shutdowns. Our working capital requirements also are affected by seasonality, as we build inventory for the summer sales month in the aftermarket. Typically our working capital requirements are highest from April through August and the change from the highest month to the lowest month (typically December), for accounts receivable, inventory and accounts payable has averaged $40 million over the past three years. Refer to Note 20 to our consolidated financial statements in Item 8, which presents certain quarterly (unaudited) financial information.

Plant Closures and Consolidations

In 2003, we took the following restructuring and consolidation actions:

Acquisitions

In 2003, we acquired Delphi’s light vehicle alternator business for $6.1 million, including $3.6 million of acquired cash. Future royalty payments associated with this acquisition are not currently expected to exceed $5 million in the aggregate.

During 2003, we made cash payments totaling $5.9 million under contractual put agreements to purchase the remaining shares from the minority shareholders of World Wide Automotive, Inc., which we acquired in 1997. These payments increased our ownership of World Wide from 94.0% to 100.0%.

In 2003, we made cash payments totaling $5.3 million on notes issued in 2002 in connection with our acquisition of the remaining shares from the minority shareholders of Delco Remy Korea, which was acquired in 1999.

We made payments totaling $5.2 million in 2003 under contractual put agreements to purchase the remaining shares from the minority shareholder of Power Investments, Inc., which we refer to as Power, which we acquired in 1996. These payments increased our ownership percentage of Power from 93.4% to 100.0%.

In the fourth quarter of 2003, we recorded an estimated contingent earn-out liability of $13.5 million related to the acquisition of M&M Knopf Auto Parts, Inc., which we refer to as Knopf. The liability was based on the achievement of certain earnings goals by Knopf during the period August 2000 to December 2003 and is payable in 2004. This adjustment to the purchase price of Knopf resulted in a $13.5 million increase in goodwill.

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In the fourth quarter of 2003, we reversed an estimated contingent earn-out liability in the amount of $4.3 million, which had been established related to the acquisition of Mazda North American Operations, which we refer to as Mazda NA. We determined that it was unlikely that certain sales goals during the period January 2003 to December 2005 would be achieved by Mazda NA. This adjustment to the purchase price of Mazda NA resulted in a $4.3 million reduction in goodwill.

Discontinued Operations

In the first quarter of 2003, we sold two non-core businesses, Tractech, Inc., which we refer to as Tractech, and Kraftube, Inc., which we refer to as Kraftube, which were engaged in the manufacture of traction control devices and components for the air conditioning industry, respectively. Net aggregate proceeds from the sales were $30.1 million and we recorded a gain of $2.3 million. Operating results for these businesses are classified as discontinued operations in our consolidated financial statements.

In the first quarter of 2003, we completed plans to exit our contract remanufacturing operation for gas engines in Beaumont, Texas. We recorded a charge of $0.6 million. Operating results for this business are classified as discontinued operations in our consolidated financial statements.

Our world headquarters are located at 2902 Enterprise Drive, Anderson, Indiana 46013. We lease our headquarters. The following table sets forth certain information regarding manufacturing and certain other facilities operated by us as of December 31, 2003.

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