Form 10-Q REMY INTERNATIONAL, INC. For: Mar 31

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May 6, 2015 5:34 PM EDT

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

 
 
Form 10-Q

 
x
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the quarterly period ended March 31, 2015
OR
o
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the transition period from          to          .
 

Commission File No. 001-13683
 
Remy International, Inc.
(Exact name of registrant as specified in its charter)
 
Delaware
 
47-1744351
(State or other jurisdiction
of incorporation or organization) 
 
(I.R.S. Employer
Identification Number)

 
600 Corporation Drive, Pendleton, IN 46064
(Address of principal executive offices, including zip code)
 
 
(765) 778-6499
(Registrant's telephone number, including area code)
 
 
Not applicable
(Former name, former address or former fiscal year, if changed since last report)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x     No o 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x     No o 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer ¨
Accelerated filer x
Non-accelerated filer ¨
Smaller reporting company o
 
 
(Do not check if a smaller reporting company)
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o     No x
As of April 30, 2015, there were 32,229,940 shares of the Registrant's common stock outstanding.
 




Table of contents
 



1

PART I - Financial Information
Item 1. Financial Statements
Remy International, Inc.
Consolidated balance sheets
 
March 31,


December 31,

(In thousands, except share information)
2015


2014

Assets:
 (unaudited)



Current assets:
 


 

Cash and cash equivalents
$
87,309


$
84,885

Trade accounts receivable (less allowances of $2,000 and $1,519)
232,486


210,356

Other receivables
13,758


16,692

Inventories
186,005


164,143

Deferred income taxes
33,069


42,308

Prepaid expenses and other current assets
15,673


11,865

Total current assets
568,300


530,249







Property, plant and equipment
228,203


226,073

Less accumulated depreciation and amortization
(66,989
)

(61,615
)
Property, plant and equipment, net
161,214


164,458






Deferred financing costs, net of amortization
1,418


1,471

Goodwill
263,491


259,586

Intangibles, net
290,604


298,023

Other noncurrent assets
47,599


65,309

Total assets
$
1,332,626


$
1,319,096





Liabilities and Equity:
 

 
Current liabilities:
 

 
Short-term debt
$
4,810


$
7,761

Current maturities of long-term debt
3,500


3,509

Accounts payable
186,326


177,333

Accrued interest
105


94

Accrued restructuring
277


331

Other current liabilities and accrued expenses
109,010


128,509

Total current liabilities
304,028


317,537







Long-term debt, net of current maturities
322,994


298,295

Postretirement benefits other than pensions
1,422


1,484

Accrued pension benefits
33,597


34,267

Deferred income taxes
51,986


54,783

Other noncurrent liabilities
27,123


26,483







Equity:
 


 

Common stock, Par value of $0.0001; 32,236,050 shares outstanding at March 31, 2015, and 32,201,086 shares outstanding at December 31, 2014
3


3

Treasury stock, at cost; 160,063 treasury shares at March 31, 2015, and no treasury shares at December 31, 2014
(1,097
)

—

Additional paid-in capital
597,101


595,627

Retained earnings
13,457


—

Accumulated other comprehensive loss
(17,988
)

(9,383
)
Total Remy International, Inc. stockholders' equity
591,476


586,247

Total liabilities and equity
$
1,332,626


$
1,319,096

See accompanying notes to unaudited condensed consolidated financial statements.


2

Remy International, Inc.
Consolidated statements of operations
(Unaudited)
 

 
Three months ended March 31,
 
(In thousands, except per share amounts)
 
2015


2014


 
Net sales
 
$
303,411

 
$
306,005

Cost of goods sold
 
241,409

 
259,654

Gross profit
 
62,002

 
46,351

Selling, general, and administrative expenses
 
33,420

 
32,931

Restructuring and other charges
 
73

 
314

Operating income
 
28,509

 
13,106

Interest expense–net
 
5,011

 
5,254

Income before income taxes
 
23,498

 
7,852

Income tax expense
 
6,928

 
2,908

Net income
 
16,570


4,944


 
 
 
 
Basic earnings per share:
 
 
 
 
Earnings per share
 
$
0.52

 
$
0.16

Weighted average shares outstanding
 
31,844

 
31,652

Diluted earnings per share:
 


 


Earnings per share
 
$
0.52

 
$
0.16

Weighted average shares outstanding
 
31,946

 
31,823

Dividends declared per common share
 
$
0.10

 
$
0.10

See accompanying notes to unaudited condensed consolidated financial statements.

















3

Remy International, Inc.
Consolidated statements of comprehensive income (loss)
(Unaudited)
 
 
Three months ended March 31,
 
(In thousands)
 
2015


2014

 
 
 
 
 
Net income
 
$
16,570

 
$
4,944

Other comprehensive income (loss):
 
 
 
 
Foreign currency translation adjustments
 
(7,993
)
 
797

Currency forward contracts, net of tax
 
817

 
(1,522
)
Commodity contracts, net of tax
 
(920
)
 
(1,592
)
Interest rate swap contract, net of tax
 
(429
)
 
(281
)
Employee benefit plans, net of tax
 
(80
)
 
(363
)
Total other comprehensive income (loss), net of tax
 
(8,605
)
 
(2,961
)
Comprehensive income
 
$
7,965

 
$
1,983

See accompanying notes to unaudited condensed consolidated financial statements.































4

Remy International, Inc.
Consolidated statements of cash flows
(Unaudited)
 
Three months ended March 31,
 
(In thousands)
2015


2014

Cash flows from operating activities:



Net income
$
16,570


$
4,944

Adjustments to reconcile net income to cash provided by (used in) operating activities:





Depreciation and amortization
17,037


18,057

Stock-based compensation
1,316


1,219

Deferred income taxes
5,744


(2,238
)
Accrued pension and postretirement benefits, net
(539
)

(1,109
)
Restructuring and other charges
73


314

Cash payments for restructuring charges
(127
)

(1,056
)
Other
757


187

Changes in operating assets and liabilities, net of restructuring charges:



 

Accounts receivable
(15,539
)

(38,409
)
Inventories
(11,746
)

(5,449
)
Accounts payable
6,455


19,582

Other current assets and liabilities, net
(25,028
)

(3,277
)
Other noncurrent assets and liabilities, net
17,258


(2,204
)
Net cash provided by (used in) operating activities
12,231


(9,439
)




Cash flows from investing activities:



Purchases of property, plant and equipment
(5,382
)

(6,513
)
Net proceeds on sale of assets
10


39

Acquisition of Maval Manufacturing, Inc.
(22,000
)

—

Acquisition of USA Industries, Inc., net of cash acquired of $109
—


(40,391
)
Net cash used in investing activities
(27,372
)

(46,865
)






Cash flows from financing activities:



 

Change in short-term debt
(2,915
)

2,934

Proceeds from borrowings on Asset-Based Revolving Credit Facility
79,250


—

Payments made on Asset-Based Revolving Credit Facility
(53,700
)

—

Payments made on long-term debt, including capital leases
(874
)

(844
)
Dividend payments on common stock
(3,305
)

(3,397
)
Purchase of treasury stock
(1,097
)

(2,504
)
Parent company net investment
—


357

Other
1,610


1,142

Net cash provided by (used in) financing activities
18,969


(2,312
)






Effect of exchange rate changes on cash and cash equivalents
(1,404
)

(441
)
Net increase (decrease) in cash and cash equivalents
2,424


(59,057
)
Cash and cash equivalents at beginning of period
84,885


114,884

Cash and cash equivalents at end of period
$
87,309


$
55,827

Supplemental information:
 


 

Noncash investing and financing activities:
 


 

Purchases of property, plant and equipment in accounts payable
$
2,773


$
1,634

See accompanying notes to unaudited condensed consolidated financial statements.


5

Remy International, Inc.
Notes to unaudited condensed consolidated financial statements

1. Description of the business

Business

Remy International, Inc. (together with its subsidiaries are collectively referred to as “we”, “our”, “us”, "Remy", or the “Company”) is a leading global vehicular parts designer, manufacturer, remanufacturer, marketer and distributor of aftermarket and original equipment electrical components for automobiles, light trucks, heavy-duty trucks and other vehicles. We sell our products worldwide primarily under the "Delco Remy", "Remy", "World Wide Automotive", "USA Industries", and "Maval" brand names and our customers' widely recognized private label brand names. Our products include new and remanufactured, light-duty and heavy-duty starters and alternators for both original equipment and aftermarket applications, hybrid power technology, and multi-line products, such as constant velocity ("CV") axles, disc brake calipers, and steering gears. These products are principally sold or distributed to original equipment manufacturers (“OEMs”) for both original equipment manufacture and aftermarket operations, as well as to warehouse distributors and retail automotive parts chains. We sell our products principally in North America, Europe, South America and Asia.

We are one of the largest producers in the world of remanufactured starters and alternators for the aftermarket. Our remanufacturing operations obtain failed products, commonly known as cores, from our customers as returns. These cores are an essential material needed for the remanufacturing operations. We have expanded our operations to become a low cost, global manufacturer and remanufacturer with a more balanced business mix between the aftermarket and the original equipment market, especially in the heavy duty OEM market.

Change in Ownership

On August 14, 2012, Fidelity National Special Opportunities, Inc., (now known as Fidelity National Financial Ventures, LLC., or "FNFV"), a wholly-owned subsidiary of Fidelity National Financial, Inc. ("FNF"), a leading provider of title insurance, mortgage services and restaurant and diversified services, increased its ownership position in Remy Holdings, Inc. ("Old Remy") (formerly known as Remy International, Inc.), above 50% (the "Acquisition"). As a result, FNF began consolidating Old Remy's financial results in the third quarter of 2012.

Spin-off and Merger Transactions

On September 7, 2014, we entered into agreements for a transaction (the "Transaction") with FNF. On December 31, 2014, the Transaction was completed pursuant to the merger agreement, which was approved by Old Remy's stockholders at a special meeting of stockholders held on the same date. The Transaction in effect resulted in the indirect distribution of the shares of common stock of Old Remy that were held by FNF to the holders of its FNFV tracking stock.

In the Transaction, FNFV contributed all of the 16,342,508 shares of Old Remy's common stock that FNFV owned and a small subsidiary, Fidelity National Technology Imaging ("Imaging"), into a newly-formed subsidiary ("New Remy"). New Remy was then distributed to FNFV shareholders. Immediately following the distribution of New Remy to FNFV shareholders, New Remy and Old Remy each engaged in stock-for-stock mergers with subsidiaries of a new publicly-traded holding company, New Remy Holdco Corp. ("New Holdco"). In the mergers, FNFV shareholders received a total of 16,615,359 shares of New Holdco common stock, or approximately 0.17879 shares for each share of FNFV tracking stock that they owned. The remaining stockholders of Old Remy (other than New Remy) received a total of 15,585,727 shares, or one share of New Holdco for each share of Old Remy they owned. Old Remy had 32.0 million shares of common stock outstanding and at the conclusion of the Transaction, New Holdco had 32.2 million shares of common stock outstanding. The Transaction should qualify as a tax-free reorganization to the stockholders under U.S. federal income tax purposes.



6

This structure in effect resulted in New Holdco becoming the new public parent of Old Remy. Effective upon the closing of the Transaction on December 31, 2014, New Holdco changed its name to "Remy International, Inc." and its shares were listed, and on January 2, 2015 began trading, on NASDAQ under the trading symbol "REMY", which was the same trading symbol used by Old Remy. Old Remy changed its name from "Remy International, Inc." to "Remy Holdings, Inc."

During the three months ended March 31, 2015, Imaging received $1,400,000 from FNF as part of a working capital adjustment in accordance with the Merger Agreement, which was previously included in other receivables at December 31, 2014.

2. Summary of significant accounting policies

Interim condensed consolidated financial statements

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) for interim financial information. Accordingly, certain information and footnote disclosures normally included in annual financial statements have been condensed or omitted. These statements include all adjustments (consisting of normal recurring adjustments) that our management believes are necessary to present fairly our financial position, results of operations, and cash flows. We believe that the disclosures are adequate to make the information presented not misleading when read in conjunction with our audited consolidated financial statements and the notes thereto in our Annual Report on Form 10-K for the year ended December 31, 2014.

Operating results for the interim periods presented in this report are not necessarily indicative of the results that may be expected for any future interim period or for the full year.

Use of estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expense during the year. Actual results could differ from these estimates.

Trade accounts receivable and allowance for doubtful accounts

Trade accounts receivable is stated at net realizable value, which approximates fair value. Substantially all of our trade accounts receivable are due from customers in the original equipment and aftermarket automotive industries, both domestically and internationally. Trade accounts receivable includes notes receivable of $38,927,000 and $38,541,000 as of March 31, 2015 and December 31, 2014, respectively. Trade accounts receivable is reduced by an allowance for amounts that are expected to become uncollectible in the future and for disputed items. We perform periodic credit evaluations of our customers' financial condition and generally do not require collateral. We maintain allowances for doubtful customer accounts for estimated losses resulting from the inability of our customers to make required payments. The allowance for doubtful accounts is developed based on several factors including customers' credit quality, historical write-off experience and any known specific issues or disputes which exist as of the balance sheet date. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Warranty

We provide certain warranties relating to quality and performance of our products. An allowance for the estimated future cost of product warranties and other defective product returns is based on management's estimate of product failure rates and customer eligibility and is recorded as a component of cost of goods sold. If these factors differ from management's estimates, revisions to the estimated warranty liability may be required. The specific terms and conditions of the warranties vary depending upon the customer and the product sold.



7

Earnings per share

Basic earnings per share is calculated by dividing net earnings by the weighted average shares outstanding during the period and assumed the additional 272,851 shares issued in respect of the contribution of Imaging were outstanding for the entire period under common control, or August 2012 through December 31, 2014. Diluted earnings per share is based on the weighted average number of shares outstanding plus the assumed issuance of common shares and related adjustment to net income attributable to common stockholders related to all potentially dilutive securities. For the three months ended March 31, 2015 and 2014, in applying the treasury stock method, equivalent shares of unvested restricted stock of 102,153 and 170,989 shares, respectively, were included in the weighted average shares outstanding in the diluted calculation. Anti-dilutive stock options of 368,281 and 325,788 were excluded from the calculation of dilutive earnings per share for the three month periods ended March 31, 2015 and 2014, respectively.

New accounting pronouncements

In April 2015, the FASB issued ASU 2015-03, Interest- Imputation of Interest (Simplifying the Presentation of Debt Issuance Costs). This update changes the presentation of debt issuance costs in financial statements. Under ASU 2015-03, an entity presents such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the debt issuance costs is reported as interest expense. This update is effective for annual and interim periods beginning after December 15, 2015, which will require us to adopt these provisions in the first quarter of 2016. Early application is permitted for financial statements that have not been previously issued. Entities would be permitted to apply this update retrospectively to all prior periods for which a balance sheet is presented. We are evaluating the effect this guidance will have on our consolidated financial statements and related disclosures. We have not yet selected a transition method nor have we determined the effect of the standard on our ongoing financial reporting.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This update provides a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. The guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. This update is effective for annual and interim periods beginning after December 15, 2016, which will require us to adopt these provisions in the first quarter of 2017. Early application is not permitted. This update permits the use of either the retrospective or cumulative effect transition method. We are evaluating the effect this guidance will have on our consolidated financial statements and related disclosures. We have not yet selected a transition method nor have we determined the effect of the standard on our ongoing financial reporting.

3. Fair value measurements

FASB ASC Topic 820, Fair Value Measurements and Disclosures, clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based upon assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, FASB ASC Topic 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1: Observable inputs such as quoted prices in active markets;
Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and
Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

An asset's or liability's fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used maximize the use of observable inputs and minimize the use of unobservable inputs.

Assets and liabilities measured at fair value are based on one or more of the following three valuation techniques noted in FASB ASC Topic 820:



8

A.
Market approach:    Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
B.
Cost approach:    Amount that would be required to replace the service capacity of an asset (replacement cost).
C.
Income approach:    Techniques to convert future amounts to a single present amount based upon market expectations (including present value techniques, option-pricing and excess earnings models).

Assets and liabilities remeasured and disclosed at fair value on a recurring basis as of March 31, 2015 and December 31, 2014, are set forth in the table below:

 
As of March 31, 2015
 
As of December 31, 2014
(In thousands)
Asset/
(liability)

Level 2

Valuation
technique
 
Asset/
(liability)

Level 2

Valuation
technique
Interest rate swap contracts
$
(4,343
)
$
(4,343
)
C
 
$
(2,848
)
$
(2,848
)
C
Foreign exchange contracts
(5,970
)
(5,970
)
C
 
(7,339
)
(7,339
)
C
Commodity contracts
(4,811
)
(4,811
)
C
 
(4,088
)
(4,088
)
C

We calculate the fair value of our interest rate swap contracts, commodity contracts and foreign currency contracts using quoted interest rate curves, quoted commodity forward rates and quoted currency forward rates. For contracts which, when aggregated by counterparty, are in a liability position, the discount rates are adjusted by the credit spread that market participants would apply if buying these contracts from our counterparties.
 

In addition to items that are measured at fair value on a recurring basis, we also have assets and liabilities that are measured at fair value on a nonrecurring basis. As these assets and liabilities are not measured at fair value on a recurring basis, they are not included in the tables above. Assets and liabilities that are measured at fair value on a nonrecurring basis include long-lived assets (see Note 7) and certain assets acquired in business acquisitions (see Note 20). We have determined that the fair value measurements included in each of these assets and liabilities rely primarily on our assumptions as observable inputs are not available. As such, we have determined that each of these fair value measurements reside within Level 3 of the fair value hierarchy.

4. Financial instruments

Foreign currency risk

We manufacture and sell our products primarily in North America, South America, Asia, Europe and Africa. As a result our financial results could be significantly affected by factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets in which we manufacture and sell our products. We generally try to use natural hedges within our foreign currency activities, including the matching of revenues and costs, to minimize foreign currency risk. Where natural hedges are not in place, we consider managing certain aspects of our foreign currency activities through the use of foreign exchange contracts. We primarily utilize forward exchange contracts with maturities generally within eighteen months to hedge against currency rate fluctuations, and are designated as hedges.

As of March 31, 2015 and December 31, 2014, we had the following outstanding foreign currency contracts that were entered into to hedge forecasted purchases and revenues, respectively:
(In thousands)
Currency denomination 
 
 
March 31,

 
December 31,

Foreign currency contract
2015

 
2014

South Korean Won
$
82,232

 
$
82,907

Mexican Peso
$
70,477

 
$
69,625

Brazilian Real
$
7,514

 
$
12,318

Hungarian Forint
€
12,434

 
€
12,646

Great Britain Pound
£
300

 
£
300




9

Accumulated unrealized net losses of $3,845,000 and $4,662,000 were recorded in accumulated other comprehensive income (loss) (AOCI) as of March 31, 2015 and December 31, 2014, respectively. As of March 31, 2015, losses of $4,168,000 are expected to be reclassified to the consolidated statement of operations within the next twelve months. Any ineffectiveness during the three months ended March 31, 2015 and 2014, respectively, was immaterial.

Interest rate risk

On March 27, 2013, we terminated our undesignated Term B Loan interest rate swap and transferred the value into a new undesignated interest rate swap agreement of $72,000,000 of the outstanding principal loan balance under which we swap a variable LIBOR rate with a floor of 1.25% to a fixed rate of 4.045% with an effective date of December 30, 2016 and expiration date of December 31, 2019. The notional value of this interest rate swap is $72,000,000, and is reduced by $187,500 quarterly from the effective date. Due to the significant value of the terminated swaps which were transferred into this new swap, this interest rate swap is an undesignated hedge and changes in the fair value are recorded as interest expense-net in the accompanying consolidated statements of operations.

On March 27, 2013, we also entered into a designated interest rate swap agreement for $72,000,000 of the outstanding principal balance of our long term debt. Under the terms of the new interest rate swap agreement, we swap a variable LIBOR rate with a floor of 1.25% to a fixed rate of 2.75% with an effective date of December 30, 2016 and expiration date of December 31, 2019. The notional value of this interest rate swap is $72,000,000, and is reduced by $187,500 quarterly from the effective date. This interest rate swap has been designated as a cash flow hedging instrument. Accumulated unrealized losses of $987,000 and $282,000, excluding the tax effect, were recorded in accumulated other comprehensive income (loss) (AOCI) as of March 31, 2015, and December 31, 2014, respectively. As of March 31, 2015, no gains are expected to be reclassified to the consolidated statement of operations within the next twelve months. Any ineffectiveness during the three month periods ended March 31, 2015 and 2014, respectively, was immaterial.

The interest rate swaps reduce our overall interest rate risk. However, due to the remaining outstanding borrowings on the Amended and Restated Term B Loan and other borrowing facilities that continue to have variable interest rates, management believes that interest rate risk to us could be material if there are significant adverse changes in interest rates.

Commodity price risk

Our production processes are dependent upon the supply of certain components whose raw materials are exposed to price fluctuations on the open market. The primary purpose of our commodity price forward contract activity is to manage the volatility associated with forecasted purchases. We monitor our commodity price risk exposures regularly to maximize the overall effectiveness of our commodity forward contracts. The principal raw material hedged is copper. Forward contracts are used to mitigate commodity price risk associated with raw materials, generally related to purchases forecast for up to twenty-four months in the future. Additionally, we purchase certain commodities during the normal course of business which result in physical delivery and are excluded from hedge accounting.

We had thirty-nine commodity price hedge contracts outstanding at March 31, 2015, and thirty-seven commodity price hedge contracts outstanding at December 31, 2014, with combined notional quantities of 9,472 and 8,196 metric tons of copper, respectively. These contracts mature within the next eighteen months. These contracts were designated as cash flow hedging instruments. Accumulated unrealized losses of $4,756,000 and $4,092,000, excluding the tax effect, were recorded in AOCI as of March 31, 2015 and December 31, 2014, respectively. As of March 31, 2015, pre-tax losses of $4,368,000 are expected to be reclassified to the accompanying consolidated statement of operations within the next 12 months. Any ineffectiveness during the three months ended March 31, 2015 and 2014, respectively, was immaterial.

Other

We present our derivative positions and any related material collateral under master netting agreements on a gross basis. We have entered into International Swaps and Derivatives Association agreements with each of its significant derivative counterparties. These agreements provide bilateral netting and offsetting of accounts that are in a liability position with those that are in an asset position. These agreements do not require us to maintain a minimum credit rating in order to be in compliance with the terms of the agreements and do not contain any margin call provisions or collateral requirements that could be triggered by derivative instruments in a net liability position. As of March 31, 2015, we have not posted any collateral to support derivatives in a liability position.


10


For derivatives designated as cash flow hedges, changes in the time value are excluded from the assessment of hedge effectiveness. Unrealized gains and losses associated with ineffective hedges, determined using the change in fair value method, are recognized in the accompanying consolidated statements of operations. Derivative gains and losses included in AOCI for effective hedges are reclassified into the accompanying consolidated statements of operations upon recognition of the hedged transaction.

Any derivative instrument designated initially, but no longer effective as a hedge, or initially not effective as a hedge, is recorded at fair value and the related gains and losses are recognized in the accompanying consolidated statements of operations. Our undesignated hedges are primarily our interest rate swaps whose fair value at inception of the instrument due to the rollover of existing interest rate swaps resulted in ineffectiveness. The following table discloses the fair values and balance sheet locations of our derivative instruments:

 
Asset derivatives  
 
Liability derivatives 
 
(In thousands)
Balance sheet location
March 31, 2015

 
December 31, 2014

Balance sheet location
March 31, 2015

 
December 31, 2014

Derivatives designated as hedging instruments:
 

 
 

 
 

 
 

Commodity contracts
Prepaid expenses and
other current assets
$
—

 
$
—

Other current liabilities
and accrued expenses
$
4,388

 
$
3,515

Commodity contracts
Other noncurrent assets
—

 
—

Other noncurrent liabilities
423

 
573

Foreign currency contracts
Prepaid expenses and
other current assets
2,002

 
869

Other current liabilities
and accrued expenses
7,549

 
7,316

Foreign currency contracts
Other noncurrent assets
51

 
—

Other noncurrent liabilities
474

 
892

Interest rate swap contracts
Other noncurrent assets
—

 
—

Other noncurrent liabilities
987

 
282

Total derivatives designated as hedging instruments
$
2,053

 
$
869

 
$
13,821

 
$
12,578

Derivatives not designated as hedging instruments:
 

 
 

 
 

 
 

Interest rate swap contracts
Other noncurrent assets
$
—

 
$
—

Other noncurrent liabilities
$
3,356

 
$
2,566

Total derivatives not designated as hedging instruments
$
—

 
$
—

 
$
3,356

 
$
2,566



11

 The following tables disclose the effect of our derivative instruments on the accompanying consolidated statement of operations for the three months ended March 31, 2015 (in thousands): 

Derivatives designated as cash flow hedging instruments
Amount of gain (loss) recognized in OCI on derivatives (effective portion)

Location of gain (loss) reclassified from AOCI into income (effective portion)
Amount of gain (loss) reclassified from AOCI into income (effective portion)

Location of gain (loss) recognized in income on derivatives (ineffective portion and amount excluded from effectiveness testing)
Amount of gain (loss) recognized in income on derivatives (ineffective portion and amount excluded from effectiveness testing)

Commodity contracts
$
(1,923
)
Cost of goods sold
$
(1,259
)
Cost of goods sold
$
(19
)
Foreign currency contracts
33

Cost of goods sold
(1,201
)
Cost of goods sold
—

Interest rate swap contracts
(705
)
Interest expense–net
—

Interest expense–net
—

 
$
(2,595
)
 
$
(2,460
)
 
$
(19
)
 
Derivatives not designated as hedging instruments
Location of gain (loss) recognized in income on derivatives
Amount of gain (loss) recognized in income on derivatives

Interest rate swap
Interest expense–net
$
(790
)

The following tables disclose the effect of our derivative instruments on the accompanying consolidated statement of operations for the three months ended March 31, 2014 (in thousands):  

Derivatives designated as cash flow hedging instruments
Amount of gain (loss) recognized in OCI on derivatives (effective portion)

Location of gain (loss) reclassified from AOCI into income (effective portion)
Amount of gain (loss) reclassified from AOCI into income (effective portion)

Location of gain (loss) recognized in income on derivatives (ineffective portion and amount excluded from effectiveness testing)
Amount of gain (loss) recognized in income on derivatives (ineffective portion and amount excluded from effectiveness testing)

Commodity contracts
$
(3,674
)
Cost of goods sold
$
(1,062
)
Cost of goods sold
$
(37
)
Foreign currency contracts
(1,124
)
Cost of goods sold
897

Cost of goods sold
—

Interest rate swap contracts
(463
)
Interest expense–net
—

Interest expense–net
—

 
$
(5,261
)
 
$
(165
)
 
$
(37
)
Derivatives not designated as hedging instruments
Location of gain (loss) recognized in income on derivatives
Amount of gain (loss) recognized in income on derivatives

Interest rate swap contracts
Interest expense–net
$
(677
)



12

Concentrations of credit risk

Financial instruments, which potentially subject us to concentrations of credit risk, consist primarily of accounts receivable and cash investments. We require placement of cash in financial institutions evaluated as highly creditworthy. Our customer base includes global light and commercial vehicle manufacturers and a large number of retailers, distributors and installers of automotive aftermarket parts. Our credit evaluation process and the geographical dispersion of sales transactions help to mitigate credit risk concentration.

Accounts receivable factoring arrangements

We have entered into factoring agreements with various U.S. and European financial institutions to sell our accounts receivable under nonrecourse agreements. These are treated as a sale. The transactions are accounted for as a reduction in accounts receivable as the agreements transfer effective control over and risk related to the receivables to the buyers. We do not service any domestic accounts after the factoring has occurred. We do not have any servicing assets or liabilities. We utilize factoring arrangements as an integral part of financing for us. The cost of factoring such accounts receivable is reflected in the accompanying consolidated statements of operations as interest expense-net with other financing costs. The cost of factoring such accounts receivable for the three months ended March 31, 2015 and 2014 was $763,000 and $1,254,000, respectively. Gross amounts factored under these facilities as of March 31, 2015 and December 31, 2014 were $202,000,000 and $229,696,000, respectively. Any change in the availability of these factoring arrangements could have a material adverse effect on our financial condition.

5. Inventories

Net inventories consisted of the following:

 
March 31,

 
 December 31,

(In thousands)
2015

 
2014

Raw materials
$
59,242

 
$
46,049

Core inventory
36,003

 
36,034

Work-in-process
9,569

 
7,827

Finished goods
81,191

 
74,233

 
$
186,005

 
$
164,143


Raw materials also include materials consumed in the manufacturing and remanufacturing process, but not directly incorporated into the finished products.

6. Property, plant and equipment

Depreciation and amortization expense of property, plant, and equipment for the three months ended March 31, 2015 and 2014 was $5,475,000 and $6,592,000, respectively.



13

7. Goodwill and other intangible assets

The following table represents the carrying value of other intangible assets:
 
 
As of March 31, 2015
 
 
As of December 31, 2014
 
(In thousands)
Carrying
value

 
Accumulated
amortization

 
Net

 
Carrying
value

 
Accumulated
amortization

 
Net

Definite-life intangibles:
 
 
 
 
 
 
 
 
 
 
 
Intellectual property
$
28,328

 
$
3,395

 
$
24,933

 
$
27,833

 
$
2,980

 
$
24,853

Customer relationships
210,270

 
56,006

 
154,264

 
206,960

 
50,558

 
156,402

Customer contract
80,795

 
56,241

 
24,554

 
93,642

 
63,285

 
30,357

Trade names
500

 
8

 
492

 
—

 
—

 
—

Lease intangible
420

 
269

 
151

 
420

 
219

 
201

Total
320,313

 
115,919

 
204,394

 
328,855

 
117,042

 
211,813

Indefinite-life intangibles:
 

 
 

 
 
 
 

 
 

 
 
Trade names
86,210

 
—

 
86,210

 
86,210

 
—

 
86,210

Intangible assets, net
$
406,523

 
$
115,919

 
$
290,604

 
$
415,065

 
$
117,042

 
$
298,023

Goodwill
$
263,491

 
$
—

 
$
263,491

 
$
259,586

 
$
—

 
$
259,586


Definite-lived intangible assets are being amortized to reflect the pattern of economic benefit consumed.

We perform impairment testing annually or more frequently when events or circumstances indicate that the carrying amount of the above intangibles may be impaired.

On March 1, 2015, we completed our previously announced acquisition of substantially all assets of Maval Manufacturing, Inc. pursuant to the terms and conditions of a definitive agreement. See Note 20 for further information. As a result of the acquisition, we assigned preliminary values to all assets and liabilities acquired, including the customer relationships intangible of $3,310,000 with a useful life of 10 years, $500,000 to value the Maval trade name with a useful life of 5 years , and $3,905,000 to goodwill in the preliminary purchase price allocation during the three months ended March 31, 2015. 

Trade names were valued based on the relief of royalty approach. This method allocates value based on what the Company would be willing to pay as a royalty to a third-party owner of the intellectual property or trade name in order to exploit the economic benefits. Customer relationships were valued using an excess earnings approach after considering a fair return on fixed assets, working capital, trade names, intellectual property, and assembled workforce. 

During the three months ended March 31, 2015, we had intellectual property additions of $495,000 which were related to patent defense and filing costs. The weighted average useful life of these intellectual property intangibles was 15 years as of March 31, 2015.

8. Other noncurrent assets

Other noncurrent assets primarily consisted of core return rights of $21,264,000 and noncurrent deferred tax assets of $12,072,000 as of March 31, 2015. Other noncurrent assets primarily consisted of core return rights of $38,940,000 and noncurrent deferred tax assets of $12,028,000 as of December 31, 2014.



14

9. Other current liabilities and accrued expenses

Other current liabilities and accrued expenses consisted of the following:
 
March 31,

 
December 31,

(In thousands)
2015

 
2014

Accrued warranty
$
24,217

 
$
22,583

Accrued wages and benefits
16,295

 
18,784

Current portion of customer obligations
2,105

 
2,234

Rebates, stocklifts, discounts and returns
14,722

 
20,282

Current deferred revenue
842

 
865

Other
50,829

 
63,761

 
$
109,010

 
$
128,509


Changes to our current and noncurrent accrued warranty were as follows:
 
 
Three months ended March 31,
 
(In thousands)
 
2015


2014

Balance at beginning of period
 
$
26,012

 
$
30,781

Provision for warranty
 
10,564

 
12,170

Payments and charges against the accrual
 
(9,225
)
 
(11,825
)
Increased warranty accruals due to business acquisitions (Note 20)
 
360

 
1,363

Balance at end of period
 
$
27,711

 
$
32,489


10. Other noncurrent liabilities

Other noncurrent liabilities consisted of the following:
 
March 31,

 
December 31,

(In thousands)
2015

 
2014

Noncurrent deferred revenue
$
3,778

 
$
3,967

Other
23,345

 
22,516

 
$
27,123

 
$
26,483


11.
Restructuring and other charges

Total restructuring and other charges of $73,000 were recorded for the three months ended March 31, 2015. These charges consisted of $15,000 of employee termination benefits and $58,000 of other exit costs. The charges were primarily related to the closure of our Mezokovesd, Hungary plant and restructuring actions in our North American operations.

Total restructuring and other charges of $314,000 were recorded during the three months ended March 31, 2014. These charges consisted of $228,000 of employee termination benefits and $86,000 of other exit costs. The charges were primarily related to the closure of our Mezokovesd, Hungary plant and restructuring actions in our Mexico operations.



15

The following table summarizes the activity in our accrual for restructuring and other charges for the three month period ended March 31, (in thousands):
2015
Termination
benefits

 
Exit
costs

 
Total

Accrual at December 31, 2014
$
259

 
$
72

 
$
331

Provision
15

 
58

 
73

Payments
(54
)
 
(73
)
 
(127
)
Accrued at March 31, 2015
$
220

 
$
57

 
$
277

 
2014
Termination
benefits

 
Exit
costs

 
Total

Accrual at December 31, 2013
$
981

 
$
45

 
$
1,026

Provision
228

 
86

 
314

Payments
(950
)
 
(106
)
 
(1,056
)
Accrued at March 31, 2014
$
259

 
$
25

 
$
284


Significant components of restructuring and other charges were as follows (in thousands):
 
Total
expected
costs

 
Expense incurred in  
 
Estimated
future
expense

 
Three
months ended
March 31,
2015

 
Twelve
months ended
December 31,
2014

 
Twelve
months ended
December 31,
2013

 
 
 
 
 
2014 Activities
 
 
 
 
 
 
 
 
 
Severance
$
1,215

 
$
15

 
$
1,066

 
$
—

 
$
134

Exit costs
959

 
9

 
950

 
—

 
—

 
$
2,174

 
$
24

 
$
2,016

 
$
—

 
$
134

2013 Activities
 

 
 

 
 

 
 

 
 

Severance
$
1,976

 
$
—

 
$
220

 
$
1,756

 
$
—

Exit costs
696

 
—

 
4

 
692

 
—

 
$
2,672

 
$
—

 
$
224

 
$
2,448

 
$
—

2012 Activities
 

 
 

 
 

 
 

 
 

Severance
$
4,533

 
$
—

 
$
—

 
$
795

 
$
—

Exit costs
1,710

 
49

 
267

 
823

 
160

Other charges
1,687

 
—

 
—

 
—

 
—

 
$
7,930

 
$
49

 
$
267

 
$
1,618

 
$
160




16

12. Debt

Borrowings under long-term debt arrangements, net of discounts, consisted of the following:
 
March 31,

 
December 31,

(In thousands)
2015

 
2014

Asset-Based Revolving Credit Facility- Maturity date of September 5, 2018
$
25,550

 
$
—

Term B Loan, as Amended and Restated - Maturity date of March 5, 2020
292,905

 
293,637

Total Senior Credit Facility and Notes
318,455

 
293,637

Capital leases and other obligations
8,039

 
8,167

Less current maturities
(3,500
)
 
(3,509
)
Long-term debt less current maturities
$
322,994

 
$
298,295


On December 31, 2014, in connection with the completion of the Transaction, Remy International, Inc. and certain subsidiaries entered into a Second Amendment to the ABL Revolver Credit Agreement (“ABL Second Amendment”) and a Second Amendment and Restatement of the Term B Loan Credit Agreement (“Term B Second Amendment”) (collectively, the “Amendments”).

The Amendments permitted the Transaction to occur, added New Remy Holdco Corp. and New Remy Corp. as guarantors of the obligations under the foregoing credit facilities, and made conforming changes to reflect the effects of the Transaction. There are no other changes that materially modify the foregoing credit facilities.

The ABL Second Amendment bears an interest rate to a defined Base Rate plus 0.50%-1.00% per year or, at our election, at an applicable LIBOR Rate plus 1.50%-2.00% per year and is paid monthly. The ABL Second Amendment maintains the current availability at $95,000,000, but may be increased, under certain circumstances, by $20,000,000. The ABL Second Amendment is secured by substantially all domestic accounts receivable and inventory. At March 31, 2015, the ABL Second Amendment balance was $25,550,000. Based upon the collateral supporting the ABL Second Amendment, the amount borrowed, and the outstanding letters of credit of $15,712,000, there was additional availability for borrowing of $50,665,000 on March 31, 2015. We will incur an unused commitment fee of 0.375% on the unused amount of commitments under the ABL Second Amendment.

The Term B Second Amendment bears an interest rate consisting of LIBOR (subject to a floor of 1.25%) plus 3.00% per year with an original issue discount of $750,000. The Term B Second Amendment also contains an option to increase the borrowing provided certain conditions are satisfied, including maintaining a maximum leverage ratio. The Term B Second Amendment is secured by a first priority lien on the stock of our subsidiaries and substantially all domestic assets other than accounts receivable and inventory pledged to the ABL Second Amendment. Principal payments in the amount of $750,000 are due at the end of each calendar quarter with termination and final payment no later than March 5, 2020. The Term B Second Amendment is subject to an excess cash calculation which may require the payment of additional principal on an annual basis. At March 31, 2015, the average borrowing rate, including the impact of the interest rate swaps, was 4.25%.

On March 5, 2013, we entered into a First Amendment to our existing ABL Revolver Credit Agreement ("ABL First Amendment") to extend the maturity date of the Asset-Based Revolving Credit Facility ("ABL") from December 17, 2015 to September 5, 2018 and reduce the borrowing rate. On March 5, 2013, we entered into a $300,000,000 Amended and Restated Term B Loan Credit Agreement ("Amended and Restated Term B Loan") to refinance the existing $286,978,000 Term B Loan, extend the maturity from December 17, 2016 to March 5, 2020, and reduce the borrowing rate.

As of March 31, 2015, the estimated fair value of our Term B Second Amendment was $295,634,000, which was $2,729,000 more than the carrying value. As of December 31, 2014, the estimated fair value of our Term B Loan was $290,693,000, which was $2,944,000 less than the carrying value. The Level 2 fair market values are based on established market prices as of March 31, 2015 and December 31, 2014. The fair value estimates do not necessarily reflect the values we could realize in the current markets. Because of their short-term nature or variable interest rate, we believe the carrying value for short-term debt and the revolving credit agreement closely approximates their fair value.



17

All of our credit agreements contain various covenants and representations that are customary for transactions of this nature. We were in compliance with all covenants as of March 31, 2015. The credit agreements contain various restrictive covenants, which include, among other things: (i) a maximum leverage ratio; (ii) a minimum interest coverage ratio; (iii) mandatory prepayments upon certain asset sales and debt issuances; and (iv) limitations on the payment of dividends in excess of a specified amount. The term loan also includes events of default customary for a facility of this type, including a cross-default provision under which the lenders may declare the loan in default if we (i) fail to make a payment when due under any debt having a principal amount greater than $5.0 million or (ii) breach any other covenant in any such debt as a result of which the holders of such debt are permitted to accelerate its maturity.

Short-term debt

We have revolving credit facilities with three Korean banks with a total facility amount of approximately $11,765,000 of which $1,810,000 was borrowed at an average interest rate of 2.75% at March 31, 2015. In Hungary, there is one revolving credit facility with one bank for a total credit facility of $1,015,000 of which nothing was borrowed at March 31, 2015. In China there is a revolving credit facility with one bank for a total credit facility of $10,000,000 of which $3,000,000 was borrowed at an average interest rate of 2.04% at March 31, 2015.

Capital leases and other obligations

Capital leases have been capitalized using nominal interest rates ranging from 4.0% to 15.1% as determined by the dates we entered into the leases. We had assets under capital leases of approximately $2,675,000 at March 31, 2015 and approximately $2,810,000 at December 31, 2014, net of accumulated amortization.

On December 29, 2014, we entered into a leaseback financing arrangement with an independent third party involving the sale of a distribution facility with a net book value of approximately $11,454,000 at March 31, 2015 and $11,855,000 at December 31, 2014. We continue to maintain the facility on our books and have included the proceeds from the sale of the facility as a financing obligation totaling $5,800,000 bearing an implied interest rate of 6.5%.

13. Stockholders' equity

Common stock and preferred stock

In connection with the Transaction closing on December 31, 2014, we amended our Amended and Restated Certificate of Incorporation, which is substantially identical to Old Remy's Amended and Restated Certificate of Incorporation in effect immediately prior to the closing of the Transaction. The rights of stockholders after the closing of the Transaction, as a matter of state law and under the relevant organizational documents, are fundamentally the same as the rights of stockholders that were in effect immediately prior to the consummation of the Transaction.

Under the Amended and Restated Certificate of Incorporation, the Company is authorized to issue 280,000,000 shares, consisting of 240,000,000 shares of common stock, par value $0.0001 per share, and 40,000,000 shares of preferred stock, par value $0.0001 per share. As of March 31, 2015, there were 32,236,050 common stock shares outstanding and no preferred stock shares outstanding.

The holders of common stock are entitled to one vote on all matters properly submitted on which the common stockholders are entitled to vote.

Share Repurchase Program

On February 18, 2015, the Board of Directors approved a share repurchase program, effective February 23, 2015, under which we may repurchase up to $100,000,000 of our outstanding common stock shares. Purchases may be made from time to time in the open market at prevailing prices or in privately negotiated transactions through February 28, 2018. There were no purchases of our common stock under this program during the three months ended March 31, 2015.

Treasury stock

During the three months ended March 31, 2015, we withheld 47,772 shares at cost, or $1,097,000, to satisfy tax obligations for vesting of restricted stock shares granted to our employees under the Remy International, Inc. Omnibus


18

Incentive Plan, or "Omnibus Incentive Plan". In addition, 112,291 shares were forfeited and returned to treasury stock during the three months ended March 31, 2015 for no value pursuant to the Omnibus Incentive Plan.

During the three months ended March 31, 2014, we withheld 114,291 shares at cost, or $2,504,000, to satisfy tax obligations for vesting of restricted stock shares granted to our employees under the Omnibus Incentive Plan. In addition, 74,892 shares were forfeited and returned to treasury stock during the three months ended March 31, 2014 for no value pursuant to the Omnibus Incentive Plan.

Dividend payments

On February 6, 2015, our Board of Directors declared a quarterly cash dividend of ten cents ($0.10) per share. The dividend was payable in cash on February 27, 2015 to stockholders of record as of the close of business on February 17, 2015. Cash dividends paid during the three months ended March 31, 2015 were $3,305,000, which also included accrued cash dividends paid on restricted stock vestings.  As of March 31, 2015, a dividend payable of $74,000 was recorded for unvested restricted stock and is payable upon vesting. 

On April 30, 2015, our Board of Directors declared a quarterly cash dividend of eleven cents ($0.11) per share, payable on May 29, 2015, to stockholders of record as of May 18, 2015.

14. Reclassifications out of accumulated other comprehensive income (loss)

The following table discloses the changes in each component of accumulated other comprehensive income, net of tax for the three months ended March 31, 2015 (in thousands):

 
 
Foreign currency translation adjustment

 
Unrealized gains (losses) on currency hedges

 
Unrealized gains (losses) on commodity hedges

 
Interest rate swaps

 
Employee benefit plan adjustment

 
Accumulated other comprehensive income (loss)

Balances at December 31, 2014
 
$
1,590

 
$
(4,662
)
 
$
(1,955
)
 
$
(172
)
 
$
(4,184
)
 
$
(9,383
)
Other comprehensive income (loss) before reclassifications
 
(7,993
)
 
(82
)
 
(1,698
)
 
(429
)
 
(105
)
 
(10,307
)
Amounts reclassified from accumulated other comprehensive income (loss)
 
—

 
899

 
778

 
—

 
25

 
1,702

Balances at March 31, 2015
 
$
(6,403
)
 
$
(3,845
)
 
$
(2,875
)
 
$
(601
)
 
$
(4,264
)
 
$
(17,988
)

The following table discloses the changes in each component of accumulated other comprehensive income, net of tax for the three months ended March 31, 2014 (in thousands):

 
 
Foreign currency translation adjustment

 
Unrealized gains (losses) on currency hedges

 
Unrealized gains (losses) on commodity hedges

 
Interest rate swaps

 
Employee benefit plan adjustment

 
Accumulated other comprehensive income (loss)

Balances at December 31, 2013
 
$
9,441

 
$
2,753

 
$
(1,776
)
 
$
886

 
$
7,866

 
$
19,170

Other comprehensive income (loss) before reclassifications
 
797

 
(886
)
 
(2,264
)
 
(281
)
 
(463
)
 
(3,097
)
Amounts reclassified from accumulated other comprehensive income (loss)
 
—

 
(636
)
 
672

 
—

 
100

 
136

Balances at March 31, 2014
 
$
10,238

 
$
1,231

 
$
(3,368
)
 
$
605

 
$
7,503

 
$
16,209




19

The following table discloses the effect of reclassifications of accumulated other comprehensive income on the accompanying consolidated statement of operations (in thousands):

Details about Accumulated Other Comprehensive Income (Loss) Components
 
Three months ended March 31,
 
 
Affected Line Item in the Statement Where Net Income is Presented
 
2015

 
2014

 
Gains (losses) on cash flow hedges:
 
 
 
 
 
 
Foreign currency contracts
 
$
(1,201
)
 
$
897

 
Cost of goods sold
Commodity contracts
 
(1,278
)
 
(1,099
)
 
Cost of goods sold
 
 
(2,479
)
 
(202
)
 
Total before tax
 
 
802

 
166

 
Tax benefit (expense)
 
 
$
(1,677
)
 
$
(36
)
 
Net of tax
 
 
 
 
 
 
 
Amortization of employee benefit plan costs:
 
 
 
 
 
 
Prior service costs
 
$
—

 
$
—

 
Selling, general and administrative expenses
Net actuarial loss
 
(29
)
 
(164
)
 
Selling, general and administrative expenses
 
 
(29
)
 
(164
)
 
Total before tax
 
 
4

 
64

 
Tax benefit (expense)
 
 
$
(25
)
 
$
(100
)
 
Net of tax
 
 
 
 
 
 
 
Total reclassifications for the period
 
$
(1,702
)
 
$
(136
)
 
Net of tax

15. Income taxes

We compute on a quarterly basis an estimated annual effective tax rate considering ordinary income and related income tax expense. Ordinary income refers to income (loss) before income tax expense excluding significant, unusual, or infrequently occurring items. The tax effect of an unusual or infrequently occurring item is recorded in the interim period in which it occurs. Other items included in income tax expense in the periods in which they occur include the cumulative effect of changes in tax laws or rates, foreign exchange gains and losses, adjustments to uncertain tax positions, and adjustments to our valuation allowance due to changes in judgment regarding the realizability of deferred tax assets in future years.

The effective income tax rate for the three months ended March 31, 2015, differs from the U.S. federal income tax rate primarily due to the effect of foreign taxable income and tax credits. The effective income tax rate for the three months ended March 31, 2014, differs from the U.S. federal income tax rate primarily due to the effect of foreign taxable income, valuation allowance utilization in certain foreign jurisdictions, and tax credits reported in the financial statements.

16. Employee benefit plans

The components of expense for our pension plans were as follows (in thousands):
 
 
 
Three months ended March 31,
 
Components of expense
 
2015


2014

Service costs
 
$
325

 
$
276

Interest costs
 
762

 
752

Expected return on plan assets
 
(761
)
 
(766
)
Recognized net actuarial loss (gain)
 
53

 
(144
)
Net periodic pension cost
 
$
379

 
$
118




20

Cash flows

We contributed $907,000 and $828,000 to our pension plans during the three months ended March 31, 2015 and 2014, respectively. We expect to contribute a total of $2,041,000 to our U.S. pension plans and $595,000 to our international pension plans in 2015.

17.
Stock-based compensation

Omnibus Incentive Plan

The Omnibus Incentive Plan, which is stockholder-approved, became effective on October 27, 2010, was amended on March 24, 2011 and permits our Compensation Committee of the Board of Directors to grant nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units and other cash or share based awards to our employees and non-employee directors. Actual participation, as well as the terms of the awards to those participants, is determined by the Compensation Committee. The maximum number of shares authorized that may be delivered pursuant to awards under the Omnibus Incentive Plan was 5,500,000. As of March 31, 2015, there were 2,837,168 shares available to be issued under the Omnibus Incentive Plan.

On February 23, 2015, executive officers and other key employees received restricted stock awards of 150,280 common shares with a weighted average grant date value of $23.01, based on the closing price of our common stock on the respective grant date as reported on the NASDAQ Stock Market. These awards are 50% time-based and 50% performance-based. The time-based restricted shares vest equally over a three-year period and one-third of the performance-based restricted shares will be available to vest for each of the calendar years 2015, 2016 and 2017 based on a target operating income for each of the years. Also on February 23, 2015, we granted an additional time-based restricted stock award of 22,816 common shares which will vest 100% on the first anniversary of the grant date. Additionally, executive officers and other key employees were granted 305,753 stock option awards which vest equally over a three-year period with a term of seven years and a weighted average exercise price of $23.01.

On March 6, 2015, an additional time-based restricted stock award of 15,000 common shares was granted with a grant date value of $22.62 based on the closing price of our common stock on the grant date as reported on the NASDAQ Stock Market. This award will vest 100% on the third anniversary of the grant date.

Also on February 23, 2015, our Board of Directors received restricted stock awards of 22,815 common shares and stock option awards of 46,418 common shares. One-half of the restricted stock shares and stock options granted to the Board of Directors vest at each anniversary of the grant date. Restricted stock granted to the Board of Directors were valued at $23.01, which was the closing price of our common stock on the grant date as reported on the NASDAQ Stock Market. Stock options granted to the Board of Directors have a term of seven years and an exercise price of $23.01.

We estimated the grant date fair value of all stock options granted during the three months ended March 31, 2015 using the Black-Scholes valuation model. The weighted average valuation per share was $4.85 based on the following assumptions: Risk-free interest rate: 1.41%, Dividend Yield: 1.74%, Expected Volatility: 28.00% and Expected Term: 4.5 years.



21

Shares issued upon exercise of stock options were 2,919 and 2,397 during the three months ended March 31, 2015 and 2014, respectively.

Noncash compensation expense related to all types of awards was recognized for the three months ended March 31, 2015 and 2014 as follows:

 
 
Three months ended March 31,
 
(In thousands)
 
2015


2014

Stock-based compensation expense
 
$
1,316

 
$
1,219


If factors change and we employ different assumptions, stock-based compensation expense may differ significantly from what we have recorded in the past. If there are any modifications or cancellations of the underlying unvested securities, we may be required to accelerate, increase or cancel any remaining unearned stock-based compensation expense. Future stock-based compensation expense and unearned stock-based compensation will increase to the extent that we grant additional equity awards to employees or we assume unvested equity awards in connection with acquisitions.

18. Business segment and geographical information

We manage our business and operate in a single reportable business segment.

We are a multi-national corporation with operations in many countries, including the United States, Canada, Mexico, Brazil, China, Hungary, South Korea, United Kingdom, Belgium and Tunisia. As a result, our financial results could be significantly affected by factors such as changes in foreign currency exchange rates or weak economic conditions in the foreign markets where we distribute our products. Our operating results are exposed to changes in exchange rates between the U.S. dollar and non-U.S. currencies. Exposure to variability in foreign currency exchange rates is managed primarily through the use of natural hedges, whereby funding obligations and assets are both denominated in the local currency, and through selective currency hedges. From time to time, we enter into exchange agreements to manage our exposure arising from fluctuating exchange rates related to specific transactions. Refer to Note 4. Sales are attributed to geographic locations based on the point of sale.

Information about our net sales by region was as follows:

 
 
Three months ended March 31,
 
(In thousands)
 
2015


2014

Net sales to external customers:
 
 
 
 
United States
 
$
204,509

 
$
204,618

Europe
 
19,763

 
23,075

Other Americas
 
8,808

 
10,880

Asia
 
70,331

 
67,432

Total net sales
 
$
303,411

 
$
306,005


19. Other commitments and contingencies

We are party to various legal actions and administrative proceedings and subject to various claims, including those relating to commercial transactions, product liability, safety, health, taxes, environmental and other matters. We believe that none of such actions, other than those discussed below, depart from customary litigation arising in the ordinary course of business. We review these matters on an ongoing basis and follow the provisions of FASB ASC Topic 450, Contingencies, when making accrual and disclosure decisions. For legal proceedings where it has been determined that a loss is both probable and reasonably estimable, a liability has been recorded in our accompanying consolidated financial statements. For legal proceedings where it has been determined that a loss is either probable but the amount or range of loss is not reasonably estimable, or reasonably possible, we provide disclosure with respect to the matter.



22

Actual losses may materially differ from the amounts recorded and the ultimate outcomes of our pending cases are generally not yet determinable. At present we do not believe that the ultimate resolution of currently pending legal proceedings, either individually or in the aggregate, will have a material adverse effect on our financial condition. However, litigation matters are inherently uncertain, and we cannot currently quantify our ultimate liability for unresolved litigation matters. As a result, it is possible that such liability could materially affect our consolidated financial position or our results of operations or cash flows for an individual reporting period.
 
Remy Componentes S. de R.L. de C.V. vs. Corporativo Industrial y Empresarial Lorva, S.A. de C.V. ("Lorva")

In December 2012, Lorva, a former vendor, filed a judicial claim against Old Remy in the Fourth District federal court in San Luis Potosi, Mexico requesting the rescission of two alleged operational service contracts. We filed a timely response in the Fourth District Court in January 2013. The collection of evidence and witness testimony concluded in the civil case, and the parties filed their written closing argument briefs in the fourth quarter of 2013. In March 2014, the first instance sentence was issued by the Fourth District Court determining Lorva has the right to rescind both contracts and collect the benefit sought in the amount of approximately $17,380,000 for liquidated damages and outstanding invoices. In April 2014, we filed an appeal of this ruling in the Unitary Tribunal in San Luis Potosi, Mexico. On October 2, 2014, the Unitary Tribunal in San Luis Potosi, Mexico ruled on the appeal, reducing the March 2014 lower Fourth District Court award from $17,380,000 to payment of invoices and amounts due of $121,000 plus Lorva's costs and attorney fees. Both Lorva and Old Remy filed a timely appeal of this ruling in the 4th Collegiate Tribunal in San Luis Potosi, Mexico in October 2014. In February 2015, the 4th Collegiate Tribunal sent instructions to the Unitary Tribunal to consider the evidence presented that supports Remy's allegation that the contract is fraudulent and rule on that evidence. In March 2015, the Unitary Tribunal reissued the same judgment as in their prior October 2014 ruling, as a result, Remy filed an appeal with the 4th Collegiate Tribunal in April 2015. We believe it is probable that we should prevail on final appeal based on legal arguments and the facts of this case. As of March 31, 2015, we continue to maintain an immaterial accrual related to this matter.

Remy, Inc. vs. Tecnomatic S.p.A.

In March 2011, Tecnomatic filed a lawsuit against Remy International, Inc., its Mexican subsidiaries and two other entities alleging breach of contract and the misappropriation of trade secrets, and requested damages of $110,000,000. On September 11, 2014, we announced entry into a Settlement Agreement and Mutual General Release (the "Agreement") to settle all disputes that existed among us and Tecnomatic. In addition, we entered into a cross licensing arrangement of certain patents with Tecnomatic. The value of the patents received from Tecnomatic was approximately $13,930,000. Pursuant to the Agreement and the cross licensing arrangement, we paid to Tecnomatic a $16,000,000 cash payment in September 2014 and paid a $16,000,000 cash payment during the three months ended March 31, 2015.

20. Acquisition

Acquisition of Maval Manufacturing, Inc.

On February 19, 2015, we announced that we entered into a definitive agreement to acquire substantially all of the assets of Maval Manufacturing, Inc., a manufacturer, remanufacturer, and distributor of steering systems, components, and specialty products to the automotive service, original equipment power sports, and off-road specialty vehicle markets. The transaction closed effective March 1, 2015. In connection with the closing of the transaction, the assets were placed in Maval Industries, L.L.C. ("Maval"), a wholly-owned subsidiary of the Company. The results of operations of Maval have been included in our consolidated results of operations since the acquisition date.

Preliminary purchase price was $22,000,000, consisting of $18,340,000 in cash and $3,660,000 cash held in escrow. The initial purchase price allocation based on their fair values as of the acquisition date was as follows:


23

Trade accounts receivable
 
$
8,011

Inventories
 
14,065

Prepaid expenses and other current assets
 
25

Property, plant and equipment
 
1,764

Goodwill
 
3,905

Intangible assets
 
3,810

Other noncurrent assets
 
22

Total assets acquired
 
$
31,602

 
 
 
Accounts payable
 
$
6,674

Other current liabilities and accrued expenses
 
2,928

Total liabilities acquired
 
$
9,602

Net assets acquired
 
$
22,000


Goodwill of $3,905,000, which is deductible for tax purposes, has been recorded based on the amount of the purchase price that exceeds the fair value of the net assets acquired. The purchase price allocation is preliminary as of March 31, 2015 as we finalize our valuation of long lived assets and any contingent liabilities.

For the three months ended March 31, 2015, we recognized a finished goods inventory step-up of $587,000 and customer relationships and trade name amortization of $36,000, which was included in cost of goods sold in the accompanying consolidated statement of operations.


24

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

The statements contained in this Quarterly Report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements regarding our expectations, hopes, intentions or strategies regarding the future. All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. It is important to note that our actual results could vary materially from those forward-looking statements contained herein due to many factors, including, but not limited to: future financial results and liquidity, development of new products and services, the effect of competitive products or pricing, the effect of commodity and raw material prices, the impact of supply chain cost management initiatives, restructuring risks, customs duty claims, litigation uncertainties and warranty claims, conditions in the automotive industry, foreign currency fluctuations, costs related to re-sourcing and outsourcing products, the effect of economic conditions, and other risks identified in the “Special note regarding forward-looking statements”, “Risk Factors” and other sections of the Company's previously filed most recent Annual Report on Form 10-K and other filings with the Securities and Exchange Commission. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect the Company.  We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events and/or otherwise, except as may be required by law.

The following discussion should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2014.

Executive Overview

Our Business

We are a global market leader in the design, manufacture, remanufacture, marketing and distribution of non-discretionary, rotating electrical components for light and commercial vehicles for original equipment manufacturers, or OEMs, and the aftermarket. We sell our products worldwide primarily under our well-recognized “Delco Remy,” “Remy,” “World Wide Automotive”, “USA Industries” and “Maval” brand names, as well as our customers' well-recognized private label brand names.

Our principal products for both light and commercial vehicles include:

•
new starters and alternators;
•
remanufactured starters and alternators;
•
hybrid electric motors; and
•
multi-line products (primarily remanufactured), including steering gears, constant velocity (CV) axles, and brake calipers.

We sell our new starters, alternators and hybrid electric motors to U.S. and non-U.S. OEMs for factory installation on new vehicles. We sell remanufactured and new products to aftermarket customers, mainly retailers in North America, warehouse distributors in North America and Europe, and OEMs globally for the original equipment service ("OES"), market. We sell a small volume of remanufactured locomotive power assemblies in North America.

Financial Results

Net sales of $303.4 million for the first quarter of 2015 decreased 0.8% from $306.0 million for the same period in 2014 driven primarily by decreased volume and mix of $7.5 million, unfavorable foreign currency impacts of $6.6 million and negative pricing impact of $1.3 million. The net sales decrease was partially offset by a one time settlement of cores with a customer whose contract expired in January 2015, the net impact for this customer was an increase of $8.8 million in sales period over period. In addition, we had $4.0 million in sales of Maval Industries, L.L.C. ("Maval"), which we acquired in March of 2015. We had operating income of $28.5 million during the first quarter of 2015, an increase of $15.4 million compared to operating income of $13.1 million during the same period in 2014 primarily due to one time core settlements with customers of $22.0 million, partially offset by a decrease in volume and mix of $8.5 million and negative foreign currency impacts of $2.2 million.


25


Acquisition of Maval Manufacturing, Inc.

On February 19, 2015, we announced that we entered into a definitive agreement to acquire substantially all assets of Maval Manufacturing, Inc., a manufacturer, remanufacturer, and distributor of steering systems, components, and specialty products to the automotive service, original equipment power sports, and off-road specialty vehicle markets. Maval adds a new product line that is complimentary to our existing portfolio of products. The transaction closed effective March 1, 2015. In connection with the closing of the transaction, the assets were placed in Maval Industries, L.L.C., a wholly-owned subsidiary of the Company. The results of operations of Maval have been included in our consolidated results of operations since the acquisition date. As of March 31, 2015, the preliminary purchase price was $22.0 million, consisting of $18.3 million in cash and $3.7 million cash held in escrow.

Recent Trends and Conditions

General economic conditions

According to IHS Global Insight, global light duty vehicle production was up 1% and global medium and heavy duty vehicle production was down 5% during the first quarter of 2015 as compared to the same period in 2014. The increase in light duty vehicle production was driven primarily by a 6% increase in China production, a 2% increase in North America production and flat production in Europe. These increases were offset by a 4% decline in Korea production and a 17% decline in South America production. The increase in global medium and heavy duty production was driven primarily by a 19% increase in North American production and a 5% increase in Europe production offset by a 10% decrease in Korea production, a 7% decline in South America production and a 23% decline in China. The global automotive industry remains susceptible to uncertain economic conditions that could adversely impact consumer demand for vehicles.

Weather can affect aftermarket sales of starters and alternators. Extreme cold can damage starters and extreme heat can increase alternator failures. In both cases, this extreme weather can stimulate sales of aftermarket starters and alternators. In early 2014, the Northeast United States experienced severe cold weather which we believe had a positive impact on our results of operations.

Pricing pressures from customers

Pressure from our customers to reduce prices is characteristic of the automotive supply industry. Due to the competitive nature of the business, revised terms with customers may impact our ongoing profitability. We anticipate the impact of our pricing to be in the range of 1% to 3% consistent with prior years. We have taken and expect to continue to take steps to improve operating efficiencies and minimize or resist price reductions. We intend to maintain a disciplined approach to customer program pricing and may choose to exit programs with certain customers to protect our margins and cash flow. As a result, we may choose to no longer continue programs with certain customers due to unacceptable competitive pricing or terms. To this end, we have chosen not to meet the demands of a major aftermarket customer due to the negative pricing and working capital impact. While these decisions impact net sales and operating income in the short term, we believe this operating discipline will help to maximize the long-term profitability of the Company. Sales to this customer were $87.7 million for the year ended December 31, 2014. Upon expiration of the contract in January 2015, we invoiced the customer $41.5 million for the sale of cores that were reflected in core right of return in other noncurrent assets as of December 31, 2014, partially offsetting the expected reduction in sales in 2015. We collected a majority of this amount during the first quarter of 2015. Despite this likely reduction, this action will have a positive impact on our net income and cash position in 2015.

Material and commodity price fluctuations

Overall commodity price fluctuation is an ongoing concern for our business and has been an operational and financial focus. We have pass-through pricing agreements with a number of our customers that reduce our exposure to metals price volatility. Where metals price volatility is not covered by customer agreements, we utilize hedging instruments where appropriate, particularly related to copper, and consider their cost and their effectiveness. Average copper prices were lower for the quarter ended March 31, 2015 than for the same period in 2014.

In our remanufacturing operations, our principal inputs are cores, approximately 90% of which we receive in exchange for remanufactured units. Cores are used starters, alternators, or other multi-line products that customers exchange


26

when they purchase new products. If usable, we refurbish these cores into a remanufactured product that we sell to our aftermarket customers. When we are required to purchase cores rather than receiving them in exchange for remanufactured units, we are affected by market pricing of cores. The cost of cores fluctuates based on a number of factors, including supply and demand and the underlying value of the commodities that the cores contain.

Foreign currencies

During the first three months of 2015, approximately 33% of our net sales were transacted outside the United States. The functional currency of our foreign operations is generally the local currency, while our financial statements are presented in U.S. dollars. Foreign exchange has an unfavorable impact on net sales when the U.S. dollar is relatively strong as compared with foreign currencies and a favorable impact on net sales when the U.S. dollar is relatively weak as compared with foreign currencies. While we employ financial instruments to hedge certain exposures related to transactions from fluctuations in foreign currency exchange rates, these hedging actions do not entirely insulate us from currency effects and such programs may not always be available to us at economically reasonable costs. During the first three months of 2015, we experienced a $2.2 million negative impact from foreign currency effects on our reported earnings in U.S. dollars compared to the first three months of 2014, primarily resulting from the results denominated in other currencies, mainly the Mexican Peso, Brazilian Real and the Euro.

Operation efficiency efforts

In general, our long-term objectives are geared toward profitably growing our business, expanding our innovative technologies, winning new contracts, generating cash and strengthening our market position. On an ongoing basis, we evaluate our competitive position and determine what actions may be required to maintain and improve that position.

We believe that a continued focus on research, development and engineering activities is critical to maintaining our leadership position in the industry and meeting our long-term objectives. As a result, we continue our commitment to invest in facilities and infrastructure in order to support new business awards and achieve our long-term growth plans.

Although we believe that we have established a firm foundation for profitability, we continue to evaluate our global manufacturing and supply chain to further streamline our operations. We have completed the transfer of production from our Mezokovesd, Hungary plant to our other facilities in Hungary, Mexico and Korea and substantially completed the closure of our Mezokovesd, Hungary plant. In addition, during 2014, we consolidated our Mexico operations and announced the planned closure of our operations in New York, obtained from the USA Industries acquisition, to better manage our cost structure.

Non-U.S. GAAP measurements - Adjusted EBITDA

Adjusted EBITDA is not a measure of performance defined in accordance with accounting principles generally accepted in the United States (U.S. GAAP). We use adjusted EBITDA as a supplement to our U.S. GAAP results in evaluating our business. Other companies in our industry define adjusted EBITDA differently from us and, as a result, our measure is not comparable to similarly titled measures used by other companies in our industry.

We define adjusted EBITDA as net income attributable to common stockholders before interest expense–net, income tax expense, depreciation and amortization, stock-based compensation expense, restructuring, other charges and other impairment charges, certain purchase accounting finished goods inventory step-up costs, litigation settlements and related legal fees, Transaction related fees, and other adjustments as set forth in the reconciliations provided below. All periods presented conform to this definition.

Adjusted EBITDA is one of the key factors upon which we assess performance. As an analytical tool, adjusted EBITDA assists us in comparing our performance over various reporting periods on a consistent basis because it excludes items that we do not believe reflect our ongoing operating performance.

Adjusted EBITDA should not be considered as an alternative to net income as an indicator of our performance, as an alternative to net cash provided by operating activities as a measure of liquidity, or as an alternative to any other measure prescribed by U.S. GAAP. There are limitations to using non-U.S. GAAP measures such as adjusted EBITDA. Although we believe that adjusted EBITDA may make an evaluation of our operating performance more consistent because it removes items that do not reflect our ongoing operations, adjusted EBITDA excludes certain financial information that some may consider important in evaluating our performance.


27


The following table sets forth a reconciliation of adjusted EBITDA to its most directly comparable U.S. GAAP measure, net income:
 

 
Three months ended March 31,
 
 (In thousands)
 
2015


2014


 
 
 
 
Net income
 
$
16,570


$
4,944

Adjustments:
 
 
 
 
Interest expense–net
 
5,011


5,254

Income tax expense
 
6,928


2,908

Depreciation and amortization
 
17,037


18,057

Stock-based compensation expense
 
1,316


1,219

Restructuring and other charges
 
73


314

Litigation settlements and related legal fees
 
—


737

Purchase accounting finished goods inventory step-up
 
587


2,509

Other nonrecurring adjustments (a)
 
(21,903
)

(3
)
Total adjustments
 
9,049

 
30,995

Adjusted EBITDA
 
$
25,619

 
$
35,939

(a) Represents the elimination of the $22.0 million net impact of one-time core settlements with customers in 2015 and (gain)/loss on sale of fixed assets in both periods.
 


28

Results of operations

The following table presents our consolidated results of operations for the three months ended March 31, 2015 compared to the three months ended March 31, 2014:
Three months ended March 31,
 
 
Increase/ (Decrease)
 
% Increase/ (Decrease)

(In thousands)
2015

 
2014

 
 
 
 
 
 
 
 
 
Net sales
$
303,411

 
$
306,005

 
$
(2,594
)
 
(0.8
)%
Cost of goods sold
241,409

 
259,654

 
(18,245
)
 
(7.0
)%
Gross profit
62,002

 
46,351

 
15,651

 
33.8
 %
Selling, general, and administrative expenses
33,420

 
32,931

 
489

 
1.5
 %
Restructuring and other charges
73

 
314

 
(241
)
 
(76.8
)%
Operating income
28,509

 
13,106

 
15,403

 
117.5
 %
Interest expense–net
5,011

 
5,254

 
(243
)
 
(4.6
)%
Income before income taxes
23,498

 
7,852

 
15,646

 
199.3
 %
Income tax expense
6,928

 
2,908

 
4,020

 
138.2
 %
Net income
$
16,570

 
$
4,944

 
$
11,626

 
235.2
 %

Net sales

Net sales decreased by $2.6 million, or (0.8)%, to $303.4 million for the three months ended March 31, 2015, from $306.0 million for the same period in 2014. The decrease in net sales was driven by decreased volume and mix of $7.5 million, a negative pricing impact of $1.3 million, and unfavorable foreign currency translation of $6.6 million. The net sales decrease was partially offset by a one time settlement of cores with a customer whose contract expired in January 2015, the net impact for this customer was an increase of $8.8 million in sales period over period. In addition, we had $4.0 million in sales of Maval, which we acquired in March of 2015.
  
Net sales of new starters and alternators to OEMs in the three months ended March 31, 2015 decreased in light vehicle products which was offset by an increase in commercial vehicle products. Net sales of light vehicle starters and alternators to OEMs were $85.4 million in the three months ended March 31, 2015, a $3.7 million, or 4.2%, decrease compared to $89.1 million in the same period in 2014. These reductions are mainly driven by the end of certain North American programs and softening demand in North America and China, offset by new programs and growth in Hyundai. Net sales of commercial vehicle starters and alternators were $47.2 million in the three months ended March 31, 2015, a $1.1 million, or 2.4%, increase compared to $46.1 million in the same period in 2014. We also sold $2.6 million of hybrid electric motors to OEMs in the three months ended March 31, 2015, as compared to $3.9 million in the same period in 2014.

Net sales of light vehicle rotating electrical products to aftermarket customers were $107.3 million in the three months ended March 31, 2015, a $4.0 million, or 3.9% increase from $103.3 million in the same period in 2014. The increase is primarily a result of $8.8 million of core sales in connection with the expiration of a contract described above, net of loss of business with that customer, offset by lower European sales due to foreign exchange. Net sales of starters and alternators for commercial vehicles to aftermarket customers were $44.3 million in the three months ended March 31, 2015, a decrease of $0.7 million, or 1.6% from $45.0 million in the same period in 2014.

Net sales of remanufactured locomotive power trains and multi-line products, which consist of a small volume of remanufactured steering gears, axles, and brake calipers that we sell in the United States and Europe to aftermarket customers, were $15.8 million in the three months ended March 31, 2015, a $0.8 million, or 5.3% increase from the same period in 2014 as sales of the Maval acquisition of $4.0 million and increased locomotive sales of $1.2 million offset reductions in European sales of multi-line products primarily due to foreign exchange.



29

Cost of goods sold

Cost of goods sold primarily represents materials, labor and overhead production costs associated with our products and production facilities. Cost of goods sold was $241.4 million in the three months ended March 31, 2015 and $259.7 million in the three months ended March 31, 2014, a decrease of $18.2 million, or 7.0%. The decrease was mainly due to lower volumes excluding one time settlements of cores with customers. The core settlements in the first quarter of 2015 resulted in a 5.2% increase in margins during the quarter ended March 31, 2015. In addition, we also recorded $0.6 million related to the step-up of finished goods inventory associated with the Maval acquisition during the three months ended March 31, 2015, as compared to $2.5 million related to the USA Industries acquisition in the three months ended March 31, 2014. As a result, cost of goods sold as a percentage of net sales decreased during the three months ended March 31, 2015 to 79.6%, from 84.9% in 2014.

Gross profit

As a result of the above changes in net sales and cost of goods sold, gross profit as a percentage of net sales increased to 20.4% for the three months ended March 31, 2015 as compared to 15.1% for the three months ended March 31, 2014.

Selling, general and administrative expenses

For the three months ended March 31, 2015, selling, general and administrative expenses, or SG&A, was $33.4 million, which represents an increase of $0.5 million, or 1.5%, from selling, general and administrative expenses of $32.9 million for the three months ended March 31, 2014. The increase was primarily related to the additional selling, general and administrative expenses associated with the Maval acquisition.
  
Restructuring and other charges

Restructuring and other charges decreased by $0.2 million, to $0.1 million for the three months ended March 31, 2015 compared to $0.3 million for the same period in 2014. The restructuring charges for the three months ended March 31, 2015 related to ongoing restructuring actions in our Mezokovesd, Hungary facility. The restructuring charges during the three months ended March 31, 2014 related to the ongoing activities of the closure of our Mezokovesd, Hungary facility and other operational restructuring efforts in our Mexico operations.

Interest expense–net

Interest expense–net decreased by $0.2 million to $5.0 million for the three months ended March 31, 2015 from $5.3 million in the same period in 2014. The decrease was primarily driven by a $0.5 million decrease in interest expense associated with lower factored receivables, partially offset by unfavorable changes in the valuation of our undesignated interest rate swap contracts of $0.1 million and interest expense on our Asset-Based Revolving Credit Facility of $0.1 million.

Income tax expense

Income tax expense increased by $4.0 million to $6.9 million for the three months ended March 31, 2015 from $2.9 million for the same period in 2014. The increase is primarily driven by the increase in income before taxes of $15.6 million. Our effective tax rate was decreased in 2015 due to tax credits in the first quarter of 2015, as well as the impact of an increase in our valuation allowance for certain state tax assets in 2014.

Net income

Our net income for the three months ended March 31, 2015 was $16.6 million as compared to $4.9 million for the three months ended March 31, 2014, for the reasons described above.



30

Liquidity and capital resources

Our primary sources of liquidity are cash flows generated from operations and the various borrowing and factoring arrangements described below, including our revolving credit facilities. We actively manage our working capital and associated cash requirements and continually seek more effective use of cash.

We believe that cash generated from operations, together with the amounts available under financing arrangements discussed below, as well as cash on hand, will be adequate to meet our liquidity requirements for at least the next twelve months. These requirements generally consist of working capital, capital expenditures, research and development programs, debt service, cash taxes and pension contributions. If we make a large acquisition or engage in certain other strategic transactions, we may need to enter into additional borrowing arrangements or obtain additional equity capital. No assurance can be given that such funds would be available to us at such time.

As of March 31, 2015, we had cash and cash equivalents on hand of $87.3 million of which $81.3 million was held by our subsidiaries outside of the U.S. Cash held by these subsidiaries is used to fund foreign operational activities and future investments. If these funds were repatriated to the U.S., we would be required to provide for U.S. federal and state income tax, foreign income tax, and foreign withholding taxes. We have not provided for such taxes as it is our intention that those funds are permanently reinvested outside the U.S. and our current plans do not demonstrate a need to repatriate them to fund our U.S. operations.

Total liquidity as of March 31, 2015, including cash on hand, availability under the ABL Second Amendment, and availability under short-term debt credit facilities, was $155.9 million.

Cash flows

The following table shows the components of our cash flows for the periods presented:
 
Three months ended March 31,
 
 (In thousands)
2015

 
2014

 
 
 
 
Net cash provided by (used in):
 
 
 
Operating activities before changes in operating assets and liabilities
$
40,831

 
$
20,318

Changes in operating assets and liabilities
(28,600
)
 
(29,757
)
Operating activities
12,231

 
(9,439
)
Investing activities
(27,372
)
 
(46,865
)
Financing activities
18,969

 
(2,312
)

Cash flows-Operating activities

Cash provided by operating activities was $12.2 million versus cash used in operations of $9.4 million for the three months ended March 31, 2015 and 2014, respectively. The increase in operating cash flows from 2014 was primarily a result of the higher net income as discussed above.

Operating cash flows were increased primarily due to the collection of $40.5 million related to a core settlement in connection with a contract expiration in the three months ended March 31, 2015. We experienced a decrease in operating cash outflows for expenditures on inventory replenishment of approximately $7.5 million in 2015 to due to the decreased sales levels.  Operating cash flows increased by approximately $11.3 million as a result of extended vendor payment terms, as well as mix of purchases increasing our days payable outstanding during the  three months ended March 31, 2015.  Cash payments for restructuring charges were $0.9 million lower in the three months ended March 31, 2015 due to the nature and timing of restructuring actions. Additionally, we made $2.6 million less payments on warranty claims in the three months ended March 31, 2015 as compared to the payments made in the same period in 2014. During the quarter ended March 31, 2015, we made a final $16.0 million payment related to the Tecnomatic litigation settlement.



31

Cash paid for interest for the three months ended March 31, 2015 was $4.5 million as compared to $4.9 million for the three months ended March 31, 2014, a decrease of $0.4 million. Cash payments were lower primarily due to lower accounts receivable factoring during 2015.

Cash paid for taxes for the three months ended March 31, 2015 was $2.9 million, compared to $4.9 million for the three months ended March 31, 2014, an decrease of $2.0 million. The reason for the increase was primarily due to lower foreign cash payments as a result of lower foreign income and tax credits in 2015.

Cash flows-Investing activities

Cash used in investing activities for the three months ended March 31, 2015 was $27.4 million representing a $19.5 million decrease over the $46.9 million cash used in investing activities for the three months ended March 31, 2014. During first quarter of 2015, we completed our acquisition of Maval for $22.0 million in cash. During the first quarter of 2014, we completed our acquisition of USA Industries for approximately $40.4 million, net of cash acquired.
 
Cash flows-Financing activities

Cash provided by financing activities for the three months ended March 31, 2015 was $19.0 million, compared to cash used in financing activities of $2.3 million for the three months ended March 31, 2014. During the three months ended March 31, 2015, we paid $3.3 million in quarterly cash dividends to our common stockholders, as declared by our Board of Directors, which was consistent with quarterly cash dividends paid in the prior year period. We also repurchased $1.1 million of our common stock to satisfy tax withholding obligations of participants under our stock-based compensation programs during the three months ended March 31, 2015, as compared to $2.5 million during the three months ended March 31, 2014. In connection with the vesting of restricted stock grants during the first quarter of 2015, we also recognized an excess tax benefit of $0.2 million, compared to a $1.1 million excess tax benefit recorded in the same period in 2014. During the quarter ended March 31, 2014, we had Parent company net investments of $0.4 million.

During the three months ended March 31, 2015, we borrowed $79.3 million and also repaid $53.7 million on our Asset-Based Revolving Credit Facility. These borrowings were for funding for general corporate working capital purposes including a $16.0 million payment related to a previously announced litigation settlement. In addition, we funded the acquisition of Maval through borrowings under the Asset-Based Revolving Credit Facility. The change in short-term debt during the three months ended March 31, 2015 was due to borrowings on our revolving credit facilities. In March 2014, we entered into a revolving credit facility in China with one bank for $10.0 million of which $3.0 million was borrowed and remained outstanding at March 31, 2015. We repaid $2.9 million against our revolving credit facility in China during the quarter ended March 31, 2015.

Financing arrangements

Our primary financing facilities are an Asset-Based Revolving Credit Facility (the "ABL Facility") and a Term B Loan (the "Term B Loan").

Asset-Based Revolving Credit Facility

The ABL Facility bears an interest rate to a defined Base Rate plus 0.50%-1.00% per year or, at our election, at an applicable LIBOR Rate plus 1.50%-2.00% per year and is paid monthly. The ABL Facility maintains the current availability at $95,000,000, but may be increased, with the consent of lenders, by $20,000,000. The ABL Facility is secured by substantially all domestic accounts receivable and inventory. At March 31, 2015, the ABL Facility balance was $25,550,000. Based upon the collateral supporting the ABL Facility, the amount borrowed, and the outstanding letters of credit of $15,712,000, there was additional availability for borrowing of $50,665,000. We will incur an unused commitment fee of 0.375% on the unused amount of commitments under the ABL Facility. The ABL Facility expires September 5, 2018.

Term B Loan

The Term B Loan bears an interest rate consisting of LIBOR (subject to a floor of 1.25%) plus 3.00% per year with an original issue discount of $750,000. The Term B Loan also contains an option to increase the borrowing provided certain conditions are satisfied, including maintaining a maximum leverage ratio. The Term B Loan is secured by a first priority lien on the stock of our subsidiaries and substantially all domestic assets other than accounts receivable and


32

inventory pledged to the ABL Facility. The outstanding principal balance of the Term B Loan was $293.25 million as of March 31, 2015. Principal payments in the amount of $750,000 are due at the end of each calendar quarter with termination and final payment no later than March 5, 2020. The Term B Loan is subject to an excess cash calculation which may require the payment of additional principal on an annual basis. At March 31, 2015, the average borrowing rate, including the impact of the interest rate swaps, was 4.25%.

Both the ABL Facility and the Term B Loan contain various covenants and representations that are customary for transactions of this nature. We are in compliance with all covenants as of March 31, 2015. The credit agreements contain various restrictive covenants, which include, among other things: (i) a maximum leverage ratio; (ii) a minimum interest coverage ratio; (iii) mandatory prepayments upon certain asset sales and debt issuances; and (iv) limitations on the payment of dividends in excess of a specified amount. The credit agreements also includes events of default customary for a facilities of these types, including a cross-default provision under which the lenders may declare the loan in default if we (i) fail to make a payment when due under any debt having a principal amount greater than $5 million or (ii) breach any other covenant in any such debt as a result of which the holders of such debt are permitted to accelerate its maturity.

See Note 12 to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Report for a description of and for more details on the ABL Facility and the Term B Loan.

Under normal working capital utilization of liquidity, portions of the amounts drawn under our credit facilities typically are paid back throughout the month as cash from customers is received. We could then draw upon such facilities again for working capital purposes in the same or succeeding months.

Non-U.S. borrowing arrangements

At March 31, 2015, our subsidiaries outside the U.S. also had various uncommitted credit facilities, of which $18.0 million was not utilized. We expect that these additional facilities will be drawn on from time to time for normal working capital purposes and to fund capital expenditures in support of operations and planned expansions in certain regions. See Note 12 to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Report for a description of our short term debt.

Factoring agreements

We have also entered into factoring agreements with various U.S., Korean and European financial institutions to sell our accounts receivable under nonrecourse agreements. These transactions are accounted for as a reduction in accounts receivable because the agreements transfer effective control over, and risk related to, the receivables to the buyers. We do not service any factored accounts after the factoring has occurred. We utilize factoring arrangements as an integral part of our financing. See Note 4 to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Report for a description of our factoring arrangements.

Share Repurchase Program

On February 18, 2015, our Board of Directors approved a share repurchase program, effective February 23, 2015, under which we may repurchase up to $100,000,000 of our outstanding common stock shares. Purchases may be made from time to time in the open market at prevailing prices or in privately negotiated transactions through February 28, 2018. There were no purchases of our common stock under this program during the three months ended March 31, 2015.

Contractual obligations

There were no material changes in our contractual obligations during the three months ended March 31, 2015 from what was previously described in our Annual Report on Form 10-K for the year ended December 31, 2014 other than related to the borrowings against our ABL Facility discussed above and leases described below.

In connection with the Maval acquisition, we acquired operating leases for two facilities in Twinsburg, Ohio, which require future cash payments of $1.5 million over the remaining lease terms through 2018.


33


Contingencies

Information concerning contingencies are contained in Note 19 to our unaudited condensed consolidated financial statements included in Part I, Item 1 of this Report is incorporated herein by reference.

Off-Balance sheet arrangements

We do not have any material off-balance sheet arrangements.  

Accounting pronouncements

For a discussion of certain adopted or pending accounting pronouncements, see Note 2 to our unaudited condensed consolidated financial statements included in Part I, Item 1 of this Report, which is incorporated herein by reference.

Critical accounting policies and estimates

Our accounting policies require management to make significant estimates and assumptions using information available at the time the estimates are made. Actual amounts could differ significantly from these estimates. See Note 2 to our unaudited condensed consolidated financial statements included in Part I, Item 1 of this Report for a summary of the significant accounting policies and methods used in the preparation of our unaudited condensed consolidated financial statements. A detailed description of our significant accounting policies is included in Note 2 to our audited consolidated financial statements included in our Annual Report for Form 10-K for the year ended December 31, 2014. There have been no significant changes in our critical accounting policies and estimates during the three months ended March 31, 2015.



34

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to the quantitative and qualitative information about our market risks from those previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2014, filed with the U.S. Securities and Exchange Commission on March 2, 2015.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the supervision and participation of our President and Chief Executive Officer (principal executive officer) and our Senior Vice President and Chief Financial Officer (principal financial officer), has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) as of March 31, 2015. Based on that evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective, at the reasonable assurance level, as of March 31, 2015.

Changes in Internal Controls

There have not been any changes in our internal control over financial reporting as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) during the quarter ended March 31, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. During the quarter ended March 31, 2015, the Company completed the acquisition of Maval and is currently integrating Maval into its operations, compliance programs, and internal control processes. As permitted by SEC rules and regulations, the Company has excluded Maval from management's evaluation of internal control over financial reporting as of March 31, 2015.

PART II - Other Information
Item 1. Legal Proceedings
 The information concerning the legal proceedings involving the Company contained in Note 19 to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Report is incorporated herein by reference.

Item 1A. Risk Factors
We face a number of significant risks and uncertainties in connection with our operations. Our business, results of operations and financial condition could be materially adversely affected by these risk factors. There have been no material changes to Risk Factors previously reported in our Annual Report on Form 10-K for the year ended December 31, 2014, filed with the U.S. Securities and Exchange Commission on March 2, 2015.



35

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

We withheld the following shares of common stock to satisfy tax withholding obligations during the quarter ended March 31, 2015 from the distributions described below. These shares may be deemed to be “issuer purchases” of shares that are required to be disclosed pursuant to this Item.

Period
 
Total number of shares purchased (1)
 
Average price paid per share
 
Total number of shares purchased as part of publicly announced plans or programs (2)
 
Maximum number (or approximate dollar value) of shares that may yet by purchased under the plans or programs (2)
1/1/2015 - 1/31/2015
 
—

 
$
—

 
—

 
$
—

2/1/2015 - 2/28/2015
 
39,509

 
22.97

 
—

 
100,000,000

3/1/2015 - 3/31/2015
 
8,263

 
22.95

 
—

 
100,000,000

Total
 
47,772

 
$
22.97

 
—

 
$
100,000,000


(1)
Shares purchased during the three months ended March 31, 2015 were in connection with employee payroll tax withholding for restricted stock vesting distributions.

(2)
On February 18, 2015, the Board of Directors approved a share repurchase program, effective February 23, 2015, under which we may repurchase up to $100,000,000 of our outstanding common stock shares. Purchases may be made from time to time in the open market at prevailing prices or in privately negotiated transactions through February 28, 2018. There were no purchases of our common stock under this program during the three months ended March 31, 2015.

Item 5. Other Information

On April 30, 2015, the Company filed with the Secretary of State of the State of Delaware a certificate of correction (the “Certificate of Correction”) correcting a typographical error in its Amended and Restated Certificate of Incorporation. The Certificate of Correction became effective upon filing.

A copy of the Certificate of Correction, as filed with the Secretary of State of the State of Delaware on April 30, 2015, is attached as Exhibit 3.1 to this Quarterly Report on Form 10-Q and is incorporated herein by reference. 

On April 30, 2015, the Company filed with the Secretary of State of the State of Delaware a Restated Certificate of Incorporation (the “Restated Certificate”). The Restated Certificate restates the Company’s Amended and Restated Certificate of Incorporation to reflect the changes in the Certificate of Correction and the Certificate of Amendment, filed with the Secretary of State of the State of Delaware on December 31, 2014, changing the name of the Company from “New Remy Holdco Corp.” to “Remy International, Inc.”  The Restated Certificate became effective upon filing.

A copy of the Restated Certificate, as filed with the Secretary of State of the State of Delaware on April 30, 2015, is attached as Exhibit 3.2 to this Quarterly Report on Form 10-Q and is incorporated herein by reference. 



36

Item 6.    Exhibits

Exhibit Index
 
 
Incorporated by reference
 
Exhibit
Number
Description
Form
Exhibit
Filing Date
Filed herewith
3.1
Certificate of Correction of Amended and Restated Certificate of Incorporation
 
 
 
X
3.2
Restated Certificate of Incorporation
 
 
 
X
3.3
Second Amended and Restated Bylaws, as currently in effect
8-K
EX-3.3
2/4/2015
 
4.1
Specimen common stock certificate
 
 
 
X
10.1
Support Agreement, dated as of February 3, 2015, by and among H Partners Group and Remy International, Inc.
8-K
EX-10.1
2/4/2015
 
*10.2
Employment Agreement, effective as of February 20, 2015, by and between Remy International, Inc. and Albert E. VanDenBergh
8-K
EX-10.1
1/23/2015
 
*10.3
Employment Agreement, effective as of May 1, 2015, by and between Remy International, Inc. and Victor A. Polen
8-K
EX-10.1
5/1/2015
 
*10.4
Employment Agreement, effective as of April 1, 2015, by and between Remy International, Inc. and David G. Krall
 
 
 
X
*10.5
2015 Form of Notice of Restricted Stock Grant for Directors and Restricted Stock Award Agreement under the Remy International, Inc. Omnibus Incentive Plan
 
 
 
X
*10.6
2015 Form of Notice of Stock Option Grant for Directors and Stock Option Agreement under the Remy International, Inc. Omnibus Incentive Plan
 
 
 
X
*10.7
2015 Form of Notice of Restricted Stock Grant for Employees and Restricted Stock Award Agreement under the Remy International, Inc. Omnibus Incentive Plan
 
 
 
X
*10.8
2015 Form of Notice of Stock Option Grant for Employees and Stock Option Agreement under the Remy International, Inc. Omnibus Incentive Plan
 
 
 
X
*10.9
Form of First Amendment to Remy International, Inc. Omnibus Incentive Plan Restricted Stock Award Agreements for Employees
 
 
 
X
31.1
Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
 
 
X
31.2
Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
 
 
X
32.1
Certification of the Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
 
 
 
X
32.2
Certification of the Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
 
 
 
X
101.INS
XBRL Instance Document
 
 
 
X
101.SCH
XBRL Taxonomy Extension Schema Document
 
 
 
X
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
 
 
 
X
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
 
 
 
X
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
 
 
 
X
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
 
 
 
X

* Indicates a management contract or compensatory plan or arrangement.




37

 
SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

    
 
 
Remy International, Inc.
 
 
(Registrant)
 
 
 
Date: May 6, 2015
 
By: /s/ Albert E. VanDenBergh
 
 
 
 
 
Albert E. VanDenBergh
 
 
Senior Vice President and Chief Financial Officer
 
 
(Principal Financial Officer)
 
 
 
 
 
 



38


Exhibit 3.1

CERTIFICATE OF CORRECTION
OF
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
REMY INTERNATIONAL, INC.


Remy International, Inc. (the “Corporation”), a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware (the “DGCL”), in accordance with the provisions of Section 103 of the DGCL, does hereby certify:

1.
The name of the Corporation is “Remy International, Inc.”

2.
That the Corporation was formed under the name “New Remy Holdco Corp.” by the filing of its original Certificate of Incorporation with the Secretary of State of the State of Delaware on August 27, 2014 and an Amended and Restated Certificate of Incorporation (the “Amended and Restated Certificate”) was filed with the Secretary of State of the State of Delaware on December 31, 2014 and a Certificate of Amendment to the Amended and Restated Certificate was filed with the Secretary of State of the State of Delaware on December 31, 2014, and that said Amended and Restated Certificate requires correction as permitted by Section 103 of the DGCL.

3.
The inaccuracies or defects of said Amended and Restated Certificate to be corrected hereby are as follows: (i) the term of the initial Class III directors as set forth in Section 5.1 should expire at the 2017 annual meeting of stockholders and (ii) successors to the class of directors whose term expires at each annual meeting shall be elected for a three-year term beginning with the 2015 annual meeting as set forth in Section 5.l.

4.
Section 5.1 of the Amended and Restated Certificate is hereby corrected to read, in its entirety, as follows:
“Section 5.1    The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. The Board of Directors shall consist of not less than one nor more than fourteen members with the exact number of directors to be determined from time to time exclusively by resolution adopted by the Board of Directors. The directors, other than those who may be elected by the holders of any series of Preferred Stock as set forth in this Certificate of Incorporation, shall be divided into three classes, designated Class I, Class II and Class III. Each class shall consist, as nearly as may be possible, of one-third of the total number of directors constituting the entire

1


Board of Directors. The Board of Directors shall be authorized to assign the members of the Board of Directors already in office to such classes effective at the time such classification becomes effective. The term of the initial Class I directors shall terminate on the date of the 2015 annual meeting of stockholders; the term of the initial Class II directors shall terminate on the date of the 2016 annual meeting of stockholders and the term of the initial Class III directors shall terminate on the date of the 2017 annual meeting of stockholders. At each annual meeting of stockholders beginning in 2015, successors to the class of directors whose term expires at that annual meeting shall be elected for a three-year term.”
5.
All other provisions of the Amended and Restated Certificate remain unchanged.

IN WITNESS WHEREOF the undersigned officer of the Corporation has executed this certificate on behalf of the Corporation this 30th day of April, 2015.


REMY INTERNATIONAL, INC.                

By: /s/ David G. Krall            
Name:     David G. Krall
Title:
Senior Vice President and General Counsel
        










    

2



Exhibit 3.2
RESTATED CERTIFICATE OF INCORPORATION
OF
REMY INTERNATIONAL, INC.

Remy International, Inc., a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), does hereby certify as follows:
First: The Corporation was incorporated under the name “New Remy Holdco Corp.” by the filing of its original Certificate of Incorporation with the Secretary of State of the State of Delaware on August 27, 2014.
Second: This Restated Certificate of Incorporation has been duly adopted in accordance with the provisions of Section 245 of the General Corporation Law of the State of Delaware.
Third: This Restated Certificate of Incorporation only restates and integrates and does not further amend the provisions of the Corporation’s Certificate of Incorporation as heretofore amended or supplemented, and there is no discrepancy between those provisions and the provisions of this Restated Certificate of Incorporation.
Fourth: The text of such Certificate of Incorporation is hereby restated to read in its entirety as follows:
ARTICLE I
NAME
The name of the Corporation is “Remy International, Inc.”
ARTICLE II
REGISTERED AGENT
The address of the registered office of the Corporation in the State of Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company.
ARTICLE III
PURPOSE
The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may now or hereafter be organized under the General Corporation Law of the State of Delaware (the “DGCL”).




ARTICLE IV
CAPITAL STOCK
Section 4.1.    The total number of shares of all classes of stock which the Corporation shall have authority to issue is 280,000,000, consisting of 240,000,000 shares of Common Stock, par value $0.0001 per share (“Common Stock”), and 40,000,000 shares of preferred stock, par value $0.0001 per share (“Preferred Stock”). The number of authorized shares of Common Stock or Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority in voting power of the stock of the Corporation entitled to vote generally in the election of directors, irrespective of the provisions of Section 242(b)(2) of the DGCL (or any successor provision thereto), voting together as a single class, without a separate vote of the holders of the class or classes the number of authorized shares of which are being increased or decreased, unless a vote by any holders of one or more series of Preferred Stock is required by the express terms of any series of Preferred Stock as provided for or fixed pursuant to the provisions of Section 4.2 of this Certificate of Incorporation.
Section 4.2.    Subject to the approval by holders of shares of any series of Preferred Stock, to the extent such approval is required, shares of Preferred Stock of the Corporation may be issued from time to time in one or more series, each of which series shall have such distinctive designation and title as shall be fixed by the Board of Directors of the Corporation (the “Board of Directors”) prior to the issuance of any shares thereof. The Board of Directors is hereby authorized to fix the designation and title for each such series of Preferred Stock, to fix the voting powers, whether full or limited, or no voting powers, and such powers, preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof, and to fix the number of shares constituting such series (but not below the number of shares thereof then outstanding), in each case as shall be stated in such resolution or resolutions providing for the issue of such series of Preferred Stock as may be adopted from time to time by the Board of Directors prior to the issuance of any shares thereof pursuant to the authority hereby expressly vested in it.
Section 4.3.    Except as otherwise expressly required by law or provided in this Certificate of Incorporation, and subject to any voting rights provided to holders of Preferred Stock at any time outstanding, the holders of any outstanding shares of Common Stock shall vote together as a single class on all matters with respect to which stockholders are entitled to vote under applicable law, this Certificate of Incorporation or the Amended and Restated Bylaws of the Corporation (the “Bylaws”), or upon which a vote of stockholders is otherwise duly called for by the Corporation. At each annual or special meeting of stockholders, each holder of record of shares of Common Stock on the relevant record date shall be entitled to cast one vote in person or by proxy for each share of the Common Stock standing in such holder’s name on the stock transfer records of the Corporation.
Section 4.4.    Notwithstanding Section 4.3, except as otherwise required by law, holders of Common Stock, as such, shall not be entitled to vote on any amendment of this Certificate of Incorporation (including any amendment of any Preferred Stock certificate of designations) that

2


alters or changes the powers, preferences, rights or other terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other series of Preferred Stock, to vote thereon as a separate class by law, by this Certificate of Incorporation or by the resolution or resolutions adopted by the Board of Directors designating the rights, powers and preferences of such Preferred Stock.
ARTICLE V
DIRECTORS
Section 5.1.    The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. The Board of Directors shall consist of not less than one nor more than fourteen members with the exact number of directors to be determined from time to time exclusively by resolution adopted by the Board of Directors. The directors, other than those who may be elected by the holders of any series of Preferred Stock as set forth in this Certificate of Incorporation, shall be divided into three classes, designated Class I, Class II and Class III. Each class shall consist, as nearly as may be possible, of one-third of the total number of directors constituting the entire Board of Directors. The Board of Directors shall be authorized to assign the members of the Board of Directors already in office to such classes effective at the time such classification becomes effective. The term of the initial Class I directors shall terminate on the date of the 2015 annual meeting of stockholders; the term of the initial Class II directors shall terminate on the date of the 2016 annual meeting of stockholders and the term of the initial Class III directors shall terminate on the date of the 2017 annual meeting of stockholders. At each annual meeting of stockholders beginning in 2015, successors to the class of directors whose term expires at that annual meeting shall be elected for a three-year term.
Section 5.2.    If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, and any additional director of any class elected to fill a vacancy resulting from an increase in such class shall hold office for a term that shall coincide with the remaining term of that class, but in no case will a decrease in the number of directors shorten the term of any incumbent director. A director shall hold office until the annual meeting for the year in which his term expires and until his successor shall be elected and shall qualify for office, subject, however, to prior death, resignation, retirement, disqualification or removal from office.
Any vacancy on the Board of Directors, however resulting, may be filled only by an affirmative vote of the majority of the directors then in office, even if less than a quorum, or by an affirmative vote of the sole remaining director. Any director elected to fill a vacancy shall hold office for a term that shall coincide with the term of the class to which such director shall have been elected.
Section 5.3.    Notwithstanding any of the foregoing provisions, whenever the holders of any one or more series of Preferred Stock issued by the Corporation shall have the right, voting separately by series (including voting with any other such series), to elect directors at an annual or special meeting of stockholders, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the terms of this Certificate of Incorporation,

3


or the resolution or resolutions adopted by the Board of Directors pursuant to Section 4.2 of this Certificate of Incorporation applicable thereto, and such directors so elected shall not be divided into classes pursuant to this Article V unless expressly provided by such terms.
ARTICLE VI
BYLAWS
In furtherance and not in limitation of the powers conferred by law, the Board of Directors is expressly authorized and empowered to adopt, amend or repeal the Bylaws of the Corporation. The affirmative vote of a majority of the directors then in office shall be required in order for the Board to adopt, amend or repeal any Bylaws. The stockholders shall also have power to adopt, amend or repeal the Bylaws of the Corporation; provided, however, that, in addition to any affirmative vote of the holders of any series of Preferred Stock required by law, by this Certificate of Incorporation or by the resolution or resolutions adopted by the Board of Directors designating the rights, powers and preferences of such Preferred Stock, Bylaws of the Corporation may not be adopted, amended or repealed by the stockholders unless approved by the affirmative vote of holders of two-thirds of the outstanding capital stock which by its terms may be voted on all matters submitted to stockholders of the Corporation generally, voting as a single class.
ARTICLE VII
REMOVAL OF DIRECTORS
Subject to the rights, if any, of the holders of shares of Preferred Stock then outstanding, any or all of the directors of the Corporation may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of a majority of the outstanding capital stock of the Corporation then entitled to vote generally in the election of directors, considered for purposes of this Article VII as one class.
ARTICLE VIII
ELECTION OF DIRECTORS
Elections of directors at an annual or special meeting of stockholders need not be by written ballot unless and to the extent the Bylaws so provide.
ARTICLE IX
WRITTEN CONSENT OF STOCKHOLDERS
Any action required or permitted to be taken by stockholders may be effected only at a duly called annual or special meeting of stockholders and may not be effected by a written consent or consents by stockholders in lieu of such a meeting.

4


ARTICLE X
SPECIAL MEETINGS
Special meetings of the stockholders of the Corporation for any purposes may be called at any time by a majority vote of the Board of Directors or the Chairman of the Board or Chief Executive Officer of the Corporation. Except as required by law or provided by resolutions adopted by the Board of Directors designating the rights, powers and preferences of any Preferred Stock, special meetings of the stockholders of the Corporation may not be called by any other person or persons.
ARTICLE XI
OFFICERS
The officers of the Corporation shall be chosen in such manner, shall hold their offices for such terms and shall carry out such duties as are determined solely by the Board of Directors, subject to the right of the Board of Directors to remove any officer or officers at any time with or without cause.
ARTICLE XII
INDEMNITY
Section 12.1.    Limitation of Personal Liability.
No person who is or was a director of the Corporation shall be personally liable to the Corporation or any of its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted by the DGCL as the same exists or hereafter may be amended. If the DGCL is hereafter amended to authorize corporate action further limiting or eliminating the liability of directors, then the liability of a director to the Corporation or its stockholders shall be limited or eliminated to the fullest extent permitted by the DGCL, as so amended. Any repeal or amendment of this Section 12.1 by the stockholders of the Corporation or by changes in law, or the adoption of any other provision of this Certificate of Incorporation inconsistent with this Section 12.1 will, unless otherwise required by law, be prospective only (except to the extent such amendment or change in law permits the Corporation to further limit or eliminate the liability of directors) and shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or amendment or adoption of such inconsistent provision with respect to acts or omissions occurring prior to such repeal or amendment or adoption of such inconsistent provision.
Section 12.2.    Indemnification.
(a)    Each person who is or was made a party or is threatened to be made a party to or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a “proceeding”),

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including, without limitation, proceedings by or in the right of the Corporation to procure a judgment in its favor, by reason of the fact that he or she is or was a director or officer of the Corporation or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (hereinafter a “Covered Person”), whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent, or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized or permitted by applicable law, as the same exists or may hereafter be amended, against all expense, liability and loss (including, without limitation, attorneys’ fees, judgments, fines, ERISA excise taxes and penalties and amounts paid in settlement) reasonably incurred or suffered by such Covered Person in connection with such proceeding, and such right to indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except for proceedings to enforce rights to indemnification, the Corporation shall indemnify a Covered Person in connection with a proceeding (or part thereof) initiated by such Covered Person only if such proceeding (or part thereof) was authorized by the Board of Directors. The right to indemnification conferred by this Section 12.2 shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending or otherwise participating in any such proceeding in advance of its final disposition.
(b)    The rights conferred on any Covered Person by this Section 12.2 shall not be exclusive of any other rights which any Covered Person may have or hereafter acquire under law, this Certificate of Incorporation, the Bylaws, an agreement, vote of stockholders or disinterested directors, or otherwise.
(c)    Any repeal or amendment of this Section 12.2 by the stockholders of the Corporation or by changes in law, or the adoption of any other provision of this Certificate of Incorporation inconsistent with this Section 12.2, will, unless otherwise required by law, be prospective only (except to the extent such amendment or change in law permits the Corporation to provide broader indemnification rights on a retroactive basis than permitted prior thereto), and will not in any way diminish or adversely affect any right or protection existing at the time of such repeal or amendment or adoption of such inconsistent provision in respect of any act or omission occurring prior to such repeal or amendment or adoption of such inconsistent provision.
(d)    This Section 12.2 shall not limit the right of the Corporation, to the extent and in the manner authorized or permitted by law, to indemnify and to advance expenses to persons other than Covered Persons.
ARTICLE XIII
AMENDMENT
The Corporation reserves the right at any time from time to time to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, and any other provisions

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authorized by the laws of the State of Delaware at any time may be added or inserted, in the manner now or hereafter prescribed by law. All rights, preferences and privileges of whatsoever nature conferred upon stockholders, directors or any other persons whomsoever by and pursuant to this Certificate of Incorporation in its present form or as hereafter amended are granted subject to the right reserved in this Article XIII, except as otherwise set forth in Sections 12.1 and 12.2(c) and Article XIV hereof.
ARTICLE XIV
CORPORATE OPPORTUNITIES
To the maximum extent permitted under the DGCL, the Corporation renounces any interest or expectancy of the Corporation in, or in being offered an opportunity to participate in, business opportunities that are from time to time presented to its directors who are not employees of the Corporation or any subsidiary (“Outside Directors”), other than any such opportunity expressly presented to an Outside Director in such Outside Director’s capacity as a director of the Corporation; and no such Outside Director shall be liable to the Corporation or its stockholders for breach of any fiduciary or other duty by reason of the fact that such Outside Director personally or on behalf of any other person pursues or acquires such business opportunity, directs such business opportunity to another person or fails to present such business opportunity, or information regarding such business opportunity, to the Corporation or its subsidiaries. For purposes of this Article XIV, a director who is the Chairman of the Board of the Corporation shall not be deemed to be an employee of the Corporation solely by reason of holding such position. No amendment or repeal of this Article XIV shall apply to or have any effect on the liability or alleged liability of any Outside Director for or with respect to business opportunities of which such Outside Director becomes aware prior to such amendment or repeal. Any person purchasing or otherwise acquiring any interest in any capital stock of the Corporation shall be deemed to have notice of and to have consented to the provisions of this Article XIV.
ARTICLE XV
FORUM SELECTION
Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation’s stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL, or (iv) any action asserting a claim governed by the internal affairs doctrine. Any person purchasing or otherwise acquiring any interest in any capital stock of the Corporation shall be deemed to have notice of and to have consented to the provisions of this Article XV.

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IN WITNESS WHEREOF the undersigned officer of the Corporation has executed this certificate on behalf of the Corporation this 30th day of April, 2015.

REMY INTERNATIONAL, INC.                

By: /s/ David G. Krall            
Name:     David G. Krall
Title:
Senior Vice President and General Counsel



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Exhibit 4.1







Exhibit 10.4

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the “Agreement”) is effective as of April 1, 2015 (the “Effective Date”), by and between Remy International, Inc., a Delaware corporation (the “Company”), and David G. Krall (the “Employee”). In consideration of the mutual covenants and agreements set forth herein, the parties agree as follows:
1.Purpose. The purpose of this Agreement is to provide a single, integrated document which shall provide the basis for the Employee’s employment by the Company.
2.Employment and Duties. Subject to the terms and conditions of this Agreement, the Company agrees to employ the Employee to serve in an executive capacity as Senior Vice President and General Counsel. The Employee accepts such continued employment and agrees to undertake and discharge the duties, functions and responsibilities commensurate with the aforesaid position and such other duties, functions and responsibilities as may be prescribed from time to time by the Company’s Chief Executive Officer (“CEO”). The Employee shall devote his full business time, attention and effort to the performance of his duties hereunder and, except as described below, shall not engage in any business, profession or occupation, other than personal, personal investment, charitable, or civic activities or other matters that do not conflict with the Employee’s duties. The Employee shall report to the CEO of the Company. The Company acknowledges that the Employee’s position would normally include Corporate Secretary and that Employee is willing to have JJ Shives serve as Corporate Secretary as an accommodation, provided that (i) for purposes of determining compensation, Employee shall be treated as if he were Corporate Secretary, and (ii) if Mr. Shives’ employment terminates for any reason, then Employee shall become Corporate Secretary. Employee shall be the Chief Legal Officer of the Company and all persons in the legal function, including the Vice President, Deputy General Counsel and Corporate Secretary, shall report (directly or indirectly) to him.
3.Term. The term of this Agreement shall commence on the Effective Date and shall continue until the third anniversary of the Effective Date or if earlier pursuant to Section 8 (including any extensions as provided in this Section 3, the “Employment Term”). Notwithstanding any termination of the Employment Term or the Employee’s employment, the Employee and the Company agree that Sections 8 through 28 hereof shall remain in effect until all parties’ obligations and benefits are satisfied thereunder.
4.Salary. During the Employment Term, the Company shall pay the Employee a base salary at an annual rate, before deducting all applicable withholdings, of no less than Three Hundred Sixty Thousand dollars ($360,000) per year, payable at the time and in the manner dictated by the Company’s standard payroll policies. Such minimum annual base salary may be periodically reviewed and increased (but not decreased without the Employee’s express written consent and except in connection with, and in the same percentage as, a broad based corporate officer salary decrease) at the discretion of the Compensation Committee (the “Committee”) of the Board of Directors of the Company (the “Board’) to reflect, among other matters, cost of living increases and performance results (such annual base salary, including any increases pursuant to this Section 4, the “Annual Base Salary”).

SGR\8735164.1

5.Other Compensation and Fringe Benefits. In addition to any executive bonus, pension, deferred compensation and long-term incentive plans which the Company or an affiliate of the Company may from time to time make available to the Employee, the Employee shall be entitled to the following during the Employment Term:
(a)
the standard Company benefits; and an annual executive physical;
(b)
medical and other insurance coverage (for the Employee and any covered dependents) provided by the Company, subject to standard costs, terms and other conditions;
(c)
an annual incentive bonus opportunity under the Company’s Amended and Restated Annual Bonus Plan (“Annual Bonus Plan”) for each calendar year included in the Employment Term, with such opportunity to be earned based upon attainment of performance objectives established by the Committee (“Annual Bonus”). Employee’s target Annual Bonus shall not be less than 60% of his Annual Base Salary. For calendar year 2015, Employee shall be entitled to a pro-rata Annual Bonus based on the number of days elapsed between Employee’s first day of employment with the Company and December 31, 2015 divided by 365 and the Company’s performance under the Annual Bonus Plan. The Annual Bonus shall be paid no later than the March 15 first following the calendar year to which the Annual Bonus relates; and
(d)
immediately following the second trading day following the filing of the Company’s quarterly report on Form 10-Q with the SEC, the Company shall award to Employee Company equity worth $450,000 in the form of stock options and/or restricted stock with such terms as determined by the Remy Compensation Committee as generally applicable to all other Remy executive officers and pursuant to the Remy International, Inc. Omnibus Incentive Plan. Employee at the discretion of the Committee shall be eligible to participate in future Company equity grants.
6.Vacation. For and during each calendar year within the Employment Term, the Employee shall be entitled to reasonable paid vacation periods consistent with the Employee’s position and in accordance with the Company’s standard policies, or as the Committee may approve. In addition, the Employee shall be entitled to such holidays consistent with the Company’s standard policies or as the Board or the Committee may approve.
7.Expense Reimbursement. In addition to the compensation and benefits provided herein, the Company shall, upon receipt of appropriate documentation, reimburse the Employee for his reasonable travel, lodging, entertainment, promotion and other ordinary and necessary business expenses to the extent such reimbursement is permitted under the Company’s expense reimbursement policy.
8.Insurance. During the Employment Term, the Company will maintain employed lawyers professional liability insurance with coverage limits not less than, and a deductible or self insured retention not greater than, such amounts in effect on the Effective Date with a financially sound insurance underwriter.
9.Termination of Employment. The Company or the Employee may terminate the Employee’s employment at any time and for any reason in accordance with Subsection 8(a) below.

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The Employment Term shall be deemed to have ended on the last day of the Employee’s employment. The Employment Term shall terminate automatically upon the Employee’s death.
(a)
Notice of Termination. Any purported termination of the Employee’s employment (other than by reason of death) shall be communicated by written Notice of Termination (as defined herein) from one party to the other in accordance with the notice provisions contained in Section 25. For purposes of this Agreement, a “Notice of Termination” shall mean a notice that indicates the Date of Termination (as that term is defined in Subsection 8(b)) and, with respect to a termination due to Disability (as that term is defined in Subsection 8(e)), Cause (as that term is defined in Subsection 8(d)), or Good Reason (as that term is defined in Subsection 8(f)), sets forth in reasonable detail the facts and circumstances that are alleged to provide a basis for such termination. A Notice of Termination from the Company shall specify whether the termination is with or without Cause or due to the Employee’s Disability. A Notice of Termination from the Employee shall specify whether the termination is with or without Good Reason.
(b)
Date of Termination. For purposes of this Agreement, “Date of Termination” shall mean the date specified in the Notice of Termination (but in no event shall such date be earlier than the thirtieth (30th) day following the date the Notice of Termination is given) or the date of the Employee’s death. Notwithstanding the foregoing, in no event shall the Date of Termination occur until the Employee experiences a “separation of service” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and notwithstanding anything contained herein to the contrary, the date on which such separation from service takes place shall be the “Date of Termination,” and all references herein to a “termination of employment” (or words of similar meaning) shall mean a “separation of service” within the meaning of Code Section 409A.
(c)
No Waiver. The failure to set forth any fact or circumstance in a Notice of Termination, which fact or circumstance was not known to the party giving the Notice of Termination when the notice was given, shall not constitute a waiver of the right to assert such fact or circumstance in an attempt to enforce any right under or provision of this Agreement.
(d)
Cause. For purposes of this Agreement, a termination for “Cause” means (i) the Employee engages in gross misconduct or gross negligence in the performance of the Employee’s material duties for the Company or any of its subsidiaries, (ii) the Employee embezzles assets of the Company or any of its subsidiaries, (iii) the Employee is convicted of or enters a plea of guilty or nolo contendere to a felony or misdemeanor involving moral turpitude, (iv) the Employee’s breach of any restrictive covenant set forth in Section 8 of this Agreement, (v) the Employee’s willful and material failure to follow the lawful and reasonable instructions of the CEO or the Board, or (vi) the Employee’s becoming barred or prohibited by the United States Securities and Exchange Commission or other regulatory body from holding his position with the Company or any of its subsidiaries; provided, however, that in each

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such case (except with regard to subsection (iii) or (vi), is not cured within 30 days after receipt of notice.
(e)
Disability. For purposes of this Agreement, a termination based upon “Disability” means a termination by the Company based upon the Employee’s entitlement to long-term disability benefits under the Company’s long-term disability plan or policy, as the case may be, as in effect on the Date of Termination; provided, however, that if the Employee is not a participant in the Company’s long-term disability plan or policy on the Date of Termination, he shall still be considered terminated based upon Disability if he would have been entitled to benefits under the Company’s long-term disability plan or policy had he been a participant on his Date of Termination.
(f)
Good Reason. For purposes of this Agreement, a termination for “Good Reason” means a termination by the Employee based upon the occurrence (without The Employee’s express written consent) of any of the following:
(i)
a material diminution in the Employee’s title, Annual Base Salary or Annual Bonus opportunity except in connection with, and in the same percentage as, a broad based corporate officer salary decrease; or
(ii)
a material breach by Company of any of its obligations under this Agreement.
(g)
Notwithstanding the foregoing, the Employee being placed on a paid leave for up to sixty (60) days pending a determination of whether there is a basis to terminate the Employee for Cause shall not constitute Good Reason. The Employee’s continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder; provided, however, that no such event described above shall constitute Good Reason unless: (i) the Employee gives Notice of Termination to Company specifying the condition or event relied upon for such termination within ninety (90) days of the initial existence of such event; and (ii) Company fails to cure the condition or event constituting Good Reason within thirty (30) days following receipt of the Employee’s Notice of Termination.
10.Obligations of the Company Upon Termination.
(a)
Termination by the Company for a Reason Other than Cause, Death or Disability and Termination by the Employee for Good Reason. If the Employee’s employment is terminated by the Company for any reason other than Cause, Death or Disability; or by the Employee for Good Reason:
(i)
the Company shall pay the Employee the following (collectively, the “Accrued Obligations”): (A) within five (5) business days after the Date of Termination, any earned but unpaid Annual Base Salary; and (B) within a reasonable time following submission of all applicable documentation, any expense reimbursement payments owed to the Employee for expenses incurred prior to the Date of Termination;
(ii)
the Company shall pay the Employee no later than March 15th of the calendar year following the year in which the Date of Termination occurs, a prorated

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Annual Bonus based upon the actual Annual Bonus that would have been earned by the Employee for the year in which the Date of Termination occurs (based upon the target Annual Bonus opportunity in the year in which the Date of Termination occurred, or the prior year if no target Annual Bonus opportunity has yet been determined, and the actual satisfaction of the applicable performance measures, but ignoring any requirement under the Annual Bonus Plan that the Employee must be employed on the payment date) multiplied by the percentage of the calendar year completed before the Date of Termination;
(iii)
the Company shall pay the Employee, no later than the sixtieth (60th) calendar day after the Date of Termination, a lump-sum payment equal to 100% of the sum of: (A) the Employee’s Annual Base Salary in effect immediately prior to the Date of Termination (disregarding any reduction in Annual Base Salary to which the Employee did not expressly consent in writing); and (B) the target Annual Bonus for the year of termination; and
(iv)
as long as the Employee pays the full monthly premiums for COBRA coverage, the Company shall provide the Employee and, as applicable, the Employee’s eligible dependents with continued medical and dental coverage, on the same basis as provided to the Company’s active executives and their dependents until the earlier of: (i) two (2) years after the Date of Termination; or (ii) the date the Employee is first eligible for medical and dental coverage (without pre-existing condition limitations) with a subsequent employer. In addition, within sixty-five (65) days after the Date of Termination, the Company shall pay the Employee a lump sum cash payment equal to twenty-four (24) months of medical and dental COBRA premiums based on the level of coverage in effect for the Employee (e.g., employee only or family coverage) on the Date of Termination.
(v)
all stock option, restricted stock and other equity-based incentive awards granted by the Company that were outstanding but not vested as of the Date of Termination shall become immediately vested and/or payable, as the case may be, unless the equity incentive awards are based upon satisfaction of performance criteria (not based solely on the passage of time); in which case, such equity awards shall not be forfeited as a result of such termination and otherwise will vest pursuant to their express terms, provided, however, that any such equity awards that are vested pursuant to this provision and that constitute a non-qualified deferred compensation arrangement within the meaning of Code Section 409A shall be paid or settled on the earliest date coinciding with or following the Date of Termination that does not result in a violation of or penalties under Section 409A.
(b)
Termination by the Company for Cause and by the Employee without Good Reason. If the Employee’s employment is terminated (i) by the Company for Cause or (ii)

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by the Employee without Good Reason, the Company’s only obligation under this Agreement shall be payment of any Accrued Obligations.
(c)
Termination due to Death. If the Employee’s employment is terminated due to death, the Company shall pay to the Employee’s estate or personal representative, within sixty-five (65) days after the Date of Termination any Accrued Obligations. In addition, the Company shall pay to the Employee’s estate or personal representative a prorated Annual Bonus, for the year of termination, determined in accordance with the terms of the Annual Bonus Plan, but not less than the amount equal to the target Annual Bonus for the year of termination, multiplied by the percentage of the calendar year completed before the Date of Termination such payment to be made no later than 2½ months after the end of the year in which the death occurs and at the time when bonus payments are paid to other senior executives in accordance with the Company’s normal payroll practices.
(d)
Termination Due to the Employee’s Disability. The Company may terminate the Employee’s employment hereunder due to Disability in accordance with this Section. Notwithstanding the foregoing, if, in the good faith determination of the Board, the Employee is suffering from a mental or physical disease or disability that impacts the performance of his duties in any material respect, the Company may suspend the Employee for a period of up to one hundred eighty (180) days during the Employment Term (provided that such suspension shall not constitute Good Reason under Section 8(f) and provided further that during such suspension, the Employee shall (i) continue to receive his Annual Base Salary in accordance with Section 4 and (ii) be eligible to receive benefits he may be entitled to under the Company’s short-term disability plan, if any). If the Board does not re-instate the Employee to employment (under the terms and conditions of this Agreement) by the end of such one hundred eighty (180) day period or at any time prior to the end of such period, in the Board’s sole discretion, the Company may terminate the Employee’s employment without Cause (as provided under Section 8(d)) if the Employee’s condition does not meet the definition of Disability (as provided under this Section). In such latter event, the Employee or his legal representative, as the case may be, shall be entitled to: (i) any Annual Base Salary earned but not paid as of the date of the Employee’s termination due to Disability, and (ii) a pro-rata payment, for the year of termination determined according to the terms of the Annual Bonus Plan, but not less than the amount equal to the target Annual Bonus multiplied by a fraction, the numerator of which is the number of days transpired in the calendar year up to and including the date on which the Employee is terminated by the Company due to Disability, and the denominator of which is 365, such payment shall be made no later than 2½ months after the end of the year in which the termination due to disability occurs and at the time when bonus payments are paid to other senior executives in accordance with the Company’s normal payroll procedures.
(e)
Six-Month Delay. To the extent the Employee is a “specified employee,” as defined in Code Section 409A(a)(2)(B)(i) and the regulations and other guidance promulgated thereunder and any elections made by the Company in accordance therewith, notwithstanding the timing of payment provided in any other Section of

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this Agreement, no payment, distribution or benefit under this Agreement that constitutes a distribution of deferred compensation (within the meaning of Treasury Regulation Section 1.409A-1(b)) upon separation from service (within the meaning of Treasury Regulation Section 1.409A-1(h)), after taking into account all available exemptions, that would otherwise be payable, distributable or settled during the six (6) month period after separation from service, will be made during such six (6) month period, and any such payment, distribution or benefit will instead be paid on the first business day after such six (6) month period, provided, however, that if the Employee dies following the Date of Termination and prior to the payment, distribution, settlement or provision of any payments, distributions or benefits delayed on account of Code Section 409A, such payments, distributions or benefits shall be paid or provided to the personal representative of the Employee’s estate within thirty (30) days after the date of the Employee’s death.
11.Excise Taxes. If any payments or benefits paid or provided or to be paid or provided to the Employee or for the Employee’s benefit pursuant to the terms of this Agreement or otherwise in connection with, or arising out of, his employment with the Company or its subsidiaries or the termination thereof (a “Payment” and, collectively, the “Payments”) would be subject to the excise tax imposed by Code Section 4999 (the “Excise Tax”), then, the Employee may elect for such Payments to be reduced to one dollar less than the amount that would constitute a “parachute payment” under Code Section 280G (the “Scaled Back Amount”). Any such election must be in writing and delivered to the Company within thirty (30) days after the Date of Termination. If the Employee does not elect to have Payments reduced to the Scaled Back Amount, the Employee shall be responsible for payment of any Excise Tax resulting from the Payments and the Employee shall not be entitled to a gross-up payment under this Agreement or any other agreement for such Excise Tax. If the Payments are to be reduced, they shall be reduced in the following order of priority: (i) first from cash compensation, (ii) next from equity compensation, then (iii) pro-rata among all remaining Payments and benefits. To the extent there is a question as to which Payments within any of the foregoing categories are to be reduced first, the Payments that will produce the greatest present value reduction in the Payments with the least reduction in economic value provided to the Employee shall be reduced first. Notwithstanding the order of priority of reduction set forth above, the Employee may include in the Employee’s election for a Scaled Back Amount a change to the order of such Payment reduction. The Company shall follow such revised reduction order, if and only if, the Company, in its sole discretion, determines such change does not violate the provisions of Code Section 409A.
11.Non-Delegation of the Employee’s Rights. The obligations, rights and benefits of the Employee hereunder are personal and may not be delegated, assigned or transferred in any manner whatsoever, nor are such obligations, rights or benefits subject to involuntary alienation, assignment or transfer.
12.Confidential Information. The Employee acknowledges that he will occupy a position of trust and confidence and will have access to and learn substantial information about the Company and its affiliates and their operations that is confidential or not generally known in the industry including, without limitation, information that relates to purchasing, sales, customers, marketing, and the financial positions and financing arrangements of the Company and its affiliates.

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The Employee agrees that all such information is proprietary or confidential, or constitutes trade secrets and is the sole property of the Company and/or its affiliates, as the case may be. The Employee will keep confidential, and will not reproduce, copy or disclose to any other person or firm, any such information or any documents or information relating to the Company’s or its affiliates’ methods, processes, customers, accounts, analyses, systems, charts, programs, procedures, correspondence or records, or any other documents used or owned by the Company or any of its affiliates, nor will the Employee advise, discuss with or in any way assist any other person, firm or entity in obtaining or learning about any of the items described in this Section 12. Accordingly, the Employee agrees that during the Employment Term and at all times thereafter he will not disclose, or permit or encourage anyone else to disclose, any such information, nor will he utilize any such information, either alone or with others, outside the scope of his duties and responsibilities with the Company and its affiliates.
13.Non-Competition.
(a)
During Employment Term. The Employee agrees that, during the Employment Term, he will devote such business time, attention and energies reasonably necessary to the diligent and faithful performance of the services to the Company and its affiliates, and he will not engage in any way whatsoever, directly or indirectly, in any business that is a direct competitor with the Company’s or its affiliates’ principal business, nor solicit customers, suppliers or employees of the Company or affiliates on behalf of, or in any other manner work for or assist any business which is a direct competitor with the Company’s or its affiliates’ principal business. In addition, during the Employment Term, the Employee will undertake no planning for or organization of any business activity competitive with the work he performs as an employee of the Company, and the Employee will not combine or conspire with any other employee of the Company or any other person for the purpose of organizing any such competitive business activity.
(b)
After Employment Term. The parties acknowledge that the Employee will acquire substantial knowledge and information concerning the business of the Company and its affiliates as a result of his employment. The parties further acknowledge that the scope of business in which the Company and its affiliates are engaged as of the Effective Date is national and very competitive and one in which few companies can successfully compete. Competition by the Employee in that business after the Employment Term would severely injure the Company and its affiliates. Accordingly, for a period of one (1) year after the Employee’s employment terminates for any reason whatsoever, except as otherwise stated herein below, the Employee agrees: (i) not to become an employee, consultant, advisor, principal, partner or substantial shareholder of any firm or business that directly competes with the Company or its affiliates in their principal products and markets; and (ii) on behalf of any such competitive firm or business, not to solicit any person or business that was at the time of such termination and remains a customer or prospective customer, a supplier or prospective supplier, or an employee of the Company or an affiliate.
14.Return of Company Documents. Upon termination of the Employment Term, the Employee shall return immediately to the Company all records and documents of or pertaining to

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the Company or its affiliates and shall not make or retain any copy or extract of any such record or document, or any other property of the Company or its affiliates.
15.Improvements and Inventions. Any and all improvements or inventions that the Employee may make or participate in during the Employment Term, unless wholly unrelated to the business of the Company and its affiliates and not produced within the scope of the Employee’s employment hereunder, shall be the sole and exclusive property of the Company. The Employee shall, whenever requested by the Company, execute and deliver any and all documents that the Company deems appropriate in order to apply for and obtain patents or copyrights in improvements or inventions or in order to assign and/or convey to the Company the sole and exclusive right, title and interest in and to such improvements, inventions, patents, copyrights or applications.
16.Actions. The parties agree and acknowledge that the rights conveyed by this Agreement are of a unique and special nature and that the Company will not have an adequate remedy at law in the event of a failure by the Employee to abide by its terms and conditions, nor will money damages adequately compensate for such injury. Therefore, it is agreed between and hereby acknowledged by the parties that, in the event of a breach by the Employee of any of the obligations of this Agreement, the Company shall have the right, among other rights, to damages sustained thereby and to obtain an injunction or decree of specific performance from any court of competent jurisdiction to restrain or compel the Employee to perform as agreed herein. Nothing herein shall in any way limit or exclude any other right granted by law or equity to the Company.
17.Release. Notwithstanding any provision herein to the contrary, the Company may require that, prior to payment of any amount or provision of any benefit under Section 9 (other than due to the Employee’s death), the Employee shall have executed a complete release of the Company and its affiliates and related parties in such form as is reasonably required by the Company, and any waiting periods contained in such release shall have expired; provided, however, that such release shall not apply to the Employee’s rights under the benefit plans and programs of the Company and its affiliates, which rights shall be determined in accordance with the terms of such plans and programs. With respect to any release required to receive payments owed pursuant to Section 9, the Company must provide the Employee with the form of release no later than seven (7) days after the Date of Termination and the release must be signed by the Employee and returned to the Company, unchanged, effective and irrevocable, no later than sixty (60) days after the Date of Termination.
18.No Mitigation. The Company agrees that, if the Employee’s employment hereunder is terminated during the Employment Term, the Employee is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Employee by the Company hereunder. Further, the amount of any payment or benefit provided for hereunder (other than pursuant to Subsection 9(a)(v) hereof) shall not be reduced by any compensation earned by the Employee as the result of employment by another employer, by retirement benefits or otherwise.
19.Entire Agreement and Amendment. This Agreement embodies the entire agreement and understanding of the parties hereto in respect of the subject matter of this Agreement supersedes and replaces all prior agreements, understandings and commitments with respect to such subject matter. This Agreement may be amended only by a written document signed by both parties to this Agreement.

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20.Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Indiana, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction. Any litigation pertaining to this Agreement shall be adjudicated in courts located in Indianapolis, Indiana.
21.Successors. This Agreement may not be assigned by the Employee. In addition to any obligations imposed by law upon any successor to the Company, the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the stock, business and/or assets of the Company, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assumption by a successor shall be a material breach of this Agreement. The Employee agrees and consents to any such assumption by a successor of the Company, as well as any assignment of this Agreement by the Company for that purpose. As used in this Agreement, “Company” shall mean the Company as herein before defined as well as any such successor that expressly assumes this Agreement or otherwise becomes bound by all of its terms and provisions by operation of law. This Agreement shall be binding upon and inure to the benefit of the parties and their permitted successors or assigns.
22.Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
23.Attorneys’ Fees. If any party finds it necessary to employ legal counsel or to bring an action at law or other proceedings against the other party to interpret or enforce any of the terms hereof, the party prevailing in any such action or other proceeding shall be promptly paid by the other party its reasonable legal fees, court costs, litigation expenses, all as determined by the court and not a jury, and such payment shall be made by the non-prevailing party no later than the end of the Employee’s tax year following the Employee’s tax year in which the payment amount becomes known and payable; provided, however, that following the Employee’s termination of employment with the Company, if any party finds it necessary to employ legal counsel or to bring an action at law or other proceedings against the other party to interpret or enforce any of the terms hereof, the Company shall pay (on an ongoing basis) to the Employee to the fullest extent permitted by law, all legal fees, court costs and litigation expenses reasonably incurred by the Employee or others on his behalf (such amounts collectively referred to as the “Reimbursed Amounts”); provided, further, that the Employee shall reimburse the Company for the Reimbursed Amounts if it is determined that a majority of the Employee’s claims or defenses were frivolous or without merit. Requests for payment of Reimbursed Amounts, together with all documents required by the Company to substantiate them, must be submitted to the Company no later than ninety (90) days after the expense was incurred. The Reimbursed Amounts shall be paid by the Company within ninety (90) days after receiving the request and all substantiating documents requested from the Employee. The payment of Reimbursed Amounts during the Employee’s tax year will not impact the Reimbursed Amounts for any other taxable year. The rights under this Section 23 shall survive the termination of employment and this Agreement until the expiration of the applicable statute of limitations.
24.Severability. If any Section, subsection or provision hereof is found for any reason whatsoever to be invalid or inoperative, that section, subsection or provision shall be deemed

10


severable and shall not affect the force and validity of any other provision of this Agreement. If any covenant herein is determined by a court to be overly broad thereby making the covenant unenforceable, the parties agree and it is their desire that such court shall substitute a reasonable judicially enforceable limitation in place of the offensive part of the covenant and that as so modified the covenant shall be as fully enforceable as if set forth herein by the parties themselves in the modified form. The covenants of the Employee in this Agreement shall each be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of the Employee against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of the covenants in this Agreement.
25.Notices. Any notice, request, or instruction to be given hereunder shall be in writing and shall be deemed given when personally delivered or three (3) days after being sent by United States Certified Mail, postage prepaid, with Return Receipt Requested, to the parties at their respective addresses set forth below:
To the Company:
Chief Executive Officer
Remy International, Inc.
600 Corporation Drive
Pendleton, Indiana 46064
To the Employee:
At the home address specified in the Company’s records
26.Waiver of Breach. The waiver by any party of any provisions of this Agreement shall not operate or be construed as a waiver of any prior or subsequent breach by the other party.
27.Tax Withholding. The Company or an affiliate may deduct from all compensation and benefits payable under this Agreement any taxes or withholdings the Company is required to deduct pursuant to state, federal or local laws.
28.Code Section 409A. To the extent applicable, it is intended that this Agreement and any payment made hereunder shall comply with the requirements of Section 409A of the Code, or an exemption or exclusion therefrom and any related regulations or other guidance promulgated with respect to such Section by the U.S. Department of the Treasury or the Internal Revenue Service (“Code Section 409A”), provided that for the avoidance of doubt, this provision shall not be construed to require a gross-up payment in respect of any taxes, interest or penalties imposed on the Employee as a result of Code Section 409A. Any provision that would cause the Agreement or any payment hereof to fail to satisfy Code Section 409A shall have no force or effect until amended in the least restrictive manner necessary to comply with Code Section 409A, which amendment may be retroactive to the extent permitted by Code Section 409A. Each payment under this Agreement shall be treated as a separate payment for purposes of Code Section 409A. In no event may the Employee, directly or indirectly, designate the calendar year of any payment to be made under this Agreement. All reimbursements and in-kind benefits provided under this Agreement shall be made or provided in accordance with the requirements of Code Section 409A, including, without limitation, that (i) in no event shall reimbursements by the Company under this Agreement

11


be made later than the end of the calendar year next following the calendar year in which the applicable fees and expenses were incurred; (ii) the amount of in-kind benefits that the Company is obligated to pay or provide in any given calendar year shall not affect the in-kind benefits that the Company is obligated to pay or provide in any other calendar year; (iii) the Employee’s right to have the Company pay or provide such reimbursements and in-kind benefits may not be liquidated or exchanged for any other benefit; and (iv) in no event shall the Company’s obligations to make such reimbursements or to provide such in-kind benefits apply later than the Employee’s remaining lifetime. The Employee acknowledges that he has been advised to consult with an attorney and any other advisors of the Employee’s choice prior to executing this Agreement, and the Employee further acknowledges that, in entering into this Agreement, he has not relied upon any representation or statement made by any agent or representative of Company or its affiliates that is not expressly set forth in this Agreement, including, without limitation, any representation with respect to the consequences or characterization (including for purpose of tax withholding and reporting) of the payment of any compensation or benefits hereunder under Code Section 409A and any similar sections of state tax law.
[The Next Page is the Signature Page]


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[Signature Page to Employment Agreement Dated as of April 1, 2015]

IN WITNESS WHEREOF the parties have executed this Agreement to be effective as of the date first set forth above.

REMY INTERNATIONAL, INC.

By: /s/ John J. Pittas
Its: President and CEO



David G. Krall
/s/ David G. Krall



13


Exhibit 10.5

REMY INTERNATIONAL, INC.
OMNIBUS INCENTIVE PLAN

Notice of Restricted Stock Grant for Directors
You (the “Grantee”) have been granted the following award of restricted Common Stock (the “Restricted Stock”) of Remy International, Inc. (the “Company”), pursuant to the Remy International, Inc. Omnibus Incentive Plan (the “Plan”):
Name of Grantee:
 
Number of Shares of Restricted Stock Granted:
 
Effective Date of Grant:
February [__], 2015
Vesting and Period of Restriction:
Subject to the terms of the Plan and the Restricted Stock Award Agreement attached hereto (the “Agreement”), the Period of Restriction shall lapse, and the shares of Restricted Stock granted hereunder shall vest and become free of the forfeiture and transfer restrictions contained in the Agreement with respect to one-half of the total number of Shares of Restricted Stock granted under this Agreement on each anniversary of the Effective Date of Grant, until fully vested.
By your signature and the signature of the Company’s representative below, you and the Company agree and acknowledge that this grant of Restricted Stock is granted under and governed by the terms and conditions of the Plan and the attached Restricted Stock Award Agreement, which are incorporated herein by reference, and that you have been provided with a copy of the Plan and Restricted Stock Agreement.
Grantee:
 
Remy International, Inc.
By:
 
 
By:
 
Name:
 
 
Name:
 
Date:
 
 
Title:
 
Address:
 
 
Date:
 
 
 
 
 
 



1




REMY INTERNATIONAL, INC.
OMNIBUS INCENTIVE PLAN
Restricted Stock Award Agreement for Directors

Section 1.
GRANT OF RESTRICTED STOCK
(a) Restricted Stock. On the terms and conditions set forth in the Notice of Restricted Stock Grant and this Restricted Stock Award Agreement (the “Agreement”), the Company grants to the Grantee on the Effective Date of Grant the Shares of Restricted Stock (the “Restricted Stock”) set forth in the Notice of Restricted Stock Grant.
(b) Plan and Defined Terms. The Restricted Stock is granted pursuant to the Plan. All terms, provisions, and conditions applicable to the Restricted Stock set forth in the Plan and not set forth herein are hereby incorporated by reference herein. To the extent any provision hereof is inconsistent with a provision of the Plan, the provisions of the Plan will govern. All capitalized terms that are used in the Notice of Restricted Stock Grant or this Agreement and not otherwise defined therein or herein shall have the meanings ascribed to them in the Plan.
Section 2.
FORFEITURE AND TRANSFER RESTRICTIONS
(a)    Forfeitures.
(i)Except as described in Section 2(a)(ii) and (iii) below, if the Grantee resigns as a Director or if the Grantee’s service as a Director is terminated or discontinued prior to the second year anniversary of the Effective Date of Grant, the Grantee shall, for no consideration, forfeit to the Company the Shares of Restricted Stock to the extent such Shares remain subject to a Period of Restriction at the time of such termination of the Grantee’s service.
(ii)If the Grantee’s service as a Director is terminated due to the Grantee’s death or Disability, as such term is defined below, a portion of the Shares which on the date of termination of service remain subject to a Period of Restrictions shall vest and become free of the forfeiture and transfer restrictions contained in the Agreement. The portion which shall vest shall be determined by the following formula (rounded to the nearest whole Share):
(A x B) – C, where
A = the total number of Shares granted under this Agreement,
B = the number of completed months to the date of termination of service as a Director since the Effective Date of Grant divided by 24, and
C = the number of Shares granted under this Agreement which vested on or prior to the date of service termination.
Any Shares which were subject to a Period of Restrictions on the date of the service termination and which will not be vested pursuant to the first two sentences of this Section 2(a)(ii) shall be forfeited to the Company, for no consideration.

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(iii)Unless otherwise specifically prohibited under applicable laws, or by the rules and regulations of any governing governmental agencies or national securities exchanges, if there occurs a Change in Control, as such term is defined in the Plan, the Award shall immediately vest if the Grantee’s service as a director is terminated or discontinued prior to the second year anniversary of the Effective Date of Grant. This paragraph shall supersede the provisions set forth in Article 17 of the Plan, and to the extent any provision in this paragraph is inconsistent with Article 17 of the Plan, the provisions of this paragraph will govern.
(iv)The term “Disability” shall mean the inability to perform the Grantee’s duties as a Director due to a physical or mental illness for a period of at least six (6) months as determined in the sole discretion of the majority of the members (excluding Grantee) of the Board.
(b)    Transfer Restrictions. During the Period of Restriction, the Restricted Stock may not be sold, assigned, pledged, exchanged, hypothecated or otherwise transferred, encumbered or disposed of to the extent such Shares are subject to a Period of Restriction.
(c)    Lapse of Restrictions. The Period of Restriction shall lapse as to the Restricted Stock in accordance with the Notice of Restricted Stock Grant and the terms of this Agreement. Subject to the terms of the Plan, upon lapse of the Period of Restriction, the Grantee shall own the Shares that are subject to this Agreement free of all restrictions otherwise imposed by this Agreement.
Section 3.
STOCK CERTIFICATES
As soon as practicable following the grant of Restricted Stock, the Shares of Restricted Stock shall be registered in the Grantee’s name in certificate or book-entry form. If a certificate is issued, it shall bear an appropriate legend referring to the restrictions and it shall be held by the Company, or its agent, on behalf of the Grantee until the Period of Restriction has lapsed. If the Shares are registered in book-entry form, the restrictions shall be placed on the book-entry registration. The Grantee may be required to execute and return to the Company a blank stock power for each Restricted Stock certificate (or instruction letter, with respect to Shares registered in book-entry form), which will permit transfer to the Company, without further action, of all or any portion of the Restricted Stock that is forfeited in accordance with this Agreement.
Section 4.
SHAREHOLDER RIGHTS
Except for the transfer and dividend restrictions, and subject to such other restrictions, if any, as determined by the Committee, the Grantee shall have all other rights of a holder of Shares, including the right to vote (or to execute proxies for voting) such Shares. Unless otherwise determined by the Committee, if all or part of a dividend in respect of the Restricted Stock is paid in Shares or any other security issued by the Company, such Shares or other securities shall be held by the Company subject to the same restrictions as the Restricted Stock in respect of which the dividend was paid.
Section 5.
DIVIDENDS
(a)    Any dividends paid with respect to Shares which remain subject to a Period of Restriction shall not be paid to the Grantee but shall be held by the Company.
(b)    Such held dividends shall be subject to the same Period of Restriction as the Shares to which they relate.

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(c)    Any dividends held pursuant to this Section 5 which are attributable to Shares which vest pursuant to this Agreement shall be paid to the Grantee within 30 days of the applicable vesting date.
(d)    Dividends attributable to Shares forfeited pursuant to Section 2 of this Agreement shall be forfeited to the Company on the date such Shares are forfeited.
Section 6.
MISCELLANEOUS PROVISIONS
(a)    Tax Withholding. Pursuant to Article 20 of the Plan, the Committee shall have the power and right to deduct or withhold, or require the Grantee to remit to the Company, an amount sufficient to satisfy any federal, state and local taxes (including the Grantee’s FICA obligations) required by law to be withheld with respect to this Award. The Committee may condition the delivery of Shares upon the Grantee’s satisfaction of such withholding obligations. The Grantee may elect to satisfy all or part of such withholding requirement by tendering previously-owned Shares or by having the Company withhold Shares having a Fair Market Value equal to the minimum statutory withholding (based on minimum statutory withholding rates for federal, state and local tax purposes, as applicable, including payroll taxes) that could be imposed on the transaction, and, to the extent the Committee so permits, amounts in excess of the minimum statutory withholding to the extent it would not result in additional accounting expense. Such election shall be irrevocable, made in writing, signed by the Grantee, and shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate.
(b)    Ratification of Actions. By accepting this Agreement, the Grantee and each person claiming under or through the Grantee shall be conclusively deemed to have indicated the Grantee’s acceptance and ratification of, and consent to, any action taken under the Plan or this Agreement and Notice of Restricted Stock Grant by the Company, the Board or the Committee.
(c)    Notice. Any notice required by the terms of this Agreement shall be given in writing and shall be deemed effective upon personal delivery or upon deposit with the United States Postal Service, by registered or certified mail, with postage and fees prepaid. Notice shall be addressed to the Company at its principal executive office and to the Grantee at the address that he or she most recently provided in writing to the Company.
(d)    Choice of Law. This Agreement and the Notice of Restricted Stock Grant shall be governed by, and construed in accordance with, the laws of Indiana, without regard to any conflicts of law or choice of law rule or principle that might otherwise cause the Plan, this Agreement or the Notice of Restricted Stock Grant to be governed by or construed in accordance with the substantive law of another jurisdiction.
(e)    Arbitration. Subject to, and in accordance with the provisions of Article 3 of the Plan, any dispute or claim arising out of or relating to the Plan, this Agreement or the Notice of Restricted Stock Grant shall be settled by binding arbitration before a single arbitrator in Indianapolis, Indiana and in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The arbitrator shall decide any issues submitted in accordance with the provisions and commercial purposes of the Plan, this Agreement and the Notice of Restricted Stock Grant, provided that all substantive questions of law shall be determined in accordance with the state and federal laws applicable in Indiana, without regard to internal principles relating to conflict of laws.
(f)    Modification or Amendment. This Agreement may only be modified or amended by written agreement executed by the parties hereto; provided, however, that the adjustments permitted pursuant to Section 4.3 of the Plan may be made without such written agreement.

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(g)    Severability. In the event any provision of this Agreement shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining provisions of this Agreement, and this Agreement shall be construed and enforced as if such illegal or invalid provision had not been included.
(h)    References to Plan. All references to the Plan shall be deemed references to the Plan as may be amended from time to time.
(i)    Section 409A Compliance. To the extent applicable, it is intended that the Plan and this Agreement comply with the requirements of Code Section 409A and any related regulations or other guidance promulgated with respect to such Section by the U.S. Department of the Treasury or the Internal Revenue Service and the Plan and the Award Agreement shall be interpreted accordingly.


5


Exhibit 10.5
REMY INTERNATIONAL, INC.

OMNIBUS INCENTIVE PLAN

Notice of Stock Option Grant for Directors

You (the “Optionee”) have been granted the following option to purchase Class A Common Stock of Remy International, Inc. (the “Company”), par value $0.0001 per share (“Share”), pursuant to the Remy International, Inc. Omnibus Incentive Plan (the “Plan”):

Name of Optionee:
 
Total Number of Shares Subject to Option:
 
Type of Option:
Nonqualified.
Exercise Price Per Share:
 
Effective Date of Grant:
February [__], 2015
Vesting Schedule:
Subject to the terms of the Plan and the Stock Option Agreement attached hereto, the right to exercise this Option shall vest with respect to one-half of the total number of Shares subject to this Option on each anniversary of the Effective Date of the grant.
Expiration Date:
7th Anniversary of Effective Date of Grant

The Option is subject to earlier expiration, as provided in Section 3(b) of the attached Stock Option Agreement.


By your acceptance/signature, you agree and acknowledge that this Option is granted under and governed by the terms and conditions of the Plan and the attached Stock Option Agreement, which are incorporated herein by reference, and that you have been provided with a copy of the Plan and Stock Option Agreement.

Grantee:
 
Remy International, Inc.
By:
 
 
By:
 
Name:
 
 
Name:
 
Date:
 
 
Title:
 
Address:
 
 
Date:
 
 
 
 
 
 


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REMY INTERNATIONAL, INC.
OMNIBUS INCENTIVE PLAN

Stock Option Agreement for Directors

SECTION 1.    GRANT OF OPTION.

(a)    Option. On the terms and conditions set forth in the Notice of Stock Option Grant, which is incorporated by reference, and this Stock Option Agreement (the “Agreement”), the Company grants to the Optionee on the Effective Date of Grant the Option to purchase at the Exercise Price the number of Shares set forth in the Notice of Stock Option Grant.

(b)    Plan and Defined Terms. The Option is granted pursuant to the Plan. All terms, provisions, and conditions applicable to the Option set forth in the Plan and not set forth herein are hereby incorporated by reference herein. To the extent any provision hereof is inconsistent with a provision of the Plan, the provisions of the Plan will govern. All capitalized terms that are used in the Notice of Stock Option Grant or this Agreement and not otherwise defined therein or herein shall have the meanings ascribed to them in the Plan.

SECTION 2.    RIGHT TO EXERCISE.
The Option hereby granted shall be exercised by written notice to the Committee, specifying the number of Shares the Optionee desires to purchase together with provision for payment of the Exercise Price. Subject to such limitations as the Committee may impose (including prohibition of one more of the following payment methods), payment of the Exercise Price may be made by (a) check payable to the order of the Company, for an amount in United States dollars equal to the aggregate Exercise Price of such Shares, (b) by tendering to the Company Shares having an aggregate Fair Market Value (as of the trading date immediately preceding the date of exercise) equal to such Exercise Price, (c) by broker-assisted exercise, or (d) by a combination of such methods. The Company may require the Optionee to furnish or execute such other documents as the Company shall reasonably deem necessary (i) to evidence such exercise and (ii) to comply with or satisfy the requirements of the Securities Act of 1933, as amended, the Exchange Act, applicable state or non-U.S. securities laws or any other law.
SECTION 3.    TERM AND EXPIRATION.

(a)    Basic Term. Subject to earlier termination pursuant to the terms hereof, the Option shall expire on the expiration date set forth in the Notice of Stock Option Grant.

(b)    Termination of Service. If the Optionee’s service as a Director is terminated or discontinued, the Option shall expire on the earliest of the following occasions:

(i)    The expiration date set forth in the Notice of Stock Option Grant;

(ii)    The date three months following the termination of the Optionee’s employment or service for any reason other than death or Disability;

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(iii)    The date one year following the termination of the Optionee’s employment or service due to death or Disability; or

(iv)    The date of termination of the Optionee’s service for Cause.

The Optionee may exercise all or part of this Option at any time before its expiration under the preceding sentence, but, subject to the following sentence, only to the extent that the Option had become vested in accordance with the terms of the Notice of Stock Option Grant or this Agreement before the Optionee’s service terminated or discontinued. When the Optionee’s service terminates or is discontinued, unless such termination or discontinuance occurs following a Change in Control, this Option shall expire immediately with respect to the number of Shares for which the Option is not yet vested. If the Optionee dies after termination of discontinuation of service, but before the expiration of the Option, all or part of this Option may be exercised (prior to expiration) by the personal representative of the Optionee or by any person who has acquired this Option directly from the Optionee by will, bequest or inheritance, but only to the extent that the Option was vested and exercisable upon termination or discontinuation of the Optionee’s service.
Unless otherwise specifically prohibited under applicable laws, or by the rules and regulations of any governing governmental agencies or national securities exchanges, if there occurs a Change in Control, as such term is defined in the Plan, the Award shall immediately vest if the Grantee’s service as a director is terminated or discontinued, prior to the second year anniversary of the Effective Date of Grant. This paragraph shall supersede the provisions set forth in Article 17 of the Plan, and to the extent any provision in this paragraph is inconsistent with Article 17 of the Plan, the provisions of this paragraph will govern.
(c)    Definition of “Cause.” The term “Cause” shall mean (i) the willful engaging by the Optionee in misconduct that is demonstrably injurious to the Company or Subsidiary (monetarily or otherwise), (ii) the Optionee’s conviction of, or pleading guilty or nolo contendere to, a felony involving moral turpitude, or (iii) the Optionee’s violation of any confidentiality, non-solicitation, or non-competition covenant to which the Optionee is subject.

(d)    Definition of “Disability.” The term “Disability” shall mean the inability to perform the Grantee’s duties as a Director due to a physical or mental illness for a period of at least six (6) months as determined in the sole discretion of the majority of the members (excluding Grantee) of the Board.

SECTION 4.    TRANSFERABILITY OF OPTION.

(a)    Generally. Except as provided in Section 4(b) herein, the Option shall not be transferable by the Optionee other than by will or the laws of descent and distribution, and the Option shall be exercisable during the Optionee’s lifetime only by the Optionee or on his or her behalf by the Optionee's guardian or legal representative.

(b)    Transfers to Family Members. Notwithstanding Section 4(a) herein, if the Option is a Nonqualified Stock Option, the Optionee may transfer the Option for no consideration to or for

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the benefit of a Family Member, subject to such limits as the Committee may establish, and the transferee shall remain subject to all the terms and conditions applicable to the Option.

(c)    Definition of “Family Member.” For purposes of this Agreement, the term “Family Member” shall mean any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law of the Optionee (including adoptive relationships), any person sharing the same household as the Optionee (other than a tenant or employee), a trust in which the above persons have more than fifty percent of the beneficial interests, a foundation in which the Optionee or the above persons control the management of assets, and any other entity in which the Optionee or the above persons own more than fifty percent of the voting interests.

SECTION 5.    MISCELLANEOUS PROVISIONS.

(a)    Acknowledgements. The Optionee hereby acknowledges that he or she has read and understands the terms of the Plan and this Agreement, and agrees to be bound by their respective terms and conditions. The Optionee acknowledges that there may be tax consequences upon the exercise or transfer of the Option and that the Optionee should consult an independent tax advisor prior to any exercise or transfer of the Option.

(b)    Tax Withholding. Pursuant to the Plan, the Committee shall have the power and the right to deduct or withhold, or require the Optionee to remit to the Company, an amount sufficient to satisfy any federal, state and local taxes (including the Optionee’s FICA obligations) required by law to be withheld with respect to this Option. The Committee may condition the delivery of Shares upon the Optionee’s satisfaction of such withholding obligations. The Optionee may elect to satisfy all or part of such withholding requirement by tendering previously-owned Shares or by having the Company withhold Shares having a Fair Market Value equal to the minimum statutory withholding (based on minimum statutory withholding rates for federal, state and local tax purposes, as applicable, including the Optionee’s FICA taxes) that could be imposed on the transaction, and, to the extent the Committee so permits, amounts in excess of the minimum statutory withholding to the extent it would not result in additional accounting expense. Such election shall be irrevocable, made in writing and signed by the Optionee, and shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate.

(c)    Notice Concerning Disqualifying Dispositions. If the Option is an Incentive Stock Option, the Optionee shall notify the Committee of any disposition of Shares issued pursuant to the exercise of the Option if the disposition constitutes a “disqualifying disposition” within the meaning of Sections 421 and 422 of the Code (or any successor provision of the Code then in effect relating to disqualifying dispositions). Such notice shall be provided by the Optionee to the Committee in writing within 10 days of any such disqualifying disposition.

(d)    Rights as a Stockholder. Neither the Optionee nor the Optionee’s transferee or representative shall have any rights as a stockholder with respect to any Shares subject to this Option until the Option has been exercised and Share certificates have been issued to the Optionee, transferee or representative, as the case may be.


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(e)    Ratification of Actions. By accepting this Agreement, the Optionee and each person claiming under or through the Optionee shall be conclusively deemed to have indicated the Optionee’s acceptance and ratification of, and consent to, any action taken under the Plan or this Agreement and Notice of Stock Option Grant by the Company, the Board, or the Committee.

(f)    Notice. Any notice required by the terms of this Agreement shall be given in writing and shall be deemed effective upon personal delivery or upon deposit with the United States Postal Service, by registered or certified mail, with postage and fees prepaid. Notice shall be addressed to the Company at its principal executive office and to the Optionee at the address that he or she most recently provided in writing to the Company.

(g)    Choice of Law. This Agreement and the Notice of Stock Option Grant shall be governed by, and construed in accordance with, the laws of Indiana, without regard to any conflicts of law or choice of law rule or principle that might otherwise cause the Plan, this Agreement or the Notice of Stock Option Grant to be governed by or construed in accordance with the substantive law of another jurisdiction.

(h)    Arbitration. Subject to the Plan, any dispute or claim arising out of or relating to the Plan, this Agreement or the Notice of Stock Option Grant shall be settled by binding arbitration before a single arbitrator in Indianapolis, Indiana and in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The arbitrator shall decide any issues submitted in accordance with the provisions and commercial purposes of the Plan, this Agreement and the Notice of Stock Option Grant, provided that all substantive questions of law shall be determined in accordance with the state and Federal laws applicable in Indiana, without regard to internal principles relating to conflict of laws.

(i)    Modification or Amendment. This Agreement may only be modified or amended by written agreement executed by the parties hereto; provided, however, that the adjustments permitted pursuant to the Plan may be made without such written agreement.

(j)    Severability. In the event any provision of this Agreement shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining provisions of this Agreement, and this Agreement shall be construed and enforced as if such illegal or invalid provision had not been included.

(k)    References to Plan. All references to the Plan (or to a Section or Article of the Plan) shall be deemed references to the Plan (or the Section or Article) as may be amended from time to time.

(l)    Section 409A Compliance. To the extent applicable, it is intended that the Plan and this Agreement comply with the requirements of Code Section 409A and any related regulations or other guidance promulgated with respect to such Section by the U.S. Department of the Treasury or the Internal Revenue Service and the Plan and the Award Agreement shall be interpreted accordingly.

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Exhibit 10.7

REMY INTERNATIONAL, INC.
OMNIBUS INCENTIVE PLAN

Notice of Restricted Stock Grant for Employees
You (the “Grantee”) have been granted the following award of restricted Common Stock (the “Restricted Stock”) of Remy International, Inc. (the “Company”), pursuant to the Remy International, Inc. Omnibus Incentive Plan (the “Plan”):
Name of Grantee:
Participant Name
Number of Shares of Restricted Stock Granted:
XXX, 50% of which will be “Time Vested Shares” and 50% of which will be “Performance Vested Shares.”
Effective Date of Grant:
February 23, 2015
Vesting and Period of Restriction:
Subject to the terms of the Plan and the Restricted Stock Award Agreement attached hereto (the “Agreement”), the Period of Restriction shall lapse, and the shares of Restricted Stock granted hereunder shall vest and become free of the forfeiture and transfer restrictions contained in the Agreement (except as otherwise provided in Section 2(b) of the Agreement), (i) with respect to the “Time Vested Shares,” one-third of the total number of Time Vested Shares on each anniversary of the Effective Date of Grant, until fully vested, and (ii) with respect to the “Performance Vested Shares” as set forth on Exhibit A to this Agreement.
By your signature and the signature of the Company’s representative below, you and the Company agree and acknowledge that this grant of Restricted Stock is granted under and governed by the terms and conditions of the Plan and the attached Restricted Stock Award Agreement, which are incorporated herein by reference, and that you have been provided with a copy of the Plan and Restricted Stock Agreement.
Grantee:
 
Remy International, Inc.
By:
 
 
By:
 
Name:
 
 
Name:
 
Date:
 
 
Title:
 
Address:
 
 
Date:
 
 
 
 
 
 



REMY INTERNATIONAL, INC.
OMNIBUS INCENTIVE PLAN
Restricted Stock Award Agreement for Employees

Section 1.    GRANT OF RESTRICTED STOCK

(a) Restricted Stock. On the terms and conditions set forth in the Notice of Restricted Stock Grant and this Restricted Stock Award Agreement (the “Agreement”), the Company grants to the Grantee on the Effective Date of Grant, the Shares of Restricted Stock (the “Restricted Stock”) set forth in the Notice of Restricted Stock Grant.
(b) Plan and Defined Terms. The Restricted Stock is granted pursuant to the Plan. All terms, provisions, and conditions applicable to the Restricted Stock set forth in the Plan and not set forth herein are hereby incorporated by reference herein. To the extent any provision hereof is inconsistent with a provision of the Plan, the provisions of the Plan will govern. All capitalized terms that are used in the Notice of Restricted Stock Grant or this Agreement and not otherwise defined therein or herein shall have the meanings ascribed to them in the Plan.
Section 2.    FORFEITURE AND TRANSFER RESTRICTIONS

(a)    Forfeiture.
(i)Except as described in Section 2(a)(ii) and (iii) below, if the Grantee’s employment is terminated prior to the third anniversary date of the Effective Date of Grant, the Grantee shall, for no consideration, forfeit to the Company the Shares of Restricted Stock to the extent such Shares are subject to a Period of Restriction at the time of such termination.
(ii)If the Grantee’s employment is terminated due to the Employee’s death or Disability, as such term is defined below, a portion of the Time Vested Shares which on the date of termination of employment remain subject to a Period of Restriction shall vest and become free of the forfeiture and transfer restrictions contained in the Agreement (except as otherwise provided in Section 2(b) of this Agreement). The portion which shall vest shall be determined by the following formula (rounded to the nearest whole Share):
(A x B) – C, where
A = the total number of Time Vested Shares granted under this Agreement,
B = the number of completed months to the date of termination of employment since the Effective Date of Grant divided by 36, and
C = the number of Time Vested Shares granted under this Agreement which vested on or prior to the date of termination of employment.
All Performance Vested Shares and all Time Vested Shares which were subject to a Period of Restrictions on the date of employment termination and which will not be vested pursuant to the first two sentences of this Section 2(a)(ii), shall be forfeited to the Company, for no consideration.
(iii)Unless otherwise specifically prohibited under applicable laws, or by the rules and regulations of any governing governmental agencies or national securities exchanges, if there occurs a Change in Control, as such term is defined in the Plan, the Award shall immediately vest if the Grantee’s employment is terminated without Cause, as such term is defined in Grantee’s employment agreement

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with the Company or if none, then as such term is defined below, or for Good Reason, as such term is defined below, prior to the third year anniversary of the Effective Date of Grant. This paragraph shall supersede the provisions set forth in Article 17 of the Plan, and to the extent any provision in this paragraph is inconsistent with Article 17 of the Plan, the provisions of this paragraph will govern.
(iv) The term “Cause” shall have the meaning ascribed to such term in the Grantee’s employment agreement with the Company or any Subsidiary. If the Grantee’s employment agreement does not define the term “Cause,” or if the Grantee has not entered into an employment agreement with the Company or any Subsidiary, the term “Cause” shall mean (A) the willful engaging by the Grantee in misconduct that is demonstrably injurious to the Company or any Parent or Subsidiary (monetarily or otherwise), (B) the Grantee’s conviction of, or pleading guilty or nolo contendere to, a felony, or (C) the Grantee’s violation of any confidentiality, non-solicitation, or non-competition covenant to which the Grantee is subject.
(v)The term “Disability” shall have the meaning ascribed to such term in the Grantee’s employment agreement with the Company or any Subsidiary. If the Grantee’s employment agreement does not define the term “Disability,” or if the Grantee has not entered into an employment agreement with the Company or any Subsidiary, the term “Disability” shall mean the Grantee’s entitlement to long-term disability benefits pursuant to the long-term disability plan maintained by the Company or in which the Company’s employees participate.
(vi)    The term “Good Reason” shall have the meaning ascribed to such term in the Optionee’s employment agreement with the Company or any Subsidiary. If the Optionee’s employment agreement does not define “Good Reason”, or if the Optionee has not entered into an employment agreement with the Company or any subsidiary, then this term shall not apply.
(vi)Any Performance Vested Shares which have not previously been forfeited and which do not satisfy the performance criteria for the applicable Performance Period, shall on the last day of the applicable Performance Period be forfeited to the Company, for no consideration.
(vii)Except as otherwise provided herein, this grant is being make outside of Grantee’s employment agreement, if any. This grant shall not be subject to any employment agreement provision accelerating the vesting of any unvested equity upon Grantee’s termination of employment.
(b)    Transfer Restrictions. During the Period of Restriction, the Restricted Stock may not be sold, assigned, pledged, exchanged, hypothecated or otherwise transferred, encumbered or disposed of, to the extent such Shares are subject to a Period of Restriction. If the Grantee is an Officer (as defined in Rule 16a-1(f) of the Exchange Act), then during the six (6) month period which begins the first day following the date a Period of Restriction lapses, (50%) of the Shares to which the Period of Restrictions has lapsed on such date may not be sold, assigned, pledged, exchanged, hypothecated or otherwise transferred, encumbered or disposed of; provided, however, this sentence shall not prohibit the Grantee from exchanging or otherwise disposing of the Restricted Stock in connection with a Change in Control or other transaction in which Shares held by other company shareholders are required to be exchanged or otherwise disposed of.
(c)    Lapse of Restrictions. The Period of Restriction shall lapse as to the Restricted Stock in accordance with the Notice of Restricted Stock Grant and the terms of this Agreement. Subject to the terms of the Plan and Section 6(a) hereof, upon lapse of the Period of Restriction, the Grantee shall own the Shares that are subject to this Agreement free of all restrictions other than the six (6) month holding period following the Period of Restriction as provided in Section 2(b) of this Agreement otherwise imposed by this Agreement.

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Section 3.    STOCK CERTIFICATES

As soon as practicable following the grant of Restricted Stock, the Shares of Restricted Stock shall be registered in the Grantee’s name in certificate or book-entry form. If a certificate is issued, it shall bear an appropriate legend referring to the restrictions and it shall be held by the Company, or its agent, on behalf of the Grantee until the Period of Restriction has lapsed. If the Shares are registered in book-entry form, the restrictions shall be placed on the book-entry registration. The Grantee may be required to execute and return to the Company a blank stock power for each Restricted Stock certificate (or instruction letter, with respect to Shares registered in book-entry form), which will permit transfer to the Company, without further action, of all or any portion of the Restricted Stock that is forfeited in accordance with this Agreement.
Section 4.    SHAREHOLDER RIGHTS

Except for the transfer and dividend restrictions, and subject to such other restrictions, if any, as determined by the Committee, the Grantee shall have all other rights of a holder of Shares, including the right to vote (or to execute proxies for voting) such Shares. Unless otherwise determined by the Committee, if all or part of a dividend in respect of the Restricted Stock is paid in Shares or any other security issued by the Company, such Shares or other securities shall be held by the Company subject to the same restrictions as the Restricted Stock in respect of which the dividend was paid.
Section 5.    DIVIDENDS

(a)    Any dividends paid with respect to Shares which remain subject to a Period of Restriction shall not be paid to the Grantee but shall be held by the Company.
(b)    Such held dividends shall be subject to the same Period of Restriction as the Shares to which they relate.
(c)    Any dividends held pursuant to this Section 5 which are attributable to Shares which vest pursuant to this Agreement shall be paid to the Grantee within 30 days of the applicable vesting date.
(d)    Dividends attributable to Shares forfeited pursuant to Section 2 of this Agreement shall be forfeited to the Company on the date such Shares are forfeited.
Section 6.    MISCELLANEOUS PROVISIONS

(a)    Tax Withholding. Pursuant to Article 20 of the Plan, the Committee shall have the power and right to deduct or withhold, or require the Grantee to remit to the Company, an amount sufficient to satisfy any federal, state and local taxes (including the Grantee’s FICA obligations) required by law to be withheld with respect to this Award. The Committee may condition the delivery of Shares upon the Grantee’s satisfaction of such withholding obligations. The Grantee may elect to satisfy all or part of such withholding requirement by tendering previously-owned Shares or by having the Company withhold Shares having a Fair Market Value equal to the minimum statutory withholding (based on minimum statutory withholding rates for federal, state and local tax purposes, as applicable, including payroll taxes) that could be imposed on the transaction, and, to the extent the Committee so permits, amounts in excess of the minimum statutory withholding to the extent it would not result in additional accounting expense. Such election shall be irrevocable, made in writing, signed by the Grantee, and shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate.

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(b)    Ratification of Actions. By accepting this Agreement, the Grantee and each person claiming under or through the Grantee shall be conclusively deemed to have indicated the Grantee’s acceptance and ratification of, and consent to, any action taken under the Plan or this Agreement and Notice of Restricted Stock Grant by the Company, the Board or the Committee.
(c)    Notice. Any notice required by the terms of this Agreement shall be given in writing and shall be deemed effective upon personal delivery or upon deposit with the United States Postal Service, by registered or certified mail, with postage and fees prepaid. Notice shall be addressed to the Company at its principal executive office and to the Grantee at the address that he or she most recently provided in writing to the Company.
(d)    Choice of Law. This Agreement and the Notice of Restricted Stock Grant shall be governed by, and construed in accordance with, the laws of Indiana, without regard to any conflicts of law or choice of law rule or principle that might otherwise cause the Plan, this Agreement or the Notice of Restricted Stock Grant to be governed by or construed in accordance with the substantive law of another jurisdiction.
(e)    Arbitration. Subject to, and in accordance with the provisions of Article 3 of the Plan, any dispute or claim arising out of or relating to the Plan, this Agreement or the Notice of Restricted Stock Grant shall be settled by binding arbitration before a single arbitrator in Indianapolis, Indiana and in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The arbitrator shall decide any issues submitted in accordance with the provisions and commercial purposes of the Plan, this Agreement and the Notice of Restricted Stock Grant, provided that all substantive questions of law shall be determined in accordance with the state and federal laws applicable in Indiana, without regard to internal principles relating to conflict of laws.
(f)    Modification or Amendment. This Agreement may only be modified or amended by written agreement executed by the parties hereto; provided, however, that the adjustments permitted pursuant to Section 4.3 of the Plan may be made without such written agreement.
(g)    Severability. In the event any provision of this Agreement shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining provisions of this Agreement, and this Agreement shall be construed and enforced as if such illegal or invalid provision had not been included.
(h)    References to Plan. All references to the Plan shall be deemed references to the Plan as may be amended from time to time.
(i)    Section 409A Compliance. To the extent applicable, it is intended that the Plan and this Agreement comply with the requirements of Code Section 409A and any related regulations or other guidance promulgated with respect to such Section by the U.S. Department of the Treasury or the Internal Revenue Service and the Plan and the Award Agreement shall be interpreted accordingly.


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Exhibit 10.8
REMY INTERNATIONAL, INC.

OMNIBUS INCENTIVE PLAN

Notice of Stock Option Grant for Employees

You (the “Optionee”) have been granted the following option to purchase Class A Common Stock of Remy International, Inc. (the “Company”), par value $0.0001 per share (“Share”), pursuant to the Remy International, Inc. Omnibus Incentive Plan (the “Plan”):

Name of Optionee:
Participant Name
Total Number of Shares Subject to Option:
 
Type of Option:
Nonqualified.
Exercise Price Per Share:
$
Effective Date of Grant:
February 23, 2015
Vesting Schedule:
Subject to the terms of the Plan and the Stock Option Agreement attached hereto, the right to exercise this Option shall vest with respect to one-third of the total number of Shares subject to this Option on each anniversary of the Effective Date of the grant.
Expiration Date:
7th Anniversary of Effective Date of Grant

The Option is subject to earlier expiration, as provided in Section 3(b) of the attached Stock Option Agreement.


By your acceptance/signature, you agree and acknowledge that this Option is granted under and governed by the terms and conditions of the Plan and the attached Stock Option Agreement, which are incorporated herein by reference, and that you have been provided with a copy of the Plan and Stock Option Agreement.

Grantee:
 
Remy International, Inc.
By:
 
 
By:
 
Name:
 
 
Name:
 
Date:
 
 
Title:
 
Address:
 
 
Date:
 
 
 
 
 
 




REMY INTERNATIONAL, INC.
OMNIBUS INCENTIVE PLAN

Stock Option Agreement for Employees

SECTION 1.GRANT OF OPTION.

(a)    Option. On the terms and conditions set forth in the Notice of Stock Option Grant, which is incorporated by reference, and this Stock Option Agreement (the “Agreement”), the Company grants to the Optionee on the Effective Date of Grant the Option to purchase at the Exercise Price the number of Shares set forth in the Notice of Stock Option Grant.

(b)    Plan and Defined Terms. The Option is granted pursuant to the Plan. All terms, provisions, and conditions applicable to the Option set forth in the Plan and not set forth herein are hereby incorporated by reference herein. To the extent any provision hereof is inconsistent with a provision of the Plan, the provisions of the Plan will govern. All capitalized terms that are used in the Notice of Stock Option Grant or this Agreement and not otherwise defined therein or herein shall have the meanings ascribed to them in the Plan.

SECTION 2.    RIGHT TO EXERCISE.
The Option hereby granted shall be exercised by written notice to the Committee, specifying the number of Shares the Optionee desires to purchase together with provision for payment of the Exercise Price. Subject to such limitations as the Committee may impose (including prohibition of one more of the following payment methods), payment of the Exercise Price may be made by (a) check payable to the order of the Company, for an amount in United States dollars equal to the aggregate Exercise Price of such Shares, (b) by tendering to the Company Shares having an aggregate Fair Market Value (as of the trading date immediately preceding the date of exercise) equal to such Exercise Price, (c) by broker-assisted exercise, or (d) by a combination of such methods. The Company may require the Optionee to furnish or execute such other documents as the Company shall reasonably deem necessary (i) to evidence such exercise and (ii) to comply with or satisfy the requirements of the Securities Act of 1933, as amended, the Exchange Act, applicable state or non-U.S. securities laws or any other law.
SECTION 3.    TERM AND EXPIRATION.

(a)    Basic Term. Subject to earlier termination pursuant to the terms hereof, the Option shall expire on the expiration date set forth in the Notice of Stock Option Grant.

(b)    Termination of Employment. If the Optionee’s employment is terminated, the Option shall expire on the earliest of the following occasions:

(i)    The expiration date set forth in the Notice of Stock Option Grant;

(ii)    The date three months following the termination of the Optionee’s employment or service for any reason other than death or Disability;

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(iii)    The date one year following the termination of the Optionee’s employment or service due to death or Disability; or

(iv)    The date of termination of the Optionee’s employment or service for Cause.

The Optionee may exercise all or part of this Option at any time before its expiration under the preceding sentence, but, subject to the following sentence, only to the extent that the Option had become vested in accordance with the terms of the Notice of Stock Option or this Agreement before the Optionee’s employment or service terminated. When the Optionee’s employment or service terminates, unless such termination occurs following a Change in Control, this Option shall expire immediately with respect to the number of Shares for which the Option is not yet vested. If the Optionee dies after termination of employment or service, but before the expiration of the Option, all or part of this Option may be exercised (prior to expiration) by the personal representative of the Optionee or by any person who has acquired this Option directly from the Optionee by will, bequest or inheritance, but only to the extent that the Option was vested and exercisable upon termination of the Optionee’s employment or service.

Unless otherwise specifically prohibited under applicable laws, or by the rules and regulations of any governing governmental agencies or national securities exchanges, if there occurs a Change in Control, as such term is defined in the Plan, the Award shall immediately vest if the Optionee’s employment is terminated without Cause, as such term is defined in Grantee’s employment agreement with the Company or if none, then as such term is defined below, or for Good Reason, as such term is defined below, prior to the third year anniversary of the Effective Date of Grant. This paragraph shall supersede the provisions set forth in Article 17 of the Plan, and to the extent any provision in this paragraph is inconsistent with Article 17 of the Plan, the provisions of this paragraph will govern.

Except as otherwise provided herein, this grant is being make outside of Optionee’s employment agreement, if any. This grant shall not be subject to any employment agreement provision accelerating the vesting of any unvested equity upon Grantee’s termination of employment.

(c)    Definition of “Cause.” The term “Cause” shall have the meaning ascribed to such term in the Optionee’s employment agreement with the Company or any Subsidiary. If the Optionee’s employment agreement does not define the term “Cause,” or if the Optionee has not entered into an employment agreement with the Company or any Subsidiary, the term “Cause” shall mean (i) the willful engaging by the Optionee in misconduct that is demonstrably injurious to the Company or any Parent or Subsidiary (monetarily or otherwise), (ii) the Optionee’s conviction of, or pleading guilty or nolo contendere to, a felony involving moral turpitude, or (iii) the Optionee’s violation of any confidentiality, non-solicitation, or non-competition covenant to which the Optionee is subject.

(d)     Definition of “Good Reason.” The term “Good Reason” shall have the meaning ascribed to such term in the Optionee’s employment agreement with the Company or any Subsidiary. If the Optionee’s employment agreement does not define “Good Reason”, or if the Optionee has

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not entered into an employment agreement with the Company or any subsidiary, then this term shall not apply.
(e)    Definition of “Disability.” The term “Disability” shall have the meaning ascribed to such term in the Optionee’s employment agreement with the Company or any Subsidiary. If the Optionee’s employment agreement does not define the term “Disability,” or if the Optionee has not entered into an employment agreement with the Company or any Subsidiary, the term “Disability” shall mean the Optionee’s entitlement to long-term disability benefits pursuant to the long-term disability plan maintained by the Company or in which the Company’s employees participate.

SECTION 4.    TRANSFERABILITY OF OPTION.

(a)    Generally. Except as provided in Section 4(b) herein, the Option shall not be transferable by the Optionee other than by will or the laws of descent and distribution, and the Option shall be exercisable during the Optionee’s lifetime only by the Optionee or on his or her behalf by the Optionee's guardian or legal representative.

(b)    Transfers to Family Members. Notwithstanding Section 4(a) herein, if the Option is a Nonqualified Stock Option, the Optionee may transfer the Option for no consideration to or for the benefit of a Family Member, subject to such limits as the Committee may establish, and the transferee shall remain subject to all the terms and conditions applicable to the Option.

(c)    Definition of “Family Member.” For purposes of this Agreement, the term “Family Member” shall mean any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law of the Optionee (including adoptive relationships), any person sharing the same household as the Optionee (other than a tenant or employee), a trust in which the above persons have more than fifty percent of the beneficial interests, a foundation in which the Optionee or the above persons control the management of assets, and any other entity in which the Optionee or the above persons own more than fifty percent of the voting interests.

SECTION 5.    MISCELLANEOUS PROVISIONS.

(a)    Acknowledgements. The Optionee hereby acknowledges that he or she has read and understands the terms of the Plan and this Agreement, and agrees to be bound by their respective terms and conditions. The Optionee acknowledges that there may be tax consequences upon the exercise or transfer of the Option and that the Optionee should consult an independent tax advisor prior to any exercise or transfer of the Option.

(b)    Tax Withholding. Pursuant to the Plan, the Committee shall have the power and the right to deduct or withhold, or require the Optionee to remit to the Company, an amount sufficient to satisfy any federal, state and local taxes (including the Optionee’s FICA obligations) required by law to be withheld with respect to this Option. The Committee may condition the delivery of Shares upon the Optionee’s satisfaction of such withholding obligations. The Optionee may elect to satisfy all or part of such withholding requirement by tendering previously-owned Shares or by having the Company withhold Shares having a Fair Market Value equal to the minimum statutory withholding (based on minimum statutory withholding rates for federal, state and local tax purposes, as

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applicable, including the Optionee’s FICA taxes) that could be imposed on the transaction, and, to the extent the Committee so permits, amounts in excess of the minimum statutory withholding to the extent it would not result in additional accounting expense. Such election shall be irrevocable, made in writing and signed by the Optionee, and shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate.

(c)    Notice Concerning Disqualifying Dispositions. If the Option is an Incentive Stock Option, the Optionee shall notify the Committee of any disposition of Shares issued pursuant to the exercise of the Option if the disposition constitutes a “disqualifying disposition” within the meaning of Sections 421 and 422 of the Code (or any successor provision of the Code then in effect relating to disqualifying dispositions). Such notice shall be provided by the Optionee to the Committee in writing within 10 days of any such disqualifying disposition.

(d)    Rights as a Stockholder. Neither the Optionee nor the Optionee’s transferee or representative shall have any rights as a stockholder with respect to any Shares subject to this Option until the Option has been exercised and Share certificates have been issued to the Optionee, transferee or representative, as the case may be.

(e)    Ratification of Actions. By accepting this Agreement, the Optionee and each person claiming under or through the Optionee shall be conclusively deemed to have indicated the Optionee’s acceptance and ratification of, and consent to, any action taken under the Plan or this Agreement and Notice of Stock Option Grant by the Company, the Board, or the Committee.

(f)    Notice. Any notice required by the terms of this Agreement shall be given in writing and shall be deemed effective upon personal delivery or upon deposit with the United States Postal Service, by registered or certified mail, with postage and fees prepaid. Notice shall be addressed to the Company at its principal executive office and to the Optionee at the address that he or she most recently provided in writing to the Company.

(g)    Choice of Law. This Agreement and the Notice of Stock Option Grant shall be governed by, and construed in accordance with, the laws of Indiana, without regard to any conflicts of law or choice of law rule or principle that might otherwise cause the Plan, this Agreement or the Notice of Stock Option Grant to be governed by or construed in accordance with the substantive law of another jurisdiction.

(h)    Arbitration. Subject to the Plan, any dispute or claim arising out of or relating to the Plan, this Agreement or the Notice of Stock Option Grant shall be settled by binding arbitration before a single arbitrator in Indianapolis, Indiana and in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The arbitrator shall decide any issues submitted in accordance with the provisions and commercial purposes of the Plan, this Agreement and the Notice of Stock Option Grant, provided that all substantive questions of law shall be determined in accordance with the state and Federal laws applicable in Indiana, without regard to internal principles relating to conflict of laws.


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(i)    Modification or Amendment. This Agreement may only be modified or amended by written agreement executed by the parties hereto; provided, however, that the adjustments permitted pursuant to the Plan may be made without such written agreement.

(j)    Severability. In the event any provision of this Agreement shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining provisions of this Agreement, and this Agreement shall be construed and enforced as if such illegal or invalid provision had not been included.

(k)    References to Plan. All references to the Plan (or to a Section or Article of the Plan) shall be deemed references to the Plan (or the Section or Article) as may be amended from time to time.

(l)    Section 409A Compliance. To the extent applicable, it is intended that the Plan and this Agreement comply with the requirements of Code Section 409A and any related regulations or other guidance promulgated with respect to such Section by the U.S. Department of the Treasury or the Internal Revenue Service and the Plan and the Award Agreement shall be interpreted accordingly.


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Exhibit 10.9

First Amendment to
Remy International, Inc. Omnibus Incentive Plan
Restricted Stock Award Agreements for Employees

The Remy International, Inc. Omnibus Incentive Plan Restricted Stock Award Agreements granted under the Remy International, Inc. Omnibus Equity Incentive Plan (the “Plan”), dated February 21, 2013 (the “2013 Award Agreements”), February 18, 2014 (the “2014 Award Agreements”), and February 23, 2015 (the “2015 Award Agreements”, and together with the 2013 Award Agreements and the 2014 Award Agreements, the “Award Agreements”), by and between Remy International, Inc. (the “Company”) and the undersigned Grantee are hereby amended effective as of April 30, 2015, as follows:

1.    Section 6 of each of the Award Agreements shall be amended by adding a new Section 6(j), which shall read as follows:

“(j)    Forfeiture and Clawback. Notwithstanding any other provision of the Plan or this Agreement to the contrary, by signing this Agreement, the Grantee acknowledges that any incentive-based compensation paid to the Grantee hereunder may be subject to recovery by the Company under any clawback policy that the Company may adopt from time to time and/or under applicable law, including without limitation any policy that the Company may be required to adopt under Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations of the U.S. Securities and Exchange Commission thereunder or the requirements of any national securities exchange on which the Shares may be listed. The Grantee further agrees to promptly return any such incentive-based compensation which the Company determines it is required to recover from the Grantee under any such clawback policy and/or under applicable law.”

2.    In accordance with Section 19.2 of the Plan, which provides that the Compensation Committee of the Board of Directors of the Company (the “Committee”) may make adjustments in the terms and conditions of, and the criteria included in, the Award Agreements for certain unusual or nonrecurring events if the Committee determines that such adjustments are appropriate to avoid the dilution of benefits intended to be provided under the Award Agreements, Exhibit A “Performance Vested Restricted Shares” of each of the Award Agreements shall be deleted and replaced with the applicable attached Exhibit A.

3.    The undersigned acknowledges and agrees that the results of Fidelity National Technology Imaging, LLC will be excluded from operating profit for purposes of the Award Agreements.    

By your signature and the signature of the Company’s representative below, you and the Company agree and acknowledge that this Amendment to the Award Agreements is effective as of the date first set forth above, including the addition of Section 6(j) as contained above to the Award Agreements. The Award Agreements, as amended, continue to be governed by the terms and conditions of the Plan, which are incorporated herein by reference.

 
Grantee:
 
 
Remy International, Inc.
 
 
 
 
 
By:
 
 
 
(Signature)
 
 
Name:
 
 
 
 
 
 
Title:
 
 
 
(Printed name)
 
 
 
 
 





EXHIBIT 31.1

CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, John J. Pittas, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Remy International, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
 
 
 
Date: May 6, 2015
 
 
 
 
 
 
/s/ John J. Pittas
 
 
John J. Pittas
 
 
President and Chief Executive Officer
 
 
(Principal Executive Officer)





EXHIBIT 31.2
CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Albert E. VanDenBergh, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Remy International, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
 
 
 
Date: May 6, 2015
 
 
 
 
 
 
/s/ Albert E. VanDenBergh
 
 
Albert E. VanDenBergh
 
 
Senior Vice President and Chief Financial Officer
 
 
(Principal Financial Officer)





EXHIBIT 32.1
CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002     

In connection with the filing of this quarterly report on Form 10-Q of Remy International, Inc. (the "Company") for the period ended March 31, 2015 with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned hereby certifies that he is the duly appointed and acting Chief Executive Officer of the Company, and hereby further certifies, to the best of his knowledge and belief, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1.
 
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
 
 
2.
 
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

     
In witness whereof, the undersigned has executed and delivered this certificate as of the date set forth opposite his signature below.

 
Date: May 6, 2015
 
 
 
 
 
 
 
By:
/s/ John J. Pittas
 
John J. Pittas
 
President and Chief Executive Officer
 
(Principal Executive Officer)






EXHIBIT 32.2
CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS
ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002     

In connection with the filing of this quarterly report on Form 10-Q of Remy International, Inc. (the "Company") for the period ended March 31, 2015 with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned hereby certifies that he is the duly appointed and acting Chief Financial Officer of the Company, and hereby further certifies to the best of his knowledge and belief, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1.
 
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
 
 
2.
 
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

     
In witness whereof, the undersigned has executed and delivered this certificate as of the date set forth opposite her signature below.

 
Date: May 6, 2015
 
 
 
 
 
 
 
By:
/s/ Albert E. VanDenBergh
 
Albert E. VanDenBergh
 
Senior Vice President and Chief Financial Officer
 
(Principal Financial Officer)





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