10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
x	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended June 29, 2003
OR
o		Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period             to
Commission File Number: 333-89061
Holley Performance Products Inc.
(Exact name of Registrant as specified in its charter)

Delaware	61-1291482
(State of incorporation)	(I.R.S. Employer Identification No.)
1801 Russellville Road, Post Office Box 10360
Bowling Green, Kentucky 42101-7360
(Address of principal executive offices)
Registrant’s telephone number, including area code:  270-782-2900

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:

Yes   x No   o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes   o No   o

There were 1,000 shares of Common Stock outstanding as of June 29, 2003.

Index

PART I      Financial Information			1
	ITEM 1.	Financial Statements	1
	ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
	ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	21
	ITEM 4.	Controls and Procedures	21
PART II      Other Information			22
	ITEM 6.	Exhibits and Reports on Form 8-K	22

PART I

ITEM 1.     Financial Statements

HOLLEY PERFORMANCE PRODUCTS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)

	December 31, 2002*			June 29, 2003
ASSETS
Cash and cash equivalents	$	602		$	—
Accounts receivable, less allowance for doubtful accounts of $1,089 and $1,198, respectively		16,915			23,509
Inventories		22,843			20,012
Deferred income taxes		3,249			3,250
Income taxes receivable		3,714			656
Other current assets		1,233			823
Total current assets		48,556			48,250
Property, plant and equipment, net		18,210			16,033
Intangible assets, net		61,008			59,477
Total assets	$	127,774		$	123,760
LIABILITIES AND STOCKHOLDER’S DEFICIT
Current portion of long-term debt	$	28,724		$	27,198
Accounts payable		8,408			9,941
Accrued liabilities		13,195			13,040
Accrued interest		5,913			6,108
Total current liabilities		56,240			56,287
Long-term debt, net of current portion		155,111			155,470
Deferred income taxes		15,841			15,841
Total liabilities		227,192			227,598
Commitments and contingencies
Stockholder’s deficit:
Preferred stock, $1.00 par value, 150,000 shares authorized, 75,000 issued and outstanding		75			75
Common stock, $1.00 par value, 1,000 shares authorized, issued and outstanding		1			1
Paid-in capital		59,924			59,924
Accumulated deficit		(159,418	)		(163,838	)
Stockholder’s deficit		(99,418	)		(103,838	)
Total liabilities and stockholder’s deficit	$	127,774		$	123,760

*This condensed consolidated balance sheet has been derived from the audited consolidated balance sheet as of December 31, 2002

See notes to condensed consolidated financial statements

1

HOLLEY PERFORMANCE PRODUCTS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(unaudited)

	3 Months Ended June 30, 2002			3 Months Ended June 29,  2003			6 Months Ended June 30,  2002			6 Months Ended June 29, 2003
Net sales	$	38,567		$	36,747		$	75,155		$	69,584
Cost of goods sold		35,953			24,536			62,967			48,303
Gross profit		2,614			12,211			12,188			21,281
Selling, general and administrative costs		7,567			5,852			13,337			12,074
Management fees		213			221			425			434
Amortization expense		472			472			944			944
Other expense (income)		288			(2	)		371			198
Total operating expenses		8,540			6,543			15,077			13,650
Operating income (loss)		(5,926	)		5,668			(2,889	)		7,631
Interest expense		5,466			6,020			10,888			11,998
Loss before income taxes and cumulative effect of accounting change		(11,392	)		(352	)		(13,777	)		(4,367	)
Income tax expense (benefit)		(644	)		22			(1,244	)		53
Loss before cumulative effect of accounting change		(10,748	)		(374	)		(12,533	)		(4,420	)
Cumulative effect of accounting change for intangible asset impairment, net of taxes of $1,292		—			—			(2,114	)		—
Net  loss	$	(10,748	)	$	(374	)	$	(14,647	)	$	(4,420	)

See notes to condensed consolidated financial statements

2

HOLLEY PERFORMANCE PRODUCTS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

	6 Months Ended June 30, 2002			6 Months Ended June 29, 2003
OPERATING ACTIVITIES
Net loss	$	(14,647	)	$	(4,420	)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation		3,554			2,456
Amortization of intangibles		944			944
Amortization of deferred financing costs included in interest expense		443			587
Amortization of debt discount		343			342
Loss on disposal of business		—			225
Gain on disposal of fixed assets		—			(27	)
Deferred income taxes		(1,307	)		—
Cumulative effect of accounting change		2,114			—
Change in operating assets and liabilities:
Accounts receivable		(1,067	)		(7,067	)
Inventories		3,412			2,058
Other assets		(179	)		3,462
Accounts payable		6,669			1,602
Accrued liabilities		12			37
Net cash from operating activities		291			199
INVESTING ACTIVITIES
Capital expenditures		(941	)		(747	)
Proceeds from the disposal of business		—			1,185
Proceeds from the disposal of fixed assets		46			162
Net cash from investing activities		(895	)		600
FINANCING ACTIVITIES
Net proceeds (repayments) from revolving credit line		1,126			(375	)
Financing costs		(191	)		—
Principal payments on long-term debt		(198	)		(1,026	)
Net cash from financing activities		737			(1,401	)
Net change in cash and cash equivalents		133			(602	)
Cash and cash equivalents:
Beginning of period		234			602
End of period	$	367		$	—
Supplemental disclosures of cash flow information:
Cash paid for interest	$	10,105		$	10,873
Cash received for income taxes	$	—		$	3,051

See notes to condensed consolidated financial statements

3

HOLLEY PERFORMANCE PRODUCTS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except as otherwise noted)
(unaudited)

1.   Significant Accounting Policies

Basis of Presentation

Holley Performance Products Inc. (the “Company” or “Holley”), a Delaware corporation based in Bowling Green, Kentucky, is a leading manufacturer of a diversified line of performance automotive products, including carburetors, fuel pumps, fuel injection systems, ignition systems, remanufactured carburetors, camshafts, crankshafts, pistons, superchargers, exhaust headers, mufflers, engine plumbing products, and nitrous oxide systems. The products are designed to enhance street, off-road, recreational and competitive vehicle performance through increased horsepower, torque and driveability. In addition to its automotive performance line, Holley manufactures performance products for the powersport, marine and motorcycle markets.

The Company is highly leveraged.  As of June 29, 2003, indebtedness was $182.7 million and stockholder’s deficit was $103.8 million.  Further, the Company has experienced recurring net losses.  Management is implementing actions designed to reduce working capital and improve operating results.  If the improvements associated with these actions do not materialize in a timely manner, the Company may be required to take additional measures to ensure the availability of sufficient cash to sustain operations.  Such measures may include, among other things, reducing or delaying capital expenditures, selling assets, restructuring or refinancing indebtedness, or seeking additional equity capital.  There is no assurance that any of these measures can be effected on satisfactory terms, if at all.

The condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial reporting information and the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements.  In the opinion of management, all material reclassifications and adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation of the results of operations, financial position and cash flows for each period shown have been included.  Operating results for interim periods are not necessarily indicative of the results for the full year.  The unaudited condensed consolidated financial statements are presented as permitted by Form 10-Q and do not contain certain information included in the Company’s annual consolidated financial statements.  For further information, refer to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002.

Accounting Period

The Company’s first three quarters of the year are based on two four-week months and one five-week month.  Each of these quarters end on the Sunday of the fifth week in the third month.  The fourth quarter and the fiscal year always end on December 31.

Recent Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standards, or SFAS, No. 143, “Accounting for Asset Retirement Obligations.” SFAS No. 143 establishes accounting standards for recognition and measurement of an asset retirement obligation and an associated asset retirement cost. This statement applies to all entities that have legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development or normal

4

use of the assets and was effective for fiscal years beginning after June 15, 2002.  The adoption of SFAS No. 143 did not have a material impact on the consolidated financial position, results of operations or cash flows of the Company.

In July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities.  SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities.  It nullifies Emerging Issues Task Force Issue No. 94-3. “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit on Activity (including Certain Costs Incurred in a Restructuring).”  The principal difference between SFAS No. 146 and Issue No. 94-3 relates to the recognition of a liability for a cost associated with an exit or disposal activity.  SFAS No. 146 requires that a liability be recognized for those costs only when the liability is incurred, that is, when it meets the definition of a liability in the FASB’s conceptual framework.  In contrast, under Issue No. 94-3, a company recognized a liability for an exit cost when it committed to an exit plan.  SFAS No. 146 is effective for exit or disposal activities that are initiated after December 31, 2002.  The adoption of SFAS No. 146 did not have any impact on the consolidated financial position, results of prospective operations or cash flows of the Company.

In December 2002, the FASB issued SFAS No. 148 Accounting for Stock-Based Compensation — Transition and Disclosure, an amendment of FASB Statement No. 123.  This Statement amends SFAS No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition of voluntary change to the fair value method of accounting for stock-based employee compensation.  In addition, this Statement amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financials statements about the method of accounting for stock-based employee compensation and the effect of the method on reported results.  The adoption of the disclosure provisions of SFAS No. 148 did not have a material effect on the Company’s consolidated financial position, results of operations or cash flows of the Company.

In November 2002, the FASB issued Interpretation (FIN) No. 45 Guarantor’s Accounting and Disclosure Requirements for Guarantees Including Indirect Guarantees of Indebtedness of others, which provides guidance on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued.  It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee.  The initial recognition and measurement provisions of FIN No. 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002, irrespective of the guarantor’s fiscal year end.  The adoption of FIN No. 45 did not have a material effect on the Company’s consolidated financial position, results of operations or cash flows of the Company.

In January 2003, the FASB issued Interpretation No. 46 Consolidation of Variable Interest Entities, an interpretation of ARB No. 51.  This Interpretation addresses the consolidation by business enterprises of variable interest entities as defined in the Interpretation.  The Interpretation applies immediately to variable interest entities created after January 31, 2003, and to variable interests in variable interest entities obtained after January 31, 2003.  The Company has determined that it does not have any interest in a variable interest entity that would require the variable interest entity to be consolidated or disclosed by the Company.

In April 2003, the FASB issued SFAS No. 149, Amendments of Statement 133 on Derivative instruments and Hedging Activities.   This Statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities.  This Statement is effective for contracts entered into or modified after June 30, 2003, except as stated below and for hedging relationships designated after June 30, 2003.  In addition, except as stated below, all provisions of this Statement should be applied prospectively.  The provisions of this Statement that relate to SFAS 133 Implementation Issues that have been effective for fiscal quarters that began prior to June 15, 2003, should continue to be applied in accordance with their respective effective dates.  In addition, paragraphs 7(a) and 23(a), which relate to forward purchases or sales of when-issued securities or other securities that do not yet exist, should be applied to both existing contracts and new contracts entered into after June 30, 2003.    The Company does not expect the adoption of SFAS No. 149, which will be effective for contracts entered into or modified after June 30, 2003, to have a material effect on its consolidated financial statements.

5

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.   This Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). Many of those instruments were previously classified as equity.   This Statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003.  It is to be implemented by reporting the cumulative effect of a change in an accounting principle for financial instruments created before the issuance date of the Statement and still existing at the beginning of the interim period of adoption. Restatement is not permitted.  The adoption of SFAS No. 150 did not have a material impact on the consolidated financial position, results of operations or cash flows of the Company.

Reclassifications

Certain 2002 amounts have been reclassified to conform with their 2003 presentation.

2.   Inventories

Inventories are comprised of the following:

	December 31, 2002		June 29, 2003
Raw materials	$	11,224	$	7,315
Work-in-process		3,979		3,333
Finished goods		7,640		9,364
	$	22,843	$	20,012

3.   Segment Information

The Company’s reportable segments are Performance Parts and Remanufactured Parts. The Company manufactures high performance aftermarket automotive parts through its Performance Parts segment. Under its Remanufactured Parts segment, the Company refurbishes used automotive part cores and then resells the parts as remanufactured products. Both segments sell primarily to automotive parts distributors throughout the United States.

Summarized financial information concerning the Company’s operating measures for the reportable segments are shown in the following table:

	Three  Months Ended June 30, 2002			Three  Months  Ended June 29, 2003		Six Months Ended June 30, 2002		Six Months Ended June 29, 2003
Performance Parts:
Net sales	$	35,388		$	33,162	$	67,036	$	62,244
Gross profits		3,345			11,745		11,439		20,329
Remanufactured Parts:
Net sales	$	3,179		$	3,585	$	8,119	$	7,340
Gross profits (loss)		(731	)		466		749		952
Total:
Net sales	$	38,567		$	36,747	$	75,155	$	69,584
Gross profits		2,614			12,211		12,188		21,281

6

Summary balance sheet data for inventories and property, plant and equipment, net for each of the Company’s reportable segments as of December 31, 2002 and June 29, 2003 are shown in the following table:

	December 31, 2002		June 29, 2003
Performance Parts:
Inventories	$	19,875	$	17,139
Property, plant and equipment		16,849		14,869
Remanufactured Parts:
Inventories	$	2,968	$	2,873
Property, plant and equipment		1,361		1,164
Total:
Inventories	$	22,843	$	20,012
Property, plant and equipment		18,210		16,033

4.   Intangible Assets

Financing costs are amortized over the term of the related outstanding debt using the effective interest method. In connection with acquisitions, the Company has entered into various covenants not to compete with certain individuals. The estimated values allocated to such agreements are amortized on a straight-line basis over the terms of the respective agreements. A summary of these results is as follows:

	December 31, 2002							June 29, 2003
	Gross Carrying  Amount		Accumulated Amortization			Net Carrying Value		Gross Carrying  Amount		Accumulated Amortization			Net Carrying Value
Amortized intangible assets:
Deferred financing costs	$	7,443	$	(2,163	)	$	5,280	$	7,443	$	(2,750	)	$	4,693
Non-compete covenants		8,164		(5,810	)		2,354		8,164		(6,754	)		1,410
	$	15,607	$	(7,973	)	$	7,634	$	15,607	$	(9,504	)	$	6,103

Amortization of deferred financing costs and non-compete agreements totaled $443 and $944 for the six months ended June 30, 2002 and $587 and $944 for the six months ended June 29, 2003, respectively. Amortization of these costs over the next five years are estimated to be: 2003, $2,780; 2004, $1,851; 2005, $1,139; 2006, $1,139; and 2007, $725.

In addition, included in the line item intangible assets, net are intangible assets not subject to amortization.   Goodwill and tradenames have a net carrying value of $16,110 and $37,264, respectively as of December 31, 2002 and June 29, 2003.

5.   Related Party Transactions

Pursuant to a management agreement, Kohlberg and Company, LLC (“Kohlberg”) provides the Company with general corporate administrative services. Kohlberg receives a management fee to recover its operating expenses based upon an allocation of time devoted to the Company. Management fee expense was $213 and $425 for the three and six months ended June 30, 2002, respectively and $221 and $434 for the three and six months ended June 29, 2003, respectively. Kohlberg has deferred cash payments with respect to the management fees charged the Company since January 1, 2002; however, such fees are accruing in connection with the aforementioned management agreement.

7

6.   Financial Information for Guarantors of the Company’s Debt

The Senior Notes are guaranteed by substantially all existing and future directly or indirectly wholly-owned domestic restricted subsidiaries of the Company (“the Guarantors”).  The Guarantors irrevocably and unconditionally, fully, jointly and severally guarantee the performance and payment, when due, of all obligations under the Senior Notes.

The information that follows presents condensed consolidating financial information as of June 29, 2003 and for the year ended December 31, 2002 for: a) Holley Performance Products Inc. (as the Issuer), b) the Guarantors, c) elimination entries and d) the Company on a consolidated basis.

The condensed consolidating financial information includes certain allocations of revenues and expenses based on management’s best estimates which is not necessarily indicative of the financial position, results of operations and cash flows that these entities would have achieved on a stand-alone basis and should be read in connection with the condensed consolidated financial statements of the Company.

8

	Condensed Consolidating Balance Sheet December 31, 2002
	Holley Performance Products Inc. (Parent Company Only)			Subsidiary Guarantors			Eliminations			Consolidated
ASSETS
Cash and cash equivalents	$	421		$	181		$	—		$	602
Accounts receivable, net		15,837			1,078			—			16,915
Inventories		11,813			11,030			—			22,843
Income taxes receivable		3,677			37			—			3,714
Deferred income taxes		1,835			1,414						3,249
Intercompany receivable		12,936			—			(12,936	)		—
Other current assets		705			528			—			1,233
Total current assets		47,224			14,268			(12,936	)		48,556
Property, plant and equipment, net		13,673			4,537			—			18,210
Investment in subsidiaries		19,450			—			(19,450	)		—
Intangible assets, net		36,999			24,009			—			61,008
Total assets	$	117,346		$	42,814		$	(32,386	)	$	127,774
LIABILITIES AND STOCKHOLDER’S DEFICIT
Current portion of long - term debt	$	28,679		$	45		$	—		$	28,724
Accounts payable		7,813			595			—			8,408
Accrued liabilities		11,306			1,889			—			13,195
Accrued interest		5,913			—						5,913
Intercompany payable		—			12,936			(12,936	)		—
Total current liabilities		53,711			15,465			(12,936	)		56,240
Long - term debt, net of current portion		154,993			118			—			155,111
Deferred income taxes		8,060			7,781			—			15,841
Total liabilities		216,764			23,364			(12,936	)		227,192
Commitments and contingencies
Stockholder’s deficit:
Preferred stock, $1.00 par value, 150,000 shares authorized, 75,000 issued and outstanding		75			—			—			75
Common stock, $1.00 par value, 1,000 shares authorized, issued and outstanding		1			88,074			(88,074	)		1
Paid-in capital		59,924			—						59,924
Accumulated deficit		(159,418	)		(68,624	)		68,624			(159,418	)
Stockholder’s deficit		(99,418	)		19,450			(19,450	)		(99,418	)
Total liabilities and stockholder’s deficit	$	117,346		$	42,814		$	(32,386	)	$	127,774

9

	Condensed Consolidating Balance Sheet June 29, 2003
	Holley Performance Products Inc. (Parent Company Only)			Subsidiary Guarantors			Eliminations			Consolidated
ASSETS
Cash and cash equivalents	$	—		$	—		$	—		$	—
Accounts receivable, net		23,090			419			—			23,509
Inventories		9,966			10,046			—			20,012
Deferred income taxes		3,250			—			—			3,250
Income taxes receivable		603			53			—			656
Intercompany receivable		8,889			8			(8,897	)		—
Other current assets		712			111			—			823
Total current assets		46,510			10,637			(8,897	)		48,250
Property, plant and equipment, net		12,337			3,696			—			16,033
Investment in subsidiaries		20,836			—			(20,836	)		—
Intangible assets, net		37,032			22,445			—			59,477
Total assets	$	116,715		$	36,778		$	(29,733	)	$	123,760
LIABILITIES AND STOCKHOLDER’S DEFICIT
Current portion of long-term debt	$	27,198		$	—		$	—		$	27,198
Accounts payable		9,662			279			—			9,941
Accrued liabilities		11,695			1,345			—			13,040
Accrued interest		6,108			—			—			6,108
Intercompany payable		—			8,897			(8,897	)		—
Total current liabilities		54,663			10,521			(8,897	)		56,287
Long-term debt, net of current portion		155,470			—			—			155,470
Deferred income taxes		10,420			5,421			—			15,841
Total liabilities		220,553			15,942			(8,897	)		227,598
Commitments and contingencies
Stockholder’s deficit:
Preferred stock, $1.00 par value, 150,000 shares authorized, 75,000 issued and outstanding		75			—			—			75
Common stock, $1.00 par value, 1,000 shares authorized, issued and outstanding		1			88,074			(88,074	)		1
Paid-in capital		59,924			—			—			59,924
Accumulated deficit		(163,838	)		(67,238	)		67,238			(163,838	)
Stockholder’s deficit		(103,838	)		20,836			(20,836	)		(103,838	)
Total liabilities and stockholder’s deficit	$	116,715		$	36,778		$	(29,733	)	$	123,760

10

	Condensed Consolidating Statement of Operations Three Months Ended June 30, 2002
	Holley Performance Products Inc. (Parent Company Only)			Subsidiary Guarantors			Eliminations			Consolidated
Net sales	$	12,635		$	61,759		$	(35,827	)	$	38,567
Cost of goods sold		11,330			60,450			(35,827	)		35,953
Gross profit		1,305			1,309			—			2,614
Selling, general and administrative costs		3,046			4,521			—			7,567
Management fees		213			—			—			213
Amortization of intangibles		—			472			—			472
Other expense		288			—			—			288
Equity in loss of subsidiaries		3,741			—			(3,741	)		—
Total operating expenses		7,288			4,993			(3,741	)		8,540
Operating loss		(5,983	)		(3,684	)		3,741			(5,926	)
Interest expense		5,445			21			—			5,466
Loss before income taxes		(11,428	)		(3,705	)		3,741			(11,392	)
Income tax expense (benefit)		(680	)		36			—			(644	)
Net loss	$	(10,748	)	$	(3,741	)	$	3,741		$	(10,748	)

	Condensed Consolidating Statement of Operations Six Months Ended June 30, 2002
	Holley Performance Products Inc.  (Parent Company Only)			Subsidiary Guarantors			Eliminations			Consolidated
Net sales	$	33,089		$	114,386		$	(72,320	)	$	75,155
Cost of goods sold		26,181			109,106			(72,320	)		62,967
Gross profit		6,908			5,280			—			12,188
Selling, general and administrative costs		3,195			10,142			—			13,337
Management fees		425			—			—			425
Amortization of intangibles		—			944			—			944
Other expense		346			25			—			371
Equity in loss of subsidiaries		6,970			—			(6,970	)		—
Total operating expenses		10,936			11,111			(6,970	)		15,077
Operating income (loss)		(4,028	)		(5,831	)		6,970			(2,889	)
Interest expense		10,846			42			—			10,888
Loss before income taxes and cumulative effect of accounting change		(14,874	)		(5,873	)		6,970			(13,777	)
Income tax benefit		(735	)		(509	)		—			(1,244	)
Loss before cumulative effect of accounting change		(14,139	)		(5,364	)		6,970			(12,533	)
Cumulative effect of accounting change		(508	)		(1,606	)		—			(2,114	)
Net loss	$	(14,647	)	$	(6,970	)	$	6,970		$	(14,647	)

11

	Consolidating Statement of Cash Flows Six Months Ended June 30, 2002
	Holley Performance Products Inc. (Parent Company Only)			Subsidiary Guarantors			Eliminations		Consolidated
OPERATING ACTIVITIES:
Net cash from operating activities	$	(161	)	$	452		$	—	$	291
INVESTING ACTIVITIES:
Capital expenditures		(572	)		(369	)		—		(941	)
Proceeds on disposal of fixed assets		—			46			—		46
Net cash from investing activities		(572	)		(323	)		—		(895	)
FINANCING ACTIVITIES:
Proceeds from long-term borrowings		1,126			—			—		1,126
Principal payments on long-term debt		(148	)		(50	)		—		(198	)
Financing costs		(191	)		—			—		(191	)
Net cash from financing activities		787			(50	)		—		737
Net changes in cash and cash equivalents		54			79			—		133
Cash and cash equivalents:
Beginning of period		72			162			—		234
End of period	$	126		$	241		$	—	$	367

	Condensed Consolidating Statement of Operations Three Months Ended June 29, 2003
	Holley Performance Products Inc. (Parent Company Only)			Subsidiary Guarantors		Eliminations			Consolidated
Net sales	$	17,658		$	19,089	$	—		$	36,747
Cost of goods sold		11,361			13,175		—			24,536
Gross profit		6,297			5,914		—			12,211
Selling, general and administrative costs		1,776			4,076		—			5,852
Management fees		221			—		—			221
Amortization of intangibles		283			189		—			472
Other income		(2	)		—		—			(2	)
Equity in income of subsidiaries		(1,640	)		—		1,640			—
Total operating expenses		638			4,265		1,640			6,543
Operating income (loss)		5,659			1,649		(1,640	)		5,668
Interest expense		6,020			—		—			6,020
Income (loss) before income taxes		(361	)		1,649		(1,640	)		(352	)
Income tax expense		13			9		—			22
Net income (loss)	$	(374	)	$	1,640	$	(1,640	)	$	(374	)

12

	Condensed Consolidating Statement of Operations Six Months Ended June 29, 2003
	Holley Performance Products Inc.  (Parent Company Only)			Subsidiary Guarantors		Eliminations			Consolidated
Net sales	$	33,357		$	36,227	$	—		$	69,584
Cost of goods sold		22,349			25,954		—			48,303
Gross profit		11,008			10,273		—			21,281
Selling, general and administrative costs		3,575			8,499		—			12,074
Management fees		434			—		—			434
Amortization of intangibles		566			378		—			944
Other expense		198			—		—			198
Equity in income of subsidiaries		(1,386	)		—		1,386			—
Total operating expenses		3,387			8,877		1,386			13,650
Operating income (loss)		7,621			1,396		(1,386	)		7,631
Interest expense		11,998			—		—			11,998
Income (loss) before income taxes		(4,377	)		1,396		(1,386	)		(4,367	)
Income tax expense		43			10		—			53
Net income (loss)	$	(4,420	)	$	1,386	$	(1,386	)	$	(4,420	)

	Consolidating Statement of Cash Flows Six Months Ended June 29, 2003
	Holley Performance Products Inc. (Parent Company Only)			Subsidiary Guarantors			Eliminations		Consolidated
OPERATING ACTIVITIES:
Net cash from operating activities	$	380		$	(181	)	$	—	$	199
INVESTING ACTIVITIES:
Capital expenditures		(747	)		—			—		(747	)
Proceeds from the disposal of business		1,185			—			—		1,185
Proceeds from the disposal of fixed assets		162			—			—		162
Net cash from investing activities		600			—			—		600
FINANCING ACTIVITIES:
Net proceeds from revolving credit line		(375	)		—			—		(375	)
Principal payments on long-term debt		(1,026	)		—			—		(1,026	)
Net cash from financing activities		(1,401	)		—			—		(1,401	)
Net change in cash and cash equivalents		(421	)		(181	)		—		(602	)
Cash and cash equivalents:
Beginning of period		421			181			—		602
End of period	$	—		$	—		$	—	$	—

13

7.   Contingent Liabilities

In May 1999, Union Pacific Railroad Company filed an action against Weiand Automotive and others in the United States District Court for the Central District of California, alleging that certain soil and groundwater contamination discovered on Union Pacific property in Los Angeles had migrated from an adjacent Weiand Automotive facility. Holley subsequently became a defendant, as did the owner of the property on which the Weiand Automotive business had been operated. In December 2000, a global settlement of claims was reached with Weiand’s insurers paying the bulk of the settlement and Holley and Weiand Automotive’s attorneys fees. In addition, $550 was put into a Site Source Control Account to cover costs incurred by Holley and Weiand Automotive and the property owner to investigate and remediate any contamination of the Weiand property which may be required by the State of California. In July 2001, Weiand Automotive entered into a Voluntary Cleanup Agreement with the State of California Environmental Protection Agency Department of Toxic Substances Control (DTSC) to investigate and, if necessary, remediate the contamination on the Weiand property. Consultants for Holley and Weiand Automotive have submitted a workplan to DTSC, which is pending approval. Although Holley estimates that the Site Source Control Account will be sufficient to cover Holley’s costs for investigation and remediation of the site, there can be no assurances that the final costs will not exceed such amount. Holley and Weiand Automotive are working vigorously to address regulatory issues arising from the discovered contamination.

The Company is a party to various lawsuits and claims in the normal course of business. While the lawsuits and claims against the Company cannot be predicted with certainty, management believes that the ultimate resolution of the matters will not have a material effect on the financial position or results of operations of the Company.

The Company generally warrants its products against certain manufacturing and other defects. These product warranties are provided for specific periods of time depending on the nature of the product.  The accrued product warranty costs are based primarily on historical experience of actual warranty claims. The following table provides the changes in the Company’s product warranties:

	Three Months Ended						Six Months Ended
	June 30, 2002			June 29,  2003			June 30,  2002			June 29, 2003
Beginning Balance	$	5,400		$	4,344		$	5,356		$	4,335
Accrued for current year claims		4,281			1,684			4,590			3,210
Settlement of warranty claims		(6,590	)		(1,703	)		(6,855	)		(3,220	)
Ending Balance	$	3,091		$	4,325		$	3,091		$	4,325

14

ITEM 2:   Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the accompanying unaudited condensed consolidated financial statements included in this report as well as the consolidated financial statements for the year ended December 31, 2002 included in the Company’s Form 10-K. This discussion and other portions of this report may contain forward-looking statements.

OVERVIEW

Founded in 1903, Holley is a leading manufacturer and marketer of specialty products for the performance automotive, marine and motorcycle aftermarkets. Holley designs, manufactures and markets a diversified line of automotive performance and racing products that are designed to enhance vehicle performance through generating increased horsepower, and torque. The Company’s products include but are not limited to performance and remanufactured carburetors, nitrous oxide systems, fuel injection systems, super chargers, intake manifolds, cylinder heads, camshafts, pistons, connecting rods, crankshafts, headers and other exhaust system components, fuel pumps, water pumps, and performance automotive plumbing products.

SEASONALITY

The Company’s operations experience slight seasonal trends, which generally affect the overall automotive aftermarket industry. Historically, revenues are highest in the spring, during the second fiscal quarter, which marks the beginning of the racing season and when the weather is better suited for outdoor automotive repair activity.

The following table sets forth for the periods shown, net sales, gross profit, selling, general and administrative costs (“SG&A”), operating income, and net loss in millions of dollars and as a percentage of sales.

	Three months ended										Six months ended
	June 30, 2002					June 29, 2003					June 30, 2002,					June 29, 2003
Net sales	$	38.6		100.0	%	$	36.7		100.0	%	$	75.2		100.0	%		69.6		100.0	%
Gross profit		2.6		6.7			12.2		33.2			12.2		16.2			21.3		30.6
SG&A		7.6		19.7			5.9		16.1			13.3		17.7			12.1		17.4
Operating income (loss)		(5.9	)	(15.3	)		5.7		15.5			(2.9	)	(3.9	)		7.6		10.9
Net loss		(10.7	)	(27.7	)		(0.4	)	(1.1	)		(14.6	)	(19.4	)		(4.4	)	(6.3	)

Net Sales

Net sales equal gross revenues less provisions for volume rebates, credits, product returns, and other sales allowances. Net sales for the quarter ended June 29, 2003 totaled $36.7 million compared to $38.6 million for the same period in 2002, a decrease of $1.9 million or 4.9%.   Net sales for the six months ended June 29, 2003 were $69.6 million compared to $75.2 million for the six months ended June 30, 2002, a decrease of $5.6 million or 7.4%.

Net sales in the performance segment for the second quarter of 2003 were $33.2 million compared to $35.4 million in the second quarter of 2002, a decrease of $2.2 million or 6.2%.   Net sales in the performance segment for the six months ended June 29, 2003 were $62.2 million compared to $67.0 million for the six months ended June 30, 2002, a decrease of $4.8 million or 7.2%.   The decline in sales for the quarter and six month periods is generally attributable to weak consumer confidence resulting in soft end-user demand, unfavorable weather conditions, uncertainty over the war in Iraq and prevailing economic conditions.  In addition, the Company has eliminated poorly performing product lines which, while reducing net sales, has resulted in improvement at the gross profit level.

Net sales in the remanufacturing segment were $3.6 million in the second quarter of 2003 compared to $3.2 million in the second quarter of 2002, an increase of $0.4 million or 12.5%.  The increase in net sales

15

for the second quarter of 2003 is due to a lower level of sales returns, credits and allowances during 2003.  Net sales in the remanufacturing segment for the six months ended June 29, 2003 were $7.3 million compared to $8.1 million for the six months ended June 30, 2002, a decrease of $0.8 million or 9.9%.   The decreased sales in the remanufacturing segment are the result of weak demand in the repair market and the fact that new cars have not been produced with carburetors since approximately 1992, which has led to a continuing decline in the demand for remanufactured carburetors.

Gross Profit

Gross profit for the second quarter of 2003 totaled $12.2 million or 33.2% of net sales compared to gross profits of $2.6 million or 6.7% of net sales for the same quarter in 2002.  This represents an increase of $9.6 million or 369.2%.  Gross profit for the six months ended June 29, 2003 was $21.3 million compared to $12.2 million for the six months ended June 30, 2002, an increase of $9.1 million or 74.6%.

In the performance segment, gross profit was $11.7 million for the second quarter of 2003 compared to $3.3 million for the second quarter of 2002, an increase of $8.4 million or 255%.  Gross profit in the performance segment for the six months ended June 29, 2003 was $20.3 million compared to $11.4 million for the six months ended June 30, 2002, an increase of $8.9 million or 78.1%.   The second quarter and six months of 2003 showed continued improvement in gross profit dollars and percentages as the Company realized improved results from the implementation of strategies to improve manufacturing performance and control manufacturing costs.  These strategies include the outsourcing of non-core processes and more efficient layout of the shop floor.

In the remanufacturing segment, gross profit was $0.5 million in the second quarter of 2003 compared to a gross loss of $0.7 million for the same period in 2002.  Gross profit in the remanufacturing segment for the six months ended June 29, 2003 was $1.0 million compared to $0.7 million for the six months ended June 30, 2002, an increase of $0.3 million or 42.9%. The increase in gross profit for the quarter and six months ended June 29, 2003 was caused primarily by a decline in sales returns, credits and allowances.  This increase was offset by the continued decline in demand for remanufactured products.

Selling, General and Administrative Costs

Selling, general and administrative costs for the three months ended June 29, 2003 totaled $5.9 million or 16.1% of net sales compared to $7.6 million or 19.7% of net sales in the same period in 2002, a decrease of $1.7 million or 22.4%.  Selling, general and administrative costs decreased to $12.1 million for the six months ended June 29, 2003 from $13.3 million for the six months ended June 30, 2002, a decrease of $1.2 million or 9.0%. The Company has focused its spending strategy on receiving maximum value for each dollar spent, which resulted in lower spending for promotions, advertising and commissions during the second quarter and first six months of 2003.

Other Expense

Other expense was $0.2 million for the six months ended June 29, 2003 compared to $0.4 million in the same period in 2002. The 2003 amount includes $0.2 million related to a loss on the sale of So-Cal Speed Shops, Inc. (“So-Cal”) effective February 24, 2003.  Cash proceeds of $1.2 million were received in connection with this sale.

Operating Income

Operating income for the three months ended June 29, 2003 was $5.7 million or 15.5% of net sales compared to an operating loss of $5.9 million or 15.3% of net sales for the same period in 2002, an increase of $11.6 million or 196.6%. Operating income for the six months ended June 29, 2003 was $7.6 million or 10.9% of net sales compared to an operating loss of $2.9 million or 3.9% of net sales for the six months ended June 30, 2002, an increase of $10.5 million or 362.1%. The increase in operating income for the quarter and six months ended June 29, 2003 resulted from the aforementioned improvements in manufacturing performance and manufacturing spending.

16

Interest Expense

Interest expense was $6.0 million for the three months ended June 29, 2003 compared to $5.5 million for the same period in 2002, an increase of $0.5 million or 9.1%.   Interest expense was $12.0 million for the six months ended June 29, 2003 compared to $10.9 million for the six months ended June 30, 2002, an increase of $1.1 million or 10.1%.  These increases were a result of higher interest rates under the revolving credit agreement as well as interest associated with the promissory notes issued in the third quarter of 2002.

Tax Expense

The tax benefit of $0.6 million and $1.2 for the three and six month periods ended June 29, 2002 resulted from a tax sharing agreement that the Company entered into in 2002 with its prior owner, Coltec Industries, Inc. (“Coltec”).  Pursuant to this agreement, the Company was able to carry back net operating losses to years it was a member of Coltec’s consolidated tax group. No further opportunities for carry back are available.

LIQUIDITY AND CAPITAL RESOURCES

The Company’s primary sources of liquidity are cash flows from operations and borrowings under the revolving credit facility.  As part of its operating strategy, the Company maintains minimal cash balances and is substantially dependent upon the availability of adequate working capital financing to support accounts receivable and inventories.

The credit agreement provides for a total credit limit of $45.0 million, which includes a $25.0 million revolving credit facility, subject to a borrowing base formula, of which $1.0 million is reserved for irrevocable standby letters of credit.  As of June 29, 2003 borrowings under the credit agreement were $27.1 million and unused borrowing capacity under the revolving credit facility was $9.3 million. 

The credit agreement contains financial covenants which require the maintenance of certain fixed charge coverage ratios beginning with the twelve-month period ended June 30, 2003.  The Company’s ability to operate within these financial covenants is dependent on its ability to improve earnings.  The Company was in compliance with the terms of its indebtedness as of June 30, 2003.

The Company is highly leveraged.  As of June 29, 2003, the Company’s indebtedness was $182.7 million and its stockholder’s deficit was $103.8 million.  Further, the Company has incurred recurring net losses.  Management is implementing actions designed to reduce working capital and improve operating results.  If the improvements associated with these actions do not materialize in a timely manner, the Company may be required to take additional measures to ensure the availability of sufficient cash to sustain operations.  Such measures may include, among other things, reducing or delaying capital expenditures, selling assets, restructuring or refinancing indebtedness, or seeking additional equity capital.  There is no assurance that any of these measures can be affected on satisfactory terms, if at all.

Operating Activities

Net cash provided by operating activities decreased to $0.2 million for the six months ended June 29, 2003 from $0.3 million for the six months ended June 30, 2002.  Operating activities for 2003 were primarily affected by the net loss of $4.4 million and the increase in trade accounts receivable of $7.1 million, offset by depreciation and amortization of $4.3 million, a decrease in inventories of $2.1 million, the receipt of a tax refund of $3.0 million and the increase in accounts payable of $1.6 million.   Operating activities for 2002 were primarily affected by the net loss of $14.6 million, offset by depreciation and amortization of $5.3 million, a decrease in inventories of $3.4 million, and the increase in accounts payable of $6.7 million.

17

Investing Activities

Net cash provided by investing activities was $0.6 million for the six months ended June 29, 2003 compared to net cash used in investing activities of $0.9 million for the six months ended June 30, 2002.  For 2003, proceeds from the sale of So-Cal of $1.2 million and proceeds from the disposal of fixed assets of $0.2 million were partially offset by capital expenditures of $0.7 million.  For the six months ended June 30, 2002, capital expenditures were $0.9 million.

Financing Activities

Net cash used in financing activities for the six months ended June 29, 2003 was $1.4 million compared to net cash provided by financing activities of 2002 of $0.7 million.   In 2003, cash was used to pay down the revolving credit facility and make principal payments on long-term debt.  In 2002, cash provided was principally a result of net borrowings under the Company’s revolving credit facility partially offset by principal payments on long-term debt.

EBITDA

EBITDA was $11.2 million for the six months ended June 29, 2003 compared to $2.0 million for the six months ended June 30, 2002, an increase of $9.2 million.  This increase in EBITDA is the result of the increase in gross profit and reduced selling, general and administrative costs in 2003.

	Six Months Ended
	June 30 2002			June 29, 2003
Net loss	$	(14,647	)	$	(4,420	)
Cumulative effect of accounting change for intangible asset impairment		2,114
Income tax expense (benefit)		(1,244	)		53
Interest expense		10,888			11,998
Other expense		371			198
Amortization of intangibles		944			944
Depreciation		3,554			2,456
EBITDA	$	1,980		$	11,229

EBITDA is a required component of the financial covenant contained in the Company’s credit agreement.  EBITDA, as defined by the Company’s credit agreement, is presented and discussed because the Company believes that investors regard EBITDA as a key measure of a leveraged company’s performance. EBITDA is defined as net income or loss (excluding extraordinary gains or losses, gains or losses from asset dispositions and minority interest) before interest, income taxes, depreciation and amortization.  However, EBITDA is not a measure of financial performance under accounting principles generally accepted in the United States of America.  EBITDA does not represent cash available to service debt and should not be considered in isolation or as a substitute for net income or cash flows from operating activities (or any other measure of performance determined in accordance with generally accepted accounting principles).

18

Contractual Obligations and Commitments

The table below sets forth a summary of the Company’s contractual obligations and commitments as of June 29, 2003 that will have an impact on the Company’s future liquidity:

	Years Ending December 31,
Contractual Obligations	2003		2004		2005		2006		2007		Thereafter		Total
Loan and security agreement	$	1,002	$	2,000	$	2,000	$	2,000	$	20,146	$	—	$	27,148
Senior notes		—		—		—		—		147,088		—		147,088
Convertible promissory note		—		7,500		—		—		—		—		7,500
Other long term debt		23		49		52		55		58		695		932
Operating leases		421		600		89		46		10		135		1,301
Total contractual obligations	$	1,446	$	10,149	$	2,141	$	2,101	$	167,302	$	830	$	183,969

Impact of Inflation

Management does not believe that inflation has had a significant affect on the results of operations over the periods presented.

Recent Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standards, or SFAS, No. 143, “Accounting for Asset Retirement Obligations.” SFAS No. 143 establishes accounting standards for recognition and measurement of an asset retirement obligation and an associated asset retirement cost. This statement applies to all entities that have legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development or normal use of the assets and was effective for fiscal years beginning after June 15, 2002.  The adoption of SFAS No. 143 did not have a material impact on the consolidated financial position, results of operations or cash flows of the Company.

In July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities.  SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities.  It nullifies Emerging Issues Task Force Issue No. 94-3. “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit on Activity (including Certain Costs Incurred in a Restructuring).”  The principal difference between SFAS No. 146 and Issue No. 94-3 relates to the recognition of a liability for a cost associated with an exit or disposal activity.  SFAS No. 146 requires that a liability be recognized for those costs only when the liability is incurred, that is, when it meets the definition of a liability in the FASB’s conceptual framework.  In contrast, under Issue No. 94-3, a company recognized a liability for an exit cost when it committed to an exit plan.  SFAS No. 146 is effective for exit or disposal activities that are initiated after December 31, 2002.  The adoption of SFAS No. 146 did not have any impact on the consolidated financial position, results of prospective operations or cash flows of the Company.

In December 2002, the FASB issued SFAS No. 148 Accounting for Stock-Based Compensation — Transition and Disclosure, an amendment of FASB Statement No. 123.  This Statement amends SFAS No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition of voluntary change to the fair value method of accounting for stock-based employee compensation.  In addition, this Statement amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financials statements about the method of accounting for stock-based employee compensation and the effect of the method on reported results.  The adoption of the disclosure provisions of SFAS No. 148 did not have a material effect on the Company’s consolidated financial position, results of operations or cash flows of the Company.

In November 2002, the FASB issued Interpretation (FIN) No. 45 Guarantor’s Accounting and Disclosure Requirements for Guarantees Including Indirect Guarantees of Indebtedness of others, which provides guidance on the disclosures to be made by a guarantor in its interim and annual financial statements about

19

its obligations under certain guarantees that it has issued.  It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee.  The initial recognition and measurement provisions of FIN No. 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002, irrespective of the guarantor’s fiscal year end.  The adoption of FIN No. 45 did not have a material effect on the Company’s consolidated financial position, results of operations or cash flows of the Company.

In January 2003, the FASB issued Interpretation No. 46 Consolidation of Variable Interest Entities, an interpretation of ARB No. 51.  This Interpretation addresses the consolidation by business enterprises of variable interest entities as defined in the Interpretation.  The Interpretation applies immediately to variable interest entities created after January 31, 2003, and to variable interests in variable interest entities obtained after January 31, 2003.  The application of this Interpretation did not have any impact on the Company’s consolidated financial position, results of operations or cash flows of the Company.

In April 2003, the FASB issued SFAS No. 149, Amendments of Statement 133 on Derivative instruments and Hedging Activities.   This Statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities.  This Statement is effective for contracts entered into or modified after June 30, 2003, except as stated below and for hedging relationships designated after June 30, 2003.  In addition, except as stated below, all provisions of this Statement should be applied prospectively.  The provisions of this Statement that relate to SFAS 133 Implementation Issues that have been effective for fiscal quarters that began prior to June 15, 2003, should continue to be applied in accordance with their respective effective dates.  In addition, paragraphs 7(a) and 23(a), which relate to forward purchases or sales of when-issued securities or other securities that do not yet exist, should be applied to both existing contracts and new contracts entered into after June 30, 2003.    The Company does not expect the adoption of SFAS No. 149, which will be effective for contracts entered into or modified after June 30, 2003, to have a material effect on its consolidated financial statements.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.   This Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). Many of those instruments were previously classified as equity.   This Statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003.  It is to be implemented by reporting the cumulative effect of a change in an accounting principle for financial instruments created before the issuance date of the Statement and still existing at the beginning of the interim period of adoption. Restatement is not permitted.  The adoption of SFAS No. 150 did not have a material impact on the consolidated financial position, results of operations or cash flows of the Company.

Forward-Looking Statements

This report may contain 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.  The Company intends that the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 apply to any forward-looking statements.  Forward-looking statements are not statements of historical fact but rather reflect the Company’s current expectations, estimates and predictions about future results and events.  These statements may use words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “predict,” “project” and similar expressions as they relate to the Company or the Company’s management.  When the Company makes forward-looking statements, it is basing them on management’s beliefs and assumptions, using information currently available to it.  These forward-looking statements are subject to risks, uncertainties and assumptions.  Information on significant risks, uncertainties and assumptions not discussed herein may be found in the Company’s filings with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.  If one or more risks or uncertainties materialize, or if the Company’s underlying assumptions prove to be incorrect, actual results may vary materially from what the Company projected.  Any forward-looking statements in this report reflect the Company’s current

20

views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to the Company’s operations, results of operations and liquidity.  All subsequent written and oral forward-looking statements attributable to the Company or individuals acting on the Company’s behalf are expressly qualified in their entirety by this paragraph.

Item 3.   Quantitative and Qualitative Disclosures About Market Risk

Certain borrowings under the revolving credit facility bear interest at fluctuating market rates. An analysis of the impact of an increase or decrease in the interest rate of 100 basis points on the Company’s interest-rate-sensitive financial instruments shows an impact on expected annual interest expense of approximately $200,000.

Item 4.   Controls and Procedures

As required by Rule 15a-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company carried out an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. This evaluation was carried out under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer along with the Company’s Chief Financial Officer.  Based upon that evaluation, the Company’s Chief Executive Officer along with the Company’s Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information relating to Holley (including its consolidated subsidiaries) required to be included in Holley’s periodic SEC filings.

There has been no change in Holley’s internal control over financial reporting during the quarter ended June 30, 2003 that has materially affected, or is reasonably likely to materially affect, Holley’s internal control over financial reporting.  However, in connection with the Company’s ongoing evaluation of internal control over financial reporting, certain internal control matters were noted that require corrective actions.  These internal control matters relate to deficiencies in staffing, systems, and processes.  The Company began implementation of a plan to strengthen internal control over financial reporting during 2002.  The plan, which has been designed to address the identified internal control matters, was an on-going project throughout 2002 and continues into 2003. 

21

PART II

ITEM 6.     Exhibits and Reports on Form 8-K

(a)   Exhibits

Exhibit No.	Item
31(a)	Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 15a-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31(b)	Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 15a-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32(a)	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32(b)	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(b)   Reports on Form 8-K

Current Report on Form 8-K dated April 18, 2003 announcing changes in the Company’s certifying accountants.

Current Report on Form 8-KA dated June 6, 2003 announcing changes in the Company’s certifying accountants.

Current Report on Form 8-KA dated June 9, 2003 announcing changes in the Company’s certifying accountants.

22

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.

	HOLLEY PERFORMANCE PRODUCTS INC.
	(Registrant)
Signature	Title	Date
/s/ JAMES D. WIGGINS	President and Chief Executive Officer	August 13, 2003
James D. Wiggins
/s/ THOMAS W. TOMLINSON	Chief Financial Officer	August 13, 2003
Thomas W. Tomlinson

23

EX-31

Exhibit 31(a)

CERTIFICATION

I, James D. Wiggins, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 of Holley Performance Products 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(s) 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)) 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)	[Omitted in reliance on SEC Release No. 33-8238; 34-47986 Section III.E.]
	(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:  August 13, 2003
	/s/ JAMES D. WIGGINS
	James D. Wiggins  Chief Executive Officer

EX-31

Exhibit 31(b)

CERTIFICATION

I, Thomas W. Tomlinson, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 of Holley Performance Products 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)) 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)	[Omitted in reliance on SEC Release No. 33-8238; 34-47986 Section III.E.]
	(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: August 13, 2003
	/s/ THOMAS W. TOMLINSON
	Thomas W. Tomlinson Chief Financial Officer

EX-32

Exhibit 32(a)

CERTIFICATION 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 Quarterly Report on Form 10-Q of Holley Performance Products Inc. (the “Company”) for the period ending June 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James D. Wiggins, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 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.

/s/ JAMES D. WIGGINS

James D. Wiggins
Chief Executive Officer

August 13, 2003

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Holley Performance Products Inc. and will be retained by Holley Performance Products Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32

Exhibit 32(b)

CERTIFICATION 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 Quarterly Report on Form 10-Q of Holley Performance Products Inc. (the “Company”) for the period ending June 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Thomas W. Tomlinson, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 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, as amended; and
(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ THOMAS W. TOMLINSON

Thomas W. Tomlinson
Chief Financial Officer
August 13, 2003

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Holley Performance Products Inc. and will be retained by Holley Performance Products Inc. and furnished to the Securities and Exchange Commission or its staff upon request.