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



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Form 10-Q/A

(Mark One)[X]
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended July 31, 2003or[  ]
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the transition period from        to

Commission file number: 000-50303



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Hayes Lemmerz International, Inc.(Exact name of registrant as specified in its charter)

Delaware
    
    32-0072578(State or other jurisdiction of
    
    (IRS Employer Identification No.)incorporation
or organization)15300 Centennial Drive Northville, Michigan
    
    48167(Address of principal executive offices)
    
    (Zip Code)


Registrants telephone number, including area code:
(734) 737-5000

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [  ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12(b)-2 of the Act). Yes [X] No [  ]

APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Act subsequent
to the distributions of securities under a plan confirmed by a court. Yes [X]
No [  ]

The number of shares of common stock outstanding as of September 15, 2003
was 30,000,000 shares.

Website Access to Company Reports

Hayes Lemmerz International, Inc.s internet website address is
www.hayes-lemmerz.com. The Companys annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K, and any amendments to those
reports filed or furnished pursuant to section 13(a) or 15(d) of the Exchange
Act are available free of charge through the Companys website as soon as
reasonably practical after those reports are electronically filed with, or
furnished to, the Securities and Exchange Commission.



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TABLE OF CONTENTS



|                                                                                              |                                            |  |  |  |  |  |  | 
|--------------------------------------------------------------------------------------------- | ------------------------------------------ |  |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION                                                                
|Item 1. Financial Statements                                                                 
|                                                                                              | Consolidated Statements of Operations     
|                                                                                              | Consolidated Balance Sheets               
|                                                                                              | Consolidated Statements of Cash Flows     
|                                                                                              | Notes to Consolidated Financial Statements
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|Item 3. Quantitative and Qualitative Disclosures about Market Risk                           
|Item 4. Controls and Procedures                                                              
|PART II. OTHER INFORMATION                                                                   
|Item 1. Legal Proceedings                                                                    
|Item 2. Changes in Securities and Use of Proceeds                                            
|Item 3. Defaults upon Senior Securities                                                      
|Item 4. Submission of Matters to a Vote of Security Holders                                  
|Item 5. Other Information                                                                    
|Item 6. Exhibits and Reports on Form 8-K                                                     
|Signatures                                                                                   
|302 CERTIFICATION OF CHIEF EXECUTIVE OFFICER                                                 
|302 CERTIFICATION OF CHIEF FINANCIAL OFFICER                                                 
|906 CERTIFICATION OF CHIEF EXECUTIVE OFFICER                                                 
|906 CERTIFICATION OF CHIEF FINANCIAL OFFICER                                                 



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HAYES LEMMERZ INTERNATIONAL, INC.

QUARTERLY REPORT ON FORM 10-Q/A

TABLE OF CONTENTS

PagePART I.FINANCIAL INFORMATIONItem 1.
    
    Financial Statements
    
    3Consolidated Statements of Operations
    
    3Consolidated Balance Sheets
    
    4Consolidated Statements of Cash Flows
    
    5Notes to Consolidated Financial Statements
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    32Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    44Item 4.
    
    Controls and Procedures
    
    44PART II.OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    47Item 2.
    
    Changes in Securities and Use of Proceeds
    
    48Item 3.
    
    Defaults upon Senior Securities
    
    49Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    49Item 5.
    
    Other Information
    
    49Item 6.
    
    Exhibits and Reports on Form 8-K
    
    50Signatures
    
    
    
    51


UNLESS OTHERWISE INDICATED, REFERENCES TO THE COMPANY MEAN HAYES LEMMERZ
INTERNATIONAL, INC., AND ITS SUBSIDIARIES, AND REFERENCES TO A FISCAL YEAR
MEANS THE COMPANYS YEAR COMMENCING ON FEBRUARY 1 OF THAT YEAR AND ENDING
JANUARY 31 OF THE FOLLOWING YEAR (E.G., FISCAL 2003 MEANS THE PERIOD BEGINNING
FEBRUARY 1, 2003, AND ENDING JANUARY 31, 2004). THIS REPORT CONTAINS FORWARD
LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995 WITH RESPECT TO THE FINANCIAL CONDITION, RESULTS OF
OPERATIONS, AND BUSINESS OF THE COMPANY. THESE FORWARD LOOKING STATEMENTS
INVOLVE CERTAIN RISKS AND UNCERTAINTIES. NO ASSURANCE CAN BE GIVEN THAT ANY OF
SUCH MATTERS WILL BE REALIZED. FACTORS THAT MAY CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD LOOKING STATEMENTS INCLUDE,
AMONG OTHERS, THE FOLLOWING POSSIBILITIES: (1) COMPETITIVE PRESSURE IN THE
COMPANYS INDUSTRY INCREASES SIGNIFICANTLY; (2) GENERAL ECONOMIC CONDITIONS ARE
LESS FAVORABLE THAN EXPECTED; (3) THE COMPANYS DEPENDENCE ON THE AUTOMOTIVE
INDUSTRY (WHICH HAS HISTORICALLY BEEN CYCLICAL); (4) PRICING PRESSURE FROM
AUTOMOTIVE INDUSTRY CUSTOMERS; (5) CHANGES IN THE FINANCIAL MARKETS AFFECTING
THE COMPANYS FINANCIAL STRUCTURE AND THE COMPANYS COST OF CAPITAL AND
BORROWED MONEY; (6) THE UNCERTAINTIES INHERENT IN INTERNATIONAL OPERATIONS AND
FOREIGN CURRENCY FLUCTUATIONS; AND (7) UNCERTAINTIES RELATED TO CONFLICT IN THE
MIDDLE EAST. THE COMPANY HAS NO DUTY UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995 TO UPDATE THE FORWARD LOOKING STATEMENTS IN THIS QUARTERLY
REPORT ON FORM 10-Q/A AND THE COMPANY DOES NOT INTEND TO PROVIDE SUCH UPDATES.

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HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(Millions of dollars, except share amounts)
(Unaudited)

Successor
    
    
    PredecessorTwo Months
    
    
    One Month
    
    
    Three Months
    
    
    Four Months
    
    
    Six MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedJuly 31,
    
    
    May 31,
    
    
    July 31,
    
    
    May 31,
    
    
    July 31,2003
    
    
    2003
    
    
    2002
    
    
    2003
    
    
    2002Net sales
    
    $
    328.3
    
    
    $
    174.5
    
    
    $
    504.0
    
    
    $
    689.8
    
    
    $
    990.7Cost of goods sold
    
    
    298.9
    
    
    
    147.8
    
    
    
    465.7
    
    
    
    611.3
    
    
    
    907.3Gross profit
    
    
    29.4
    
    
    
    26.7
    
    
    
    38.3
    
    
    
    78.5
    
    
    
    83.4Marketing, general and administration
    
    
    20.7
    
    
    
    6.0
    
    
    
    23.0
    
    
    
    33.5
    
    
    
    50.6Engineering and product development
    
    
    4.2
    
    
    
    1.7
    
    
    
    5.5
    
    
    
    8.1
    
    
    
    10.5Asset impairments and other restructuring
charges
    
    
    
    
    
    
    2.3
    
    
    
    18.1
    
    
    
    6.4
    
    
    
    25.3Other (income) expense, net
    
    
    2.1
    
    
    
    (1.3
    )
    
    
    (1.1
    )
    
    
    (1.9
    )
    
    
    (3.7
    )Reorganization items
    
    
    
    
    
    
    31.9
    
    
    
    5.4
    
    
    
    45.0
    
    
    
    27.9Fresh start accounting adjustments
    
    
    
    
    
    
    (63.1
    )
    
    
    
    
    
    
    (63.1
    )
    
    
    Earnings (loss) from operations
    
    
    2.4
    
    
    
    49.2
    
    
    
    (12.6
    )
    
    
    50.5
    
    
    
    (27.2
    )Interest expense, net
    
    
    8.1
    
    
    
    5.8
    
    
    
    17.9
    
    
    
    22.7
    
    
    
    34.7Earnings (loss) before subsidiary preferred
stock dividends, taxes on income, minority
interest, cumulative effect of change in
accounting principle and extraordinary gain on
debt discharge
    
    
    (5.7
    )
    
    
    43.4
    
    
    
    (30.5
    )
    
    
    27.8
    
    
    
    (61.9
    )Subsidiary preferred stock dividends
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Earnings (loss) before taxes on income, minority
interest, cumulative effect of change in
accounting principle and extraordinary gain on
debt discharge
    
    
    (5.8
    )
    
    
    43.4
    
    
    
    (30.5
    )
    
    
    27.8
    
    
    
    (61.9
    )Income tax provision (benefit)
    
    
    2.6
    
    
    
    54.4
    
    
    
    (3.3
    )
    
    
    60.3
    
    
    
    (2.4
    )Loss before minority interest, cumulative effect
of change in accounting principle and
extraordinary gain on debt discharge
    
    
    (8.4
    )
    
    
    (11.0
    )
    
    
    (27.2
    )
    
    
    (32.5
    )
    
    
    (59.5
    )Minority interest
    
    
    0.8
    
    
    
    0.2
    
    
    
    0.8
    
    
    
    1.2
    
    
    
    1.5Loss before cumulative effect of change in
accounting principle and extraordinary gain on
debt discharge
    
    
    (9.2
    )
    
    
    (11.2
    )
    
    
    (28.0
    )
    
    
    (33.7
    )
    
    
    (61.0
    )Cumulative effect of change in accounting
principle, net of tax of $0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (554.4
    )Extraordinary gain on debt discharge, net of tax
$0
    
    
    
    
    
    
    1,076.7
    
    
    
    
    
    
    
    1,076.7
    
    
    
    Net income (loss)
    
    $
    (9.2
    )
    
    $
    1,065.5
    
    
    $
    (28.0
    )
    
    $
    1,043.0
    
    
    $
    (615.4
    )Basic net loss per share:Loss before cumulative effect of change in
accounting principle and extraordinary gain on
debt discharge
    
    $
    (0.31
    )Cumulative effect of change in accounting
principle, net of tax
    
    
    Extraordinary gain on debt discharge, net of
tax
    
    
    Basic net loss per share
    
    $
    (0.31
    )Diluted net loss per share:Loss before cumulative effect of change in
accounting principle and extraordinary gain on
debt discharge
    
    $
    (0.31
    )Cumulative effect of change in accounting
principle, net of tax
    
    
    Extraordinary gain on debt discharge, net of
tax
    
    
    Diluted net loss per share
    
    $
    (0.31
    )


See accompanying notes to consolidated financial statements.

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HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(Millions of dollars,
except share amounts)

Successor
    
    
    PredecessorJuly 31,
    
    
    January 31,2003
    
    
    2003(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    140.6
    
    
    $
    66.1Receivables
    
    
    275.3
    
    
    
    276.6Inventories
    
    
    186.6
    
    
    
    176.6Prepaid expenses and other
    
    
    21.1
    
    
    
    32.5Total current assets
    
    
    623.6
    
    
    
    551.8Property, plant and equipment, net
    
    
    922.6
    
    
    
    951.2Goodwill
    
    
    392.9
    
    
    
    191.3Intangible assets, net
    
    
    228.4
    
    
    
    102.6Other assets
    
    
    76.6
    
    
    
    49.7Total assets
    
    $
    2,244.1
    
    
    $
    1,846.6LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)Current liabilities:DIP Facility
    
    $
    
    
    
    $
    49.9Bank borrowings and other notes
    
    
    12.2
    
    
    
    15.8Current portion of long-term debt
    
    
    14.6
    
    
    
    40.1Accounts payable and accrued liabilities
    
    
    349.0
    
    
    
    268.7Total current liabilities
    
    
    375.8
    
    
    
    374.5Long-term debt, net of current portion
    
    
    755.5
    
    
    
    61.9Pension and other long-term liabilities
    
    
    536.6
    
    
    
    334.4Series A Warrants and Series B Warrants
    
    
    4.8
    
    
    
    Redeemable preferred stock of subsidiary
    
    
    10.1
    
    
    
    Minority interest
    
    
    13.4
    
    
    
    16.4Liabilities subject to compromise
    
    
    
    
    
    
    2,133.8Commitments and contingencies
Stockholders equity (deficit):Successor preferred stock, 1,000,000 shares authorized,
none issued or outstanding at July 31, 2003
    
    
    
    
    
    
    Predecessor preferred stock, 25,000,000 shares authorized,
none issued or outstanding at January 31, 2003
    
    
    
    
    
    
    Common stock, par value $0.01 per share:Successor Voting - 100,000,000 shares authorized;
30,000,000 issued and outstanding at July 31, 2003
    
    
    0.3
    
    
    
    Predecessor Voting - 99,000,000 shares authorized;
27,708,419 shares issued; 25,806,969 shares outstanding
at January 31, 2003
    
    
    
    
    
    
    0.3Predecessor Nonvoting - 5,000,000 shares authorized;
2,649,026 shares issued and outstanding at January 31,
2003
    
    
    
    
    
    
    Additional paid in capital
    
    
    544.1
    
    
    
    235.1Predecessor common stock in treasury at cost, 1,901,450
shares at January 31, 2003
    
    
    
    
    
    
    (25.7
    )Accumulated deficit
    
    
    (9.2
    )
    
    
    (1,176.9
    )Accumulated other comprehensive income (loss)
    
    
    12.7
    
    
    
    (107.2
    )Total stockholders equity (deficit)
    
    
    547.9
    
    
    
    (1,074.4
    )Total liabilities and stockholders equity (deficit)
    
    $
    2,244.1
    
    
    $
    1,846.6


See accompanying notes to consolidated financial statements.

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HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Millions of dollars)
(Unaudited)

Successor
    
    
    PredecessorTwo Months
    
    
    Four Months
    
    
    Six MonthsEnded
    
    
    Ended
    
    
    EndedJuly 31,
    
    
    May 31,
    
    
    July 31,2003
    
    
    2003
    
    
    2002Cash flows from operating activities:Net income (loss)
    
    $
    (9.2
    )
    
    $
    1,043.0
    
    
    $
    (615.4
    )Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities:Depreciation and amortization
    
    
    26.7
    
    
    
    46.4
    
    
    
    65.0Interest income resulting from fair value adjustment of
Series A Warrants and Series B Warrants
    
    
    (4.5
    )
    
    
    
    
    
    
    Amortization of deferred financing fees
    
    
    0.6
    
    
    
    1.6
    
    
    
    2.6Change in deferred income taxes
    
    
    (1.8
    )
    
    
    52.6
    
    
    
    0.5Asset impairments and other restructuring charges
    
    
    
    
    
    
    6.4
    
    
    
    25.3Minority interest
    
    
    0.8
    
    
    
    1.2
    
    
    
    1.5Subsidiary preferred stock dividend
    
    
    0.1
    
    
    
    
    
    
    
    Cumulative effect of change in accounting principle
    
    
    
    
    
    
    
    
    
    
    554.4Gain (loss) on sale of assets and businesses
    
    
    0.3
    
    
    
    (0.4
    )
    
    
    (0.3
    )Changes in operating assets and liabilities:Receivables
    
    
    28.5
    
    
    
    (13.7
    )
    
    
    1.3Inventories
    
    
    7.1
    
    
    
    (4.0
    )
    
    
    (21.1
    )Prepaid expenses and other
    
    
    (0.7
    )
    
    
    5.2
    
    
    
    (6.3
    )Accounts payable and accrued liabilities
    
    
    18.8
    
    
    
    (6.9
    )
    
    
    25.1Chapter 11 items:Reorganization items
    
    
    
    
    
    
    45.0
    
    
    
    27.9Fresh start accounting adjustments
    
    
    
    
    
    
    (63.1
    )
    
    
    Extraordinary gain on debt discharge
    
    
    
    
    
    
    (1,076.7
    )
    
    
    Accrued interest on Credit Agreement
    
    
    
    
    
    
    16.9
    
    
    
    25.9Payments related to Chapter 11 Filings
    
    
    (22.3
    )
    
    
    (22.4
    )
    
    
    (36.8
    )Cash provided by operating activities
    
    
    44.4
    
    
    
    31.1
    
    
    
    49.6Cash flows from investing activities:Purchase of property, plant, equipment and tooling
    
    
    (19.5
    )
    
    
    (26.3
    )
    
    
    (44.8
    )Purchase of equipment previously leased
    
    
    
    
    
    
    (23.6
    )
    
    
    Proceeds from sale of assets and businesses
    
    
    
    
    
    
    0.8
    
    
    
    9.0Purchase of businesses
    
    
    
    
    
    
    
    
    
    
    (7.2
    )Cash used for investing activities
    
    
    (19.5
    )
    
    
    (49.1
    )
    
    
    (43.0
    )Cash flows from financing activities:Change in borrowings under DIP Facility
    
    
    
    
    
    
    (49.9
    )
    
    
    5.8Repayment of note payable
    
    
    
    
    
    
    (2.0
    )
    
    
    Net repayments on bank borrowings
    
    
    (65.0
    )
    
    
    (9.8
    )
    
    
    (17.6
    )Proceeds from New Senior Notes, net of discount and
related fees
    
    
    
    
    
    
    242.8
    
    
    
    Proceeds from New Term Loan, net of related fees
    
    
    
    
    
    
    436.1
    
    
    
    Prepetition Lenders Payment amount
    
    
    
    
    
    
    (477.3
    )
    
    
    Payment to holders of Old Senior Notes
    
    
    
    
    
    
    (13.0
    )
    
    
    Cash provided by (used for) financing activities
    
    
    (65.0
    )
    
    
    126.9
    
    
    
    (11.8
    )Effect of exchange rate changes on cash and cash
Equivalents
    
    
    1.6
    
    
    
    4.1
    
    
    
    3.7Increase(decrease) in cash and cash equivalents
    
    
    (38.5
    )
    
    
    113.0
    
    
    
    (1.5
    )Cash and cash equivalents at beginning of period
    
    
    179.1
    
    
    
    66.1
    
    
    
    45.2Cash and cash equivalents at end of period
    
    $
    140.6
    
    
    $
    179.1
    
    
    $
    43.7Supplemental data:Cash paid for interest
    
    
    2.0
    
    
    
    5.8
    
    
    $
    6.3Cash paid for income taxes
    
    
    6.5
    
    
    
    2.9
    
    
    $
    3.3


See accompanying notes to consolidated financial statements.

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HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Two Months Ended July 31, 2003, Four Months Ended May 31, 2003 and
Six Months Ended July 31, 2002
(Unaudited)
(Millions of Dollars Unless Otherwise Stated)

(1) Description of Business, Chapter 11 Filings and Emergence from Chapter 11

These financial statements should be read in conjunction with the
financial statements included in the Companys Annual Report on Form 10-K for
the fiscal year ended January 31, 2003 as filed with the Securities and
Exchange Commission (SEC) on April 2, 2003.

Description of Business

Unless otherwise indicated, references to Company mean Hayes Lemmerz
International, Inc. and its subsidiaries and references to fiscal year means
the Companys year commencing on February 1 of that year and ending on January
31 of the following year (i.e., fiscal 2003 refers to the period beginning
February 1, 2003 and ending January 31, 2004, fiscal 2002 refers to the
period beginning February 1, 2002 and ending January 31, 2003).

The Company is a leading supplier of wheels, wheel-end attachments,
aluminum structural components and automotive brake components. The Company is
the worlds largest manufacturer of automotive wheels. In addition, the Company
also designs and manufactures wheels and brake components for commercial
highway vehicles, and powertrain components and aluminum non-structural
components for the automotive, commercial highway, heating and general
equipment industries.

Chapter 11 Filings

On December 5, 2001, Hayes Lemmerz International, Inc., 30 of its
wholly-owned domestic subsidiaries and one wholly-owned Mexican subsidiary
(collectively, the Debtors) filed voluntary petitions for reorganization
relief (the Chapter 11 Filings or the Filings) under Chapter 11 of the
Bankruptcy Code in the United States Bankruptcy Court for the District of
Delaware (the Bankruptcy Court).

On December 16, 2002, certain of the Debtors filed a proposed joint plan
of reorganization with the Bankruptcy Court. On April 9, 2003, the Debtors
filed a modified first amended joint plan of reorganization (the Plan of
Reorganization) which received the requisite support from creditors authorized
to vote thereon. The following five Debtors were not proponents of the Plan of
Reorganization and are not subject to the terms thereof: HLI Netherlands
Holdings, Inc., CMI Quaker Alloy, Inc., Hayes Lemmerz Funding Company, LLC,
Hayes Lemmerz Funding Corporation, and Hayes Lemmerz International Import, Inc.
(collectively, the Non-reorganizing Debtors).

The Plan of Reorganization provided for the cancellation of the existing
common stock of the Company and the issuance of cash, new common stock in the
reorganized Company and other property to certain creditors of the Company in
respect of certain classes of claims. The Plan of Reorganization was confirmed
by an order of the Bankruptcy Court on May 12, 2003, which order has become
final and non-appealable.

Emergence from Chapter 11

On June 3, 2003 (the Effective Date), Hayes Lemmerz International, Inc.
and each of the 27 Debtors proposing the Plan of Reorganization emerged from
Chapter 11 proceedings pursuant to the Plan of Reorganization, which was
confirmed by an order of the Bankruptcy Court on May 12, 2003, which order has
become final and non-appealable. The Non-reorganizing Debtors were not
proponents of the Plan of Reorganization and are not subject to the terms
thereof. On June 3, 2003, the Bankruptcy Court entered an order dismissing the
Chapter 11 Filings of the Non-reorganizing Debtors.

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Pursuant to the Plan of Reorganization, the Company caused the formation
of (i) a new holding company, HLI Holding Company, Inc., a Delaware corporation
(HoldCo), (ii) HLI Parent Company, Inc., a Delaware corporation and a wholly
owned subsidiary of HoldCo (ParentCo), and (iii) HLI Operating Company, Inc,
a Delaware corporation and a wholly owned subsidiary of ParentCo (HLI). On
the Effective Date, (i) HoldCo was renamed Hayes Lemmerz International, Inc.
(New Hayes), (ii) New Hayes contributed to ParentCo 30,0000,000 shares of its
common stock, par value $.01 per share (the New Common Stock), and 957,447
series A warrants and 957,447 series B warrants to acquire New Common Stock of
New Hayes (the Series A Warrants and Series B Warrants, respectively),
(iii) ParentCo in turn contributed such shares of New Common Stock and Series A
Warrants and Series B Warrants to HLI and (iv) pursuant to an Agreement and
Plan of Merger, dated as of June 3, 2003 (the Merger Agreement), between the
Company and HLI, the Company was merged with and into HLI (the Merger), with
HLI continuing as the surviving corporation.

Pursuant to the Plan of Reorganization and as a result of the Merger, all
of the issued and outstanding shares of common stock, par value $.01 per share,
of the Company (the Old Common Stock), and any other outstanding equity
securities of the Company, including all options and warrants, were cancelled.
The holders of the existing voting common stock of the Company immediately
before confirmation did not receive any voting shares of the emerging entity or
any other consideration under the Plan of Reorganization as a result of their
ownership interests of the Predecessor. This represented a complete change of
control in the ownership of the Company. Promptly following the Merger, HLI
distributed to certain holders of allowed claims, under the terms of the Plan
of Reorganization, an amount in cash, the New Common Stock, the Series A
Warrants, the Series B Warrants and the Preferred Stock (as defined below).
Prior to the Merger, the Old Common Stock was registered pursuant to Section
12(g) of the Securities Exchange Act of 1934, as amended (the Exchange Act).
In reliance on Rule 12g-3(a) of the Exchange Act, by virtue of the status of
New Hayes as a successor issuer to the Company, the New Common Stock is deemed
registered under Section 12(g) of the Exchange Act. The Company filed a Form 15
with the SEC to terminate the registration of the Old Common Stock under the
Exchange Act.

Pursuant to the terms of the Plan of Reorganization, HLI issued 100,000
shares of Preferred Stock, par value $1.00, of HLI (the Preferred Stock) to
the holders of certain allowed claims. In accordance with the terms of the
Preferred Stock, the shares of Preferred Stock are, at the holders option,
exchangeable into a number of fully paid and nonassessable shares of New Common
Stock equal to (i) the aggregate liquidation preference of the shares of
Preferred Stock so exchanged ($100 per share plus all accrued and unpaid
dividends thereon (whether or not declared) to the exchange date) divided by
(ii) 125% of the Emergence Share Price. As determined pursuant to the terms
of the Plan of Reorganization, the Emergence Share Price is $18.50.

In connection with the Debtors emergence from Chapter 11, on the
Effective Date, HLI entered into a $550.0 million senior secured credit
facility (the New Credit Facility). The New Credit Facility consists of a
$450.0 million six-year amortizing term loan (the New Term Loan) and a
five-year $100.0 million revolving credit facility (the Revolving Credit
Facility). In addition, HLI issued on the Effective Date an aggregate of
$250.0 million principal amount of 10 1/2% senior notes due 2010 (the New
Senior Notes). The proceeds from the initial $450.0 million of borrowings
under the New Credit Facility and the net proceeds from the New Senior Notes
were used to make payments required under the Plan of Reorganization, including
the repayment of the Companys DIP Facility and a payment of $477.3 million to
certain prepetition lenders, to pay related transaction costs and to refinance
certain debt. See Notes (11) and (12).

Reorganization Items

Reorganization items as reported in the consolidated statements of
operations included herein are comprised of income, expense and loss items that
were realized or incurred by the Debtors as a direct result of the Companys
decision to reorganize under Chapter 11. During the one month and four months
ended May 31, 2003 and the three months and six months ended July 31, 2002,
respectively, reorganization items were as follows (millions of dollars):

7



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##### Table of Contents



PredecessorOne Month
    
    
    Four Months
    
    
    Three Months
    
    
    Six MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedMay 31, 2003
    
    
    May 31, 2003
    
    
    July 31, 2002
    
    
    July 31, 2002Critical employee retention plan
provision
    
    $
    10.5
    
    
    $
    11.7
    
    
    $
    2.7
    
    
    $
    5.2Estimated accrued liability for
rejected prepetition leases and
contracts
    
    
    
    
    
    
    
    
    
    
    (3.0
    )
    
    
    9.5Professional fees directly related
to the Filings
    
    
    19.3
    
    
    
    30.8
    
    
    
    7.0
    
    
    
    14.6Creditors Trust obligation
    
    
    2.0
    
    
    
    2.0
    
    
    
    
    
    
    
    Settlement of prepetition
liabilities
    
    
    
    
    
    
    
    
    
    
    (1.2
    )
    
    
    (1.2
    )Other
    
    
    0.1
    
    
    
    0.5
    
    
    
    (0.1
    )
    
    
    (0.2
    )Total
    
    $
    31.9
    
    
    $
    45.0
    
    
    $
    5.4
    
    
    $
    27.9


On May 30, 2002, the Bankruptcy Court entered an order approving, among
other things, the critical employee retention plan (the CERP) filed with the
Bankruptcy Court in February 2002 which was designed to compensate certain
critical employees in order to assure their retention and availability during
the Companys restructuring. The plan has two components which (i) rewarded
critical employees who remained with the Company (and certain affiliates of the
Company who are not directly involved in the restructuring) during and through
the completion of the restructuring (the Retention Bonus) and (ii) provided
additional incentives to a more limited group of the most senior critical
employees if the enterprise value upon completing the restructuring exceeded an
established baseline (the Restructuring Performance Bonus).

Thirty-five percent, or approximately $3.0 million, of the Retention Bonus
was paid on October 1, 2002. The remaining portion of the Retention Bonus of
approximately $5.9 million was paid on June 13, 2003. Further, the
Restructuring Performance Bonus provided under the CERP was paid after the
consummation of the restructuring as discussed below.

Based on the Companys compromise total enterprise value of $1,250.0
million as confirmed by the Bankruptcy Court, the aggregate amount of the
Restructuring Performance Bonus is $12.1 million. Of the
aggregate $12.1 million, approximately $6.0 million was paid in cash on July 1,
2003, and approximately $2.0 million was paid on August 28, 2003 as determined
by the Companys Board of Directors. The remaining portion of the Restructuring
Performance Bonus was paid in 215,935 shares of restricted units of New Hayes
on July 28, 2003. Pursuant to provisions contained in the CERP, the restricted
units will vest as follows, subject to the participants continued employment:



| |  | one half of the restricted units will vest on the later of (i) the
first date (the Minimum Valuation Date) upon which the average trading
price for the New Common Stock during any consecutive 10 trading-day
period is 80% or greater of the Emergence Share Price and (ii) the first
anniversary of the Effective Date, and;
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | one half of the restricted units will vest on the later of (i) the
Minimum Valuation Date and (ii) the second anniversary of the Effective
Date.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------



| |  | any unvested restricted units will vest on the third anniversary of
the Effective Date, if the participant is employed by the Company or a
subsidiary on such date.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

Cash payments with respect to other reorganization items consisted
primarily of professional fees and cure payments and were approximately $10.4
million and $21.2 million during the two months ended July 31, 2003 and the
four months ended May 31, 2003, respectively, and $11.0 million during the
first six months of fiscal 2002.

(2) Basis of Presentation and Stock-Based Compensation

Basis of Presentation

As discussed in Note 1, the Company filed a voluntary petition for
reorganization relief under Chapter 11 of the Bankruptcy Code in December 2001.
Upon emergence from Chapter 11, the Company implemented fresh start accounting
principles pursuant to

8



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##### Table of Contents



American Institute of Certified Public Accountants (AICPA) Statement of
Position 90-7, Financial Reporting by Entities in Reorganization under the
Bankruptcy Code (SOP 90-7). See Note (3), Fresh Start Accounting.

As a result of the application of fresh start accounting on May 31, 2003,
and in accordance with SOP 90-7, the post-emergence financial results of the
Company for the period ending July 31, 2003 are presented as the Successor
and the pre-emergence financial results of the Company for the period ending
May 31, 2003 are presented as the Predecessor. Comparative financial
statements do not straddle the emergence date because in effect the Successor
Company represents a new entity. Per share and share information for the
Predecessor Company for all periods presented on the consolidated statement of
operations have been omitted as such information is deemed to be not
meaningful.

The accompanying consolidated financial statements of the Predecessor have
been prepared in accordance with SOP 90-7 and on a going concern basis.
Continuing as a going concern contemplates continuity of operations,
realization of assets, and payment of liabilities in the ordinary course of
business. The accompanying consolidated financial statements do not reflect
adjustments that might result if the Company is unable to continue as a going
concern. The Companys recent history of significant losses, deficit in
stockholders equity and issues related to non-compliance with debt covenants,
raise substantial doubt about the Companys ability to continue as a going
concern. Continuing as a going concern is dependent upon, among other things,
the success of future business operations and the generation of sufficient cash
from operations and financing sources to meet the Companys obligations. SOP
90-7 requires the segregation of liabilities subject to compromise by the
Bankruptcy Court as of the bankruptcy filing date, and identification of all
transactions and events that are directly associated with the reorganization of
the Predecessor.

The Companys unaudited interim consolidated financial statements do not
include all of the disclosures required by accounting principles generally
accepted in the United States of America for annual financial statements. In
the opinion of management, all adjustments considered necessary for a fair
presentation of the interim period results have been included. Operating
results for the interim periods presented in fiscal 2003 are not necessarily
indicative of the results that may be expected for the full fiscal year ending
January 31, 2004.

Stock-Based Compensation

The Company accounts for its stock-based compensation in accordance with
the provisions of Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees, and related interpretations. As
such, compensation expense is recorded on the date of grant only if the current
market price of the underlying stock exceeds the exercise price. The Company
follows the provisions of Statement of Financial Accounting Standards (SFAS)
No. 123, Accounting for Stock-Based Compensation, and discloses pro forma net
income (loss) and pro forma earnings (loss) per share as if employee stock
option grants were treated as compensation expense using the fair-value-based
method defined in SFAS No. 123.

In December 2002, the Financial Accounting Standards Board (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 to provide alternative methods of transition for a voluntary change to
the fair value method of accounting for stock-based employee compensation. In
addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to
require prominent disclosures in both annual and interim financial statements.

On July 28, 2003, the Company granted 1,887,162 stock options and
1,258,107 restricted units to certain employees and officers (excluding those
restricted shares granted under the CERP), and 65,455 options and 43,637
restricted units to non-employee members of the Companys Board of Directors
under the Long-Term Incentive Plan (see Note (8)). There would be no additional
compensation cost as a result of applying SFAS No. 123, since the issuance of
the stock based awards coincided with the end of the quarter.

SuccessorTwo MonthsEndedJuly 31, 2003Net loss:As reported
    
    $
    (9.2
    )Pro forma
    
    
    (9.2
    )Basic and diluted loss per share:As reported
    
    $
    (0.31
    )Pro forma
    
    
    (0.31
    )


9



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##### Table of Contents



As of the Effective Date, all options under the Predecessor Companys
stock option plans were cancelled and those plans were terminated. Accordingly,
no pro forma net income (loss) or pro forma earnings (loss) per share have been
presented for any of the stock options granted under those terminated plans.

(3) Fresh Start Accounting

Pursuant to SOP 90-7, the accounting for the effects of the Companys
reorganization occurred once the Plan of Reorganization was confirmed by the
Bankruptcy Court and there were no remaining contingencies material to
completing the implementation of the plan. The fresh start accounting
principles pursuant to SOP 90-7 provide, among other things, for the Company to
determine the value to be assigned to the equity of the reorganized Company as
of a date selected for financial reporting purposes. As discussed in Note (1),
the Debtors emerged from Chapter 11 on June 3, 2003, and the Company has
selected May 31, 2003 for financial reporting purposes as the date to implement
fresh start accounting principles.

Pursuant to SOP 90-7, the results of operations of the Company ended May
31, 2003 include (i) a pre-emergence extraordinary gain of $1,076.7 million
resulting from the discharge of debt and other liabilities under the Plan of
Reorganization; (ii) pre-emergence charges to earnings of $25.9 million
recorded as Reorganization items related to certain costs and expenses
resulting from the Plan of Reorganization becoming effective; and (iii) a
pre-emergence pre-tax gain of $63.1 million ($17.1 million, net of tax)
resulting from the aggregate remaining changes to the net carrying value of the
Companys pre-emergence assets and liabilities to reflect the fair values under
fresh start accounting.

The Companys compromise total enterprise value is $1,250.0 million, with
a total value for common equity of $544.4 million, excluding the estimated fair
value of the Preferred Stock and the Series A Warrants and Series B Warrants
issued on the Effective Date. The Preferred Stock is classified as a liability
in the consolidated balance sheet and referred to as redeemable preferred stock
of subsidiary. Under fresh start accounting, the compromise total enterprise
value has been allocated to the Companys assets based on their respective fair
values in conformity with the purchase method of accounting for business
combinations in accordance with SFAS No. 141, Business Combinations; any
portion not attributed to specific tangible or identified intangible assets has
been recorded as an indefinite-lived intangible asset referred to as
reorganization value in excess of amounts allocable to identifiable assets
and reported as goodwill. The valuations required to determine the fair value
of certain of the Companys assets as presented below represent the results of
the valuation procedures performed by the Companys valuation specialist at May
31, 2003.

Valuation of Compromise Total Enterprise Value and Reorganization Value in
Excess of Amounts Allocable to Identifiable
Assets (Goodwill)

The compromise total enterprise value (reorganization value) represents
the amount of resources available, or that become available, for the
satisfaction of post-petition liabilities and allowed claims, as negotiated
between the Debtors and the creditors (the interested parties). This value
along with other terms of the Plan of Reorganization were determined only after
extensive arms-length negotiations amongst the interested parties. Each
interested party developed its view of what the value should be based primarily
upon expected future cash flows of the business after emergence from Chapter
11, discounted at rates reflecting perceived business and financial risks. This
value is viewed as the fair value of the entity before considering liabilities
and approximates the amount a willing buyer would pay for the assets of the
Company immediately after restructuring.

The amount of reorganization value in excess of amounts allocated to
identifiable assets (goodwill) is a function of compromise total enterprise
value. While the Company believes that the compromise total enterprise value
approximates fair value, differences between the methodology used in testing
for goodwill impairment, as discussed in Note (6), and the negotiated value
could adversely impact the Companys future results of operations.

The consolidated balance sheet presented below gives effect to the Plan of
Reorganization and the application of fresh start accounting at May 31, 2003.

10



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##### Table of Contents



REORGANIZED CONDENSED CONSOLIDATED BALANCE SHEET
May 31, 2003
(Millions of dollars)
(Unaudited)

Predecessor
    
    
    Discharge of
    
    
    Cancellation
    
    
    
    
    
    
    SuccessorMay 31,
    
    
    Debt and Exit
    
    
    of
    
    
    Fresh Start
    
    
    May 31,2003
    
    
    Financing
    
    
    Old Equity
    
    
    Adjustments
    
    
    2003ASSETSCurrent assets:Cash and cash equivalents
    
    $
    89.3
    
    
    $
    89.8
    (a)
    
    $
    
    
    
    $
    
    
    
    $
    179.1Receivables
    
    
    299.9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    299.9Inventories
    
    
    186.0
    
    
    
    
    
    
    
    
    
    
    
    5.2
    (j)
    
    
    191.2Prepaid expenses and other
    
    
    27.0
    
    
    
    1.3
    (b)
    
    
    
    
    
    
    (7.8
    )(k)
    
    
    20.5Total current assets
    
    
    602.2
    
    
    
    91.1
    
    
    
    
    
    
    
    (2.6
    )
    
    
    690.7Property, plant and equipment, net
    
    
    959.7
    
    
    
    54.0
    (c)
    
    
    
    
    
    
    (95.3
    )(l)
    
    
    918.4Old goodwill
    
    
    198.3
    
    
    
    
    
    
    
    
    
    
    
    (198.3
    )(m)
    
    
    New goodwill
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    390.9
    (n)
    
    
    390.9Intangible assets
    
    
    103.8
    
    
    
    
    
    
    
    
    
    
    
    121.9
    (o)
    
    
    225.7Other assets
    
    
    60.9
    
    
    
    19.9
    (d)
    
    
    
    
    
    
    0.4
    (k)(l)
    
    
    81.2Total assets
    
    $
    1,924.9
    
    
    $
    165.0
    
    
    $
    
    
    
    $
    217.0
    
    
    $
    2,306.9LIABILITIES AND STOCKHOLDERSEQUITY
(DEFICIT)Current liabilities:DIP facility
    
    $
    59.7
    
    
    $
    (59.7
    )(e)
    
    $
    
    
    
    
    
    
    
    $
    Bank borrowings and other notes
    
    
    13.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13.0Current portion of long-term debt
    
    
    39.6
    
    
    
    4.5
    (f)
    
    
    
    
    
    
    
    
    
    
    44.1Accounts payable and accrued
Liabilities
    
    
    303.8
    
    
    
    33.6
    (g)
    
    
    
    
    
    
    9.1
    (k)(p)
    
    
    346.5Total current liabilities
    
    
    416.1
    
    
    
    (21.6
    )
    
    
    
    
    
    
    9.1
    
    
    
    403.6Long-term debt, net of current portion
    
    
    62.0
    
    
    
    31.0
    (f)
    
    
    
    
    
    
    
    
    
    
    93.0New Term Loan
    
    
    
    
    
    
    445.5
    (f)
    
    
    
    
    
    
    
    
    
    
    445.5New Senior Notes, net of discount
    
    
    
    
    
    
    248.5
    (f)
    
    
    
    
    
    
    
    
    
    
    248.5Pension and other long-term liabilities
    
    
    343.5
    
    
    
    0.5
    (g)
    
    
    
    
    
    
    195.5
    (k)(p)
    
    
    539.5Series A Warrants and Series B Warrants
    
    
    
    
    
    
    9.3
    (f)
    
    
    
    
    
    
    
    
    
    
    9.3Redeemable preferred stock of subsidiary
    
    
    
    
    
    
    10.0
    (f)
    
    
    
    
    
    
    
    
    
    
    10.0Minority interest
    
    
    17.8
    
    
    
    
    
    
    
    
    
    
    
    (4.7
    )(q)
    
    
    13.1Liabilities subject to compromise
    
    
    2,153.4
    
    
    
    (2,153.4
    )(h)
    
    
    
    
    
    
    
    
    
    
    Commitments and contingencies
    
    
    
    
    
    
    
    
    
    
    Stockholders equity (deficit):
    
    
    
    
    
    
    
    
    
    
    New Common Stock
    
    
    
    
    
    
    0.3
    (f)
    
    
    
    
    
    
    
    
    
    
    0.3New additional paid-in capital
    
    
    
    
    
    
    544.1
    (f)
    
    
    
    
    
    
    
    
    
    
    544.1Old Common Stock
    
    
    0.3
    
    
    
    
    
    
    
    (0.3
    )(i)
    
    
    
    
    
    
    Old additional paid in capital
    
    
    235.1
    
    
    
    
    
    
    
    (235.1
    )(i)
    
    
    
    
    
    
    Old common stock in treasury at cost
    
    
    (25.7
    )
    
    
    
    
    
    
    25.7
    (i)
    
    
    
    
    
    
    Accumulated deficit
    
    
    (1,201.8
    )
    
    
    1,050.8
    (h)
    
    
    209.7
    (i)
    
    
    (58.7
    )(m)
    
    
    Accumulated other comprehensive loss
    
    
    (75.8
    )
    
    
    
    
    
    
    
    
    
    
    75.8
    (m)
    
    
    Total stockholders equity (deficit)
    
    
    (1,067.9
    )
    
    
    1,595.2
    
    
    
    
    
    
    
    17.1
    
    
    
    544.4Total liabilities and stockholders
equity (deficit)
    
    $
    1,924.9
    
    
    $
    165.0
    
    
    $
    
    
    
    $
    217.0
    
    
    $
    2,306.9


Adjustments reflected in the reorganized condensed consolidated balance
sheet are as follows:



|a) |  | Represents adjustment to reflect a portion of the proceeds from
the New Senior Notes and the New Credit Facility, net of a $13.0
million cash payment to former holders of the Companys 11 7/8% senior
notes due 2006 (the Old Senior Notes).
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|b) |  | Represents escrowed property taxes and insurance required in
connection with exit financing.
|-- |  | --------------------------------------------------------------------------------------------



|c) |  | Represents capitalization of $54.0 million of assets resulting
from repayment or refinancing of certain synthetic leases.
|-- |  | -------------------------------------------------------------------------------------------------------------------------



|d) |  | Represents recognition of debt issuance costs recorded as other
assets consisting of fees and expenses of the New Credit Facility of
$13.9 million, and fees and expenses of the New Senior Notes of $6.0
million.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|e) |  | Represents repayment of the DIP Facility on the Effective Date.
|-- |  | ---------------------------------------------------------------

11



---



##### Table of Contents





|f) |  | Represents new capitalization structure after giving effect to
the Plan of Reorganization. The Company recorded the Series A Warrants
and Series B Warrants at fair value. The Company also determined that
its Series A Warrants and Series B Warrants met the criteria for
classification as liabilities. As such they will be measured at fair
value at each reporting period with changes in fair value recognized
in interest expense. The Company also has recorded the redeemable
preferred stock at fair value which equals the stated liquidation
preference. The fair value of the redeemable preferred stock was $10.0
million and the Series A Warrants and Series B Warrants fair value was
approximately $9.3 million at emergence. The Series A Warrants and
Series B Warrants were valued utilizing the Black-Scholes model that
requires the estimation of several variables in the formula. The
redeemable preferred stock of subsidiary was valued using a
market/capitalization approach that capitalizes the dividend stream
of similar instruments issued by a comparative group using
capitalization rates that reflect prevailing market yields. The use of
this approach provides a range of possible fair values. This range was
evaluated by the Company before it selected a capitalization rate of
8% which approximated the mean rate of the comparative group. The use
of different valuation techniques could have resulted in different
conclusions of the fair value of these instruments.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|g) |  | Represents accrual or settlement of short- and long-term
liabilities upon emergence under the Plan of Reorganization as follows
(millions of dollars):
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------

Accrual of contingent professional fees
    
    $
    8.5Accrual of the portion of the Restructuring Performance
Bonus component of the CERP to be paid in cash
    
    
    9.0Accrual of obligation to fund the Creditors Trust
    
    
    1.5Payment of accrued professional fees
    
    
    (13.1
    )Payment of accrued interest on the DIP Facility
    
    
    (0.4
    )Deferral of cure payments for assumed contracts and other
priority and administrative claims
    
    
    19.2Accrual of state tax liability for restructuring
transactions upon emergence
    
    
    6.5Other accrued liabilities incurred upon emergence
    
    
    2.9Net adjustment to accounts payable, accrued
liabilities, and pension and other long-term
liabilities
    
    $
    34.1




|h) |  | Represents the elimination of pre-petition liabilities
discharged under the Plan of Reorganization as follows (millions of
dollars):
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------

Liabilities subject to compromise
    
    $
    2,153.4Form of settlement:Issuance of New Common Stock of HoldCo.
    
    
    (544.4
    )Issuance of New Preferred Stock of HLI
    
    
    (10.0
    )Issuance of Series A Warrants and Series B Warrants
    
    
    (9.3
    )Repayment of remaining Old Senior Note proceeds
    
    
    (13.0
    )Prepetition Lenders Payment Amount
    
    
    (477.3
    )Amounts reclassified to accounts payable and accrued
liabilities for certain estimated cure payments with
respect to assumption of prepetition executory
contracts and unexpired leases, and other priority and
administrative claims
    
    
    (22.7
    )Gain on discharge of debt
    
    
    1,076.7Accrual of estimated contingent professional fees, cash
portion of the Restructuring Performance Bonus, Creditors
Trust obligation and tax expense related to restructuring
activities
    
    
    (25.9
    )Net adjustment to accumulated deficit
    
    $
    1,050.8




|i) |  | Represents cancellation of Old Common Stock under fresh start
accounting.
|-- |  | -------------------------------------------------------------------------

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##### Table of Contents





|j) |  | Represents adjustment to reflect the increase in the fair value
of inventory under fresh start accounting. Work-in-process and
finished goods were valued at the expected selling price less costs to
complete, selling and disposal cost and a normal profit. Raw materials
and supplies were valued using the cost approach.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|k) |  | Represents the adjustment of deferred tax assets and liabilities
resulting from fair value adjustments under fresh start accounting as
follows:
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------

Prepaid expenses and other
    
    $
    (7.8
    )Other assets
    
    
    4.5Accounts payable and accrued liabilities
    
    
    (2.4
    )Pension and other long-term liabilities
    
    
    (46.3
    )Net adjustment
    
    $
    (52.0
    )




|l) |  | Primarily represents net adjustments to reflect the decrease of
property, plant, equipment and tooling to fair value under fresh start
accounting based on results of valuation procedures performed by the
Companys valuation specialist. The valuation methodologies employed
included the use of the market value and replacement cost approach for
personal property and the use of the cost, income and sales comparison
approaches for real property.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|m) |  | Represents elimination of pre-emergence goodwill, equity accounts
and retained earnings under fresh start accounting.
|-- |  | ---------------------------------------------------------------------------------------------------------------------



|n) |  | Represents new goodwill resulting from the excess of
reorganization value over the amounts allocable to the fair value of
identifiable assets and liabilities.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------

The allocation of compromise enterprise value and goodwill was as follows:

Assets:Current assets
    
    $
    690.7Property, plant and equipment
    
    
    918.4Goodwill
    
    
    390.9Intangible assets
    
    
    225.7Other assets
    
    
    81.2Liabilities:Current liabilities
    
    
    403.6Other long-term liabilities
    
    
    1,358.9New common equity
    
    
    544.4Assumed obligations:New Term Loan, including current portion
    
    
    450.0New Senior Notes, net of discount
    
    
    248.5Series A Warrants and Series B Warrants
    
    
    9.3Redeemable preferred stock of subsidiary
    
    
    10.0Other assumed obligations, net of excess cash
    
    
    (12.2
    )Total compromise enterprise value
    
    $
    1,250.0




|o) |  | Represents adjustment of $121.9 million to reflect the fair value
of identified intangible assets based on results of valuation
procedures performed by the Companys valuation specialist. See Note
(6) for additional disclosure regarding the category of intangibles
and a description of the valuation methodology.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|p) |  | Primarily reflects the additional liability of $155.2 million
under fresh-start accounting for any pension and retiree medical plan
costs as determined by the Companys actuaries. This net additional
liability had been deferred pre-emergence in
accordance with Statement of Financial Accounting Standards (SFAS) Nos.
87 and 106. The actuarial assumptions used in computing the liabilities
were as follows:
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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InternationalNorth American Plans
    
    
    PlansPension Benefits
    
    
    Other Benefits
    
    
    Pension BenefitsWeighted average assumptions:Discount Rate
    
    
    5.75
    %
    
    
    5.75
    %
    
    
    5.0-5.5
    %Expected return on plan assets
    
    
    8.0
    %
    
    
    N/A
    
    
    
    5.0
    %Rate of compensation increase
    
    
    4.75
    %
    
    
    N/A
    
    
    
    2.1
    %




|q) |  | Reflects the adjustment to minority interest as a result of
fair value adjustments under fresh start accounting.
|-- |  | ----------------------------------------------------------------------------------------------------------------

(4) Inventories

The major classes of inventory are as follows (millions of dollars):

Successor
    
    
    PredecessorJuly 31, 2003
    
    
    January 31, 2003Raw materials
    
    $
    44.9
    
    
    $
    48.3Work-in-process
    
    
    40.9
    
    
    
    36.5Finished goods
    
    
    64.2
    
    
    
    56.2Spare parts and supplies
    
    
    36.6
    
    
    
    35.6Total
    
    $
    186.6
    
    
    $
    176.6




|(5) |  | Property, Plant and Equipment
|--- |  | -----------------------------

The major classes of property, plant and equipment are as follows
(millions of dollars):

Successor
    
    
    PredecessorJuly 31, 2003
    
    
    January 31, 2003Land
    
    $
    39.6
    
    
    $
    30.4Buildings
    
    
    202.2
    
    
    
    256.0Machinery and equipment
    
    
    670.1
    
    
    
    1,134.5Capital lease assets:Land
    
    
    0.7
    
    
    
    Buildings
    
    
    7.7
    
    
    
    Machinery and equipment
    
    
    23.1
    
    
    
    943.4
    
    
    
    1,420.9Accumulated depreciation
    
    
    (20.8
    )
    
    
    (469.7
    )Property, plant and equipment, net
    
    $
    922.6
    
    
    $
    951.2


(6) Goodwill and Other Intangible Assets

Effective February 1, 2002, the Company adopted SFAS No. 142, Goodwill
and Other Intangible Assets. SFAS No. 142 requires that goodwill and
indefinite-lived intangible assets be reviewed for impairment annually, rather
than amortized into earnings. Any impairment to the amount of goodwill existing
at the date of adoption is to be recognized as a cumulative effect of a change
in accounting principle on that date.

As a result of applying fresh start accounting, the changes in the net
carrying amount of goodwill during the first six months of fiscal 2003
represent the elimination of $198.3 million of the Predecessors goodwill, the
establishment of $390.9 million of the Successors goodwill and the impact of
foreign currency translation. Goodwill by segment for the Successor as of July
31, 2003 and for the Predecessor as of January 31, 2003 is presented in Note
(13).

Upon adoption of SFAS No. 142 in fiscal 2002, the Company discontinued
amortizing goodwill and indefinite-lived intangible assets into earnings. In
connection with the transitional provisions of the Statement, the Company
performed an assessment of whether there was an indication that goodwill was
impaired as of the adoption date. To accomplish this, the Company determined
the carrying value of each of its reporting units (i.e., one step below the segment
level) by assigning the assets and liabilities, including existing goodwill and
intangible assets, to the reporting units on February 1, 2002. As of that date,
the Company had unamortized goodwill and other indefinite-lived intangibles of
approximately $758.7 million that were subject to the transition provisions of
SFAS No. 142. The Company determined the fair value of each reporting unit and
compared those fair values to the carrying values of each reporting unit.

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To the extent the carrying amount of a reporting unit exceeded the fair value of
the reporting unit (indicating that goodwill may be impaired), the Company
performed the second step of the transitional impairment test. This test was
required for five reporting units.

In the second step, the Company compared the implied fair value of the
reporting units goodwill with the carrying value of that goodwill, both of
which were measured at the adoption date. The implied fair value of goodwill
was determined by allocating the fair value of the reporting units to all of
the assets (both recognized and unrecognized) and liabilities of the reporting
units in a similar manner to a purchase price allocation in accordance with
SFAS No. 141, Business Combinations. The residual fair value after this
allocation was the implied fair value of the reporting units goodwill. The
carrying amounts of these reporting units exceeded the fair values, and the
Company recorded an impairment charge of $554.4 million as of February 1, 2002
as a cumulative effect of a change in accounting principle as described above.

Intangible assets and goodwill consist of the following (millions of
dollars):

Successor
    
    
    PredecessorJuly 31, 2003
    
    
    January 31, 2003Gross
    
    
    
    
    
    
    Net
    
    
    Gross
    
    
    
    
    
    
    NetCarrying
    
    
    Accumulated
    
    
    Carrying
    
    
    Carrying
    
    
    Accumulated
    
    
    CarryingAmount
    
    
    Amortization
    
    
    Amount
    
    
    Amount
    
    
    Amortization
    
    
    AmountAmortized intangible
assets:Customer relationships
and contracts
    
    $
    159.1
    
    
    $
    (1.6
    )
    
    $
    157.5
    
    
    $
    26.5
    
    
    $
    (4.0
    )
    
    $
    22.5Licenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13.4
    
    
    
    (2.4
    )
    
    
    11.0Unpatented
technology
    
    
    33.5
    
    
    
    (0.7
    )
    
    
    32.8
    
    
    
    33.5
    
    
    
    (8.8
    )
    
    
    24.7Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.9
    
    
    
    (1.0
    )
    
    
    0.9$
    192.6
    
    
    $
    (2.3
    )
    
    $
    190.3
    
    
    $
    75.3
    
    
    $
    (16.2
    )
    
    $
    59.1Non amortized intangible
assets:Tradenames
    
    $
    38.1
    
    
    
    
    
    
    
    
    
    
    $
    43.5Goodwill
    
    $
    392.9
    
    
    
    
    
    
    
    
    
    
    $
    191.3


The Company expects that ongoing amortization expense will approximate
between $13 million and $16 million in each of the next five fiscal years.

Valuation of Intangible Assets as a result of Fresh Start Accounting

The Company worked with and relied extensively on the expertise of
external valuation consultants in arriving at its assigned values for
intangible assets. In managements opinion, the valuations appear reasonable
and appropriate.

Customer Contracts

Value was based on a review of contracts, award letters and purchase
orders in existence for the Companys Domestic Wheels, Domestic Components, and
International Wheels reporting units. At the Companys International Components
and Commercial Highway reporting units, sales are not generated or attributed
to contracts but rather to customer relationships and therefore contracts were
not valued. Value was determined on economic profits which exceeded a fair
return on assets employed. The amortization period is based on the remaining
contract terms.

Customer Relationships

This refers to likely new business from existing customers that is not
currently booked. Automotive suppliers often receive future business as a
result of being the incumbent on a program. Management and its outside
valuation consultants had discussions on expected future business based on
historic relationships and trends. Economic profit was based on expected future
sales with a growth rate of 2% less projected contract sales. The amortization
period was based on a review of historical data and discounting of cash flows.
The International Components and Commercial Highway valuations were based on a
review of projections provided which identified sales generated by existing customers with an attrition rate
provided for loss of customers and indicated that no intangible asset existed
for these reporting units.

Trade Names

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The Hayes Lemmerz trade name was valued using a royalty savings method. It
assumes a third party would be willing to pay for the use of a name which
represents a cost savings to the Company. Our outside valuation consultants
identified other licensing agreements similar to ones that could be used by the
Company as a benchmark for royalty rates. Using this data and historical use of
the Companys name, premiums earned on our products, excess earnings analysis
and projected profitability identified that the International Wheels reporting
unit could economically support a trade name. The name is a perpetual,
non-wasting asset and therefore an indefinite life was assigned.

Technology

Discussions were held between management and the external valuation
consultant to identify specific technologies valuable to a potential acquirer.
Additional discussions were then held with product development and engineering
personnel to gain an understanding of the distinctiveness, development stage,
third party agreements, royalty rates charged, and expected remaining useful
life of each technology. The technologies were valued using a royalty savings
method applied to sales projections for 2003 through 2007. Royalty rates were
determined based on a review of discussions between management and the external
valuation consultant and a review of royalty data for similar or comparable
technologies. The amortization periods are based on the expected useful lives
of the product or product program to which the technology relates.

(7) Asset Impairments and Other Restructuring Charges

The Company recorded asset impairment losses and other restructuring
charges of $6.4 million in the Predecessor four months ended May 31, 2003 and
$25.3 million in the Predecessor six months ended July 31, 2002.

Asset impairments and other restructuring charges by segment were as
follows:

PredecessorFour Months Ended May 31, 2003AutomotiveWheels
    
    
    Components
    
    
    Other
    
    
    TotalImpairment of manufacturing facilities
    
    $
    0.5
    
    
    $
    0.1
    
    
    $
    
    
    
    $
    0.6Impairment of machinery, equipment and tooling
    
    
    1.5
    
    
    
    3.3
    
    
    
    
    
    
    
    4.8Facility closure costs
    
    
    0.9
    
    
    
    
    
    
    
    
    
    
    
    0.9Severance and other restructuring costs
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    0.1Total
    
    $
    3.0
    
    
    $
    3.4
    
    
    
    
    
    
    
    6.4


PredecessorSix
Months Ended July 31, 2002AutomotiveWheels
    
    
    Components
    
    
    Other
    
    
    TotalImpairment of manufacturing facilities
    
    $
    
    
    
    $
    0.3
    
    
    $
    
    
    
    $
    0.3Impairment of machinery, equipment and tooling
    
    
    16.5
    
    
    
    0.8
    
    
    
    
    
    
    
    17.3Facility closure costs
    
    
    6.7
    
    
    
    
    
    
    
    
    
    
    
    6.7Severance and other restructuring costs
    
    
    0.5
    
    
    
    
    
    
    
    0.5
    
    
    
    1.0Total
    
    $
    23.7
    
    
    $
    1.1
    
    
    $
    0.5
    
    
    $
    25.3


Impairment of Facilities

During the first quarter of fiscal 2003, the Predecessor Company recorded
asset impairment losses of $0.6 million to write down the fair value of its
Petersburg, Michigan facility and its Thailand greenfield site based on current
real estate market conditions. These non-operating facilities are currently
held for sale by the Company at July 31, 2003. The Thailand greenfield site was
subsequently sold by the Company in August 2003.

During the second quarter of fiscal 2002, an impairment charge of $0.3
million was recorded to write down the Petersburg facility to fair value based
on real estate market conditions at that time.

Impairment of Machinery, Equipment and Tooling

In May 2003, the Predecessor Company recorded asset impairment losses of
$1.6 million on certain machinery and equipment in its Components segment due
primarily to a change in managements plan for the future use of idled
machinery and equipment. Such

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investments in fixed assets were written down to
fair value based on the expected scrap value, if any, of such machinery and
equipment.

During the first quarter of fiscal 2003, the Company recorded asset
impairment losses of $1.5 million on certain machinery and equipment in its
Automotive Wheels segment and $1.7 million in its Components segment due
primarily to a change in managements plan for the future use of idled
machinery and equipment. Such investments in fixed assets were written down to
fair value based on the expected scrap value, if any, of such machinery,
equipment and tooling.

In the second quarter of fiscal 2002, the Company determined, based on its
most recent sales projections for the facility, that its current estimate of
the future undiscounted cash flows from its manufacturing facility in La
Mirada, California will not be sufficient to recover the carrying value of the
facilitys fixed assets and production tooling. Accordingly, the Company
recorded an estimated impairment loss of $15.5 million in the second quarter of
fiscal 2002 on those assets.

During the second quarter of fiscal 2002, the Company also recognized
asset impairment losses of $1.8 million on certain machinery and equipment due
primarily to a change in managements plan for the future use of idled
machinery and equipment.

Facility Closures

During the first four months of fiscal 2003, the Predecessor Company
recognized additional restructuring charges of $0.9 million related to the
closure of its Bowling Green, Kentucky facility. These charges relate to
additional plant closure costs and terminated employee health care benefits. Of
these and other closure costs previously recognized, approximately $1.8 million
remain unpaid as of July 31, 2003 and are expected to be paid during fiscal
2003.

In February 2002, the Company committed to a plan to close its
manufacturing facility in Somerset, Kentucky. In connection with the closure of
the Somerset facility (which commenced during February 2002), the Company
recorded an estimated restructuring charge of $6.7 million in the first quarter
of fiscal 2002. This charge included amounts related to lease termination costs
and other closure costs including security and maintenance costs subsequent to
the shut down date. The amount of the charge related to leases was $3.5 million
and was classified as a liability subject to compromise until May 31, 2003. The
lease termination costs were ultimately discharged under the Plan of
Reorganization upon emergence from Chapter 11. Of the other closure costs,
approximately $1.1 million remained unpaid as of July 31, 2003 and are expected
to be paid during fiscal 2003.

Facility Exit Cost and Severance Accruals

The following table describes the activity in the balance sheet accounts
affected by the severance and other restructuring charges noted above during
the six months ended July 31, 2003 (millions of dollars):

SeveranceJanuary 31,
    
    
    and Other
    
    
    
    
    
    
    
    
    
    
    July 31,2003
    
    
    Restructuring
    
    
    
    
    
    
    Cash
    
    
    2003Accrual
    
    
    Charges
    
    
    Reclassification
    
    
    Payments
    
    
    AccrualFacility exit costs
    
    $
    12.6
    
    
    $
    0.9
    
    
    $
    (7.5
    )
    
    $
    (2.8
    )
    
    $
    3.2Severance
    
    
    4.0
    
    
    
    0.1
    
    
    
    
    
    
    
    (2.3
    )
    
    
    1.8$
    16.6
    
    
    $
    1.0
    
    
    $
    (7.5
    )
    
    $
    (5.1
    )
    
    $
    5.0


Of the facility exit costs accrued as of January 31, 2003, $7.5 million
relates to lease termination costs which were reclassified to liabilities
subject to compromise and ultimately discharged under the Plan of
Reorganization upon emergence from Chapter 11.

(8) Long-Term Incentive Plan

Upon the Effective Date, all options under the Predecessor Companys stock
option plans were cancelled and those plans were terminated in accordance with
the Plan of Reorganization.

In conjunction with the Plan of Reorganization, the Company filed a
proposed Long-Term Incentive Plan with the Bankruptcy Court. The Long-Term
Incentive Plan was approved by the Bankruptcy Court on May 12, 2003 in
connection with the confirmation of the Plan of Reorganization, and in
accordance with Section 303 of the Delaware General Corporation Law, such
approval constituted stockholder approval of the Long-Term Incentive Plan. The
Long-Term Incentive Plan became effective on July 23, 2003, the date

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that the
Plan was approved by the Companys Board of Directors. No award may be granted
under the Long-Term Incentive Plan after July 23, 2013.

The Long-Term Incentive Plan provides for the grant of incentive stock
options (ISOs), stock options that do not qualify as ISOs, restricted shares
of common stock, and restricted stock units (collectively, the awards). The
number of shares subject to awards under the Long-Term Incentive Plan is
3,734,554 (subject to adjustment in certain circumstances as provided for in
the plan). Any officer, director or key employee of the Company or any of its
subsidiaries is eligible to be designated a participant in the Long-Term
Incentive Plan.

On July 28, 2003, the Company granted 1,887,162 stock options and
1,258,107 restricted units to certain employees and officers, and 65,455
options and 43,637 restricted units to non-employee members of the Companys
Board of Directors. The exercise price of the stock options was $13.93 per
share. The stock options granted to certain employees and officers of the
Company vest 25% per year over a four year period. The restricted units granted
to certain employees and officers of the Company vest one third after three
years and the remaining two thirds after four years. The stock options and
restricted units granted to the non-employee directors vest over a two year
period.

As a result of issuing the restricted units discussed above, and the
restricted units issued under the CERP (see Note (1)), the Company recorded
deferred compensation expense of $21.1 million which will be recognized in
results of operations over the respective vesting periods.

(9) Earnings (Loss) Per Share

Basic earnings (loss) per share are calculated by dividing net income
(loss) by the weighted average number of common shares outstanding. Diluted
earnings (loss) per share are computed by dividing net income (loss) by the
diluted weighted average shares outstanding. Diluted weighted average shares
assume the exercise of stock options and warrants, so long as they are not
anti-dilutive.

Shares outstanding for the two months ended July 31, 2003 were as follows
(thousands of shares):

Weighted average shares outstanding
    
    
    30,100Dilutive effect of options and warrants
    
    
    Diluted shares outstanding
    
    
    30,100


For the two month period ended July 31, 2003, all options and warrants
were excluded from the calculation of diluted earnings (loss) per share as the
effect was anti-dilutive due to the net loss before cumulative effect of change
in accounting principle and extraordinary gain on debt discharge reflected for
such periods.

(10) Comprehensive Income (Loss)

The components of comprehensive income (loss) for the two months ended
July 31, 2003, the four months ended May 31, 2003 and the six months ended July
31, 2002 are as follows (millions of dollars):

Successor
    
    
    PredecessorFour
    
    
    SixTwo Months
    
    
    Months
    
    
    MonthsEnded
    
    
    Ended
    
    
    EndedJuly 31,
    
    
    May 31,
    
    
    July 31,2003
    
    
    2003
    
    
    2002Net income (loss)
    
    $
    (9.2
    )
    
    $
    1,043.0
    
    
    $
    (615.4
    )Currency translation adjustments
    
    
    12.7
    
    
    
    31.4
    
    
    
    34.8Elimination of Predecessor equity accounts under
fresh start accounting
    
    
    
    
    
    
    75.8
    
    
    
    Reclassification adjustment for amount included in
fresh start adjustment
    
    
    
    
    
    
    (75.8
    )
    
    
    Total comprehensive income (loss)
    
    $
    3.5
    
    
    $
    1,074.4
    
    
    $
    (580.6
    )


(11) Bank Borrowings, Other Notes and Long-Term Debt

Bank Borrowings and Other Notes

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Bank borrowings and other notes of the Successor of $12.2 million at July
31, 2003 consists primarily of short-term revolving credit facilities of the
Companys foreign subsidiaries which bear interest at rates ranging from 1.85%
to 14.5%. Bank borrowings and other notes of the Predecessor of $15.8 million
at January 31, 2003 consists of short-term revolving credit facilities of the
Companys foreign subsidiaries which bear interest at rates ranging from 2.25%
to 10.75%, and a note issued in conjunction with the purchase of the Companys
Wheland foundry which was repaid on March 7, 2003.

Long-Term Debt

Long-term debt consists of the following (millions of dollars):

Successor
    
    
    PredecessorJuly 31,
    
    
    January 31,2003
    
    
    2003DIP Facility
    
    $
    
    
    
    $
    49.9Bank term loan facility maturing February 3, 2005, weighted
average interest rate of 8.4% at January 31, 2003
    
    
    
    
    
    
    176.8Bank revolving credit facility maturing through 2005,
weighted average interest rate of 6.9% at January 31,
2003
    
    
    
    
    
    
    573.8Various foreign bank and government loans maturing through
2006, weighted average interest rates of 8.0% and 6.1% at
July 31, 2003 and January 31, 2003
    
    
    31.7
    
    
    
    91.38 1/4% Senior Subordinated Notes due 2008
    
    
    
    
    
    
    224.39 1/8% Senior Subordinated Notes due 2007
    
    
    
    
    
    
    389.111% Senior Subordinated Notes due 2006
    
    
    
    
    
    
    239.411 7/8% Senior Notes due 2006
    
    
    
    
    
    
    300.0New Term Loan maturing 2009, weighted average interest rate
of 5.9%
    
    
    450.0
    
    
    
    10 1/2% New Senior Notes, net of discount, due 2010
    
    
    248.5
    
    
    
    Mortgage note payable
    
    
    22.6
    
    
    
    Capital lease obligations
    
    
    17.3
    
    
    
    10.7770.1
    
    
    
    2,055.3Less current portion of DIP Facility
    
    
    
    
    
    
    49.9Less current portion of long-term debt
    
    
    14.6
    
    
    
    Less current portion not subject to compromise
    
    
    
    
    
    
    40.1Less liabilities subject to compromise
    
    
    
    
    
    
    1,903.4Long-term debt
    
    $
    755.5
    
    
    $
    61.9


As discussed in Note (1), the Debtors emerged from Chapter 11 on June 3,
2003. In connection with the Debtors emergence on the Effective Date, HLI
entered into a $550.0 million senior secured credit facility (the New Credit
Facility). The New Credit Facility consists of a $450.0 million six-year
amortizing term loan (the New Term Loan) and a five-year $100.0 million
revolving credit facility (the Revolving Credit Facility). In addition, HLI
issued on the Effective Date an aggregate of $250.0 million principal amount of
10 1/2% senior notes due 2010 (the New Senior Notes). The proceeds from the
initial $450.0 million of borrowings under the New Credit Facility and the net
proceeds from the New Senior Notes were used to make payments required under
the Plan of Reorganization, including the repayment of the Companys DIP
Facility and a payment of $477.3 million to certain prepetition lenders, to pay
related transaction costs and to refinance certain debt.

New Credit Facility

The Term Loan Facility was made available to HLI in a single drawing on
the Effective Date, payable in quarterly installments equal to 0.25% of the
principal amount outstanding immediately following effectiveness of the Plan of
Reorganization with the remaining balance payable on the sixth anniversary of
the Effective Date. The Revolving Credit Facility will be available until the
fifth anniversary of the Effective Date, on which date all loans
outstanding under the Revolving Credit Facility will become due and payable.

The interest rates per annum under the New Credit Facility will, at HLIs
option, be: (A) for the Term Loan, either the LIBOR rate plus 4.75% or the
alternate base rate plus 3.75%; and (B) for the Revolving Credit Facility: (i)
for the first two fiscal quarters after the

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##### Table of Contents



closing date of the New Credit
Facility, either the LIBOR rate plus 3.50% or the alternate base rate plus
2.50%, and (ii) thereafter, such higher or lower rates determined by reference
to the Companys leverage ratio.

The New Credit Facility contains covenants restricting the Companys
ability and the ability of its subsidiaries to issue more debt, pay dividends,
repurchase stock, make investments, merge or consolidate, transfer assets and
enter into transactions with affiliates. These restrictive covenants are
customary for such facilities and subject to certain exceptions. The New Credit
Facility also contains certain financial covenants regarding a maximum total
leverage ratio, a minimum interest coverage ratio and a minimum fixed charge
coverage ratio. HLIs obligations under the New Credit Facility are guaranteed
by the Company and all of its material direct and indirect domestic
subsidiaries.

As of July 31, 2003, there were no outstanding borrowings and $31.5
million in letters of credit issued under the Revolving Credit Facility. The
amount available to borrow under the Revolving Credit Facility at July 31, 2003
was approximately $68.5 million.

New Senior Notes

HLI issued $250.0 million aggregate principal amount of New Senior Notes
on June 3, 2003. The New Senior Notes will mature on June 15, 2010. Interest on
the New Senior Notes will accrue at a rate of 10 1/2% per annum and will be
payable semi-annually in arrears on June 15 and December 15.

The New Senior Notes are senior, unsecured obligations of HLI and are
effectively subordinated in right of payment to all existing and future secured
debt of HLI to the extent of the value of the assets securing that debt, equal
in right of payment with all existing and future senior debt of HLI, senior in
right of payment to all subordinated debt of HLI.

Except as set forth below, the New Senior Notes will not be redeemable at
the option of HLI prior to June 15, 2007. Starting on that date, HLI may redeem
all or any portion of the New Senior Notes, at once or over time, upon the
terms and conditions set forth in the senior note indenture agreement (the
Indenture).

At any time prior to June 15, 2007, HLI may redeem all or any portion of
the New Senior Notes, at once or over time, at a redemption price equal to 100%
of the principal amount of the New Senior Notes to be redeemed, plus a
specified make-whole premium.

In addition, at any time and from time to time prior to June 15, 2006, HLI
may redeem up to a maximum of 35% of the aggregate principal amount of the New
Senior Notes with the proceeds of one or more public equity offerings at a
redemption price equal to 110.50% of the principal amount thereof, plus accrued
and unpaid interest.

The Indenture provides for certain restrictions regarding additional debt,
dividends and other distributions, additional stock of subsidiaries, certain
investments, liens, transactions with affiliates, mergers, consolidations, and
the transfer and sales of assets. The Indenture also provides that a holder of
the New Senior Notes may, under certain circumstances, have the right to
require that the Company repurchase such holders New Senior Notes upon a
change of control of the Company. The New Senior Notes are unconditionally
guaranteed as to the payment of principal, premium, if any, and interest,
jointly and severally on a senior, unsecured basis by the Company and
substantially all of its domestic subsidiaries (see Note (15)).

Other Financing

In addition to the New Credit Facility and New Senior Notes as described
above, the Company had other debt financing of $71.6 million as of July 31,
2003. These included borrowings under various foreign debt facilities in an
aggregate amount of $31.7 million, capital lease obligations of $17.3 million
and a mortgage note payable of $22.6 million.

(12) Liabilities Subject to Compromise

The principal categories of claims that were classified as liabilities
subject to compromise under the reorganization proceedings are identified
below.

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##### Table of Contents



Recorded Liabilities

Prior to emergence, on a consolidated basis, recorded liabilities subject
to compromise under the Chapter 11 proceedings consisted of the following
(millions of dollars):

May 31,
    
    
    January 31,2003
    
    
    2003Accounts payable and accrued liabilities, principally trade
Credit Agreement:
    
    $
    155.8
    
    
    $
    152.1Term loans
    
    
    176.8
    
    
    
    176.8Revolving facility
    
    
    573.8
    
    
    
    573.8Accrued interest
    
    
    45.2
    
    
    
    29.3Old Senior Notes and Old Senior Subordinated Notes:Face value
    
    
    1,152.8
    
    
    
    1,152.8Accrued interest
    
    
    49.0
    
    
    
    49.0Total
    
    $
    2,153.4
    
    
    $
    2,133.8


The Bankruptcy Code generally disallows the payment of interest that would
otherwise accrue postpetition with respect to unsecured or undersecured claims.
The Company continued to record interest expense accruing postpetition with
respect to the Companys Third Amended and Restated Credit Agreement dated as
of February 3, 1999 (the Prepetition Credit Agreement) because a significant
portion of such accrued interest would be an allowed claim as part of the Plan
of Reorganization. The amount of such unpaid interest recorded as of May 31,
2003 was $45.2 million, net of the May payment noted below, and was classified
as a liability subject to compromise in the consolidated balance sheet as of
that date.

The DIP Facility provided for the postpetition cash payment at certain
intervals of interest and fees accruing postpetition under the Companys
Prepetition Credit Agreement, if certain tests are satisfied relating to the
liquidity position and earnings of the Company and its subsidiaries, and the
repatriation of funds from foreign subsidiaries. On May 1, 2003, a payment of
$1.2 million was made for a portion of accrued interest and fees with respect
to this provision.

The Company did not continue to record interest expense accruing
postpetition with respect to the Old Senior Notes and the Companys 11% Senior
Subordinated Notes due 2006, 9 1/8% Senior Subordinated Notes due 2007, and 8
1/4% Senior Subordinated Notes due 2008 (the Old Senior Subordinated Notes)
because such interest would not be an allowed claim as part of the Plan of
Reorganization. The amount of such interest accruing postpetition that had not
been recorded as of May 31, 2003 and January 31, 2003 was $174.9 million and
$136.3 million, respectively. The recorded amount of prepetition accrued
interest was $49.0 million, which was classified as a liability subject to
compromise in the consolidated balance sheets as of May 31, 2003 and January
31, 2003.

Contingent Liabilities

Contingent liabilities of the Debtors as of the Chapter 11 Filing date are
also subject to compromise. The Company is a party to litigation matters and
claims that are normal in the course of its operations. Generally, litigation
related to claims, as defined by the Bankruptcy Code, is stayed. Also, as a
normal part of their operations, the Companys subsidiaries undertake certain
contractual obligations, warranties and guarantees in connection with the sale
of products or services. Resolution of these matters cannot be predicted with
certainty.

(13) Segment Reporting

The Company is organized based primarily on markets served and products
produced. Under this organization structure, the Companys operating segments
have been aggregated into three reportable segments: Automotive Wheels,
Components, and Other. The Other category includes Commercial Highway products,
the corporate office and elimination of intercompany activities, none of which
meet the requirements of being classified as an operating segment. Earnings
(loss) from operations excluding fresh start and reorganization items is used
as a non-GAAP measure of the Companys primary profitability measure because it
excludes fresh start accounting adjustments and reorganization items which do
not represent normal operating performance of the Company as these items relate
only to the Companys Chapter 11 Filings and emergence.

21



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##### Table of Contents



The following tables present revenues and other financial information by
business segment (millions of dollars):

SuccessorAs of and for the Two Months Ended July 31, 2003AutomotiveWheels
    
    
    Components
    
    
    Other
    
    
    TotalNet sales
    
    $
    199.3
    
    
    $
    110.6
    
    
    $
    18.4
    
    
    $
    328.3Earnings (loss) from operations
    
    
    8.5
    
    
    
    (1.4
    )
    
    
    (4.7
    )
    
    
    2.4Goodwill
    
    
    303.2
    
    
    
    89.7
    
    
    
    
    
    
    
    392.9Total assets
    
    
    1,494.2
    
    
    
    606.0
    
    
    
    143.9
    
    
    
    2,244.1


PredecessorFour Months Ended May 31, 2003AutomotiveWheels
    
    
    Components
    
    
    Other
    
    
    TotalNet sales
    
    $
    403.5
    
    
    $
    248.1
    
    
    $
    38.2
    
    
    $
    689.8Earnings (loss) from operations
    
    
    85.4
    
    
    
    37.2
    
    
    
    (72.1
    )
    
    
    50.5Reorganization items
    
    
    (0.1
    )
    
    
    0.2
    
    
    
    (45.1
    )
    
    
    (45.0
    )Fresh start adjustments
    
    
    57.9
    
    
    
    27.7
    
    
    
    (22.5
    )
    
    
    63.1Earnings (loss) from operations excluding
fresh start adjustments and reorganization
items
    
    
    27.6
    
    
    
    9.3
    
    
    
    (4.5
    )
    
    
    32.4Asset impairments and other restructuring
charges
    
    
    (3.0
    )
    
    
    (3.4
    )
    
    
    
    
    
    
    (6.4
    )Extraordinary gain on debt discharge
    
    
    81.1
    
    
    
    58.3
    
    
    
    937.3
    
    
    
    1,076.7


PredecessorAs of January 31, 2003AutomotiveWheels
    
    
    Components
    
    
    Other
    
    
    TotalGoodwill
    
    $
    189.6
    
    
    $
    
    
    
    $
    1.7
    
    
    $
    191.3Total assets
    
    
    1,049.0
    
    
    
    546.4
    
    
    
    251.2
    
    
    
    1,846.6


PredecessorSix Months Ended July 31, 2002AutomotiveWheels
    
    
    Components
    
    
    Other
    
    
    TotalNet sales
    
    $
    576.0
    
    
    $
    364.8
    
    
    $
    49.9
    
    
    $
    990.7Earnings (loss) from operations
    
    
    (4.7
    )
    
    
    5.2
    
    
    
    (27.7
    )
    
    
    (27.2
    )Reorganization items
    
    
    (9.2
    )
    
    
    1.0
    
    
    
    (19.7
    )
    
    
    27.9Earnings (loss) from operations excluding
fresh start adjustments and reorganization
items
    
    
    4.5
    
    
    
    4.2
    
    
    
    (8.0
    )
    
    
    0.7Asset impairments and other restructuring
charges
    
    
    (23.7
    )
    
    
    (1.1
    )
    
    
    (0.5
    )
    
    
    (25.3
    )Cumulative effect of change in accounting
principle
    
    
    (127.1
    )
    
    
    (342.8
    )
    
    
    (84.5
    )
    
    
    (554.4
    )


(14) Taxes on Income

Income tax expense was $2.6 million for the Successor two months ended
July 31, 2003. This expense is the result of tax related to operations in
foreign jurisdictions as well as various states.

Income tax expense was $60.3 million for the Predecessor four months ended
May 31, 2003. This expense is the result of recording deferred tax liabilities
related to fresh start accounting adjustments in foreign jurisdictions, $6.5
million of state tax related to the merger between the Predecessor and HLI, and
tax related to operations in foreign jurisdictions as well as various states.

The Company has determined that a valuation allowance is required against
all net deferred tax assets in the United States and certain deferred tax
assets in foreign jurisdictions. As such, there is no United States federal
income tax benefit recorded against current losses.

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##### Table of Contents



(15) Condensed Consolidating Financial Statements

The following condensed consolidating financial statements present the
financial information required with respect to those entities which guarantee
certain of the Companys debt.

The condensed consolidating financial statements are presented on the
equity method. Under this method, the investments in subsidiaries are recorded
at cost and adjusted for the Companys share of the subsidiaries cumulative
results of operations, capital contributions, distributions and other equity
changes. The principal elimination entries eliminate investments in
subsidiaries and intercompany balances and transactions.

Guarantor and Nonguarantor Financial Statements

As further discussed in Notes (1) and (11), in connection with the Plan of
Reorganization, HLI issued $250.0 million aggregate principal amount of the New
Senior Notes. The New Senior Notes are guaranteed by New Hayes and
substantially all of New Hayes domestic subsidiaries (other than HLI as the
issuer of the New Senior Notes) (collectively, the Guarantor Subsidiaries).
None of New Hayes foreign subsidiaries have guaranteed the New Senior Notes,
nor have two of New Hayes domestic subsidiaries owned by foreign subsidiaries
of New Hayes (collectively, the Nonguarantor Subsidiaries).

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##### Table of Contents



CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
Successor Company
For the Two Months Ended July 31, 2003
(Millions of dollars)
(Unaudited)

Guarantor
    
    
    NonguarantorParent
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalNet sales
    
    $
    
    
    
    $
    0.8
    
    
    $
    159.5
    
    
    $
    173.8
    
    
    $
    (5.8
    )
    
    $
    328.3Cost of goods sold
    
    
    
    
    
    
    3.9
    
    
    
    150.4
    
    
    
    150.4
    
    
    
    (5.8
    )
    
    
    298.9Gross profit (loss)
    
    
    
    
    
    
    (3.1
    )
    
    
    9.1
    
    
    
    23.4
    
    
    
    
    
    
    
    29.4Marketing, general and
administration
    
    
    
    
    
    
    2.5
    
    
    
    9.1
    
    
    
    9.1
    
    
    
    
    
    
    
    20.7Engineering and product
development
    
    
    
    
    
    
    1.5
    
    
    
    1.3
    
    
    
    1.4
    
    
    
    
    
    
    
    4.2Equity in (earnings) losses of
subsidiaries and joint
ventures
    
    
    13.7
    
    
    
    
    
    
    
    0.3
    
    
    
    
    
    
    
    (14.0
    )
    
    
    Other expense (income), net
    
    
    
    
    
    
    0.2
    
    
    
    (0.8
    )
    
    
    2.7
    
    
    
    
    
    
    
    2.1Earnings (loss) from
operations
    
    
    (13.7
    )
    
    
    (7.3
    )
    
    
    (0.8
    )
    
    
    10.2
    
    
    
    14.0
    
    
    
    2.4Interest (income) expense, net
    
    
    (4.5
    )
    
    
    (2.4
    )
    
    
    8.5
    
    
    
    6.5
    
    
    
    
    
    
    
    8.1Earnings (loss) before
subsidiary preferred stock
dividends, taxes on income
and minority interest
    
    
    (9.2
    )
    
    
    (4.9
    )
    
    
    (9.3
    )
    
    
    3.7
    
    
    
    14.0
    
    
    
    (5.7
    )Subsidiary preferred stock
Dividends
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.1Earnings (loss) before taxes on
income and minority
interest
    
    
    (9.2
    )
    
    
    (5.0
    )
    
    
    (9.3
    )
    
    
    3.7
    
    
    
    14.0
    
    
    
    (5.8
    )Income tax provision
    
    
    
    
    
    
    
    
    
    
    0.5
    
    
    
    2.1
    
    
    
    
    
    
    
    2.6Earnings (loss) before minority
Interest
    
    
    (9.2
    )
    
    
    (5.0
    )
    
    
    (9.8
    )
    
    
    1.6
    
    
    
    14.0
    
    
    
    (8.4
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.8
    
    
    
    
    
    
    
    0.8Net income (loss)
    
    $
    (9.2
    )
    
    $
    (5.0
    )
    
    $
    (9.8
    )
    
    $
    0.8
    
    
    $
    14.0
    
    
    $
    (9.2
    )


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##### Table of Contents



CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
Predecessor Company
For the Four Months Ended May 31, 2003
(Millions of dollars)
(Unaudited)

Guarantor
    
    
    NonguarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalNet sales
    
    $
    61.0
    
    
    $
    330.3
    
    
    $
    307.0
    
    
    $
    (8.5
    )
    
    $
    689.8Cost of goods sold
    
    
    61.3
    
    
    
    297.6
    
    
    
    260.9
    
    
    
    (8.5
    )
    
    
    611.3Gross profit (loss)
    
    
    (0.3
    )
    
    
    32.7
    
    
    
    46.1
    
    
    
    
    
    
    
    78.5Marketing, general and
administration
    
    
    2.6
    
    
    
    16.3
    
    
    
    16.1
    
    
    
    (1.5
    )
    
    
    33.5Engineering and product
development
    
    
    2.9
    
    
    
    2.8
    
    
    
    2.4
    
    
    
    
    
    
    
    8.1Equity in (earnings) losses of
subsidiaries and joint ventures
    
    
    (132.1
    )
    
    
    (7.9
    )
    
    
    (0.1
    )
    
    
    140.1
    
    
    
    Asset impairments and other
restructuring charges
    
    
    0.3
    
    
    
    4.9
    
    
    
    1.2
    
    
    
    
    
    
    
    6.4Other expense (income), net
    
    
    (0.3
    )
    
    
    (1.4
    )
    
    
    (1.0
    )
    
    
    0.8
    
    
    
    (1.9
    )Fresh Start accounting adjustments
    
    
    
    
    
    
    (18.9
    )
    
    
    (44.2
    )
    
    
    
    
    
    
    (63.1
    )Reorganization items
    
    
    13.3
    
    
    
    31.7
    
    
    
    
    
    
    
    
    
    
    
    45.0Earnings (loss) from operations
    
    
    113.0
    
    
    
    5.2
    
    
    
    71.7
    
    
    
    (139.4
    )
    
    
    50.5Interest expense, net
    
    
    2.8
    
    
    
    16.4
    
    
    
    3.5
    
    
    
    
    
    
    
    22.7Earnings (loss) before taxes on
income, minority interest and
extraordinary gain on debt
discharge
    
    
    110.2
    
    
    
    (11.2
    )
    
    
    68.2
    
    
    
    (139.4
    )
    
    
    27.8Income tax provision
    
    
    (0.3
    )
    
    
    7.4
    
    
    
    53.2
    
    
    
    
    
    
    
    60.3Earnings (loss) before minority
interest and extraordinary gain
on debt discharge
    
    
    110.5
    
    
    
    (18.6
    )
    
    
    15.0
    
    
    
    (139.4
    )
    
    
    (32.5
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    1.2
    
    
    
    
    
    
    
    1.2Earnings (loss) before extraordinary
gain on debt discharge
    
    
    110.5
    
    
    
    (18.6
    )
    
    
    13.8
    
    
    
    
    
    
    
    (33.7
    )Extraordinary gain on debt
discharge
    
    
    932.5
    
    
    
    142.9
    
    
    
    1.3
    
    
    
    
    
    
    
    1,076.7Net income (loss)
    
    $
    1,043.0
    
    
    $
    124.3
    
    
    $
    15.1
    
    
    $
    (139.4
    )
    
    $
    1,043.0


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CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
Predecessor Company
For the Six Months Ended July 31, 2002
(Millions of dollars)
(Unaudited)

Guarantor
    
    
    NonguarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalNet sales
    
    $
    117.6
    
    
    $
    495.0
    
    
    $
    392.5
    
    
    $
    (14.4
    )
    
    $
    990.7Cost of goods sold
    
    
    121.9
    
    
    
    465.2
    
    
    
    335.0
    
    
    
    (14.8
    )
    
    
    907.3Gross profit (loss)
    
    
    (4.3
    )
    
    
    29.8
    
    
    
    57.5
    
    
    
    0.4
    
    
    
    83.4Marketing, general and
administration
    
    
    8.1
    
    
    
    22.9
    
    
    
    19.6
    
    
    
    
    
    
    
    50.6Engineering and product
development
    
    
    2.2
    
    
    
    5.3
    
    
    
    3.0
    
    
    
    
    
    
    
    10.5Equity in (earnings) losses of
subsidiaries and joint ventures
    
    
    563.0
    
    
    
    (7.8
    )
    
    
    (0.7
    )
    
    
    (554.5
    )
    
    
    Asset impairments and other
restructuring charges
    
    
    1.0
    
    
    
    23.3
    
    
    
    1.0
    
    
    
    
    
    
    
    25.3Other expense (income), net
    
    
    4.3
    
    
    
    (3.3
    )
    
    
    (4.7
    )
    
    
    
    
    
    
    (3.7
    )Reorganization items
    
    
    19.7
    
    
    
    8.0
    
    
    
    0.2
    
    
    
    
    
    
    
    27.9Earnings (loss) from operations
    
    
    (602.6
    )
    
    
    (18.6
    )
    
    
    39.1
    
    
    
    554.9
    
    
    
    (27.2
    )Interest expense, net
    
    
    2.8
    
    
    
    21.3
    
    
    
    10.6
    
    
    
    
    
    
    
    34.7Earnings (loss) before taxes on
income, minority interest and
cumulative effect of change in
accounting principle
    
    
    (605.4
    )
    
    
    (39.9
    )
    
    
    28.5
    
    
    
    554.9
    
    
    
    (61.9
    )Income tax provision
    
    
    (12.7
    )
    
    
    0.9
    
    
    
    9.4
    
    
    
    
    
    
    
    (2.4
    )Earnings (loss) before minority
interest and cumulative effect
of change in accounting
principle
    
    
    (592.7
    )
    
    
    (40.8
    )
    
    
    19.1
    
    
    
    554.9
    
    
    
    (59.5
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    1.5
    
    
    
    
    
    
    
    1.5Earnings (loss) before cumulative
effect of change in accounting
principle
    
    
    (592.7
    )
    
    
    (40.8
    )
    
    
    17.6
    
    
    
    554.9
    
    
    
    (61.0
    )Cumulative effect of change in
accounting principle, net of
tax
    
    
    22.7
    
    
    
    498.5
    
    
    
    33.2
    
    
    
    
    
    
    
    554.4Net income (loss)
    
    $
    (615.4
    )
    
    $
    (539.3
    )
    
    $
    (15.6
    )
    
    $
    554.9
    
    
    $
    (615.4
    )


26



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##### Table of Contents



CONDENSED CONSOLIDATING BALANCE SHEETS
Successor Company
As of July 31, 2003
(Millions of dollars)
(Unaudited)

Guarantor
    
    
    NonguarantorParent
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalCash and cash equivalents
    
    $
    
    
    
    $
    54.1
    
    
    $
    0.1
    
    
    $
    86.4
    
    
    $
    
    
    
    $
    140.6Receivables
    
    
    
    
    
    
    1.4
    
    
    
    91.9
    
    
    
    182.0
    
    
    
    
    
    
    
    275.3Inventories
    
    
    
    
    
    
    5.7
    
    
    
    84.5
    
    
    
    96.4
    
    
    
    
    
    
    
    186.6Prepaid expenses and other
    
    
    
    
    
    
    28.2
    
    
    
    17.6
    
    
    
    8.1
    
    
    
    (32.8
    )
    
    
    21.1Total current assets
    
    
    
    
    
    
    89.4
    
    
    
    194.1
    
    
    
    372.9
    
    
    
    (32.8
    )
    
    
    623.6Net property, plant and
equipment
    
    
    
    
    
    
    30.6
    
    
    
    359.3
    
    
    
    532.7
    
    
    
    
    
    
    
    922.6Goodwill and other assets
    
    
    562.8
    
    
    
    1,572.8
    
    
    
    140.0
    
    
    
    352.6
    
    
    
    (1,930.3
    )
    
    
    697.9Total assets
    
    $
    562.8
    
    
    $
    1,692.8
    
    
    $
    693.4
    
    
    $
    1,258.2
    
    
    $
    (1,963.1
    )
    
    $
    2,244.1Bank borrowings and other
notes
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    12.2
    
    
    $
    
    
    
    $
    12.2Current portion of long-term
debt
    
    
    
    
    
    
    4.5
    
    
    
    
    
    
    
    10.1
    
    
    
    
    
    
    
    14.6Accounts payable and accrued
liabilities
    
    
    
    
    
    
    95.3
    
    
    
    80.6
    
    
    
    206.4
    
    
    
    (33.3
    )
    
    
    349.0Total current
liabilities
    
    
    
    
    
    
    99.8
    
    
    
    80.6
    
    
    
    228.7
    
    
    
    (33.3
    )
    
    
    375.8Long-term debt, net of
current portion
    
    
    
    
    
    
    716.6
    
    
    
    8.4
    
    
    
    30.5
    
    
    
    
    
    
    
    755.5Pension and other long-term
liabilities
    
    
    
    
    
    
    277.0
    
    
    
    1.5
    
    
    
    258.1
    
    
    
    
    
    
    
    536.6Series A Warrants and Series
B Warrants
    
    
    4.8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4.8Redeemable preferred stock of
subsidiary
    
    
    10.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10.1Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13.4
    
    
    
    
    
    
    
    13.4Parent loans
    
    
    
    
    
    
    32.5
    
    
    
    (7.8
    )
    
    
    267.3
    
    
    
    (292.0
    )
    
    
    Common stock
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.3Additional paid-in capital
    
    
    544.1
    
    
    
    553.7
    
    
    
    620.4
    
    
    
    454.8
    
    
    
    (1,628.9
    )
    
    
    544.1Preferred stock
    
    
    
    
    
    
    10.1
    
    
    
    
    
    
    
    
    
    
    
    (10.1
    )
    
    
    Retained earnings
(accumulated deficit)
    
    
    (9.2
    )
    
    
    (5.1
    )
    
    
    (9.7
    )
    
    
    0.7
    
    
    
    14.1
    
    
    
    (9.2
    )Accumulated other
comprehensive income
    
    
    12.7
    
    
    
    8.2
    
    
    
    
    
    
    
    4.7
    
    
    
    (12.9
    )
    
    
    12.7Total stockholders
equity (deficit)
    
    
    547.9
    
    
    
    566.9
    
    
    
    610.7
    
    
    
    460.2
    
    
    
    (1,637.8
    )
    
    
    547.9Total liabilities and
stockholders equity
(deficit)
    
    $
    562.8
    
    
    $
    1,692.8
    
    
    $
    693.4
    
    
    $
    1,258.2
    
    
    $
    (1,963.1
    )
    
    $
    2,244.1


27



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##### Table of Contents



CONDENSED CONSOLIDATING BALANCE SHEETS
Predecessor Company
As of January 31, 2003
(Millions of dollars)

Guarantor
    
    
    NonguarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalCash and cash equivalents
    
    $
    13.3
    
    
    $
    
    
    
    $
    52.8
    
    
    $
    
    
    
    $
    66.1Receivables
    
    
    29.9
    
    
    
    98.9
    
    
    
    147.8
    
    
    
    
    
    
    
    276.6Inventories
    
    
    26.1
    
    
    
    72.2
    
    
    
    78.3
    
    
    
    
    
    
    
    176.6Prepaid expenses and other
    
    
    4.9
    
    
    
    20.7
    
    
    
    6.9
    
    
    
    
    
    
    
    32.5Total current assets
    
    
    74.2
    
    
    
    191.8
    
    
    
    285.8
    
    
    
    
    
    
    
    551.8Net property, plant and
Equipment
    
    
    111.5
    
    
    
    393.2
    
    
    
    446.5
    
    
    
    
    
    
    
    951.2Goodwill and other assets
    
    
    378.5
    
    
    
    172.4
    
    
    
    269.3
    
    
    
    (476.6
    )
    
    
    343.6Total assets
    
    $
    564.2
    
    
    $
    757.4
    
    
    $
    1,001.6
    
    
    $
    (476.6
    )
    
    $
    1,846.6DIP Facility
    
    $
    49.9
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    49.9Bank borrowings and other notes
    
    
    
    
    
    
    2.0
    
    
    
    13.8
    
    
    
    
    
    
    
    15.8Current portion of long-term
Debt
    
    
    
    
    
    
    
    
    
    
    40.1
    
    
    
    
    
    
    
    40.1Accounts payable and accrued
Liabilities
    
    
    58.9
    
    
    
    59.1
    
    
    
    172.0
    
    
    
    (21.3
    )
    
    
    268.7Total current liabilities
    
    
    108.8
    
    
    
    61.1
    
    
    
    225.9
    
    
    
    (21.3
    )
    
    
    374.5Long-term debt, net of current
Portion
    
    
    
    
    
    
    
    
    
    
    61.9
    
    
    
    
    
    
    
    61.9Pension and other long-term
Liabilities
    
    
    106.2
    
    
    
    51.7
    
    
    
    176.5
    
    
    
    
    
    
    
    334.4Minority interest
    
    
    
    
    
    
    
    
    
    
    16.4
    
    
    
    
    
    
    
    16.4Parent loans
    
    
    (598.2
    )
    
    
    411.3
    
    
    
    186.9
    
    
    
    
    
    
    
    Liabilities subject to
Compromise
    
    
    2,021.8
    
    
    
    110.5
    
    
    
    1.5
    
    
    
    
    
    
    
    2,133.8Common stock
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.3Additional paid-in capital
    
    
    235.1
    
    
    
    1,144.9
    
    
    
    328.3
    
    
    
    (1,473.2
    )
    
    
    235.1Common stock in treasury at
Cost
    
    
    (25.7
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25.7
    )Retained earnings (accumulated
deficit)
    
    
    (1,176.9
    )
    
    
    (951.9
    )
    
    
    67.8
    
    
    
    884.1
    
    
    
    (1,176.9
    )Accumulated other comprehensive
Loss
    
    
    (107.2
    )
    
    
    (70.2
    )
    
    
    (63.6
    )
    
    
    133.8
    
    
    
    (107.2
    )Total stockholders equity
(deficit)
    
    
    (1,074.4
    )
    
    
    122.8
    
    
    
    332.5
    
    
    
    (455.3
    )
    
    
    (1,074.4
    )Total liabilities and
stockholders equity
(deficit)
    
    $
    564.2
    
    
    $
    757.4
    
    
    $
    1,001.6
    
    
    $
    (476.6
    )
    
    $
    1,846.6


28



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##### Table of Contents



CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Successor Company
For the Two Months Ended July 31, 2003
(Millions of dollars)
(Unaudited)

Guarantor
    
    
    NonguarantorParent
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalCash flows provided by (used
for) operating activities
    
    $
    
    
    
    $
    (85.8
    )
    
    $
    29.8
    
    
    $
    100.4
    
    
    $
    
    
    
    $
    44.4Cash flows from investing
activities:Acquisition of property,
plant, equipment, and
tooling
    
    
    
    
    
    
    (0.6
    )
    
    
    (7.6
    )
    
    
    (11.3
    )
    
    
    
    
    
    
    (19.5
    )Cash provided by (used
for) investing
activities
    
    
    
    
    
    
    (0.6
    )
    
    
    (7.6
    )
    
    
    (11.3
    )
    
    
    
    
    
    
    (19.5
    )Cash flows from financing
activities:Increase in bank
borrowings, revolving
facility and DIP
facility
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (65.0
    )
    
    
    
    
    
    
    (65.0
    )Repayment of bank
borrowings, revolving
facility, and long term
debt from refinancing
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash provided by (used for)
financing activities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (65.0
    )
    
    
    
    
    
    
    (65.0
    )Increase (decrease) in parent
loans and advances
    
    
    
    
    
    
    32.5
    
    
    
    (21.8
    )
    
    
    (10.7
    )
    
    
    
    
    
    
    Effect of exchange rates of
cash and cash
equivalents
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.6
    
    
    
    
    
    
    
    1.6Net increase (decrease) in
cash and cash
equivalents
    
    
    
    
    
    
    (53.9
    )
    
    
    0.4
    
    
    
    15.0
    
    
    
    
    
    
    
    (38.5
    )Cash and cash equivalents at
beginning of period
    
    
    
    
    
    
    108.0
    
    
    
    (0.3
    )
    
    
    71.4
    
    
    
    
    
    
    
    179.1Cash and cash equivalents at
end of period
    
    $
    
    
    
    $
    54.1
    
    
    $
    0.1
    
    
    $
    86.4
    
    
    $
    
    
    
    $
    140.6


29



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##### Table of Contents



CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Predecessor Company
For the Four Months Ended May 31, 2003
(Millions of dollars)
(Unaudited)

Guarantor
    
    
    NonguarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalCash flows provided by (used for)
operating activities
    
    $
    (7.5
    )
    
    $
    14.7
    
    
    $
    23.9
    
    
    $
    
    
    
    $
    31.1Cash flows from investing activities:Acquisition of property, plant,
equipment, and tooling
    
    
    (24.9
    )
    
    
    (15.4
    )
    
    
    (9.6
    )
    
    
    
    
    
    
    (49.9
    )Proceeds from sale of non-core
Businesses
    
    
    
    
    
    
    0.5
    
    
    
    0.3
    
    
    
    
    
    
    
    0.8Purchase of businesses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash provided by (used for)
investing activities
    
    
    (24.9
    )
    
    
    (14.9
    )
    
    
    (9.3
    )
    
    
    
    
    
    
    (49.1
    )Cash flows from financing activities:Increase in bank borrowings,
revolving facility and DIP
facility
    
    
    (49.9
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (49.9
    )Repayment of bank borrowings,
revolving facility, and long term
debt from refinancing
    
    
    178.8
    
    
    
    (2.0
    )
    
    
    
    
    
    
    
    
    
    
    176.8Cash provided by (used for) financing
Activities
    
    
    128.9
    
    
    
    (2.0
    )
    
    
    
    
    
    
    
    
    
    
    126.9Increase (decrease) in parent loans and
Advances
    
    
    (1.9
    )
    
    
    2.2
    
    
    
    (0.3
    )
    
    
    
    
    
    
    Effect of exchange rates of cash and
cash equivalents
    
    
    
    
    
    
    
    
    
    
    4.1
    
    
    
    
    
    
    
    4.1Net increase (decrease) in cash and
cash equivalents
    
    
    94.6
    
    
    
    
    
    
    
    18.4
    
    
    
    
    
    
    
    113.0Cash and cash equivalents at beginning
of period
    
    
    13.3
    
    
    
    
    
    
    
    52.8
    
    
    
    
    
    
    
    66.1Cash and cash equivalents at end of
Period
    
    $
    107.9
    
    
    $
    
    
    
    $
    71.2
    
    
    $
    
    
    
    $
    179.1


30



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##### Table of Contents



CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Predecessor Company
For the Six Months Ended July 31, 2002
(Millions of dollars)
(Unaudited)

Guarantor
    
    
    NonguarantorParent
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalCash flows provided by (used for)
operating activities
    
    $
    0.1
    
    
    $
    18.9
    
    
    $
    30.6
    
    
    $
    
    
    
    $
    49.6Cash flows from investing activities:Acquisition of property, plant,
equipment, and tooling
    
    
    (4.5
    )
    
    
    (20.9
    )
    
    
    (19.4
    )
    
    
    
    
    
    
    (44.8
    )Proceeds from sale of non-coreBusinesses
    
    
    
    
    
    
    0.8
    
    
    
    8.2
    
    
    
    
    
    
    
    9.0Purchase of businesses
    
    
    
    
    
    
    (2.1
    )
    
    
    (5.1
    )
    
    
    
    
    
    
    (7.2
    )Cash provided by (used for)
investing activities
    
    
    (4.5
    )
    
    
    (22.2
    )
    
    
    (16.3
    )
    
    
    
    (43.0
    )Cash flows from financing activities:Increase in bank borrowings,
revolving facility and DIP
facility
    
    
    5.8
    
    
    
    
    
    
    
    (17.6
    )
    
    
    
    
    
    
    (11.8
    )Repayment of bank borrowings,
revolving facility, and long term
debt from refinancing
    
    
    
    
    
    
    1.0
    
    
    
    (1.0
    )
    
    
    
    
    
    
    Cash provided by (used for)
financing activities
    
    
    5.8
    
    
    
    1.0
    
    
    
    (18.6
    )
    
    
    
    
    
    
    (11.8
    )Increase (decrease) in parent loans
and advances
    
    
    (2.0
    )
    
    
    1.7
    
    
    
    0.3
    
    
    
    
    
    
    
    Effect of exchange rates of cash and
cash equivalents
    
    
    
    
    
    
    
    
    
    
    3.7
    
    
    
    
    
    
    
    3.7Net increase (decrease) in cash and
cash equivalents
    
    
    (0.6
    )
    
    
    (0.6
    )
    
    
    (0.3
    )
    
    
    
    
    
    
    (1.5
    )Cash and cash equivalents at beginning
of period
    
    
    11.3
    
    
    
    0.4
    
    
    
    33.5
    
    
    
    
    
    
    
    45.2Cash and cash equivalents at end of
Period
    
    $
    10.7
    
    
    $
    (0.2
    )
    
    $
    33.2
    
    
    $
    
    
    
    $
    43.7


31



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##### Table of Contents






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

Description of Business, Chapter 11 Filings and Emergence from Chapter 11

This discussion should be read in conjunction with the Companys Annual
Report on Form 10-K for the fiscal year ended January 31, 2003 as filed with
the Securities and Exchange Commission on April 2, 2003 and the other
information included herein.

Description of Business

Unless otherwise indicated, references to Company mean Hayes Lemmerz
International, Inc. and its subsidiaries and references to fiscal year means
the Companys year commencing on February 1 of that year and ending on January
31 of the following year (i.e., fiscal 2003 refers to the period beginning
February 1, 2003 and ending January 31, 2004, fiscal 2002 refers to the
period beginning February 1, 2002 and ending January 31, 2003).

The Company is a leading supplier of wheels, wheel-end attachments,
aluminum structural components and automotive brake components. The Company is
the worlds largest manufacturer of automotive wheels. In addition, the Company
also designs and manufactures wheels and brake components for commercial
highway vehicles, and powertrain components and aluminum non-structural
components for the automotive, commercial highway, heating and general
equipment industries.

The Company is organized based primarily on markets served and products
produced. Under this organization structure, the Companys operating segments
have been aggregated into three reportable segments: Automotive Wheels,
Components and Other. The Automotive Wheels segment includes results from the
Companys operations that primarily design and manufacture fabricated steel and
cast aluminum wheels for original equipment manufacturers in the global
passenger car and light vehicle markets. The Components segment includes
results from the Companys operations that primarily design and manufacture
suspension, brake and powertrain components for original equipment
manufacturers and Tier 1 suppliers in the global passenger car and light
vehicle markets. The Other segment includes results from the Companys
operations that primarily design and manufacture wheel and brake products for
commercial highway and aftermarket customers in North America. The Other
category includes Commercial Highway products, the corporate office and
elimination of intercompany activities, none of which meet the requirements of
being classified as an operating segment.

Chapter 11 Filings

On December 5, 2001, Hayes Lemmerz International, Inc., 30 of its
wholly-owned domestic subsidiaries and one wholly-owned Mexican subsidiary
(collectively, the Debtors) filed voluntary petitions for reorganization
relief (the Chapter 11 Filings or the Filings) under Chapter 11 of the
Bankruptcy Code in the United States Bankruptcy Court for the District of
Delaware (the Bankruptcy Court).

On December 16, 2002, certain of the Debtors filed a proposed joint plan
of reorganization with the Bankruptcy Court. On April 9, 2003, the Debtors
filed a modified first amended joint plan of reorganization (the Plan of
Reorganization) which received the requisite support from creditors authorized
to vote thereon. The following five Debtors were not proponents of the Plan of
Reorganization and are not subject to
the terms thereof: HLI Netherlands Holdings, Inc., CMI Quaker Alloy, Inc.,
Hayes Lemmerz Funding Company, LLC, Hayes Lemmerz Funding Corporation, and
Hayes Lemmerz International Import, Inc. (collectively, the Non-reorganizing
Debtors).

The Plan of Reorganization provided for the cancellation of the existing
common stock of the Company and the issuance of cash, new common stock in the
reorganized Company and other property to certain creditors of the Company in
respect of certain classes of claims. The Plan of Reorganization was confirmed
by an order of the Bankruptcy Court on May 12, 2003, which order has become
final and non-appealable.

Emergence from Chapter 11

On June 3, 2003 (the Effective Date), Hayes Lemmerz International, Inc.
and each of the 27 Debtors proposing the Plan of Reorganization emerged from
Chapter 11 proceedings pursuant to the Plan of Reorganization, which was
confirmed by an order of the Bankruptcy Court on May 12, 2003, which order has
become final and non-appealable. The Non-reorganizing Debtors were not

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proponents of the Plan of Reorganization and are not subject to the terms
thereof. On June 3, 2003, the Bankruptcy Court entered an order dismissing the
Chapter 11 Filings of the Non-reorganizing Debtors.

Pursuant to the Plan of Reorganization, the Company caused the formation
of (i) a new holding company, HLI Holding Company, Inc., a Delaware corporation
(HoldCo), (ii) HLI Parent Company, Inc., a Delaware corporation and a wholly
owned subsidiary of HoldCo (ParentCo), and (iii) HLI Operating Company, Inc,
a Delaware corporation and a wholly owned subsidiary of ParentCo (HLI). On
the Effective Date, (i) HoldCo was renamed Hayes Lemmerz International, Inc.
(New Hayes), (ii) New Hayes contributed to ParentCo 30,0000,000 shares of its
common stock, par value $.01 per share (the New Common Stock), and 957,447
series A warrants and 957,447 series B warrants to acquire New Common Stock of
New Hayes (the Series A Warrants and Series B Warrants, respectively),
(iii) ParentCo in turn contributed such shares of New Common Stock and Series A
Warrants and Series B Warrants to HLI and (iv) pursuant to an Agreement and
Plan of Merger, dated as of June 3, 2003 (the Merger Agreement), between the
Company and HLI, the Company was merged with and into HLI (the Merger), with
HLI continuing as the surviving corporation.

Pursuant to the Plan of Reorganization and as a result of the Merger, all
of the issued and outstanding shares of common stock, par value $.01 per share,
of the Company (the Old Common Stock), and any other outstanding equity
securities of the Company, including all options and warrants, were cancelled.
The holders of the existing voting common stock of the Company immediately
before confirmation did not receive any voting shares of the emerging entity or
any other consideration under the Plan of Reorganization as a result of their
ownership interests of the Predecessor. This represented a complete change of
control in the ownership of the Company. Promptly following the Merger, HLI
distributed to certain holders of allowed claims, under the terms of the Plan
of Reorganization, an amount in cash, the New Common Stock, the Series A
Warrants, the Series B Warrants and the Preferred Stock (as defined below).
Prior to the Merger, the Old Common Stock was registered pursuant to Section
12(g) of the Securities Exchange Act of 1934, as amended (the Exchange Act).
In reliance on Rule 12g-3(a) of the Exchange Act, by virtue of the status of
New Hayes as a successor issuer to the Company, the New Common Stock is deemed
registered under Section 12(g) of the Exchange Act. The Company filed a Form 15
with the SEC to terminate the registration of the Old Common Stock under the
Exchange Act.

Pursuant to the terms of the Plan of Reorganization, HLI issued 100,000
shares of Preferred Stock, par value $1.00, of HLI (the Preferred Stock) to
the holders of certain allowed claims. In accordance with the terms of the
Preferred Stock, the shares of Preferred Stock are, at the holders option,
exchangeable into a number of fully paid and nonassessable shares of New Common
Stock equal to (i) the aggregate liquidation preference of the shares of
Preferred Stock so exchanged ($100 per share plus all accrued and unpaid
dividends thereon (whether or not declared) to the exchange date) divided by
(ii) 125% of the Emergence Share Price. As determined pursuant to the terms
of the Plan of Reorganization, the Emergence Share Price is $18.50.

In connection with the Debtors emergence from Chapter 11, on the
Effective Date, HLI entered into a $550.0 million senior secured credit
facility (the New Credit Facility). The New Credit Facility consists of a
$450.0 million six-year amortizing term loan (the New Term Loan) and a
five-year $100.0 million revolving credit facility (the Revolving Credit
Facility). In addition, HLI issued on the Effective Date an aggregate of
$250.0 million principal amount of 10 1/2% senior notes due 2010 (the New
Senior Notes). The proceeds from the initial $450.0 million of borrowings
under the New Credit Facility and the net proceeds from the New Senior Notes
were used to make payments required under the Plan of Reorganization, including
the repayment of the Companys DIP Facility and a payment of $477.3 million to
certain prepetition lenders, to pay related transaction costs and to refinance
certain debt.

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Reorganization Items

Reorganization items as reported in the consolidated statements of
operations included herein are comprised of income, expense and loss items that
were realized or incurred by the Debtors as a direct result of the Companys
decision to reorganize under Chapter 11. During the one month and four months
ended May 31, 2003 and the three months and six months ended July 31, 2002,
respectively, reorganization items were as follows (millions of dollars):

PredecessorOne Month
    
    
    Four Months
    
    
    Three Months
    
    
    Six MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedMay 31, 2003
    
    
    May 31, 2003
    
    
    July 31, 2002
    
    
    July 31, 2002Critical employee retention plan
provision
    
    $
    10.5
    
    
    $
    11.7
    
    
    $
    2.7
    
    
    $
    5.2Estimated accrued liability for
rejected prepetition leases and
contracts
    
    
    
    
    
    
    
    
    
    
    (3.0
    )
    
    
    9.5Professional fees directly related
to the Filing
    
    
    19.3
    
    
    
    30.8
    
    
    
    7.0
    
    
    
    14.6Creditors Trust obligation
    
    
    2.0
    
    
    
    2.0
    
    
    
    
    
    
    
    Settlement of prepetition
liabilities
    
    
    
    
    
    
    
    
    
    
    (1.2
    )
    
    
    (1.2
    )Other
    
    
    0.1
    
    
    
    0.5
    
    
    
    (0.1
    )
    
    
    (0.2
    )Total
    
    $
    31.9
    
    
    $
    45.0
    
    
    $
    5.4
    
    
    $
    27.9


On May 30, 2002, the Bankruptcy Court entered an order approving, among
other things, the critical employee retention plan (the CERP) filed with the
Bankruptcy Court in February 2002 which was designed to compensate certain
critical employees in order to assure their retention and availability during
the Companys restructuring. The plan has two components which (i) rewarded
critical employees who remained with the Company (and certain affiliates of the
Company who are not directly involved in the restructuring) during and through
the completion of the restructuring (the Retention Bonus) and (ii) provided
additional incentives to a more limited group of the most senior critical
employees if the enterprise value upon completing the restructuring exceeded an
established baseline (the Restructuring Performance Bonus).

Thirty-five percent, or approximately $3.0 million, of the Retention Bonus
was paid on October 1, 2002. The remaining portion of the Retention Bonus of
approximately $5.9 million was paid on June 13, 2003. Further, the
Restructuring Performance Bonus provided under the CERP was paid after the
consummation of the restructuring as discussed below.

Based on the Companys compromise total enterprise value of $1,250.0
million as confirmed by the Bankruptcy Court, the aggregate amount of the
Restructuring Performance Bonus is $12.1 million. Of the aggregate $12.1
million, approximately $6.0 million was paid in cash on July 1, 2003, and
approximately $2.0 million was paid on August 28, 2003 as determined by the
Companys Board of Directors. The remaining portion of the Restructuring
Performance Bonus was paid in 215,935 shares of restricted units of New Hayes
on July 28, 2003. Pursuant to provisions contained in the CERP, the restricted
units will vest as follows, subject to the participants continued employment:



| |  |  | one half of the restricted units will vest on the later of (i) the
first date (the Minimum Valuation Date) upon which the average trading
price for the New Common Stock during any consecutive 10 trading-day
period is 80% or greater of the Emergence Share Price and (ii) the first
anniversary of the Effective Date, and;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | one half of the restricted units will vest on the later of (i) the
Minimum Valuation Date and (ii) the second anniversary of the Effective
Date.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | any unvested restricted units will vest on the third anniversary of
the Effective Date, if the participant is employed by the Company or a
subsidiary on such date.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

Cash payments with respect to other reorganization items consisted
primarily of professional fees and cure payments and were approximately $10.4
million and $21.2 million during the two months ended July 31, 2003 and the
four months ended May 31, 2003, respectively, and $11.0 million during the
first six months of fiscal 2002.

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As a result of the application of fresh start accounting on May 31, 2003,
and in accordance with SOP 90-7, the post-emergence financial results of the
Company for the period ending July 31, 2003 are presented as the Successor
and the pre-emergence financial results of the Company for the period ending
May 31, 2003 are presented as the Predecessor. Comparative financial
statements do not straddle the emergence date because in effect the Successor
Company represents a new entity. As a result of applying fresh start
accounting, the Successor will have increased depreciation and amortization
expense, no reorganization items, no fresh start accounting adjustments and
lower interest expense in comparison to the Predecessor. Depreciation expense
of the Successor is expected to be approximately $7.5 million higher annually
resulting from: (a) an increase in the carrying value of certain plant,
equipment and tooling to fair value under fresh start accounting; (b) revisions
to remaining estimated useful lives under fresh start accounting; and (c) the
increase in the carrying value of other property, plant, equipment and tooling
from refinancing certain synthetic leases. Amortization expense of the
Successor is expected to be approximately $10.4 million higher annually
resulting from an increase in the carrying value of definite-lived intangible
assets to fair value under fresh start accounting. Interest expense is
expected to decrease resulting from the Successors new capital structure.

For purposes of the periods presented in Managements Discussion and
Analysis of Financial Condition and Result of Operations, the Successor two
months ended July 31, 2003 and the Predecessor one month ended May 31, 2003
have been combined for convenience of discussion and are collectively referred
to as fiscal 2003 second quarter. The Successor two months ended July 31,
2003 and the Predecessor four months ended May 31, 2003 have been combined for
convenience of discussion and are collectively referred to as fiscal 2003 six
months.

Results of Operations

Sales of the Companys wheels, wheel-end attachments, aluminum structural
components and brake components produced in North America are directly affected
by the overall level of passenger car, light truck and commercial highway
vehicle production of North American OEMs and the relative performance of its
customers product lines in the North American market. The Companys sales of
its wheels and automotive castings in foreign locations are directly affected
by the overall vehicle production in those locations and the relative
performance of its customers product lines in the those markets. The North
American and European automotive industries are sensitive to the overall
strength of their respective economies.

Three Months Ended July 31, 2003 Compared to Three Months Ended July 31, 2002

Net Sales

Three Months Ended July 31,2003
    
    
    2002
    
    
    $ Change(millions)Automotive Wheels
    
    $
    299.8
    
    
    $
    288.9
    
    
    $
    10.9Components
    
    
    174.6
    
    
    
    188.3
    
    
    
    (13.7
    )Other
    
    
    28.4
    
    
    
    26.8
    
    
    
    1.6Total
    
    $
    502.8
    
    
    $
    504.0
    
    
    $
    (1.2
    )


The Companys net sales for the second quarter of fiscal 2003 decreased
$1.2 million from $504.0 million in the second quarter of 2002 to $502.8
million in the second quarter of 2003. After adjusting for the net impact of
favorable exchange rate fluctuations, relative to the U.S. dollar, net sales
for the second quarter of 2003 declined 7.8% or approximately $40 million as
compared to the same period in 2002.

Net sales from the Companys Automotive Wheels segment increased $10.9
million to $299.8 million in the second quarter of fiscal 2003 from $288.9
million in the second quarter of fiscal 2002. The net impact of favorable
foreign exchange rate fluctuations, relative to the U.S. dollar, increased
sales by approximately $31 million. This was partially offset by the
termination and balancing out of certain programs at our primary customers in
North America, as well as lower industry production volumes globally.

Net sales from Components decreased $13.7 million to $174.6 million in the
second quarter of 2003 from $188.3 in the same quarter in 2002. The impact of
the closure of the Companys Petersburg, Michigan facility and the sale of the
Companys Maulbronn, Germany foundry during fiscal 2002 reduced net sales by
approximately $6 million during the second quarter of 2003 compared to the same
period in fiscal 2002. The remainder of the decrease in Components net sales
was primarily due to lower industry production, the expiration of certain
programs and lower unit pricing. These reductions were partially offset by the
impact of favorable foreign exchange rate fluctuations and a more favorable
product mix, which combined, increased net sales by approximately $11 million.

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Other net sales increased $1.6 million to $28.4 million in the second
quarter of 2003 from $26.8 million in the second quarter of 2002 primarily due
to higher volumes in the Companys commercial highway and aftermarket
operations.

Earnings (loss) from operations excluding fresh start and reorganization items

Three MonthsEnded July 31,2003
    
    
    2002Earnings (loss) from operations
    
    $
    51.6
    
    
    $
    (12.6
    )Excluding:Fresh start accounting adjustments
    
    
    (63.1
    )
    
    
    Reorganization items
    
    
    31.9
    
    
    
    5.4Earnings (loss) from operations excluding fresh start and
reorganization items
    
    $
    20.4
    
    
    $
    (7.2
    )


Earnings (loss) from operations excluding fresh start and reorganization
items is used as a non-GAAP measure of the Companys primary profitability
measure because it excludes fresh start accounting adjustments and
reorganization items which do not represent normal operating performance of the
Company as these items relate only to the Companys Chapter 11 Filings and
emergence.

The following tables present earnings (loss) from operations excluding
fresh start adjustments and reorganization items, as well as other information
by segment:

Three Months Ended July 31, 2003AutomotiveWheels
    
    
    Components
    
    
    Other
    
    
    TotalEarnings (loss) from operations excluding
fresh start and reorganization items
    
    $
    18.9
    
    
    $
    4.7
    
    
    $
    (3.2
    )
    
    $
    20.4Fresh start adjustments
    
    
    57.9
    
    
    
    27.7
    
    
    
    (22.5
    )
    
    
    63.1Reorganization items
    
    
    (0.1
    )
    
    
    
    
    
    
    (31.8
    )
    
    
    (31.9
    )Asset impairments and other restructuring
charges:Impairment of machinery, equipment and
tooling
    
    
    
    
    
    
    1.6
    
    
    
    
    
    
    
    1.6Facility closure costs
    
    
    0.6
    
    
    
    
    
    
    
    
    
    
    
    0.6Severance and other restructuring costs
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    0.1Total asset impairments and other
restructuring charges
    
    $
    0.7
    
    
    $
    1.6
    
    
    $
    
    
    
    $
    2.3


Three Months Ended July 31, 2002AutomotiveWheels
    
    
    Components
    
    
    Other
    
    
    TotalEarnings (loss) from operations excluding
fresh start and reorganization items
    
    $
    (7.6
    )
    
    $
    0.9
    
    
    $
    (0.5
    )
    
    $
    (7.2
    )Reorganization items
    
    
    3.3
    
    
    
    1.0
    
    
    
    (9.7
    )
    
    
    (5.4
    )Asset impairments and other restructuring
charges:Impairment of manufacturing facilities
    
    $
    
    
    
    $
    0.3
    
    
    $
    
    
    
    $
    0.3Impairment of machinery, equipment and
tooling
    
    
    16.5
    
    
    
    0.8
    
    
    
    
    
    
    
    17.3Severance and other restructuring costs
    
    
    0.5
    
    
    
    
    
    
    
    
    
    
    
    0.5Total asset impairments and other
restructuring charges
    
    $
    17.0
    
    
    $
    1.1
    
    
    $
    
    
    
    $
    18.1


Earnings from operations excluding fresh start accounting adjustments and
reorganization items increased by $27.6 million in the second quarter of fiscal
2003 to $20.4 million, from a loss of $7.2 million in the second quarter of
2002. Adjusted for the net impact of foreign exchange rate fluctuations
relative to the U.S. dollar, the Companys earnings from operations excluding
fresh start accounting adjustments and reorganization items increased by
approximately $25 million from the second quarter of fiscal 2002.

Earnings from operations excluding fresh start accounting adjustments and
reorganization items from the Companys Automotive Wheels operations increased
$26.5 million in the second quarter of fiscal 2003 from the same period in
fiscal 2002. During the second

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##### Table of Contents



quarter of fiscal 2002, Automotive Wheels recorded $16.5 million of asset
impairment losses primarily related to its La Mirada, California facility where
it was estimated that the future undiscounted cash flow projections for that
facility would not be sufficient to recover the carrying value of the
facilitys fixed assets and production tooling. Earnings from the Companys
Automotive Wheels operations were favorably impacted due to improved operating
performance and favorable fluctuations in foreign exchange rates relative to
the U.S. dollar. This was partially offset by lower OEM production
requirements, increased depreciation expense related to the change in useful
lives of fixed assets upon emergence from Chapter 11, as well as the $3.6
million fair value adjustment to inventory included in the Successors opening
balance sheet, which was recognized in June and July and negatively impacted
earnings.

Components earnings from operations excluding fresh start accounting
adjustments and reorganization items increased by $3.8 million in the second
quarter of fiscal 2003 compared to the same period in fiscal 2002. During the
second quarters of fiscal 2002 and 2003, Components recorded asset impairment
losses of $1.1 million and $1.6 million, respectively. These losses were
recorded primarily due to a change in managements plan for the future use of
idled machinery and equipment. The Companys programs aimed at improving both
ongoing operations as well as the abnormally high start-up costs and
inefficiencies associated with the new program launches in the first quarter of
2002, at the Companys Montague, Michigan facility, resulted in improved
operating performance during the second quarter of 2003 which increased
earnings. This increase was partially offset by decreased OEM production
requirements and lower overall unit pricing in the second quarter of 2003 as
compared to the second quarter of 2002 as well as the $1.6 million fair value
adjustment to inventory included in the Successors opening balance sheet,
which was recognized in June and July and negatively impacted earnings. The
remaining difference is primarily the result of favorable foreign exchange rate
fluctuations relative to the U.S. dollar in the Companys foreign Components
business.

The Companys Other segment recorded a loss from operations excluding
fresh start accounting adjustments and reorganization items of approximately
$3.2 million in the second quarter of fiscal 2003 compared to a loss of $0.5
million in the second quarter of 2003. The difference is primarily attributable
to increased post-emergence professional fees in fiscal 2003.

Interest Expense, net

Interest expense was $13.9 million for the second quarter of fiscal 2003
and $17.9 million for the second quarter of fiscal 2002. Interest expense
between the two periods are not comparable because of the Companys new capital
structure established upon emergence from Chapter 11. See Notes (1) and (11) to
the consolidated financial statements included herein regarding the Companys
new capital structure.

Additionally, interest expense, net, for the second quarter of fiscal 2003
includes a $4.5 million reduction to interest expense as the result of
adjusting to fair value the Companys outstanding Series A Warrants and Series
B Warrants, which are recorded as liabilities on the consolidated balance sheet
as of July 31, 2003.

Income Taxes

Income tax expense was $57.0 million for the second quarter of fiscal
2003. This expense is the result of the following items; deferred tax related
to fresh start accounting adjustments in foreign jurisdictions, $6.5 million of
state tax related to the merger between the Predecessor and HLI, and tax
related to operations in foreign jurisdictions as well as in various states.
The Company has determined that a valuation allowance is required against all
net deferred tax assets in the United States and certain deferred tax assets in
foreign jurisdictions. As such, there is no United States federal income tax
benefit recorded against current losses.

Net Income (Loss)

The net income for the three months ended July 31, 2003 includes an
extraordinary gain on discharge of debt and other liabilities of $1,076.7
million realized upon emergence from Chapter 11.

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Six Months Ended July 31, 2003, Compared to Six Months Ended July 31, 2002

Net Sales

Six Months Ended July 31,2003
    
    
    2002
    
    
    $ Change(millions)Automotive Wheels
    
    $
    602.8
    
    
    $
    576.0
    
    
    $
    26.8Components
    
    
    358.7
    
    
    
    364.8
    
    
    
    (6.1
    )Other
    
    
    56.6
    
    
    
    49.9
    
    
    
    6.7Total
    
    $
    1,018.1
    
    
    $
    990.7
    
    
    $
    27.4


The Companys net sales for the six months ended July 31, 2003 increased
$27.4 million from $990.7 million in the six months ended July 31, 2002 to
$1,018.1 million in the six months ended July 31, 2003. After adjusting for the
net impact of favorable exchange rate fluctuations, relative to the U.S.
dollar, net sales for the first six months of 2003 declined 4.1% or
approximately $40 million as compared to the same period in 2002.

Net sales from the Companys Automotive Wheels segment increased $26.8
million to $602.8 million during the first six months of fiscal 2003 from
$576.0 million during the first six months of fiscal 2002. The Companys net
sales were favorably impacted by favorable foreign exchange rate fluctuations
relative to the U.S. dollar, which increased sales by approximately $55 million
and a favorable product mix. This increase was partially offset by decreased
unit pricing and lower volumes in North America, primarily due to the
termination and balancing out of certain programs.

Net sales from Components decreased $6.1 million to $358.7 million during
the first six months of 2003 from $364.8 million during the same period in
2002. The decrease in Components net sales was due to lower industry
production, the termination and balancing out of certain programs and lower
unit pricing, and was partially offset by a more favorable product mix
primarily at the Companys Montague, Michigan facility, which launched several
new programs in 2002. The impact of the closure of the Companys Petersburg,
Michigan facility and the sale of the Companys Maulbronn, Germany foundry
during the first six months of fiscal 2002 reduced net sales by approximately
$15 million during the first six months of 2003 compared to the same period in
fiscal 2002. This was partially offset by the impact of favorable foreign
exchange rate fluctuations, which increased net sales by approximately $10
million.

Other net sales increased $6.7 million to $56.6 million during the first
six months of 2003 from $49.9 million during the first six months of 2002 due
primarily to higher volumes in the Companys commercial highway and aftermarket
operations.

Earnings (loss) from operations excluding fresh start accounting and
reorganization items

Six Months EndedJuly 31,2003
    
    
    2002Earnings (loss) from operations
    
    $
    52.9
    
    
    $
    (27.2
    )Excluding:Fresh start accounting adjustments
    
    
    (63.1
    )
    
    
    Reorganization items
    
    
    45.0
    
    
    
    27.9Earnings (loss) from operations excluding fresh start
and reorganization items
    
    $
    34.8
    
    
    $
    0.7


Earnings (loss) from operations excluding fresh start and reorganization
items is used as a non-GAAP measure of the Companys primary profitability
measure because it excludes fresh start accounting adjustments and
reorganization items which do not represent normal operating performance of the
Company as these items relate only to the Companys Chapter 11 Filings and
emergence.

The following tables present earnings (loss) from operations excluding
fresh start adjustments and reorganization items, as well as other information
by segment:

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##### Table of Contents



Six Months Ended July 31, 2003AutomotiveWheels
    
    
    Components
    
    
    Other
    
    
    TotalEarnings (loss) from operations excluding
fresh start and reorganization items
    
    $
    36.2
    
    
    $
    7.9
    
    
    $
    (9.3
    )
    
    $
    34.8Fresh start adjustments
    
    
    57.9
    
    
    
    27.7
    
    
    
    (22.5
    )
    
    
    63.1Reorganization items
    
    
    (0.1
    )
    
    
    0.2
    
    
    
    (45.1
    )
    
    
    (45.0
    )Asset impairments and other restructuring
charges:Impairment of manufacturing facilities
    
    $
    0.5
    
    
    $
    0.1
    
    
    $
    
    
    
    $
    0.6Impairment of machinery, equipment and
tooling
    
    
    1.5
    
    
    
    3.3
    
    
    
    
    
    
    
    4.8Facility closure costs
    
    
    0.9
    
    
    
    
    
    
    
    
    
    
    
    0.9Severance and other restructuring costs
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    0.1Total asset impairments and other
restructuring charges
    
    $
    3.0
    
    
    $
    3.4
    
    
    $
    
    
    
    $
    6.4


Six Months Ended July 31, 2002AutomotiveWheels
    
    
    Components
    
    
    Other
    
    
    TotalEarnings (loss) from operations excluding
Fresh start and reorganization items
    
    $
    4.5
    
    
    $
    4.3
    
    
    $
    (8.1
    )
    
    $
    0.7Reorganization items
    
    
    (9.2
    )
    
    
    1.0
    
    
    
    (19.7
    )
    
    
    (27.9
    )Asset impairments and other restructuring
charges:Impairment of manufacturing facilities
    
    $
    
    
    
    $
    0.3
    
    
    $
    
    
    
    $
    0.3Impairment of machinery, equipment and
tooling
    
    
    16.5
    
    
    
    0.8
    
    
    
    
    
    
    
    17.3Facility closure costs
    
    
    6.7
    
    
    
    
    
    
    
    
    
    
    
    6.7Severance and other restructuring costs
    
    
    0.5
    
    
    
    
    
    
    
    0.5
    
    
    
    1.0Total asset impairments and other
restructuring charges
    
    $
    23.7
    
    
    $
    1.1
    
    
    $
    0.5
    
    
    $
    25.3


The Companys earnings from operations excluding fresh start accounting
adjustments and reorganization items increased by $34.1 million in the first
six months of fiscal 2003 to $34.8 million, up from earnings of $0.7 million in
the first six months of 2002. Adjusted for the net impact of foreign exchange
rate fluctuations relative to the U.S. dollar, the Companys earnings from
operations excluding fresh start accounting adjustments and reorganization
items increased by approximately $28 million from the first six months of 2002.

Earnings from operations excluding fresh start accounting adjustments and
reorganization items at the Companys Automotive Wheels operations increased
$31.7 million from the first six months of fiscal 2002 compared to the same
period in 2003. During the first six months of fiscal 2003, Automotive Wheels
recorded asset impairment losses and restructuring charges of $3.0 million.
During the first six months of fiscal 2002, Automotive Wheels recorded $23.7
million of asset impairment losses and restructuring charges including $15.5
million of asset impairment losses related to its La Mirada, California
facility and $6.7 million in facility closure costs related to its Somerset,
Kentucky facility. Automotive Wheels recorded asset impairment losses when it
determined, based on its most recent sales projections, that its current
estimate of the future undiscounted cash flows from its La Mirada facility
would not be sufficient to recover the carrying value of that facilitys fixed
assets and production tooling and also when managements plan for the future
use of machinery and equipment changed. The charges recorded at Somerset
included amounts related to lease termination costs and other closure costs
subsequent to the shut down date. The remaining increase in earnings from the
Companys Automotive Wheels operations excluding fresh start accounting
adjustments and reorganization items is due primarily to improved operating
performance, favorable fluctuations in foreign exchange rates relative to the
U.S. dollar and a favorable product mix. This was partially offset by lower OEM
production requirements in North America, lower overall pricing worldwide, and
increased depreciation expense related to the change in useful lives of fixed
assets upon emergence from Chapter 11, as well as the $3.6 million fair value
adjustment to inventory included in the Successors opening balance sheet which
negatively impacted earnings.

Components earnings from operations excluding fresh start accounting
adjustments and reorganization items increased by $3.6 million in the first six
months of fiscal 2003 compared to the same period in fiscal 2002. During the
first six months of fiscal 2002 and 2003, Components recorded asset impairment
losses of $1.1 million and $3.4 million respectively. These losses were
recorded

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primarily due to a change in managements plan for the future use of idled
machinery and equipment. Improved operating performance at the Companys
Montague, MI facility, increased earnings from operations excluding fresh start
accounting adjustments and reorganization items during the first six months of
2003 due to the abnormally high start-up costs associated with new program
launches at this facility during the first six months of 2002. This increase
was partially offset by lower OEM production requirements and lower overall
unit pricing.

Other loss from operations excluding fresh start accounting adjustments
and reorganization items was $9.3 million in the first six months of fiscal
2003 compared to $8.1 million in the same period in 2002. This difference is
due primarily to higher post-emergence professional fees in fiscal 2003.

Interest Expense, net

Interest expense was $30.8 million for the first six months of fiscal 2003
and $34.7 million for the same period of fiscal 2002. Interest expense amounts
between the two periods are not comparable, due to the Companys new capital
structure established upon emergence from Chapter 11. See Notes (1) and (11) to
the consolidated financial statements included herein regarding the Companys
new capital structure.

Additionally, interest expense, net, for the first six months of fiscal
2003 includes a $4.5 million reduction to interest expense as the result of
adjusting to fair value the Companys outstanding Series A Warrants and Series
B Warrants, which are recorded as liabilities on the consolidated balance sheet
as of July 31, 2003.

Income Taxes

Income tax expense was $62.9 million for the first six months of fiscal
2003. This expense is the result of deferred taxes related to fresh start
accounting adjustments in foreign jurisdictions, $6.5 million of state tax
related to the merger between the Predecessor and HLI, and tax related to
operations in foreign jurisdictions as well as in various states. The Company
has determined that a valuation allowance is required against all net deferred
tax assets in the United States and certain deferred tax assets in foreign
jurisdictions. As such, there is no United States federal income tax benefit
recorded against current losses.

Net Income (Loss)

The net income for the six months ended July 31, 2003 includes an
extraordinary gain on discharge of debt of $1,076.7 million realized upon
emergence from Chapter 11. The net loss for the six months ended July 31, 2002
includes the cumulative effect of change in accounting principle of $544.4
million related to the adoption of SFAS No. 142 and the impairment of goodwill
of the Predecessor.

Liquidity and Capital Resources

Cash Flows

The Companys operations provided $75.5 million in cash in the first six
months of fiscal 2003 compared to $49.6 million in the first six months of
fiscal 2002. This increase is partially due to an early domestic customer
payment received in the second quarter of 2003, improved days sales outstanding
in the Companys foreign operations, the improvement in payment terms with
domestic vendors and lower payments related to the Chapter 11 filings.

The principal sources of liquidity for the Companys future operating,
capital expenditure, facility closure, restructuring and reorganization
requirements are expected to be (i) cash flows from operations, (ii) proceeds
from the sale of non-core assets and businesses, (iii) cash on hand, and (iv)
borrowings under the $100 million Revolving Credit Facility under the New
Credit Facility. While the Company expects that such sources will meet these
requirements, there can be no assurances that such sources will prove to be
sufficient, in part, due to inherent uncertainties about applicable future
capital market conditions.

Capital expenditure for the first six months of fiscal 2003 were $45.8
million. These expenditures were primarily for additional machinery and
equipment to improve productivity and reduce costs, to meet demand for new
vehicle platforms and to meet expected requirements for the Companys products.
The Company anticipates capital expenditures for fiscal 2003 will be
approximately $115 million to $125 million relating primarily to meet demand
for new vehicle platforms and to support maintenance and cost reduction
programs.

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Other Liquidity Matters

As more fully discussed above, on June 3, 2003, in connection with the
Companys emergence from Chapter 11, HLI entered into the $550.0 million New
Credit Facility, consisting of the $450.0 million New Term Loan and the $100.0
million Revolving Credit Facility. HLI also issued an aggregate of $250.0
million New Senior Notes. The Company and substantially all of its material
direct and indirect domestic subsidiaries have guaranteed HLIs obligations
under the New Credit Facility, and the Company and substantially all of its
domestic subsidiaries have guaranteed HLIs obligations under the New Senior
Notes. The proceeds from the initial $450.0 million of borrowings under the New
Credit Facility and the net proceeds from the New Senior Notes were used to
make payments required under the Plan of Reorganization. As of July 31, 2003,
there were no outstanding borrowings and $31.5 million in letters of credit
issued under the Revolving Credit Facility. The amount available to borrow
under the revolving credit facility at July 31, 2003 was approximately $68.5
million.

In addition, upon the Companys emergence from bankruptcy, all of the
Companys existing securities, including the Old Common Stock, Old Senior Notes
and Old Subordinated Notes, were cancelled. All amounts outstanding under the
Prepetition Credit Agreement were satisfied in exchange for: (i) a cash payment
of $477.3 million; (ii) 15,930,000 shares of New Common Stock; and (iii) 53,100
shares of Preferred Stock. All amounts outstanding under the Old Senior Notes
were satisfied in exchange for: (i) a cash payment of approximately $13.0
million; (ii) 13,470,000 shares of New Common Stock; (iii) 44,900 shares of
Preferred Stock; and (iv) a portion of the distributions from the trust
established under the Plan of Reorganization for the benefit of the prepetition
creditors (the Creditors Trust). All amounts outstanding under the Old
Subordinated Notes were satisfied in exchange for a distribution of Series A
Warrants and a portion of the distributions under the Creditors Trust. In
addition, holders of unsecured claims will receive an aggregate amount of
600,000 shares of New Common Stock, 2,000 shares of Preferred Stock, the Series
B Warrants and a portion of the distributions under the Creditors Trust.

Upon emergence from Chapter 11, the Company: (i) repaid the DIP Facility
in full; (ii) settled certain of the operating leases discussed below; and
(iii) paid certain other costs and expenses pursuant to the Plan of
Reorganization.

Certain of the operating leases covering leased assets with an original
cost of approximately $68.0 million contain provisions which, if certain events
occur or conditions are met, including termination of the lease, might require
the Company to purchase or re-sell the leased assets within a specified period
of time, generally one year, based on amounts specified in the lease
agreements. In connection with the Companys emergence from Chapter 11, the
Company purchased these assets for $23.6 million.

Outlook

The Company derived approximately half of its fiscal 2002 net sales on a
worldwide basis from Ford, DaimlerChrysler and General Motors and their
subsidiaries. The Companys sales levels and margins could be adversely
affected as a result of pricing pressures caused by new competitors in foreign
markets, such as China. These factors have led to selective resourcing of
future business to competitors. Additionally, these customers have been
experiencing decreasing market share in North America which could result in
lower sales volumes for the Company.

Contractual Obligations

The following table identifies the Companys significant contractual
obligations (millions of dollars):

Payment due by PeriodLess than
    
    
    
    
    
    
    
    
    
    
    After 51 year
    
    
    1-3 years
    
    
    4-5 years
    
    
    years
    
    
    TotalLong-term debt and capital lease obligations
    
    $
    14.6
    
    
    $
    17.6
    
    
    $
    489.4
    
    
    $
    248.5
    
    
    $
    770.1Redeemable preferred stock of subsidiary
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10.1
    
    
    
    10.1Short-term borrowings
    
    
    12.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12.2Operating leases
    
    
    19.1
    
    
    
    24.2
    
    
    
    6.0
    
    
    
    
    
    
    
    49.3Capital expenditures
    
    
    29.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29.3Total obligations
    
    $
    75.2
    
    
    $
    41.8
    
    
    $
    495.4
    
    
    $
    258.6
    
    
    $
    871.0


Other Matters

The Company does not believe that sales of its products are materially
affected by inflation, although there can be no assurance that such an effect
will not occur in the future. In accordance with industry practice, the costs
or benefits of fluctuations in aluminum

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prices are passed through to customers. In the United States, the Company
adjusts the sales prices of its aluminum wheels every three to six months, if
necessary, to fully reflect any increase or decrease in the price of aluminum.
As a result, the Companys net sales of aluminum wheels are adjusted, although
gross profit per wheel is not materially affected. From time to time, the
Company enters into futures contracts or purchase commitments solely to hedge
against possible aluminum price changes that may occur between the dates of
aluminum wheel price adjustments. Pricing and purchasing practices are similar
in Europe, but opportunities to recover increased material costs from customers
are more limited than in the United States.

The Companys net sales are continually affected by pressure from its
major customers to reduce prices. The Companys emphasis on reduction of
production costs, increased productivity and improvement of production
facilities has enabled the Company to respond to this pressure.

Accounting Policies

The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period.
Considerable judgment is often involved in making these determinations; the use
of different assumptions could result in significantly different results.
Management believes its assumptions and estimates are reasonable and
appropriate, however actual results could differ from those estimates.

Asset impairment losses and other restructuring charges

The Companys consolidated statements of operations included herein
reflect an element of operating expenses described as asset impairments and
other restructuring charges. The Company periodically evaluates whether events
and circumstances have occurred that indicate that the remaining useful life of
any of its long lived assets may warrant revision or that the remaining balance
might not be recoverable. When factors indicate that the long lived assets
should be evaluated for possible impairment, the Company uses an estimate of
the future undiscounted cash flows generated by the underlying assets to
determine if a write-down is required. If a write-down is required, the Company
adjusts the book value of the impaired long-lived assets to their estimated
fair values. Fair value is determined through third party appraisals or
discounted cash flow calculations. The related charges are recorded as an asset
impairment or, in the case of certain exit costs in connection with a plant
closure or restructuring, a restructuring or other charge in the consolidated
statements of operations.

As discussed above and in the notes to the Companys consolidated
financial statements included herein, a number of decisions have occurred or
other factors have indicated that these types of charges are required to be
currently recognized. There can be no assurance that there will not be
additional charges based on future events and that the additional charges would
not have a materially adverse impact on the Companys financial position and
results of operations.

Pension and Postretirement Benefits Other than Pensions

Annual net periodic expense and benefit liabilities under the Companys
defined benefit plans are determined on an actuarial basis. Assumptions used in
the actuarial calculations have a significant impact on plan obligations and
expense. Each October, the Company reviews the actual experience compared to
the more significant assumptions used and makes adjustments to the assumptions,
if warranted. The healthcare trend rates are reviewed with the actuaries based
upon the results of their review of claims experience. Discount rates are based
upon an expected benefit payments duration analysis and the equivalent average
yield rate for high-quality fixed-income investments.

Pension benefits are funded through deposits with trustees and the
expected long-term rate of return on fund assets is based upon actual
historical returns modified for known changes in the market and any expected
change in investment policy. Postretirement benefits are not funded and our
policy is to pay these benefits as they become due.

Certain accounting guidance, including the guidance applicable to
pensions, does not require immediate recognition of the effects of a deviation
between actual and assumed experience or the revision of an estimate. This
approach allows the favorable and unfavorable effects that fall within an
acceptable range to be netted. Although this netting occurs outside the basic
financial statements, the net amount is disclosed as an unrecognized gain or
loss in the footnotes to the Companys financial statements. The Company
expects to incur approximately $3.7 million of pension expense and $14.1
million of retiree benefit costs in fiscal 2003.

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Goodwill Impairment Testing

During fiscal 2002, the Company completed the implementation of SFAS 142,
Goodwill and Other Intangible Assets. Under SFAS 142, goodwill is no longer
amortized. Instead, goodwill and indefinite-lived intangible assets are tested
for impairment in accordance with the provisions of SFAS 142. To accomplish
this, the Company determined the carrying value of each of its reporting units
(i.e., one step below the segment level) by assigning the assets and
liabilities, including existing goodwill and intangible assets, to the
reporting units on February 1, 2002. As of that date, the Company had
unamortized goodwill and other indefinite-lived intangibles of approximately
$758.7 million that were subject to the transition provisions of SFAS No. 142.
The Company determined the fair value of each reporting unit and compared those
fair values to the carrying values of each reporting unit. To the extent the
carrying amount of a reporting unit exceeded the fair value of the reporting
unit (indicating that goodwill may be impaired), the Company performed the
second step of the transitional impairment test. This test was required for
five reporting units.

In the second step, the Company compared the implied fair value of the
reporting units goodwill with the carrying value of that goodwill, both of
which were measured at the adoption date. The implied fair value of goodwill
was determined by allocating the fair value of the reporting units to all of
the assets (both recognized and unrecognized) and liabilities of the reporting
units in a similar manner to a purchase price allocation in accordance with
SFAS No. 141, Business Combinations. The residual fair value after this
allocation was the implied fair value of the reporting units goodwill. The
carrying amounts of these reporting units exceeded the fair values, and the
Company recorded an impairment charge of $554.4 million as of February 1, 2002
as a cumulative effect of a change in accounting principle as described above.

The Company employed a discounted cash flow analysis in conducting its
impairment tests. Fair value was determined based upon the discounted cash
flows of the reporting units. Future cash flows are affected by future
operating performance, which will be impacted by economic conditions, car
builds, financial, business and other factors, many of which are beyond the
Companys control.

Allowance for uncollectible accounts

The allowance for uncollectible accounts provides for losses believed to
be inherent within the Companys Receivables, (primarily trade receivables).
Management evaluates both the creditworthiness of specific customers and the
overall probability of losses based upon an analysis of the overall aging of
receivables, past collection trends and general economic conditions. Management
believes, based on its review, that the allowance for uncollectibles is
adequate to cover potential losses. Actual results may vary as a result of
unforeseen economic events and the impact those events could have on the
Companys customers.

Valuation allowances on deferred income tax assets

In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of the
deferred tax assets will not be realized. Management considers the scheduled
reversal of deferred tax liabilities, projected future taxable income, and tax
planning strategies in making this assessment. The Company expects the deferred
tax assets, net of the valuation allowance to be realized as a result of the
reversal of existing taxable temporary differences in the United States and as
a result of projected future taxable income and the reversal of existing
taxable temporary differences in certain foreign locations. As a result of
managements assessment, a valuation allowance was recorded. The Company
determined that it could not conclude that it was more likely than not that the
benefits of certain deferred income tax assets would be realized. The valuation
allowance recorded by the Company reduces to zero the net carrying value of all
United States and certain foreign net deferred tax assets.

Valuation of Series A Warrants and Series B Warrants

The Companys Series A Warrants and Series B Warrants are classified as
liabilities that were initially measured at fair value and will subsequently be
measured at fair value with changes in fair value recognized in interest
expense. The fair value of the Series A Warrants and Series B Warrants at
emergence was approximately $9.3 million. As of July 31, 2003, the fair value
of the Series A Warrants and Series B Warrants was approximately $4.8 million.
The Series A Warrants and Series B Warrants were valued utilizing the
Black-Scholes model that requires the estimation of several variables in the
formula.

New Accounting Pronouncements

In May 2003, the FASB issued Statement No. 150, Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity
(SFAS No. 150). SFAS No. 150 requires that certain classes of free-standing
financial instruments that embody obligations for entities be classified as
liabilities. Generally, SFAS No. 150 is effective for financial instruments
entered into

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or modified after May 31, 2003 and is otherwise effective at the beginning
of the first interim period beginning after June 15, 2003. The adoption of SFAS
No. 150 did not have a material impact on the financial position or results of
operations of the Company.

In April 2003, the FASB issued Statement No. 149, Amendment of Statement
133 on Derivative Instruments and Hedging Activities (SFAS No. 149). SFAS No.
149 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 FASB Statement No. 133, Accounting for Derivative Instruments and
Hedging Activities. SFAS 149 is generally effective for contracts entered into
or modified after June 30, 2003. The provisions of SFAS No. 149 are required to
be applied prospectively. The adoption of SFAS No. 149 did not have a material
impact on its financial position or results of operations.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities. Interpretation No. 46 provides guidance for
identifying a controlling interest in a Variable Interest Entity (VIE)
established by means other than voting interests. Interpretation No. 46 also
requires consolidation of a VIE by an enterprise that holds such a controlling
interest when it is determined that the investor will absorb a majority of the
VIEs expected losses or residual returns, if they occur. The effective date
for this Interpretation is July 1, 2003. Adoption of this pronouncement did not
have any effect on the Companys financial position or results of operations.

In December 2002, the Emerging Issues Task Force (EITF) issued EITF
Issue 00-21, Accounting for Revenue Arrangements with Multiple Deliverables.
EITF 00-21 provides guidance on determining whether a revenue arrangement
contains multiple deliverable items and if so, requires revenue be allocated
amongst the different items based on fair value. EITF 00-21 also requires
revenue on any item in a revenue arrangement with multiple deliverables not
delivered completely must be deferred until delivery of the item is
completed. The effective date of this Issue for the Company is July 1, 2003.
Adoption of this pronouncement did not have a material effect on the financial
statements of the Company.




Item 3.Quantitative and Qualitative Disclosures about Market Risk

In the normal course of business the Company is exposed to market risks
arising from changes in foreign exchange rates, interest rates and raw material
and utility prices. The Company may selectively use derivative financial
instruments to manage these risks, but does not enter into any derivative
financial instruments for trading purposes.

Foreign Exchange

The Company has global operations and thus makes investments and enters
into transactions in various foreign currencies. In order to minimize the risks
associated with global diversification, the Company first seeks to internally
net foreign exchange exposures, and uses derivative financial instruments to
hedge any remaining net exposure. The Company uses forward foreign currency
exchange contracts on a limited basis to reduce the cash flow impact of
non-functional currency denominated transactions. The gains and losses from
these hedging instruments generally offset the gains or losses from the hedged
items and are recognized in the same period the hedged items are settled.

Interest Rates

The Company generally manages its risk associated with interest rate
movements through the use of a combination of variable and fixed rate debt.
Under the Companys post-emergence capital structure at July 31, 2003,
approximately $450 million of the Companys debt was variable rate debt. The
Company believes that a 10% increase or decrease in the interest rate on
variable rate debt would not materially affect earnings.

Except as previously discussed, for the period ended July 31, 2003, the
Company did not experience any other material change in market risk exposures
affecting the quantitative and qualitative disclosures as presented in the
Companys Annual Report on Form 10-K for the year ended January 31, 2003.




Item 4.Controls and Procedures

On February 19, 2002, the Company issued restated consolidated financial
statements included in its filings with the Securities and Exchange Commission
(the SEC) as of and for the fiscal years ended January 31, 2001 and 2000, and
related quarterly periods (the 10-K/A), and for the fiscal quarter ended
April 30, 2001 (the 10-Q/A). The restatement was the result of failure by the
Company

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to properly apply certain accounting standards generally accepted in the
United States of America, and because certain accounting errors and
irregularities in the Companys financial statements were identified. As
discussed in the Companys Annual Report on Form 10-K for the fiscal year 2001
filed with the SEC on May 1, 2002, the Company has been advised that the SEC is
conducting an investigation into the facts and circumstances giving rise to the
restatement, and the Company has been and intends to continue cooperating with
the SEC. The Company cannot predict the outcome of such an investigation.

Following the commencement of an internal review of its accounting records
and procedures and the investigation initiated by the Companys Audit Committee
of the Board of Directors in connection with the restatement process (the
Audit Committee Investigation), the Company initiated a significant
restructuring which included, among other things, (i) a new management team
under the leadership of a new chief executive officer and the hiring of a new
chief financial officer (initially an interim chief financial officer), (ii) a
number of key operating initiatives including an ongoing process to rationalize
the manufacturing capacity of the company on a global basis and (iii) the
Chapter 11 Filings.

These activities, while critical to the restructuring of the Company,
complicate the Companys ability to assess the overall effectiveness of (i)
disclosure controls and procedures, as defined in Exchange Act Rules 13a-14 and
15d-14 (the Disclosure Controls and Procedures) and (ii) internal controls,
including those internal controls and procedures for financial reporting (the
Internal Controls). These activities also complicate the Companys ability to
implement certain improvements to its disclosure controls and procedures and
internal controls. As a result, we will continue to be subjected to a number of
risks relating to these controls that are inherent in our transition following
emergence from Chapter 11.

Since the inception of the restatement process and Audit Committee
Investigation, the Company has made a number of significant changes that
strengthened its Disclosure Controls and Procedures and Internal Controls.
These changes included, but were not necessarily limited to, (i) communicating
clearly and consistently a tone from new senior management regarding the proper
conduct in these matters, (ii) terminating or reassigning key managers, (iii)
hiring (or retaining on an interim basis), in addition to the chief financial
officer position noted above, a new chief accounting officer, a new chief
information officer, and several new experienced business unit controllers,
(iv) strengthening the North American financial management organizational
reporting chain, (v) requiring stricter account reconciliation standards, (vi)
establishing an anonymous TIPLINE monitored by the general counsel of the
Company, (vii) updating and expanding the distribution of the Companys
business conduct questionnaire, (viii) conducting more face-to-face quarterly
financial reviews with business unit management, (ix) requiring quarterly as
well as annual plant and business unit written representations, (x) expanding
the financial accounting procedures in the current year internal audit plan,
(xi) temporarily supplementing the Companys existing staff with additional
contractor-based support to collect and analyze the information necessary to
prepare the Companys financial statements, related disclosures and other
information requirements contained in the Companys SEC periodic reporting
until the Company implements changes to the current organization and staffing,
and (xii) commencing a comprehensive, team-based process to further assess and
enhance the efficiency and effectiveness of the Companys financial processes,
including support efforts which better integrate current and evolving financial
information system initiatives, and addressing any remaining critical
weaknesses, including any reported by the Companys internal audit function and
independent public accountants.

As more fully discussed in the American Institute of Certified Public
Accountants (AICPA) auditing standards pronouncement Consideration Of
Internal Control in a Financial Statement Audit, AU Section 319, paragraphs
..21 to .24, an internal control system no matter how well designed and
operated, can provide only reasonable, not absolute, assurance that the control
objectives will be met. Limitations inherent in any system of internal controls
might include, among other things, (i) faulty human judgment and simple errors
or mistakes, (ii) collusion of two or more people or inappropriate management
override of procedures, (iii) imprecision in estimating and judging
cost-benefit relationships in designing controls and (iv) reductions in the
effectiveness of one deterring component (such as a strong cultural and
governance environment) by a conflicting component (such as may be found in
certain management incentive plans).

The Company, including its Chief Executive Officer and Chief Financial
Officer, believes that the aforementioned limitations apply to any applicable
system of internal controls, including the Disclosure Control and Procedures
and Internal Controls. The Company will continue the process of identifying and
implementing corrective actions where required to improve the effectiveness of
its Disclosure Controls and Procedures and Internal Controls. Significant
supplemental resources will continue to be required to prepare the required
financial and other information during this process. The changes made to date
as discussed above have enabled the Company to restate its previous filings
where required, as well as subsequently prepare and file the remainder of the
required periodic reports for fiscal 2001, 2002 and 2003 on a timely basis.

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Evaluation of Disclosure Controls and Procedures

During fiscal 2002, the Company formed a disclosure committee reporting to
the Chief Executive Officer of the Company to assist the Chief Executive
Officer and Chief Financial Officer in fulfilling their responsibility in
designing, establishing, maintaining and reviewing the Companys Disclosure
Controls and Procedures (the Disclosure Committee). The Disclosure Committee
is currently chaired by the Companys Chief Financial Officer and includes the
Companys General Counsel, Vice President of Human Resources and
Administration, Corporate Controller, Treasurer, Director of Corporate
Accounting, Director of Internal Audit, Senior Counsel, and Manager of
Financial Reporting and Governance as its other members. As of the end of the
period covered by this report, the Companys Chief Executive Officer and Chief
Financial Officer, along with the Disclosure Committee, evaluated the Companys
Disclosure Controls and Procedures. The Companys Chief Executive Officer and
Chief Financial Officer have concluded that the Disclosure Controls and
Procedures are effective based on such evaluation.

Changes in Internal Controls

Since the date of the last quarterly filing, the Company has continued to
take steps intended to increase the effectiveness of its compensating control
procedures while it completes a program that, over time, will address the
financial process and information systems objectives noted above. As previously
discussed above, the Company emerged from Chapter 11 on June 3, 2003. The
Company has completed a transition period after which AlixPartners LLC and
other outside consultants are no longer retained by the Company, and some of
the services provided by these professionals are now performed by current
employees. Certain of these services represent a significant portion of the
Companys current key accounting and financial reporting processes and related
controls. As part of this transition, the Company has recently hired a new
Director of Corporate Accounting, a new Director of Internal Audit and a new
Manager of Financial Reporting and Governance.

Other than the aforementioned items, there were no other significant
changes in the Companys Internal Controls or in other factors that could
significantly affect Internal Controls over financial reporting during the most
recent fiscal quarter.

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PART II.

OTHER INFORMATION




Item 1.Legal Proceedings

On February 19, 2002, the Company issued restated consolidated financial
statements as of and for the fiscal years ended January 31, 2001 and 2000, and
related quarterly periods (the 10-K/A), and for the fiscal quarter ended
April 30, 2001 (the 10-Q/A). The restatement was the result of failure by the
Company to properly apply certain accounting standards generally accepted in
the United States of America, and because certain accounting errors and
irregularities in the Companys financial statements were identified. The
Company has been advised that the Securities and Exchange Commission (SEC) is
conducting an investigation into the facts and circumstances giving rise to the
restatement, and the Company has been and intends to continue cooperating with
the SEC by providing requested documents and cooperating with depositions of
Company employees. The Company cannot predict the outcome of the investigation.

On May 3, 2002, a group of purported purchasers of the Companys bonds
commenced a putative class action lawsuit against thirteen present or former
directors and officers of the Company (but not the Company) and KPMG LLP, the
Companys independent auditor, in the United States District Court for the
Eastern District of Michigan. The complaint seeks damages for an alleged class
of persons who purchased Company bonds between June 3, 1999 and September 5,
2001 and claim to have been injured because they relied on the Companys
allegedly materially false and misleading financial statements. On June 27,
2002, the plaintiffs filed an amended class action complaint adding CIBC World
Markets Corp. and Credit Suisse First Boston Corporation, underwriters for
certain bonds issued by the Company, as defendants. These claims were not
discharged upon the effectiveness of the Plan of Reorganization because they
are against the Companys present and former directors and officers and KPMG
LLP, and not against the Company.

Additionally, before the date the Company commenced its Chapter 11
Bankruptcy case, four other putative class actions were filed in the United
States District Court for the Eastern District of Michigan against the Company
and certain of its directors and officers, on behalf of a class of purchasers
of the Companys Old Common Stock from June 3, 1999 to December 13, 2001, based
on similar allegations of securities fraud. These claims, as against the
Company, but not as against the Companys officers and directors, were
discharged upon the effectiveness of the Plan of Reorganization. On May 10,
2002, the plaintiffs filed a consolidated and amended class action complaint
seeking damages against the Companys present and former officers and directors
(but not the Company) and KPMG LLP. Pursuant to the Companys Plan of
Reorganization, the Company purchased directors and officers liability
insurance for certain of these current and former directors and officers and
agreed to indemnify such individuals against certain liabilities, including
those matters described above, up to an aggregate of $10 million in excess of
any coverage to or for the benefit of all indemnitees.

On June 13, 2002, the Company filed an adversary complaint and motion for
a preliminary injunction in the Bankruptcy Court requesting the Court to stay
the class action litigation commenced by the bond purchasers and equity
purchasers. Additionally, on July 25, 2002, the Company filed with the
Bankruptcy Court a motion to lift the automatic stay in the Chapter 11 Filings
to allow the insurance company that provides officer and director liability
insurance to the Company to pay the defense costs of the Companys present and
former officers and directors in such litigation. The Bankruptcy Court has
since entered an order permitting the insurance company to pay up to $500,000
in defense costs incurred by the Companys present and former officers and
directors in the litigation subject to certain conditions, which amount has
subsequently been increased to $800,000 pursuant to further authority in the
order. The Company has withdrawn its motion for a preliminary injunction.

During the pendency of the Chapter 11 Filings, the Company took action to
terminate certain marketing and support services, technology license and
technical assistance and shareholders agreements (the Agreements) relating to
the Companys 40% interest in Hayes Wheels de Mexico, S.A. de C.V., a Mexican
corporation manufacturing aluminum and steel wheels (HW de Mexico). In the
event that such termination is not effective for any reason, the Company also
filed a protective motion with the Bankruptcy Court seeking to reject the
Agreements. DESC Automotriz, S.A. de C.V. (the 60% owner of HW-Mexico)
(DESC), HW de Mexico, and Hayes Wheels Aluminio, S.A. de C.V. (a subsidiary
of HW de Mexico) have asserted administrative expense claims against the
Company in an amount not less than $20.6 million relating to allegedly improper
actions taken by the Company with respect to HW de Mexico and certain of the
Agreements during the Chapter 11 Filings. As part of the resolution of its
objection to confirmation of the Plan of Reorganization, the Company has agreed
with DESC that if either the Company or Hayes Lemmerz International-Mexico,
Inc. is found liable on these claims and such claims are entitled to
administrative expense claim status, the Company will pay such liabilities in
full in cash in the amount determined by the court to be entitled to
administrative expense claim status. On June 30, 2003,

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the Bankruptcy Court ordered Hayes Mexico to arbitrate the claims in
Mexico City, Mexico. The Company and Hayes Mexico have appealed that order to
the District Court. This appeal is pending. The Company is presently in
discussions with DESC regarding a resolution of these claims; however, there
can be no assurance that such discussions will result in a resolution of this
dispute or what the terms of any resolution may be.

The Company is a defendant in a patent infringement matter filed in 1997
in the United States District Court, Eastern District of Michigan. Lacks
Incorporated (Lacks) alleged that the Company infringed on three patents held
by Lacks relating to chrome-plated plastic cladding for steel wheels. Prior to
fiscal 2000, the Federal District Court dismissed all claims relating to two of
the three patents that Lacks claimed were infringed and dismissed many of the
claims relating to the third patent. The remaining claims relating to the third
patent were submitted to a special master. In January 2001, the special master
issued a report finding that Lacks third patent was invalid and recommending
that Lacks remaining claims be dismissed, the trial court accepted these
recommendations. Lacks appealed this matter to the Federal Circuit Court. The
Federal Circuit Court vacated the trial courts ruling that the third patent
was invalid and remanded the matter back to the trial court for further
proceedings. In addition to the Companys defenses in the lawsuit, the Company
has certain rights of indemnification against a co-defendant in the matter that
supplied the allegedly infringing products to the Company. If it is ultimately
determined that the third patent is valid and the Company is unable to collect
on the indemnification rights, it may have an adverse impact on the Company.

The Company was party to a license agreement with Kuhl Wheels, LLC
(Kuhl), whereby Kuhl granted the Company an exclusive patent license
concerning high vent steel wheel technology known as the Kuhl Wheel (the
Kuhl Wheel), which agreement was terminated as of January 10, 2003 pursuant
to a stipulation between the Company and Kuhl entered in connection with the
Companys bankruptcy proceeding. The original license agreement (as amended,
the License Agreement), dated May 11, 1999, granted the Company a
non-exclusive license for the Kuhl Wheel technology. The License Agreement was
subsequently amended to provide the Company with an exclusive worldwide
license. On January 14, 2003, the Company filed a Complaint for Declaratory and
Injunctive Relief against Kuhl and its affiliate, Epilogics Group, in the
United States District Court for the Eastern District of Michigan. The Company
commenced such action seeking a declaration of noninfringement of two United
States patents and injunctive relief to prevent Epilogics Group and Kuhl from
asserting claims of patent infringement against the Company, and disclosing and
using the Companys technologies, trade secrets and confidential information to
develop, market, license, manufacture or sell automotive wheels. The Company is
unable to predict the outcome of this litigation at this time. However, if the
Company is not successful in such litigation, it may have an adverse impact on
the Company.

In the ordinary course of its business, the Company is a party to other
judicial and administrative proceedings involving its operations and products,
which may include allegations as to manufacturing quality, design and safety.
After reviewing the proceedings that are currently pending (including the
probable outcomes, reasonably anticipated costs and expenses, availability and
limits of insurance rights under indemnification agreements and established
reserves for uninsured liabilities), management believes that the outcome of
these proceedings will not have a material adverse effect on the financial
condition or ongoing results of operations of the Company.




Item 2.Changes in Securities and Use of Proceeds

On June 3, 2003 (the Effective Date), Hayes Lemmerz International, Inc.,
(the Company or Old Hayes) emerged from Chapter 11 proceedings pursuant to
the Modified First Amended Joint Plan of Reorganization of Hayes Lemmerz
International, Inc. and Its Affiliated Debtors and Debtors in Possession, filed
with the United States Bankruptcy Court for the District of Delaware (the
Bankruptcy Court) on April 9, 2003 (the Plan of Reorganization), which was
confirmed by the Bankruptcy Court on May 12, 2003.

Pursuant to the Plan of Reorganization, the Company caused the formation
of (i) a new holding company, HLI Holding Company, Inc., a Delaware corporation
(HoldCo), (ii) HLI Parent Company, Inc., a Delaware corporation and a wholly
owned subsidiary of HoldCo (ParentCo), and (iii) HLI Operating Company, Inc,
a Delaware corporation and a wholly owned subsidiary of ParentCo (HLI). On
the Effective Date, (i) HoldCo was renamed Hayes Lemmerz International, Inc.
(New Hayes), (ii) New Hayes contributed to ParentCo 30,0000,000 shares of its
common stock, par value $.01 per share (the New Common Stock), and 957,447
series A warrants and 957,447 series B warrants to acquire New Common Stock of
New Hayes (the Series A Warrants and Series B Warrants, respectively),
(iii) ParentCo in turn contributed such shares of New Common Stock and Series A
Warrants and Series B Warrants to HLI and (iv) pursuant to an Agreement and
Plan of Merger, dated as of June 3, 2003 (the Merger Agreement), between the
Company and HLI, the Company was merged with and into HLI (the Merger), with
HLI continuing as the surviving corporation.

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Pursuant to the Plan of Reorganization and as a result of the Merger, all
of the issued and outstanding shares of common stock, par value $.01 per share,
of the Company (the Old Common Stock), and any other outstanding equity
securities of the Company, including all options and warrants, were cancelled.
Promptly following the Merger, HLI distributed to certain holders of allowed
claims, under the terms of the Plan of Reorganization, an amount in cash, the
New Common Stock, the Series A Warrants, the Series B Warrants and the
Preferred Stock (as defined below). Prior to the Merger, the Old Common Stock
was registered pursuant to Section 12(g) of the Securities Exchange Act of
1934, as amended (the Exchange Act). In reliance on Rule 12g-3(a) of the
Exchange Act, by virtue of the status of New Hayes as a successor issuer to the
Company, the New Common Stock is deemed registered under Section 12(g) of the
Exchange Act. The Company filed a Form 15 with the SEC to terminate the
registration of the Old Common Stock under the Exchange Act.

Pursuant to the terms of the Plan of Reorganization, HLI issued 100,000
shares of Series A Exchangeable Preferred Stock, par value $1.00, of HLI (the
Preferred Stock) to the holders of certain allowed claims. In accordance with
the terms of the Preferred Stock, the shares of Preferred Stock are, at the
holders option, exchangeable into a number of fully paid and nonassessable
shares of New Common Stock equal to (i) the aggregate liquidation preference of
the shares of Preferred Stock so exchanged ($100 per share plus all accrued and
unpaid dividends thereon (whether or not declared) to the exchange date)
divided by (ii) 125% of the Emergence Share Price. As determined pursuant to
the terms of the Plan of Reorganization, the Emergence Share Price is $18.50.

Following consummation of the Plan, 30,000,000 shares of the total
100,000,000 shares of authorized New Common Stock and 100,000 shares of the
total 100,000 shares of the authorized New Preferred Stock were issued and
outstanding as a result of the distribution to certain holders of allowed
claims as described above. The issued shares of New Common Stock of New Hayes
will be subject to dilution as a result of (i) exercise of the Series A
Warrants and Series B Warrants, each series of which will entitle the holders
thereof to purchase in the aggregate up to 957,447 shares of New Common Stock
which New Hayes will reserve for issuance, (ii) the grant of certain shares in
an amount to be determined and options to acquire New Common Shares to be
issued to management which New Hayes will reserve for issuance, and (iii) the
issuance of a currently indeterminable number of shares of New Common Stock
upon the exchange of shares of New Preferred Stock for shares of New Common
Stock at the election of the holders thereof. In addition to those shares being
issued to certain holders of allowed claims under the Plan, New Hayes will have
1,000,000 shares of preferred stock authorized for issuance, of which no shares
were issued and outstanding at the time the Plan became effective, and HLI has
600,000 shares of common stock authorized for issuance, of which 590,000 shares
are outstanding and held by ParentCo at the time the Plan became effective.




Item 3.Defaults Upon Senior Securities

None




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

None




Item 5.Other Information

Membership of Board of Directors

Upon emergence from bankruptcy, all of the Companys initial board
members, other than Curtis J. Clawson, President, Chief Executive Officer and
Chairman of the Board of the Company, were newly appointed. The six newly
appointed board members have been selected pursuant to the Plan of
Reorganization. As of this filing, all of the six newly appointed board members
were in place. They are: Mr. Laurence Berg, Senior Partner, Apollo Management
L.P.; Mr. Steve Martinez, Principal, Apollo Management L.P.; Dr. William H.
Cunningham, James L. Bayless Chair of Free Enterprise, University of Texas at
Austin; Mr. Henry D.G. Wallace, retired Group Vice President, Ford Motor
Company; Mr. Richard F. Wallman, retired Senior Vice President and Chief
Financial Officer, Honeywell International, Inc.; and Mr. George T. Haymaker,
Jr., Chairman of the Board of Kaiser Aluminum Corporation.

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Item 6.Exhibits and Reports on Form 8-K

(a) Exhibits

4.1
    
    First Supplemental Indenture, dated as of June 19, 2003, by and
between HLI Operating Company, certain listed Guarantors, and U.S.
Bank National Association, as Trustee (Incorporated by reference to
Exhibit 4.2 to the Companys Registration Statement No. 333-107539
on Form S-4, filed with the SEC on July 31, 2003, as amended).10.49
    
    Form of Directors Indemnification Agreement. (Incorporated by
reference to Exhibit 10.49 to the Companys Quarterly Report on Form
10-Q for the quarterly period ended July 31, 2003 filed September 15,
2003).12.1
    
    Ratio of earnings to fixed charges. (Incorporated by
reference to Exhibit 12.1 to the Companys Quarterly Report on Form
10-Q for the quarterly period ended July 31, 2003 filed September 15,
2003).31.1
    
    Certification of Curtis J. Clawson, Chairman of the Board,
President and Chief Executive Officer, pursuant to Sections 302 of
the Sarbanes-Oxley Act of 2002.*31.2
    
    Certification of James A. Yost, Vice President, Finance, and Chief
Financial Officer, pursuant to Sections 302 of the Sarbanes-Oxley
Act of 2002.*32.1
    
    Certification of Curtis J. Clawson, Chairman of the Board,
President and Chief Executive Officer, Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.*32.2
    
    Certification of James A. Yost, Vice President, Finance, and Chief
Financial Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*




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(b) Reports on Form 8-K

During the fiscal quarter ended July 31, 2003, the Company filed Current
Reports on Form 8-K with the SEC as follows:

May 5, 2003
    
    Items 9 and 12,
    
    Regulation FD Disclosure, and Results of Operations
and Financial ConditionMay 12, 2003
    
    Items 9 and 12,
    
    Regulation FD Disclosure, and Results of Operations
and Financial ConditionMay 13, 2003
    
    Items 5 and 7,
    
    Other Events and Regulation FD Disclosure, and
Financial Statements and ExhibitsMay 14, 2003
    
    Items 9 and 12,
    
    Regulation FD Disclosure, and Results of Operations
and Financial ConditionMay 21, 2003
    
    Item 3,
    
    Bankruptcy or ReceivershipMay 23, 2003
    
    Items 5 and 7,
    
    Other Events and Regulation FD Disclosure, and
Financial Statements and ExhibitsJune 3, 2003
    
    Items 2, 5 and 7,
    
    Acquisition or Disposition of Assets, Other Events
and Regulation FD Disclosure, and Financial
Statements and ExhibitsJune 17, 2003
    
    Items 7 and 12,
    
    Financial Statements and Exhibits, and Results of
Operations and Financial ConditionJune 19, 2003
    
    Items 7 and 12,
    
    Financial Statements and Exhibits, and Results of
Operations and Financial Condition


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SIGNATURES

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

HAYES LEMMERZ INTERNATIONAL, INC./s/ James A. YostJames A. YostVice President, Finance, and Chief Financial Officer


October 28, 2003

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EXHIBIT INDEX

Exhibit No.
    
    Description4.1
    
    First Supplemental Indenture, dated as of June 19, 2003, by
and between HLI Operating Company, certain listed
Guarantors, and U.S. Bank National Association, as Trustee
(Incorporated by reference to Exhibit 4.2 to the Companys
Registration Statement No. 333-107539 on Form S-4, filed
with the SEC on July 31, 2003, as amended).10.49
    
    Form of Directors Indemnification Agreement. (Incorporated by
reference to Exhibit 10.49 to the Companys Quarterly Report on Form
10-Q for the quarterly period ended July 31, 2003 filed September 15,
2003).12.1
    
    Ratio of earnings to fixed charges. (Incorporated by
reference to Exhibit 12.1 to the Companys Quarterly Report on Form
10-Q for the quarterly period ended July 31, 2003 filed September 15,
2003).31.1
    
    Certification of Curtis J. Clawson, Chairman of the Board,
President and Chief Executive Officer, pursuant to Sections
302 of the Sarbanes-Oxley Act of 2002.*31.2
    
    Certification of James A. Yost, Vice President, Finance, and
Chief Financial Officer, pursuant to Sections 302 of the
Sarbanes-Oxley Act of 2002.*32.1
    
    Certification of Curtis J. Clawson, Chairman of the Board,
President and Chief Executive Officer, Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.*32.2
    
    Certification of James A. Yost, Vice President, Finance, and
Chief Financial Officer, Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.*




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