**UNITED
STATES**
 **SECURITIES
AND EXCHANGE COMMISSION**
 WASHINGTON,
D.C. 20549
 
 ______________
 
 **Form
10-Q**
  (Mark
one)
 
 x
    Quarterly
      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934For
      the quarterly period ended March 31, 2005
 
 OR
 
  ̈
    Transition
      report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934For
      the transition period from _______________ to
    ________________
 ______________
 
 **Commission
File Number**  **333-106356**
 ______________
 
 **CHAAS
ACQUISITIONS, LLC.**
 *(Exact
name of registrant as specified in its charter)*
 
 **Delaware**
    **41-2107245***(State
      or other jurisdiction of*
    *(I.R.S.
      Employer**incorporation
      or organization)*
    *Identification
      No.)*
 
 **12900
      Hall Road, Suite 200, Sterling Heights, MI**
    **48313***(Address
      of principal executive offices)*
    *(Zip
      Code)*
 
 **(586)
997-2900**
 *(Registrant’s
telephone number, including area code)*
 
 **NOT
APPLICABLE**
 *(Former
name, former address and former fiscal year, if changed since last
report)*
 
 Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such a 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
12b-2 of the Exchange Act).
 
 Yes
     ̈
    No
    x
 Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.
  
  Class
    
    Outstanding
      at May 13, 2005Membership
      Units
    
    100
 
 
 
 **CHAAS
ACQUISITIONS, LLC**

**INDEX**
 
   Page
      No.Part
      I.Financial
      InformationItem
      1.   Financial StatementsConsolidated Condensed Balance Sheets as of March 31,
      2005
    1and December 31, 2004Consolidated Condensed Statements of Operations for the
      three months
    2ended March 31, 2005 and 2004Consolidated Condensed Statements of Cash Flows for the
      three months
    3ended March 31, 2005 and 2004Consolidated Condensed Statement of Changes in Members’
      Equity for the three months
    4ended March 31, 2005Notes to Consolidated Condensed Financial
      Statements
    5Item
      2.Management's Discussion and Analysis of Financial
      Condition and Results of Operations
    11Item
      3.Quantitative and Qualitative Disclosures About Market
      Risk
    14Item
      4.Controls and Procedures
    15Part
      II.Other
      Information and SignatureItem
      1.Legal Proceedings
    15Item
      2.Changes in Securities, Use of Proceeds and Issuer
      Purchases of Equity Securities
    15Item
      3.Defaults Upon Senior Securities
    15Item
      4.Submission of Matters to a Vote of
      Security-Holders
    15Item
      5.Other Information
    15Item
      6.Exhibits
    15Signature
    16
    **PART
I. FINANCIAL INFORMATION**

**Item
1.****Financial
Statements**

**CHAAS
ACQUISITIONS, LLC**
**CONSOLIDATED
CONDENSED BALANCE SHEETS**
**As
of March 31, 2005 and December 31, 2004**
**(Dollars
in thousands)**
   
 
 **March
      31,**
    
    **December
      31,****2005**
    
    **2004****ASSETS**
    
    
    **(Unaudited)**
    ****Current
      assetsCash
    
    $
    4,727
    
    $
    14,747Accounts
      receivable, less reservesof
      $2,170 and $2,078, respectively
    
    
    72,161
    
    
    61,745InventoriesRaw
      materials
    
    
    27,871
    
    
    25,400Work-in-process
    
    
    11,675
    
    
    12,382Finished
      goods
    
    
    31,342
    
    
    28,937Reserves
    
    
    (5,176
    )
    
    (5,325
    )Total
      inventories
    
    
    65,712
    
    
    61,394Other
      current assets
    
    
    14,742
    
    
    13,976Total
      current assets
    
    
    157,342
    
    
    151,862Property
      and equipment, net
    
    
    74,270
    
    
    75,113Goodwill
    
    
    39,061
    
    
    39,061Other
      intangible assets, net
    
    
    99,667
    
    
    102,835Deferred
      income taxes
    
    
    1,218
    
    
    1,047Other
      noncurrent assets
    
    
    9,385
    
    
    8,064Total
      Assets
    
    $
    380,943
    
    $
    377,982**LIABILITIES
      AND MEMBERS’ EQUITY**Current
      liabilitiesCurrent
      maturities of long-term debt
    
    $
    3,284
    
    $
    3,068Accounts
      payable
    
    
    53,288
    
    
    46,664Accrued
      liabilities
    
    
    27,245
    
    
    22,951Deferred
      income taxes
    
    
    1,798
    
    
    1,876Total
      current liabilities
    
    
    85,615
    
    
    74,559Noncurrent
      liabilitiesDeferred
      income taxes
    
    
    6,682
    
    
    7,203Other
      noncurrent liabilities
    
    
    5,635
    
    
    4,276Long-term
      debt, less current maturities
    
    
    200,811
    
    
    202,179Total
      noncurrent liabilities
    
    
    213,128
    
    
    213,658Members’
      equityUnits
    
    
    100,900
    
    
    100,900Other
      comprehensive income
    
    
    6,859
    
    
    8,549Accumulated
      deficit
    
    
    (25,559
    )
    
    (19,684
    )Total
      Members’ Equity
    
    
    82,200
    
    
    89,765Total
      Liabilities and Members’ Equity
    
    $
    380,943
    
    $
    377,982
 
 
 
 
   The
accompanying notes are an integral part of the
 consolidated
condensed financial statements.
 1
 **CHAAS
ACQUISITIONS, LLC**
 **CONSOLIDATED
CONDENSED STATEMENTS OF OPERATIONS**
 **(Dollars
in thousands)**
 **(Unaudited)**
   
 
 **Three
      Months Ended****March
      31,****2005**
    
    **2004**Net
      sales
    
    $
    111,270
    
    $
    96,631Cost
      of sales
    
    
    91,494
    
    
    74,064Gross
      profit
    
    
    19,776
    
    
    22,567Selling,
      administrative and product development expenses
    
    
    16,585
    
    
    15,085Amortization
      of intangible assets
    
    
    2,066
    
    
    2,051Operating
      income
    
    
    1,125
    
    
    5,431Other
      expenseInterest
      expense
    
    
    (5,683
    )
    
    (5,103
    )Foreign
      currency loss, net
    
    
    (1,331
    )
    
    (628
    )Other
      expense
    
    
    (10
    )
    
    (89
    )Loss
      before income taxes
    
    
    (5,899
    )
    
    (389
    )Benefit
      from income taxes
    
    
    (24
    )
    
    (104
    )Net
      loss
    
    $
    (5,875
    )
    $
    (285
    )
 
 
   The
accompanying notes are an integral part of the
 consolidated
condensed financial statements.
 2
 **CHAAS
ACQUISITIONS, LLC**
 **CONSOLIDATED
CONDENSED STATEMENTS OF CASH FLOWS**
 **(Dollars
in thousands)**
 **(Unaudited)**
   **Three
      Months Ended****March
      31,****2005**
    
    **2004****CASH
      FLOWS FROM OPERATING ACTIVITIES:**Net loss
    
    $
    (5,875
    )
    $
    (285
    )Adjustments
      to reconcile net loss to netcash
      provided by (used for) operating activities:Depreciation
      and amortization
    
    
    6,265
    
    
    5,305Deferred
      taxes
    
    
    (668
    )
    
    (1,806
    )Foreign
      currency (gain) loss
    
    
    1,241
    
    
    (5
    )Loss
      on disposal of assets
    
    
    8
    
    
    114Interest
      accretion on notes
    
    
    319
    
    
    342Changes
      in assets and liabilities, net
    
    
    (5,451
    )
    
    682Net
      cash provided by (used for) operating activities
    
    
    (4,161
    )
    
    4,347**CASH
      FLOWS USED FOR INVESTING ACTIVITIES:**Acquisition
      of property and equipment
    
    
    (4,827
    )
    
    (2,645
    )Net
      cash used for investing activities
    
    
    (4,827
    )
    
    (2,645
    )**CASH
      FLOWS USED FOR FINANCING ACTIVITIES:**Net
      decrease in revolving loan
    
    
    (211
    )
    
    (390
    )Repayment
      of debt
    
    
    (336
    )
    
    (480
    )Net
      cash used for financing activities
    
    
    (547
    )
    
    (870
    )Effect
      of exchange rate changes
    
    
    (485
    )
    
    528Net
      (decrease) increase in cash
    
    
    (10,020
    )
    
    1,360Cash
      at beginning of period
    
    
    14,747
    
    
    16,686Cash
      at end of period
    
    $
    4,727
    
    $
    18,046
 The
accompanying notes are an integral part of the
 consolidated
condensed financial statements.
 3
 **CHAAS
ACQUISITIONS, LLC**
 **CONSOLIDATED
CONDENSED STATEMENT OF CHANGES IN MEMBERS’ EQUITY**
 **For
the Three Months Ended March 31, 2005**
 **(Dollars
in thousands)**
 **(Unaudited)**
   
 
 **Other**
    
    
    
    **Total****Members’**
    
    **comprehensive**
    
    **Accumulated**
    
    **members’****capital**
    
    **income
      (loss)**
    
    **deficit**
    
    **equity**Balanceat December 31, 2004
    
    $
    100,900
    
    $
    8,549
    
    $
    (19,684
    )
    $
    89,765Currency
      translation adjustment
    
    
    —
    
    
    (1,690
    )
    
    
    
    
    (1,690
    )Net
      loss
    
    
    
    
    
    
    
    
    (5,875
    )
    
    (5,875
    )Balance
      at March 31, 2005
    
    $
    100,900
    
    $
    6,859
    
    $
    (25,559
    )
    $
    82,200
 
 
 
 
 
 
 
   The
accompanying notes are an integral part of the
 consolidated
condensed financial statements.
 4
 **CHAAS
ACQUISITIONS, LLC**
 **NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS**
 **(Dollars
in thousands)**
 **(Unaudited)**
  ****
 **1. BASISOF PRESENTATION**
 
 On
April 15, 2003, substantially all of the equity interests of the Advanced
Accessory Systems, LLC ("the Predecessor") were acquired by Castle Harlan
Partners IV, L.P. ("the Acquisition"), a private equity investment fund
organized and managed by Castle Harlan Inc., a private New York based equity
firm. CHAAS Holdings, LLC ("CHAAS Holdings") was formed in April 2003 in
connection with the Acquisition and was the direct parent of CHAAS Acquisitions,
LLC ("CHAAS Acquisitions" or "the Company") which was also formed pursuant to
the Acquisition.
 In
January 2004, Advanced Accessory Holdings Corporation ("AAHC") was formed by
CHAAS Holdings. At that time, CHAAS Holdings made a contribution of all of its
equity interests in CHAAS Acquisitions to AAHC in exchange for all the
outstanding membership units of AAHC. Subsequent to this transaction, CHAAS
Holdings is the direct parent of AAHC and AAHC is the direct parent of CHAAS
Acquisitions and the indirect parent of the Predecessor. Unless the context
otherwise requires, all information which refers to "we," "our" or "us" refers
to CHAAS Acquisitions and its subsidiaries.
 
 The
Acquisition was accounted for in accordance with the purchase method of
accounting. Accordingly, the purchase price of the Acquisition has been
allocated to identifiable assets acquired and liabilities assumed based upon
their estimated fair values at the acquisition date.
 
 The North
American subsidiaries of the Company use a fiscal month-end that corresponds to
two four-week months and one five-week month per quarter, each ending on
Saturday. The exception to this rule is at year-end, when the subsidiaries close
on December 31. The Company’s Brink subsidiary uses the calendar month-end and
year-end. The Company’s financial statements are dated as of the end of the
calendar period, although they reflect the different closing dates identified
above.
 
 The
accompanying unaudited consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America for interim financial information and with the instructions to Form
10-Q. Accordingly, they do not include all information and footnotes required by
accounting principles generally accepted in the United States of America for
complete financial statements and should be read in conjunction with the Annual
Report on Form 10-K for the fiscal year ended December 31, 2004.
 
 In the
opinion of the Company, the accompanying unaudited consolidated condensed
financial statements contain all adjustments, which are normal and recurring in
nature, necessary to present fairly its financial position as of March 31, 2005
and December 31, 2004 and the results of its operations for the three months
ended March 31, 2005 and 2004. The Company has reclassified certain prior year
amounts to conform to the presentation of our current consolidated financial
statements.
  **2.**
    **COMPREHENSIVE
      LOSS**
 
 Comprehensive
loss for the Company is as follows:
 Three
      months ended
      March
      31, 2005
    
    Three
      months ended
      March
      31, 2004Net
      loss
    
    $
    (5,875
    )
    $
    (285
    )Change
      in the cumulative translation adjustment, net of tax
    
    
    (1,690
    )
    
    (985
    )Comprehensive
      loss
    
    $
    (7,565
    )
    $
    (1,270
    )
 
 
 **3.**
    **CURRENCY
      CONTRACTS**
 
 The
Company has significant operations in Europe where the functional currency is
the Euro. Our objective is to protect reported earnings from volatility in the
Euro/US Dollar exchange rates. On February 12, 2004, when the Euro to the US
Dollar exchange rate was 1.28:1.00, the Company entered into a series of foreign
currency forward option contracts related to the Euro ("Euro Collar"), which
matured quarterly on a staggered basis. On May 12, 2004 when the Euro to US
Dollar exchange rate was 1.19:1.00, the Company entered into additional foreign
currency option contracts. The Company provided a $1,900 letter of credit in
support of the foreign currency option contracts. To the extent that the quarter
end exchange rate falls between the Euro collar exchange rates, fulfillment of
the Euro collar exchange contracts will result in offsetting foreign currency
gains and losses upon expiration. For each reporting period, the Company
recorded the fair value, as determined by independent financial institutions, of
open obligations and the resultant gains and losses are recorded in the
Statement of Operations. The Company recorded an unrealized gain on foreign
currency options in the first quarters of 2005 and 2004 of $138 and $145,
respectively. Two option contracts having zero value expired during the first
quarter of 2005 and three option contracts having zero value expired during the
same period in 2004.
 
 A summary
of outstanding foreign currency option contracts at March 31, 2005 is as
follows:
  **Euro
      Collar Exchange Rates****Expiration
      Date**
    **Contract
      Date**
    **Notional
      Value**
    **Purchased**
      **Put
      Option**
    **Sold**
      **Call
      Option**
    **Purchased**
      **Call
      Option****(thousands)**June
      28, 2005
    May
      12, 2004
    €3,000
    $1.150
    $1.242
    $1.300
  5
 **CHAAS
ACQUISITIONS, LLC**
 **NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS**
 **(Dollars
in thousands)**
 **(Unaudited)**
 **4.**  **GOODWILL
AND INTANGIBLE ASSETS**
 
 The
carrying amount of goodwill was $39,061 at March 31, 2005 and December 31, 2004.
A summary of intangible assets identified by the Company in the allocation of
the April 15, 2003 purchase consideration follows **:**
   **Customer**
      **Contracts**
    
    **Customer**
      **Relationships**
    
    **Technology**
    
    **Intangible**
      **Pension
      Asset**
    
    **Tradename
      /**
      **Trademark**
    
    **Deferred**
      **Financing
      Costs**
    
    **Total**Amortization
      period in years
    
    
    *8
      - 10*
    
    
    *18
      - 21*
    
    
    *10*
    
    
    *15*
    
    
    *Indefinite*Balance
      at December 31, 2004
    
    $
    35,475
    
    $
    34,206
    
    $
    14,992
    
    $
    514
    
    $
    11,477
    
    $
    6,171
    
    $
    102,835Additions
    
    
    —
    
    
    —
    
    
    4
    
    
    —
    
    
    —
    
    
    —
    
    
    4Foreign
      currency translation
    
    
    (70
    )
    
    (582
    )
    
    (30
    )
    
    —
    
    
    (134
    )
    
    (23
    )
    
    (839
    )Amortization
    
    
    (1,030
    )
    
    (586
    )
    
    (450
    )
    
    —
    
    
    —
    
    
    (267
    )
    
    (2,333
    )Balance
      at March 31, 2005
    
    $
    34,375
    
    $
    33,038
    
    $
    14,516
    
    $
    514
    
    $
    11,343
    
    $
    5,881
    
    $
    99,667
 
 Amortization
expense of identifiable intangible assets for the quarter ended March 31, 2005
was $2,333.
  **5.**  **CONDENSED
CONSOLIDATING INFORMATION**
   On May 23, 2003, the Company’s wholly-owned subsidiaries, Advanced Accessory
Systems, LLC and AAS Capital Corporation, issued and sold 103⁄4% Senior Notes -
Series A due 2011. On November 18, 2003, these notes were exchanged for 103⁄4%
Senior Notes - Series B , (the "103⁄4% Senior Notes") having substantially the
same terms. The 103⁄4% Senior Notes are guaranteed on a full, unconditional and
joint and several basis by the Company and all of the Company’s direct and
indirect wholly-owned domestic subsidiaries.
 
 The
following condensed consolidating financial information presents the financial
position, results of operations and cash flows of (i) the Company (the
"Parent"), as of March 31, 2005 and December 31, 2004 and for the three months
ended March 31, 2005 and 2004 as if it accounted for its subsidiaries on the
equity method, (ii) Advanced Accessory Systems, LLC and AAS Capital Corporation
as issuers; (iii) guarantor subsidiaries which are domestic, wholly-owned
subsidiaries and include SportRack LLC, Valley Industries, LLC, AASA Holdings,
LLC and ValTek, LLC; and (iv) the non-guarantor subsidiaries which are foreign,
wholly-owned subsidiaries and include Brink International B.V. and its
subsidiaries, SportRack Accessories, Inc. and its subsidiary, and SportRack
Automotive GmbH and its subsidiaries.
 
 
  6
 **CHAAS
ACQUISITIONS, LLC**
 **NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS**
 **(Dollars
in thousands)**
 **(Unaudited)**
  **4.**
    **CONDENSED
      CONSOLIDATING INFORMATION —
(continued)**
 
 **CONDENSED
CONSOLIDATING BALANCE SHEET**
 **March
31, 2005**
 
 **Parent**
    
    **Issuers**
    
    **Guarantor**
      **subsidiaries**
    
    **Non-guarantor**
      **subsidiaries**
    
    **Eliminations/**
      **adjustments**
    
    **Consolidated****ASSETS**Current
      assetsCash
    
    $
    16
    
    $
    —
    
    $
    426
    
    $
    4,285
    
    $
    —
    
    $
    4,727Accounts
      receivable
    
    
    —
    
    
    —
    
    
    42,422
    
    
    29,739
    
    
    —
    
    
    72,161Inventories
    
    
    —
    
    
    —
    
    
    25,814
    
    
    39,898
    
    
    —
    
    
    65,712Other
      current assets
    
    
    23
    
    
    1,689
    
    
    9,069
    
    
    3,961
    
    
    —
    
    
    14,742Total
      current assets
    
    
    39
    
    
    1,689
    
    
    77,731
    
    
    77,883
    
    
    —
    
    
    157,342Property
      and equipment, net
    
    
    —
    
    
    143
    
    
    33,142
    
    
    40,985
    
    
    —
    
    
    74,270Goodwill
    
    
    —
    
    
    —
    
    
    39,061
    
    
    —
    
    
    —
    
    
    39,061Other
      intangible assets, net
    
    
    —
    
    
    5,085
    
    
    73,227
    
    
    21,355
    
    
    —
    
    
    99,667Deferred
      income taxes and other noncurrent assets
    
    
    —
    
    
    7,064
    
    
    516
    
    
    3,023
    
    
    —
    
    
    10,603Investment
      in and advances to subsidiaries
    
    
    107,184
    
    
    236,521
    
    
    13,993
    
    
    249
    
    
    (357,947
    )
    
    —Total
      assets
    
    $
    107,223
    
    $
    250,502
    
    $
    237,670
    
    $
    143,495
    
    $
    (357,947
    )
    $
    380,943**LIABILITIES
      AND MEMBERS’ EQUITY**Current
      liabilitiesCurrent maturities of long-term debt
    
    $
    —
    
    $
    —
    
    $
    61
    
    $
    3,223
    
    $
    —
    
    $
    3,284Accounts payable
    
    
    —
    
    
    —
    
    
    34,829
    
    
    18,459
    
    
    —
    
    
    53,288Accrued liabilities and deferred income taxes
    
    
    —
    
    
    5,403
    
    
    6,372
    
    
    17,268
    
    
    —
    
    
    29,043Total
      current liabilities
    
    
    —
    
    
    5,403
    
    
    41,262
    
    
    38,950
    
    
    —
    
    
    85,615Deferred
      income taxes and other noncurrent liabilities
    
    
    —
    
    
    2,349
    
    
    369
    
    
    9,599
    
    
    —
    
    
    12,317Long-term
      debt, less current maturities
    
    
    —
    
    
    150,000
    
    
    29,812
    
    
    20,999
    
    
    —
    
    
    200,811Intercompany
      debt
    
    
    25,023
    
    
    —
    
    
    11,053
    
    
    65,336
    
    
    (101,412
    )
    
    —Members’
      equity
    
    
    82,200
    
    
    92,750
    
    
    155,174
    
    
    8,611
    
    
    (256,535
    )
    
    82,200Total
      liabilities and members’ equity
    
    $
    107,223
    
    $
    250,502
    
    $
    237,670
    
    $
    143,495
    
    $
    (357,947
    )
    $
    380,943
  7
 **CHAAS
ACQUISITIONS, LLC**
 **NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS**
 **(Dollars
in thousands)**
 **(Unaudited)**
  **4.**
    **CONDENSED
      CONSOLIDATING INFORMATION —
(continued)**
 
 **CONDENSED
CONSOLIDATING BALANCE SHEET**
 **December
31, 2004**
 
 **Parent**
    
    **Issuers**
    
    **Guarantor**
      **subsidiaries**
    
    **Non-guarantor**
      **subsidiaries**
    
    **Eliminations/**
      **adjustments**
    
    **Consolidated****ASSETS**Current
      assetsCash
    
    $
    16
    
    $
    3⁄4
    
    $
    5,466
    
    $
    9,265
    
    $
    —
    
    $
    14,747Accounts
      receivable
    
    
    —
    
    
    —
    
    
    37,296
    
    
    24,449
    
    
    —
    
    
    61,745Inventories
    
    
    —
    
    
    —
    
    
    22,834
    
    
    38,560
    
    
    —
    
    
    61,394Other
      current assets
    
    
    23
    
    
    663
    
    
    10,879
    
    
    2,411
    
    
    —
    
    
    13,976Total
      current assets
    
    
    39
    
    
    663
    
    
    76,475
    
    
    74,685
    
    
    —
    
    
    151,862Property
      and equipment, net
    
    
    —
    
    
    133
    
    
    31,084
    
    
    43,896
    
    
    —
    
    
    75,113Goodwill
    
    
    —
    
    
    3⁄4
    
    
    39,061
    
    
    3⁄4
    
    
    —
    
    
    39,061Other
      intangible assets, net
    
    
    —
    
    
    5,288
    
    
    74,980
    
    
    22,567
    
    
    —
    
    
    102,835Deferred
      income taxes and other noncurrent assets
    
    
    4,199
    
    
    6,074
    
    
    (4,396
    )
    
    3,205
    
    
    29
    
    
    9,111Investment
      in and advances to subsidiaries
    
    
    114,749
    
    
    239,156
    
    
    13,682
    
    
    250
    
    
    (367,837
    )
    
    3⁄4Total
      assets
    
    $
    118,987
    
    $
    251,314
    
    $
    230,886
    
    $
    144,603
    
    $
    (367,808
    )
    $
    377,982**LIABILITIES
      AND MEMBERS’ EQUITY**Current
      liabilitiesCurrent
      maturities of long-term debt
    
    $
    —
    
    $
    —
    
    $
    61
    
    $
    3,007
    
    $
    —
    
    $
    3,068Accounts
      payable
    
    
    —
    
    
    —
    
    
    27,385
    
    
    19,279
    
    
    —
    
    
    46,664Accrued
      liabilities and deferred income taxes
    
    
    —
    
    
    1,297
    
    
    6,551
    
    
    16,979
    
    
    —
    
    
    24,827Total
      current liabilities
    
    
    —
    
    
    1,297
    
    
    33,997
    
    
    39,265
    
    
    —
    
    
    74,559Deferred
      income taxes and other noncurrent liabilities
    
    
    —
    
    
    2,348
    
    
    (1,157
    )
    
    10,288
    
    
    —
    
    
    11,479Long-term
      debt, less current maturities
    
    
    —
    
    
    150,000
    
    
    32,260
    
    
    19,919
    
    
    —
    
    
    202,179Intercompany
      debt
    
    
    29,222
    
    
    —
    
    
    9,879
    
    
    64,946
    
    
    (104,047
    )
    
    —Members’
      equity
    
    
    89,765
    
    
    97,669
    
    
    155,907
    
    
    10,185
    
    
    (263,761
    )
    
    89,765Total
      liabilities and members’ equity
    
    $
    118,987
    
    $
    251,314
    
    $
    230,886
    
    $
    144,603
    
    $
    (367,808
    )
    $
    377,982
  8
 **CHAAS
ACQUISITIONS, LLC**
 **NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS**
 **(Dollars
in thousands)**
 **(Unaudited)**
  **4.**
    **CONDENSED
      CONSOLIDATING INFORMATION —
(continued)**
 
 **CONDENSED
CONSOLIDATING STATEMENT OF OPERATIONS**
 **For
the three months ended March 31, 2005**
 **Parent**
    
    **Issuers**
    
    **Guarantor**
      **subsidiaries**
    
    **Non-guarantor**
      **subsidiaries**
    
    **Eliminations/**
      **adjustments**
    
    **Consolidated**Net
      sales
    
    $
    —
    
    $
    —
    
    $
    70,286
    
    $
    40,984
    
    $
    —
    
    $
    111,270Cost
      of sales
    
    
    —
    
    
    —
    
    
    61,906
    
    
    29,588
    
    
    —
    
    
    91,494Gross
      profit
    
    
    —
    
    
    —
    
    
    8,380
    
    
    11,396
    
    
    —
    
    
    19,776Selling,
      administrative and product development expenses
    
    
    —
    
    
    1,666
    
    
    6,618
    
    
    8,301
    
    
    —
    
    
    16,585Amortization
      of intangible assets
    
    
    —
    
    
    —
    
    
    1,725
    
    
    341
    
    
    —
    
    
    2,066Operating
      income (loss)
    
    
    —
    
    
    (1,666
    )
    
    37
    
    
    2,754
    
    
    —
    
    
    1,125Interest
      expense
    
    
    —
    
    
    (3,427
    )
    
    (753
    )
    
    (1,503
    )
    
    —
    
    
    (5,683
    )Equity
      in income (loss) of subsidiaries
    
    
    (5,875
    )
    
    —
    
    
    —
    
    
    —
    
    
    5,875
    
    
    —Foreign
      currency gain (loss), net
    
    
    —
    
    
    138
    
    
    7
    
    
    (1,476
    )
    
    —
    
    
    (1,331
    )Other
      expense
    
    
    —
    
    
    —
    
    
    (3
    )
    
    (7
    )
    
    —
    
    
    (10
    )Income
      (loss) before income taxes
    
    
    (5,875
    )
    
    (4,955
    )
    
    (712
    )
    
    (232
    )
    
    5,875
    
    
    (5,899
    )Provision
      (benefit) for income taxes
    
    
    —
    
    
    —
    
    
    15
    
    
    (39
    )
    
    —
    
    
    (24
    )Net
      income (loss)
    
    $
    (5,875
    )
    $
    (4,955
    )
    $
    (727
    )
    $
    (193
    )
    $
    5,875
    
    $
    (5,875
    )
 
 **CONDENSED
CONSOLIDATING STATEMENT OF OPERATIONS**
 **For
the three months ended March 31, 2004**
  **Parent**
    
    **Issuers**
    
    **Guarantor**
      **subsidiaries**
    
    **Non-guarantor**
      **subsidiaries**
    
    **Eliminations/**
      **adjustments**
    
    **Consolidated**Net
      sales
    
    $
    —
    
    $
    —
    
    $
    62,028
    
    $
    34,603
    
    $
    —
    
    $
    96,631Cost
      of sales
    
    
    —
    
    
    —
    
    
    49,951
    
    
    24,113
    
    
    —
    
    
    74,064Gross
      profit
    
    
    —
    
    
    —
    
    
    12,077
    
    
    10,490
    
    
    —
    
    
    22,567Selling,
      administrative and product development expenses
    
    
    —
    
    
    1,387
    
    
    6,274
    
    
    7,424
    
    
    —
    
    
    15,085Amortization
      of intangible assets
    
    
    —
    
    
    —
    
    
    1,725
    
    
    326
    
    
    —
    
    
    2,051Operating
      income (loss)
    
    
    —
    
    
    (1,387
    )
    
    4,078
    
    
    2,740
    
    
    —
    
    
    5,431Interest
      expense
    
    
    —
    
    
    (3,918
    )
    
    (584
    )
    
    (601
    )
    
    —
    
    
    (5,103
    )Equity
      in income (loss) of subsidiaries
    
    
    (285
    )
    
    —
    
    
    —
    
    
    —
    
    
    285
    
    
    —Foreign
      currency gain (loss)
    
    
    —
    
    
    —
    
    
    145
    
    
    (773
    )
    
    —
    
    
    (628
    )Other
      income (expense)
    
    
    —
    
    
    —
    
    
    (236
    )
    
    147
    
    
    —
    
    
    (89
    )Income
      (loss) before income taxes
    
    
    (285
    )
    
    (5,305
    )
    
    3,403
    
    
    1,513
    
    
    285
    
    
    (389
    )Provision
      (benefit) for income taxes
    
    
    —
    
    
    (1,857
    )
    
    1,236
    
    
    517
    
    
    —
    
    
    (104
    )Net
      income (loss)
    
    $
    (285
    )
    $
    (3,448
    )
    $
    2,167
    
    $
    996
    
    $
    285
    
    $
    (285
    )
 9
 **CHAAS
ACQUISITIONS, LLC**
 **NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS**
 **(Dollars
in thousands)**
 **(Unaudited)**
  **CONDENSED
CONSOLIDATING STATEMENT OF CASH FLOWS**
 **For
the three months ended March 31, 2005**
 
 **Parent**
    
    **Issuers**
    
    **Guarantor**
      **subsidiaries**
    
    **Non-guarantor**
      **subsidiaries**
    
    **Eliminations/**
      **adjustments**
    
    **Consolidated**Net
      cash provided by (used for) operating activities
    
    $
    —
    
    $
    19,956
    
    $
    (18,067
    )
    $
    (6,050
    )
    $
    —
    
    $
    (4,161
    )Cash
      flows used for investing activities:Acquisition
      of property and equipment
    
    
    —
    
    
    (10
    )
    
    (4,122
    )
    
    (695
    )
    
    —
    
    
    (4,827
    )Net
      cash used for investing activities
    
    
    —
    
    
    (10
    )
    
    (4,122
    )
    
    (695
    )
    
    —
    
    
    (4,827
    )Cash
      flows from financing activities:Net increase (decrease) in revolving loan
    
    
    —
    
    
    (19,946
    )
    
    17,146
    
    
    2,589
    
    
    —
    
    
    (211
    )Repayment of debt
    
    
    —
    
    
    —
    
    
    3
    
    
    (339
    )
    
    —
    
    
    (336
    )Net
      cash provided by (used for) financing activities
    
    
    —
    
    
    (19,946
    )
    
    17,149
    
    
    2,250
    
    
    —
    
    
    (547
    )Effect
      of exchange rate changes
    
    
    —
    
    
    —
    
    
    —
    
    
    (485
    )
    
    —
    
    
    (485
    )Net
      decrease in cash
    
    
    —
    
    
    —
    
    
    (5,040
    )
    
    (4,980
    )
    
    —
    
    
    (10,020
    )Cash
      at beginning of period
    
    
    16
    
    
    —
    
    
    5,466
    
    
    9,265
    
    
    —
    
    
    14,747Cash
      at end of period
    
    $
    16
    
    $
    —
    
    $
    426
    
    $
    4,285
    
    $
    —
    
    $
    4,727
  **CONDENSED
CONSOLIDATING STATEMENT OF CASH FLOWS**
 **For
the three months ended March 31, 2004**
 
 **Parent**
    
    **Issuers**
    
    **Guarantor**
      **subsidiaries**
    
    **Non-guarantor**
      **subsidiaries**
    
    **Eliminations/**
      **adjustments**
    
    **Consolidated**Net
      cash provided by (used for) operating activities
    
    $
    (9
    )
    $
    (576
    )
    $
    3,622
    
    $
    1,310
    
    $
    —
    
    $
    4,347Cash
      flows used for investing activities:Acquisition
      of property and equipment
    
    
    —
    
    
    —
    
    
    (1,896
    )
    
    (749
    )
    
    —
    
    
    (2,645
    )Net
      cash used for investing activities
    
    
    —
    
    
    —
    
    
    (1,896
    )
    
    (749
    )
    
    —
    
    
    (2,645
    )Cash
      flows from financing activities:Change in intercompany debt
    
    
    9
    
    
    576
    
    
    2,947
    
    
    (3,532
    )
    
    —
    
    
    —Net increase (decrease) in revolving loan
    
    
    —
    
    
    —
    
    
    (3,473
    )
    
    3,083
    
    
    —
    
    
    (390
    )Repayment of debt
    
    
    —
    
    
    —
    
    
    (31
    )
    
    (449
    )
    
    —
    
    
    (480
    )Net
      cash provided by (used for) financing activities
    
    
    9
    
    
    576
    
    
    (557
    )
    
    (898
    )
    
    —
    
    
    (870
    )Effect
      of exchange rate changes
    
    
    —
    
    
    —
    
    
    —
    
    
    528
    
    
    —
    
    
    528Net
      increase in cash
    
    
    —
    
    
    —
    
    
    1,169
    
    
    191
    
    
    —
    
    
    1,360Cash
      at beginning of period
    
    
    16
    
    
    —
    
    
    12,629
    
    
    4,041
    
    
    —
    
    
    16,686Cash
      at end of period
    
    $
    16
    
    $
    —
    
    $
    13,798
    
    $
    4,232
    
    $
    —
    
    $
    18,046
  10
 **CHAAS
ACQUISITIONS, LLC**
   **Item
      2.**
    **Management'sDiscussion and Analysis of Financial
      Condition and Results of
Operations**
 
 The
following discussion of our results of operations and financial condition should
be read in conjunction with our financial statements and notes thereto included
elsewhere in this Form 10-Q. This Form 10-Q contains forward-looking statements.
Discussions containing forward-looking statements may be found in the material
set forth above, in the material set forth below, as well as in this Form 10-Q
generally. Forward-looking statements generally can be identified by the use of
terms such as "may," "will," "should," "expect," "anticipate," "believe,"
"intend," "plan," "estimate," "predict," "potential," "forecast," "project,"
"will be," "continue" or variations of such terms, or the use of these terms in
the negative.  Our actual results may differ significantly from the results
discussed in the forward-looking statements, and such differences may be
material.  General risks that may impact the achievement of such forecasts
include, but are not limited to: compliance with new laws and regulations,
general economic conditions in the markets in which we operate, fluctuation in
demand for our products and in the production of vehicles for which we are a
supplier, significant raw material price fluctuations, labor disputes with our
employees or those of our significant customers or suppliers, changes in
consumer preferences, dependence on significant automotive customers, the level
of competition in the automotive supply industry, pricing pressure from
automotive customers, our substantial leverage, limitations imposed by our debt
facilities, changes in the popularity of particular vehicle models or towing and
rack systems, the loss of programs on particular vehicle models, risks
associated with conducting business in foreign countries, other business factors
and other risks detailed from time to time in the Company’s reports filed with
the Securities & Exchange Commission.  Any such forward-looking
statements are not guarantees of future performance and involve risks and
uncertainties.  Actual events or results may differ materially from those
discussed in the forward-looking statements.  All of these forward-looking
statements are based on estimates and assumptions made by our management which,
although believed to be reasonable, are inherently uncertain.  Given these
risks and uncertainties, readers are cautioned not to place undue reliance on
forward-looking statements.  We disclaim any obligation to update any
forward-looking statements.
 
 **OVERVIEW**
 
 We are
one of the world’s leading designers and manufacturers of exterior accessories
for automotive original equipment manufacturers and the aftermarket. We design
and manufacture a wide array of both rack systems and towing systems and related
accessories. Our broad offering of rack systems includes fixed and detachable
racks and accessories, which can be installed on vehicles to carry items such as
bicycles, skis, luggage, surfboards, and sailboards. Our towing products and
accessories include trailer hitches, trailer balls, ball mounts, electrical
harnesses, safety chains and locking pins. Our products are sold to OEM’s as
standard accessories or options for a variety of light vehicles and to the
aftermarket.
 
 **Company
Background**
 
 On April
15, 2003, substantially all of the equity interests of Advanced Accessory
Systems, LLC ("the Predecessor") were acquired by Castle Harlan Partners IV,
L.P. ("the Acquisition"), a private equity investment fund organized and managed
by Castle Harlan Inc., a private New York based equity firm. CHAAS Holdings, LLC
("CHAAS Holdings") was formed in April 2003 in connection with the Acquisition
and was the direct parent of CHAAS Acquisitions, LLC ("CHAAS Acquisitions" or
"the Company") which was also formed pursuant to the Acquisition.
 
 In
January 2004, Advanced Accessory Holdings Corporation ("AAHC") was formed by
CHAAS Holdings. At that time, CHAAS Holdings made a contribution of all of its
equity interests in CHAAS Acquisitions to AAHC in exchange for all the
outstanding membership units of AAHC. Subsequent to this transaction, CHAAS
Holdings is the direct parent of AAHC and AAHC is the direct parent of CHAAS
Acquisitions and the indirect parent of the Predecessor. Unless the context
otherwise requires, all information which refers to "we", "our" or "us" refers
to CHAAS Acquisitions and its subsidiaries.
 
  11
 **CHAAS
ACQUISITIONS, LLC**
  **RESULTS
OF OPERATIONS**
 
 **Three
Months Ended March 31, 2005 Compared to the Three Months Ended March 31,
2004**
 
 *Net
sales.* Net
sales for the first quarter of 2005 were $111.3 million, representing an
increase of $14.7 million, or 15.2%, compared with net sales of $96.6 million
for the first quarter of 2004. This increase primarily includes approximately
$3.0 million due to the increase of the average exchange rates between the US
Dollar and primarily the Euro, the functional currency of Brink and SportRack
Europe. Additionally, North American OEM sales increased approximately $6.8
million, primarily as a result of new program launches at SportRack. Offsetting
these increases in sales were agreed-upon price concessions with certain large
OEM customers at SportRack US of $1.3 million. Sales to our aftermarket
customers in both North America and Europe increased $5.9 million of which
approximately $3.2 million represented revenue from surcharges for steel
economics with the remainder attributable to other volume increases.
 
 *Gross
profit.* Gross
profit for the first quarter of 2005 was $19.8 million, which represents a
decrease of $2.8 million, or 12.4%, compared with gross profit of $22.6 for the
first quarter of 2004. Gross profit as a percentage of net sales was 17.8% for
the first quarter of 2005 and was 23.4% for the first quarter of 2004. The
decrease in gross profit and gross margin percentage reflects higher costs for
steel, aluminum and resin as well as price decreases to our OEM customers.
During the quarter, increased cost of raw material resulted in lower gross
profit of approximately $0.9 million net of recovery through the introduction of
steel surcharges on some of our aftermarket towing systems products. Pursuant to
pre-negotiated contractual obligations, OEM customer price reductions totaled
approximately $1.4 million during the first quarter of 2005. Gross profit was
also negatively impacted by excess manufacturing costs associated with program
launches. These decreases were offset by additional gross profit that was driven
by the increased sales.
 
 *Selling,
administrative and product development expenses.* Selling,
administrative and product development expenses for the first quarter of 2005
were $16.6 million representing an increase of $1.5 million, or 9.9%, compared
with $15.1 million for the first quarter of 2004. This increase is primarily due
to higher levels of selling expenses to support sales growth and general and
administrative expenses. In addition, expenses increased by $0.4 million
resulting from an increase in the average exchange rates between the US Dollar
and primarily the Euro.
 
 *Operating
income.* Our
operating income for the first quarter of 2005 was $1.1 million representing a
decrease of $4.3 million, or 79.6%, compared with operating income of $5.4
million for the first quarter of 2004. The decrease resulted from decreased
gross profit and increased selling, administrative and product development
expenses.
 
 *Interest
expense.* Interest
expense for the first quarter of 2005 was $5.7 million representing a increase
of $0.6 million or 11.8%, compared with interest expense of $5.1 million for the
first quarter of 2004. This increase is a result of higher overall outstanding
variable rate debt and slightly higher interest rates during the first quarter
of 2005 relative to the first quarter of 2004.
 
 *Foreign
currency loss.* Foreign
currency loss in the first quarter of 2005 was $1.3 million compared to a
foreign currency loss of $0.6 million in the first quarter of 2004. These losses
were primarily attributable to the US Dollar denominated intercompany
indebtedness of Brink, whose functional currency is the Euro. During the first
quarters of both 2004 and 2005 the US Dollar strengthened in comparison with the
Euro. The intercompany indebtedness for our foreign subsidiaries other than
Brink are deemed to be permanently invested and therefore changes in the
intercompany balances for these subsidiaries caused by foreign currency
fluctuations have been recorded in the currency translation adjustment account
and included in other comprehensive income.
 
 *Benefit
from income taxes.* During
the first quarter of 2005 we recorded a loss before income taxes of $5.9 million
and recorded an income tax benefit of $0.02 million. The effective tax rate
differs from the US federal income tax rate primarily due to changes in
valuation allowances on the deferred tax assets of all North American operations
and differences in the tax rates of foreign countries. During the first quarter
of 2004 we had a net loss before taxes of $0.4 million and recorded an income
tax benefit of $0.1 million.
 
 *Net
loss* . We
recorded a net loss of $5.9 million in the first quarter of 2005 and a net loss
of $0.3 million in the first quarter of 2004. The net losses were a result of
the items discussed above related to net sales, gross profit and the other
expense and income items.
 
 
 **LIQUIDITY
AND CAPITAL RESOURCES**
 
 Our
principal liquidity requirements are to service our debt and meet our working
capital and capital expenditure needs. Our indebtedness at March 31,
2005 was $204.1 million including current maturities of $3.3 million.
 
 In 2004
our operating results and operating cash flows were negatively impacted
primarily by the costs associated with launching an unprecedented number of new
roof rack programs, the high costs of steel and pricing pressures from certain
OEM customers. As a result of these and other factors, our availability under
our revolving credit facilities declined to $27.1 million at December 31, 2004
and $26.6 million at March 31, 2005 from $38.1 million available at September
30, 2004. Although we met our covenants for the quarter ended December 31, 2004,
we anticipated that we would be unable to meet our fixed charge coverage ratio
and senior secured leverage ratio covenants for the quarter ended March 31,
2005. On March 30, 2005, we entered into the Fourth Amendment to the Amended and
Restated Credit Agreement (the "Fourth Amendment") with General Electric Capital
Corporation individually as a lender and as agent for the lenders referred to
therein to modify the fixed charge coverage ratio and the senior secured
leverage ratio.
 
 12
 **CHAAS
ACQUISITIONS, LLC**
****
 Under the
modified fixed charge coverage ratio covenant, the required minimum fixed charge
coverage ratio will be determined quarterly for all borrowers for specified
quarterly periods and for European borrowers for specified quarterly periods.
Prior to this modification the required minimum fixed charge coverage ratios for
all borrowers and their subsidiaries were 1.15:1.00. As modified, the required
minimum fixed charge coverage ratios for all borrowers and their subsidiaries
range from 1.15:1.00 for each fiscal quarter from the fiscal quarter ending June
30, 2004 through and including the fiscal quarter ending December 31, 2004;
1.05:1.00 for the fiscal quarter ending December 31, 2005; and 1.15:1.00 for
each fiscal quarter ending thereafter. The required minimum fixed charge
coverage ratios for the European borrowers and their subsidiaries range from
1.25:1.00 for the fiscal quarters ending March 31, 2005, June 30, 2005 and
September 30, 2005. The actual fixed charge coverage ratio for the European
borrowers for the fiscal quarter ending March 31, 2005 was 1.61:1.0 and we were
in compliance with this covenant as of March 31, 2005.
  Although
we anticipate the ability to meet our modified covenants, there can be no such
assurance. Our principal sources of liquidity are funds derived from operations
and borrowings under our revolving credit facilities. Management believes that,
based on current and expected levels of operations, cash flows from operations
and borrowings under the revolving credit facilities will be sufficient to fund
its debt service requirements, working capital needs, and capital expenditures
for the next twelve months, although no assurances can be given in this regard.
Our ability to fund operations, make scheduled payments of interest and
principal on our indebtedness and maintain compliance with the terms of our
revolving credit facilities, including our fixed charge coverage ratio covenant
and senior secured leverage ratio covenant, depends on our future operating
performance, which is subject to economic, financial, competitive and other
factors beyond our control. If we are unable to generate sufficient cash flows
from operations to meet our financial obligations and achieve compliance with
our debt covenants, there would be a material adverse effect on our business,
financial condition and results of operations.
 
 
 **Working
Capital and Cash Flows**
 
 Working
capital and key elements of the consolidated statement of cash flows
are:
 
 March
      31,
      2005
    
    December
      31,
      2004(in
      thousands)Working
      Capital
    
    $
    71,727
    
    $
    77,303
 Three
      months ended
      March
      31,2005
    
    2004(in
      thousands)Cash
      flows provided by (used for) operating activities
    
    $
    (4,161
    )
    $
    4,347Cash
      flows used for investing activities
    
    $
    (4,827
    )
    $
    (2,645
    )Cash
      flows used for financing activities
    
    $
    (547
    )
    $
    (870
    )
 *Working
Capital*
 
 Working
capital decreased by $5.6 million to $71.7 million at March 31, 2005 from $77.3
million at December 31, 2004. This is due primarily to a decrease in cash of
$10.0 million, an increase in accounts payable of $6.6 million, an increase in
accrued liabilities of $4.3 million and an increase in the current maturities of
long-term debt of $0.2 million. These decreases in working capital were
partially offset by an increase in accounts receivable of $10.4 million, an
increase in inventories of $4.3 million, an increase in other current assets of
$0.8 million and a decrease in current deferred income tax liabilities of $0.1
million.  Included
in the net working capital decrease was the negative impact of the decreased
exchange rate between the US Dollar and the Euro as of March 31, 2005 as
compared with the exchange rate as of December 31, 2004.
 
 Increases
in accounts payable reflected increased purchasing activities to support the
increased sales volume.  The
increase in accrued expenses is primarily due to an increase in accrued interest
on our $150 million of 103⁄4% Senior Notes. The increase in accounts receivable
was attributable to the timing of payments from OEM customers and to increased
sales levels in the first quarter of 2005 as compared with the fourth quarter of
2004. Inventory increased primarily for our aftermarket products to support
seasonally higher sales for the period as compared with the period prior to
December 31, 2004. Differences in sales levels between the two periods are
primarily due to increased sales to automotive OEM's and seasonal sales levels
of our aftermarket products.
 
 *Operating
Activities*
 
 Our
operations used $4.2 million in cash during the first three months of 2005
compared to providing $4.3 million in the first three months of 2004. The
decrease of $8.5 million is primarily due to decreased net income before
depreciation and amortization of $0.1 million during the first quarter of 2005
as compared to $5.0 million in the first quarter of 2004 and an increase in
inventory and accounts receivable in 2005 of $5.7 million and $11.3 million,
respectively. These uses were partially offset by increases in accounts payable
of $7.4 million and accrued liabilities of $5.2 million. This balance sheet
activity includes the impact of foreign currencies.
 
 *Investing
Activities*
 
 Cash flow
used for investing activities for the first three months of 2005 and 2004
represented acquisitions of property and equipment of $4.8 million and $2.6
million, respectively, and were primarily for the expansion of capacity,
productivity, process improvements and maintenance.
 
  13
 **CHAAS
ACQUISITIONS, LLC**
  *Financing
Activities*
 
 During
the first three months of 2005, financing cash flows included a reduction in
borrowings under the revolving line of credit of $0.2 million and repayment of
debt of $0.3 million.
 
 **Debt
and Credit Sources**
 
 Our
indebtedness at March 31, 2005 was $204.1 million. We expect that our primary
sources of cash will be from operating activities and borrowings under our
revolving credit facilities. As of March 31, 2005, we had borrowings under the
revolving credit facilities totaling $23.0 million and had $26.6 million of
available borrowing capacity. Standby letters of credit totaling $2.9 million
providing security for our US workers compensation program and $1.9 million
providing security to a financial institution for foreign currency instruments
reduced borrowing availability.
 
 On March
30, 2005 we entered into the Fourth Amendment to the Amended and Restated Credit
Agreement. See the discussion of the amendment to the credit facility in "-
Liquidity and Capital Resources".
 
 *International
Operations*
 
 We
conduct operations in several foreign countries including Canada, the Czech
Republic, Denmark, France, Germany, Italy, The Netherlands, Poland, Spain,
Sweden and the United Kingdom. Net sales from international operations during
the first quarter of 2005 were $41.0 million, or 36.8% of our net sales. At
March 31, 2005, assets associated with these operations were approximately 37.7%
of total assets, and we had indebtedness denominated in currencies other than
the US Dollar of approximately $24.2 million.
 
 Our
international operations may be subject to volatility because of currency
fluctuations, inflation and changes in political and economic conditions in
these countries. Most of the revenues and costs and expenses of our operations
in these countries are denominated in the local currencies. The financial
position and results of operations of the Company's foreign subsidiaries are
measured using the local currency as the functional currency.
 
 *Currency
contracts*
 
 We have
significant operations in Europe where the functional currency is the Euro. Our
objective is to protect reported earnings from volatility in the Euro/US Dollar
exchange rates. On February 12, 2004, when the Euro to the US Dollar exchange
rate was 1.28:1.00, we entered into a series of foreign currency forward option
contracts related to the Euro ("Euro Collar"), which matured quarterly on a
staggered basis. On May 12, 2004 when the Euro to US Dollar exchange rate was
1.19:1.00, we entered into additional foreign currency option contracts. We
provided a $1.9 million letter of credit in support of the foreign currency
option contracts. To the extent that the quarter end exchange rate falls between
the Euro collar exchange rates, fulfillment of the Euro collar exchange
contracts will result in offsetting foreign currency gains and losses upon
expiration. For each reporting period we record the fair value, as determined by
independent financial institutions, of open obligations and the resultant gains
and losses are recorded in the Statement of Operations. We recorded an
unrealized gain on our foreign currency options in the first quarters of 2005
and 2004 of $0.1 million each. Two option contracts having zero value expired
during the first quarter of 2005 and three option contracts having zero value
expired during the same period in 2004.
 
 A summary
of outstanding foreign currency option contracts at March 31, 2005 is as
follows:
 
 **Euro
      Collar Exchange Rates****Expiration
      Date**
    **Contract
      Date**
    **Notional
      Value**
    **Purchased**
      **Put
      Option**
    **Sold**
      **Call
      Option**
    **Purchased**
      **Call
      Option****(thousands)**June
      28, 2005
    May
      12, 2004
    €3,000
    $1.150
    $1.242
    $1.300
 
 
 *Recently
Issued Accounting Standards*
 In March
2005, the FASB issued FIN 47, "Accounting for Conditional Asset Retirement
Obligations." FIN 47 clarifies that a conditional asset retirement obligation,
as used in SFAS 143, "Accounting for Asset Retirement Obligations," refers to a
legal obligation to perform an asset retirement activity in which the timing
and/or method of the settlement are conditional on a future event that may or
may not be within the control of the entity. Accordingly, an entity is required
to recognize a liability for the fair value of a conditional asset retirement
obligation if the fair value can be reasonably estimated. FIN 47 is effective
January 1, 2006, with early adoption allowed. We have not yet determined the
impact, if any, FIN 47 will have on the Company's consolidated financial
statements.
 **Item
3.**  **Quantitativeand Qualitative Disclosures About Market
Risk**
 
 In May
2004, we executed several foreign currency option contracts. See " -
Management’s Discussion and Analysis of Financial Condition and Results of
Operations - Debt and Credit Sources - Currency
Contracts".
 
 
 14
 **CHAAS
ACQUISITIONS, LLC**
****
 **Item
4.**  **Controlsand Procedures**
 
 Under the
supervision and with the participation of management, including our principal
executive officer and principal financial officer, the Company has evaluated the
effectiveness of the design and operation of its disclosure controls and
procedures as of March 31, 2005 and, based on their evaluation, the principal
executive officer and principal financial officer have concluded that these
controls and procedures are effective. There were no significant changes in
internal controls or in other factors that could significantly affect these
controls during the quarter.
 
 Disclosure
controls and
procedures are the Company’s controls and other procedures that are designed to
ensure that information required to be disclosed by the Company in the reports
that it files or submits under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), is recorded, processed, summarized and reported, within
the time periods specified in the Securities and Exchange Commission’s rules and
forms. Disclosure controls and procedures include, without limitation, controls
and procedures designed to ensure that information required to be disclosed in
the reports that the Company files under the Exchange Act is accumulated and
communicated to management, including the principal executive officer and
principal financial officer, as appropriate to allow timely decisions regarding
required disclosure.
 
 
 
 **PART
II. OTHER INFORMATION AND SIGNATURE**
 
 
 **Item
1.**  **LegalProceedings**
 
 From time
to time, we are subject to routine legal proceedings incidental to the operation
of our business. The outcome of any threatened or pending proceedings is not
expected to have a material adverse effect on our financial condition, operating
results or cash flows, based on our current understanding of the relevant facts.
The Company maintains insurance coverage against claims in an amount that it
believes to be adequate.
 
 
 **Item
2.**  **Changesin Securities, Use of Proceeds and Issuer Purchases of
Equity Security**
 
 None
 
 
 **Item
3.**  **DefaultsUpon Senior Securities**
 
 None
 
 
 **Item
4.**  **Submissionof Matters to a Vote of
Security-Holders**
 
 None
 
 
 **Item
5.**  **OtherInformation**
 
 None
 
 
 **Item
6.**  **Exhibits**
 
 Exhibit 31.1
    Certification
      of Chief Executive Officer Pursuant to Rules 13a-14 and 15d-14, as Adopted
      Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
 Exhibit 31.2
    Certification
      of Chief Financial Officer Pursuant to Rules 13a-14 and 15d-14, as Adopted
      Pursuant to Section 302 of the Sarbanes-Oxley Act of
  2002
 
 Exhibit 32.1
    Certification
      of Chief Executive Officer Pursuant To 18 U.S.C. Section 1350, as Adopted
      Pursuant To Section 906 of the Sarbanes-Oxley Act Of 2002
 
 Exhibit 32.2
    Certification
      of Chief Financial Officer Pursuant To 18 U.S.C. Section 1350, as Adopted
      Pursuant To Section 906 of the Sarbanes-Oxley Act Of 2002
 
 
 
 
   15
 **CHAAS
ACQUISITIONS, LLC**
 SIGNATURE
   
 Pursuantto 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.
 
 
 
 CHAAS
      ACQUISITIONS, LLCDate:
      May 13, 2005
    /s/
      Ronald J. GardhouseRonald
      J. GardhouseChief
      Financial Officer(Principal
      Financial Officerand
      Authorized Signatory)
 
 
  **CHAAS
ACQUISITIONS, LLC**
 
 **EXHIBIT
INDEX**
  
 
 
 Exhibit
    Description31.1
    Certification
      of Chief Executive Officer Pursuant to Rules 13a-14 and 15d-14, as Adopted
      Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    Certification
      of Chief Financial Officer Pursuant to Rules 13a-14 and 15d-14, as Adopted
      Pursuant to Section 302 of the Sarbanes-Oxley Act of
  200232.1
    Certification
      of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as
      Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
      200232.2
    Certification
      of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as
      Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002