**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 June 30,
                  2006
 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
               ̈
              No
              x
 Indicate
        by check mark whether the Registrant is a large accelerated filer, an
        accelerated filer, or a non-accelerated filer. See definition of “accelerated
        filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
        one):
 Large
        accelerated filer  ̈  Accelerated
        filer  ̈  Non-accelerated
        filer x
 Indicate
        by check mark whether the Registrant is a shell company (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 August 18, 2006Membership
                  Units
              
              100
 
 
 **CHAAS
              ACQUISITIONS, LLC**
  **INDEX**
 
 
  
 Page
                  No.Part
                  I.Financial
                  InformationItem
                  1.Financial
                  StatementsConsolidated
                  Condensed Balance Sheets as of June 30, 2006 (unaudited) and December
                  31, 2005
              
              
              1Consolidated
                  Condensed Statements of Operations for the three and six months
                  ended June
                  30, 2006 and 2005 (unaudited)
              
              
              2Consolidated
                  Condensed Statements of Cash Flows for the six months ended June
                  30, 2006
                  and 2005 (unaudited)
              
              
              3Consolidated
                  Condensed Statement of Changes in Members’ Equity for the six months ended
                  June 30, 2006 (unaudited)
              
              
              4Notes
                  to Consolidated Condensed Financial Statements (unaudited)
              
              
              5Item
                  2.Management's
                  Discussion and Analysis of Financial Condition and Results of
                  Operations
              
              
              16Item
                  3.Quantitative
                  and Qualitative Disclosures About Market Risk
              
              
              23Item
                  4.Controls
                  and Procedures
              
              
              23Part
                  II.Other
                  Information and SignatureItem
                  1.Legal
                  Proceedings
              
              
              23Item
                  1A.Risk
                  Factors
              
              
              23Item
                  2.Unregistered
                  Sales of Equity Securities and Use of Proceeds
              
              
              23Item
                  3.Defaults
                  Upon Senior Securities
              
              
              23Item
                  4.Submission
                  of Matters to a Vote of Security-Holders
              
              
              24Item
                  5.Other
                  Information
              
              
              24Item
                  6.Exhibits
              
              
              24Signature
              
              
              25
 
 
 **PART
              I. FINANCIAL INFORMATION**
 
 **Item
              1.**  **Financial
              Statements**
 
 **CHAAS
              ACQUISITIONS, LLC**
 **CONSOLIDATED
              CONDENSED BALANCE SHEETS**
 **As
              of June 30, 2006 and December 31, 2005**
 **(Dollars
              in thousands)**
  **June
                  30,**
              
              **December
                  31,****2006**
              
              **2005****ASSETS**
              
              
              **(Unaudited)**Current
                  assetsCash
              
              $
              2,185
              
              $
              13,429Accounts
                  receivable, less reserves of $165 and $1,870, respectively
              
              
              31,604
              
              
              64,318InventoriesRaw
                  materials
              
              
              6,542
              
              
              21,740Work-in-process
              
              
              4,478
              
              
              13,153Finished
                  goods
              
              
              1,289
              
              
              27,857Reserves
              
              
              (1,002
              )
              
              (4,437
              )Total
                  inventories
              
              
              11,307
              
              
              58,313Other
                  current assets
              
              
              4,200
              
              
              6,554Total
                  assets of discontinued operations
              
              
              206,066
              
              
              —Total
                  current assets
              
              
              255,362
              
              
              142,614Property
                  and equipment, net
              
              
              17,579
              
              
              62,871Intangible
                  assets, net
              
              
              64,319
              
              
              87,328Deferred
                  income taxes
              
              
              —
              
              
              131Other
                  noncurrent assets
              
              
              30,635
              
              
              18,502Total
                  Assets
              
              $
              367,895
              
              $
              311,446**LIABILITIES
                  AND MEMBERS’ EQUITY**Current
                  liabilitiesCurrent
                  maturities of long-term debt
              
              $
              14
              
              $
              3,940Accounts
                  payable
              
              
              20,528
              
              
              40,037Accrued
                  liabilities
              
              
              4,805
              
              
              22,708Deferred
                  income taxes
              
              
              —
              
              
              1,513Total
                  liabilities of discontinued operations
              
              
              239,416
              
              
              —Total
                  current liabilities
              
              
              264,763
              
              
              68,198Noncurrent
                  liabilitiesDeferred
                  income taxes
              
              
              1,797
              
              
              5,119Other
                  noncurrent liabilities
              
              
              44,060
              
              
              4,558Long-term
                  debt, less current maturities
              
              
              34,136
              
              
              209,808Total
                  noncurrent liabilities
              
              
              79,993
              
              
              219,485Members’
                  equityUnits
              
              
              100,900
              
              
              100,900Other
                  comprehensive income
              
              
              6,193
              
              
              4,338Accumulated
                  deficit
              
              
              (83,954
              )
              
              (81,475
              )Total
                  members’ equity
              
              
              23,139
              
              
              23,763Total
                  Liabilities and Members’ Equity
              
              $
              367,895
              
              $
              311,446
  The
              accompanying notes are an integral part of the
 consolidated
              condensed financial statements.
 1
 **PART
              I. FINANCIAL INFORMATION**
  **CHAAS
              ACQUISITIONS, LLC**
 **CONSOLIDATED
              CONDENSED STATEMENTS OF OPERATIONS**
 **(Dollars
              in thousands)**
  
 
 **Three
                  Months Ended**
              
              **Six
                  Months Ended****June
                  30,**
              
              **June
                  30,****2006**
              
              **2005**
              
              **2006**
              
              **2005**Net
                  sales
              
              $
              46,950
              
              $
              52,353
              
              $
              92,312
              
              $
              102,334Cost
                  of sales
              
              
              42,392
              
              
              45,888
              
              
              84,502
              
              
              89,982Gross
                  profit
              
              
              4,558
              
              
              6,465
              
              
              7,810
              
              
              12,352Selling,
                  administrative and product development expenses
              
              
              4,564
              
              
              5,237
              
              
              9,344
              
              
              11,056Amortization
                  of intangible assets
              
              
              1,797
              
              
              1,797
              
              
              3,591
              
              
              3,597Operating
                  loss
              
              
              (1,803
              )
              
              (569
              )
              
              (5,125
              )
              
              (2,301
              )Other
                  expenseInterest
                  expense
              
              
              (869
              )
              
              (637
              )
              
              (1,665
              )
              
              (1,208
              )Foreign
                  currency gain (loss), net
              
              
              439
              
              
              (440
              )
              
              637
              
              
              (609
              )Other
                  income (expense)
              
              
              (16
              )
              
              75
              
              
              (1
              )
              
              71Loss
                  from continuing operations before income taxes
              
              
              (2,249
              )
              
              (1,571
              )
              
              (6,154
              )
              
              (4,047
              )Benefit
                  from income taxes
              
              
              (978
              )
              
              (149
              )
              
              (844
              )
              
              (282
              )Net
                  loss from continuing operations
              
              
              (1,271
              )
              
              (1,422
              )
              
              (5,310
              )
              
              (3,765
              )Discontinued
                  operations:Income
                  (loss) from discontinued operations
              
              
              5,989
              
              
              2,124
              
              
              4,996
              
              
              (1,299
              )Provision
                  for income taxes
              
              
              1,944
              
              
              1,166
              
              
              2,165
              
              
              1,275Net
                  income (loss) from discontinued operations
              
              
              4,045
              
              
              958
              
              
              2,831
              
              
              (2,574
              )Net
                  income (loss)
              
              $
              2,774
              
              $
              (464
              )
              $
              (2,479
              )
              $
              (6,339
              )
 
  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)**
 
 
 **Six
                  months Ended****June
                  30,****2006**
              
              **2005****CASH
                  FLOWS FROM OPERATING ACTIVITIES:**Net
                  loss
              
              $
              (2,479
              )
              $
              (6,339
              )Adjustments
                  to reconcile net loss to netcash
                  provided by (used for) operating activities:Depreciation
                  and amortization
              
              
              10,971
              
              
              12,604Deferred
                  taxes
              
              
              (781
              )
              
              (671
              )Foreign
                  currency (gain)/loss
              
              
              (2,632
              )
              
              3,478Loss
                  on disposal of assets
              
              
              772
              
              
              8Interest
                  accretion on notes
              
              
              834
              
              
              689Changes
                  in assets and liabilities, net:Accounts
                  receivable
              
              
              (20,685
              )
              
              (23,718
              )Inventories
              
              
              942
              
              
              5Other
                  current assets
              
              
              251
              
              
              (3,341
              )Other
                  noncurrent assets
              
              
              (1,358
              )
              
              4,057Accounts
                  payable
              
              
              9,606
              
              
              3,876Accrued
                  liabilities
              
              
              3,122
              
              
              3,288Other
                  noncurrent liabilities
              
              
              215
              
              
              (572
              )Net
                  cash used for operating activities
              
              
              (1,222
              )
              
              (6,636
              )**CASH
                  FLOWS USED FOR INVESTING ACTIVITIES:**Acquisition
                  of property and equipment
              
              
              (3,359
              )
              
              (6,766
              )Proceeds
                  from disposals of property and equipment
              
              
              143
              
              
              —Net
                  cash used for investing activities
              
              
              (3,216
              )
              
              (6,766
              )**CASH
                  FLOWS (USED FOR) PROVIDED BY FINANCING
                  ACTIVITIES:**Net
                  increase (decrease) in revolving loan
              
              
              (675
              )
              
              6,182Repayment
                  of debt
              
              
              (1,898
              )
              
              (1,045
              )Net
                  cash (used for) provided by financing activities
              
              
              (2,573
              )
              
              5,137Effect
                  of exchange rate changes
              
              
              533
              
              
              (769
              )Net
                  decrease in cash
              
              
              (6,478
              )
              
              (9,034
              )Cash
                  at beginning of period
              
              
              13,429
              
              
              14,747Cash
                  at end of period
              
              $
              6,951
              
              $
              5,713
 
 
  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 Six Months Ended June 30, 2006**
 **(Dollars
                in thousands)**
 **(Unaudited)**
   
 
 **Other**
              
              
              
              **Total****Members’**
              
              **comprehensive**
              
              **Accumulated**
              
              **members’****capital**
              
              **income**
              
              **deficit**
              
              **equity**Balance
                  at December 31, 2005
              
              $
              100,900
              
              $
              4,338
              
              $
              (81,475
              )
              $
              23,763Currency
                  translation adjustment
              
              
              —
              
              
              1,855
              
              
              —
              
              
              1,855Net
                  loss
              
              
              —
              
              
              —
              
              
              (2,479
              )
              
              (2,479
              )Balance
                  at June 30, 2006
              
              $
              100,900
              
              $
              6,193
              
              $
              (83,954
              )
              $
              23,139
 
 
 
 
 
 
 
  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.**  **BASIS
        OF PRESENTATION**
 
 On
        April 15, 2003, substantially all of the equity interests of Advanced Accessory
        Systems, LLC (“AAS” or "Predecessor") were acquired by Castle Harlan
        Partners IV, L.P. (the "Acquisition"), a private equity investment fund
        organized and managed by Castle Harlan Inc. 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 formed as an acquisition vehicle to acquire the
        Predecessor's equity interest from J.P. Morgan Partners (23 SBIC), LLC,
        directors and officers of the Predecessor, and other investors .
 
 The
        aggregate consideration paid at or shortly after the closing of the Acquisition
        was approximately $266,000, approximately $168,000 of which was used to repay,
        assume or defease certain indebtedness at the time of the Acquisition and
        approximately $98,000 (inclusive of subordinated promissory notes and a
        subsequent working capital adjustment) of which was used for the closing
        purchase price of the equity interests of AAS.
 
 In
        January 2004, Advanced Accessory Holdings Corporation (“AAHC”) was formed by
        CHAAS Holdings, LLC in connection with an offering of the $88,000 aggregate
        principal amount at maturity, 131⁄4% Senior Discount Notes due 2011. At that time,
        CHAAS Holdings made a contribution of all of its equity interests in the
        Company
        to AAHC in exchange for all the outstanding membership units of AAHC. 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 the Company 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
        the
        estimated fair values at the acquisition date. The Company engaged an
        independent appraiser to assist in the determination of fair value at the
        acquisition date and such independent appraiser completed its work during
        the
        fourth quarter of 2003. The accompanying financial statements of the Company
        as
        of and for the periods ended June 30, 2005, December 31, 2005 and June 30,
        2006 reflect the allocation of the purchase consideration to tangible assets,
        goodwill and other identifiable intangible assets.
 
 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,
        2005.
 
 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 June 30,
        2006
        and the results of its operations for the three and six months ended June
        30,
        2006 and 2005.
 
 
  5
 **CHAAS
            ACQUISITIONS, LLC**
 **NOTES
            TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS**
 **(Dollars
            in thousands)**
 **(Unaudited)**
  **2.**
              **DISCONTINUED
                  OPERATIONS**
 
 On
        May 17, 2006, the Company and certain of its affiliates signed a purchase
        agreement (the “Agreement”) with Thule AB (“Buyer”) to sell substantially all of
        the net assets of Valley Industries, LLC (“Valley”) and all of the issued and
        outstanding stock of CHAAS Holdings B.V. (“Brink”) and AAS (collectively, the
“Discontinued Companies”). Pursuant to the Agreement, the Buyer will purchase
        the Automotive Accessories Business, consisting of Valley, Brink and SportRack
        Accessories Inc. and their respective subsidiaries. In accordance with the
        Agreement, on May 12, 2006, AAS transferred 100% of the outstanding
        membership interest of SportRack, LLC to the Company, and SportRack, LLC
        transferred to AAS its ownership of 10% of the outstanding stock issued by
        SportRack Accessories, Inc. in order that SportRack Accessories, Inc. is
        a
        wholly-owned subsidiary of AAS. The proceeds of the sale will be
        $203,000.  The expected gain on the sale is in the range of $75,000 to
        $85,000 based on current book values and the retirement of all of the long-term
        debt of the Company, except for certain capital leases. On July 13, 2006
        the Company, certain of its affiliates and the Buyer signed Amendment No.
        1 to
        the Agreement, a copy of which is attached to this Form 10-Q as Exhibit 10.1.
        The Company expects the transaction contemplated by the Agreement, as amended,
        to be consummated in the third quarter. A copy of the Agreement was filed
        as an
        exhibit to Form 8-K dated May 12, 2006.
 
 The
        Discontinued Companies manufacture towing systems for the Original Equipment
        Manufacturer’s market (OEM) and aftermarket in North America and Europe and
        lifestyle accessories for both the automotive and sporting accessory
        aftermarkets. These accessories typically attach to towing or rack systems
        and
        are used for carrying items such as bicycles, skis, luggage, surfboards and
        sailboards.
 
 On
        June 5, 2006, in connection with the sale of the Discontinued Companies,
        AAHC,
        AAS and AAS Capital Corporation (a wholly-owned subsidiary of AAS) commenced
        a
        combined tender offer and consent solicitation in respect of the 131⁄4% Senior
        Discount Notes due 2011, issued by AAHC pursuant to the indenture dated February
        4, 2004 and the 103⁄4% Senior Notes due 2011, issued by AAS and AAS Capital
        Corporation, pursuant to the indenture dated May 23, 2003. A copy of the
        press
        release announcing the combined tender offer and consent solicitation was
        filed
        as an exhibit to Form 8-K dated June 5, 2006.
 
 In
        accordance with FASB Statement No. 144, “Accounting for the Impairment or
        Disposal of Long-lived Assets,” (“SFAS No. 144”) the net assets of the
        Discontinued Companies were accounted for as held for sale subsequent to
        the
        signing of the Agreement on May 17, 2006. Accordingly, the Statement of
        Operations reports the results of the Discontinued Companies in a separate
        component of income after net loss from continuing operations for both current
        and prior periods. The assets and liabilities of the Discontinued Companies
        are
        presented separately as one line item each for total assets and liabilities
        for
        the current period only.
 
 SFAS
        No. 144 also requires long lived assets classified as held for sale to be
        recorded at the lower of their carrying value or fair value less cost to
        sell
        and that depreciation and amortization not be recorded on long lived assets
        while classified as held for sale. Based on the expected gain on the sale
        of the
        Discontinued Companies, the Company believes that the book value of their
        net
        assets is fairly stated and no write-down to fair value is
        required.
 
 Revenue
        and pre-tax income (loss) of the Discontinued Companies are as
        follows:
 
 Three
                  Months Ended
              
              Six
                  Months EndedJune
                  30, 2006
              
              June
                  30, 2005
              
              June
                  30, 2006
              
              June
                  30, 2005Revenues
              
              $
              78,583
              
              $
              76,069
              
              $
              139,748
              
              $
              137,358Pre-tax
                  income (loss)
              
              
              5,989
              
              
              2,124
              
              
              4,996
              
              
              (1,299
              )
 
 
  6
 **CHAAS
            ACQUISITIONS, LLC**
 **NOTES
            TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS**
 **(Dollars
            in thousands)**
 **(Unaudited)**
  **2.**
              **DISCONTINUED
                  OPERATIONS - (continued)**
 
 The
        assets and liabilities of the Discontinued Companies are as
        follows:
 
 June
                  30, 2006Cash
              
              $
              4,766Accounts
                  Receivable
              
              
              55,576Inventory
              
              
              48,619Property
                  and equipment, net
              
              
              43,315Intangible
                  Assets, net
              
              
              20,970Other
                  assets
              
              
              32,820Total
                  assets of Discontinued Companies
              
              $
              206,066Current
                  maturities of long-term debt
              
              $
              4,565Accounts
                  payable
              
              
              29,982Accrued
                  liabilities
              
              
              22,061Long-term
                  debt
              
              
              175,001Deferred
                  taxes
              
              
              4,436Other
                  liabilities
              
              
              3,371Total
                  liabilities of Discontinued Companies
              
              $
              239,416
 
 
 **3.**
              **COMPREHENSIVE
                  INCOME (LOSS)**
 
 Comprehensive
        income (loss) for the Company is as follows:
 
 
 Three
                  months ended
              
              Six
                  months endedJune
                  30, 2006
              
              June
                  30, 2005
              
              June
                  30, 2006
              
              June
                  30, 2005Net
                  income (loss)
              
              $
              2,774
              
              $
              (464
              )
              $
              (2,479
              )
              $
              (6,339
              )Change
                  in the cumulative translation adjustment, net of tax
              
              
              1,855
              
              
              (2,108
              )
              
              1,855
              
              
              (3,798
              )Comprehensive
                  income (loss)
              
              $
              4,629
              
              $
              (2,572
              )
              $
              (624
              )
              $
              (10,137
              )
 
 
 **4.**
              **CURRENCY
                  CONTRACTS**
 
 The
        Company has significant operations in Europe where the functional currency
        is
        the Euro. In February and May 2004, 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. 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 were recorded in the
        Statement of Operations. The final option contracts expired during the second
        quarter of 2005. For the three and six months ended June 30, 2005, the Company
        recorded an unrealized gain on foreign currency options of $26 and $164,
        respectively.
 
 
  7
 **CHAAS
            ACQUISITIONS, LLC**
 **NOTES
            TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS**
 **(Dollars
            in thousands)**
 **(Unaudited)**
  **5.**  **INTANGIBLE
        ASSETS**
 
 A
        summary of intangible assets identified by the Company follows **:**
  Customer
                  Contracts
                
                Customer
                  Relationships
                
                Technology
                
                IntangiblePension
                    Asset
                
                Tradename
                    /
                  Trademark
                
                Deferred
                  Financing
                    Costs
                
                Deferred
                  Selling
                    Costs
                
                TotalAmortization
                    period in years
                
                *8
                    - 10*
                
                *15
                    - 21*
                
                *10*
                
                *15*
                
                *Indefinite*
                
                *7
                    - 8*
                
                *Indefinite*Balance
                    at December 31, 2005
                
                $
                30,989
                
                $
                30,643
                
                $
                13,183
                
                $
                466
                
                $
                7,070
                
                $
                4,977
                
                $
                —
                
                $
                87,328Less
                    discontinued operations at December 31, 2005
                
                
                (68
                )
                
                (12,819
                )
                
                (58
                )
                
                —
                
                
                (2,876
                )
                
                (4,783
                )
                
                —
                
                
                (20,604
                )Balance
                    at December 31, 2005 from continuing operations
                
                
                30,921
                
                
                17,824
                
                
                13,125
                
                
                466
                
                
                4,194
                
                
                194
                
                
                —
                
                
                66,724Additions
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                278
                
                
                732
                
                
                1,010Foreign
                    currency translation
                
                
                76
                
                
                117
                
                
                
                
                
                —
                
                
                25
                
                
                —
                
                
                —
                
                
                218Amortization
                
                
                (2,150
                )
                
                (543
                )
                
                (900
                )
                
                —
                
                
                —
                
                
                (40
                )
                
                —
                
                
                (3,633
                )Balance
                    at June 30, 2006
                
                $
                28,847
                
                $
                17,398
                
                $
                12,225
                
                $
                466
                
                $
                4,219
                
                $
                432
                
                $
                732
                
                $
                64,319
  Amortization
        expense of identifiable intangible assets for the three and six months ended
        June 30, 2006 was $1,818 and $3,633, respectively, which included $20 and
        $40 of
        amortization of deferred financing costs included in interest
        expense.
   **6.**
                **RESTRUCTURING
                    COSTS**
 On
        March 8, 2006 the Company announced its intention to close the Greenwood,
        Mississippi facility. Current production is being transferred to other
        locations. The costs to close the facility will include severance, cost to
        move
        equipment and ongoing lease costs and are estimated to be approximately
        $2,200.
  During
        the three and six months ended June 30, 2006 the Company accrued $133 and
        $191,
        respectively, as a ratable portion of the employee termination costs. No
        payments were made against this accrual and the liability at June 30, 2006
        was
        $191. The Company anticipates that the closure will be complete during the
        third
        quarter of 2006.
 
 
 **7.**
              **CONDENSED
                  CONSOLIDATING INFORMATION**
 
 On
        May 23, 2003, the Company’s 100%-owned subsidiaries, AAS 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.
 
 On
        June 5, 2006, in connection with the sale of the Discontinued Companies,
        AAHC,
        AAS and AAS Capital Corporation (a wholly-owned subsidiary of AAS) commenced
        a
        combined tender offer and consent solicitation in respect of the 131⁄4% Senior
        Discount Notes due 2011, issued by AAHC pursuant to the indenture dated February
        4, 2004 and the 103⁄4% Senior Notes. A copy of the press release announcing the
        combined tender offer and consent agreement was filed as an exhibit to Form
        8-K
        dated June 5, 2006.
  The
        following condensed consolidating financial information presents the financial
        position, results of operations and cash flows of (i) the Company as Parent,
        as
        of June 30, 2006 and December 31, 2005 and for the three and six months ended
        June 30, 2006 and 2005 as if it accounted for its subsidiaries on the equity
        method, (ii) AAS and AAS Capital Corporation as Issuers; (iii) Guarantor
        Subsidiaries which are domestic, 100%-owned subsidiaries and include SportRack
        LLC, Valley, AAS Acquisitions, LLC and ValTek, LLC; and (iv) the Non-guarantor
        Subsidiaries which are foreign, 100%-owned subsidiaries and include Brink
        and
        its subsidiaries, SportRack Accessories, Inc. and its subsidiary, and SportRack
        Automotive GmbH and its subsidiaries (collectively, “SportRack Europe”). The
        financial position of the Discontinued Companies as of June 30, 2006 and
        their
        results of operations for all periods presented are presented as discontinued
        operations in the appropriate category described above.
  8
 **CHAAS
              ACQUISITIONS, LLC**
 **NOTES
              TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS**
 **(Dollars
              in thousands)**
 **(Unaudited)**
 **7.**
            **CONDENSED
                CONSOLIDATING INFORMATION -
                (continued)** 
 **CONDENSED
        CONSOLIDATING BALANCE SHEET**
 **June
        30, 2006**
 
 
 **Parent**
              
              **Issuers**
              
              **Guarantor**
                **subsidiaries**
              
              **Non-guarantor**
                **subsidiaries**
              
              **Eliminations/**
                **adjustments**
              
              **Consolidated****ASSETS**Current
                  assetsCash
              
              $
              16
              
              $
              —
              
              $
              1,134
              
              $
              1,035
              
              $
              —
              
              $
              2,185Accounts
                  receivable
              
              
              —
              
              
              —
              
              
              27,144
              
              
              4,460
              
              
              —
              
              
              31,604Inventories
              
              
              —
              
              
              —
              
              
              9,042
              
              
              2,265
              
              
              —
              
              
              11,307Other
                  current assets
              
              
              —
              
              
              1,206
              
              
              2,265
              
              
              729
              
              
              —
              
              
              4,200Total
                  assets of discontinued operations
              
              
              —
              
              
              93,179
              
              
              32,212
              
              
              80,675
              
              
              —
              
              
              206,066Total
                  current assets
              
              
              16
              
              
              94,385
              
              
              71,797
              
              
              89,164
              
              
              —
              
              
              255,362Property
                  and equipment, net
              
              
              —
              
              
              140
              
              
              16,068
              
              
              1,371
              
              
              —
              
              
              17,579Intangible
                  assets, net
              
              
              730
              
              
              —
              
              
              60,623
              
              
              2,966
              
              
              —
              
              
              64,319Deferred
                  income taxes and other noncurrent assets
              
              
              —
              
              
              —
              
              
              30,635
              
              
              —
              
              
              —
              
              
              30,635Investment
                  in and advances to subsidiaries
              
              
              48,570
              
              
              157,843
              
              
              13,666
              
              
              249
              
              
              (220,328
              )
              
              —Total
                  assets
              
              $
              49,316
              
              $
              252,368
              
              $
              192,789
              
              $
              93,750
              
              $
              (220,328
              )
              $
              367,895**LIABILITIES
                  AND MEMBERS’ EQUITY**Current
                  liabilitiesCurrent
                  maturities of long-term debt
              
              $
              —
              
              $
              —
              
              $
              14
              
              $
              —
              
              $
              —
              
              $
              14Accounts
                  payable
              
              
              —
              
              
              —
              
              
              19,082
              
              
              1,446
              
              
              —
              
              
              20,528Accrued
                  liabilities and deferred income taxes
              
              
              —
              
              
              1,177
              
              
              2,902
              
              
              726
              
              
              —
              
              
              4,805Total
                  liabilities of discontinued operations
              
              
              —
              
              
              150,000
              
              
              22,521
              
              
              66,895
              
              
              —
              
              
              239,416Total
                  current liabilities
              
              
              —
              
              
              151,177
              
              
              44,519
              
              
              69,067
              
              
              —
              
              
              64,763Deferred
                  income taxes and other noncurrent liabilities
              
              
              42,197
              
              
              17,066
              
              
              (13,680
              )
              
              274
              
              
              —
              
              
              45,857Long-term
                  debt, less current maturities
              
              
              —
              
              
              —
              
              
              34,136
              
              
              —
              
              
              —
              
              
              34,136Intercompany
                  debt
              
              
              (16,020
              )
              
              —
              
              
              7,777
              
              
              8,243
              
              
              —
              
              
              —Members’
                  equity
              
              
              23,139
              
              
              84,125
              
              
              120,037
              
              
              16,166
              
              
              (220,328
              )
              
              23,139Total
                  liabilities and members’ equity
              
              $
              49,316
              
              $
              252,368
              
              $
              192,789
              
              $
              93,750
              
              $
              (220,328
              )
              $
              367,895
 
  9
 **CHAAS
            ACQUISITIONS, LLC**
 **NOTES
            TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS**
 **(Dollars
            in thousands)**
 **(Unaudited)**
  **7.**
              **CONDENSED
                  CONSOLIDATING INFORMATION —
(continued)**
 
 **CONDENSED
        CONSOLIDATING BALANCE SHEET**
 **December
        31, 2005**
 
 
 **Parent**
              
              **Issuers**
              
              **Guarantor**
                **subsidiaries**
              
              **Non-guarantor**
                **subsidiaries**
              
              **Eliminations/**
                **adjustments**
              
              **Consolidated****ASSETS**Current
                  assetsCash
              
              $
              16
              
              $
              —
              
              $
              7,041
              
              $
              6,372
              
              $
              —
              
              $
              13,429Accounts
                  receivable
              
              
              —
              
              
              —
              
              
              38,977
              
              
              25,341
              
              
              —
              
              
              64,318Inventories
              
              
              —
              
              
              —
              
              
              24,326
              
              
              33,987
              
              
              —
              
              
              58,313Deferred
                  income taxes and other current assets
              
              
              —
              
              
              1,670
              
              
              2,858
              
              
              2,026
              
              
              —
              
              
              6,554Total
                  current assets
              
              
              16
              
              
              1,670
              
              
              73,202
              
              
              67,726
              
              
              —
              
              
              142,614Property
                  and equipment, net
              
              
              —
              
              
              170
              
              
              28,885
              
              
              33,816
              
              
              —
              
              
              62,871Intangible
                  assets, net
              
              
              —
              
              
              4,442
              
              
              63,894
              
              
              18,992
              
              
              —
              
              
              87,328Deferred
                  income taxes and other noncurrent assets
              
              
              252
              
              
              14,024
              
              
              3,116
              
              
              1,241
              
              
              —
              
              
              18,633Investment
                  in and advances to subsidiaries
              
              
              49,194
              
              
              219,175
              
              
              13,666
              
              
              249
              
              
              (282,284
              )
              
              3⁄4Total
                  assets
              
              $
              49,462
              
              $
              239,481
              
              $
              182,763
              
              $
              122,024
              
              $
              (282,284
              )
              $
              311,446**LIABILITIES
                  AND MEMBERS’ EQUITY**Current
                  liabilitiesCurrent
                  maturities of long-term debt
              
              $
              —
              
              $
              —
              
              $
              80
              
              $
              3,860
              
              $
              —
              
              $
              3,940Accounts
                  payable
              
              
              —
              
              
              —
              
              
              25,323
              
              
              14,714
              
              
              —
              
              
              40,037Accrued
                  liabilities and deferred income taxes
              
              
              606
              
              
              1,162
              
              
              8,324
              
              
              14,129
              
              
              —
              
              
              24,221Total
                  current liabilities
              
              
              606
              
              
              1,162
              
              
              33,727
              
              
              32,703
              
              
              —
              
              
              68,198Deferred
                  income taxes and other noncurrent liabilities
              
              
              —
              
              
              17,066
              
              
              (15,466
              )
              
              8,077
              
              
              —
              
              
              9,677Long-term
                  debt, less current maturities
              
              
              —
              
              
              150,000
              
              
              41,398
              
              
              18,410
              
              
              —
              
              
              209,808Intercompany
                  debt
              
              
              25,093
              
              
              —
              
              
              1,483
              
              
              57,490
              
              
              (84,066
              )
              
              —Members’
                  equity
              
              
              23,763
              
              
              71,253
              
              
              121,621
              
              
              5,344
              
              
              (198,218
              )
              
              23,763Total
                  liabilities and members’ equity
              
              $
              49,462
              
              $
              239,481
              
              $
              182,763
              
              $
              122,024
              
              $
              (282,284
              )
              $
              311,446
 
  10
 **CHAAS
            ACQUISITIONS, LLC**
 **NOTES
            TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS**
 **(Dollars
            in thousands)**
 **(Unaudited)**
  **7.**
              **CONDENSED
                  CONSOLIDATING INFORMATION —
(continued)**
 
 
 **CONDENSED
        CONSOLIDATING STATEMENT OF OPERATIONS**
 **For
        the three months ended June 30, 2006**
 
 
 **Parent**
                
                **Issuers**
                
                **Guarantor**
                  **subsidiaries**
                
                **Non-guarantor**
                  **subsidiaries**
                
                **Eliminations/**
                  **adjustments**
                
                **Consolidated**Net
                    sales
                
                $
                —
                
                $
                —
                
                $
                41,601
                
                $
                5,349
                
                $
                —
                
                $
                46,950Cost
                    of sales
                
                
                —
                
                
                —
                
                
                37,351
                
                
                5,041
                
                
                —
                
                
                42,392Gross
                    profit
                
                
                —
                
                
                —
                
                
                4,250
                
                
                308
                
                
                —
                
                
                4,558Selling,
                    administrative and product development expenses
                
                
                —
                
                
                1,359
                
                
                2,852
                
                
                353
                
                
                —
                
                
                4,564Amortization
                    of intangible assets
                
                
                —
                
                
                —
                
                
                1,725
                
                
                72
                
                
                —
                
                
                1,797Operating
                    loss
                
                
                —
                
                
                (1,359
                )
                
                (327
                )
                
                (117
                )
                
                —
                
                
                (1,803
                )Interest
                    expense
                
                
                —
                
                
                —
                
                
                (868
                )
                
                (1
                )
                
                —
                
                
                (869
                )Equity
                    in income (loss) of subsidiaries
                
                
                2,774
                
                
                —
                
                
                —
                
                
                —
                
                
                (2,774
                )
                
                —Foreign
                    currency gain, net
                
                
                —
                
                
                60
                
                
                —
                
                
                379
                
                
                —
                
                
                439Other
                    income (expense)
                
                
                —
                
                
                —
                
                
                (16
                )
                
                —
                
                
                —
                
                
                (16
                )Income
                    (loss) before income taxes
                
                
                2,774
                
                
                (1,299
                )
                
                (1,211
                )
                
                261
                
                
                (2,774
                )
                
                (2,249
                )Provision
                    for (benefit from) income taxes
                
                
                (965
                )
                
                —
                
                
                —
                
                
                (13
                )
                
                —
                
                
                (978
                )Net
                    income (loss) from continuing operations
                
                
                3,739
                
                
                (1,299
                )
                
                (1,211
                )
                
                274
                
                
                (2,774
                )
                
                (1,271
                )Discontinued
                    operations:Income
                    (loss) from discontinued operations
                
                
                —
                
                
                (3,619
                )
                
                2,248
                
                
                7,360
                
                
                —
                
                
                5,989Provision
                    for income taxes
                
                
                —
                
                
                —
                
                
                6
                
                
                1,938
                
                
                —
                
                
                1,944Income
                    (loss) from discontinued operations
                
                
                —
                
                
                (3,619
                )
                
                2,242
                
                
                5,422
                
                
                —
                
                
                4,045Net
                    income (loss)
                
                $
                3,739
                
                $
                (4,918
                )
                $
                1,031
                
                $
                5,696
                
                $
                (2,774
                )
                $
                2,774
 
  11
 **CHAAS
            ACQUISITIONS, LLC**
 **NOTES
            TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS**
 **(Dollars
            in thousands)**
 **(Unaudited)**
  
 **7.**
              **CONDENSED
                  CONSOLIDATING INFORMATION —
(continued)**
 
 
 **CONDENSED
        CONSOLIDATING STATEMENT OF OPERATIONS**
 **For
        the three months ended June 30, 2005**
  **Parent**
                        
                        **Issuers**
                        
                        **Guarantor**
                          **subsidiaries**
                        
                        **Non-guarantor**
                          **subsidiaries**
                        
                        **Eliminations/**
                          **adjustments**
                        
                        **Consolidated**Net
                            sales
                        
                        $
                        —
                        
                        $
                        —
                        
                        $
                        47,932
                        
                        $
                        4,421
                        
                        $
                        —
                        
                        $
                        52,353Cost
                            of sales
                        
                        
                        —
                        
                        
                        —
                        
                        
                        41,714
                        
                        
                        4,174
                        
                        
                        —
                        
                        
                        45,888Gross
                            profit
                        
                        
                        —
                        
                        
                        —
                        
                        
                        6,218
                        
                        
                        247
                        
                        
                        —
                        
                        
                        6,465Selling,
                            administrative and product development expenses
                        
                        
                        —
                        
                        
                        1,353
                        
                        
                        3,487
                        
                        
                        397
                        
                        
                        —
                        
                        
                        5,237Amortization
                            of intangible assets
                        
                        
                        —
                        
                        
                        —
                        
                        
                        1,725
                        
                        
                        72
                        
                        
                        —
                        
                        
                        1,797Operating
                            income (loss)
                        
                        
                        —
                        
                        
                        (1,353
                        )
                        
                        1,006
                        
                        
                        (222
                        )
                        
                        —
                        
                        
                        (569
                        )Interest
                            expense
                        
                        
                        —
                        
                        
                        —
                        
                        
                        (633
                        )
                        
                        (4
                        )
                        
                        —
                        
                        
                        (637
                        )Equity
                            in income (loss) of subsidiaries
                        
                        
                        (441
                        )
                        
                        —
                        
                        
                        —
                        
                        
                        —
                        
                        
                        441
                        
                        
                        —Foreign
                            currency gain (loss), net
                        
                        
                        —
                        
                        
                        26
                        
                        
                        —
                        
                        
                        (466
                        )
                        
                        —
                        
                        
                        (440
                        )Other
                            income (expense)
                        
                        
                        (23
                        )
                        
                        —
                        
                        
                        41
                        
                        
                        57
                        
                        
                        —
                        
                        
                        75Income
                            (loss) before income taxes
                        
                        
                        (464
                        )
                        
                        (1,327
                        )
                        
                        414
                        
                        
                        (635
                        )
                        
                        441
                        
                        
                        (1,571
                        )Benefit
                            from income taxes
                        
                        
                        —
                        
                        
                        —
                        
                        
                        —
                        
                        
                        (149
                        )
                        
                        —
                        
                        
                        (149
                        )Net
                            income (loss) from continuing operations
                        
                        
                        (464
                        )
                        
                        (1,327
                        )
                        
                        414
                        
                        
                        (486
                        )
                        
                        441
                        
                        
                        (1,422
                        )Discontinued
                            operations:Income
                            (loss) from discontinued operations
                        
                        
                        —
                        
                        
                        (3,380
                        )
                        
                        1,726
                        
                        
                        3,778
                        
                        
                        —
                        
                        
                        2,124Provision
                            for (benefit from) income taxes
                        
                        
                        —
                        
                        
                        —
                        
                        
                        (3
                        )
                        
                        1,169
                        
                        
                        —
                        
                        
                        1,166Income
                            (loss) from discontinued operations
                        
                        
                        —
                        
                        
                        (3,380
                        )
                        
                        1,729
                        
                        
                        2,609
                        
                        
                        —
                        
                        
                        958Net
                            income (loss)
                        
                        $
                        (464
                        )
                        $
                        (4,707
                        )
                        $
                        2,143
                        
                        $
                        2,123
                        
                        $
                        441
                        
                        $
                        (464
                        )
  12
 **CHAAS
            ACQUISITIONS, LLC**
 **NOTES
            TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS**
 **(Dollars
            in thousands)**
 **(Unaudited)**
  **7.**
              **CONDENSED
                  CONSOLIDATING INFORMATION —
(continued)**
 
 
 **CONDENSED
        CONSOLIDATING STATEMENT OF OPERATIONS**
 **For
        the six months ended June 30, 2006**
 
 **Parent**
                    
                    **Issuers**
                    
                    **Guarantor**
                      **subsidiaries**
                    
                    **Non-guarantor**
                      **subsidiaries**
                    
                    **Eliminations/**
                      **adjustments**
                    
                    **Consolidated**Net
                        sales
                    
                    $
                    —
                    
                    $
                    —
                    
                    $
                    82,217
                    
                    $
                    10,095
                    
                    $
                    —
                    
                    $
                    92,312Cost
                        of sales
                    
                    
                    —
                    
                    
                    —
                    
                    
                    75,396
                    
                    
                    9,106
                    
                    
                    —
                    
                    
                    84,502Gross
                        profit
                    
                    
                    —
                    
                    
                    —
                    
                    
                    6,821
                    
                    
                    989
                    
                    
                    —
                    
                    
                    7,810Selling,
                        administrative and product development expenses
                    
                    
                    —
                    
                    
                    2,711
                    
                    
                    5,916
                    
                    
                    717
                    
                    
                    —
                    
                    
                    9,344Amortization
                        of intangible assets
                    
                    
                    —
                    
                    
                    —
                    
                    
                    3,450
                    
                    
                    141
                    
                    
                    —
                    
                    
                    3,591Operating
                        income (loss)
                    
                    
                    —
                    
                    
                    (2,711
                    )
                    
                    (2,545
                    )
                    
                    131
                    
                    
                    —
                    
                    
                    (5,125
                    )Interest
                        expense
                    
                    
                    —
                    
                    
                    —
                    
                    
                    (1,664
                    )
                    
                    (1
                    )
                    
                    —
                    
                    
                    (1,665
                    )Equity
                        in income (loss) of subsidiaries
                    
                    
                    (2,479
                    )
                    
                    —
                    
                    
                    —
                    
                    
                    —
                    
                    
                    2,479
                    
                    
                    —Foreign
                        currency gain
                    
                    
                    —
                    
                    
                    77
                    
                    
                    —
                    
                    
                    560
                    
                    
                    —
                    
                    
                    637Other
                        income (expense)
                    
                    
                    —
                    
                    
                    —
                    
                    
                    5
                    
                    
                    (6
                    )
                    
                    —
                    
                    
                    (1
                    )Income
                        (loss) before income taxes
                    
                    
                    (2,479
                    )
                    
                    (2,634
                    )
                    
                    (4,204
                    )
                    
                    684
                    
                    
                    2,479
                    
                    
                    (6,154
                    )Provision
                        for income taxes
                    
                    
                    (965
                    )
                    
                    —
                    
                    
                    3
                    
                    
                    118
                    
                    
                    —
                    
                    
                    (844
                    )Net
                        income (loss) from continuing operations
                    
                    
                    (1,514
                    )
                    
                    (2,634
                    )
                    
                    (4,207
                    )
                    
                    566
                    
                    
                    2,479
                    
                    
                    (5,310
                    )Discontinued
                        operations:Income
                        (loss) from discontinued operations
                    
                    
                    —
                    
                    
                    (7,227
                    )
                    
                    2,641
                    
                    
                    9,582
                    
                    
                    —
                    
                    
                    4,996Provision
                        for income taxes
                    
                    
                    —
                    
                    
                    —
                    
                    
                    19
                    
                    
                    2,146
                    
                    
                    —
                    
                    
                    2,165Income
                        (loss) from discontinued operations
                    
                    
                    —
                    
                    
                    (7,227
                    )
                    
                    2,622
                    
                    
                    7,436
                    
                    
                    —
                    
                    
                    2,831Net
                        income (loss)
                    
                    $
                    (1,514
                    )
                    $
                    (9,861
                    )
                    $
                    (1,585
                    )
                    $
                    8,002
                    
                    $
                    2,479
                    
                    $
                    (2,479
                    )
 
 
  13
 **CHAAS
            ACQUISITIONS, LLC**
 **NOTES
            TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS**
 **(Dollars
            in thousands)**
 **(Unaudited)**
  **7.**
              **CONDENSED
                  CONSOLIDATING INFORMATION —
(continued)**
 
 
 **CONDENSED
        CONSOLIDATING STATEMENT OF OPERATIONS**
 **For
        the six months ended June 30, 2005**
 
 **Parent**
                
                **Issuers**
                
                **Guarantor**
                  **subsidiaries**
                
                **Non-guarantor**
                  **subsidiaries**
                
                **Eliminations/**
                  **adjustments**
                
                **Consolidated**Net
                    sales
                
                $
                —
                
                $
                —
                
                $
                93,813
                
                $
                8,521
                
                $
                —
                
                $
                102,334Cost
                    of sales
                
                
                —
                
                
                —
                
                
                82,227
                
                
                7,755
                
                
                —
                
                
                89,982Gross
                    profit
                
                
                —
                
                
                —
                
                
                11,586
                
                
                766
                
                
                —
                
                
                12,352Selling,
                    administrative and product development expenses
                
                
                —
                
                
                3,019
                
                
                7,196
                
                
                841
                
                
                —
                
                
                11,056Amortization
                    of intangible assets
                
                
                —
                
                
                —
                
                
                3,450
                
                
                147
                
                
                —
                
                
                3,597Operating
                    income (loss)
                
                
                —
                
                
                (3,019
                )
                
                940
                
                
                (222
                )
                
                —
                
                
                (2,301
                )Interest
                    expense
                
                
                —
                
                
                —
                
                
                (1,206
                )
                
                (2
                )
                
                —
                
                
                (1,208
                )Equity
                    in income (loss) of subsidiaries
                
                
                (6,316
                )
                
                —
                
                
                —
                
                
                —
                
                
                6,316
                
                
                —Foreign
                    currency gain (loss)
                
                
                —
                
                
                164
                
                
                7
                
                
                (780
                )
                
                —
                
                
                (609
                )Other
                    income (expense)
                
                
                (23
                )
                
                —
                
                
                38
                
                
                56
                
                
                —
                
                
                71Loss
                    before income taxes
                
                
                (6,339
                )
                
                (2,855
                )
                
                (221
                )
                
                (948
                )
                
                6,316
                
                
                (4,047
                )Benefit
                    from income taxes
                
                
                —
                
                
                —
                
                
                —
                
                
                (282
                )
                
                —
                
                
                (282
                )Net
                    loss
                
                
                (6,339
                )
                
                (2,855
                )
                
                (221
                )
                
                (666
                )
                
                6,316
                
                
                (3,765
                )Discontinued
                    operations:Income
                    (loss) from discontinued operations
                
                
                —
                
                
                (6,807
                )
                
                1,649
                
                
                3,859
                
                
                —
                
                
                (1,299
                )Provision
                    for income taxes
                
                
                —
                
                
                —
                
                
                12
                
                
                1,263
                
                
                —
                
                
                1,275Income
                    (loss) from discontinued operations
                
                
                —
                
                
                (6,807
                )
                
                1,637
                
                
                2,596
                
                
                —
                
                
                (2,574
                )Net
                    income (loss)
                
                $
                (6,339
                )
                $
                (9,662
                )
                $
                1,416
                
                $
                1,930
                
                $
                6,316
                
                $
                (6,339
                )
 
 
  14
 **CHAAS
            ACQUISITIONS, LLC**
 **NOTES
            TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS**
 **(Dollars
            in thousands)**
 **(Unaudited)**
  **7.**
              **CONDENSED
                  CONSOLIDATING INFORMATION —
(continued)**
  **CONDENSED
        CONSOLIDATING STATEMENT OF CASH FLOWS**
 **For
        the six months ended June 30, 2006**
 
 **Parent**
              
              **Issuers**
              
              **Guarantor**
                **subsidiaries**
              
              **Non-guarantor**
                **subsidiaries**
              
              **Eliminations/**
                **adjustments**
              
              **Consolidated**Net
                  cash provided by (used for) operating activities
              
              $
              (1,336
              )
              $
              (9,054
              )
              $
              4,519
              
              $
              4,649
              
              $
              —
              
              $
              (1,222
              )Cash
                  flows from investing activities:Acquisition
                  of property and equipment
              
              
              —
              
              
              —
              
              
              (2,103
              )
              
              (1,256
              )
              
              —
              
              
              (3,359
              )Proceeds
                  from disposals
              
              
              —
              
              
              —
              
              
              31
              
              
              112
              
              
              —
              
              
              143Net
                  cash used for investing activities
              
              
              —
              
              
              —
              
              
              (2,072
              )
              
              (1,144
              )
              
              —
              
              
              (3,216
              )Cash
                  flows from financing activities:Change
                  in intercompany debt
              
              
              1,336
              
              
              9,054
              
              
              (7,398
              )
              
              (2,992
              )
              
              —
              
              
              —Net
                  increase (decrease) in revolving loan
              
              
              —
              
              
              —
              
              
              (675
              )
              
              —
              
              
              —
              
              
              (675
              )Repayment
                  of debt
              
              
              —
              
              
              —
              
              
              (32
              )
              
              (1,866
              )
              
              —
              
              
              (1,898
              )Net
                  cash provided by (used for)financing
                  activities
              
              
              1,336
              
              
              9,054
              
              
              (8,105
              )
              
              (4,858
              )
              
              —
              
              
              (2,573
              )Effect
                  of exchange rate changes
              
              
              —
              
              
              —
              
              
              —
              
              
              533
              
              
              —
              
              
              533Net
                  decrease in cash
              
              
              —
              
              
              —
              
              
              (5,658
              )
              
              (820
              )
              
              —
              
              
              (6,478
              )Cash
                  at beginning of period
              
              
              16
              
              
              —
              
              
              7,041
              
              
              6,372
              
              
              —
              
              
              13,429Cash
                  at end of period
              
              $
              16
              
              $
              —
              
              $
              1,383
              
              $
              5,552
              
              $
              —
              
              $
              6,951
  **CONDENSED
        CONSOLIDATING STATEMENT OF CASH FLOWS**
 **For
        the six months ended June 30, 2005**
 
 **Parent**
              
              **Issuers**
              
              **Guarantor**
                **subsidiaries**
              
              **Non-guarantor**
                **subsidiaries**
              
              **Eliminations/**
                **adjustments**
              
              **Consolidated**Net
                  cash provided by (used for) operating activities
              
              $
              —
              
              $
              (9,220
              )
              $
              5,423
              
              $
              (2,839
              )
              $
              —
              
              $
              (6,636
              )Cash
                  flows from investing activities:Acquisition
                  of property and equipment
              
              
              —
              
              
              (10
              )
              
              (5,474
              )
              
              (1,282
              )
              
              —
              
              
              (6,766
              )Net
                  cash used for investing activities
              
              
              —
              
              
              (10
              )
              
              (5,474
              )
              
              (1,282
              )
              
              —
              
              
              (6,766
              )Cash
                  flows from financing activities:Change
                  in intercompany debt
              
              
              —
              
              
              9,230
              
              
              (7,546
              )
              
              (1,684
              )
              
              —
              
              
              —Net
                  increase (decrease) in revolving loan
              
              
              —
              
              
              —
              
              
              3,654
              
              
              2,528
              
              
              —
              
              
              6,182Repayment
                  of debt
              
              
              —
              
              
              —
              
              
              71
              
              
              (1,116
              )
              
              —
              
              
              (1,045
              )Net
                  cash provided by (used for) financing activities
              
              
              —
              
              
              9,230
              
              
              (3,821
              )
              
              (272
              )
              
              —
              
              
              5,137Effect
                  of exchange rate changes
              
              
              —
              
              
              —
              
              
              —
              
              
              (769
              )
              
              —
              
              
              (769
              )Net
                  decrease in cash
              
              
              —
              
              
              —
              
              
              (3,872
              )
              
              (5,162
              )
              
              —
              
              
              (9,034
              )Cash
                  at beginning of period
              
              
              16
              
              
              —
              
              
              5,466
              
              
              9,265
              
              
              —
              
              
              14,747Cash
                  at end of period
              
              $
              16
              
              $
              —
              
              $
              1,594
              
              $
              4,103
              
              $
              —
              
              $
              5,713
  15
 **CHAAS
              ACQUISITIONS, LLC**
   **Item
                  2.**
              **Management’s
                  Discussion 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**
 
 ***Company
        Background***
 
 We
        believe that 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 original equipment manufacturers (“OEMs”) as standard
        accessories or options for a variety of light vehicles and to the
        aftermarket.
 
 *Discontinued
        Operations*
 
 On
        May 17, 2006 the Company and certain of its affiliates signed a purchase
        agreement (the “Agreement”) with Thule AB (“Buyer”) to sell substantially all of
        the net assets of Valley Industries, LLC (“Valley”) and all of the issued and
        outstanding stock of CHAAS Holdings B.V. (“Brink”) and Advanced Accessory
        Systems, LLC (“AAS” or “Predecessor”, together with Valley and Brink, the
“Discontinued Companies”). Pursuant to the Agreement, the Buyer will purchase
        the Automotive Accessories Business, consisting of Valley, Brink and SportRack
        Accessories Inc. and their respective subsidiaries. In accordance with the
        Agreement, on May 12, 2006, AAS transferred 100% of the outstanding
        membership interest of SportRack, LLC to the Company, and SportRack, LLC
        transferred to AAS its ownership of 10% of the outstanding stock issued by
        SportRack Accessories, Inc. in order that SportRack Accessories, Inc. is
        a
        wholly-owned subsidiary of AAS. On July 13, 2006, the Company, certain of
        its
        affiliates and the Buyer signed Amendment No. 1 to the Agreement, a copy
        of
        which is attached to this Form 10-Q as Exhibit 10.1. The Company expects
        the
        transaction contemplated by the Agreement, as amended, to be consummated
        in the
        third quarter. A copy of the Agreement was filed as an exhibit to Form 8-K
        dated
        May 12, 2006.
 
 On
        June 5, 2006, in connection with the sale of the Discontinued Companies,
        Advanced Accessory Holdings Corporation (“AAHC”), AAS and AAS Capital
        Corporation commenced a combined tender offer and consent solicitation in
        respect of the 131⁄4% Senior Discount Notes due 2011, issued by AAHC pursuant to
        the indenture dated February 4, 2004 and the 103⁄4% Senior Notes due 2011, issued
        by AAS and AAS Capital Corporation, pursuant to the indenture dated May 23,
        2003. A copy of the press release announcing the combined tender offer and
        consent solicitation was filed as an exhibit to Form 8-K dated June 5,
        2006.
 
 16
 **CHAAS
              ACQUISITIONS, LLC**
  ***Industry
        Trends and Competition***
 
 Several
        trends are affecting the already highly competitive automotive industry,
        including a decline in the US domestic market share with its accompanying
        price
        pressures, worldwide increases in steel, aluminum and resin demand and prices
        and the ongoing financial distress of the US domestic OEMs and supply
        base.
  ***US
        Domestic Market Share***
 
 The
        US market share for General Motors and Ford has declined and their US domestic
        vehicle production levels continue to decrease. This affects us in lower
        sales
        volumes to these customers and in increased pressure to lower our selling
        prices. Year-to-year price reductions are common in the industry, and the
        long-term contracts that we use to sell our products often include annual
        price
        reductions. We do not believe that these price reductions will have a material
        adverse impact on our results because we intend to offset such price reductions
        through cost reductions and other productivity increases.
  ***Increases
        in Raw Materials Costs***
 
 Worldwide
        market conditions, including the growth of demand from China and other Asian
        countries, and the tensions in the Mid-East have resulted in higher steel,
        aluminum and resin prices in recent years. These increases in demand are
        seen as
        long-term and we do not expect prices to go down in the short term. We are
        focused on mitigating the impact of this trend through commercial agreements
        with our customers, competitive sourcing arrangements, technology advancements
        and improvements in the efficiency of our production processes.
  ***Financial
        Distress of US Domestic OEMs and Suppliers***
 
 The
        declining market share of US domestic OEMs, their high legacy costs, and
        increased raw material prices and higher energy costs have resulted in financial
        losses for them. As well, several large automotive suppliers have filed for
        Chapter 11 bankruptcy protection. A result of these issues is that the US
        domestic automotive industry is experiencing a major structural change. The
        Company is not able to predict how long these industry trends will continue,
        but
        a sustained downturn could have a material adverse effect on the Company's
        results of operations, cash flows and financial position.
  ***The
        Acquisition***
 
 On
        April 15, 2003, substantially all of the equity interests of AAS 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 the
        Company
        which was also formed pursuant to the Acquisition.
 
 In
        January 2004, AAHC was formed by CHAAS Holdings. At that time, CHAAS Holdings
        made a contribution of all of its equity interests in the Company to AAHC
        in
        exchange for all the outstanding membership units of AAHC. CHAAS Holdings
        is the
        direct parent of AAHC and AAHC is the direct parent of the Company and the
        indirect parent of AAS. Unless the context otherwise requires, all information
        which refers to “we”, “our” or “us” refers to the Company and its
        subsidiaries.
 
 
 **RESULTS
        OF OPERATIONS**
 
 **Three
        Months Ended June 30, 2006 Compared to the Three Months Ended June 30,
        2005**
 
 *Net
        sales.* Net sales for the second quarter of 2006 were $47.0 million, representing
        a
        decrease of $5.4 million, or 10.3%, compared with net sales of $52.4 million
        for
        the second quarter of 2005. North American OEM sales decreased by approximately
        $6.3 million, primarily as a result of a general overall volume decline in
        sport
        utility vehicles linked to higher fuel prices. This decline is partially
        offset
        by new product replacement programs such as the General Motors 900 series
        sport
        utility vehicles (“SUVs”) and new product offerings such as the Jeep Commander
        and GM’s HHR. European OEM sales increased by $0.9 million due to new business
        awards at Ford and Volkswagen. The European sales increase includes an increase
        of approximately $0.3 million due primarily to the increase of the average
        exchange rates between the US Dollar and primarily the Czech
        Koruna.
 
 17
 **CHAAS
              ACQUISITIONS, LLC**
 
 *Gross
        profit.* Gross
        profit for the second quarter of 2006 was $4.6 million, which represents
        a
        decrease of $1.9 million, or 29.2%, compared with gross profit of $6.5 million
        for the second quarter of 2005. Gross profit as a percentage of net sales
        was
        9.8% for the second quarter of 2006 and 12.4% for the second quarter of 2005.
        The decrease in gross profit and margin reflects the impact of lower volume
        and
        product mix and increases in raw material costs, partially offset by improved
        plant operating performance.
 
 *Selling,
        administrative and product development expenses.* Selling,
        administrative and product development expenses for the second quarter of
        2006
        were $4.6 million, representing a decrease of $0.6 million, or 11.5%, compared
        with $5.2 million for the second quarter of 2005. The net decrease is due
        to
        lower engineering and selling expenses, results of restructuring actions
        and
        cost improvements on tooling programs, and lower sales commissions in line
        with
        volume levels. These decreases are partially offset by the cost of restructuring
        actions included in the closing of the Greenwood, Mississippi plant.
 
 *Operating
        loss.* The
        operating loss for the second quarter of 2006 was $1.8 million and $0.6 million
        for the second quarter of 2005. The increase in operating loss resulted from
        decreased gross profit partially offset by lower selling, administrative
        and
        product development expenses, as discussed above.
 
 *Interest
        expense.* Interest expense for the second quarter of 2006 was $0.9 million and for
        the
        second quarter of 2005 was $0.6 million. This increase reflects higher interest
        rates and slightly higher debt levels in the second quarter of 2006 relative
        to
        2005.
 
 *Foreign
        currency gain (loss).* Foreign
        currency gain in the second quarter of 2006 was $0.4 million compared to
        a
        foreign currency loss of $0.4 million in the second quarter of 2005. Both
        the
        gain and loss were primarily attributable to the US Dollar-denominated
        intercompany indebtedness of SportRack Europe, whose functional currency
        is the
        Euro.
  *Benefit
        from income taxes.* During the second quarter of 2006 we recorded a loss from continuing operations
        before income taxes of $2.2 million and recorded an income tax benefit of
        $1.0
        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
        (including current net operating losses) of all North American operations
        and
        differences in the tax rates of foreign operations.  During the second
        quarter of 2005 we had a net loss from continuing operations before taxes
        of
        $1.6 million and recorded an income tax benefit of $0.1 million.
  *Net
        loss from continuing operations* .
        We recorded a net loss from continuing operations of $1.3 million in the
        second
        quarter of 2006 and $1.4 million in the second quarter of 2005. The increase
        in
        the loss was a result of the items discussed above related to net sales,
        gross
        profit and foreign currency.
  *Net
        income (loss) from discontinued operations* .
        We recorded income from discontinued operations of $6.0 million in the second
        quarter of 2006 and an income tax provision of $2.0 million, resulting in
        net
        income from discontinued operations of $4.0 million. In the second quarter
        of
        2005 we recorded income from discontinued operations of $2.1 million and
        an
        income tax provision of $1.2 million, resulting in net income from discontinued
        operations of $0.9 million. Gross profit in the second quarter of 2006 was
        $23.0
        million which represents an increase of $3.0 million or 15.0%, compared with
        gross profit of $20.0 million for the same period in 2005. The increase is
        attributable to volume, pricing, discontinued depreciation partially offset
        by
        manufacturing performance. Foreign currency gain in the second quarter of
        2006
        was $0.7 million compared to a loss of $1.8 million in the second quarter
        of
        2005. Both the foreign exchange gain and the loss were primarily attributable
        to
        the US Dollar-denominated intercompany indebtedness of Brink, whose functional
        currency is the Euro.
 
 
 18
 **CHAAS
              ACQUISITIONS, LLC**
  **Six
        Months Ended June 30, 2006 Compared to the Six Months Ended June 30,
        2005**
 
 *Net
        sales.* Net sales for the first six months of 2006 were $92.3 million, representing
        a
        decrease of $10.0 million, or 9.8%, compared with net sales of $102.3 million
        for the first six months of 2005. North American OEM sales decreased by
        approximately $11.6 million, primarily as a result of a general trend away
        from
        sport utility vehicles due to high operating costs at current fuel prices.
        This
        decrease is partially offset by the launch of replacement programs such as
        the
        General Motors 900 series line of SUVs and new product entries such as the
        Jeep
        Commander and GM’s HHR. This net decrease was offset by increased European OEM
        sales of $1.6 million which was driven by new business awards at Ford and
        Volkswagen.
 
 *Gross
        profit.* Gross
        profit for the first six months of 2006 was $7.8 million, which represents
        a
        decrease of $4.6 million, or 37.1%, compared with gross profit of $12.4
        million for the first six months of 2005. Gross profit as a percentage of
        net sales was 8.5% for the first six months of 2006 versus 12.1% for the
        first
        six months of 2005. The overall decrease in gross profit reflects volume
        and
        product mix as well as increases in raw material costs.
 
 *Selling,
        administrative and product development expenses* .
        Selling, administrative and product development expenses for the first six
        months of 2006 were $9.3 million representing a decrease of $1.8 million,
        or
        16.2%, compared with $11.1 million for the first six months of 2005. The
        net
        decrease is due to lower engineering and selling expenses, results of
        restructuring actions and cost improvements on tooling programs, and lower
        sales
        commissions in line with volume levels. These decreases are partially offset
        by
        the cost of restructuring actions included in the closing of the Greenwood,
        Mississippi plant.
 
 *Operating
        loss.* Our
        operating loss for the first six months of 2006 was $5.1 million representing
        a
        decrease of $2.8 million compared with an operating loss of $2.3 million
        for the
        first six months of 2005. The decrease resulted from decreased gross profit
        partially offset by lower selling, administrative and product development
        expenses, as discussed above.
 
 *Interest
        expense.* Interest expense for the first six months of 2006 was $1.7 million representing
        an increase of $0.5 million or 41.7%, compared with interest expense of $1.2
        million for the first six months of 2005. This increase reflects higher interest
        rates and debt levels in the first six months of 2006 relative to
        2005.
 
 *Foreign
        currency gain (loss).* Foreign currency gain in the first six months of 2006 was $0.6 million compared
        to a loss of $0.6 million in the first six months of 2005. Both the gain
        and
        loss were primarily attributable to the US Dollar-denominated intercompany
        indebtedness of SportRack Europe, whose functional currency is the Euro.
  *Benefit
        from income taxes.*During the first six months of 2006 we recorded a loss from continuing
        operations before income taxes of $6.2 million and recorded an income tax
        benefit of $0.8 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 six months of 2005 we had a net loss
        from
        continuing operations before taxes of $4.0 million and recorded an income
        tax
        benefit of $0.3 million.
  *Net
        loss from continuing operations**.*
        We recorded a net loss from continuing operations of $5.3 million in the
        first
        six months of 2006 and $3.8 million in the first six months of 2005. The
        net
        losses were a result of the items discussed above related to net sales, gross
        profit, foreign currency loss and the other expense and income
        items.
  *Net
        income from discontinued operations* .
        We recorded income from discontinued operations of $5.0 million in the second
        quarter of 2006 and an income tax provision of $2.2 million, resulting in
        net
        income from discontinued operations of $2.8 million. In the second quarter
        of
        2005 we recorded a loss from discontinued operations of $1.3 million and
        an
        income tax provision of $1.3 million, resulting in a net loss from discontinued
        operations of $2.6 million. Gross profit for the first six months of the
        2006
        was $37.3 million which represents an increase of $3.4 million, or 10.0%
        compared with gross profit of $33.9 for the same period in 2005. The increase
        is
        attributable to volume, pricing, discontinued depreciation partially offset
        by
        manufacturing performance and foreign exchange. Foreign currency gain in
        the
        first six months of 2006 was $1.2 million compared with a loss of $2.9 million
        in the first six months of 2005. Both the foreign exchange gain and the loss
        were primarily attributable to the US Dollar-denominated intercompany
        indebtedness of Brink, whose functional currency is the Euro.
 
 19
 **CHAAS
              ACQUISITIONS, LLC**
  **LIQUIDITY
        AND CAPITAL RESOURCES**
 
 Our
        principal liquidity requirements are to service our debt and meet our working
        capital and capital expenditure needs. The indebtedness of our continuing
        operations at June 30, 2006 was $34.2 million including current maturities
        of
        $14,000.
 
 On
        May 12, 2006, we entered into a Consent and Eighth Amendment to the Amended
        and
        Restated Credit Agreement (the “Eighth Amendment”) with General Electric Capital
        Corporation (“GECC”) individually as a lender and as agent for the lenders
        referred to therein. Under the Eighth Amendment, GECC and the lenders consented
        to the transfer (i) by AAS to the Company of 100% of the outstanding membership
        interests of SportRack, LLC and (ii) by SportRack, LLC to AAS of 10% of the
        outstanding stock issued by SportRack Accessories Inc., such that SportRack
        Accessories Inc. is a wholly-owned subsidiary of AAS, in each case in accordance
        with certain documents set forth in the Eighth Amendment. A copy of the Eighth
        Amendment was attached as an Exhibit to Form 8-K dated May 12,
        2006.
 
 On
        March 29, 2006, we entered into the Seventh Amendment to the Amended and
        Restated Credit Agreement (the "Seventh 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 covenant and
        the
        senior secured leverage ratio covenant. Although we were able to meet our
        senior
        leverage covenant for the quarter ended December 31, 2005, the agreement
        was
        amended because we anticipated that we would be unable to meet our fixed
        charge
        coverage ratio covenant for the quarter ended December 31, 2005 and future
        quarters.
 
 Prior
        to this modification, the required minimum fixed charge coverage ratios for
        all
        borrowers and their subsidiaries were 1.05 to 1.00 for the fiscal quarter
        ended
        December 31, 2005 and 1.15 to 1.00 for each fiscal quarter ending thereafter.
        The required minimum fixed charge coverage ratios for the European borrowers
        and
        their subsidiaries were 1.25 to 1.00 for the fiscal quarters ended March
        31,
        2005, June 30, 2005 and September 30, 2005. Under the modified fixed charge
        coverage ratio covenant, the required minimum fixed charge coverage ratio
        for
        all borrowers and their subsidiaries range from 1.15 to 1.00 for the fiscal
        quarter ending June 30, 2007 and for each fiscal quarter ending thereafter.
        The
        required minimum fixed charge coverage ratios for European borrowers and
        their
        subsidiaries are 1.25 to 1.00 for the fiscal quarter ended December 31, 2005
        and
        1.15 to 1.00 for the following fiscal quarters through December 31, 2006.
        The
        actual fixed charge coverage ratio for the fiscal quarter ended June 30,
        2006
        was 1.78 to 1.00 and we were in compliance with the modified covenant as
        of June
        30, 2006.
 
 Prior
        to the modification of the senior secured leverage ratio covenant, the required
        maximum leverage ratios for all borrowers and their subsidiaries were 1.75
        to
        1.00 for the fiscal quarters ended March 31, 2005 and June 30, 2005; 1.50
        to
        1.00 for the fiscal quarter ended September 30, 2005; and 1.25 to 1.00 for
        each
        fiscal quarter ending thereafter. Under the modified senior secured leverage
        ratio covenant, the required maximum leverage ratios for all borrowers and
        their
        subsidiaries range from 2.00 to 1.00 for fiscal quarters ended March 31,
        2006
        and June 30, 2006; 1.75 to 1.00 for the fiscal quarter ending September 30,
        2006; 1.50 to 1.00 for the fiscal quarter ending December 31, 2006; and 1.25
        to
        1.00 for each fiscal quarter ending thereafter. The actual leverage ratio
        for
        the quarter ended June 30, 2006 was 1.55 to 1.00 and we were in compliance
        with
        the modified covenant as of June 30, 2006.
 
 In
        addition, the Seventh Amendment modified the definition of “Obligations” under
        the credit agreement to include obligations of any credit party in favor
        of any
        lender party to the credit agreement arising under (i) certain bank products
        offered by such lender or (ii) any agreement with such lender to fix or hedge
        foreign currency risk of up to an aggregate maximum amount of $2.4 million.
        A
        copy of the Seventh Amendment was attached as an exhibit to the Annual Report
        filed on Form 10-K as of December 31, 2005.
 
 20
 **CHAAS
              ACQUISITIONS, LLC**
 
 **Working
        Capital and Cash Flows**
 
 Working
        capital and key elements of the consolidated statement of cash flows
        are:
 
 June
                  30, 2006
              
              December
                  31,
                2005(in
                  thousands)Working
                  Capital
              
              $
              (9,401
              )
              $
              74,416
 
 Six
                  months ended June 30,2006
              
              2005(in
                  thousands)Cash
                  flows used for operating activities
              
              $
              (1,222
              )
              $
              (6,636
              )Cash
                  flows used for investing activities
              
              $
              (3,216
              )
              $
              (6,766
              )Cash
                  flows provided by (used for) financing activities
              
              $
              (2,573
              )
              $
              5,137
 
 *Working
        capital*
 
 Working
        capital decreased by $83.8 million to $(9.4) million at June 30, 2006 from
        $74.4
        million at December 31, 2005 primarily due to the classification of the
        Discontinued Companies. Working capital before the reclassification of the
        Discontinued Companies increased by $2.7 million to $77.1 million at June
        30,
        2006 from $74.4 million at December 31, 2005. This increase is primarily
        due to
        increased accounts receivable and inventory of $22.9 million and $1.6 million,
        respectively. These increases were partially offset by increases in accounts
        payable ($10.5 million), accrued liabilities ($4.2 million) and current
        maturities of long-term debt ($0.6 million) and a decrease in cash of $6.5
        million. The net working capital decrease was favorably impacted by the
        increased exchange rate between the US Dollar and local currencies, especially
        the Euro, as of June 30, 2006 as compared with the exchange rate as of December
        31, 2005.
 
 The
        major components of the working capital change were accounts receivable,
        accounts payable and accrued liabilities. The increase in these three components
        was attributable to increased sales and production levels prior to June 30
        as
        compared with the normal year-end shutdown period in December.
 
 *Investing
        activities*
 
 Cash
        flow used for investing activities for the first six months of 2006 and 2005
        included acquisitions of property and equipment of $3.4 million and $6.8
        million, respectively, and were primarily for productivity and process
        improvements, and maintenance.
 
 *Capital
        expenditures*
 
 Our
        capital expenditures for 2005 were $9.3 million. Approximately $8.0 million
        was
        spent in connection with the expansion of capacity, productivity and process
        improvements and maintenance of machinery, equipment and tooling, $0.9 million
        was spent on furniture, fixtures and computers, $0.4 million on uncompleted
        construction in process and $0.1 million on repairs and improvements to land
        and
        buildings. Our 2005 capital expenditures were paid for from cash flows provided
        by operating activities or borrowings against our revolving credit facilities.
        We estimate that capital expenditures for 2006 will be approximately $11.1
        million, primarily for the expansion of capacity, productivity and process
        improvements and maintenance. Our 2006 capital expenditures are anticipated
        to
        be paid for from our current cash and cash provided by operating
        activities.
 
 *Financing
        activities*
 
 During
        the first six months of 2006, financing cash flows included a decrease in
        borrowings under the revolving line of credit of $0.7 million and repayment
        of
        debt of $1.9 million. For the same period in 2005 the financing cash flows
        included an increase in the revolving line of credit of $6.2 million and
        repayment of debt of $1.0 million.
 
 21
 **CHAAS
              ACQUISITIONS, LLC**
  *Off-balance
        sheet arrangements*
 
 The
        Company is not party to off-balance sheet arrangements as defined in SEC
        Regulation SK, Item 303(a).
 
 *Contractual
        Obligations*
 
 The
        following table represents our contractual commitments associated with our
        debt
        and other obligations disclosed above as of December 31, 2005.
 
 Payments
                  due by yearTotal
              
              Year
                  1
              
              Years
                  2-3
              
              Years
                  4-5
              
              ThereafterLong-term
                  debt obligations - fixed rate
              
              $
              160,000
              
              $
              —
              
              $
              —
              
              $
              —
              
              $
              160,000Long-term
                  debt obligations - variable rate
              
              
              43,189
              
              
              3,256
              
              
              39,933
              
              
              —
              
              
              —Interest
                  on long-term fixed rate debt obligations
              
              
              105,747
              
              
              16,125
              
              
              32,250
              
              
              32,250
              
              
              25,122Capital
                  lease obligations (including interest)
              
              
              7,927
              
              
              917
              
              
              1,786
              
              
              1,699
              
              
              3,525Operating
                  lease obligations
              
              
              41,201
              
              
              7,258
              
              
              12,997
              
              
              6,688
              
              
              14,258Total
              
              $
              358,064
              
              $
              27,556
              
              $
              86,966
              
              $
              40,637
              
              $
              202,905
 
 In
        addition to the above, our senior credit facility includes obligations subject
        to variable interest rates. Borrowings under the credit facility, at the
        Company’s election, may be made as “index rate” loans or LIBOR rate loans, plus
        an applicable margin. As both the interest rate and the relative balances
        of the
        variable rate debt are not determinable, the interest related to the variable
        rate debt is not reflected in the above table. At December 31, 2005 the
        outstanding variable rate obligations were $43.2 million and the weighted
        average interest rate for those obligations was 7.65%.
 
 **Debt
        and Credit Sources**
 
 Our
        indebtedness at June 30, 2006 before the reclassification of the Discontinued
        Companies was $213.7 million. We expect that our primary sources of cash
        will be
        from operating activities and borrowings under our revolving credit facilities.
        As of June 30, 2006, we had borrowings under the revolving credit facilities
        totaling $35.1 million and had $16.1 million of available borrowing capacity.
        Standby letters of credit totaling $2.9 million providing security for our
        US
        workers compensation program reduced borrowing availability.
 
 On
        May 12, 2006 we entered into the Eighth Amendment to the Amended and Restated
        Credit Agreement, and on March 29, 2006 we entered into the Seventh Amendment
        to
        the Amended and Restated Credit Agreement. See the discussion of the amendments
        to the credit facility in “- Liquidity and Capital Resources”.
 
 *International
        operations*
 
 Our
        continuing companies conduct operations in the Czech Republic, Germany and
        Spain. Net sales from international operations during the first six months of
        2006 were $10.1 million, or 10.9% of our net sales. At June 30, 2006,
        assets associated with these operations were approximately 14.5% of total
        assets, and we had no indebtedness denominated in currencies other than the
        US
        Dollar.
 
 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.
 
 22
 **CHAAS
              ACQUISITIONS, LLC**
  *Currency
        contracts*
 
 We
        have significant operations in Europe where the functional currency is the
        Euro.
        In February and May 2004, we entered into a series of foreign currency forward
        option contracts related to the Euro (“Euro Collar”), which matured quarterly on
        a staggered basis. For each reporting period we recorded the fair value,
        as
        determined by independent financial institutions, of open obligations and
        the
        resultant gains and losses were recorded in the Statement of Operations.
        The
        final option contracts expired during the second quarter of 2005. For the
        three
        and six months ended June 30, 2005, the Company recorded an unrealized gain
        on
        foreign currency options of $26,000 and $164,000, respectively.
 
 
 **Item
        3.**  **Quantitative
        and 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”.
 
 
 **Item
        4.**  **Controls
        and 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 June 30, 2006 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 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.**  **Legal
        Proceedings**
 
 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
        1A.** **Risk
        Factors**
 
 Not
        Applicable
 
 
 **Item
        2.**  **Unregistered
        Sales of Equity Securities and Use of Proceeds**
 
 None
 
 
 **Item
        3.**  **Defaults
        Upon Senior Securities**
 
 None
 
 23
 **CHAAS
              ACQUISITIONS, LLC**
 
 **Item
        4.**  **Submission
        of Matters to a Vote of Security-Holders**
 
 None
 
 
 **Item
        5.**  **Other
        Information**
 
 None
 
 
 **Item
        6.**  **Exhibits**
 
 Exhibit
                  10.1
              Amendment
                  No. 1 to the Purchase Agreement, dated July 13, 2006, by and among
                  CHAAS
                  Acquisitions, LLC, Advanced Accessory Holdings Corporation, AAS
                  Acquisitions, LLC, Valley Industries, LLC and Thule
                  AB.
 
 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
 
 
  24
 **CHAAS
              ACQUISITIONS, LLC**
  SIGNATURE
   
 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.
 
 
 
 CHAAS
                  ACQUISITIONS, LLCDate:
                  August 18, 2006
              /s/
                  Ronald J. GardhouseRonald
                  J. GardhouseChief
                  Financial Officer(Principal
                  Financial Officerand
                  Authorized Signatory)
 
 
  25
 **CHAAS
            ACQUISITIONS, LLC**
 
 **EXHIBIT
            INDEX**
  
 
 
 Exhibit
              Description10.1
              Amendment
                  No. 1 to the Purchase Agreement, dated July 13, 2006, by and among
                  CHAAS
                  Acquisitions, LLC, Advanced Accessory Holdings Corporation, AAS
                  Acquisitions, LLC, Valley Industries, LLC and Thule AB.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 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