##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
      Form 10-Q
  (Mark One)þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE
    SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended
    April 30, 2006oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)  OF
    THE SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file number:
    333-107539
      HLI Operating Company, Inc.
 (Exact name of registrant as
    specified in its charter)
  Delaware

30-0167742(State or other jurisdiction of
    incorporation or organization)

(IRS Employer Identification
    No.)15300 Centennial Drive
    Northville, Michigan

48168(Address of principal executive
    offices)

(Zip
    Code)   Registrants telephone number, including area code:
 (734) 737-5000
  o þ
  Rule 12b-2
 o o þ
    þ o
  Rule 12b-2 o þ




---



##### 



HLI OPERATING COMPANY, INC.
  QUARTERLY
    REPORT ON
    FORM 10-Q
 TABLE OF
    CONTENTS
  PagePART I. FINANCIAL
    INFORMATIONItem 1.

Financial
    Statements


2Consolidated
    Statements of Operations


2Condensed
    Consolidated Balance Sheets


3Consolidated
    Statements of Cash Flows


4Consolidated
    Statements of Changes in Stockholders Equity
    (Deficit)


5Notes to
    Consolidated Financial Statements


6Item 2.

Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


20Item 3.

Quantitative and
    Qualitative Disclosures about Market Risk


29Item 4.

Controls and
    Procedures


30PART II.
    OTHER INFORMATIONItem 1.

Legal
    Proceedings


31Item 1A.

Risk
    Factors


31Item 2.

Changes in
Securities and Use of Proceeds


31Item 3.

Defaults upon
    Senior Securities


31Item 4.

Submission of
    Matters to a Vote of Security Holders


31Item 5.

Other
    Information


31Item 6.

Exhibits


32Signatures


33Certification of Curtis J. Clawson, Chairman of the Board, President, and Chief Executive Officer, pursuant to Section 302Certification of James A. Yost, Vice President, Finance, and Chief Financial Officer, pursuant to Section 302Certification of Curtis J. Clawson, Chairman of the Board, President, and Chief Executive Officer, pursuant to Section 906Certification of James A. Yost, Vice President, Finance, and Chief Financial Officer, pursuant to Section 906    Unless otherwise indicated, references to we,
    us, or our mean HLI Operating Company, Inc., a Delaware corporation, and our
    subsidiaries. References to fiscal year means the
    12-month
    period commencing on February 1 of that year and ending January
    31 of the following year (e.g., fiscal 2006 means the period
    beginning February 1, 2006, and ending January 31,
    2007). This report contains forward looking statements with respect to our financial condition, results of
    operations, and business. All statements other than statements
    of historical fact made in this Quarterly Report are
    forward-looking. Such forward-looking statements include, among
    others, those statements including the words expect,
    anticipate, intend, believe
    and similar language. These forward looking statements involve
    certain risks and uncertainties. Our actual results may differ
    significantly from those projected in the forward-looking
    statements. Factors that may cause actual results to differ
    materially from those contemplated by such forward looking
    statements include, among others: (1) competitive pressure
    in our industry; (2) fluctuations in the price of steel,
    aluminum and other raw materials; (3) changes in general
    economic conditions; (4) our dependence on the automotive
    industry (which has historically been cyclical) and on a small
    number of major customers for the majority of our sales;
    (5) pricing pressure from automotive industry customers and
    the potential for re-sourcing of business to lower-cost
    providers overseas; (6) changes in the financial markets or
    our debt ratings affecting our financial structure and our cost
    of capital and borrowed money; (7) the uncertainties
    inherent in international operations and foreign currency
    fluctuations; (8) our ability to divest non-core assets and
    businesses; and (9) the risks described in our most recent
    Annual Report on
    Form 10-K.
    You are cautioned not to place undue reliance on the
    forward-looking statements, which speak only as of the date of
    this Quarterly Report on
    Form 10-Q.
    We have no duty to update the forward looking statements in this
    Quarterly Report on
    Form 10-Q
    and we do not intend to provide such updates.
 1




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##### Table of Contents



Item 1.
    Financial
    Statements  HLI OPERATING COMPANY, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS
    (Unaudited)
  Three Months Ended


Three Months EndedApril 30, 2006


April 30, 2005(Dollars in millions)Net sales

$
572.8


$
589.2Cost of goods sold


520.4



531.3Gross profit


52.4



57.9Marketing, general, and
    administrative


39.9



41.1Asset impairments and other
    restructuring charges


3.7



0.8Other expense, net


1.4



2.8Earnings from operations


7.4



13.2Interest expense, net


17.3



15.1Other non-operating expense


0.2



0.2Loss from continuing operations
    before taxes and minority interest


(10.1
)


(2.1
)Income tax expense


5.6



4.8Loss from continuing operations
    before minority interest


(15.7
)


(6.9
)Minority interest


1.9



2.6Loss from continuing operations


(17.6
)


(9.5
)Income from discontinued
    operations, net of tax of $0.0 and $0.2, respectively






1.4Net loss

$
(17.6
)

$
(8.1
)    2




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##### Table of Contents



HLI OPERATING COMPANY, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS
    (Unaudited)
  April 30,


January 31,2006


2006(Dollars in millions)ASSETSCurrent assets:Cash and cash equivalents

$
52.5


$
42.5Receivables


292.7



255.6Other receivables


80.0



101.0Inventories


199.7



179.9Prepaid expenses and other current
    assets


18.0



23.5Total current assets


642.9



602.5Property, plant, and equipment, net


758.1



758.1Goodwill


205.8



197.8Intangible assets, net


185.7



187.7Other assets


59.2



53.1Total assets

$
1,851.7


$
1,799.2LIABILITIES AND
    STOCKHOLDERS EQUITYCurrent liabilities:Bank borrowings and other notes

$
26.0


$
25.5Current portion of long-term debt


20.8



19.2Accounts payable and accrued
    liabilities


405.3



367.8Total current liabilities


452.1



412.5Long-term debt, net of current
    portion


682.2



684.3Deferred tax liabilities


61.6



62.7Pension and other long-term
    liabilities


412.4



409.2Redeemable preferred stock


12.3



12.1Minority interest


38.1



35.1Commitments and contingencies







Stockholders equity:Common stock, par value
    $0.01 per share:600,000 shares
    authorized; 590,000 issued and outstanding at
    April 30, 2006 and January 31, 2006, respectively







Additional paid in capital


685.6



685.6Accumulated deficit


(593.2
)


(575.6
)Accumulated other comprehensive
    income


100.6



73.3Total stockholders equity


193.0



183.3Total liabilities and
    stockholders equity

$
1,851.7


$
1,799.2    3




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##### Table of Contents



HLI OPERATING COMPANY, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS
  Three Months


Three MonthsEnded April 30,


Ended April 30,2006


2005(Dollars in millions)Cash flows from operating
    activities:Loss from continuing operations

$
(17.6
)

$
(9.5
)Adjustments to reconcile net loss
    from operations to net cash provided by (used for) operating
    activities:Depreciation and amortization


34.1



44.1Change in deferred income taxes






(3.4
)Asset impairments


0.2



0.1Minority interest


1.9



2.6Preferred stock
    dividends accrued


0.2



0.2Equity compensation expense






1.3Loss on sale of assets and
    businesses


1.1



0.1Amortization of deferred financing
    fees


1.1



2.7Changes in operating assets and
    liabilities that increase (decrease) cash flows:Receivables


(27.5
)


(28.5
)Other receivables


21.0



(49.7
)Inventories


(15.0
)


(21.3
)Prepaid expenses and other


4.8



(7.6
)Accounts payable and accrued
    liabilities


21.2



37.6Cash provided by (used for)
    operating activities


25.5



(31.3
)Cash flows from investing
    activities:Purchase of property, plant,
    equipment, and tooling


(12.3
)


(36.4
)Proceeds from sale of assets


0.4



Capital contributed by minority
    shareholders


0.4Cash used for investing activities


(11.5
)


(36.4
)Cash flows from financing
    activities:Changes in bank borrowings and
    credit facilities


(0.6
)


(0.2
)Redemption of Term Loan B, net
    of related fees






(70.5
)Proceeds from Term Loan C






150.0Bank finance fees paid


(2.9
)


Repayment of long-term debt


(1.3
)


(0.2
)Dividends paid to minority
    shareholders


(1.0
)


Cash (used for) provided by
    financing activities


(5.8
)


79.1Net cash used for operating
    activities (discontinued operations)






(6.1
)Net cash used for investing
    activities (discontinued operations)






(0.1
)Net cash provided by financing
    activities (discontinued operations)






Effect of exchange rate changes on
    cash and cash equivalents


1.8



1.9Increase in cash and cash
    equivalents


10.0



7.1Cash and cash equivalents at
    beginning of period


42.5



34.9Cash and cash equivalents at end of
    period

$
52.5


$
42.0Supplemental data:Cash paid for interest

$
12.5


$
7.5Cash paid for income taxes

$
3.4


$
2.2    4




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##### Table of Contents



HLI OPERATING COMPANY, INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
 (Unaudited)
  Retained


AccumulatedEarnings


OtherPar


Paid in


(Accumulated


ComprehensiveShares


Value


Capital


Deficit)


Income


Total(Dollars in millions, except
    share amounts)Balance at January 31, 2006


590,000






$
685.6


$
(575.6
)

$
73.3


$
183.3Comprehensive income:Net loss














(17.6
)






(17.6
)Currency translation adjustment


















30.7



30.7Unrealized loss on derivatives


















(3.4
)


(3.4
)Total comprehensive income






















9.7Balance at April 30, 2006


590,000






$
685.6


$
(593.2
)

$
100.6


$
193.0    5




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##### Table of Contents



HLI OPERATING COMPANY, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSThree Months Ended April 30, 2006 and 2005
    (Unaudited)
    (Dollars in millions, unless otherwise stated)
  Note 1.
    Description
    of Business  Form 10-K
  Description
    of Business
      Note 2.
    Basis of
    Presentation        6




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##### Table of Contents



HLI OPERATING COMPANY, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 3.
    Inventories    April 30,


January 31,2006


2006Raw materials

$
47.0


$
41.5Work-in-process


44.7



38.8Finished goods


69.2



61.5Spare parts and supplies


38.8



38.1Total

$
199.7


$
179.9   Note 4.
    Assets
    Held for Sale    Note 5.
    Discontinued
    Operations        Three MonthsEnded April 30,2005Net sales

$
28.8Earnings before income tax expense

$
1.6Income tax expense


0.2Net income

$
1.4  7




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##### Table of Contents



HLI OPERATING COMPANY, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 6.
    Goodwill
    and Other Intangible Assets    April 30, 2006


January 31, 2006Weighted


Gross





Net


Gross





NetAverage


Carrying


Accumulated


Carrying


Carrying


Accumulated


CarryingUseful Life


Amount


Amortization


Amount


Amount


Amortization


AmountAmortized intangible assets:Customer relationships


30 years


$
126.8


$
(15.4
)

$
111.4


$
120.7


$
(10.2
)

$
110.5Customer contracts


6 years



24.5



(11.9
)


12.6



24.5



(10.9
)


13.6Unpatented technology


8 years



33.5



(13.6
)


19.9



36.3



(12.7
)


23.6$
184.8


$
(40.9
)

$
143.9


$
181.5


$
(33.8
)

$
147.7Non amortized intangible assets:Tradenames





$
41.8










$
40.0Goodwill





$
205.8










$
197.8       AutomotiveWheels


Components


Other


TotalBalance as of January 31, 2006

$
197.8


$



$



$
197.8Effects of currency translation


8.8











8.8Reclassification


(0.8
)










(0.8
)Balance as of April 30, 2006

$
205.8


$



$



$
205.8   Note 7.
    Bank
    Borrowings, Other Notes, and Long-Term Debt      April 30,


January 31,2006


2006Various foreign bank and
    government loans maturing through 2006, weighted average
    interest rates of 5.7% and 5.6% at April 30, 2006 and
    January 31, 2006, respectively

$
19.1


$
18.4Term Loan B maturing 2009,
    weighted average interest rate of 8.4% and 7.7% at
    April 30, 2006 and January 31, 2006, respectively


332.3



332.4Term Loan C maturing 2010,
    weighted average interest rate of 10.6% and 9.9% at
    April 30, 2006 and January 31, 2006, respectively


150.0



150.0101/2% Senior
    Notes due 2010, net of discount of $0.5 and $0.8 million at
    April 30, 2006 and January 31, 2006, respectively


162.0



161.7Mortgage note payable maturing
    June 3, 2008


22.0



22.0Capital lease obligations


17.6



19.0703.0



703.5Less current portion of long-term
    debt


20.8



19.2Long-term debt

$
682.2


$
684.3   Credit
    Facility
     8




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##### Table of Contents



HLI OPERATING COMPANY,  INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
       Senior
    Notes
  1 2 1 2
        Early
    Repayment of Long-Term Debt
    Other
    Financing
   9




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##### Table of Contents



HLI OPERATING COMPANY, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Note 8.
    Pension
    Plans and Postretirement Benefits Other Than Pensions      US Plans


International PlansPension Benefits


Other Benefits


Pension BenefitsThree Months


Three Months


Three Months


Three Months


Three Months


Three MonthsEnded


Ended


Ended


Ended


Ended


EndedApril 30,


April 30,


April 30,


April 30,


April 30,


April 30,2006


2005


2006


2005


2006


2005Service cost

$
0.2


$
0.3


$



$



$
0.3


$
0.2Interest cost


2.8



2.7



2.6



2.7



1.5



2.0Expected return on plan assets


(2.7
)


(2.4
)










(0.2
)


Amortization of net loss






















0.1Net periodic benefit cost

$
0.3


$
0.6


$
2.6


$
2.7


$
1.6


$
2.3     Note 9.
    Asset
    Impairments and Other Restructuring Charges    Three Months Ended
    April 30, 2006AutomotiveWheels


Components


Other


TotalFacility closure costs

$
0.4


$



$



$
0.4Impairment of land, building,
    machinery, equipment, and tooling


0.2











0.2Severance and other restructuring
    costs


1.4



1.1



0.6



3.1Total

$
2.0


$
1.1


$
0.6


$
3.7   10




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##### Table of Contents



HLI OPERATING COMPANY, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Three Months Ended
    April 30, 2005AutomotiveWheels


Components


Other


TotalFacility closure costs

$
0.3


$



$



$
0.3Impairment of machinery,
    equipment, and tooling


0.1











0.1Severance and other restructuring
    costs


0.4











0.4Total

$
0.8


$



$



$
0.8   Asset
    Impairment Losses and Other Restructuring Charges for the Three
    Months Ended April 30, 2006
    Asset
    Impairment Losses and Other Restructuring Charges for the Three
    Months Ended April 30, 2005
    Facility
    Exit Costs and Severance Accruals
    Accrual of


CashSeverance


Payments andJanuary 31,


and Other


Effects of


April 30,2006


Restructuring


Foreign


2006Accrual


Charges


Currency


AccrualFacility exit costs

$



$
0.4


$



$
0.4Severance


2.9



3.1



(1.4
)


4.6Total

$
2.9


$
3.5


$
(1.4
)

$
5.0 11




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##### Table of Contents



HLI OPERATING COMPANY, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 10.
    Taxes on
    Income    Three Months Ended
    April 30,2006


2005US


Foreign


US


ForeignPre-tax income (loss)

$
(24.5
)

$
14.4


$
(18.0
)

$
15.9Income tax expense


0.4



5.2



0.4



4.4       Note 11.
    Prior
    Period Accounting Errors    Note 12.
    Segment
    Reporting   12




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##### Table of Contents



HLI OPERATING COMPANY,  INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
       Three Months Ended
    April 30, 2006AutomotiveWheels


Components


Other


TotalNet sales

$
403.8


$
169.0


$



$
572.8Asset impairments and other
    restructuring charges


2.0



1.1



0.6



3.7Earnings (loss) from operations


13.5



(1.2
)


(4.9
)


7.4   Three Months Ended
    April 30, 2005AutomotiveWheels


Components


Other


TotalNet sales

$
397.8


$
191.4


$



$
589.2Asset impairments and other
    restructuring charges


0.8











0.8Earnings (loss) from operations


19.2



0.9



(6.9
)


13.2   As of April 30,
    2006AutomotiveWheels


Components


Other


TotalTotal assets

$
1,312.9


$
333.7


$
205.1


$
1,851.7   As of January 31,
    2006AutomotiveWheels


Components


Other


TotalTotal assets

$
1,247.7


$
321.5


$
230.0


$
1,799.2   Note 13.
    Condensed
    Consolidating Financial Statements      Guarantor
    and Nonguarantor Financial Statements
   13




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##### Table of Contents



HLI OPERATING COMPANY, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   CONDENSED
    CONSOLIDATING STATEMENTS OF OPERATIONS
    For the Three Months Ended April 30, 2006
  Guarantor


NonguarantorIssuer


Subsidiaries


Subsidiaries


Eliminations


Total(Dollars in millions)(Unaudited)Net sales


$



$
227.2


$
354.8


$
(9.2
)

$
572.8Cost of goods sold



4.2



213.6



311.8



(9.2
)


520.4Gross profit (loss)



(4.2
)


13.6



43.0







52.4Marketing, general, and
    administrative



1.3



18.3



20.3







39.9Equity in (earnings) losses of
    subsidiaries and joint ventures



(0.3
)


(1.5
)






1.8



Asset impairments and other
    restructuring charges



1.4



1.8



0.5







3.7Other (income) expense, net



(0.1
)


0.1



1.4







1.4Earnings (loss) from operations



(6.5
)


(5.1
)


20.8



(1.8
)


7.4Interest expense, net



10.9



0.4



6.0







17.3Other non-operating expense



0.1







0.1







0.2Earnings (loss) from continuing
    operations before taxes on income and minority interest



(17.5
)


(5.5
)


14.7



(1.8
)


(10.1
)Income tax expense



0.1



0.3



5.2







5.6Earnings (loss) from continuing
    operations before minority interest



(17.6
)


(5.8
)


9.5



(1.8
)


(15.7
)Minority interest











1.9







1.9Net income (loss)


$
(17.6
)

$
(5.8
)

$
7.6


$
(1.8
)

$
(17.6
)  14




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##### Table of Contents



HLI OPERATING COMPANY, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   CONDENSED
    CONSOLIDATING STATEMENTS OF OPERATIONS
    For the Three Months Ended April 30, 2005
  Guarantor


NonguarantorIssuer


Subsidiaries


Subsidiaries


Eliminations


Total(Dollars in millions)(Unaudited)Net sales


$
1.0


$
251.2


$
344.3


$
(7.3
)

$
589.2Cost of goods sold



5.4



231.4



301.8



(7.3
)


531.3Gross profit (loss)



(4.4
)


19.8



42.5







57.9Marketing, general, and
    administrative



2.0



20.8



18.3







41.1Equity in (earnings) losses of
    subsidiaries and joint ventures



(6.2
)


(0.8
)






7.0



Asset impairments and other
    restructuring charges



0.2



0.5



0.1







0.8Other (income) expense, net



(1.3
)


0.2



3.9







2.8Earnings (loss) from operations



0.9



(0.9
)


20.2



(7.0
)


13.2Interest (income) expense, net



8.7



0.2



6.2







15.1Other non-operating expense



0.2















0.2Earnings (loss) from continuing
    operations before taxes on income and minority interest



(8.0
)


(1.1
)


14.0



(7.0
)


(2.1
)Income tax expense



0.1



0.3



4.4







4.8Earnings (loss) from continuing
    operations before minority interest



(8.1
)


(1.4
)


9.6



(7.0
)


(6.9
)Minority interest











2.6







2.6Income (loss) from continuing
    operations before cumulative effect of change in accounting



(8.1
)


(1.4
)


7.0



(7.0
)


(9.5
)Income from discontinued
    operations, net of tax







0.9



0.5







1.4Net income (loss)


$
(8.1
)

$
(0.5
)

$
7.5


$
(7.0
)

$
(8.1
)  15




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##### Table of Contents



HLI OPERATING COMPANY, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   CONDENSED
    CONSOLIDATING BALANCE SHEETS
 As of April 30, 2006
  Guarantor


NonguarantorIssuer


Subsidiaries


Subsidiaries


Eliminations


Total(Dollars in millions)(Unaudited)Cash and cash equivalents


$
0.9


$
1.2


$
50.4


$



$
52.5Receivables



(105.9
)


126.6



272.0







292.7Other receivables



160.0











(80.0
)


80.0Inventories



0.3



68.6



131.2



(0.4
)


199.7Prepaid expenses and other



3.0



8.1



6.9







18.0Total current assets



58.3



204.5



460.5



(80.4
)


642.9Property, plant, and equipment, net



32.9



169.2



556.0







758.1Goodwill and other assets



904.6



(103.7
)


394.7



(744.9
)


450.7Total assets


$
995.8


$
270.0


$
1,411.2


$
(825.3
)

$
1,851.7Bank borrowings and other notes


$



$
0.6


$
25.4


$



$
26.0Current portion of long-term debt



4.5



3.8



12.5







20.8Accounts payable and accrued
    liabilities



152.9



71.6



261.0



(80.3
)


405.3Total current liabilities



157.4



76.0



298.9



(80.3
)


452.1Long-term debt, net of current
    portion



661.7



13.6



6.9







682.2Pension and other long-term
    liabilities



231.9



0.6



241.5







474.0Redeemable preferred stock



12.3















12.3Minority interest











38.1







38.1Parent loans



(260.9
)


(29.1
)


285.6



4.1



Common stock



















Additional paid-in capital



685.6



517.8



569.1



(1,086.9
)


685.6Retained earnings (accumulated
    deficit)



(593.2
)


(311.3
)


(114.5
)


425.8



(593.2
)Accumulated other comprehensive
    income (loss)



100.6



2.4



85.6



(88.0
)


100.6Total stockholders equity



193.0



208.9



540.2



(749.1
)


193.0Total liabilities and
    stockholders equity


$
995.8


$
270.0


$
1,411.2


$
(825.3
)

$
1,851.7  16




---



##### Table of Contents



HLI OPERATING COMPANY, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   CONDENSED
    CONSOLIDATING BALANCE SHEETS
    As of January 31, 2006
  Guarantor


NonguarantorIssuer


Subsidiaries


Subsidiaries


Eliminations


Total(Dollars in millions)(Unaudited)Cash and cash equivalents


$
(4.1
)

$
0.6


$
46.0


$



$
42.5Receivables



(112.1
)


126.6



241.1







255.6Other receivables



101.0















101.0Inventories



1.3



66.0



112.6







179.9Prepaid expenses and other



4.7



9.3



9.5







23.5Total current assets



(9.2
)


202.5



409.2







602.5Property, plant, and equipment, net



34.1



173.1



550.9







758.1Goodwill and other assets



876.8



(102.4
)


384.5



(720.3
)


438.6Total assets


$
901.7


$
273.2


$
1,344.6


$
(720.3
)

$
1,799.2Bank borrowings and other notes


$



$
1.0


$
24.5


$



$
25.5Current portion of long-term debt



4.6



3.0



11.6







19.2Accounts payable and accrued
    liabilities



68.7



70.0



229.1







367.8Total current liabilities



73.3



74.0



265.2







412.5Long-term debt, net of current
    portion



661.7



15.5



7.1







684.3Pension and other long-term
    liabilities



236.6



0.6



234.7







471.9Redeemable preferred stock



12.1















12.1Minority interest











35.1







35.1Parent loans



(265.3
)


(30.4
)


292.3



3.4



Common stock



















Additional paid-in capital



685.6



519.0



570.6



(1,089.6
)


685.6Retained earnings (accumulated
    deficit)



(575.6
)


(305.5
)


(122.1
)


427.6



(575.6
)Accumulated other comprehensive
    income (loss)



73.3







61.7



(61.7
)


73.3Total stockholders equity



183.3



213.5



510.2



(723.7
)


183.3Total liabilities and
    stockholders equity


$
901.7


$
273.2


$
1,344.6


$
(720.3
)

$
1,799.2  17




---



##### Table of Contents



HLI OPERATING COMPANY, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   CONDENSED
    CONSOLIDATING STATEMENTS OF CASH FLOWS
    For the Three Months Ended April 30, 2006
  Guarantor


NonguarantorIssuer


Subsidiaries


Subsidiaries


Eliminations


Total(Dollars in millions)(Unaudited)Cash flows provided by (used for)
    operating activities



$
(1.3
)

$
2.8


$
24.0


$



$
25.5Cash flows from investing
    activities:Purchase of property, plant,
    equipment and tooling




(0.2
)


(4.5
)


(7.6
)






(12.3
)Proceeds from disposal of assets
    and businesses












0.4







0.4Capital contributed by minority
    shareholders












0.4







0.4Cash used for investing activities




(0.2
)


(4.5
)


(6.8
)






(11.5
)Cash flows from financing
    activities:Changes in bank borrowings and
    credit facility








(0.4
)


(0.2
)






(0.6
)Borrowings (repayment) of long
    term debt








(1.1
)


(0.2
)






(1.3
)Bank finance fees paid




(2.9
)














(2.9
)Dividends paid to minority
    shareholders












(1.0
)






(1.0
)Cash used for financing activities




(2.9
)


(1.5
)


(1.4
)






(5.8
)Increase (decrease) in parent
    loans and advances




9.4



3.8



(13.2
)






Effect of exchange rates on cash
    and cash equivalents












1.8







1.8Increase in cash and cash
    equivalents




5.0



0.6



4.4







10.0Cash and cash equivalents at
    beginning of period




(4.1
)


0.6



46.0







42.5Cash and cash equivalents at end
    of period



$
0.9


$
1.2


$
50.4


$



$
52.5  18




---



##### Table of Contents



HLI OPERATING COMPANY, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   CONDENSED
    CONSOLIDATING STATEMENTS OF CASH FLOWS
    For the Three Months Ended April 30, 2005
  Guarantor


NonguarantorIssuer


Subsidiaries


Subsidiaries


Eliminations


Total(Dollars in millions)(Unaudited)Cash flows provided by (used for)
    operating activities



$
(57.3
)

$
10.9


$
15.1


$



$
(31.3
)Cash flows from investing
    activities:Purchase of property, plant,
    equipment and tooling




(0.1
)


(20.3
)


(16.0
)






(36.4
)Proceeds from disposal of assets
    and businesses








0.1



(0.1
)






Cash used for investing activities




(0.1
)


(20.2
)


(16.1
)






(36.4
)Cash flows from financing
    activities:Changes in bank borrowings and
    credit facility












(0.2
)






(0.2
)Repayment of Term Loan B, net
    of related fees




(70.5
)














(70.5
)Borrowings from Term Loan C




150.0















150.0Borrowings (repayment) of long
    term debt








(0.2
)










(0.2
)Cash provided by (used for)
    financing activities




79.5



(0.2
)


(0.2
)






79.1Increase (decrease) in parent
    loans and advances




(24.3
)


13.1



11.2







Net cash used for operating
    activities from discontinued operations








(3.4
)


(2.7
)






(6.1
)Net cash used for investing
    activities from discontinued operations








(0.1
)










(0.1
)Net cash provided by financing
    activities from discontinued operations




















Effect of exchange rates on cash
    and cash equivalents












1.9







1.9Increase (decrease) in cash and
    cash equivalents




(2.2
)


0.1



9.2







7.1Cash and cash equivalents at
    beginning of period




(9.3
)


(0.2
)


44.4







34.9Cash and cash equivalents at end
    of period



$
(11.5
)

$
(0.1
)

$
53.6


$



$
42.0   Note 16.
    Subsequent
    Events   19




---



##### Table of Contents



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Executive
    Summary
  Form 10-K
  Company
    Overview
  12-month
           20




---



##### Table of Contents



Results
    of Operations
  Consolidated
    Results  Comparison of the Three Months Ended
    April 30, 2006 to the Three Months Ended April 30,
    2005
    Three Months


Three MonthsEnded April 30,


Ended April 30,2006


2005


$ Change


% ChangeNet sales:Automotive Wheels

$
403.8


$
397.8


$
6.0



1.5
%Components


169.0



191.4



(22.4
)


(11.7
)%Total

$
572.8


$
589.2


$
(16.4
)


(2.8
)%Gross profit

$
52.4


$
57.9


$
(5.5
)


(9.5
)%Marketing, general, and
    administrative


39.9



41.1



(1.2
)


(2.9
)%Asset impairments and other
    restructuring charges


3.7



0.8



2.9



362.5
%Other expense, net


1.4



2.8



(1.4
)


(50.0
)%Earnings from operations


7.4



13.2



(5.8
)


(43.9
)%Interest expense, net


17.3



15.1



2.2



14.6
%Other non-operating expense


0.2



0.2







0.0
%Income tax expense


5.6



4.8



0.8



16.7
%Minority interest


1.9



2.6



(0.7
)


(26.9
)%Loss from continuing operations


(17.6
)


(9.5
)


(8.1
)


85.3
%Income from discontinued
    operations, net of tax $1.5






1.4



(1.4
)


(100.0
)%Net loss

$
(17.6
)

$
(8.1
)

$
(9.5
)


117.3
%   Sales
    Gross
    profit
   21




---



##### Table of Contents



Marketing,
    general, and administrative
    Asset
    impairments and other restructuring Charges
      Interest
    expense, net
    Income
    taxes
    Discontinued
    operations
    Net
    loss
   22




---



##### Table of Contents



Segment
    Results  Comparison of the Three Months Ended
    April 30, 2006 to the Three Months Ended April 30,
    2005
  Automotive
    Wheels
    Three Months


Three MonthsEnded April 30,


Ended April 30,2006


2005


$ ChangeNet sales

$
403.8


$
397.8


$
6.0Asset impairments and other
    restructuring charges:Facility closure costs

$
0.4


$
0.3


$
0.1Impairment of machinery,
    equipment, and tooling


0.2



0.1



0.1Severance and other restructuring
    costs


1.4



0.4



1.0Total asset impairments and other
    restructuring charges

$
2.0


$
0.8


$
1.2Earnings from operations

$
13.5


$
19.2


$
(5.7
)   Net
    sales
    Asset
    impairments and other restructuring charges
    Earnings
    from operations
   23




---



##### Table of Contents



Components
    Three Months


Three MonthsEnded April 30,


Ended April 30,2006


2005


$ ChangeNet sales

$
169.0


$
191.4


$
(22.4
)Asset impairments and other
    restructuring charges:Facility closure costs

$



$



$
Impairment of land, building,
    machinery, equipment, and tooling










Severance and other restructuring
    costs


1.1







1.1Total asset impairments and other
    restructuring charges

$
1.1


$



$
1.1(Loss) earnings from operations

$
(1.2
)

$
0.9


$
(2.1
)   Net
    sales
    Asset
    impairments and other restructuring charges
    Earnings
    from operations
    Other
    Three Months


Three MonthsEnded April 30,


Ended April 30,2006


2005


$ ChangeLoss from operations

$
4.9


$
6.9


$
(2.0
)  24




---



##### Table of Contents



Loss from
    operations
    Liquidity
    and Capital Resources
  Cash
    Flows
  Operating Activities:
  Investing Activities:
  Financing Activities:
  Sources
    of Liquidity
      Other
    Liquidity Matters
       25




---



##### Table of Contents



Credit
    Ratings
    S&P

MoodysCorporate and Bank Debt rating


B−



B3Senior Note rating


CCC



Caa3   Off
    Balance Sheet Arrangements
        Contractual
    Obligations
    Payment Due by PeriodLess than


1-3


4-5


After 51 Year


Years


Years


Years


TotalShort-term borrowings

$
26.0


$



$



$



$
26.0Long-term debt


16.7



14.4



632.3







663.4Mortgage note payable


0.2



21.8











22.0Capital lease obligations


3.9



7.6



6.1







17.6Operating leases


14.3



15.9



5.8



1.1



37.1Redeemable preferred stock














12.3



12.3Capital expenditures


11.4















11.4United States pension contributions


16.8



15.0



0.7







32.5Total obligations

$
89.3


$
74.7


$
644.9


$
13.4


$
822.3  26




---



##### Table of Contents



Other
    Cash Requirements
    Interest

$
59.2Taxes


14.3United States pension and other
    post-retirement benefits funding


11.6Restructuring costs


5.5   Critical
    Accounting Policies
    Asset
    impairment losses and other restructuring charges
      Pension
    and postretirement benefits other than pensions
       27




---



##### Table of Contents



Goodwill
    impairment testing
    Allowance
    for uncollectible accounts
    Income
    Taxes
        New
    Accounting Pronouncements
  available-for-sale
 28




---



##### Table of Contents



instrument-by-instrument
  Item 3.
    Quantitative
    and Qualitative Disclosures About Market Risk    Foreign
    Exchange
      Interest
    Rates
   29




---



##### Table of Contents



Commodities
    Item 4.
    Controls
    and Procedures  Evaluation
    of Disclosure Controls and Procedures
    Rules 13a-15(e) 15d-15(e) Form 10-K
  Changes
    in Internal Control over Financial Reporting
  Form 10-K Internal
    Control  Integrated Framework.
    
    increase formality and rigor of controls and procedures over
    accounting for income taxes
    develop a plan and implement additional actions to fully
    remediate the material weakness, including increasing the use of
    third party tax service providers for the more complex areas of
    our income tax accounting 30




---



##### Table of Contents



PART II.
    OTHER INFORMATION  Item 1.
    Legal
    Proceedings      Item 1A.
    Risk
    Factors  Form 10-K.
  Item 2.
    Changes
    in Securities and Use of Proceeds    Item 3.
    Defaults
    upon Senior Securities    Item 4.
    Submission
    of Matters to a Vote of Security Holders    Item 5.
    Other
    Information   31




---



##### Table of Contents



Item 6.
    Exhibits  10
.21

Amendment No. 2 to Amended
    and Restated Credit Agreement dated as of March 31, 2006
    among HLI Operating Company, Inc., Hayes Lemmerz International
    Inc., and Citicorp North America, Inc. as Administrative Agent
    on behalf of each lender executing a Lender Consent
    (incorporated by reference to Exhibit 10.1 to our Current
    Report on
    Form 8-K
    filed on April 3, 2006).31
.1

Certification of Curtis J.
    Clawson, Chairman of the Board, President, and Chief Executive
    Officer, pursuant to Section 302 of the Sarbanes-Oxley Act
    of 2002.*31
.2

Certification of James A. Yost,
    Vice President, Finance, and Chief Financial Officer, pursuant
    to Section 302 of the Sarbanes-Oxley Act of 2002.*32
.1

Certification of Curtis J.
    Clawson, Chairman of the Board, President, and Chief Executive
    Officer, Pursuant to 18 U.S.C. Section 1350, as
    Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002.*32
.2

Certification of James A. Yost,
    Vice President, Finance, and Chief Financial Officer, Pursuant
    to 18 U.S.C. Section 1350, as Adopted Pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.*     *
    
    Filed electronically herewith. 32




---



##### Table of Contents



SIGNATURES      James
    A. Yost
    Vice President, Finance, and Chief Financial Officer
   33




---



##### Table of Contents



HAYES
    LEMMERZ INTERNATIONAL, INC.
  10-Q
    EXHIBIT INDEX
  10
.21

Amendment No. 2 to Amended
    and Restated Credit Agreement dated as of March 31, 2006
    among HLI Operating Company, Inc., Hayes Lemmerz International
    Inc., and Citicorp North America, Inc. as Administrative Agent
    on behalf of each lender executing a Lender Consent
    (incorporated by reference to Exhibit 10.1 to our Current
    Report on
    Form 8-K
    filed on April 3, 2006).31
.1

Certification of Curtis J.
    Clawson, Chairman of the Board, President, and Chief Executive
    Officer, pursuant to Section 302 of the Sarbanes-Oxley Act
    of 2002.*31
.2

Certification of James A. Yost,
    Vice President, Finance, and Chief Financial Officer, pursuant
    to Section 302 of the Sarbanes-Oxley Act of 2002.*32
.1

Certification of Curtis J.
    Clawson, Chairman of the Board, President, and Chief Executive
    Officer, Pursuant to 18 U.S.C. Section 1350, as
    Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002.*32
.2

Certification of James A. Yost,
    Vice President, Finance, and Chief Financial Officer, Pursuant
    to 18 U.S.C. Section 1350, as Adopted Pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.*     *
    
    Filed electronically herewith. 34