##### 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 1934
 For the quarterly period ended April 30, 2007
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from       to
 Commission file number: 333-107539
 
 HLI Operating Company, Inc.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    30-0167742(State or other jurisdiction of
    
    (IRS Employerincorporation or organization)
    
    Identification No.)15300 Centennial Drive
    
    48168Northville, Michigan
    
    (Zip Code)(Address of principal executive offices)
 Registrants telephone number, including area code:
(734) 737-5000
 þ o
  o o þ
 o þ
 
 þ o




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##### 



HLI OPERATING COMPANY, INC.
 QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
 PagePART I. FINANCIAL INFORMATIONItem 1. Financial StatementsConsolidated Statements of OperationsCondensed Consolidated Balance SheetsConsolidated Statements of Cash FlowsConsolidated Statements of Changes in Stockholders EquityNotes to Consolidated Financial StatementsItem 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 3. Quantitative and Qualitative Disclosures about Market RiskItem 4. Controls and ProceduresPART II. OTHER INFORMATIONItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 2. Unregistered Sales of Equity Securities and Use of ProceedsItem 3. Defaults upon Senior SecuritiesItem 4. Submission of Matters to a Vote of Security HoldersItem 5. Other InformationItem 6. ExhibitsSignatureSection 302 Certification of Curtis J. ClawsonSection 302 Certification of James A. YostSection 906 Certification of Curtis J. ClawsonSection 906 Certification of James A. Yost
  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 st of that year and ending January 31 st of the
following year (e.g., fiscal 2007 means the period beginning February 1, 2007, and ending January
31, 2008). 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 on Form 10-Q 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; (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; and (8) our ability to divest non-core
assets and businesses. 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.
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##### Table of Contents



Item 1. Financial Statements
 HLI OPERATING COMPANY, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 Three Months
    
    
    Three MonthsEnded April 30,
    
    
    Ended April 30,2007
    
    
    2006(Dollars in millions, except per shareamounts)Net sales
    
    $
    561.0
    
    
    $
    503.5Cost of goods sold
    
    
    499.5
    
    
    
    456.6Gross profit
    
    
    61.5
    
    
    
    46.9Marketing, general, and administrative
    
    
    38.6
    
    
    
    34.6Asset impairments and other restructuring charges
    
    
    2.4
    
    
    
    3.5Other expense, net
    
    
    0.4
    
    
    
    1.4Earnings from operations
    
    
    20.1
    
    
    
    7.4Interest expense, net
    
    
    18.3
    
    
    
    16.9Other non-operating expense
    
    
    0.3
    
    
    
    0.2Income (loss) from continuing operations before taxes
and minority interest
    
    
    1.5
    
    
    
    (9.7
    )Income tax expense
    
    
    8.6
    
    
    
    5.5Loss from continuing operations before minority interest
    
    
    (7.1
    )
    
    
    (15.2
    )Minority interest
    
    
    3.7
    
    
    
    1.9Loss from continuing operations
    
    
    (10.8
    )
    
    
    (17.1
    )Discontinued operations:Loss from operations, net of tax of $0.0 for both
April 30, 2007 and 2006
    
    
    (0.9
    )
    
    
    (0.5
    )Loss on sale of business, net of tax of $0.0
    
    
    (3.6
    )
    
    
    Loss from discontinued operations
    
    
    (4.5
    )
    
    
    (0.5
    )Net loss
    
    $
    (15.3
    )
    
    $
    (17.6
    )
  3




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HLI OPERATING COMPANY, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 April 30,
    
    
    January 31,2007
    
    
    2007(Dollars in millions)(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    64.7
    
    
    $
    38.4Receivables
    
    
    321.1
    
    
    
    258.5Other receivables
    
    
    34.3
    
    
    
    43.2Inventories
    
    
    197.3
    
    
    
    172.8Assets held for sale
    
    
    4.4
    
    
    
    51.8Prepaid expenses and other current assets
    
    
    15.9
    
    
    
    15.9Total current assets
    
    
    637.7
    
    
    
    580.6Property, plant, and equipment, net
    
    
    695.4
    
    
    
    680.7Goodwill
    
    
    221.3
    
    
    
    210.0Intangible assets, net
    
    
    178.9
    
    
    
    173.8Other assets
    
    
    35.3
    
    
    
    46.1Total assets
    
    $
    1,768.6
    
    
    $
    1,691.2LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Bank borrowings and other notes
    
    $
    28.8
    
    
    $
    27.9Current portion of long-term debt
    
    
    6.4
    
    
    
    6.7Accounts payable and accrued liabilities
    
    
    447.9
    
    
    
    384.4Liabilities held for sale
    
    
    0.6
    
    
    
    19.9Total current liabilities
    
    
    483.7
    
    
    
    438.9Long-term debt, net of current portion
    
    
    663.3
    
    
    
    659.4Deferred tax liabilities
    
    
    61.2
    
    
    
    67.3Pension and other long-term liabilities
    
    
    374.7
    
    
    
    366.5Minority interest
    
    
    44.7
    
    
    
    44.8Stockholders equity:Preferred stock, par value $1.00 per share:100,000 shares authorized; 81,118 and 97,034 issued and outstanding
at April 30, 2007 and January 31, 2007, respectively
    
    
    10.6
    
    
    
    12.5Common stock, par value $0.01 per share:600,000 shares authorized; 590,000 issued and outstanding at both
April 30, 2007 and January 31, 2007
    
    
    
    
    
    
    Additional paid in capital
    
    
    696.3
    
    
    
    688.3Accumulated deficit
    
    
    (758.4
    )
    
    
    (742.9
    )Accumulated other comprehensive income
    
    
    192.5
    
    
    
    156.4Total stockholders equity
    
    
    141.0
    
    
    
    114.3Total liabilities and stockholders equity
    
    $
    1,768.6
    
    
    $
    1,691.2
  4




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HLI OPERATING COMPANY, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 Three Months Ended
    
    
    Three Months EndedApril 30, 2007
    
    
    April 30, 2006(Dollars in millions)Cash flows from operating activities:Net loss
    
    $
    (15.3
    )
    
    $
    (17.6
    )Adjustments to reconcile net loss from operations to net cash provided by
(used for) operating activities:Net loss from discontinued operations
    
    
    4.5
    
    
    
    0.5Depreciation and amortization
    
    
    30.0
    
    
    
    31.2Asset impairments
    
    
    0.2
    
    
    
    0.2Minority interest
    
    
    3.7
    
    
    
    2.1Equity compensation expense
    
    
    0.6
    
    
    
    (0.2
    )Loss on sale of assets and businesses
    
    
    0.2
    
    
    
    1.2Amortization of deferred financing fees
    
    
    1.4
    
    
    
    1.1Changes in operating assets and liabilities that increase (decrease) cash flows:Receivables
    
    
    (47.7
    )
    
    
    (15.6
    )Other receivables
    
    
    8.9
    
    
    
    21.0Inventories
    
    
    (18.0
    )
    
    
    (13.8
    )Prepaid expenses and other
    
    
    0.5
    
    
    
    4.0Accounts payable and accrued liabilities
    
    
    45.9
    
    
    
    22.7Cash provided by operating activities
    
    
    14.9
    
    
    
    36.8Cash flows from investing activities:Purchase of property, plant, equipment, and tooling
    
    
    (16.6
    )
    
    
    (10.9
    )Proceeds from sale of assets
    
    
    
    
    
    
    0.2Capital contributed by minority shareholders
    
    
    
    
    
    
    0.4Cash used for investing activities
    
    
    (16.6
    )
    
    
    (10.3
    )Cash flows from financing activities:Changes in bank borrowings and credit facilities
    
    
    (0.6
    )
    
    
    (0.6
    )Bank finance fees paid
    
    
    
    
    
    
    (2.9
    )Borrowing (repayment) of long-term debt
    
    
    8.4
    
    
    
    (0.2
    )Dividends paid to minority shareholders
    
    
    (5.5
    )
    
    
    (1.0
    )Cash
provided by (used for) financing activities
    
    
    2.3
    
    
    
    (4.7
    )Cash flows of discontinued operations:Net cash provided by operating activities
    
    
    2.9
    
    
    
    (11.3
    )Net cash provided by (used for) investing activities
    
    
    26.0
    
    
    
    (1.2
    )Net cash used for financing activities
    
    
    (5.2
    )
    
    
    (1.1
    )Net cash provided by (used for) discontinued operations
    
    
    23.7
    
    
    
    (13.6
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    2.0
    
    
    
    1.9Increase in cash and cash equivalents
    
    
    26.3
    
    
    
    10.1Cash and cash equivalents at beginning of period
    
    
    38.4
    
    
    
    42.3Cash and cash equivalents at end of period
    
    $
    64.7
    
    
    $
    52.4Supplemental data:Cash paid for interest
    
    $
    15.1
    
    
    $
    12.1Cash paid for income taxes
    
    $
    3.3
    
    
    $
    3.4
  5




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HLI OPERATING COMPANY, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 (Unaudited)
 AccumulatedAdditional
    
    
    
    
    
    
    OtherPreferred
    
    
    Paid in
    
    
    Accumulated
    
    
    ComprehensiveShares
    
    
    Par Value
    
    
    Stock
    
    
    Capital
    
    
    Deficit
    
    
    Income
    
    
    Total(Dollars in millions, except share amounts)Balance at January 31, 2007
    
    
    590,000
    
    
    $
    
    
    
    $
    12.5
    
    
    $
    688.3
    
    
    $
    (742.9
    )
    
    $
    156.4
    
    
    $
    114.3Preferred stock dividends accrued
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    (0.2
    )
    
    
    
    
    
    
    Comprehensive income:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15.3
    )
    
    
    
    
    
    
    (15.3
    )Currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    38.9
    
    
    
    38.9Unrealized loss on derivatives
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2.8
    )
    
    
    (2.8
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20.8HLI common stock issued to note holders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.3
    
    
    
    
    
    
    
    
    
    
    
    5.3Shares of redeemable preferred stock
converted into HLI common stock
    
    
    
    
    
    
    
    
    
    
    (2.1
    )
    
    
    2.1
    
    
    
    
    
    
    
    
    
    
    
    Equity compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.6
    
    
    
    
    
    
    
    
    
    
    
    0.6Balance at April 30, 2007
    
    
    590,000
    
    
    $
    
    
    
    $
    10.6
    
    
    $
    696.3
    
    
    $
    (758.4
    )
    
    $
    192.5
    
    
    $
    141.0Balance at January 31, 2006
    
    
    590,000
    
    
    $
    
    
    
    $
    12.1
    
    
    $
    685.6
    
    
    $
    (575.6
    )
    
    $
    73.3
    
    
    $
    195.4Comprehensive income:
    
    
    
    
    
    
    
    
    
    
    0.2Net 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
    
    
    $
    
    
    
    $
    12.3
    
    
    $
    685.6
    
    
    $
    (593.2
    )
    
    $
    100.6
    
    
    $
    205.1
  6




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HLI OPERATING COMPANY, INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Three Months Ended April 30, 2007 and 2006
 (Unaudited)
 (Dollars in millions, unless otherwise stated)
 Note 1. Description of Business
  Description of Business
   Note 2. Basis of Presentation
    Note 3. Stock-Based Compensation
   7




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WeightedNumber of
    
    
    Average ExerciseShares
    
    
    PriceOutstanding at January 31, 2006
    
    
    1,722,235
    
    
    $
    13.54Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Canceled
    
    
    (32,888
    )
    
    
    13.87Outstanding and exercisable at April 30, 2006
    
    
    1,689,347
    
    
    $
    13.53Outstanding at January 31, 2007
    
    
    1,334,639
    
    
    $
    13.47Granted
    
    
    
    
    
    
    Exercised
    
    
    (7,790
    )
    
    
    4.52Canceled
    
    
    (6,710
    )
    
    
    16.07Outstanding and exercisable at April 30, 2007
    
    
    1,320,139
    
    
    $
    13.51
  8




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##### Table of Contents



WeightedAverage GrantNumber of Shares
    
    
    Date Fair ValueNonvested at January 31, 2006
    
    
    1,357,705
    
    
    $
    12.14Granted
    
    
    
    
    
    
    Exercised
    
    
    (1,782
    )
    
    
    14.90Forfeited
    
    
    (130,919
    )
    
    
    11.86Outstanding at April 30, 2006
    
    
    1,225,004
    
    
    $
    12.16Nonvested at January 31, 2007
    
    
    1,676,999
    
    
    $
    7.03Granted
    
    
    
    
    
    
    Exercised
    
    
    (28,506
    )
    
    
    14.09Forfeited
    
    
    (26,521
    )
    
    
    8.92Outstanding at April 30, 2007
    
    
    1,621,972
    
    
    $
    6.88
   Note 4. Inventories
  April 30,
    
    
    January 31,2007
    
    
    2007Raw materials
    
    $
    47.6
    
    
    $
    39.9Work-in-process
    
    
    52.8
    
    
    
    38.5Finished goods
    
    
    63.3
    
    
    
    64.0Spare parts and supplies
    
    
    33.6
    
    
    
    30.4Total
    
    $
    197.3
    
    
    $
    172.8
 Note 5. Assets Held for Sale
  April 30,
    
    
    January 31,2007
    
    
    2007Suspension business
    
    $
    1.6
    
    
    $
    49.0Howell, Michigan building
    
    
    2.8
    
    
    
    2.8Total
    
    $
    4.4
    
    
    $
    51.8
  Note 6. Discontinued Operations
  9




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April 30,
    
    
    January 31,2007
    
    
    2007Cash and cash equivalents
    
    $
    0.1
    
    
    $
    0.1Receivables
    
    
    1.4
    
    
    
    30.0Inventories
    
    
    
    
    
    
    17.5Prepaid expenses and other assets
    
    
    
    
    
    
    1.4Property, plant, and equipment, net
    
    
    0.1
    
    
    
    Total assets held for sale
    
    $
    1.6
    
    
    $
    49.0Accounts payable and accrued liabilities
    
    $
    0.6
    
    
    $
    15.7Other long term liabilities
    
    
    
    
    
    
    4.2Total liabilities held for sale
    
    $
    0.6
    
    
    $
    19.9
  April 30,
    
    
    April 30,2007
    
    
    2006Net sales
    
    $
    6.8
    
    
    $
    69.3Loss before income tax expense
    
    $
    (4.5
    )
    
    $
    (0.4
    )Income tax expense
    
    
    
    
    
    
    0.1Net loss
    
    $
    (4.5
    )
    
    $
    (0.5
    )
 Note 7. Bank Borrowings, Other Notes, and Long-Term Debt
   10




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April 30,
    
    
    January 31,2007
    
    
    2007Various foreign bank and government loans, weighted average interest
rates of 5.4% and 5.4% at April 30, 2007 and January 31, 2007,
respectively
    
    $
    3.4
    
    
    $
    3.4Term Loan B maturing 2009, weighted average interest rate of 8.8%
and 8.9% at April 30, 2007 and January 31, 2007, respectively
    
    
    326.7
    
    
    
    327.8Term Loan C maturing 2010, weighted average interest rate of 11.4%
at both April 30, 2007 and January 31, 2007
    
    
    150.0
    
    
    
    150.0101/2% Senior Notes due 2010, net of discount of $0.3 million and $0.4
million at April 30, 2007 and January 31, 2007, respectively
    
    
    157.2
    
    
    
    162.1Revolving Credit Facility, weighted average interest rate of 11.0%
at April 30, 2007
    
    
    10.0
    
    
    
    Mortgage note payable maturing June 3, 2008
    
    
    21.7
    
    
    
    21.8Capital lease obligations
    
    
    0.7
    
    
    
    1.0669.7
    
    
    
    666.1Less current portion of long-term debt
    
    
    6.4
    
    
    
    6.7Long-term debt
    
    $
    663.3
    
    
    $
    659.4
 Credit Facility
     Senior Notes
 1 2 1 2
   11




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NewFinancing
  Note 8. Pension Plans and Postretirement Benefits Other Than Pensions
   US Plans
    
    
    International PlansPension Benefits
    
    
    Other Benefits
    
    
    Pension BenefitsThree Months Ended April 30,2007
    
    
    2006
    
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006Service cost
    
    $
    0.3
    
    
    $
    0.2
    
    
    $
    
    
    
    $
    
    
    
    $
    0.2
    
    
    $
    0.3Interest cost
    
    
    2.6
    
    
    
    2.7
    
    
    
    2.4
    
    
    
    2.7
    
    
    
    1.6
    
    
    
    1.4Expected return on plan assets
    
    
    (3.1
    )
    
    
    (2.6
    )
    
    
    0.1
    
    
    
    
    
    
    
    (0.2
    )
    
    
    (0.1
    )Amortization of net loss
    
    
    
    
    
    
    
    
    
    
    (0.1
    )
    
    
    (0.1
    )
    
    
    
    
    
    
    Special termination benefit recognized
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net periodic benefit cost
    
    $
    (0.2
    )
    
    $
    0.4
    
    
    $
    2.4
    
    
    $
    2.6
    
    
    $
    1.6
    
    
    $
    1.6
   Note 9. Asset Impairments and Other Restructuring Charges
  12




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Three Months Ended April 30, 2007AutomotiveWheels
    
    
    Components
    
    
    Other
    
    
    TotalFacility closure costs
    
    $
    2.1
    
    
    $
    
    
    
    $
    
    
    
    $
    2.1Impairment of facility, machinery, and equipment
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    0.2Severance and other restructuring costs
    
    
    
    
    
    
    
    
    
    
    0.1
    
    
    
    0.1Total
    
    $
    2.3
    
    
    $
    
    
    
    $
    0.1
    
    
    $
    2.4
 Three Months Ended April 30, 2006AutomotiveWheels
    
    
    Components
    
    
    Other
    
    
    TotalFacility closure costs
    
    $
    0.4
    
    
    $
    
    
    
    $
    
    
    
    $
    0.4Impairment of facility, machinery, and equipment
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    0.2Severance and other restructuring costs
    
    
    1.5
    
    
    
    0.8
    
    
    
    0.6
    
    
    
    2.9Total
    
    $
    2.1
    
    
    $
    0.8
    
    
    $
    0.6
    
    
    $
    3.5
 Asset Impairment Losses and Other Restructuring Charges for the Three Months Ended April 30, 2007
  Asset Impairment Losses and Other Restructuring Charges for the Three Months Ended April 30, 2006
  Facility Exit Costs and Severance Accruals
  Accrual of
    
    
    CashSeverance and
    
    
    Payments andOther
    
    
    Effects ofJanuary 31,
    
    
    Restructuring
    
    
    Foreign
    
    
    April 30, 20072007 Accrual
    
    
    Charges
    
    
    Currency
    
    
    AccrualFacility exit costs
    
    $
    0.2
    
    
    $
    2.1
    
    
    $
    (2.2
    )
    
    $
    0.1Severance
    
    
    0.8
    
    
    
    0.1
    
    
    
    (0.6
    )
    
    
    0.3Total
    
    $
    1.0
    
    
    $
    2.2
    
    
    $
    (2.8
    )
    
    $
    0.4
 Note 10. Taxes on Income
  13




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##### Table of Contents



Three Months Ended April 30,2007
    
    
    2006US
    
    
    Foreign
    
    
    US
    
    
    ForeignPre-tax income (loss)
    
    $
    (24.1
    )
    
    $
    25.6
    
    
    $
    (24.1
    )
    
    $
    14.4Income tax expense
    
    
    0.2
    
    
    
    8.4
    
    
    
    0.3
    
    
    
    5.2
   Accounting for Uncertainty
in Income Taxes, an interpretation of FASB Statement No. 109
    Note 11. Segment Reporting
   14




---



##### Table of Contents



Three Months Ended April 30, 2007AutomotiveWheels
    
    
    Components
    
    
    Other
    
    
    TotalNet sales
    
    $
    466.8
    
    
    $
    94.2
    
    
    $
    
    
    
    $
    561.0Asset impairments and other restructuring charges
    
    
    2.3
    
    
    
    
    
    
    
    0.1
    
    
    
    2.4Earnings (loss) from operations
    
    
    24.5
    
    
    
    0.4
    
    
    
    (4.8
    )
    
    
    20.1
 Three Months Ended April 30, 2006AutomotiveWheels
    
    
    Components
    
    
    Other
    
    
    TotalNet sales
    
    $
    403.8
    
    
    $
    99.7
    
    
    $
    
    
    
    $
    503.5Asset impairments and other restructuring charges
    
    
    2.1
    
    
    
    0.8
    
    
    
    0.6
    
    
    
    3.5Earnings (loss) from operations
    
    
    13.5
    
    
    
    (1.2
    )
    
    
    (4.9
    )
    
    
    7.4
 As of April 30, 2007AutomotiveWheels
    
    
    Components
    
    
    Other
    
    
    TotalTotal assets
    
    $
    1,462.5
    
    
    $
    151.9
    
    
    $
    154.2
    
    
    $
    1,768.6
 As of January 31, 2007AutomotiveWheels
    
    
    Components
    
    
    Other
    
    
    TotalTotal assets
    
    $
    1,336.6
    
    
    $
    192.0
    
    
    $
    162.6
    
    
    $
    1,691.2
 Note 12. Accounting Errors
  Note 13. Condensed Consolidating Financial Statements
   Guarantor and Nonguarantor Financial Statements
  15




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##### Table of Contents



CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
 For the Three months Ended April 30, 2007
 (Unaudited)
 Guarantor
    
    
    NonguarantorIssuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalNet sales
    
    $
    
    
    
    $
    145.5
    
    
    $
    421.0
    
    
    $
    (5.5
    )
    
    $
    561.0Cost of goods sold
    
    
    2.9
    
    
    
    136.2
    
    
    
    365.9
    
    
    
    (5.5
    )
    
    
    499.5Gross profit (loss)
    
    
    (2.9
    )
    
    
    9.3
    
    
    
    55.1
    
    
    
    
    
    
    
    61.5Marketing, general, and administrative
    
    
    0.4
    
    
    
    14.7
    
    
    
    23.5
    
    
    
    
    
    
    
    38.6Equity in (earnings) losses of
subsidiaries and joint ventures
    
    
    (1.1
    )
    
    
    0.6
    
    
    
    
    
    
    
    0.5
    
    
    
    Asset impairments and other restructuring charges
    
    
    
    
    
    
    2.2
    
    
    
    0.2
    
    
    
    
    
    
    
    2.4Other (income) expense, net
    
    
    (0.4
    )
    
    
    (1.5
    )
    
    
    2.3
    
    
    
    
    
    
    
    0.4Earnings (loss) from operations
    
    
    (1.8
    )
    
    
    (6.7
    )
    
    
    29.1
    
    
    
    (0.5
    )
    
    
    20.1Interest expense, net
    
    
    13.3
    
    
    
    
    
    
    
    5.0
    
    
    
    
    
    
    
    18.3Other non-operating expense
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.3Earnings (loss) from continuing operations
before taxes on income and minority interest
    
    
    (15.4
    )
    
    
    (6.7
    )
    
    
    24.1
    
    
    
    (0.5
    )
    
    
    1.5Income tax expense
    
    
    (0.1
    )
    
    
    0.9
    
    
    
    7.8
    
    
    
    
    
    
    
    8.6Earnings (loss) from continuing operations before
minority interest
    
    
    (15.3
    )
    
    
    (7.6
    )
    
    
    16.3
    
    
    
    (0.5
    )
    
    
    (7.1
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    3.7
    
    
    
    
    
    
    
    3.7Earnings (loss) from continuing operations
    
    
    (15.3
    )
    
    
    (7.6
    )
    
    
    12.6
    
    
    
    (0.5
    )
    
    
    (10.8
    )Income (loss) from discontinued operations
    
    
    
    
    
    
    (5.8
    )
    
    
    1.3
    
    
    
    
    
    
    
    (4.5
    )Net income (loss)
    
    $
    (15.3
    )
    
    $
    (13.4
    )
    
    $
    13.9
    
    
    $
    (0.5
    )
    
    $
    (15.3
    )
 16




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##### Table of Contents



CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Three months Ended April 30, 2006
(Unaudited)
 Guarantor
    
    
    NonguarantorIssuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalNet sales
    
    $
    
    
    
    $
    157.9
    
    
    $
    354.8
    
    
    $
    (9.2
    )
    
    $
    503.5Cost of goods sold
    
    
    4.2
    
    
    
    149.8
    
    
    
    311.8
    
    
    
    (9.2
    )
    
    
    456.6Gross profit (loss)
    
    
    (4.2
    )
    
    
    8.1
    
    
    
    43.0
    
    
    
    
    
    
    
    46.9Marketing, general, and administrative
    
    
    1.3
    
    
    
    13.1
    
    
    
    20.2
    
    
    
    
    
    
    
    34.6Equity in (earnings) losses of
subsidiaries and joint ventures
    
    
    (0.3
    )
    
    
    (1.5
    )
    
    
    
    
    
    
    1.8
    
    
    
    Asset impairments and other restructuring charges
    
    
    1.4
    
    
    
    1.6
    
    
    
    0.5
    
    
    
    
    
    
    
    3.5Other (income) expense, net
    
    
    (0.1
    )
    
    
    
    
    
    
    1.5
    
    
    
    
    
    
    
    1.4Earnings (loss) from operations
    
    
    (6.5
    )
    
    
    (5.1
    )
    
    
    20.8
    
    
    
    (1.8
    )
    
    
    7.4Interest (income) expense, net
    
    
    10.9
    
    
    
    
    
    
    
    6.0
    
    
    
    
    
    
    
    16.9Other non-operating expense
    
    
    0.1
    
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    0.2Earnings (loss) from continuing operations
before taxes on income and minority interest
    
    
    (17.5
    )
    
    
    (5.1
    )
    
    
    14.7
    
    
    
    (1.8
    )
    
    
    (9.7
    )Income tax expense
    
    
    0.1
    
    
    
    0.2
    
    
    
    5.2
    
    
    
    
    
    
    
    5.5Earnings (loss) from continuing operations before
minority interest
    
    
    (17.6
    )
    
    
    (5.3
    )
    
    
    9.5
    
    
    
    (1.8
    )
    
    
    (15.2
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    1.9
    
    
    
    
    
    
    
    1.9Income (loss) from continuing operations
    
    
    (17.6
    )
    
    
    (5.3
    )
    
    
    7.6
    
    
    
    (1.8
    )
    
    
    (17.1
    )Income from discontinued operations, net of tax
    
    
    
    
    
    
    (0.5
    )
    
    
    
    
    
    
    
    
    
    
    (0.5
    )Net income (loss)
    
    $
    (17.6
    )
    
    $
    (5.8
    )
    
    $
    7.6
    
    
    $
    (1.8
    )
    
    $
    (17.6
    )
 17




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##### Table of Contents



CONDENSED CONSOLIDATING BALANCE SHEETS
As of April 30, 2007
(Unaudited)
 Guarantor
    
    
    NonguarantorIssuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalCash and cash equivalents
    
    $
    4.4
    
    
    $
    1.0
    
    
    $
    59.3
    
    
    $
    
    
    
    $
    64.7Receivables
    
    
    (71.3
    )
    
    
    77.0
    
    
    
    315.4
    
    
    
    
    
    
    
    321.1Other receivables
    
    
    34.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    34.3Inventories
    
    
    1.2
    
    
    
    51.2
    
    
    
    144.9
    
    
    
    
    
    
    
    197.3Prepaid expenses and other
    
    
    6.5
    
    
    
    4.4
    
    
    
    9.4
    
    
    
    
    
    
    
    20.3Total current assets
    
    
    (24.9
    )
    
    
    133.6
    
    
    
    529.0
    
    
    
    
    
    
    
    637.7Property, plant, and equipment, net
    
    
    29.2
    
    
    
    121.2
    
    
    
    545.0
    
    
    
    
    
    
    
    695.4Goodwill and other assets
    
    
    869.0
    
    
    
    (240.4
    )
    
    
    391.2
    
    
    
    (584.3
    )
    
    
    435.5Total assets
    
    $
    873.3
    
    
    $
    14.4
    
    
    $
    1,465.2
    
    
    $
    (584.3
    )
    
    $
    1,768.6Bank borrowings and other notes
    
    $
    
    
    
    $
    
    
    
    $
    28.8
    
    
    $
    
    
    
    $
    28.8Current portion of long-term debt
    
    
    4.6
    
    
    
    0.7
    
    
    
    1.1
    
    
    
    
    
    
    
    6.4Accounts payable and accrued liabilities
    
    
    52.4
    
    
    
    54.8
    
    
    
    341.3
    
    
    
    
    
    
    
    448.5Total current liabilities
    
    
    57.0
    
    
    
    55.5
    
    
    
    371.2
    
    
    
    
    
    
    
    483.7Long-term debt, net of current portion
    
    
    660.9
    
    
    
    
    
    
    
    2.4
    
    
    
    
    
    
    
    663.3Pension and other long-term liabilities
    
    
    197.4
    
    
    
    0.8
    
    
    
    237.7
    
    
    
    
    
    
    
    435.9Minority interest
    
    
    
    
    
    
    
    
    
    
    44.7
    
    
    
    
    
    
    
    44.7Parent loans
    
    
    (183.0
    )
    
    
    (16.7
    )
    
    
    204.8
    
    
    
    (5.1
    )
    
    
    Common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Preferred stock
    
    
    10.6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10.6Additional paid-in capital
    
    
    696.3
    
    
    
    389.0
    
    
    
    569.1
    
    
    
    (958.1
    )
    
    
    696.3Retained earnings (accumulated deficit)
    
    
    (758.4
    )
    
    
    (419.4
    )
    
    
    (101.9
    )
    
    
    521.3
    
    
    
    (758.4
    )Accumulated other comprehensive
income (loss)
    
    
    192.5
    
    
    
    5.2
    
    
    
    137.2
    
    
    
    (142.4
    )
    
    
    192.5Total stockholders equity
    
    
    141.0
    
    
    
    (25.2
    )
    
    
    604.5
    
    
    
    (579.2
    )
    
    
    141.0Total liabilities and stockholders equity
    
    $
    873.3
    
    
    $
    14.4
    
    
    $
    1,465.2
    
    
    $
    (584.3
    )
    
    $
    1,768.6
 18




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##### Table of Contents



CONDENSED CONSOLIDATING BALANCE SHEETS
As of January 31, 2007
 Guarantor
    
    
    NonguarantorIssuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalCash and cash equivalents
    
    $
    (0.7
    )
    
    $
    0.5
    
    
    $
    38.6
    
    
    $
    
    
    
    $
    38.4Receivables
    
    
    (80.6
    )
    
    
    60.6
    
    
    
    278.5
    
    
    
    
    
    
    
    258.5Other receivables
    
    
    43.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43.2Inventories
    
    
    0.4
    
    
    
    48.5
    
    
    
    123.9
    
    
    
    
    
    
    
    172.8Prepaid expenses and other
    
    
    3.1
    
    
    
    52.2
    
    
    
    12.4
    
    
    
    
    
    
    
    67.7Total current assets
    
    
    (34.6
    )
    
    
    161.8
    
    
    
    453.4
    
    
    
    
    
    
    
    580.6Property, plant, and equipment, net
    
    
    30.0
    
    
    
    123.8
    
    
    
    526.9
    
    
    
    
    
    
    
    680.7Goodwill and other assets
    
    
    852.3
    
    
    
    (115.6
    )
    
    
    381.6
    
    
    
    (688.4
    )
    
    
    429.9Total assets
    
    $
    847.7
    
    
    $
    170.0
    
    
    $
    1,361.9
    
    
    $
    (688.4
    )
    
    $
    1,691.2Bank borrowings and other notes
    
    $
    
    
    
    $
    
    
    
    $
    27.9
    
    
    $
    
    
    
    $
    27.9Current portion of long-term debt
    
    
    4.6
    
    
    
    1.1
    
    
    
    1.0
    
    
    
    
    
    
    
    6.7Accounts payable and accrued liabilities
    
    
    48.3
    
    
    
    59.8
    
    
    
    296.2
    
    
    
    
    
    
    
    404.3Total current liabilities
    
    
    52.9
    
    
    
    60.9
    
    
    
    325.1
    
    
    
    
    
    
    
    438.9Long-term debt, net of current portion
    
    
    657.1
    
    
    
    
    
    
    
    2.3
    
    
    
    
    
    
    
    659.4Pension and other long-term liabilities
    
    
    199.5
    
    
    
    0.8
    
    
    
    233.5
    
    
    
    
    
    
    
    433.8Minority interest
    
    
   
    
    
    
    
    
    
    
    44.8
    
    
    
    
    
    
    
    44.8Parent loans
    
    
    (176.1
    )
    
    
    (20.5
    )
    
    
    199.1
    
    
    
    (2.5
    )
    
    
    Preferred stock
    
    
    12.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12.5Common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Additional paid-in capital
    
    
    688.3
    
    
    
    525.8
    
    
    
    569.1
    
    
    
    (1,094.9
    )
    
    
    688.3Retained earnings (accumulated deficit)
    
    
    (742.9
    )
    
    
    (406.0
    )
    
    
    (115.8
    )
    
    
    521.8
    
    
    
    (742.9
    )Accumulated other comprehensive
income (loss)
    
    
    156.4
    
    
    
    9.0
    
    
    
    103.8
    
    
    
    (112.8
    )
    
    
    156.4Total stockholders equity
    
    
    114.3
    
    
    
    128.8
    
    
    
    557.1
    
    
    
    (685.9
    )
    
    
    114.3Total liabilities and stockholders equity
    
    $
    847.7
    
    
    $
    170.0
    
    
    $
    1,361.9
    
    
    $
    (688.4
    )
    
    $
    1,691.2
 19




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##### Table of Contents



CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Three months Ended April 30, 2007
(Unaudited)
 Guarantor
    
    
    NonguarantorIssuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalCash flows provided by (used for)
operating activities
    
    $
    (20.2
    )
    
    $
    (3.4
    )
    
    $
    38.5
    
    
    $
    
    
    
    $
    14.9Cash flows from investing activities:Purchase of property, plant,
equipment and tooling
    
    
    (0.6
    )
    
    
    (3.2
    )
    
    
    (12.8
    )
    
    
    
    
    
    
    (16.6
    )Cash used for investing activities
    
    
    (0.6
    )
    
    
    (3.2
    )
    
    
    (12.8
    )
    
    
    
    
    
    
    (16.6
    )Cash flows from financing activities:Changes in bank borrowings and
credit facility
    
    
    
    
    
    
    
    
    
    
    (0.6
    )
    
    
    
    
    
    
    (0.6
    )Borrowing/ repayment of long term debt
    
    
    8.9
    
    
    
    (0.4
    )
    
    
    (0.1
    )
    
    
    
    
    
    
    8.4Dividends paid to minority shareholders
    
    
    
    
    
    
    
    
    
    
    (5.5
    )
    
    
    
    
    
    
    (5.5
    )Cash
provided by (used for) financing activities
    
    
    8.9
    
    
    
    (0.4
    )
    
    
    (6.2
    )
    
    
    
    
    
    
    2.3Increase (decrease) in parent loans
and advances
    
    
    17.0
    
    
    
    (14.9
    )
    
    
    (2.1
    )
    
    
    
    
    
    
    (0.0
    )Cash flow from discontinued operations
    
    
    
    
    
    
    22.4
    
    
    
    1.3
    
    
    
    
    
    
    
    23.7Effect of exchange rates on cash and cash
equivalents
    
    
    
    
    
    
    
    
    
    
    2.0
    
    
    
    
    
    
    
    2.0Increase in cash and cash equivalents
    
    
    5.1
    
    
    
    0.5
    
    
    
    20.7
    
    
    
    
    
    
    
    26.3Cash and cash equivalents at beginning
of period
    
    
    (0.7
    )
    
    
    0.5
    
    
    
    38.6
    
    
    
    
    
    
    
    38.4Cash and cash equivalents at end of period
    
    $
    4.4
    
    
    $
    1.0
    
    
    $
    59.3
    
    
    $
    
    
    
    $
    64.7
 20




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##### Table of Contents



CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Three months Ended April 30, 2006
(Unaudited)
 Guarantor
    
    
    NonguarantorIssuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalCash flows provided by (used for)
operating activities
    
    $
    (1.3
    )
    
    $
    14.0
    
    
    $
    24.1
    
    
    $
    
    
    
    $
    36.8Cash flows from investing activities:Purchase of property, plant,
equipment and tooling
    
    
    (0.2
    )
    
    
    (3.1
    )
    
    
    (7.6
    )
    
    
    
    
    
    
    (10.9
    )Capital contributed by minority shareholders
    
    
    
    
    
    
    
    
    
    
    0.4
    
    
    
    
    
    
    
    0.4Proceeds from disposal of assets
and businesses
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    0.2Cash used for investing activities
    
    
    (0.2
    )
    
    
    (3.1
    )
    
    
    (7.0
    )
    
    
    
    
    
    
    (10.3
    )Cash flows from financing activities:Changes in bank borrowings and
credit facility
    
    
    
    
    
    
    (0.4
    )
    
    
    (0.2
    )
    
    
    
    
    
    
    (0.6
    )Repayment of long term debt
    
    
    
    
    
    
    
    
    
    
    (0.2
    )
    
    
    
    
    
    
    (0.2
    )Bank finance fees paid
    
    
    (2.9
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2.9
    )Dividends paid to minority shareholders
    
    
    
    
    
    
    
    
    
    
    (1.0
    )
    
    
    
    
    
    
    (1.0
    )Cash used for financing activities
    
    
    (2.9
    )
    
    
    (0.4
    )
    
    
    (1.4
    )
    
    
    
    
    
    
    (4.7
    )Increase (decrease) in parent loans
and advances
    
    
    9.4
    
    
    
    3.8
    
    
    
    (13.2
    )
    
    
    
    
    
    
    Cash flow from discontinued operations
    
    
    
    
    
    
    (13.7
    )
    
    
    0.1
    
    
    
    
    
    
    
    (13.6
    )Effect of exchange rates on cash and cash
equivalents
    
    
    
    
    
    
    
    
    
    
    1.9
    
    
    
    
    
    
    
    1.9Increase in cash and cash equivalents
    
    
    5.0
    
    
    
    0.6
    
    
    
    4.5
    
    
    
    
    
    
    
    10.1Cash and cash equivalents at beginning
of period
    
    
    (4.1
    )
    
    
    0.6
    
    
    
    45.8
    
    
    
    
    
    
    
    42.3Cash and cash equivalents at end of period
    
    $
    0.9
    
    
    $
    1.2
    
    
    $
    50.3
    
    
    $
    
    
    
    $
    52.4
 21




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##### Table of Contents



Note 14. Subsequent Events
  Rights Offering
  1 2
 Tender Offer for Senior Notes
   New Senior Notes
 1 4
 22




---



##### Table of Contents



New Credit Facilities
     Pro Forma Capitalization
  23




---



##### Table of Contents



Actual
    
    
    Adjustments
    
    
    As Adjusted(Unaudited)Total cash and cash equivalents
    
    $
    64.7
    
    
    $
    26.4
    
    
    $
    91.1DebtBank borrowings and other notes
    
    
    28.8
    
    
    
    
    
    
    
    28.8Debt of foreign subsidiaries
    
    
    3.4
    
    
    
    
    
    
    
    3.4Revolving credit facility
    
    
    10.0
    
    
    
    (10.0
    )
    
    
    Term Loan B
    
    
    326.7
    
    
    
    (326.7
    )
    
    
    New Term Loan
    
    
    
    
    
    
    350.5
    
    
    
    350.5Term Loan C
    
    
    150.0
    
    
    
    (150.0
    )
    
    
    10.5% Senior notes
    
    
    157.2
    
    
    
    (157.2
    )
    
    
    New 8.25% Senior notes
    
    
    
    
    
    
    175.2
    
    
    
    175.2Mortgage note payable
    
    
    21.7
    
    
    
    (21.7
    )
    
    
    Capital lease obligations
    
    
    0.7
    
    
    
    
    
    
    
    0.7Total Debt
    
    
    698.5
    
    
    
    (139.9
    )
    
    
    558.6Minority interest
    
    
    44.7
    
    
    
    
    
    
    
    44.7Total stockholders equity
    
    
    141.0
    
    
    
    166.5
    (a)
    
    
    307.5Total Capitalization
    
    $
    884.2
    
    
    $
    26.6
    
    
    $
    910.8
 
 (a)
    
    Net proceeds from Rights Offering of $189.6 million less call premium on 10.5% Senior
Notes of $9.0 million less $11.9 million of unamortized banks fees on old term debt, less $2.2
million in legal expenses 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Executive Summary
  Company Overview
     24




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##### Table of Contents



Results of Operations
 Consolidated Results  Comparison of the Three Months Ended April 30, 2007 to the Three Months
Ended April 30, 2006
  Three Months
    
    
    Three MonthsEnded April 30,
    
    
    Ended April 30,2007
    
    
    2006
    
    
    $ Change
    
    
    % ChangeNet sales:Automotive Wheels
    
    $
    466.8
    
    
    $
    403.8
    
    
    $
    63.0
    
    
    
    15.6
    %Components
    
    
    94.2
    
    
    
    99.7
    
    
    
    (5.5
    )
    
    
    -5.5
    %Total
    
    $
    561.0
    
    
    $
    503.5
    
    
    $
    57.5
    
    
    
    11.4
    %Gross profit
    
    $
    61.5
    
    
    $
    46.9
    
    
    $
    14.6
    
    
    
    31.1
    %Marketing, general, and administrative
    
    
    38.6
    
    
    
    34.6
    
    
    
    4.0
    
    
    
    11.6
    %Asset impairments and other restructuring charges
    
    
    2.4
    
    
    
    3.5
    
    
    
    (1.1
    )
    
    
    -31.4
    %Other expense, net
    
    
    0.4
    
    
    
    1.4
    
    
    
    (1.0
    )
    
    
    -71.4
    %Earnings from operations
    
    
    20.1
    
    
    
    7.4
    
    
    
    12.7
    
    
    
    171.6
    %Interest expense, net
    
    
    18.3
    
    
    
    16.9
    
    
    
    1.4
    
    
    
    8.3
    %Other non-operating expense
    
    
    0.3
    
    
    
    0.2
    
    
    
    0.1
    
    
    
    50.0
    %Income tax expense
    
    
    8.6
    
    
    
    5.5
    
    
    
    3.1
    
    
    
    56.4
    %Minority interest
    
    
    3.7
    
    
    
    1.9
    
    
    
    1.8
    
    
    
    94.7
    %Loss from continuing operations
    
    
    (10.8
    )
    
    
    (17.1
    )
    
    
    6.4
    
    
    
    37.4
    %Loss from discontinued operations, net of tax of $0.0
    
    
    (4.5
    )
    
    
    (0.5
    )
    
    
    (4.0
    )
    
    
    -800.0
    %Net loss
    
    $
    (15.3
    )
    
    $
    (17.6
    )
    
    $
    2.3
    
    
    
    13.1
    %
 Sales
  Gross profit
  Marketing, general, and administrative
  25




---



##### Table of Contents



Asset impairments and other restructuring charges
   Interest expense, net
  Income taxes
  Discontinued operations
  Net loss
  Segment Results  Comparison of the Three Months Ended April 30, 2007 to the Three Months Ended
April 30, 2006
 Automotive Wheels
  26




---



##### Table of Contents



Three Months
    
    
    Three MonthsEnded April 30,
    
    
    Ended April 30,2007
    
    
    2006
    
    
    $ ChangeNet sales
    
    $
    466.8
    
    
    $
    403.8
    
    
    $
    63.0Asset impairments and other restructuring charges:Facility closure costs
    
    $
    2.1
    
    
    $
    0.4
    
    
    $
    1.7Impairment of facility, machinery, and equipment
    
    
    0.2
    
    
    
    0.2
    
    
    
    Severance and other restructuring costs
    
    
    
    
    
    
    1.5
    
    
    
    (1.5
    )Total asset impairments and other restructuring charges
    
    $
    2.3
    
    
    $
    2.1
    
    
    $
    0.2Earnings from operations
    
    $
    24.5
    
    
    $
    13.5
    
    
    $
    11.0
 Net sales
  Asset impairments and other restructuring charges
  Earnings from operations
  Components
  Three Months
    
    
    Three MonthsEnded April 30,
    
    
    Ended April 30,2007
    
    
    2006
    
    
    $ ChangeNet sales
    
    $
    94.2
    
    
    $
    99.7
    
    
    $
    (5.5
    )Asset impairments and other restructuring charges:Impairment of facility, machinery, equipment, and intangibles
    
    $
    
    
    
    $
    
    
    
    $
    Severance and other restructuring costs
    
    
    
    
    
    
    0.8
    
    
    
    (0.8
    )Total asset impairments and other restructuring charges
    
    $
    
    
    
    $
    0.8
    
    
    $
    (0.8
    )Earnings (loss) from operations
    
    $
    0.4
    
    
    $
    (1.2
    )
    
    $
    1.6
 Net sales
  27




---



##### Table of Contents



Asset impairments and other restructuring charges
  Loss from operations
  Other
  Three Months
    
    Three MonthsEnded April 30,
    
    Ended April 30,2007
    
    2006
    
    $ ChangeLoss from operations
    
    $
    (4.8
    )
    
    $
    (4.9
    )
    
    $
    0.1
 Loss from operations
  Liquidity and Capital Resources
 Cash Flows
 Operating Activities:
 Investing Activities:
 Financing Activities:
 Sources of Liquidity
  28




---



##### Table of Contents



Rights Offering
  1 2
 New Senior Notes
 1 4
 New Credit Facilities
   29




---



##### Table of Contents



Other Liquidity Matters
    Credit Ratings
  S&P
    
    MoodysCorporate rating
    
    
    B-
    
    
    Caa1Bank debt rating
    
    
    B-
    
    
    
    B1Senior Note rating
    
    CCC
    
    Caa2
  S&P
    
    Moodys
    
    FitchCorporate rating
    
    
    B
    
    
    
    B3
    
    
    
    BBank debt rating
    
    BB-
    
    
    B2
    
    
    BB/RR1New Senior Note rating
    
    CCC+
    
    Caa2
    
    B-/RR5
 Off Balance Sheet Arrangements
  30




---



##### Table of Contents



Contractual Obligations
  Payment Due by PeriodLess than 1Year
    
    
    2-3 Years
    
    
    4-5 Years
    
    
    After 5 Years
    
    
    TotalShort-term borrowings
    
    $
    28.8
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    28.8Long-term debt
    
    
    4.5
    
    
    
    334.8
    
    
    
    308.0
    
    
    
    
    
    
    
    647.3Mortgage note payable
    
    
    0.2
    
    
    
    21.5
    
    
    
    
    
    
    
    
    
    
    
    21.7Capital lease obligation
    
    
    0.7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.7Operating leases
    
    
    6.2
    
    
    
    6.9
    
    
    
    0.7
    
    
    
    0.2
    
    
    
    14.0Capital expenditures
    
    
    22.8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22.8United States pension contribution
    
    
    11.5
    
    
    
    16.5
    
    
    
    14.7
    
    
    
    
    
    
    
    42.7Total obligations
    
    $
    74.7
    
    
    $
    379.7
    
    
    $
    323.4
    
    
    $
    0.2
    
    
    $
    778.0
 Other Cash Requirements
  31




---



##### Table of Contents



Interest
    
    $
    42.2Taxes
    
    
    20.3International pension and other post-retirement benefits funding
    
    
    18.3Restructuring costs
    
    
    1.2
 New Accounting Pronouncements
    
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  Foreign Exchange
   32




---



##### Table of Contents



Interest Rates
  Commodities
  
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
   Changes in Internal Control over Financial Reporting
  
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  33




---



##### Table of Contents



Item 1A. Risk Factors
  
 Item 2. Changes in Securities and Use of Proceeds
  
 Item 3. Defaults upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
 10.23
    
    Stock Purchase Agreement among HLI Operating Company, Inc., HLI
Suspension Holding Company, Inc. and Diversified Machine, Inc. dated
February 1, 2007 (incorporated by reference to Exhibit 10.23 to the
Hayes Lemmerz International, Inc. Quarterly Report on Form 10-Q
filed on June 8, 2007).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




---



##### Table of Contents



SIGNATURES
  HLI OPERATING COMPANY, INC./s/ James A. YostJames A. YostVice President, Finance, and Chief Financial Officer  35




---



##### Table of Contents



HLI OPERATING COMPANY, INC.
 10-Q EXHIBIT INDEX
 10.23
    
    Stock Purchase Agreement among HLI Operating Company, Inc., HLI
Suspension Holding Company, Inc. and Diversified Machine, Inc. dated
February 1, 2007 (incorporated by reference to Exhibit 10.23 to the
Hayes Lemmerz International, Inc. Quarterly Report on Form 10-Q
filed on June 8, 2007).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. 36