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** **

 

** **

**UNITED STATES SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, DC  20549**

 

**FORM 10-Q**

 

**(Mark One)**

 

**x  Quarterly Report Pursuant to Section 13or 15 (d) of the Securities Exchange Act of 1934**

 

**For the quarterly period ended June 30, 2010.**

 

**OR**

 

**o  Transition Report Pursuant to Section 13or 15(d) of the Securities Exchange Act of 1934**

 

**For the transition period from              to               .**

 

**Commissionfile number 001-32483**

 

**ACCURIDE CORPORATION**

(Exact Name of Registrant as Specified in Its Charter)

 

| **Delaware**                                                    | ** ** | **61-1109077**                       |
|-----------------------------------------------------------------|------------|--------------------------------------|
| (State or Other Jurisdiction of  Incorporation or Organization) |       | (I.R.S. Employer Identification No.) |

 

| **7140  Office Circle, Evansville, IN** | ** ** | **47715**  |
|----------------------------------------------|------------|------------|
| (Address of Principal Executive Offices)     |       | (Zip Code) |

 

Registrant’s TelephoneNumber, Including Area Code: **(812)962-5000**

 

Indicateby check mark whether the registrant (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days. Yes x  No o

 

Indicateby check mark whether the registrant has submitted electronically and posted onits corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 ofthis chapter) during the preceding 12 months (or for such shorter period thatthe registrant was required to submit and post such files).  Yes o  No o

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, a non-accelerated filer, or a smaller reporting company. Seedefinitions of “large accelerated filer,” “accelerated filer” and “smallerreporting company” in Rule 12b-2 of the Exchange Act.

 

| Large Accelerated Filer o |   | Accelerated Filer o         |
|--------------------------------|--------|-----------------------------|
|                           |   |                        |
| Non-Accelerated Filerx         |   | Smaller Reporting Company o |

 

Indicate by check mark whether the registrant is a shellcompany (as defined in Rule 12b-2 of the Exchange Act). Yeso No x

 

Indicateby check mark whether the registrant has filed all documents and reportsrequired to be filed by Sections 12, 13 or 15(d) of the SecuritiesExchange Act of 1934 subsequent to the distribution of securities under a planconfirmed by a court.  Yes  x No o

 

As of August 5, 2010, 126,294,882 shares of Accuride Corporationcommon stock, par value $.01 per share, were outstanding.

 

 

 

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**ACCURIDE CORPORATION**

 

**Tableof Contents**

** **
| ** **                                   | ** **                                                                                  | **Page**   |
|----------------------------------------------|---------------------------------------------------------------------------------------------|------------|
| ** **                                   | ** **                                                                                  | ** ** |
| **PART I — FINANCIAL INFORMATION** |                                                                                        |
|                                         |                                                                                        |       |
| Item 1.                                      | Condensed  Consolidated Financial Statements (Unaudited)                                    |       |
|                                         |                                                                                        |       |
|                                         | Condensed Consolidated Balance Sheets                                                       | 3          |
|                                         |                                                                                        |       |
|                                         | Condensed Consolidated Statements of Operations                                             | 4          |
|                                         |                                                                                        |       |
|                                         | Condensed Consolidated Statements of Stockholders’  Equity (Deficiency)                | 6          |
|                                         |                                                                                        |       |
|                                         | Condensed Consolidated Statements of Cash Flows                                             | 7          |
|                                         |                                                                                        |       |
|                                         | Notes to Condensed Consolidated Financial Statements                                        | 8          |
|                                         |                                                                                        |       |
| Item 2.                                      | Management’s  Discussion and Analysis of Financial Condition and Results of Operations | 26         |
|                                         |                                                                                        |       |
| Item 3.                                      | Quantitative  and Qualitative Disclosures About Market Risk                                 | 34         |
|                                         |                                                                                        |       |
| Item 4.                                      | Controls and  Procedures                                                                    | 34         |
|                                         |                                                                                        |       |
| **PART II  — OTHER INFORMATION**   |                                                                                        |
| ** **                                   |                                                                                        |
| Item 1.                                      | Legal Proceedings                                                                           | 35         |
|                                         |                                                                                        |       |
| Item  6.                                     | Exhibits                                                                                    | 35         |
|                                         |                                                                                        |       |
| Signatures                                   |                                                                                        | 37         |

 

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**Part I. FINANCIAL INFORMATION**

 

**Item 1. Financial Statements**

 

**ACCURIDE CORPORATION**

**CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)**

 
| ** **                                                                                                                                                                                          | ** ** | **Successor** | ** **    | **Predecessor**  | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------|---------------|------------------|------------|
| ** **                                                                                                                                                                                          | ** ** | **June 30,**  | ** **    | **December 31,** | ** ** |
| **(In  thousands, except for per share and per share data)**                                                                                                                                        | ** ** | **2010**      | ** **    | **2009**         | ** ** |
| **ASSETS**                                                                                                                                                                                          |       |          |          |             |       |
| CURRENT ASSETS:                                                                                                                                                                                     |       |          |          |             |       |
| Cash and cash equivalents                                                                                                                                                                           |       | $             |  52,319  |             | $          |  56,521 |   |
| Customer receivables, net of allowance for  doubtful accounts of $1,531 and $2,329 in 2010 and 2009, respectively                                                                                   |       | 87,332        |          | 60,120           |       |
| Other receivables                                                                                                                                                                                   |       | 7,239         |          | 6,181            |       |
| Inventories                                                                                                                                                                                         |       | 67,673        |          | 50,742           |       |
| Deferred income taxes                                                                                                                                                                               |       | 2,811         |          | 2,811            |       |
| Income tax receivable                                                                                                                                                                               |       | —        |          | 1,542            |       |
| Prepaid expenses and other current assets                                                                                                                                                           |       | 5,090         |          | 21,220           |       |
| Total current assets                                                                                                                                                                                |       | 222,464       |          | 199,137          |       |
| PROPERTY, PLANT AND EQUIPMENT, net                                                                                                                                                                  |       | 263,733       |          | 229,527          |       |
| OTHER ASSETS:                                                                                                                                                                                       |       |          |          |             |       |
| Goodwill                                                                                                                                                                                            |       | 114,384       |          | 127,474          |       |
| Other intangible assets, net                                                                                                                                                                        |       | 237,281       |          | 89,230           |       |
| Deferred financing costs, net of accumulated  amortization of $7,360 in 2009                                                                                                                        |       | —        |          | 4,282            |       |
| Other                                                                                                                                                                                               |       | 28,131        |          | 22,020           |       |
| TOTAL                                                                                                                                                                                               |       | $             |  865,993 |             | $          |  671,670 |   |
| **LIABILITIES AND STOCKHOLDERS’  DEFICIENCY**                                                                                                                                                  |       |          |          |             |       |
| CURRENT LIABILITIES:                                                                                                                                                                                |       |          |          |             |       |
| Accounts payable                                                                                                                                                                                    |       | $             |  58,935  |             | $          |  31,277 |   |
| Accrued payroll and compensation                                                                                                                                                                    |       | 18,294        |          | 14,318           |       |
| Accrued interest payable                                                                                                                                                                            |       | 93            |          | 3,571            |       |
| Accrued workers compensation                                                                                                                                                                        |       | 7,467         |          | 7,038            |       |
| Debt                                                                                                                                                                                                |       | —        |          | 397,472          |       |
| Accrued and other liabilities                                                                                                                                                                       |       | 20,925        |          | 20,609           |       |
| Total current liabilities                                                                                                                                                                           |       | 105,714       |          | 474,285          |       |
| LONG-TERM DEBT                                                                                                                                                                                      |       | 629,955       |          | —           |       |
| DEFERRED INCOME TAXES                                                                                                                                                                               |       | 14,736        |          | 14,274           |       |
| NON-CURRENT INCOME TAXES PAYABLE                                                                                                                                                                    |       | 7,914         |          | 7,914            |       |
| OTHER POSTRETIREMENT BENEFIT PLAN LIABILITY                                                                                                                                                         |       | 60,885        |          | 61,292           |       |
| PENSION BENEFIT PLAN LIABILITY                                                                                                                                                                      |       | 35,272        |          | 35,932           |       |
| OTHER LIABILITIES                                                                                                                                                                                   |       | 7,702         |          | 4,125            |       |
| LIABILITIES SUBJECT TO COMPROMISE                                                                                                                                                                   |       | —        |          | 302,114          |       |
| COMMITMENTS AND CONTINGENCIES (Note 7)                                                                                                                                                              |       | —        |          | —           |       |
| STOCKHOLDERS’ EQUITY (DEFICIENCY):                                                                                                                                                             |       |          |          |             |       |
| Predecessor Company Preferred Stock, $0.01 par  value; 5,000,000 shares authorized and 1 issued                                                                                                     |       | —        |          | —           |       |
| Predecessor Company Common Stock, $0.01 par value;  100,000,000 shares authorized, 48,139,000 shares issued, and 47,562,000  shares outstanding at December 31, 2009 and additional paid-in-capital |       | —        |          | 268,582          |       |
| Successor Company Preferred Stock, $0.01 par  value; 100,000,000 shares authorized                                                                                                                  |       | —        |          | —           |       |
| Successor Company Common Stock, $0.01 par value;  800,000,000 shares authorized, 128,124,399 shares issued and 126,294,882  outstanding at June 30, 2010 and additional paid-in-capital             |       | 49,531        |          | —           |       |
| Predecessor Company Treasury stock — 76,000 shares  at cost in 2009                                                                                                                            |       | —        |          | (751             | )          |
| Accumulated other comprehensive income (loss)                                                                                                                                                       |       | 802           |          | (48,376          | )          |
| Accumulated deficiency                                                                                                                                                                              |       | (46,518       | )             | (447,721         | )          |
| Total stockholders’ equity (deficiency)                                                                                                                                                        |       | 3,815         |          | (228,266         | )          |
| TOTAL                                                                                                                                                                                               |       | $             |  865,993 |             | $          |  671,670 |   |

 

Seenotes to unaudited condensed consolidated financial statements.

 

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**ACCURIDE CORPORATION**

**CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(UNAUDITED)**

 
| ** **                                                       | ** ** | **Successor**                    | ** ** | **Predecessor**                  | ** ** |
|------------------------------------------------------------------|------------|----------------------------------|------------|----------------------------------|------------|
| ** **                                                       | ** ** | **Three Months  Ended June 30,** | ** ** | **Three Months  Ended June 30,** | ** ** |
| **(In  thousands except per share data)**                        | ** ** | **2010**                         | ** ** | **2009**                         | ** ** |
| ** **                                                       | ** ** | ** **                       | ** ** | ** **                       | ** ** |
| NET SALES                                                        |       | $                                | 195,639    |                             | $          | 135,206 |   |
| COST OF GOODS SOLD                                               |       | 179,820                          |       | 144,227                          |       |
| GROSS PROFIT (LOSS)                                              |       | 15,819                           |       | (9,021                           | )          |
| OPERATING EXPENSES:                                              |       |                             |       |                             |       |
| Selling, general and administrative                              |       | 20,235                           |       | 12,490                           |       |
| LOSS FROM OPERATIONS                                             |       | (4,416                           | )          | (21,511                          | )          |
| OTHER INCOME (EXPENSE):                                          |       |                             |       |                             |       |
| Interest income                                                  |       | 55                               |       | 244                              |       |
| Interest expense                                                 |       | (10,292                          | )          | (15,835                          | )          |
| Unrealized gain on mark to market valuation of  convertible debt |       | 19,397                           |       | —                           |       |
| Other income, net                                                |       | 2,267                            |       | 1,543                            |       |
| INCOME (LOSS) BEFORE INCOME TAXES                                |       | 7,011                            |       | (35,559                          | )          |
| INCOME TAX PROVISION                                             |       | 501                              |       | 512                              |       |
| NET INCOME (LOSS)                                                |       | $                                | 6,510      |                             | $          | (36,071 | ) |
| Weighted average common shares outstanding—basic            |       | 126,295                          |       | 36,252                           |       |
| Basic income (loss) per share                                    |       | $                                | 0.02       |                             | $          | (1.00 | ) |
| Weighted average common shares outstanding—diluted          |       | 313,395                          |       | 36,252                           |       |
| Diluted loss per share                                           |       | $                                | (0.03      | )                                | $          | (1.00 | ) |

 

Seenotes to unaudited condensed consolidated financial statements.

 

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**ACCURIDE CORPORATION**

**CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)**

 
| ** **                                                       | ** ** | **Successor**                             | ** ** | **Predecessor**                             | ** ** |
|------------------------------------------------------------------|------------|-------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                                       | ** ** | **Period from  February 26 to  June 30,** | ** ** | **Period from  January 1 to  February 26,** | ** ** | **Six Months  Ended June 30,** | ** ** |
| **(In  thousands except per share data)**                        | ** ** | **2010**                                  | ** ** | **2010**                                    | ** ** | **2009** | ** ** |
| ** **                                                       | ** ** | ** **                                | ** ** | ** **                                  | ** ** | ** ** | ** ** |
| NET SALES                                                        |       | $                                         | 260,553    |                                        | $          | 104,059 |   | $ | 278,782 |   |
| COST OF GOODS SOLD                                               |       | 239,134                                   |       | 99,577                                      |       | 287,763 |   |
| GROSS PROFIT (LOSS)                                              |       | 21,419                                    |       | 4,482                                       |       | (8,981 | ) |
| OPERATING EXPENSES:                                              |       |                                      |       |                                        |       |   |   |
| Selling, general and administrative                              |       | 24,601                                    |       | 7,595                                       |       | 24,714 |   |
| LOSS FROM OPERATIONS                                             |       | (3,182                                    | )          | (3,113                                      | )          | (33,695 | ) |
| OTHER INCOME (EXPENSE):                                          |       |                                      |       |                                        |       |   |   |
| Interest income                                                  |       | 67                                        |       | 54                                          |       | 463 |   |
| Interest expense                                                 |       | (13,797                                   | )          | (7,550                                      | )          | (29,357 | ) |
| Loss on extinguishment of debt                                   |       | —                                    |       | —                                      |       | (5,389 | ) |
| Unrealized loss on mark to market valuation of  convertible debt |       | (31,204                                   | )          | —                                      |       | — |   |
| Other income, net                                                |       | 1,941                                     |       | 566                                         |       | 2,354 |   |
| LOSS BEFORE REORGANIZATION ITEMS AND INCOME TAXES                |       | (46,175                                   | )          | (10,043                                     | )          | (65,624 | ) |
| Reorganization items                                             |       | —                                    |       | (59,311                                     | )          | — |   |
| INCOME (LOSS) BEFORE INCOME TAXES                                |       | (46,175                                   | )          | 49,268                                      |       | (65,624 | ) |
| INCOME TAX PROVISION (BENEFIT)                                   |       | 343                                       |       | (1,534                                      | )          | 1,502 |   |
| NET INCOME (LOSS)                                                |       | $                                         | (46,518    | )                                           | $          | 50,802 |   | $ | (67,126 | ) |
| Weighted average common shares outstanding—basic            |       | 126,295                                   |       | 47,572                                      |       | 36,210 |   |
| Basic income (loss) per share                                    |       | $                                         | (0.37      | )                                           | $          | 1.07 |   | $ | (1.85 | ) |
| Weighted average common shares outstanding—diluted          |       | 126,295                                   |       | 47,572                                      |       | 36,210 |   |
| Diluted income (loss) per share                                  |       | $                                         | (0.37      | )                                           | $          | 1.07 |   | $ | (1.85 | ) |

 

Seenotes to unaudited condensed consolidated financial statements.

 

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**ACCURIDE CORPORATION**

**CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY(DEFICIENCY) (UNAUDITED)**

 
| **(In  thousands)**                                                                       | ** ** | **Comprehensive  Loss** | ** ** | **Common  Stock and  Additional  Paid-in-  Capital** | ** ** | **Treasury  Stock** | ** ** | **Accumulated  Other  Comprehensive  Income (Loss)** | ** ** | **Retained  Earnings  (Deficiency)** | ** ** | **Total  Stockholders’  Equity  (Deficiency)** | ** ** |
|-------------------------------------------------------------------------------------------|------------|-------------------------|------------|------------------------------------------------------|------------|---------------------|------------|------------------------------------------------------|------------|--------------------------------------|------------|-----------------------------------------------------|------------|
| BALANCE at January 1, 2010 (Predecessor)                                                  |       | —                  |       | $                                                    | 268,582    |                | $          | (751                                                 | )          | $                                    | (48,376    | )                                                   | $          | (447,721 | ) | $ | (228,266 | ) |
| Net loss before reorganization items                                                      |       | $                       | (8,509     | )                                                    | —     |                | —     |                                                 | —     |                                 | (8,509     | )                                                   | (8,509     | ) |
| Exercise of share-based awards                                                            |       | —                  |       | 8                                                    |       | —              |       | —                                               |       | —                               |       | 8                                                   |       |
| Reorganization items                                                                      |       | —                  |       | —                                               |       | —              |       | —                                               |       | (25,030                              | )          | (25,030                                             | )          |
| Comprehensive loss                                                                        |       | $                       | (8,509     | )                                                    |       |                |       |                                                 |       |                                 |       |                                                |       |   |
| BALANCE at February 26, 2010 (Predecessor)                                                |       |                    |       | 268,590                                              |       | (751                | )          | (48,376                                              | )          | (481,260                             | )          | (261,797                                            | )          |
| FRESH START ADJUSTMENTS:                                                                  |       |                    |       |                                                 |       |                |       |                                                 |       |                                 |       |                                                |       |
| Debt discharge — Senior Subordinated Notes                                           |       | —                  |       | 48,540                                               |       | —              |       | —                                               |       | 242,436                              |       | 290,976                                             |       |
| Debt discharge — Deferred financing fees                                             |       | —                  |       | —                                               |       | —              |       | —                                               |       | (3,847                               | )          | (3,847                                              | )          |
| Debt discharge — Sun Capital Warrant liability                                       |       | —                  |       | —                                               |       | —              |       | —                                               |       | 76                                   |       | 76                                                  |       |
| Debt discharge — Term facility discount                                              |       | —                  |       | —                                               |       | —              |       | —                                               |       | (2,974                               | )          | (2,974                                              | )          |
| Issuance of Warrants                                                                      |       | —                  |       | —                                               |       | —              |       | —                                               |       | (6,618                               | )          | (6,618                                              | )          |
| Issuance of Notes                                                                         |       | —                  |       | —                                               |       | —              |       | —                                               |       | (144,732                             | )          | (144,732                                            | )          |
| BALANCE at February 26, 2010 (Predecessor)                                                |       |                    |       | 317,130                                              |       | (751                | )          | (48,376                                              | )          | (396,919                             | )          | (128,916                                            | )          |
| FRESH START ADJUSTMENTS:                                                                  |       |                    |       |                                                 |       |                |       |                                                 |       |                                 |       |                                                |       |
| Cancellation of Predecessor preferred, common and  treasury stock                         |       | —                  |       | (317,130                                             | )          | 751                 |       | —                                               |       | —                               |       | (316,379                                            | )          |
| Cancellation of Predecessor accumulated deficit  and accumulated other comprehensive loss |       | —                  |       | —                                               |       | —              |       | 48,376                                               |       | 396,919                              |       | 445,295                                             |       |
| Issuance of new equity interests                                                          |       | —                  |       | 49,396                                               |       | —              |       | —                                               |       | —                               |       | 49,396                                              |       |
| BALANCE at February 26, 2010 (Successor)                                                  |       | —                  |       | 49,396                                               |       | —              |       | —                                               |       | —                               |       | 49,396                                              |       |
| Net loss                                                                                  |       | $                       | (46,518    | )                                                    | —     |                | —     |                                                 | —     |                                 | (46,518    | )                                                   | (46,518    | ) |
| Stock compensation expense                                                                |       | —                  |       | 150                                                  |       | —              |       | —                                               |       | —                               |       | 150                                                 |       |
| Other                                                                                     |       | —                  |       | (15                                                  | )          | —              |       | —                                               |       | —                               |       | (15                                                 | )          |
| Other comprehensive income:                                                               |       |                    |       |                                                 |       |                |       |                                                 |       |                                 |       |                                                |       |
| Pension liability adjustment (net of tax)                                                 |       | 802                     |       | —                                               |       | —              |       | 802                                                  |       | —                               |       | 802                                                 |       |
| Comprehensive loss                                                                        |       | $                       | (45,716    | )                                                    |       |                |       |                                                 |       |                                 |       |                                                |       |   |
| BALANCE—June 30, 2010 (Successor)                                               |       |                    |       | $                                                    | 49,531     |                | $          | —                                               |       | $                                    | 802        |                                                | $          | (46,518 | ) | $ | 3,815 |   |

 

See notes to unaudited condensed consolidatedfinancial statements.

 

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**ACCURIDE CORPORATION**

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS (UNAUDITED)**

 
| ** **                                                                            | ** ** | **Successor**                             | ** ** | **Predecessor**                             | ** ** |
|---------------------------------------------------------------------------------------|------------|-------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                                                            | ** ** | **Period from  February 26 to  June 30,** | ** ** | **Period from  January 1 to  February 26,** | ** ** | **Six Months  Ended June 30,** | ** ** |
| **(In  thousands)**                                                                   | ** ** | **2010**                                  | ** ** | **2010**                                    | ** ** | **2009** | ** ** |
| ** **                                                                            | ** ** | ** **                                | ** ** | ** **                                  | ** ** | ** ** | ** ** |
| CASH FLOWS FROM OPERATING ACTIVITIES:                                                 |       |                                      |       |                                        |       |   |   |
| Net income (loss)                                                                     |       | $                                         | (46,518    | )                                           | $          | 50,802 |   | $ | (67,126 | ) |
| Adjustments to reconcile net income (loss) to net  cash used in operating activities: |       |                                      |       |                                        |       |   |   |
| Depreciation and impairment of property, plant and  equipment                         |       | 14,702                                    |       | 6,711                                       |       | 22,286 |   |
| Amortization — deferred financing costs                                          |       | —                                    |       | 694                                         |       | 2,127 |   |
| Amortization — other intangible assets                                           |       | 3,719                                     |       | 821                                         |       | 2,460 |   |
| Loss on extinguishment of debt                                                        |       | —                                    |       | —                                      |       | 5,389 |   |
| Reorganization items                                                                  |       | —                                    |       | (59,311                                     | )          | — |   |
| Payments on reorganization items                                                      |       | (19,722                                   | )          | (12,164                                     | )          | — |   |
| Loss (gain) on disposal of assets                                                     |       | 24                                        |       | 3                                           |       | (32 | ) |
| Provision for deferred income taxes                                                   |       | (298                                      | )          | (1,560                                      | )          | — |   |
| Non-cash stock-based compensation                                                     |       | 150                                       |       | —                                      |       | 124 |   |
| Non-cash change in market valuation - convertible  notes                              |       | 31,204                                    |       | —                                      |       | — |   |
| Change in warrant liability                                                           |       | (2,868                                    | )          | —                                      |       | (729 | ) |
| Paid-in-kind interest                                                                 |       | 3,500                                     |       | 1,769                                       |       | 3,643 |   |
| Changes in certain assets and liabilities:                                            |       |                                      |       |                                        |       |   |   |
| Receivables                                                                           |       | (12,437                                   | )          | (15,833                                     | )          | 5,139 |   |
| Inventories and supplies                                                              |       | (7,934                                    | )          | (5,736                                      | )          | 15,901 |   |
| Prepaid expenses and other assets                                                     |       | (1,441                                    | )          | 1,051                                       |       | (4,105 | ) |
| Accounts payable                                                                      |       | (5,993                                    | )          | 12,931                                      |       | (21,519 | ) |
| Accrued and other liabilities                                                         |       | 21,622                                    |       | (951                                        | )          | 4,029 |   |
| Net cash used in operating activities                                                 |       | (22,290                                   | )          | (20,773                                     | )          | (32,413 | ) |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                                 |       |                                      |       |                                        |       |   |   |
| Purchases of property, plant and equipment                                            |       | (4,775                                    | )          | (1,457                                      | )          | (10,729 | ) |
| Other                                                                                 |       | (2,382                                    | )          | (555                                        | )          | 146 |   |
| Net cash used in investing activities                                                 |       | (7,157                                    | )          | (2,012                                      | )          | (10,583 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES:                                                 |       |                                      |       |                                        |       |   |   |
| Proceeds from postpetition senior credit facility                                     |       | 1,500                                     |       | 309,019                                     |       | — |   |
| Payment of prepetition senior credit facility                                         |       | —                                    |       | (305,814                                    | )          | — |   |
| Proceeds from convertible notes                                                       |       | —                                    |       | 140,000                                     |       | — |   |
| Payment of debtor-in-possession borrowing                                             |       | —                                    |       | (25,000                                     | )          | — |   |
| Payment of revolving credit facility                                                  |       | —                                    |       | (71,659                                     | )          | (53,000 | ) |
| Increase in revolving credit facility                                                 |       | —                                    |       | —                                      |       | 30,626 |   |
| Credit facility amendment fees                                                        |       | —                                    |       | —                                      |       | (10,797 | ) |
| Other                                                                                 |       | (81                                       | )          | 65                                          |       | 48 |   |
| Net cash provided by (used in) financing  activities                                  |       | 1,419                                     |       | 46,611                                      |       | (33,123 | ) |
| INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                      |       | (28,028                                   | )          | 23,826                                      |       | (76,119 | ) |
| CASH AND CASH EQUIVALENTS—Beginning of period                                    |       | 80,347                                    |       | 56,521                                      |       | 123,676 |   |
| CASH AND CASH EQUIVALENTS—End of period                                          |       | $                                         | 52,319     |                                        | $          | 80,347 |   | $ | 47,557 |   |
|                                                                                  |       |                                      |       |                                        |       |   |   |
| Supplemental cash flow information:                                                   |       |                                      |       |                                        |       |   |   |
| Cash paid for interest                                                                |       | $                                         | 10,255     |                                        | $          | 9,393 |   | $ | 24,199 |   |
| Cash paid (received) for income taxes                                                 |       | $                                         | (298       | )                                           | $          | (826 | ) | $ | 1,691 |   |
| Non-cash transactions:                                                                |       |                                      |       |                                        |       |   |   |
| Purchases of property, plant and equipment in  accounts payable                       |       | $                                         | 1,277      |                                        | $          | — |   | $ | 2,868 |   |
| Issuance of warrants                                                                  |       | $                                         | —     |                                        | $          | 6,618 |   | $ | 4,655 |   |

 

See notes to unaudited condensed consolidatedfinancial statements.

 

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**ACCURIDE CORPORATION**

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**

**(AMOUNTSIN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)**

 

**Note 1 - Summary of Significant Accounting Policies**

 

***Basis of Presentation*****— The accompanying unauditedcondensed consolidated financial statements have been prepared in accordancewith accounting principles generally accepted in the United States of America,except that the unaudited condensed consolidated financial statements do notinclude all of the information and footnotes required by accounting principlesgenerally accepted in the United States of America for complete financialstatements.  However, in the opinion of AccurideCorporation (“Accuride” or the “Company”), all adjustments (consisting ofnormal recurring accruals) considered necessary to present fairly the condensedconsolidated financial statements have been included.

 

Theresults of operations for the periods January 1, 2010 through February 26,2010 for the Predecessor Company and February 26, 2010 through June 30,2010 for the Successor Company are not necessarily indicative of the results tobe expected for the year ending December 31, 2010.  The unaudited consolidated financialstatements and notes thereto should be read in conjunction with the auditedcondensed consolidated financial statements and notes thereto disclosed inAccuride’s Annual Report on Form 10-K for the year ended December 31,2009.

 

Allocationsof fair value to tangible and intangible assets, goodwill, pension obligationsand deferred taxes are based upon preliminary valuation information.  It is anticipated that all necessaryinformation will be available and the analysis will be completed during thethird and fourth quarters of 2010.

 

***Chapter 11 Proceedings —***On October 8, 2009,Accuride and its domestic subsidiaries filed voluntary petitions for reliefunder Chapter 11 of the Bankruptcy Code with the United States Bankruptcy Courtfor the District of Delaware (the “Bankruptcy Court”).  Priorto filing for bankruptcy, we were in default under our prepetition seniorcredit facility and the indenture governing our prepetition senior subordinatednotes due to our failure to comply with certain financial covenants in theprepetition senior credit facility and to make the $11.7 million interestpayment due August 3, 2009 on our prepetition senior subordinatednotes.  Beginning in July 2009, weentered into a series of amendments and temporary waivers with our seniorlenders and forbearances with our prepetition noteholders related to thesedefaults, which prevented acceleration of the indebtedness outstanding underthese debt instruments and enabled us to negotiate a financial reorganization tobe implemented through the bankruptcy process with these key constituents priorto our bankruptcy filing.  On October 7,2009, we entered into restructuring support agreements with the holders ofapproximately 57% of the principal amount of the loans outstanding under ourprepetition senior credit facility and the holders of approximately 70% of theprincipal amount of our prepetition senior subordinated notes, pursuant towhich the parties agreed to support a financial reorganization of Accuride andits domestic subsidiaries consistent with the terms set forth therein.

 

OnNovember 18, 2009, we filed our Joint Plan of Reorganization and therelated Disclosure Statement with the Bankruptcy Court.  All classes ofcreditors entitled to vote voted to approve the Plan of Reorganization.  A confirmation hearing for the Plan ofReorganization was held beginning on February 17, 2010.  At the confirmation hearing, we and all ofour constituents reached a settlement to fully resolve all disputes related tothe Plan of Reorganization and all of our key constituents agreed to supportthe Plan of Reorganization.  On February 18, 2010, the Bankruptcy Courtentered an order confirming the Third Amended Joint Plan of Reorganization,which approved and confirmed the Plan of Reorganization, as modified by theconfirmation order.  On February 26,2010 (the “Effective Date”), the Plan of Reorganization became effectiveand we emerged from Chapter 11bankruptcy proceedings. During the pendency of the bankruptcy, weoperated our business as debtors-in-possession under the jurisdiction of theBankruptcy Court and in accordance with the applicable provisions of theBankruptcy Code.

 

***Financial Statement Presentation***

 

We have prepared the accompanying consolidatedfinancial statements in accordance with Accounting Standards Codification (“ASC”)852.  ASC 852 requires that the financialstatements for the periods subsequent to a Chapter 11 filing separatetransactions and events that are directly associated with the reorganizationfrom the ongoing operations of the business. Accordingly, all transactions (including, but not limited to, allprofessional fees, realized gains and losses and provisions for losses)directly associated with the reorganization of the business are reported separatelyin the financial statements as reorganization items, net.  The Predecessor Company recognized thefollowing reorganization income (expense) in our financial statements:

 

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| ** **                                                   | ** ** | **Predecessor**                                       | ** ** |
|--------------------------------------------------------------|------------|-------------------------------------------------------|------------|
| ** **                                                   | ** ** | **Period from  January 1 to  February 26,** | ** ** |
| **(In  thousands)**                                          | ** ** | **2010**                                              | ** ** |
| ** **                                                   | ** ** | ** **                                            | ** ** |
| Debt discharge — Senior subordinate notes and  interest |       | $                                                     | 242,436    |   |
| Market valuation of $140 million Convertible Notes           |       | (144,732                                              | )          |
| Professional fees                                            |       | (25,030                                               | )          |
| Market valuation of warrants issued                          |       | (6,618                                                | )          |
| Deferred financing fees                                      |       | (3,847                                                | )          |
| Term loan facility discount                                  |       | (2,974                                                | )          |
| Other                                                        |       | 76                                                    |       |
| Total                                                        |       | $                                                     | 59,311     |   |

 

***Fresh-Start Reporting***

 

Uponour emergence from Chapter 11 bankruptcy proceedings, we adopted fresh-startaccounting in accordance with the provisions of ASC 852 Reorganizations (“ASC852”), pursuant to which the midpoint of the range of our reorganization valuewas allocated to our assets and liabilities in conformity with the proceduresspecified by ASC 805, “Business Combinations.”

 

Thefollowing fresh-start balance sheet illustrates the financial effects on theCompany of the implementation of the Plan of Reorganization and the adoption offresh-start reporting.  This fresh-startbalance sheet reflects the effect of the consummation of the transactionscontemplated in the Plan of Reorganization, including issuance of newindebtedness and repayment and settlement of old indebtedness.

 

Asa result of the adoption of fresh-start reporting, our consolidated statementof financial position and consolidated statements of operations subsequent to February 26,2010, will not be comparable in many respects to our consolidated statement offinancial position and consolidated statements of operations prior to February 26,2010.  References to “Successor Company”refer to Accuride after February 26, 2010, after giving effect to theapplication of fresh-start reporting. References to “Predecessor Company” refer to Accuride prior to February 26,2010.

 

Theallocations of fair value are based upon valuation information and otherstudies that have not yet been completed due to the complexity of the analysisrequired.  It is anticipated that allnecessary information will be available and the analysis will be completedduring the third and fourth quarters of 2010.

 

Thepreliminary effects of the Plan of Reorganization and fresh-start reporting onthe Company’s consolidated balance sheet as of February 26, 2010 are as follows:

 

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| ** **                                                  | ** ** | **Fresh-Start Adjustments** | ** ** |
|-------------------------------------------------------------|------------|----------------------------------|------------|
| **(in thousands)**                                     | ** ** | **Predecessor**                  | ** ** | **Debt  Discharge and  Issuance (a)** | ** ** | **Reinstatement  of Liabilities (b)** | ** ** | **Revaluation of  Assets and  Liabilities (c)** | ** ** | **Successor** | ** ** |
| **ASSETS**                                                  |       |                             |       |   |   |   |   |   |   |   |   |
| CURRENT ASSETS                                              |       |                             |       |   |   |   |   |   |   |   |   |
| Cash and cash equivalents                                   |       | $                                | 34,880     |   | $ | 45,467 |   | $ | — |   | $ | — |   | $ | 80,347 |   |
| Customer receivables, net                                   |       | 73,636                           |       | — |   | — |   | — |   | 73,636 |   |
| Other receivables                                           |       | 8,498                            |       | — |   | — |   | — |   | 8,498 |   |
| Inventories                                                 |       | 56,639                           |       | — |   | — |   | 3,028 |   | 59,667 |   |
| Deferred income taxes                                       |       | 4,371                            |       | — |   | — |   | (1,836 | ) | 2,535 |   |
| Income tax receivable                                       |       | 720                              |       | — |   | — |   | — |   | 720 |   |
| Prepaid expenses and other current assets                   |       | 20,518                           |       | — |   | — |   | (16,439 | ) | 4,079 |   |
| Total current assets                                        |       | 199,262                          |       | 45,467 |   | — |   | (15,247 | ) | 229,482 |   |
| PROPERTY, PLANT AND EQUIPMENT, net                          |       | 224,270                          |       | — |   | — |   | 49,322 | (d) | 273,592 |   |
| Goodwill                                                    |       | 127,474                          |       | — |   | — |   | (13,090 | )(d) | 114,384 |   |
| Other intangible assets, net                                |       | 88,409                           |       | — |   | — |   | 152,591 | (d) | 241,000 |   |
| Deferred financing fees, net                                |       | 3,847                            |       | (3,847 | ) | — |   | — |   | — |   |
| Other                                                       |       | 22,221                           |       | 66 |   | — |   | 2,600 |   | 24,887 |   |
| TOTAL                                                       |       | $                                | 665,483    |   | $ | 41,686 |   | $ | — |   | $ | 176,176 |   | $ | 883,345 |   |
| **LIABILITIES AND STOCKHOLDERS’  EQUITY (DEFICIENCY)** |       |                             |       |   |   |   |   |   |   |   |   |
| CURRENT LIABILITIES                                         |       |                             |       |   |   |   |   |   |   |   |   |
| Accounts Payable                                            |       | $                                | 57,074     |   | $ | — |   | $ | 7,978 |   | $ | — |   | $ | 65,052 |   |
| Accrued payroll and compensation                            |       | 18,058                           |       | — |   | — |   | — |   | 18,058 |   |
| Accrued interest payable                                    |       | 242                              |       | — |   | — |   | — |   | 242 |   |
| Debt                                                        |       | 399,500                          |       | (399,500 | ) | — |   | — |   | — |   |
| Accrued and other liabilities                               |       | 27,044                           |       | (1,012 | ) | 346 |   | (755 | )(d) | 25,623 |   |
| Total current liabilities                                   |       | 501,918                          |       | (400,512 | ) | 8,324 |   | (755 | ) | 108,975 |   |
| LONG-TERM DEBT                                              |       | —                           |       | 593,751 |   | — |   | — |   | 593,751 |   |
| DEFERRED INCOME TAXES                                       |       | 14,274                           |       | — |   | — |   | 393 | (d) | 14,667 |   |
| NON-CURRENT INCOME TAXES PAYABLE                            |       | 7,914                            |       | — |   | — |   | — |   | 7,914 |   |
| OTHER POSTRETIREMENT BENEFIT PLAN LIABILITY                 |       | 61,037                           |       | — |   | — |   | — |   | 61,037 |   |
| PENSION BENEFIT PLAN LIABILITY                              |       | 35,915                           |       | — |   | — |   | — |   | 35,915 |   |
| OTHER LIABILITIES                                           |       | 4,108                            |       | 6,542 |   | 2,814 |   | (1,774 | )(d) | 11,690 |   |
| LIABILITIES SUBJECT TO COMPROMISE                           |       | 302,114                          |       | (290,976 | ) | (11,138 | ) | — |   | — |   |
| STOCKHOLDERS’ EQUITY (DEFICIENCY):                     |       |                             |       |   |   |   |   |   |   |   |   |
| Common stock and Additional Paid-in-Capital                 |       | 268,590                          |       | 48,540 |   | — |   | (267,734 | ) | 49,396 |   |
| Treasury stock                                              |       | (751                             | )          | — |   | — |   | 751 |   | — |   |
| Accumulated other comprehensive loss                        |       | (48,376                          | )          | — |   | — |   | 48,376 |   | — |   |
| Retained earnings (deficiency)                              |       | (481,260                         | )          | 84,341 |   | — |   | 396,919 |   | — |   |
| Total stockholders’ equity (deficiency)                |       | (261,797                         | )          | 132,881 |   | — |   | 178,312 |   | 49,396 |   |
| TOTAL                                                       |       | $                                | 665,483    |   | $ | 41,686 |   | $ | — |   | $ | 176,176 |   | $ | 883,345 |   |

 

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(a)                                  Included in the debtdischarge and issuance is the receipt of the $140 million aggregate principalamount of convertible notes (as defined below), which was used to pay off the$71.1 million of Last-Out-Loans (as defined below) under our prepetition seniorcredit facility and our DIP facility (as defined below) of $25.0 million.  The net gain recognized is a result of thedischarge of our prepetition senior subordinated notes of $275.0 million alongwith interest of $16.0 million being partially offset by the issuance of theconvertible notes and the corresponding equity received from the Plan ofReorganization.

 

(b)                                 The liabilities subject tocompromise other than debt were reinstated to the appropriate liabilityclassification as part of the Plan of Reorganization.

 

(c)                                  The allocations of fairvalue are based upon preliminary valuation information and other studies thathave not yet been completed due to the complexity of the analysisrequired.  It is anticipated that allnecessary information will be available and the analysis will be completedduring the third and fourth quarters of 2010. Also included in this column is the adoption of the new accountingpolicy for supplies.

 

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(d)                                 Balances reflect adjustmentsmade during the three month period ended June 30, 2010 based on updatedinformation pertaining to fair value of tangible and intangible assets,deferred tax liabilities, goodwill and other liabilities.

 

***Postpetition Capital Structure***

 

Pursuant to the Plan of Reorganization, as of the Effective Date, ournew capital structure consists of the following:

 

*·**Postpetition Senior CreditFacility* — Our prepetition senior credit facility wasamended and restated****to providefor a senior credit facility of approximately $311.2 million.  All Last-Out-Loans under our prepetitionsenior credit facility were paid in full on the Effective Date.  On July 29, 2010, we refinanced thepostpetition senior credit facility and the postpetition senior credit facilitywas terminated.  See Note 12, SubsequentEvents.

 

*·**7.5% Senior Convertible Notes* — We issued $140 millionaggregate principal amount of 7.5% Senior Convertible Notes due 2020 (the “convertiblenotes”) pursuant to a rights offering.  The first six interest payments on the convertiblenotes will be paid-in-kind (“PIK”) interest. Thereafter, beginning on August 26, 2013, interest on theconvertible notes will be paid in cash.  As of the Effective Date, the initial $140 million principal amount ofconvertible notes was convertible into 186,666,662 shares of our CommonStock.

 

*·**Common Stock and Warrants* — We issuedthe following equity securities: (i) 98,000,000 shares of our postpetitioncommon stock, par value $0.01 per share (the “Common Stock”), to holders of ourprepetition senior subordinated notes, on a pro rata basis (ii) 25,000,000shares of Common Stock to the parties backstopping the rights offering ofconvertible notes as payment of their backstop fee, (iii) 2,000,000 sharesof Common Stock to holders of our prepetition common stock on a pro rata basis,(iv) warrants to purchase 22,058,824 shares of Common Stock (the “Warrants”)to holders of our prepetition common stock on a pro rata basis and (v) 1,294,882shares of Common Stock, net of shares withheld for tax purposes, under our KeyExecutive Incentive Plan.  The Warrants are exercisable at an exerciseprice of $2.10 per share until February 26, 2012.

 

Underthe Plan of Reorganization, our prepetition common stock, all other equityinterests in Accuride, our prepetition senior subordinated notes and theindenture governing our prepetition senior subordinated notes werecancelled.  The holders of thesesecurities received the distributions described above. All amounts outstandingunder the DIP credit facility were also paid in full on the Effective Date andthe DIP credit facility was terminated in accordance with its terms.

 

Additionally,pursuant to the Plan of Reorganization, we amended and restated our Certificateof Incorporation and our Bylaws to, among other things, reduce the size of ourBoard of Directors to seven directors.

 

***Management’s Estimates and Assumptions*****— Thepreparation of financial statements in conformity with accounting principlesgenerally accepted in the United States of America requires management to makeestimates and assumptions that affect the reported amounts of assets andliabilities and disclosures of contingent assets and liabilities at the date ofthe financial statements and the reported amounts of revenues and expensesduring the reporting period.  Actualresults could differ from those estimates.

 

***Derivative Financial Instruments*** — We use derivativefinancial instruments as part of our overall risk management strategy asfurther described under Item 7A of our 2009 Annual Report on Form 10-K.  The derivative instruments used from time totime include interest rate and foreign exchange instruments. As of June 30,2010, there were no derivatives that were designated as hedges for financialreporting purposes.

 

***Interest Rate Instruments*** — From time totime, we use interest rate swap agreements as a means of fixing the interestrate on portions of our floating-rate debt.  The interest rate swap agreements are not designated as hedges forfinancial reporting purposes and are carried in the consolidated financialstatements at fair value, with all realized and unrealized gains or lossesreflected in current period earnings as a component of interest expense.  As of December 31, 2009, we had oneinterest rate swap agreement to exchange, at specified intervals, thedifference between 3.81% from March 2008 through March 2010, and thevariable rate interest amounts calculated by reference to the notionalprincipal amount of $125 million.  As of December 31,2009, we had a liability of $1.1 million included in accrued and otherliabilities on the consolidated balance sheet. On March 10, 2010 we terminated the swap agreement and paid theoutstanding liability.

 

Gainsand losses included as a component of interest expense for the three and sixmonths ended June 30, 2009, included realized losses of $1,006 and $1,854,respectively, and unrealized gains of $573 and $1,381, respectively.

 

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***Foreign Exchange Instruments*** — We useforeign currency forward contracts and option contracts to limit foreignexchange risk on anticipated but not yet committed transactions expected to bedenominated in Canadian dollars. As of June 30, 2010, the notional amountof open foreign exchange contracts was $658.

 

Gainsand losses are included as a component of other income and are not material in2010.  Gains included as a component ofother income for the three and six months ended June 30, 2009, includedrealized gains of $543 and $750, respectively and unrealized gains of $601 and$162, respectively.

 

***Commodity Price Instruments***— We usecommodity price swap contracts to limit exposure to changes in certain rawmaterial prices. Commodity price instruments, which do not meet the normalpurchase exception, are not designated as hedges for financial reportingpurposes and, accordingly, are carried in the financial statements at fairvalue, with realized and unrealized gains and losses reflected in currentperiod earnings as a component of Cost of goods sold. At June 30, 2010, wehad no open commodity price swaps or futures contracts.

 

***Earnings Per Common Share*** — Basic and dilutedearnings (loss) per common share were computed as follows:

 
| ** **                                                        | ** ** | **Successor**                         | ** ** | **Predecessor**                       | ** ** | **Successor**                                       | ** ** | **Predecessor**                                       | ** ** |
|-------------------------------------------------------------------|------------|---------------------------------------|------------|---------------------------------------|------------|-----------------------------------------------------|------------|-------------------------------------------------------|------------|
| ** **                                                        | ** ** | **Three Months  Ended June 30,** | ** ** | **Three Months  Ended June 30,** | ** ** | **Period from  February 26  to June 30,** | ** ** | **Period from  January 1 to  February 26,** | ** ** | **Six Months  Ended June 30,** | ** ** |
| **(In  thousands except per share data)**                         | ** ** | **2010**                              | ** ** | **2009**                              | ** ** | **2010**                                            | ** ** | **2010**                                              | ** ** | **2009** | ** ** |
|                                                              |       |                                  |       |                                  |       |                                                |       |                                                  |       |   |   |
| **Numerator:**                                                    | ** ** | ** **                            |       |                                  |       |                                                |       |                                                  |       |   |   |
| Net income (loss)                                                 |       | $                                     | 6,510      |                                  | $          | (36,071                                             | )          | $                                                     | (46,518    | ) | $ | 50,802 |   | $ | (67,126 | ) |
| Less: Earnings allocated to participating  securities             |       | (3,906                                | )          | —                                |       | —                                              |       | —                                                |       | — |   |
| Net income (loss) available to common stockholders  - basic       |       | $                                     | 2,604      |                                  | $          | (36,071                                             | )          | $                                                     | (46,518    | ) | $ | 50,802 |   | $ | (67,126 | ) |
|                                                              |       |                                  |       |                                  |       |                                                |       |                                                  |       |   |   |
| Net income (loss)                                                 |       | $                                     | 6,510      |                                  | $          | (36,071                                             | )          | $                                                     | (46,518    | ) | $ | 50,802 |   | $ | (67,126 | ) |
| Effect of dilutive securities:                                    |       |                                  |       |                                  |       |                                                |       |                                                  |       |   |   |
| Unrealized gain on mark to market valuation of conversion  option |       | (19,397                               | )          | —                                |       | —                                              |       | —                                                |       | — |   |
| Discount amortization expense                                     |       | 231                                   |       | —                                |       | —                                              |       | —                                                |       | — |   |
| PIK interest expense                                              |       | 2,625                                 |       | —                                |       | —                                              |       | —                                                |       | — |   |
| Net income (loss) available to common stockholders  - diluted     |       | $                                     | (10,031    | )                                     | $          | (36,071                                             | )          | $                                                     | (46,518    | ) | $ | 50,802 |   | $ | (67,126 | ) |
|                                                              |       |                                  |       |                                  |       |                                                |       |                                                  |       |   |   |
| **Denominator:**                                                  |       |                                  |       |                                  |       |                                                |       |                                                  |       |   |   |
| Weighted average shares outstanding — Basic                  |       | 126,295                               |       | 36,252                                |       | 126,295                                             |       | 45,572                                                |       | 36,210 |   |
| Weighted average effect of dilutive securities:                   |       |                                  |       |                                  |       |                                                |       |                                                  |       |   |   |
| Convertible notes                                                 |       | 186,667                               |       | —                                |       | —                                              |       | —                                                |       | — |   |
| Effect of restricted stock units                                  |       | 433                                   |       | —                                |       | —                                              |       | —                                                |       | — |   |
| Weighted average shares outstanding - Diluted                     |       | 313,395                               |       | 36,252                                |       | 126,295                                             |       | 45,572                                                |       | 36,210 |   |
|                                                              |       |                                  |       |                                  |       |                                                |       |                                                  |       |   |   |
| Basic income (loss) per common share                              |       | $                                     | 0.02       |                                  | $          | (1.00                                               | )          | $                                                     | (0.37      | ) | $ | 1.07 |   | $ | (1.85 | ) |
| Diluted income (loss) per common share                            |       | $                                     | (0.03      | )                                     | $          | (1.00                                               | )          | $                                                     | (0.37      | ) | $ | 1.07 |   | $ | (1.85 | ) |

 

Thecomputation of dilutive earnings per share for the three months ended June 30,2010 did not include warrants exercisable for 22,058,824 shares of common stockbecause the effect would be anti-dilutive. For the period February 26, 2010 through June 30, 2010, therewere warrants exercisable for 22,058,824 shares of common stock and convertiblenotes exercisable for 186,666,667 shares of common stock that were not includedin the computation of diluted earnings per share because the effect would beanti-dilutive.  For the three and sixmonths ended June 30, 2009, there were 544,738 stock options, 1,117,113stock appreciation rights, and a warrant exercisable for 12,249,529 shares thatwere not included in the computation of diluted earnings per share because theeffect would be anti-dilutive.

 

***Stock-Based Compensation***—Compensationexpense for share-based compensation programs was recognized as follows:

 

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| ** **                                  | ** ** | **Successor**                         | ** ** | **Predecessor**                       | ** ** | **Successor**                                       | ** ** | **Predecessor**                                       | ** ** |
|---------------------------------------------|------------|---------------------------------------|------------|---------------------------------------|------------|-----------------------------------------------------|------------|-------------------------------------------------------|------------|
| ** **                                  | ** ** | **Three Months  Ended June 30,** | ** ** | **Three Months  Ended June 30,** | ** ** | **Period from  February 26  to June 30,** | ** ** | **Period from  January 1 to  February 26,** | ** ** | **Six Months  Ended June 30,** | ** ** |
| **(In  thousands)**                         | ** ** | **2010**                              | ** ** | **2009**                              | ** ** | **2010**                                            | ** ** | **2010**                                              | ** ** | **2009** | ** ** |
|                                        |       |                                  |       |                                  |       |                                                |       |                                                  |       |   |   |
| Share-based compensation expense recognized |       | $                                     | 150        |                                  | $          | 29                                                  |       | $                                                     | 150        |   | $ | — |   | $ | 124 |   |
|                                             |            |                                       |            |                                       |            |                                                     |            |                                                       |            |  |  |  |  |  |  |  |

 

OnMay 18, 2010 the Company authorized 1,829,517 shares of Common Stock forissuance pursuant to individual restricted stock unit agreements with employeesof the Company.  The awards grantedduring 2010 vest in installments of 33%, 33%, and 34% over a three year periodon the anniversary date of the grant.  Asof June 30, 2010, there was approximately $1.8 million of unrecognizedpre-tax compensation expense related to share-based awards not yet vested thatwill be recognized over a weighted-average period of 1.2 years.

 

***Income Tax***—We compute ona quarterly basis an estimated annual effective tax rate considering ordinaryincome and related income tax expense. Ordinary income refers to income (loss)before income tax expense excluding significant, unusual, or infrequentlyoccurring items. The tax effect of an unusual or infrequently occurring item isrecorded in the interim period in which it occurs. To the extent the Companycannot reliably estimate annual projected taxes for a taxing jurisdiction,taxes on ordinary income for such a jurisdiction are reported in the period inwhich they are incurred, which is the case for our domestic tax jurisdictions.Other items included in income tax expense in the periods in which they occurinclude the cumulative effect of changes in tax laws or rates, foreign exchangegains and losses, adjustments to uncertain tax positions, and adjustments toour valuation allowance due to changes in judgment in the realizability ofdeferred tax assets in future years.

 

Wehave assessed the need to maintain a valuation allowance for deferred taxassets based on an assessment of whether it is more likely than not thatdeferred tax benefits will be realized through the generation of future taxableincome. Appropriate consideration is given to all available evidence, bothpositive and negative, in assessing the need for a valuation allowance. Due toour recent history of U.S. operating and taxable losses, the inconsistency ofthese profits, and the uncertainty of our financial outlook, we continue tomaintain a full valuation allowance against our domestic deferred tax assets.

 

***Recent Accounting Adoptions***

 

***ASC 855-10*** - We adopted *Subsequent Events* topic in the FASBAccounting Standard Codification for the Quarterly Report for the period ended June 30,2009.  *Subsequent Events*establishes general standards of accounting for and disclosure of events thatoccur after the balance sheet date but before financial statements are issued,which are referred to as subsequent events. The statement clarifies existingguidance on subsequent events, including a requirement that a public entityshould evaluate subsequent events through the issue date of the financialstatements, the determination of when the effects of subsequent events shouldbe recognized in the financial statement and disclosures regarding allsubsequent events.  Adoption of the *SubsequentEvents* topic did not have a material affect on our consolidatedfinancial statements.

 

***ASC 820 -***In April 2009, theFinancial Accounting Standards Board (FASB) issued accounting guidance oninterim disclosures about fair value of financial instruments.  Thisguidance amends previous guidance to require disclosures about fair value offinancial instruments for interim reporting periods of publicly tradedcompanies as well as in annual financial statements.  This guidancealso amends previous guidance to require disclosures in summarized financialinformation at interim reporting periods.  This guidance waseffective for interim reporting periods ending after June 15,2009.  The adoption of this guidance did not have a material impacton our consolidated financial statements.

 

***ASC 810*** — In June 2009, the FASB finalized SFAS No. 167,Amending FASB interpretation No. 46(R), which was later superseded by theFASB Codification and included in ASC topic 810. The provisions of ASC 810 provideguidance in determining whether an enterprise has a controlling financialinterest in a variable interest entity. This determination identifies theprimary beneficiary of a variable interest entity as the enterprise that hasboth the power to direct the activities of a variable interest entity that mostsignificantly impacts the entity’s economic performance, and the obligation toabsorb losses or the right to receive benefits of the entity that couldpotentially be significant to the variable interest entity. This pronouncementalso requires ongoing reassessments of whether an enterprise is the primarybeneficiary and eliminates the quantitative approach previously required fordetermining the primary beneficiary. New provisions of this pronouncement areeffective January 1, 2010. The adoption of ASC 810 didnot have a material impact on our consolidated financial statements.

 

***New Accounting Pronouncements***

 

In January 2010, the FASBissued ASU 2010-6, “Improving Disclosures about Fair Value Measurements,” whichrequires interim disclosures regarding significant transfers in and out ofLevel 1 and Level 2 fair value measurements.

 

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Additionally, this ASU requiresdisclosure for each class of assets and liabilities and disclosures about thevaluation techniques and inputs used to measure fair value for both recurringand non-recurring fair value measurements. These disclosures are required forfair value measurements that fall in either Level 2 or Level 3. Further, theASU requires separate presentation of Level 3 activity for the fair value measurements.We adopted the interim disclosure requirements under this standard during thequarter ended March 31, 2010, with the exception of the separatepresentation in the Level 3 activity rollforward, which is not effective untilfiscal years beginning after December 15, 2010 and for interim periodswithin those fiscal years.

 

**Note 2 — Operational Restructuring**

 

Priorto 2010, in response to the slow commercial vehicle market and the decline ofsales, management undertook a review of current operations that led to acomprehensive restructuring plan. During that time, we approved a restructuringplan to more appropriately align our workforce in response to the relativelyslow commercial vehicle market.  Includedwere actions that were focused on the consolidation of several of ourfacilities.

 

Restructuringcosts are shown below by reportable segment of the Predecessor Company:

 
| ** **                              | ** ** | **January 1, 2010 to  February 26, 2010** | ** ** | **Three Months  Ended June  30,2009** | ** ** | **Six Months  Ended June  30,2009** | ** ** |
|-----------------------------------------|------------|-----------------------------------------------------|------------|---------------------------------------|------------|-------------------------------------|------------|
| **Wheels**                              |       |                                                |       |                                  |       |                                |       |
| Employee severance costs                |       | $                                                   |       | —                                |       | $                                   |       | — |   | $ |   | 643 |   |
| Lease and other contractual commitments |       | —                                              |       | 141                                   |       | 141                                 |       |
|                                    |       |                                                |       |                                  |       |                                |       |
| **Components**                          |       |                                                |       |                                  |       |                                |       |
| Employee severance costs                |       | 186                                                 |       | —                                |       | 42                                  |       |
| Lease and other contractual commitments |       | —                                              |       | 3,219                                 |       | 3,219                               |       |
|                                    |       |                                                |       |                                  |       |                                |       |
| **Corporate**                           |       |                                                |       |                                  |       |                                |       |
| Employee severance costs                |       | —                                              |       | 602                                   |       | 913                                 |       |
| **Total**                               |       | $                                                   |       | 186                                   |       | $                                   |       | 3,962 |   | $ |   | 4,958 |   |

 

The$0.2 million restructuring expenses recognized in the period January 1,2010 to February 26, 2010 was recorded in cost of goods sold.  Of the $4.0 million restructuring expensesrecognized in the three months ended June 30, 2009, $3.4 million wasrecorded in cost of goods sold and the remaining $0.6 million was recorded inselling, general and administrative operating expenses.  Of the $5.0 million restructuring expensesrecognized in the six months ended June 30, 2009, $4.1 million wasrecorded in cost of goods sold and the remaining $0.9 million was recorded inselling, general and administrative operating expenses.

 

Thefollowing is a reconciliation of the beginning and ending restructuring reservebalances for the periods ended December 31, 2009 and June 30, 2010:

 
| ** **                                       | ** ** | **Employee  Severance Costs** | ** ** | **Lease and Other  Contractual Costs** | ** ** | **Total** | ** ** |
|--------------------------------------------------|------------|------------------------------------|------------|-------------------------------------------------------|------------|-----------|------------|
| Balance January 1, 2009                     |       | $                                  | 4,281      |                                                  | $          | —    |       | $ | 4,281 |   |
| Costs incurred and charged to operating expenses |       | 1,037                              |       | —                                                |       | 1,037     |       |
| Costs incurred and charged to cost of goods sold |       | 788                                |       | 3,360                                                 |       | 4,148     |       |
| Adjustments (1)                                  |       | —                             |       | 59                                                    |       | 59        |       |
| Costs paid or otherwise settled                  |       | (5,420                             | )          | (259                                                  | )          | (5,679    | )          |
| Balance at December 31, 2009                |       | $                                  | 686        |                                                  | $          | 3,160     |       | $ | 3,846 |   |
| Costs incurred and charged to operating expenses |       | —                             |       | —                                                |       | —    |       |
| Costs incurred and charged to cost of goods sold |       | 186                                |       | —                                                |       | 186       |       |
| Adjustments (1)                                  |       | —                             |       | 9                                                     |       | 9         |       |
| Costs paid or otherwise settled                  |       | (293                               | )          | —                                                |       | (293      | )          |
| Balance at February 26, 2010                |       | $                                  | 579        |                                                  | $          | 3,169     |       | $ | 3,748 |   |
| Costs incurred and charged to operating expenses |       | 116                                |       | —                                                |       | 116       |       |
| Costs incurred and charged to cost of goods sold |       | 46                                 |       | —                                                |       | 46        |       |
| Adjustments (1)                                  |       | —                             |       | (2,449                                                | )          | (2,449    | )          |
| Costs paid or otherwise settled                  |       | (429                               | )          | —                                                |       | (429      | )          |
| Balance at June 30, 2010                    |       | $                                  | 312        |                                                  | $          | 720       |       | $ | 1,032 |   |

 

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(1) Represents accretion of interest ondiscounted restructuring liabilities and reduction in liability due to settlementagreement.

 

The remaining accrued liabilities will be paid in2010.

 

**Note 3 - Inventories**

 

Inventoriesare stated at the lower of cost or market. We review inventory on hand and write down excess and obsolete inventorybased on our assessment of future demand and historical experience.  The components of inventory on a FIFO basisare as follows:

 
| ** **                  | ** ** | **Successor**          | ** ** | **Predecessor**            | ** ** |
|-----------------------------|------------|------------------------|------------|----------------------------|------------|
| ** **                  | ** ** | **June 30, 2010** | ** ** | **December 31, 2009** | ** ** |
| Raw materials               |       | $                      | 20,021     |                       | $          | 14,432 |   |
| Work in process             |       | 19,755                 |       | 15,566                     |       |
| Finished manufactured goods |       | 27,897                 |       | 20,744                     |       |
| Total inventories           |       | $                      | 67,673     |                       | $          | 50,742 |   |

 

**Note 4- Goodwill and Other Intangible Assets**

 

Goodwilland any indefinite-lived intangible assets are assessed for impairment annuallyor more frequently if circumstances indicate impairment may have occurred.  The analysis of potential impairment ofgoodwill requires a two-step approach. The first step is the estimation of fair value of each reporting unit,which is compared to the carrying value. If step one indicates that impairment potentially exists, the secondstep is performed to measure the amount of impairment, if any.  Goodwill impairment exists when the impliedfair value of goodwill is less than its carrying value.

 

Thepreliminary allocations of fair value to our reportable segments are based uponpreliminary valuation information and have not yet been completed due to thecomplexity of the analysis required.  Itis anticipated that the analysis will be completed during the third and fourthquarters of 2010.  During the period endingJune 30, 2010, fair value estimates we recorded for tangible andintangible assets, deferred taxes and other liabilities, resulted in a $77.0million change in allocated goodwill. The changes in goodwill from February 26, 2010 to June 30,2010 are as follows:

 
| ** **                           | ** ** | **Wheels** | ** ** | **Components** | ** ** | **Other** | ** ** | **Corporate** | ** ** | **Total** | ** ** |
|--------------------------------------|------------|------------|------------|----------------|------------|-----------|------------|---------------|------------|-----------|------------|
| Balance as of February 26, 2010 |       | $          | 131,859    |           | $          | 49,564    |       | $             | 9,991      |      | $          | — |   | $ | 191,414 |   |
| Valuation adjustment                 |       | (66,431    | )          | (13,076        | )          | 2,477     |       | —        |       | (77,030   | )          |
| Balance as of June 30, 2010     |       | $          | 65,428     |           | $          | 36,488    |       | $             | 12,468     |      | $          | — |   | $ | 114,384 |   |

 

Thepreliminary value for intangible assets for the Successor Company includes$40,900 of technology which will be amortized over 15 years, $166,100 ofcustomer relationships which will be amortized over 20 years, notdeductible for income tax purposes, and $34,000 of trade names that are notsubject to amortization.

 

Thechanges in the carrying amount of other intangible assets for the period January 1,2010 to February 26, 2010 by reportable segment for the PredecessorCompany, are as follows:

 
| ** **                           | ** ** | **Components** | ** ** | **Other** | ** ** | **Corporate** | ** ** | **Total** | ** ** |
|--------------------------------------|------------|----------------|------------|-----------|------------|---------------|------------|-----------|------------|
|                                 |       |           |       |      |       |          |       |      |       |
| Balance as of December 31, 2009 |       | $              | 83,045     |      | $          | 5,812         |       | $         | 373        |   | $ | 89,230 |   |
| Amortization                         |       | (726           | )          | (64       | )          | (31           | )          | (821      | )          |
| Balance as of February 26, 2010 |       | $              | 82,319     |      | $          | 5,748         |       | $         | 342        |   | $ | 88,409 |   |

 

Thechanges in the carrying amount of other intangible assets for the period February 26,2010 to June 30, 2010 by reportable segment for the Successor Company, areas follows:

 

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| ** **                           | ** ** | **Wheels** | ** ** | **Components** | ** ** | **Other** | ** ** | **Total** | ** ** |
|--------------------------------------|------------|------------|------------|----------------|------------|-----------|------------|-----------|------------|
|                                 |       |       |       |           |       |      |       |      |       |
| Balance as of February 26, 2010 |       | $          | 127,800    |           | $          | 81,100    |       | $         | 36,900     |   | $ | 245,800 |   |
| Valuation adjustment                 |       | (3,300     | )          | (1,700         | )          | 200       |       | (4,800    | )          |
| Amortization                         |       | (1,903     | )          | (1,203         | )          | (613      | )          | (3,719    | )          |
| Balance as of June 30, 2010     |       | $          | 122,597    |           | $          | 78,197    |       | $         | 36,487     |   | $ | 237,281 |   |

 

Thesummary of goodwill and other intangible assets is as follows:

 
| ** **               | ** ** | ** **                 | ** ** | **Successor**                | ** ** | **Predecessor**                  | ** ** |
|--------------------------|------------|----------------------------|------------|------------------------------|------------|----------------------------------|------------|
| ** **               | ** ** | **Weighted**               | ** ** | **As of June 30, 2010** | ** ** | **As of December 31, 2009** | ** ** |
| ** **               | ** ** | **Average  Useful  Lives** | ** ** | **Gross  Amount**            | ** ** | **Accumulated  Amortization**    | ** ** | **Carrying  Amount** | ** ** | **Gross  Amount** | ** ** | **Accumulated  Amortization  & Impairment** | ** ** | **Carrying  Amount** | ** ** |
| Goodwill                 |       | —                     |       | $                            | 114,384    |                             | $          | — |   | $ | 114,384 |   | $ | 378,804 |   | $ | 251,330 |   | $ | 127,474 |   |
| Other intangible assets: |       |                       |       |                         |       |                             |       |   |   |   |   |   |   |   |   |
| Non-compete agreements   |       | 3.0                        |       | $                            | —     |                             | $          | — |   | $ | — |   | $ | 3,160 |   | $ | 2,787 |   | $ | 373 |   |
| Trade names              |       | —                     |       | 34,000                       |       | —                           |       | 34,000 |   | 38,080 |   | 30,980 |   | 7,100 |   |
| Technology               |       | 15.0                       |       | 40,900                       |       | 911                              |       | 39,989 |   | 33,540 |   | 11,279 |   | 22,261 |   |
| Customer relationships   |       | 20.0                       |       | 166,100                      |       | 2,808                            |       | 163,292 |   | 71,500 |   | 12,004 |   | 59,496 |   |
|                     |       | 19.0                       |       | $                            | 241,000    |                             | $          | 3,719 |   | $ | 237,281 |   | $ | 146,280 |   | $ | 57,050 |   | $ | 89,230 |   |

 

Weestimate that aggregate intangible asset amortization expense for the SuccessorCompany will be $9,195 in 2010 and $11,032 in each year beginning 2011 through2014.

 

**Note 5 - Comprehensive loss**

 

Comprehensiveloss for the period is summarized as follows:

 
| ** **                                                             | ** ** | **Successor**                         | ** ** | **Predecessor**                       | ** ** | **Successor**                                       | ** ** | **Predecessor**                                       | ** ** |
|------------------------------------------------------------------------|------------|---------------------------------------|------------|---------------------------------------|------------|-----------------------------------------------------|------------|-------------------------------------------------------|------------|
| ** **                                                             | ** ** | **Three Months  Ended June 30,** | ** ** | **Three Months  Ended June 30,** | ** ** | **Period from  February 26  to June 30,** | ** ** | **Period from  January 1 to  February 26,** | ** ** | **Six Months  Ended June 30,** | ** ** |
| **(In  thousands)**                                                    | ** ** | **2010**                              | ** ** | **2009**                              | ** ** | **2010**                                            | ** ** | **2010**                                              | ** ** | **2009** | ** ** |
|                                                                   |       |                                  |       |                                  |       |                                                |       |                                                  |       |   |   |
| Net income (loss)                                                      |       | $                                     | 6,510      |                                  | $          | (36,071                                             | )          | $                                                     | (46,518    | ) | $ | 50,802 |   | $ | (67,126 | ) |
| Other comprehensive income (loss), net of tax:                         |       |                                  |       |                                  |       |                                                |       |                                                  |       |   |   |
| Foreign currency translation impact on pension  liabilities adjustment |       | 802                                   |       | (1,208                                | )          | 802                                                 |       | —                                                |       | (689 | ) |
| Total comprehensive income (loss)                                      |       | $                                     | 7,312      |                                  | $          | (37,279                                             | )          | $                                                     | (45,716    | ) | $ | 50,802 |   | $ | (67,815 | ) |

 

Includedin accumulated other comprehensive loss is the impact of pension liabilityfluctuations in the Canadian dollar to U.S. dollar exchange rate related to ourCanadian pension plans.

 

**Note 6 - Pension and Other Postretirement Benefit Plans**

 

Components of net periodic benefit cost for theperiods ended:

 
| ** **                                        | ** ** | **Pension Benefits**                  | ** ** | **Other Benefits**                    | ** ** |
|---------------------------------------------------|------------|---------------------------------------|------------|---------------------------------------|------------|
| ** **                                        | ** ** | **Successor**                         | ** ** | **Predecessor**                       | ** ** | **Successor** | ** ** | **Predecessor** | ** ** |
| ** **                                        | ** ** | **Three Months  ended June 30,** | ** ** | **Three Months  ended June 30,** | ** ** | **Three Months  ended June 30,** | ** ** | **Three Months  ended June 30,** | ** ** |
| ** **                                        | ** ** | **2010**                              | ** ** | **2009**                              | ** ** | **2010** | ** ** | **2009** | ** ** |
| Service cost-benefits earned during the period    |       | $                                     | 393        |                                  | $          | 373 |   | $ | 90 |   | $ | 79 |   |
| Interest cost on projected benefit obligation     |       | 2,917                                 |       | 2,894                                 |       | 951 |   | 922 |   |
| Expected return on plan assets                    |       | (3,287                                | )          | (3,032                                | )          | — |   | — |   |
| Amortization of net transition (asset) obligation |       | 3                                     |       | 3                                     |       | — |   | — |   |
| Amortization of prior service (credit) cost       |       | 75                                    |       | 89                                    |       | (393 | ) | (393 | ) |
| Amortization of (gain)/loss                       |       | 878                                   |       | 555                                   |       | (1 | ) | (127 | ) |
| Total benefits cost charged to income             |       | $                                     | 979        |                                  | $          | 882 |   | $ | 647 |   | $ | 481 |   |

 

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| ** **                                        | ** ** | **Pension Benefits**                                | ** ** | **Other Benefits**                                    | ** ** |
|---------------------------------------------------|------------|-----------------------------------------------------|------------|-------------------------------------------------------|------------|
| ** **                                        | ** ** | **Successor**                                       | ** ** | **Predecessor**                                       | ** ** | **Successor** | ** ** | **Predecessor** | ** ** |
| ** **                                        | ** ** | **Period from  February 26  to June 30,** | ** ** | **Period from  January 1 to  February 26,** | ** ** | **Six  Months  ended  June 30,** | ** ** | **Period from  February 26  to June 30,** | ** ** | **Period from  January 1 to  February 26,** | ** ** | **Six  Months  ended  June 30,** | ** ** |
| ** **                                        | ** ** | **2010**                                            | ** ** | **2010**                                              | ** ** | **2009** | ** ** | **2010** | ** ** | **2010** | ** ** | **2009** | ** ** |
| Service cost-benefits earned during the period    |       | $                                                   | 528        |                                                  | $          | 269 |   | $ | 745 |   | $ | 121 |   | $ | 61 |   | $ | 155 |   |
| Interest cost on projected benefit obligation     |       | 3,912                                               |       | 1,989                                                 |       | 5,715 |   | 1,272 |   | 642 |   | 1,827 |   |
| Expected return on plan assets                    |       | (4,410                                              | )          | (2,245                                                | )          | (5,977 | ) | — |   | — |   | — |   |
| Amortization of net transition (asset) obligation |       | 4                                                   |       | 2                                                     |       | 6 |   | — |   | — |   | — |   |
| Amortization of prior service (credit) cost       |       | 101                                                 |       | 53                                                    |       | 171 |   | (524 | ) | (261 | ) | (786 | ) |
| Amortization of (gain)/loss                       |       | 1,179                                               |       | 603                                                   |       | 1,087 |   | (1 | ) | — |   | (256 | ) |
| Total benefits cost charged to income             |       | $                                                   | 1,314      |                                                  | $          | 671 |   | $ | 1,747 |   | $ | 868 |   | $ | 442 |   | $ | 940 |   |

 

From January 1, 2010 to February 26, 2010and during the period from February 26, 2010 to June 30, 2010,contributions of $0.9 million and $2.9 million have been made to our sponsoredpension plans, respectively.  Wepresently anticipate contributing an additional $5.8 million to fund ourpension plans during 2010.

 

**Note 7 — Commitments and Contingencies**

 

Weare from time to time involved in various legal proceedings of a characternormally incident to our business. We do not believe that the outcome of theseproceedings will have a material adverse effect on our consolidated financialcondition or results of our operations.

 

Asof June 30, 2010, we had an environmental reserve of approximately$1.5 million, related primarily to our foundry operations. This reserve isbased on current cost estimates and does not reduce estimated expenditures tonet present value, but does take into account the benefit of a contractualindemnity given to us by a prior owner of our wheel-end subsidiary. The failureof the indemnitor to fulfill its obligations could result in future costs thatmay be material. Any cash expenditures required by us or our subsidiaries tocomply with applicable environmental laws and/or to pay for any remediationefforts will not be reduced or otherwise affected by the existence of theenvironmental reserve. We currently anticipate spending approximately$0.2 million per year in 2010 through 2013 for monitoring the variousenvironmental sites associated with the environmental reserve, includingattorney and consultant costs for strategic planning and negotiations withregulators and other potentially responsible parties, and payment of remedialinvestigation costs. Based on all of the information presently available to us,we believe that our environmental reserves will be adequate to cover the futurecosts related to the sites associated with the environmental reserves and thatany additional costs will not have a material adverse effect on our financialcondition, results of operations or cash flows. However, the discovery ofadditional sites, the modification of existing or the promulgation of new lawsor regulations, more vigorous enforcement by regulators, the imposition ofjoint and several liability under CERCLA or analogous state laws or otherunanticipated events could result in a material adverse effect.

 

Thefinal Iron and Steel Foundry National Emission Standard for Hazardous AirPollutants, or NESHAP, was developed pursuant to Section 112(d) ofthe Clean Air Act and requires all major sources of hazardous air pollutants toinstall controls representative of maximum achievable control technology. Webelieve that our foundry operations are in compliance with the applicablerequirements of the Iron and Steel Foundry NESHAP.

 

Asof June 30, 2010, we had approximately 2,777 employees, of which 651 weresalaried employees with the remainder paid hourly. Unions representapproximately 1,544 of our employees, which is approximately 56% of our totalemployees. We have collective bargaining agreements with several unions,including (1) the United Auto Workers, (2) the InternationalBrotherhood of Teamsters, (3) the United Steelworkers, (4) theInternational Association of Machinists and Aerospace Workers, (5) theNational Automobile, Aerospace, Transportation, and General Workers Union ofCanada and (6) El Sindicato Industrial de Trabajadores de Nuevo Leon.

 

Eachof our unionized facilities has a separate contract with the union thatrepresents the workers employed at such facility. The union contracts expire atvarious times over the next few years with the exception of our union contractthat covers the hourly employees at our Monterrey, Mexico, facility, whichexpires on an annual basis in January unless otherwise renewed. The 2010negotiations in Monterrey and Elkhart have been completed.  During the remainder of 2010, we have

 

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contractsexpiring at our Erie and Rockford facilities.  We do not anticipate thatthe outcome of the 2010 negotiations will have a material adverse effect on ouroperating performance or cost.

 

**Note 8 — Financial Instruments**

 

Wehave determined the estimated fair value amounts of financial instruments usingavailable market information and other appropriate valuation methodologies.However, considerable judgment is required in interpreting market data todevelop the estimates of fair value.  Afair value hierarchy accounting standard exists for those instruments measuredat fair value that distinguishes between assumptions based on market data(observable inputs) and our own assumptions (unobservableinputs).  Determining which category an asset or liability fallswithin the hierarchy requires significant judgment.  We evaluate our hierarchydisclosures each quarter.

 

Thehierarchy consists of three levels:

 

Level1                        Quoted marketprices in active markets for identical assets or liabilities;

Level2                        Inputs otherthan Level 1 inputs that are either directly or indirectly observable; and

Level3                        Unobservableinputs developed using estimates and assumptions developed by us, which reflectthose that a market participant would use.

 

Thecarrying amounts of cash and cash equivalents, trade receivables, and accountspayable approximate fair value because of the relatively short maturity ofthese instruments. The fair value of debt at December 31, 2009 and June 30,2010 was $400.9 million and $647.5 million, respectively.

 
| ** **                                     | ** ** | **Carrying** | ** ** | **Fair Value** | ** ** |
|------------------------------------------------|------------|--------------|------------|----------------|------------|
| ** **                                     | ** ** | **Amount**   | ** ** | **Level 1**    | ** ** | **Level 2** | ** ** | **Level 3** | ** ** |
| **As of June 30, 2010**                   |       |         |       |           |       |   |   |   |   |
|                                           |       |         |       |           |       |   |   |   |   |
| **Liabilities**                                | ** ** | ** **   |       |           |       |   |   |   |   |
| Postpetition common stock warrants             |       | $            | 3,750      |           |       |   |   |   | $ | 3,750 |   |
| Conversion option within our convertible notes |       | 202,193      |       |           |       |   |   | 202,193 |   |
|                                                |            |              |            |                |            |  |  |  |  |  |  |

 

Inputsthat factor into the valuations for our warrants include the strike price ofthe warrants ($2.10 per common share), the market price of our common stock pershare, dividend yield, volatility, risk-free rate, and the contractual term,which is two years from issuance. Inputs that factor into the market-basedvaluation model for the conversion option within our convertible notes includethe market price of our common stock per share, volatility, the risk-free rate,and credit spread.

 

Thefollowing table summarizes changes in fair value of our Level 3 assets and(liabilities) for the periods ended December 31, 2009, February 26,2010, and June 30, 2010:

** **
| ** **                        | ** ** | **Marketable  Securities** | ** ** | **Prepetition  Common  Stock  Warrants** | ** ** | **Postpetition  Common  Stock  Warrants** | ** ** | **Conversion  Option within  our  Convertible  Notes** | ** ** |
|-----------------------------------|------------|----------------------------|------------|------------------------------------------|------------|-------------------------------------------|------------|--------------------------------------------------------|------------|
| Balance at January 1, 2009   |       | $                          | 5,000      |                                     | —     |                                      | —     |                                                   | —     |   |
| Purchase (issuance) of securities |       | —                     |       | $                                        | (4,655     | )                                         | —     |                                                   | —     |   |
| Unrealized gain (loss) recognized |       | —                     |       | 594                                      |       | —                                    |       | —                                                 |       |
| Realized loss                     |       | (1,100                     | )          | —                                   |       | —                                    |       | —                                                 |       |
| Net settlements                   |       | (3,900                     | )          | 3,985                                    |       | —                                    |       | —                                                 |       |
| Balance at December 31, 2009 |       | $                          | —     |                                     | $          | (76                                       | )          | —                                                 |       | — |   |
| Net settlements                   |       | —                     |       | 76                                       |       | —                                    |       | —                                                 |       |
| Issuance of securities            |       | —                     |       | —                                   |       | $                                         | 6,618      |                                                   | $          | 170,989 |   |
| Balance at February 26, 2010 |       | $                          | —     |                                     | $          | —                                    |       | $                                                      | 6,618      |   | $ | 170,989 |   |
| Unrealized (gain) loss            |       | —                     |       | —                                   |       | (2,868                                    | )          | 31,204                                                 |       |
| Balance at June 30, 2010     |       | $                          | —     |                                     | $          | —                                    |       | $                                                      | 3,750      |   | $ | 202,193 |   |

 

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**Note 9 — Segment Reporting**

 

Asa part of our continual monitoring of the long-term economic characteristics,products and production processes, class of customer, and distribution methodsof our operating segments, we aggregate our seven operating segments into threereportable segments shown below. The accounting policies of the reportablesegments are the same as described in Note 1, Summary of Significant AccountingPolicies.

 

Thefair values of our reportable segments are based upon preliminary valuationinformation which has not yet been completed due to the complexity of theanalysis required. It is anticipated that the analysis will be completed duringthe third and fourth quarters of 2010. Due to the impact of this on ourreportable segments, the information in the table below should be consideredpreliminary.

 
| ** **                                | ** ** | **Successor**                         | ** ** | **Predecessor**                   | ** ** | **Successor**                                       | ** ** | **Predecessor**                                       | ** ** |
|-------------------------------------------|------------|---------------------------------------|------------|-----------------------------------|------------|-----------------------------------------------------|------------|-------------------------------------------------------|------------|
| ** **                                | ** ** | **Three Months  Ended June 30,** | ** ** | **Three Months  Ended June  30,** | ** ** | **Period from  February 26  to June 30,** | ** ** | **Period from  January 1 to  February 26,** | ** ** | **Six Months  Ended June  30,** | ** ** |
| **(In  thousands except per share data)** | ** ** | **2010**                              | ** ** | **2009**                          | ** ** | **2010**                                            | ** ** | **2010**                                              | ** ** | **2009** | ** ** |
|                                      |       |                                  |       |                              |       |                                                |       |                                                  |       |   |   |
| Net sales:                                | ** ** | ** **                            |       |                              |       |                                                |       |                                                  |       |   |   |
| Wheels                                    |       | $                                     | 70,065     |                              | $          | 54,220                                              |       | $                                                     | 93,826     |   | $ | 38,379 |   | $ | 111,105 |   |
| Components                                |       | 107,826                               |       | 73,067                            |       | 142,980                                             |       | 57,233                                                |       | 147,123 |   |
| Other                                     |       | 17,748                                |       | 7,919                             |       | 23,747                                              |       | 8,447                                                 |       | 20,554 |   |
| Consolidated total                        |       | $                                     | 195,639    |                              | $          | 135,206                                             |       | $                                                     | 260,553    |   | $ | 104,059 |   | $ | 278,782 |   |
|                                      |       |                                  |       |                              |       |                                                |       |                                                  |       |   |   |
| Income (loss) from operations:            |       |                                  |       |                              |       |                                                |       |                                                  |       |   |   |
| Wheels                                    |       | $                                     | 4,950      |                              | $          | (2,614                                              | )          | $                                                     | 6,325      |   | $ | 2,663 |   | $ | 2,874 |   |
| Components                                |       | 1,033                                 |       | (11,329                           | )          | 2,344                                               |       | (2,250                                                | )          | (23,545 | ) |
| Other                                     |       | 4,225                                 |       | 605                               |       | 4,968                                               |       | 1,662                                                 |       | 3,245 |   |
| Corporate                                 |       | (14,624                               | )          | (8,173                            | )          | (16,819                                             | )          | (5,188                                                | )          | (16,269 | ) |
| Consolidated total                        |       | $                                     | (4,416     | )                                 | $          | (21,511                                             | )          | $                                                     | (3,182     | ) | $ | (3,113 | ) | $ | (33,695 | ) |

 
| ** **         | ** ** | **Successor**               | ** ** | **Predecessor**                 | ** ** |
|--------------------|------------|-----------------------------|------------|---------------------------------|------------|
| ** **         | ** ** | **As of**                   | ** ** |
| ** **         | ** ** | **June 30, 2010** | ** ** | **December 31, 2009** | ** ** |
| Total assets:      |       |                        |       |                            |       |
| Wheels             |       | $                           | 440,286    |                            | $          | 265,977 |   |
| Components         |       | 287,313                     |       | 230,618                         |       |
| Other              |       | 73,505                      |       | 29,997                          |       |
| Corporate          |       | 64,889                      |       | 145,078                         |       |
| Consolidated total |       | $                           | 865,993    |                            | $          | 671,670 |   |

 

**Note 10 - Debt**

 

Debtat June 30, 2010, and December 31, 2009, consisted of the following:

 
| ** **                                        | ** ** | **Successor**          | ** ** | **Predecessor**            | ** ** |
|---------------------------------------------------|------------|------------------------|------------|----------------------------|------------|
| ** **                                        | ** ** | **June 30, 2010** | ** ** | **December 31, 2009** | ** ** |
| ** **                                        | ** ** | **Debt**               | ** ** | **Subject to  Compromise** | ** ** | **Debt** | ** ** |
| Term Facility — Non-related Parties          |       | $                      | 310,520    |                       | $          | — |   | $ | 224,560 |   |
| Term Facility — Related Party Last-Out Loans |       | —                 |       | —                     |       | 79,486 |   |
| Senior Subordinated Notes                         |       | —                 |       | 275,000                    |       | — |   |
| Convertible Notes, including conversion option    |       | 319,435                |       |                       |       |   |   |
| Revolving Credit Facility                         |       | —                 |       | —                     |       | 71,659 |   |
| Term Facility Discount                            |       | —                 |       | —                     |       | (3,233 | ) |
| Debtors-In-Possession (“DIP”) Facility  |       | —                 |       | —                     |       | 25,000 |   |
| Total                                             |       | $                      | 629,955    |                       | $          | 275,000 |   | $ | 397,472 |   |

 

Pursuant to the Plan of Reorganization, as of the Effective Date, ournew capital structure consists of the following:

 

*·****Postpetition Senior CreditFacility* — Our prepetition senior credit facility wasamended and restated****to providefor a senior credit facility of approximately $311.2 million. The interest ratefor all loans will be, at our option, LIBOR + 6.75% (with a LIBOR floor of3.00%) or Base Rate + 5.75% (with a Base Rate floor of 4.00%). The maturity forall

 

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loans and reimbursements of draws under theletters of credit is June 30, 2013. As part of the amendment, thefinancial covenants in the prepetition senior credit facility were replacedwith minimum liquidity and minimum EBITDA covenants and a maximum capitalexpenditure covenant. The postpetition senior credit facility is secured by,among other things, a lien on substantially all of our U.S. and Canadianproperties, assets and domestic subsidiaries and a pledge of 65% of the stockof our foreign subsidiaries. All Last-Out-Loans under our prepetition seniorcredit facility were paid on the Effective Date.

 

On July 29, 2010, werefinanced the postpetition credit facility and the postpetition creditfacility was terminated. See Note 12, Subsequent Events.

 

*·**7.5% Senior Convertible Notes* — We issued $140 millionaggregate principal amount of convertible notes. The first six interest payments on the convertible notes will be PIKinterest. Thereafter, beginning on August 26, 2013, interest on theconvertible notes will be paid in cash.

 

The $140 million principal amount of convertiblenotes is convertible into 60% of our outstanding Common Stock (as definedbelow), on a diluted basis as providedfor in the Plan of Reorganization. The convertible notes are convertible into common stock at an initialconversion rate of 1333.3333 per $1,000 principal amount of notes (equivalentto an initial conversion price of $0.75 per share of common stock). Theconvertible notes are redeemable by the Company subject to the terms of theindenture governing the convertible notes.

 

Theembedded conversion option is bifurcated and accounted for separately from theconvertible debt. The conversion option is recorded at fair value and presentedwith the convertible notes on the consolidated balance sheet. Each period,the conversion option will be recorded at fair value with the correspondingnon-cash gain or loss recognized in our consolidated statements of operationsas a component of other income (expense). The increase in fair value from February 26,2010 to June 30, 2010 was $31.2 million, and the decrease in fair valuefor the three months ended June 30, 2010 was $19.4 million.

 

*·**Common Stock and Warrants* — We issuedthe following equity securities: (i) 98,000,000 shares of Common Stock toholders of our prepetition senior subordinated notes, on a pro rata basis(ii) 25,000,000 shares of Common Stock to the parties backstopping therights offering of convertible notes as payment of their backstop fee, (iii) 2,000,000shares of Common Stock to holders of our prepetition common stock on a pro ratabasis, (iv) Warrants to purchase 22,058,824 shares of Common Stock toholders of our prepetition common stock on a pro rata basis and (v) 1,294,882shares of Common Stock, net of shares withheld for tax purposes, under our KeyExecutive Incentive Plan.  The Warrants are exercisable at $2.10 per shareuntil February 26, 2012, when they expire.

 

In accordance with applicable accountingguidance, the Warrants were recorded as a liability at fair value on theEffective Date. Each period, the Warrants will be recorded at fair value withthe corresponding non-cash gain or loss recognized in our consolidatedstatements of operations as a component of other income (expense).

 

Alsounder the Plan of Reorganization, ourprepetition common stock, all other equity interests in Accuride, ourprepetition senior subordinated notes and the indenture governing ourprepetition senior subordinated notes (other than for the purposes ofallowing holders of the notes to receive distributions under the Plan ofReorganization and allowing thetrustees to exercise certain rights) were cancelled. The holders of thesesecurities received the distributions described above pursuant to the Plan of Reorganization. Allamounts outstanding under the DIP credit facility that we had entered into toprovide financing during the pendency of our bankruptcy were also paid on theEffective Date and the DIP credit facility was terminated in accordance withits terms.

 

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**Note 11 — Guarantor and Non-guarantor Financial Statements**

 

Ourpostpetition senior credit facility is secured by, among other things, a lienon substantially all of our U.S. and Canadian properties, assets and domesticsubsidiaries (“Guarantor Subsidiaries”) and a pledge of 65% of the stock of ourforeign subsidiaries.  Our convertiblenotes are fully and unconditionally guaranteed, on a joint and several basis, bysubstantially all of our 100% owned domestic subsidiaries. The non-guarantorsubsidiaries are our foreign subsidiaries.  The following condensed financial information illustrates thecomposition of the combined Guarantor Subsidiaries:

 

**CONDENSED CONSOLIDATED BALANCE SHEET**

 
| ** **                                                  | ** ** | **June 30, 2010** | ** **    |
|-------------------------------------------------------------|------------|-------------------|---------------|
| ** **                                                  | ** ** | **Parent**        | ** **    | **Guarantor  Subsidiaries** | ** ** | **Non-guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| **ASSETS**                                                  |       |              |          |   |   |   |   |   |   |   |   |
| Cash and cash equivalents                                   |       | $                 |  48,037  |   | $ |  (1,234 | ) | $ |  5,516 |   | — |   | $ |  52,319 |   |
| Accounts receivable, net                                    |       | 37,698            |          | 31,811 |   | 6,419 |   | $ |  18,643 |   | 94,571 |   |
| Inventories                                                 |       | 20,382            |          | 42,648 |   | 4,656 |   | (13 | ) | 67,673 |   |
| Other current assets                                        |       | 1,886             |          | 2,961 |   | 25,054 |   | (22,000 | ) | 7,901 |   |
| Total current assets                                        |       | 108,003           |          | 76,186 |   | 41,645 |   | (3,370 | ) | 222,464 |   |
| Property, plant, and equipment, net                         |       | 42,729            |          | 168,125 |   | 52,879 |   | — |   | 263,733 |   |
| Goodwill                                                    |       | 22,865            |          | 69,665 |   | 21,854 |   | — |   | 114,384 |   |
| Intangible assets, net                                      |       | 54,295            |          | 147,916 |   | 35,070 |   | — |   | 237,281 |   |
| Investments in and advances to subsidiaries and  affiliates |       | 566,004           |          | — |   | — |   | (566,004 | ) | — |   |
| Other non-current assets                                    |       | 16,469            |          | 2,231 |   | 9,431 |   | — |   | 28,131 |   |
| TOTAL                                                       |       | $                 |  810,365 |   | $ |  464,123 |   | $ |  160,879 |   | $ |  (569,374 | ) | $ |  865,993 |   |
| **LIABILITIES AND STOCKHOLDERS’  EQUITY**              |       |              |          |   |   |   |   |   |   |   |   |
| Accounts payable                                            |       | $                 |  11,868  |   | $ |  41,230 |   | $ |  5,837 |   | — |   | $ |  58,935 |   |
| Accrued payroll and compensation                            |       | 3,337             |          | 9,241 |   | 5,716 |   | — |   | 18,294 |   |
| Accrued interest payable                                    |       | 70                |          | — |   | 23 |   | — |   | 93 |   |
| Accrued and other liabilities                               |       | 6,068             |          | 19,473 |   | 38,633 |   | $ |  (35,782 | ) | 28,392 |   |
| Total current liabilities                                   |       | 21,343            |          | 69,944 |   | 50,209 |   | (35,782 | ) | 105,714 |   |
| Long term debt                                              |       | 607,955           |          | — |   | 22,000 |   | — |   | 629,955 |   |
| Deferred and non-current income taxes                       |       | 155,527           |          | (133,999 | ) | 1,122 |   | — |   | 22,650 |   |
| Other non-current liabilities                               |       | 21,725            |          | 68,211 |   | 13,923 |   | — |   | 103,859 |   |
| Stockholders’ equity                                   |       | 3,815             |          | 459,967 |   | 73,625 |   | (533,592 | ) | 3,815 |   |
| TOTAL                                                       |       | $                 |  810,365 |   | $ |  464,123 |   | $ |  160,879 |   | $ |  (569,374 | ) | $ |  865,993 |   |

 
| ** **                                                  | ** ** | **December 31, 2009** | ** ** |
|-------------------------------------------------------------|------------|---------------------------------|------------|
| **(in  thousands)**                                         | ** ** | **Parent**                      | ** ** | **Guarantor Subsidiaries** | ** ** | **Non-guarantor Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| **ASSETS**                                                  |       |                            |       |   |   |   |   |   |   |   |   |
| Cash and cash equivalents                                   |       | $                               | 53,505     |   | $ | (1,871 | ) | $ | 4,887 |   | — |   | $ | 56,521 |   |
| Accounts receivable, net                                    |       | 26,145                          |       | 185,953 |   | 5,831 |   | $ | (151,628 | ) | 66,301 |   |
| Inventories                                                 |       | 14,870                          |       | 33,963 |   | 2,091 |   | (182 | ) | 50,742 |   |
| Other current assets                                        |       | 6,603                           |       | 12,675 |   | 26,346 |   | (20,051 | ) | 25,573 |   |
| Total current assets                                        |       | 101,123                         |       | 230,720 |   | 39,155 |   | (171,861 | ) | 199,137 |   |
| Property, plant, and equipment, net                         |       | 34,672                          |       | 154,173 |   | 40,682 |   | — |   | 229,527 |   |
| Goodwill                                                    |       | 66,973                          |       | 52,460 |   | 8,041 |   | — |   | 127,474 |   |
| Intangible assets, net                                      |       | 373                             |       | 88,857 |   | — |   | — |   | 89,230 |   |
| Investments in and advances to subsidiaries and  affiliates |       | 271,863                         |       | — |   | — |   | (271,863 | ) | — |   |
| Other non-current assets                                    |       | 17,104                          |       | 1,341 |   | 7,857 |   | — |   | 26,302 |   |
| TOTAL                                                       |       | $                               | 492,108    |   | $ | 527,551 |   | $ | 95,735 |   | $ | (443,724 | ) | $ | 671,670 |   |
| **LIABILITIES AND STOCKHOLDERS’  EQUITY**              |       |                            |       |   |   |   |   |   |   |   |   |
| Accounts payable                                            |       | $                               | 5,289      |   | $ | 22,206 |   | $ | 3,782 |   | — |   | 31,277 |   |
| Debt                                                        |       | 375,472                         |       | — |   | 22,000 |   | $ | — |   | 397,472 |   |
| Accrued payroll and compensation                            |       | 3,006                           |       | 5,885 |   | 5,427 |   | — |   | 14,318 |   |
| Accrued interest payable                                    |       | 3,067                           |       | — |   | 504 |   | — |   | 3,571 |   |
| Accrued and other liabilities                               |       | 8,297                           |       | 277,845 |   | 1,977 |   | (260,472 | ) | 27,647 |   |
| Total current liabilities                                   |       | 395,131                         |       | 305,936 |   | 33,690 |   | (260,472 | ) | 474,285 |   |
| Deferred and non-current income taxes                       |       | 10,810                          |       | 10,347 |   | 1,031 |   | — |   | 22,188 |   |
| Other non-current liabilities                               |       | 18,465                          |       | 69,442 |   | 13,442 |   | — |   | 101,349 |   |
| Liabilities subject to compromise                           |       | 295,968                         |       | 6,146 |   | — |   | — |   | 302,114 |   |
| Stockholders’ equity (deficiency)                      |       | (228,266                        | )          | 135,680 |   | 47,572 |   | (183,252 | ) | (228,266 | ) |
| TOTAL                                                       |       | $                               | 492,108    |   | $ | 527,551 |   | $ | 95,735 |   | $ | (443,724 | ) | $ | 671,670 |   |

 

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**CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**

 
| ** **                                   | ** ** | **Successor**                                                 | ** ** |
|----------------------------------------------|------------|---------------------------------------------------------------|------------|
| ** **                                   | ** ** | **Three Months Ended June 30, 2010** | ** ** |
| ** **                                   | ** ** | **Parent**                                                    | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| Net sales                                    |       | $                                                             | 91,435     |   | $ | 105,109 |   | $ | 27,852 |   | $ | (28,757 | ) | $ | 195,639 |   |
| Cost of goods sold                           |       | 88,484                                                        |       | 93,730 |   | 26,363 |   | (28,757 | ) | 179,820 |   |
| Gross profit                                 |       | 2,951                                                         |       | 11,379 |   | 1,489 |   | — |   | 15,819 |   |
| Operating expenses                           |       | 16,466                                                        |       | 3,699 |   | 70 |   | — |   | 20,235 |   |
| Income (loss) from  operations               |       | (13,515                                                       | )          | 7,680 |   | 1,419 |   | — |   | (4,416 | ) |
| Other income (expense):                      |       |                                                          |       |   |   |   |   |   |   |   |   |
| Interest expense, net                        |       | (10,427                                                       | )          | (33 | ) | 223 |   | — |   | (10,237 | ) |
| Equity in earnings  (losses) of subsidiaries |       | 7,151                                                         |       | — |   | — |   | (7,151 | ) | — |   |
| Other income (expense),  net                 |       | 23,162                                                        |       | 97 |   | (1,595 | ) | — |   | 21,644 |   |
| Income before and income  taxes              |       | 6,371                                                         |       | 7,744 |   | 47 |   | (7,151 | ) | 7,011 |   |
| Income tax provision  (benefit)              |       | (139                                                          | )          | — |   | 640 |   | — |   | 501 |   |
| Net income (loss)                            |       | $                                                             | 6,510      |   | $ | 7,744 |   | $ | (593 | ) | $ | (7,151 | ) | $ | 6,510 |   |

** **
| ** **                                  | ** ** | **Predecessor**                                               | ** ** |
|---------------------------------------------|------------|---------------------------------------------------------------|------------|
| ** **                                  | ** ** | **Three Months Ended June 30, 2009** | ** ** |
| ** **                                  | ** ** | **Parent**                                                    | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| Net sales                                   |       | $                                                             | 68,603     |   | $ | 69,542 |   | $ | 18,916 |   | $ | (21,855 | ) | $ | 135,206 |   |
| Cost of goods sold                          |       | 70,786                                                        |       | 73,415 |   | 21,881 |   | (21,855 | ) | 144,227 |   |
| Gross loss                                  |       | (2,183                                                        | )          | (3,873 | ) | (2,965 | ) | — |   | (9,021 | ) |
| Operating expenses                          |       | 9,278                                                         |       | 3,098 |   | 114 |   | — |   | 12,490 |   |
| Loss from operations                        |       | (11,461                                                       | )          | (6,971 | ) | (3,079 | ) | — |   | (21,511 | ) |
| Other income (expense):                     |       |                                                          |       |   |   |   |   |   |   |   |   |
| Interest expense, net                       |       | (15,211                                                       | )          | (54 | ) | (326 | ) | — |   | (15,591 | ) |
| Equity in earnings (losses) of subsidiaries |       | (7,523                                                        | )          | — |   | — |   | 7,523 |   | — |   |
| Other income (expense), net                 |       | (1,846                                                        | )          | 75 |   | 3,314 |   | — |   | 1,543 |   |
| Income (loss) before income taxes           |       | (36,041                                                       | )          | (6,950 | ) | (91 | ) | 7,523 |   | (35,559 | ) |
| Income tax provision                        |       | 30                                                            |       | — |   | 482 |   | — |   | 512 |   |
| Net loss                                    |       | $                                                             | (36,071    | ) | $ | (6,950 | ) | $ | (573 | ) | $ | 7,523 |   | $ | (36,071 | ) |

 

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** **

**CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**

 
| ** **                                  | ** ** | **Successor**                                                                   | ** ** |
|---------------------------------------------|------------|---------------------------------------------------------------------------------|------------|
| ** **                                  | ** ** | **Period from February 26 to June 30, 2010** | ** ** |
| ** **                                  | ** ** | **Parent**                                                                      | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| Net sales                                   |       | $                                                                               | 122,316    |   | $ | 140,924 |   | $ | 37,999 |   | $ | (40,686 | ) | $ | 260,553 |   |
| Cost of goods sold                          |       | 120,851                                                                         |       | 124,360 |   | 34,609 |   | (40,686 | ) | 239,134 |   |
| Gross profit                                |       | 1,465                                                                           |       | 16,564 |   | 3,390 |   | — |   | 21,419 |   |
| Operating expenses                          |       | 19,515                                                                          |       | 4,985 |   | 101 |   | — |   | 24,601 |   |
| Income (loss) from operations               |       | (18,050                                                                         | )          | 11,579 |   | 3,289 |   | — |   | (3,182 | ) |
| Other income (expense):                     |       |                                                                            |       |   |   |   |   |   |   |   |   |
| Interest expense, net                       |       | (13,567                                                                         | )          | (44 | ) | (119 | ) | — |   | (13,730 | ) |
| Equity in earnings (losses) of subsidiaries |       | 13,060                                                                          |       | — |   | — |   | (13,060 | ) | — |   |
| Other income (expense), net                 |       | (28,258                                                                         | )          | 164 |   | (1,169 | ) | — |   | (29,263 | ) |
| Income (loss) before and income taxes       |       | (46,815                                                                         | )          | 11,699 |   | 2,001 |   | (13,060 | ) | (46,175 | ) |
| Income tax provision (benefit)              |       | (297                                                                            | )          | — |   | 640 |   | — |   | 343 |   |
| Net income (loss)                           |       | $                                                                               | (46,518    | ) | $ | 11,699 |   | $ | 1,361 |   | $ | (13,060 | ) | $ | (46,518 | ) |

 
| ** **                                                  | ** ** | **Predecessor**                                                                   | ** ** |
|-------------------------------------------------------------|------------|-----------------------------------------------------------------------------------|------------|
| ** **                                                  | ** ** | **Period from January 1 to February 26, 2010** | ** ** |
| ** **                                                  | ** ** | **Parent**                                                                        | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| Net sales                                                   |       | $                                                                                 | 47,897     |   | $ | 56,971 |   | $ | 14,011 |   | $ | (14,820 | ) | $ | 104,059 |   |
| Cost of goods sold                                          |       | 45,553                                                                            |       | 54,526 |   | 14,318 |   | (14,820 | ) | 99,577 |   |
| Gross profit (loss)                                         |       | 2,344                                                                             |       | 2,445 |   | (307 | ) | — |   | 4,482 |   |
| Operating expenses                                          |       | 5,327                                                                             |       | 2,216 |   | 52 |   | — |   | 7,595 |   |
| Income (loss) from operations                               |       | (2,983                                                                            | )          | 229 |   | (359 | ) | — |   | (3,113 | ) |
| Other income (expense):                                     |       |                                                                              |       |   |   |   |   |   |   |   |   |
| Interest expense, net                                       |       | (6,804                                                                            | )          | (21 | ) | (671 | ) | — |   | (7,496 | ) |
| Equity in earnings (losses) of subsidiaries                 |       | (826                                                                              | )          | — |   | — |   | 826 |   | — |   |
| Other income (expense), net                                 |       | 547                                                                               |       | 49 |   | (30 | ) | — |   | 566 |   |
| Income (loss) before reorganization items and  income taxes |       | (10,066                                                                           | )          | 257 |   | (1,060 | ) | 826 |   | (10,043 | ) |
| Reorganization items                                        |       | (59,334                                                                           | )          | 21 |   | 2 |   | — |   | (59,311 | ) |
| Income tax benefit                                          |       | (1,534                                                                            | )          | — |   | — |   | — |   | (1,534 | ) |
| Net income (loss)                                           |       | $                                                                                 | 50,802     |   | $ | 236 |   | $ | (1,062 | ) | $ | 826 |   | $ | 50,802 |   |

 
| ** **                         | ** ** | **Predecessor**                                             | ** ** |
|------------------------------------|------------|-------------------------------------------------------------|------------|
| ** **                         | ** ** | **Six Months Ended June 30, 2009** | ** ** |
| ** **                         | ** ** | **Parent**                                                  | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| Net sales                          |       | $                                                           | 132,858    |   | $ | 148,370 |   | $ | 41,075 |   | $ | (43,521 | ) | $ | 278,782 |   |
| Cost of goods sold                 |       | 129,874                                                     |       | 161,616 |   | 39,794 |   | (43,521 | ) | 287,763 |   |
| Gross profit (loss)                |       | 2,984                                                       |       | (13,246 | ) | 1,281 |   | — |   | (8,981 | ) |
| Operating expenses                 |       | 18,312                                                      |       | 6,062 |   | 340 |   | — |   | 24,714 |   |
| Income (loss) from operations      |       | (15,328                                                     | )          | (19,308 | ) | 941 |   | — |   | (33,695 | ) |
| Other income (expense):            |       |                                                        |       |   |   |   |   |   |   |   |   |
| Interest expense, net              |       | (27,749                                                     | )          | (67 | ) | (1,078 | ) | — |   | (28,894 | ) |
| Loss on extinguishment of debt     |       | (5,389                                                      | )          | — |   | — |   | — |   | (5,389 | ) |
| Equity in earnings of subsidiaries |       | (17,380                                                     | )          | — |   | — |   | 17,380 |   | — |   |
| Other income (expense), net        |       | (260                                                        | )          | 154 |   | 2,460 |   | — |   | 2,354 |   |
| Income (loss) before income taxes  |       | (66,106                                                     | )          | (19,221 | ) | 2,323 |   | 17,380 |   | (65,624 | ) |
| Income tax provision               |       | 1,020                                                       |       | — |   | 482 |   | — |   | 1,502 |   |
| Net income (loss)                  |       | $                                                           | (67,126    | ) | $ | (19,221 | ) | $ | 1,841 |   | $ | 17,380 |   | $ | (67,126 | ) |

 

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**CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**

 
| ** **                                                                                          | ** ** | **Successor**                                                                   | ** ** |
|-----------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------|------------|
| ** **                                                                                          | ** ** | **Period from February 26 to June 30, 2010** | ** ** |
| ** **                                                                                          | ** ** | **Parent  Company**                                                             | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| CASH FLOWS FROM OPERATING ACTIVITIES:                                                               |       |                                                                            |       |   |   |   |   |   |   |   |   |
| Net income (loss)                                                                                   |       | $                                                                               | (46,518    | ) | $ | 11,699 |   | $ | 1,361 |   | $ | (13,060 | ) | $ | (46,518 | ) |
| Adjustments to reconcile net income (loss) to net  cash provided by (used in) operating activities: |       |                                                                            |       |   |   |   |   |   |   |   |   |
| Depreciation                                                                                        |       | 3,966                                                                           |       | 8,875 |   | 1,861 |   | — |   | 14,702 |   |
| Amortization — other intangible assets                                                         |       | 1,903                                                                           |       | 1,816 |   | — |   | — |   | 3,719 |   |
| Loss on disposal of assets                                                                          |       | 3                                                                               |       | 19 |   | 2 |   | — |   | 24 |   |
| Deferred income taxes                                                                               |       | (298                                                                            | )          | — |   | — |   | — |   | (298 | ) |
| Payments on reorganization items                                                                    |       | (19,722                                                                         | )          | — |   | — |   | — |   | (19,722 | ) |
| Paid-in-kind interest                                                                               |       | 3,500                                                                           |       | — |   | — |   | — |   | 3,500 |   |
| Non-cash stock-based compensation                                                                   |       | 150                                                                             |       | — |   | — |   | — |   | 150 |   |
| Equity in earnings of subsidiaries and affiliates                                                   |       | (13,060                                                                         | )          | — |   | — |   | 13,060 |   | — |   |
| Non-cash change in market valuation - convertible  notes                                            |       | 31,204                                                                          |       | — |   | — |   | — |   | 31,204 |   |
| Change in warrant liability                                                                         |       | (2,868                                                                          | )          | — |   | — |   | — |   | (2,868 | ) |
| Change in other operating items                                                                     |       | 10,819                                                                          |       | (16,090 | ) | (912 | ) | — |   | (6,183 | ) |
| Net cash provided by (used in) operating  activities                                                |       | (30,921                                                                         | )          | 6,319 |   | 2,312 |   | — |   | (22,290 | ) |
|                                                                                                |       |                                                                            |       |   |   |   |   |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                                               |       |                                                                            |       |   |   |   |   |   |   |   |   |
| Purchases of property, plant, and equipment                                                         |       | (920                                                                            | )          | (3,419 | ) | (436 | ) | — |   | (4,775 | ) |
| Other                                                                                               |       | (2,512                                                                          | )          | 130 |   | — |   | — |   | (2,382 | ) |
| Net cash used in investing activities                                                               |       | (3,432                                                                          | )          | (3,289 | ) | (436 | ) | — |   | (7,157 | ) |
|                                                                                                |       |                                                                            |       |   |   |   |   |   |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES:                                                               |       |                                                                            |       |   |   |   |   |   |   |   |   |
| Other                                                                                               |       | 1,419                                                                           |       | — |   | — |   | — |   | 1,419 |   |
| Net cash provided by financing activities                                                           |       | 1,419                                                                           |       | — |   | — |   | — |   | 1,419 |   |
|                                                                                                |       |                                                                            |       |   |   |   |   |   |   |   |   |
| Increase (decrease) in cash and cash equivalents                                                    |       | (32,934                                                                         | )          | 3,030 |   | 1,876 |   | — |   | (28,028 | ) |
| Cash and cash equivalents, beginning of period                                                      |       | 80,971                                                                          |       | (4,264 | ) | 3,640 |   | — |   | 80,347 |   |
| Cash and cash equivalents, end of period                                                            |       | $                                                                               | 48,037     |   | $ | (1,234 | ) | $ | 5,516 |   | $ | — |   | $ | 52,319 |   |

 
| ** **                                                                                          | ** ** | **Predecessor**                                                                   |
|-----------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------|
| ** **                                                                                          | ** ** | **Period from January 1 to February 26, 2010** |
| ** **                                                                                          | ** ** | **Parent  Company**                                                               | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| CASH FLOWS FROM OPERATING ACTIVITIES:                                                               |       |                                                                              |   |   |   |   |   |   |   |   |   |
| Net income (loss)                                                                                   |       | $                                                                                 | 50,802 |   | $ | 236 |   | $ | (1,062 | ) | $ | 826 |   | $ | 50,802 |   |
| Adjustments to reconcile net income (loss) to net  cash provided by (used in) operating activities: |       |                                                                              |   |   |   |   |   |   |   |   |   |
| Depreciation                                                                                        |       | 1,205                                                                             |   | 4,527 |   | 979 |   | — |   | 6,711 |   |
| Amortization — deferred financing costs                                                        |       | 690                                                                               |   | — |   | 4 |   | — |   | 694 |   |
| Amortization — other intangible assets                                                         |       | 31                                                                                |   | 790 |   | — |   | — |   | 821 |   |
| Reorganization items                                                                                |       | (59,334                                                                           | ) | 21 |   | 2 |   | — |   | (59,311 | ) |
| Payments on reorganization items                                                                    |       | (12,164                                                                           | ) | — |   | — |   | — |   | (12,164 | ) |
| Paid-in-kind interest                                                                               |       | 1,769                                                                             |   | — |   | — |   | — |   | 1,769 |   |
| Loss (gain) on disposal of assets                                                                   |       | 2                                                                                 |   | 1 |   | — |   | — |   | 3 |   |
| Equity in earnings of subsidiaries and affiliates                                                   |       | 826                                                                               |   | — |   | — |   | (826 | ) | — |   |
| Deferred income taxes                                                                               |       | (1,560                                                                            | ) | — |   | — |   | — |   | (1,560 | ) |
| Change in other operating items                                                                     |       | (752                                                                              | ) | (6,636 | ) | (1,150 | ) | — |   | (8,538 | ) |
| Net cash used in operating activities                                                               |       | (18,485                                                                           | ) | (1,061 | ) | (1,227 | ) | — |   | (20,773 | ) |
|                                                                                                |       |                                                                              |   |   |   |   |   |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                                               |       |                                                                              |   |   |   |   |   |   |   |   |   |
| Purchases of property, plant, and equipment                                                         |       | (60                                                                               | ) | (1,377 | ) | (20 | ) | — |   | (1,457 | ) |
| Other                                                                                               |       | (600                                                                              | ) | 45 |   | — |   | — |   | (555 | ) |
| Net cash used in investing activities                                                               |       | (660                                                                              | ) | (1,332 | ) | (20 | ) | — |   | (2,012 | ) |
|                                                                                                |       |                                                                              |   |   |   |   |   |   |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES:                                                               |       |                                                                              |   |   |   |   |   |   |   |   |   |
| Net proceeds from debt issuance                                                                     |       | 46,611                                                                            |   | — |   | — |   | — |   | 46,611 |   |
| Net cash provided by financing activities                                                           |       | 46,611                                                                            |   | — |   | — |   | — |   | 46,611 |   |
|                                                                                                |       |                                                                              |   |   |   |   |   |   |   |   |   |
| Increase (decrease) in cash and cash equivalents                                                    |       | 27,466                                                                            |   | (2,393 | ) | (1,247 | ) | — |   | 23,826 |   |
| Cash and cash equivalents, beginning of year                                                        |       | 53,505                                                                            |   | (1,871 | ) | 4,887 |   | — |   | 56,521 |   |
| Cash and cash equivalents, end of period                                                            |       | $                                                                                 | 80,971 |   | $ | (4,264 | ) | $ | 3,640 |   | $ | — |   | $ | 80,347 |   |

 

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| ** **                                                                                          | ** ** | **Predecessor**                    | ** ** |
|-----------------------------------------------------------------------------------------------------|------------|------------------------------------|------------|
| ** **                                                                                          | ** ** | **Six Months Ended June 30, 2009** | ** ** |
| ** **                                                                                          | ** ** | **Parent  Company**                | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| CASH FLOWS FROM OPERATING ACTIVITIES:                                                               |       |                               |       |   |   |   |   |   |   |   |   |
| Net income (loss)                                                                                   |       | $                                  | (67,126    | ) | $ | (19,221 | ) | $ | 1,841 |   | $ | 17,380 |   | $ | (67,126 | ) |
| Adjustments to reconcile net income (loss) to net  cash provided by (used in) operating activities: |       |                               |       |   |   |   |   |   |   |   |   |
| Depreciation                                                                                        |       | 3,722                              |       | 15,672 |   | 2,892 |   | — |   | 22,286 |   |
| Amortization — deferred financing costs                                                        |       | 2,112                              |       | 2 |   | 13 |   | — |   | 2,127 |   |
| Amortization — other intangible assets                                                         |       | 93                                 |       | 2,367 |   | — |   | — |   | 2,460 |   |
| Loss on extinguishment of debt                                                                      |       | 5,389                              |       | — |   | — |   | — |   | 5,389 |   |
| Change in warrant liability                                                                         |       | (729                               | )          | — |   | — |   | — |   | (729 | ) |
| Paid-in-kind interest                                                                               |       | 3,643                              |       | — |   | — |   | — |   | 3,643 |   |
| Loss (gain) on disposal of assets                                                                   |       | (170                               | )          | 139 |   | (1 | ) | — |   | (32 | ) |
| Equity in earnings of subsidiaries and affiliates                                                   |       | 17,380                             |       | — |   | — |   | (17,380 | ) | — |   |
| Non-cash stock-based compensation                                                                   |       | 124                                |       | — |   | — |   | — |   | 124 |   |
| Change in other operating items                                                                     |       | 5,412                              |       | 8,252 |   | (14,219 | ) | — |   | (555 | ) |
| Net cash provided by (used in) operating  activities                                                |       | (30,150                            | )          | 7,211 |   | (9,474 | ) | — |   | (32,413 | ) |
|                                                                                                |       |                               |       |   |   |   |   |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                                               |       |                               |       |   |   |   |   |   |   |   |   |
| Purchases of property, plant, and equipment                                                         |       | (4,459                             | )          | (5,942 | ) | (328 | ) | — |   | (10,729 | ) |
| Other                                                                                               |       | —                             |       | 146 |   | — |   | — |   | 146 |   |
| Net cash used in investing activities                                                               |       | (4,459                             | )          | (5,796 | ) | (328 | ) | — |   | (10,583 | ) |
|                                                                                                |       |                               |       |   |   |   |   |   |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES:                                                               |       |                               |       |   |   |   |   |   |   |   |   |
| Net change in revolving credit advance                                                              |       | (14,374                            | )          | — |   | (8,000 | ) | — |   | (22,374 | ) |
| Other                                                                                               |       | (10,749                            | )          | — |   | — |   | — |   | (10,749 | ) |
| Net cash used in financing activities                                                               |       | (25,123                            | )          | — |   | (8,000 | ) | — |   | (33,123 | ) |
|                                                                                                |       |                               |       |   |   |   |   |   |   |   |   |
| Increase (decrease) in cash and cash equivalents                                                    |       | (59,732                            | )          | 1,415 |   | (17,802 | ) | — |   | (76,119 | ) |
| Cash and cash equivalents, beginning of year                                                        |       | 95,630                             |       | (1,633 | ) | 29,679 |   | — |   | 123,676 |   |
| Cash and cash equivalents, end of period                                                            |       | $                                  | 35,898     |   | $ | (218 | ) | $ | 11,877 |   | $ | — |   | $ | 47,557 |   |

 

**Note 12 — Subsequent Events**

 

OnJuly 22, 2010, we priced $310 million aggregate principal amount of firstpriority senior secured notes due 2018 (the “Notes”) in a private placementthat is exempt from the registration requirements of the Securities Act of1933, as amended (the “Act”).  The Noteswere sold at a price equal to 97.288% of their face value.

 

                In connection with the privateplacement transaction, we entered into a new ABL Credit Agreement (the “ABLfacility”).  The ABL facility is a seniorsecured asset based revolving credit facility in an aggregate principal amountof up to $75.0 million, with the right, subject to certain conditions, toincrease the availability under the facility by up to $25.0 million in theaggregate (for a total aggregate availability of $100.0 million). The four-yearABL facility matures on July 29, 2014 and provides for loans and letters ofcredit in an aggregate amount up to the amount of the facility, subject tomeeting certain borrowing base conditions, with sub-limits of up to $10.0million for swingline loans and $25.0 million to be available for the issuanceof letters of credit.  Loans under theABL facility initially bears interest at an annual rate equal to either LIBOR plus3.50% or Base Rate plus 2.50%, at our option, subject to changes based on ourleverage ratio as defined in the ABL facility.

 

Wemust also pay a commitment fee equal to 0.50% per annum to the lenders underthe ABL facility if utilization under the facility exceeds 50.0% of the totalcommitments under the facility and a commitment fee equal to 0.75% per annum ifutilization under the facility is less than or equal to 50.0% of the totalcommitments under the facility. Customary letter of credit fees are alsopayable, as necessary.

 

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**Item 2.  Management’s Discussionand Analysis of Financial Condition and Results of Operations.**

 

Theaccompanying unaudited condensed interim consolidated financial statements areprepared in conformity with accounting principles generally accepted in theUnited States of America and such principles are applied on a basis consistentwith the information reflected in our Form 10-K for the year ended December 31,2009 filed with the Securities and Exchange Commission (“SEC”).  Certain information and footnote disclosuresnormally included in financial statements prepared in accordance withaccounting principles generally accepted in the United States of America have beencondensed or omitted pursuant to the rules and regulations promulgated bythe SEC.  In the opinion of management,the interim financial information includes all adjustments and accruals,consisting only of normal recurring adjustments and adjustments related tofresh start accounting as noted in Note 1 — Summary of Significant AccountingPolicies, which are necessary for a fair presentation of results for therespective interim periods.  The resultsof operations for the three and six months ended June 30, 2010 are notnecessarily indicative of the results to be expected for the full fiscal yearending December 31, 2010 or any interim period.  Except for the historical informationcontained herein, this quarterly report on Form 10-Q contains forward-lookingstatements that involve risks and uncertainties.  Our actual results may differ materially fromthose indicated by such forward-looking statements.

 

Overview

 

Weare one of the largest manufacturers and suppliers of commercial vehiclecomponents in North America, offering one of the broadest product lines to thecommercial vehicle industry. We believe that we have the number one or numbertwo market position in a variety of heavy- and medium-duty commercial vehicleproducts including: steel wheels, forged aluminum wheels, brake drums, discwheel hubs, metal bumpers and seating assemblies.  We market our products under some of the mostrecognized brand names in the industry, including Accuride, Bostrom, Brillion,Fabco, Gunite, Highway Original, and Imperial. We have long-standingrelationships with the leading original equipment manufacturers (“OEMs”) andthe related aftermarket channels in most major segments of the commercialvehicle market, including heavy- and medium-duty trucks, commercial trailers, lighttrucks, buses, as well as specialty and military vehicles.

 

Ourprimary product lines are standard equipment used by a majority of NorthAmerican heavy- and medium-duty truck OEMs, providing us with a significantcompetitive advantage. We believe that a majority of all heavy- and medium-dutytruck models manufactured in North America contain one or more Accuridecomponents.

 

Ourdiversified customer base includes substantially all of the leading commercialvehicle OEMs, such as Daimler Truck North America, LLC, with its Freightlinerand Western Star brand trucks, PACCAR, Inc., with its Peterbilt andKenworth brand trucks, Navistar, Inc., with its International brandtrucks, and Volvo Truck Corporation, with its Volvo and Mack brand trucks.  Our primary commercial trailer customersinclude leading commercial trailer OEMs, such as Great Dane LimitedPartnership, Wabash National, Inc., and Utility Trailer, Inc.  Our major light truck customer is GeneralMotors Corporation.  We have builtrelationships of more than 20 years with many of these leading OEMcustomers.  Our product portfolio issupported by strong sales, marketing and design engineering capabilities with17 strategically located, technologically-advanced manufacturing facilitiesacross the United States, Mexico, and Canada.

 

Recentglobal market and economic conditions have been unprecedented and challengingwith tighter credit conditions and recession in most major economies which havecontinued into 2010.  As a result ofthese market conditions, the cost and availability of credit has been and maycontinue to be adversely affected by illiquid credit markets and wider creditspreads.  Concern about the stability ofthe markets generally and the strength of counterparties specifically has ledmany lenders and institutional investors to reduce, and in some cases, cease toprovide credit to businesses and consumers. These factors have led to a decrease in spending by businesses andconsumers alike. Continued turbulence in the U.S. and international markets andeconomies and prolonged declines in business and consumer spending mayadversely affect our liquidity and financial condition, and the liquidity andfinancial condition of our customers, including our ability to refinancematuring liabilities and access the capital markets to meet liquidity needs.

 

Theheavy- and medium-duty truck and commercial trailer markets and the relatedaftermarket are the primary drivers of our sales. These markets are, in turn,directly influenced by conditions in the North American truck industrygenerally by conditions in other industries which indirectly impact the truckindustry, such as the home-building industry, and by overall economic growthand consumer spending.  Accordingly, thecurrent economic conditions described above have led to a severe and ongoingdownturn in the North American truck and vehicle supply industries, whichresulted in a significant decline in our sales volume and necessitated our bankruptcy filings in October 2009, asdescribed above in Note 1. Although current industry forecasts predict a modest improvement incommercial vehicle production in 2010, we cannot accurately predict howprolonged the current downturn may be. This downturn may lead to further reduced spending and deterioration inthe North American truck and vehicle supply industries for the foreseeablefuture. We emerged from 

 

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bankruptcy with reduced financial leverage and animproved capital structure, which we believe will better enable us to operatein this economic environment.  However,we continue to be a highly leveraged company, and a delayed****or failedeconomic recovery would continue to have a material adverse effect on ourbusiness, results of operations and financial condition.

 

Usingthe commercial vehicle industry production forecasts by industry experts, weexpect results from operations to improve in 2010 compared to 2009 due toincreased demand for our product, improved operational efficiencies, andreduced fees and expenses related to our senior credit facilities and ourChapter 11 filing and emergence.

 

**Results of Operations**

 

Allocationsof fair value to tangible and intangible assets, goodwill, pension obligationsand deferred taxes are based upon preliminary valuation information.  It is anticipated that all necessaryinformation will be available and the analysis will be completed during thethird and fourth quarters of 2010.

 

In connection with ouremergence from Chapter 11 bankruptcy proceedings and the adoption offresh-start accounting, the results of operations for 2010 separately presentthe 2010 Successor Period and the 2010 Predecessor Period. Although the 2010Successor Period and the 2010 Predecessor Period are distinct reportingperiods, the effects of emergence and fresh-start accounting did not have amaterial impact on the comparability of our results of operations between theperiods. Accordingly, references to 2010 results of operations for the sixmonths ended June 30, 2010 combine the two periods in order to enhance thecomparability of such information to the prior year. A summary of our operatingresults for the three and six months ended June 30, 2010 and 2009 and as apercentage of net sales is shown below:

 

***Three Months Ended June 30, 2010 Compared to the Three MonthsEnded June 30, 2009***

 

 
| **(Dollars  in thousands)**                        | ** ** | **Fiscal 2010** | ** ** | **Fiscal 2009** | ** ** |
|----------------------------------------------------|------------|-----------------|------------|-----------------|------------|
| ** **                                         | ** ** | ** **      | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net sales:                                         |       |            |       |            |       |   |   |   |   |
| Wheels                                             |       | $               | 70,065     |            | 35.8       | % | $ | 54,220 |   | 40.1 | % |
| Components                                         |       | 107,826         |       | 55.1            | %          | 73,067 |   | 54.0 | % |
| Other                                              |       | 17,748          |       | 9.1             | %          | 7,919 |   | 5.9 | % |
| Total net sales                                    |       | 195,639         |       | 100.0           | %          | 135,206 |   | 100.0 | % |
| Gross profit (loss):                               |       |            |       |            |       |   |   |   |   |
| Wheels                                             |       | 7,964           |       | 11.4            | %          | (843 | ) | (1.6 | )% |
| Components                                         |       | 2,999           |       | 2.8             | %          | (9,100 | ) | (12.5 | )% |
| Other                                              |       | 5,726           |       | 32.3            | %          | 1,503 |   | 19.0 | % |
| Corporate                                          |       | (870            | )          | —          | %          | (581 | ) | — | % |
| Total gross profit (loss)                          |       | 15,819          |       | 8.1             | %          | (9,021 | ) | (6.7 | )% |
| Operating expenses                                 |       | 20,235          |       | 10.3            | %          | 12,490 |   | 9.2 | % |
| Loss from operations                               |       | (4,416          | )          | (2.3            | )%         | (21,511 | ) | (15.9 | )% |
| Interest (expense), net                            |       | (10,237         | )          | (5.2            | )%         | (15,591 | ) | (11.5 | )% |
| Non-cash market valuation — convertible notes |       | 19,397          |       | 9.9             | %          | — |   | — | % |
| Other income, net                                  |       | 2,267           |       | 1.2             | %          | 1,543 |   | 1.1 | % |
| Income tax expense                                 |       | 501             |       | 0.3             | %          | 512 |   | 0.4 | % |
| Net income (loss)                                  |       | $               | 6,510      |            | 3.3        | % | $ | (36,071 | ) | (26.7 | )% |

 

**NetSales.**  Net sales for the three monthsended June 30, 2010, were $195.6 million, which was an increase of 44.7%,compared to net sales of $135.2 million for the three months ended June 30,2009.  The increase was due to increasedproduct demand from both our OEM and aftermarket customers.

 

**GrossProfit. **Gross profit increased $24.8million to $15.8 million for the three months ended June 30, 2010 due tothe contribution from increased net sales, better capacity utilization withhigher sales volumes and improvements in operating efficiencies.

 

**InterestExpense. **Net interest expense decreased $5.4 million to $10.2 million for thethree months ended June 30, 2010 from $15.6 million for the three monthsended June 30, 2009.  This wasmostly due to lower debt levels, which resulted in lower interest expense ofapproximately $3.2 million.  During 2009,we recognized $1.2 million in interest expenses related to warrant and debtissue cost amortization, which were not recognized during 2010.

 

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**MarketValuation — Conversion Option on Convertible Notes. **In connection withaccounting guidance following the emergence from Chapter 11, we record theconversion option on our convertible notes at fair value.  Due to the decrease in value of theconversion option, we recorded income of $19.4 million during the three monthsended June 30, 2010.  We expectthese unrealized, non-cash gains or losses to continue as the fair value of theconversion option fluctuates.

 

**Net Income. **Wehad net income of $6.5 million forthe three months ended June 30, 2010 compared to a net loss of $36.1million for the three months ended June 30, 2009.  The primary reasons for the improvement areimproved gross profit margins related to increased net sales and operatingefficiencies and non-cash market valuation gain for the conversion option onour convertible debt.

 

***Six Months Ended June 30, 2010 Compared to the Six Months Ended June 30,2009***

 
| **(In  thousands except per share data)**          | ** ** | **Fiscal 2010** | ** ** | **Fiscal 2009** | ** ** |
|----------------------------------------------------|------------|-----------------|------------|-----------------|------------|
| ** **                                         | ** ** | ** **      | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net sales:                                         |       |            |       |            |       |   |   |   |   |
| Wheels                                             |       | $               | 132,205    |            | 36.3       | % | $ | 111,105 |   | 39.8 | % |
| Components                                         |       | 200,213         |       | 54.9            | %          | 147,123 |   | 52.8 | % |
| Other                                              |       | 32,194          |       | 8.8             | %          | 20,554 |   | 7.4 | % |
| Total net sales                                    |       | 364,612         |       | 100.0           | %          | 278,782 |   | 100.0 | % |
| Gross profit (loss):                               |       |            |       |            |       |   |   |   |   |
| Wheels                                             |       | 14,256          |       | 10.8            | %          | 6,740 |   | 6.1 | % |
| Components                                         |       | 4,016           |       | 2.0             | %          | (19,551 | ) | (13.3 | )% |
| Other                                              |       | 9,440           |       | 29.3            | %          | 5,367 |   | 26.1 | % |
| Corporate                                          |       | (1,811          | )          | —          | %          | (1,537 | ) | — | % |
| Total gross profit (loss)                          |       | 25,901          |       | 7.1             | %          | (8,981 | ) | (3.2 | )% |
| Operating expenses                                 |       | 32,196          |       | 8.8             | %          | 24,714 |   | 8.9 | % |
| Loss from operations                               |       | (6,295          | )          | (1.7            | )%         | (33,695 | ) | (12.1 | )% |
| Interest (expense), net                            |       | (21,226         | )          | (5.8            | )%         | (28,894 | ) | (10.4 | )% |
| Loss on extinguishment of debt                     |       | —          |       | —          | %          | (5,389 | ) | (1.9 | )% |
| Non-cash market valuation — convertible notes |       | (31,204         | )          | (8.6            | )%         | — |   | — | % |
| Other income, net                                  |       | 2,507           |       | 0.7             | %          | 2,354 |   | 0.8 | % |
| Reorganization items (gain)                        |       | (59,311         | )          | (16.3           | )%         | — |   | — | % |
| Income tax expense (benefit)                       |       | (1,191          | )          | (0.3            | )%         | 1,502 |   | 0.5 | % |
| Net income (loss)                                  |       | $               | 4,284      |            | 1.2        | % | $ | (67,126 | ) | (24.1 | )% |

 

**NetSales.**  Combined net sales for the sixmonths ended June 30, 2010, were $364.6 million, which was an increase of30.8%, compared to net sales of $278.8 million for the six months ended June 30,2009.  The increase was due to increasedproduct demand from both our OEM and aftermarket customers.

 

**GrossProfit. **Gross profit increased $34.9million to $25.9 million for the six months ended June 30, 2010 due to thecontribution from increased net sales, better capacity utilization with highersales volumes and improvements in operating efficiencies.

 

**InterestExpense. **Net interest expense decreased $7.7 million to $21.2 million for thesix months ended June 30, 2010 from $28.9 million for the six months endedJune 30, 2009.  This was mostly dueto not recognizing interest related to our prepetition senior subordinatednotes that were cancelled as part of our Plan of Reorganization and having areduced net debt position as a result of our Plan of Reorganization.

 

**MarketValuation — Conversion Option on Convertible Notes. **In connection withaccounting guidance following the emergence from Chapter 11, we record theconversion option on our convertible notes at fair value.  Due to the increase in value of theconversion option, we recorded a charge to income of $31.2 million during2010.  We expect these unrealized,non-cash gains or losses to continue as the fair value of the conversionoptions fluctuates.

 

**ReorganizationItems. **ASC 852 requires therecognition of certain transactions directly related to the reorganization asreorganization expense or income in the statement of operations. Thereorganization gain of $59.3 million for 2010 consisted 

 

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of$25.0 million professional fees directly related to reorganization and an $84.3million gain on the discharge and issuance of our debt instruments.

 

**NetIncome. **Wehad net income of $4.3 million forthe six months ended June 30, 2010 compared to a net loss of $67.1 millionfor the six months ended June 30, 2009. The primary reasons for the improvement are the improved gross profit onhigher sales volumes, the net of one-time items related to the debt discharge,and the non-cash market valuation charge for the conversion option on ourconvertible notes.

 

***Changes inFinancial Condition***

 

AtJune 30, 2010, the Successor Company had total assets of $866.0 million,as compared to the Predecessor Company’s total assets of $671.7 million at December 31,2009.  The $194.3 million, or 28.9%,increase in total assets primarily resulted from changes from the fairvaluation of the Company’s assets by adopting fresh start accounting inaccordance with ASC 852, as well as changes in working capital.  We define working capital as current assets(excluding cash and debt) less current liabilities.  During the six months ended June 30,2010, property, plant and equipment increased by $49.3 million, otherintangible assets increased by $152.6 million and goodwill decreased by $13.1million for changes in the allocation of fair values as of February 26,2010.  Since the allocation of fair valueis still preliminary, additional changes are expected in the third and fourthquarters of this year.

 

Weuse working capital and cash flow measures to evaluate the performance of ouroperations and our ability to meet our financial obligations. We requireworking capital investment to maintain our position as a leading manufacturerand supplier of commercial vehicle components. We continue to strive for aligning our working capital investment withour customers’ purchase requirements and our production schedules.

 

Thefollowing table summarizes the major components of our working capital as ofthe periods listed below:

 
| ** **                        | ** ** | **Successor**     | ** ** | **Predecessor**       | ** ** |
|-----------------------------------|------------|-------------------|------------|-----------------------|------------|
| ** **                        | ** ** | **June 30,** | ** ** | **December 31,** | ** ** |
| ** **                        | ** ** | **2010**          | ** ** | **2009**              | ** ** |
| Accounts  receivable              |       | $                 | 94,571     |                  | $          | 66,301 |   |
| Inventories                       |       | 67,673            |       | 50,742                |       |
| Deferred  income taxes (current)  |       | 2,811             |       | 2,811                 |       |
| Other  current assets             |       | 5,090             |       | 22,762                |       |
| Accounts  payable                 |       | (58,935           | )          | (31,277               | )          |
| Accrued  payroll and compensation |       | (18,294           | )          | (14,318               | )          |
| Accrued  interest payable         |       | (93               | )          | (3,571                | )          |
| Accrued  workers compensation     |       | (7,467            | )          | (7,038                | )          |
| Other  current liabilities        |       | (20,925           | )          | (20,609               | )          |
| Working  Capital                  |       | $                 | 64,431     |                  | $          | 65,803 |   |

 

Significantchanges in working capital included:

·            an increase in receivables of $28.3 million due tothe comparative increase in revenue in the months leading up to the respectiveperiod-end dates;

·            an increase in inventory of $17.0 million due toincrease in sales demand;

·            a decrease in other current assets of $17.7 milliondue to the adoption of a new accounting policy for supplies as part of thefresh-start reporting;

·            an increase of accounts payable of $27.6 millionprimarily due to the increase in raw material purchases in the months leadingup to the respective period-end dates.

 

**Capital Resources and Liquidity**

 

Our primary sources of liquidity during the periods January 1, 2010through February 26, 2010 for the Predecessor Company and February 26,2010 through June 30, 2010 for the Successor Company were cash reservesand the debt instruments entered into in connection with our emergence frombankruptcy.  We believe that cash fromoperations, existing cash reserves, and availability under our new ABL facilitywill provide adequate funds for our working capital needs, planned capitalexpenditures and debt service obligations through 2010 and the foreseeablefuture.

 

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Our ability to fund working capital needs, planned capitalexpenditures, scheduled debt payments, and to comply with any financialcovenants under our new ABL facility, depends on our future operatingperformance and cash flow, which in turn, are subject to prevailing economicconditions and to financial, business and other factors, some of which arebeyond our control.

 

**Operating Activities**

 

Net cash used in operating activities during the six months ended June 30,2010 was $43.1 million. The primary drivers of the use in cash were $31.9million of cash payments for reorganization items and $14.7 million ofincreased working capital assets. During a period of increasing sales demand,our working capital needs also rise.

 

**Investing Activities**

 

Net cash used in investing activities totaled $9.2 million for the sixmonths ended June 30, 2010.  Ourmost significant cash outlays for investing activities are the purchases ofproperty, plant and equipment.  Capitalexpenditures for 2010 are expected to be approximately $20 million, which weexpect to fund through existing cash reserves. Due to the continued challenges facing our industry and the economy as awhole, we are managing our capital expenditures very closely in order topreserve liquidity throughout 2010 while still maintaining our productioncapacity and making investments necessary to meet competitive threats and toseize upon growth opportunities.

 

**Financing Activities**

 

Net cash provided by financing activities totaled $48.0 million for thesix months ended June 30, 2010. Included in this amount are the impacts from the Plan of Reorganizationof satisfying our prepetition senior credit facility of $305.8 million, ourrevolving credit facility of $71.7 million, and the DIP facility of $25.0million.  Also included are proceeds fromthe $140 million aggregate principal amount of convertible notes we issued andthe $310.5 million postpetition senior credit facility we entered into uponemergence from bankruptcy.

 

***Postpetition Senior Credit Facility***

 

Onthe Effective Date of the Plan of Reorganization, we entered into the fifthamendment and restatement to our prepetition senior credit facility (the “postpetitionsenior credit facility”).  As of theEffective Date, under our postpetition senior credit facility Accuride hadoutstanding term loans of $287,019,628 and outstanding letters of credit in thestated amount of $2,000,000 and Accuride Canada Inc. had outstanding term loansof $22,000,000.  As of June 30,2010, Accuride had $288,519,629 of outstanding term loans, outstanding lettersof credit in the stated amount of $350,000 and Accuride Canada Inc. hadoutstanding term loans of $22,000,000. The interest rate for all loans was, at our option, LIBOR + 6.75% (witha LIBOR floor of 3.00%) or Base Rate + 5.75% (with a Base Rate floor of4.00%).  The maturity for all loans andreimbursements of draws under the letters of credit was June 30, 2013.

 

Withcertain exceptions, our postpetition senior credit facility required us toprepay loans with (i) 100% of excess cash flow (commencing with the fiscalyear ending December 31, 2010), (ii) 100% of net proceeds from assetsales, (iii) 100% of new proceeds from new debt issuances, (iv) 100%of net cash proceeds from equity issuances and (v) 100% of cash receivedby us from third parties that are holding cash from letters of credit that theyhave drawn.

 

Theloans under our postpetition senior credit facility were secured by, amongother things, a lien on substantially all of our U.S. and Canadian properties,assets and domestic subsidiaries and a pledge of 65% of the stock of ourforeign subsidiaries.

 

OnJuly 29, 2010, as described below under “—Refinancing—The ABL Facility,”we refinanced the postpetition senior credit facility and the postpetitionsenior credit facility was terminated.

 

***Postpetition Senior Convertible Notes***

 

Onthe Effective Date, we issued $140 million aggregate principal amount ofconvertible notes and entered into the indenture governing the convertiblenotes, dated the Effective Date.  Underthe terms of the indenture, the convertible notes bear interest at a rate of7.5% per annum and will mature on February 26, 2020.  The first six interest payments will be PIKinterest.  Thereafter, beginning on August 26,2013, interest on the convertible notes will be paid in cash.

 

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Theconvertible notes are convertible into Common Stock at any time beginning onthe Effective Date until the second business day preceding maturity, at aninitial conversion rate of 1333.3333 per $1,000 principal amount of notes(equivalent to an initial conversion price of $0.75 per share of CommonStock).  The conversion rate is subjectto customary adjustments and will also be adjusted to account for PIK interest.  The adjustment to the conversion rate forconvertible notes issued as PIK interest serves to prevent the convertiblenotes outstanding immediately prior to the PIK interest payment from beingdiluted by the notes paid as PIK interest.

 

Theconvertible notes are redeemable by the Company, in whole but not in part, atany time on or after February 26, 2013, at a price equal to 100% of theprincipal amount of the convertible notes to be redeemed, plus any accrued andunpaid interest up to the redemption date; provided, that (i) the CommonStock is listed on a national securities exchange, (ii) the average weeklytrading volume of the Common Stock as reported by such national securitiesexchange during the four week period prior to conversion is at least 3.0% ofthe total number of outstanding shares of Common Stock immediately prior toconversion and (iii) for twenty of the preceding thirty consecutivetrading days, the Common Stock has had a closing sale price at least equal to2.25 times the effective conversion price.

 

**Refinancing**

 

OnJuly 29, 2010, we completed an offering of $310.0 million aggregateprincipal amount of senior secured notes and entered into the ABL facility. Weused the net proceeds from the offering of the senior secured notes, $15.0 millionof borrowings under the ABL facility and cash on hand to refinance ourpostpetition senior credit facility and to pay related fees and expenses (the “Refinancing”).

 

**The ABL Facility**

 

In connection with the Refinancing, we entered into a new ABL CreditAgreement (the “ABL facility”).  The ABLfacility is a senior secured asset based revolving credit facility in anaggregate principal amount of up to $75.0 million, with the right, subjectto certain conditions, to increase the availability under the facility by up to$25.0 million in the aggregate (for a total aggregate availability of$100.0 million). The four-year ABL facility matures on July 29, 2014 andprovides for loans and letters of credit in an aggregate amount up to theamount of the facility, subject to meeting certain borrowing base conditions,with sub-limits of up to $10.0 million for swingline loans and $25.0 million tobe available for the issuance of letters of credit.  Loans under the ABL facility initially bearsinterest at an annual rate equal to either LIBOR plus 3.50% or Base Rate plus2.50%, at our option, subject to changes based on our leverage ratio as definedin the ABL facility.

 

We must also pay a commitment fee equal to 0.50% per annum to thelenders under the ABL facility if utilization under the facility exceeds 50.0%of the total commitments under the facility and a commitment fee equal to 0.75%per annum if utilization under the facility is less than or equal to 50.0% ofthe total commitments under the facility. Customary letter of credit fees arealso payable, as necessary.

 

The obligations under the ABL facility are secured by (i) first-priorityliens on substantially all of the Company’s accounts receivable andinventories, subject to certain exceptions and permitted liens (the “ABLPriority Collateral”) and (ii) second-priority liens on substantially allof the Company’s owned real property and tangible and intangible assets otherthan the ABL Priority Collateral, including all of the outstanding capitalstock of our domestic subsidiaries, subject to certain exceptions and permittedliens (the “Notes Priority Collateral”).

 

**Senior Secured Notes**

 

Alsoin connection the Refinancing, we issued $310.0 million aggregate principalamount of senior secured notes.  Underthe terms of the indenture governing the senior secured notes, the seniorsecured notes bear interest at a rate of 9.5% per year and mature on August 1,2018.   Prior to maturity we may redeemthe senior secured notes on the terms set forth in the indenture governing thesenior secured notes. The senior secured notes are guaranteed by theGuarantors, and the senior secured notes and the related guarantees are securedby first priority liens on the Notes Priority Collateral and second priorityliens on the ABL Priority Collateral.

 

**Restrictive Debt Covenants.**  Our credit documents****(theABL facility and the indentures governing the convertible notes and the seniorsecured notes) contain operating covenants that limit the discretion ofmanagement with respect to certain business matters. These covenants placesignificant restrictions on, among other things, the ability to incuradditional debt, to pay dividends, to create liens, to make certain paymentsand investments and to sell or otherwise dispose of assets and merge orconsolidate with other entities.  Inaddition, the ABL facility contains a financial covenant which requires us tomaintain a fixed charge coverage ratio during any compliance period, which isany time when the excess availability is less than or equal to the greater of$10.0 million or 15 percent of the total commitment under the ABL facility.  Due to the amount of our excess availability(as 

 

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calculatedunder the ABL facility), the Company is not currently in a compliance periodand we do not have to maintain a fixed charge coverage ratio, although this issubject to change.

 

Wecontinue to operate in a challenging economic environment and our ability tomaintain liquidity and comply with our debt covenants may be affected byeconomic or other conditions that are beyond our control and which aredifficult to predict.  The 2010 production forecasts by ACT Publicationsfor the significant commercial vehicle markets that we serve, as of July 10,2010, are as follows:

 
| North American Class 8 |   | 149,601 |   |
|-----------------------------|--------|---------|--------|
| North American Classes 5-7  |   | 109,307 |   |
| U.S. Trailers               |   | 107,450 |   |

 

Based on the these production builds, we expect to comply with anyfinancial covenants we may become subject to and believe that our liquiditywill be sufficient to fund currently anticipated working capital, capitalexpenditures, and debt service requirements for at least the next twelvemonths.  However, if our net sales are significantly less thanexpectations, given the volatility and the calendarization of the productionbuilds as well as the other markets that we serve, or due to the challengingcredit markets, we could violate any such financial covenants or haveinsufficient liquidity.  In the event of noncompliance, we would pursue anamendment or waiver.  However, no assurances can be given that thoseforecasts will be accurate.

 

**Off-Balance Sheet Arrangements. **We do not currently have anyoff-balance sheet arrangements that have or are reasonably likely to have amaterial current or future effect on our financial condition, revenues orexpenses, results of operations, liquidity, capital expenditures or capitalresources.  From time to time we mayenter into operating leases, letters of credit, or take-or-pay obligationsrelated to the purchase of raw materials that would not be reflected in ourbalance sheet.

 

**Recent Developments**

 

***New Accounting Pronouncements***

 

In January 2010, the FASBissued ASU 2010-6, “Improving Disclosures about Fair Value Measurements,” whichrequires interim disclosures regarding significant transfers in and out ofLevel 1 and Level 2 fair value measurements. Additionally, this ASU requiresdisclosure for each class of assets and liabilities and disclosures about thevaluation techniques and inputs used to measure fair value for both recurringand non-recurring fair value measurements. These disclosures are required forfair value measurements that fall in either Level 2 or Level 3. Further, theASU requires separate presentation of Level 3 activity for the fair valuemeasurements. We adopted the interim disclosure requirements under thisstandard during the quarter ended March 31, 2010, with the exception ofthe separate presentation in the Level 3 activity rollforward, which is noteffective until fiscal years beginning after December 15, 2010 and forinterim periods within those fiscal years.

 

**Critical Accounting Policies and Estimates. **We have made a number ofestimates and assumptions relating to the reporting of results of operationsand financial position in the preparation of our financial statements inconformity with accounting principles generally accepted in the United Statesof America.  Actual results could differsignificantly from those estimates under different assumptions andconditions.  We included in our Form 10-Kfor the year ended December 31, 2009 a discussion of our most criticalaccounting policies, which are those that have a material impact on ourfinancial condition or operating performance and require management’s mostdifficult, subjective and complex judgments, often as a result of the need tomake estimates about the effect of matters that are inherently uncertain.  Upon our emergence from Chapter 11 bankruptcyproceedings, we adopted fresh-start accounting in accordance with theprovisions of ASC 852 Reorganizations (“ASC 852”), which requires significantestimates and assumptions related to the fair value of our assets andliabilities.  The allocations of fairvalue are based upon preliminary valuation information and analysis that havenot yet been completed.  It isanticipated that all necessary information will be available and our analysiswill be completed during the third and fourth quarters of 2010.

 

*Cautionary Statements Regarding Forward-Looking Statements*

 

Inthis report, we have made various statements regarding current expectations orforecasts of future events, which speak only as of the date the statements, aremade.  These statements are “forward-lookingstatements” within the meaning of that term in Section 27A of theSecurities Act of 1933 and Section 21E of the Securities Exchange Act of1934.  Forward-looking statements arealso made from time-to-time in press releases and in oral statements made bythe officers of Accuride. Forward-looking statements are identified by the words “estimate,” “project,”“anticipate,” “will continue,” “will likely 

 

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result,”“expect,” “intend,” “believe,” “plan,” “predict” and similar expressions.  Forward looking statements also include, butare not limited to, statements regarding commercial vehicle market recovery,projections of revenue, income, loss, or working capital, capital expenditurelevels, ability to mitigate rising raw material costs through increases inselling prices, plans for future operations, financing needs, the ultimateoutcome and impact of any litigation against Accuride, the sufficiency of ourcapital resources and plans and assumptions relating to the foregoing.

 

Suchforward-looking statements are based on assumptions and estimates, whichalthough believed to be reasonable, may turn out to be incorrect.  Therefore, undue reliance should not beplaced upon these estimates and statements. We cannot assure that any of these statements, estimates, or beliefswill be realized and actual results may differ from those contemplated in these“forward-looking statements.”  Weundertake no obligation to publicly update any forward-looking statements,whether as a result of new information, future events, or otherwise.  You are advised to consult furtherdisclosures we may make on related subjects in our filings with the SEC.  In addition to other factors discussed inthis report, some of the important factors that could cause actual results todiffer materially from those discussed in the forward-looking statementsinclude, without limitation, the following:

 

·                  currenteconomic conditions, including those related to the credit markets and thecommercial vehicle industry, may have a material adverse effect on our businessand results of operations;

·                  we rely on, andmake significant operational decisions based in part upon, industry data andforecasts that may prove to be inaccurate;

·                  the failure torealize cost savings under our cost restructuring plan could adversely affectour business;

·                  we aredependent on sales to a small number of our major customers and on our statusas standard supplier on certain truck platforms of each of our major customers;

·                  increased costor reduced supply of raw materials and purchased components may adverselyaffect our business, results of operations or financial condition;

·                  our business isaffected by the seasonality and regulatory nature of the industries and marketsthat we serve;

·                  cost reductionand quality improvement initiatives by original equipment manufacturers couldhave a material adverse effect on our business, results of operations orfinancial condition;

·                  we operate inhighly competitive markets;

·                  we faceexposure to foreign business and operational risks including foreign exchangerate fluctuations and if we were to experience a substantial fluctuation, ourprofitability may change;

·                  we may not beable to continue to meet our customers’ demands for our products and services;

·                  equipmentfailures, delays in deliveries or catastrophic loss at any of our facilitiescould lead to production or service curtailments or shutdowns;

·                  we may incurpotential product liability, warranty and product recall costs;

·                  work stoppages orother labor issues at our facilities or at our customers’ facilities could havea material adverse effect on our operations;

·                  we are subjectto a number of environmental rules and regulations that may require us tomake substantial expenditures;

·                  we might failto adequately protect our intellectual property, or third parties might assertthat our technologies infringe on their intellectual property;

·                  litigationagainst us could be costly and time consuming to defend;

·                  substantiallyall the members of our Board of Directors have been associated with the Companyfor a relatively short period of time;

·                  if we fail toretain our executive officers, our business could be harmed;

·                  we have enteredinto typical severance arrangements with certain of our senior managementemployees, which may result in certain costs associated with strategicalternatives;

·                  our productsmay be rendered obsolete or less attractive by changes in regulatory,legislative or industry requirements;

·                  our strategicinitiatives may be unsuccessful, may take longer than anticipated, or mayresult in unanticipated costs;

·                  our substantialleverage and significant debt service obligations could have a material adverseeffect on our financial condition or our ability to fulfill our obligations andmake it more difficult for us to fund our operations;

·                  despite oursubstantial leverage, we and our subsidiaries will be able to incur moreindebtedness. This could further exacerbate the risk immediately describedabove, including our ability to service our indebtedness;

·                  to service ourindebtedness, we will require a significant amount of cash. Our ability togenerate cash depends on many factors beyond our control; and

·                  we are subjectto a number of restrictive covenants, which, if breached, may restrict ourbusiness and financing activities.

 

Forfurther information, refer to the business description and additional riskfactors sections included in our Form 10-K for the year ended December 31,2009, as filed with the SEC.

 

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**Item 3. Quantitative and Qualitative Disclosures about Market Risk**

 

Inthe normal course of doing business, we are exposed to risks associated withchanges in foreign exchange rates, raw material/commodity prices, and interestrates.  We use derivative instruments tomanage these exposures.  The objectivesfor holding derivatives are to minimize the risks using the most effectivemethods to eliminate or reduce the impacts of these exposures.

 

**Foreign Currency Risk**

 

Certainforecasted transactions, assets, and liabilities are exposed to foreigncurrency risk. We monitor our foreign currency exposures to maximize theoverall effectiveness of our foreign currency derivatives. The principalcurrency of exposure is the Canadian dollar. From time to time, we use foreigncurrency financial instruments to offset the impact of the variability inexchange rates on our operations, cash flows, assets and liabilities. As of June 30,2010, the notional amount of open foreign exchange contracts was $658.

 

Foreigncurrency derivative contracts provide only limited protection against currencyrisks. Factors that could impact the effectiveness of our currency riskmanagement programs include accuracy of sales estimates, volatility of currencymarkets and the cost and availability of derivative instruments.

 

Thecounterparty to the foreign exchange contracts is a financial institution withan investment grade credit rating. The use of forward contracts protects ourcash flows against unfavorable movements in exchange rates, to the extent ofthe amount under contract.

 

**Raw Material/Commodity Price Risk**

 

Werely upon the supply of certain raw materials and commodities in our productionprocesses, and we have entered into firm purchase commitments for certainmetals and natural gas. Additionally, from time to time, we use commodity priceswaps and futures contracts to manage the variability in certain commodityprices on our operations and cash flows. At June 30, 2010, we had no opencommodity price swaps or futures contracts.

 

**Interest Rate Risk**

 

Weuse long-term debt as a primary source of capital. The following table presentsthe principal cash repayments and related weighted average interest rates bymaturity date for our long-term fixed-rate debt and other types of long-termdebt at June 30, 2010:

 
| **(Dollars  in thousands)** | ** ** | **2010** | ** ** | **2011** | ** ** | **2012** | ** ** | **2013** | ** **    | **2014** | ** ** | **Thereafter** | ** **    | **Total** | ** ** | **Fair  Value** | ** ** |
|-----------------------------|------------|----------|------------|----------|------------|----------|------------|----------|---------------|----------|------------|----------------|---------------|-----------|------------|-----------------|------------|
| Long-term Debt:             |       |     |       |     |       |     |       |     |          |     |       |           |          |      |       |            |       |
| Fixed Rate                  |       | —   |       | —   |       | —   |       | —   |          | —   |       | $              |  140,000 |      | $          |  140,000   |       | $ |  337,302 |   |
| Average Rate                |       | —   |       | —   |       | —   |       | —   |          | —   |       | 7.50           | %             | 7.50      | %          |            |       |
| Variable Rate               |       | —   |       | —   |       | —   |       | $        |  310,520 |     | —     |           | —        |      | $          |  310,520   |       | $ |  310,209 |   |
| Average Rate                |       | —   |       | —   |       | —   |       | 9.75     | %             | —   |       | —         |          | 9.75      | %          |            |       |
|                             |            |          |            |          |            |          |            |          |               |          |            |                |               |           |            |                 |            |  |  |  |  |

 

The carrying value of our $140 million aggregate principal amount ofconvertible notes is disclosed on our condensed consolidated balance sheet at$319.4 million, which considers the fair value of the conversion option andaccrued PIK interest, as of June 30, 2010. The table above represents the face value of the debt instrument with afixed rate of interest of 7.5%.

 

We have used interest rate swaps to alter interest rate exposurebetween fixed and variable rates on a portion of our long-term debt.  As of December 31, 2009, we had oneinterest rate swap agreement to exchange, at specified intervals, thedifference between 3.81% from March 2008 through March 2010, and thevariable rate interest amounts calculated by reference to the notionalprincipal amount of $125 million.  As of December 31,2009, we had a liability of $1.1 million included in accrued and otherliabilities on the consolidated balance sheet. On March 10, 2010 we terminated the swap agreement and paid theoutstanding liability.

 

**Item 4. Controls and Procedures**

 

Wemaintain disclosure controls and procedures that are designed to ensure thatinformation required to be disclosed in our Exchange Act reports is recorded,processed, summarized and reported within the time periods specified in the SEC’s

 

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rules andforms, and that such information is accumulated and communicated to ourmanagement, including our Chief Executive Officer and Chief Financial Officer,as appropriate, to allow timely decisions regarding required disclosure.  In designing and evaluating the disclosurecontrols and procedures, management recognized that any controls andprocedures, no matter how well designed and operated, can provide onlyreasonable assurance of achieving the desired control objectives, andmanagement is required to apply its judgment in evaluating the cost-benefitrelationship of possible controls and procedures.

 

Asrequired by SEC Rule 13a-15(b), we carried out an evaluation, under thesupervision and with the participation of the Company’s management, includingour Chief Executive Officer and Chief Financial Officer, of the effectivenessof the design and operation of our disclosure controls and procedures as of theend of the period covered by this report. Based on that evaluation, our Chief Executive Officer and ChiefFinancial Officer concluded that our disclosure controls and procedures wereeffective at the reasonable assurance level.

 

***Changes in Internal Control Over FinancialReporting.***  There havebeen no changes to our internal controls over financial reporting that havematerially affected or are reasonably likely to materially affect our internalcontrol over financial reporting.

 

**PART II.  OTHER INFORMATION**

 

**Item 1.  LegalProceedings**

 

NeitherAccuride nor any of our subsidiaries is a party to any legal proceeding which,in the opinion of management, would have a material adverse effect on ourbusiness or financial condition. However, we from time-to-time are involved in ordinary routinelitigation incidental to our business, including actions related to productliability, contractual liability, intellectual property, workplace safety andenvironmental claims.  We establishreserves for matters in which losses are probable and can be reasonablyestimated.  While we believe that we haveestablished adequate accruals for our expected future liability with respect toour pending legal actions and proceedings, we cannot assure you that ourliability with respect to any such action or proceeding would not exceed ourestablished accruals.  Further, we cannotassure that litigation having a material adverse affect on our financialcondition will not arise in the future.

 

**Item 6. Exhibits**

 
| **Exhibit No.** | ** ** | **Description** |
|----------------------|------------|-----------------|
|                 |       |            |   |   |
| 2.1                  |       | —          |   | Agreement  and Plan of Merger, dated as of December 24, 2004, by and among Accuride  Corporation, Amber Acquisition Corp., Transportation Technologies  Industries, Inc., certain signing stockholders and the Company  Stockholders Representatives. Previously filed as an exhibit to the  Form 8-K filed on December 30, 2004 and incorporated herein by  reference. |
| 2.2                  |       | —          |   | Amendment  to Agreement and Plan of Merger, dated as of January 28, 2005, by and  among Accuride Corporation, Amber Acquisition Corp., Transportation  Technologies Industries, Inc. certain signing stockholders and the  Company Stockholders Representatives. Previously filed as an exhibit to the  Form 8-K filed on February 4, 2005 and incorporated herein by  reference. |
| 2.3                  |       | —          |   | Third  Amended Joint Plan of Reorganization for Accuride Corporation, et al.  Previously filed as an exhibit to the Form 8-K filed on  February 22, 2010, and incorporated herein by reference. |
| 2.4                  |       | —          |   | Confirmation  Order for Third Amended Plan of Reorganization. Previously filed as an  exhibit to the Form 8-K filed on February 22, 2010, and  incorporated herein by reference. |
| 3.1                  |       | —          |   | Amended  and Restated Certificate of Incorporation of Accuride Corporation. Previously  filed as an exhibit to the Form 8-K (Acc. No. 0001104659-10-012168)  filed on March 4, 2010, and incorporated herein by reference. |
| 3.2                  |       | —          |   | Amended  and Restated Bylaws of Accuride Corporation. Previously filed as an exhibit  to the Form 8-K (Acc. No. 0001104659-10-012168) filed on  March 4, 2010, and incorporated herein by reference. |
| 4.1                  |       | —          |   | Indenture,  dated as of February 26, 2010, by and among Accuride Corporation,  Accuride Corporation’s direct and indirect domestic subsidiaries and  Wilmington Trust FSB, with respect to $140.0 million aggregate principal  amount of 71/2% Senior  Convertible Notes due 2020. Previously filed as an exhibit to the  Form 8-K filed on March 4, 2010 (Acc.  No. 0001104659-10-012168) and incorporated herein by reference. |
| 4.2                  |       | —          |   | Registration  Rights Agreement, dated February 26, 2010, by and between Accuride  Corporation and each of the Holders party thereto. Previously filed as an  exhibit to the Form 8-K (Acc. No. 0001104659-10-012168) filed on  March 4, 2010 and incorporated herein by reference. |
| 4.3                  |       | —          |   | Bond  Guaranty Agreement dated as of March 1, 1999 by Bostrom  Seating, Inc. in favor of NBD Bank as |

 

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|             |   |   |   | Trustee.  Previously filed as an exhibit to Amendment No. 1 filed on  February 23, 2005 to the Form S-1 effective April 25, 2005  (Reg. No. 333-121944) and incorporated herein by reference.                                                                                                                                                                                                                                                                                            |
|------------------|--------|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 4.4              |   | — |   | Indenture,  dated July 29, 2010, by and among Accuride Corporation, Accuride  Corporation’s domestic subsidiaries, Wilmington Trust FSB, as trustee, and  Deutsche Bank Trust Company Americas, as notes priority collateral agent,  registrar and paying agent, with respect to $310.0 million aggregate  principal amount of 91/2% First  Priority Senior Secured Notes due 2018. Previously filed as an exhibit to  Form 8-K filed on August 2, 2010 and incorporated herein by reference. |
| 4.5              |   | — |   | Form of  91/2% First  Priority Senior Secured Notes due 2018 (included in Exhibit 4.4).  Previously filed as an exhibit to Form 8-K filed on August 2, 2010  and incorporated herein by reference.                                                                                                                                                                                                                                                                                            |
| 4.6              |   | — |   | Registration  Rights Agreement, dated July 29, 2010, by and between Accuride  Corporation and each of the Holders party thereto. Previously filed as an  exhibit to Form 8-K filed on August 2, 2010 and incorporated herein  by reference.                                                                                                                                                                                                                                                        |
| 4.7              |   | — |   | Intercreditor  Agreement, dated July 29, 2010, between Deutsche Bank Trust Company  Americas, as initial ABL agent, and Deutsche Bank Trust Company Americas, as  Senior Secured Notes Collateral Agent, and acknowledged by Accuride  Corporation and its domestic subsidiaries. Previously filed as an exhibit to  Form 8-K filed on August 2, 2010 and incorporated herein by  reference.                                                                                                       |
| 10.1*            |   | — |   | Form of  Indemnification Agreement between Accuride and its Directors and Officers.  Previously filed as an exhibit to Form 8-K filed on May 5, 2010 and  incorporated herein by reference.                                                                                                                                                                                                                                                                                                        |
| 10.2*            |   | — |   | Letter  dated May 17, 2010 from Accuride Corporation and Mr. William M.  Lasky. Previously filed as an exhibit to Form 10-Q filed on May 17,  2010 and incorporated herein by reference.                                                                                                                                                                                                                                                                                                      |
| 10.3*            |   | — |   | Letter  dated May 17, 2010 from Accuride Corporation and Mr. James H.  Woodward, Jr. Previously filed as an exhibit to Form 10-Q filed on  May 17, 2010 and incorporated herein by reference.                                                                                                                                                                                                                                                                                            |
| 10.4*            |   | — |   | Form of  Restricted Stock Unit Agreement. Previously filed as an exhibit to  Form 10-Q filed on May 17, 2010 and incorporated herein by  reference.                                                                                                                                                                                                                                                                                                                                                |
| 10.5             |   | — |   | ABL  Credit Agreement, dated July 29, 2010, by and among Accuride  Corporation, Accuride Corporation’s domestic subsidiaries, Deutsche Bank  Securities Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Trust  Company Americas, Sun Trust Bank, Wells Fargo Capital Finance, LLC, and the  initial lenders named therein. Previously filed as an exhibit to  Form 8-K filed on August 2, 2010 and incorporated herein by reference.                                                  |
| 10.6*            |   | — |   | Accuride  Corporation 2010 Incentive Award Plan. Previously filed as an exhibit to  Form S-8 filed on August 3, 2010 and incorporated herein by  reference.                                                                                                                                                                                                                                                                                                                                             |
| 10.7*            |   | — |   | Form of  Accuride Corporation 2010 Initial Grant Restricted Stock Unit Award to be  entered into by Accuride Corporation and individual directors of Accuride  Corporation. Previously filed as an exhibit to Form S-8 filed on  August 3, 2010 and incorporated herein by reference.                                                                                                                                                                                                              |
| 10.8*            |   | — |   | Form of  Accuride Corporation 2010 Annual Grant Restricted Stock Unit Award to be  entered into by Accuride Corporation and individual directors of Accuride  Corporation. Previously filed as an exhibit to Form S-8 filed on  August 3, 2010 and incorporated herein by reference.                                                                                                                                                                                                               |
| 31.1†       |   | — |   | Section 302  Certification of William M. Lasky in connection with the Quarterly Report of  Form 10-Q on Accuride Corporation for the period ended June 30,  2010.                                                                                                                                                                                                                                                                                                                                  |
| 31.2†       |   | — |   | Section 302  Certification of James H. Woodward, Jr. in connection with the Quarterly  Report on Form 10-Q of Accuride Corporation for the period ended  June 30, 2010.                                                                                                                                                                                                                                                                                                                       |
| 32.1†† |   | — |   | Certifications  Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States  Code.                                                                                                                                                                                                                                                                                                                                                                                                               |

 

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†                                          Filed herewith

 

††                                    Furnishedherewith

 

*                                         Managementcontract or compensatory agreement

 

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**SIGNATURES**

 

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

 

 

ACCURIDECORPORATION

 
| /s/  WILLIAM M. LASKY                              |   | Dated: | August 6,  2010 |
|----------------------------------------------------|--------|--------|----------------------|
| William  M. Lasky                                  |   |   |                 |
| President  and Chief Executive Officer             |   |   |                 |
| (Principal  Executive Officer)                     |   |   |                 |
|                                               |   |   |                 |
|                                               |   |   |                 |
| /s/  JAMES H. WOODWARD, Jr.                   |   | Dated: | August 6,  2010 |
| James  H. Woodward, Jr.                       |   |   |                 |
| Senior  Vice President and Chief Financial Officer |   |   |                 |
| (Principal  Financial Officer)                     |   |   |                 |
|                                               |   |   |                 |
|                                               |   |   |                 |
| /s/  GREGORY A. RISCH                              |   | Dated: | August 6,  2010 |
| Gregory  A. Risch                                  |   |   |                 |
| Vice  President and Chief Accounting Officer       |   |   |                 |
| (Principal  Accounting Officer)                    |   |   |                 |

 

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