** **

** **

**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,DC  20549**

 

**FORM 10-Q**

 

**(Mark One)**

 

**x****     ****Quarterly Report Pursuant to Section13 or 15 (d) of the Securities Exchange Act of 1934**

 

**For thequarterly period ended September 30, 2007.**

 

**OR**

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

**For thetransition period from                to                .**

 

**Commission file number 001-32483**

 

**ACCURIDECORPORATION**

(Exact Name of Registrantas Specified in Its Charter)

 

| **Delaware**                              | ** ** | **61-1109077**                        |
|-------------------------------------------|------------|---------------------------------------|
| (State or Other  Jurisdiction of          |       | (I.R.S. Employer  Identification No.) |
| Incorporation or  Organization)           |       |                                  |
|                                      |       |                                  |
| **7140 Office Circle**                    |       |                                  |
| **Evansville,  IN**                       | ** ** | **47715**                             |
| (Address of Principal  Executive Offices) |       | (Zip Code)                            |

 

Registrant’sTelephone Number, Including Area Code: **(812)962-5000**

 

Indicate by check mark whether the registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days.  Yes x No o

 

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated and largeaccelerated filer” in Rule 12b-2 of the Exchange Act.  (Check one):

 

| Large Accelerated  Filer o | Accelerated Filer x | Non-Accelerated  Filer o |
|---------------------------------|--------------------------|-------------------------------|

 

Indicate by check mark whether theregistrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  o  No x

 

As of October 31, 2007,35,349,883 shares of Accuride Corporation common stock, par value $.01 pershare, were outstanding. 

 

 

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**ACCURIDECORPORATION**

 

 

**Table ofContents**

** **
| **PART  I — FINANCIAL INFORMATION** | ** **                                                                                                       | ** ** |
|------------------------------------------|------------------------------------------------------------------------------------------------------------------|------------|
| ** **                               | ** **                                                                                                       | ** ** |
| Item  1.                                 | Condensed  Consolidated Financial Statements (Unaudited)                                                         |       |   |
|                                     |                                                                                                             |       |   |
|                                     | Condensed Consolidated Balance Sheets as of September  30, 2007 and December 31, 2006                            |       |   |
|                                     |                                                                                                             |       |   |
|                                     | Condensed Consolidated Statements of Operations for  the Three and Nine Months Ended September 30, 2007 and 2006 |       |   |
|                                     |                                                                                                             |       |   |
|                                     | Condensed Consolidated Statements of Cash Flows for  the Nine Months Ended September 30, 2007 and 2006           |       |   |
|                                     |                                                                                                             |       |   |
|                                     | Notes to Condensed Consolidated Financial Statements                                                             |       |   |
|                                     |                                                                                                             |       |   |
| Item 2.                                  | Management’s Discussion and Analysis of Financial  Condition and Results of Operations                      |       |   |
|                                     |                                                                                                             |       |   |
| Item 3.                                  | Quantitative and Qualitative Disclosures About Market  Risk                                                      |       |   |
|                                     |                                                                                                             |       |   |
| Item 4.                                  | Controls and Procedures                                                                                          |       |   |
|                                     |                                                                                                             |       |   |
| **PART  II — OTHER INFORMATION**    |                                                                                                             |       |
| ** **                               |                                                                                                             |       |
| Item  1.                                 | Legal  Proceedings                                                                                               |       |   |
|                                     |                                                                                                             |       |   |
| Item 6.                                  | Exhibits                                                                                                         |       |   |
|                                     |                                                                                                             |       |   |
| Signatures                               |                                                                                                             |       |

 

 

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**PartI.  FINANCIAL INFORMATION**

 

**Item1.  Financial Statements**

 

**ACCURIDE CORPORATION**

**CONDENSEDCONSOLIDATED BALANCE SHEETS (UNAUDITED)**

 
| ** **                                                                                                                                                           | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|------------|------------------|------------|
| **(In thousands, except for per share data)**                                                                                                                        | ** ** | **2007**          | ** ** | **2006**         | ** ** |
| ** **                                                                                                                                                           | ** ** | ** **        | ** ** | ** **       | ** ** |
| **ASSETS**                                                                                                                                                           | ** ** | ** **        | ** ** | ** **       | ** ** |
| CURRENT ASSETS:                                                                                                                                                      |       |              |       |             |       |
| Cash and cash  equivalents                                                                                                                                           |       | $                 | 46,352     |             | $          | 110,204 |   |
| Customer  receivables, net of allowance for doubtful accounts of $1,838 and $2,127 in  2007 and 2006, respectively                                                   |       | 106,861           |       | 132,482          |       |
| Other  receivables                                                                                                                                                   |       | 5,651             |       | 10,183           |       |
| Inventories, net                                                                                                                                                     |       | 109,800           |       | 103,653          |       |
| Supplies, net                                                                                                                                                        |       | 21,706            |       | 22,124           |       |
| Deferred income  taxes                                                                                                                                               |       | 15,813            |       | 14,451           |       |
| Prepaid expenses  and other current assets                                                                                                                           |       | 6,192             |       | 5,143            |       |
| Total current  assets                                                                                                                                                |       | 312,375           |       | 398,240          |       |
| PROPERTY, PLANT  AND EQUIPMENT, net                                                                                                                                  |       | 273,434           |       | 300,806          |       |
| OTHER ASSETS:                                                                                                                                                        |       |              |       |             |       |
| Goodwill                                                                                                                                                             |       | 386,953           |       | 389,513          |       |
| Other intangible  assets, net                                                                                                                                        |       | 131,388           |       | 135,644          |       |
| Investment in  affiliates                                                                                                                                            |       | 850               |       | 350              |       |
| Deferred  financing costs, net of accumulated amortization of $3,395 and $2,470 in 2007  and 2006, respectively                                                      |       | 7,104             |       | 8,029            |       |
| Other                                                                                                                                                                |       | 235               |       | 605              |       |
| TOTAL                                                                                                                                                                |       | $                 | 1,112,339  |             | $          | 1,233,187 |   |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY**                                                                                                                       | ** ** | ** **        | ** ** | ** **       | ** ** |
| CURRENT  LIABILITIES:                                                                                                                                                |       |              |       |             |       |
| Accounts payable                                                                                                                                                     |       | $                 | 73,664     |             | $          | 107,217 |   |
| Accrued payroll  and compensation                                                                                                                                    |       | 30,852            |       | 28,430           |       |
| Accrued interest  payable                                                                                                                                            |       | 5,382             |       | 11,406           |       |
| Income taxes  payable                                                                                                                                                |       | 626               |       | 4,135            |       |
| Accrued and  other liabilities                                                                                                                                       |       | 31,328            |       | 35,711           |       |
| Total current  liabilities                                                                                                                                           |       | 141,852           |       | 186,899          |       |
| LONG-TERM DEBT                                                                                                                                                       |       | 572,725           |       | 642,725          |       |
| DEFERRED INCOME  TAXES                                                                                                                                               |       | 19,356            |       | 39,945           |       |
| NON-CURRENT INCOME  TAXES PAYABLE                                                                                                                                    |       | 11,566            |       | —           |       |
| OTHER  POSTRETIREMENT BENEFIT PLAN LIABILITY                                                                                                                         |       | 85,831            |       | 81,158           |       |
| PENSION BENEFIT  PLAN LIABILITY                                                                                                                                      |       | 10,338            |       | 15,096           |       |
| OTHER  LIABILITIES                                                                                                                                                   |       | 3,713             |       | 3,782            |       |
| COMMITMENTS AND  CONTINGENCIES                                                                                                                                       |       | —            |       | —           |       |
| STOCKHOLDERS’  EQUITY:                                                                                                                                          |       |              |       |             |       |
| Preferred stock,  $0.01 par value; 5,000 shares authorized and unissued                                                                                              |       | —            |       | —           |       |
| Common Stock,  $0.01 par value; 100,000 shares authorized, 36,042 and 35,554 shares issued,  and 35,338 and 34,850 shares outstanding in 2007 and 2006, respectively |       | 353               |       | 349              |       |
| Additional  paid-in-capital                                                                                                                                          |       | 261,775           |       | 255,741          |       |
| Treasury stock —  76 shares at cost in 2007 and 2006                                                                                                            |       | (751              | )          | (751             | )          |
| Accumulated  other comprehensive loss                                                                                                                                |       | (25,503           | )          | (23,100          | )          |
| Retained  earnings                                                                                                                                                   |       | 31,084            |       | 31,343           |       |
| Total  stockholders’ equity                                                                                                                                     |       | 266,958           |       | 263,582          |       |
| TOTAL                                                                                                                                                                |       | $                 | 1,112,339  |             | $          | 1,233,187 |   |
|                                                                                                                                                                      |            |                   |            |                  |            |  |  |  |  |

 

Seenotes to unaudited condensed consolidated financial statements.

 

 

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**ACCURIDE CORPORATION**

**CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)**

 
| ** **                                               | ** ** | **Three Months Ended  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** |
|----------------------------------------------------------|------------|---------------------------------------|------------|--------------------------------------|------------|
| **(in thousands except per share data)**                 | ** ** | **2007**                              | ** ** | **2006**                             | ** ** | **2007** | ** ** | **2006** | ** ** |
| ** **                                               | ** ** | ** **                            | ** ** | ** **                           | ** ** | ** ** | ** ** | ** ** | ** ** |
| NET SALES                                                |       | $                                     | 220,580    |                                 | $          | 341,610 |   | $ | 791,143 |   | $ | 1,063,268 |   |
| COST OF GOODS  SOLD                                      |       | 207,289                               |       | 299,707                              |       | 725,282 |   | 912,231 |   |
| GROSS PROFIT                                             |       | 13,291                                |       | 41,903                               |       | 65,861 |   | 151,037 |   |
| OPERATING  EXPENSES:                                     |       |                                  |       |                                 |       |   |   |   |   |
| Selling, general  and administrative                     |       | 13,690                                |       | 12,636                               |       | 42,964 |   | 39,412 |   |
| INCOME (LOSS)  FROM OPERATIONS                           |       | (399                                  | )          | 29,267                               |       | 22,897 |   | 111,625 |   |
| OTHER INCOME  (EXPENSE):                                 |       |                                  |       |                                 |       |   |   |   |   |
| Interest income                                          |       | 399                                   |       | 495                                  |       | 1,336 |   | 887 |   |
| Interest expense                                         |       | (12,014                               | )          | (14,819                              | )          | (36,242 | ) | (39,120 | ) |
| Equity in  earnings of affiliate                         |       | —                                |       | 137                                  |       | — |   | 528 |   |
| Other income  (expense), net                             |       | 2,524                                 |       | (127                                 | )          | 5,820 |   | 869 |   |
| INCOME (LOSS)  BEFORE INCOME TAXES                       |       | (9,490                                | )          | 14,953                               |       | (6,189 | ) | 74,789 |   |
| INCOME TAX  PROVISION (BENEFIT)                          |       | (8,270                                | )          | 2,518                                |       | (7,978 | ) | 23,976 |   |
| NET INCOME  (LOSS)                                       |       | $                                     | (1,220     | )                                    | $          | 12,435 |   | $ | 1,789 |   | $ | 50,813 |   |
| Weighted average  common shares outstanding—basic   |       | 35,324                                |       | 34,308                               |       | 35,115 |   | 34,145 |   |
| Basic income  (loss) per share                           |       | $                                     | (0.03      | )                                    | $          | 0.36 |   | $ | 0.05 |   | $ | 1.49 |   |
| Weighted average  common shares outstanding—diluted |       | 35,324                                |       | 34,682                               |       | 35,209 |   | 34,577 |   |
| Diluted income  (loss) per share                         |       | $                                     | (0.03      | )                                    | $          | 0.36 |   | $ | 0.05 |   | $ | 1.47 |   |
|                                                          |            |                                       |            |                                      |            |  |  |  |  |  |  |  |  |  |  |  |  |

 

Seenotes to unaudited condensed consolidated financial statements.

 

 

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**ACCURIDE CORPORATION**

**CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)**

 
| ** **                                                                         | ** ** | **Nine Months Ended  September 30,** | ** ** |
|------------------------------------------------------------------------------------|------------|--------------------------------------|------------|
| **(In thousands)**                                                                 | ** ** | **2007**                             | ** ** | **2006** | ** ** |
| CASH FLOWS FROM  OPERATING ACTIVITIES:                                             |       |                                 |       |   |   |
| Net income                                                                         |       | $                                    | 1,789      |   | $ | 50,813 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities: |       |                                 |       |   |   |
| Depreciation and  impairment                                                       |       | 44,228                               |       | 40,092 |   |
| Amortization —  deferred financing costs                                      |       | 925                                  |       | 1,062 |   |
| Amortization —  other intangible assets                                       |       | 4,256                                |       | 4,149 |   |
| Loss on disposal  of assets                                                        |       | 125                                  |       | 1,470 |   |
| Deferred income  taxes                                                             |       | (13,874                              | )          | (2,386 | ) |
| Equity in  earnings of affiliates                                                  |       | —                               |       | (528 | ) |
| Non-cash  stock-based compensation                                                 |       | 1,900                                |       | 1,000 |   |
| Changes in  certain assets and liabilities:                                        |       |                                 |       |   |   |
| Receivables                                                                        |       | 30,153                               |       | (33,411 | ) |
| Inventories and  supplies                                                          |       | (5,729                               | )          | 5,103 |   |
| Prepaid expenses  and other assets                                                 |       | (3,411                               | )          | (2,790 | ) |
| Accounts payable                                                                   |       | (25,818                              | )          | 4,771 |   |
| Accrued and  other liabilities                                                     |       | (7,633                               | )          | 27,574 |   |
| Net cash  provided by operating activities                                         |       | 26,911                               |       | 96,919 |   |
| CASH FLOWS FROM  INVESTING ACTIVITIES:                                             |       |                                 |       |   |   |
| Purchases of  property, plant and equipment                                        |       | (25,162                              | )          | (24,782 | ) |
| Other                                                                              |       | 270                                  |       | 2,309 |   |
| Net cash used in  investing activities                                             |       | (24,892                              | )          | (22,473 | ) |
| CASH FLOWS FROM  FINANCING ACTIVITIES:                                             |       |                                 |       |   |   |
| Payments on long-term  debt                                                        |       | (70,000                              | )          | (40,000 | ) |
| Increase in  revolving credit advance                                              |       | 5,000                                |       | 25,000 |   |
| Decrease in  revolving credit advance                                              |       | (5,000                               | )          | (25,000 | ) |
| Other                                                                              |       | 4,129                                |       | 3,816 |   |
| Net cash used in  financing activities                                             |       | (65,871                              | )          | (36,184 | ) |
| INCREASE  (DECREASE) IN CASH AND CASH EQUIVALENTS                                  |       | (63,852                              | )          | 38,262 |   |
| CASH AND CASH  EQUIVALENTS—Beginning of period                                |       | 110,204                              |       | 48,415 |   |
| CASH AND CASH  EQUIVALENTS—End of period                                      |       | $                                    | 46,352     |   | $ | 86,677 |   |
|                                                                               |       |                                 |       |   |   |
| Supplemental  cash flow information:                                               |       |                                 |       |   |   |
| Cash paid for  interest                                                            |       | $                                    | 39,129     |   | $ | 45,828 |   |
| Cash paid for  income taxes                                                        |       | $                                    | 3,419      |   | $ | 5,848 |   |
|                                                                                    |            |                                      |            |  |  |  |  |  |  |

 

Seenotes to unaudited condensed consolidated financial statements.

 

 

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**ACCURIDE CORPORATION**

**NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS (UNAUDITED)**

**AS OF SEPTEMBER 30, 2007 ANDDECEMBER 31, 2006 AND FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)**

 

**Note 1 - Summary of SignificantAccounting Policies**

 

***Basis of Presentation*****— The accompanying unaudited condensed consolidatedfinancial statements have been prepared in accordance with accountingprinciples generally accepted in the United States of America, except that theunaudited condensed consolidated financial statements do not include all of theinformation and footnotes required by accounting principles generally acceptedin the United States of America for complete financial statements.  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.

 

The results of operations for the three and ninemonths ended September 30, 2007 are not necessarily indicative of the resultsto be expected for the year ending December 31, 2007.  The unaudited condensed consolidatedfinancial statements and notes thereto should be read in conjunction with theaudited condensed consolidated financial statements and notes thereto disclosedin Accuride’s Annual Report on Form 10-K for the year ended December 31, 2006.

 

***Management’s Estimates andAssumptions*****- 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.

 

***Earnings Per Common Share*** — Basic and diluted earnings per common share werecomputed as follows:

 
| ** **                                     | ** ** | **Three Months  Ended September 30,** | ** ** | **Nine Months  Ended September 30,** | ** ** |
|------------------------------------------------|------------|---------------------------------------|------------|--------------------------------------|------------|
| **(in thousands except per share data)**       | ** ** | **2007**                              | ** ** | **2006**                             | ** ** | **2007** | ** ** | **2006** | ** ** |
| Numerator:                                     |       |                                  |       |                                 |       |   |   |   |   |
| Net income  (loss)                             |       | $                                     | (1,220     | )                                    | $          | 12,435 |   | $ | 1,789 |   | $ | 50,813 |   |
| Denominator:                                   |       |                                  |       |                                 |       |   |   |   |   |
| Weighted average  shares outstanding - Basic   |       | 35,324                                |       | 34,308                               |       | 35,115 |   | 34,145 |   |
| Effect of  dilutive stock options              |       | —                                |       | 374                                  |       | 94 |   | 432 |   |
| Weighted average  shares outstanding - Diluted |       | 35,324                                |       | 34,682                               |       | 35,209 |   | 34,577 |   |
| Basic earnings  (loss) per common share        |       | $                                     | (0.03      | )                                    | $          | 0.36 |   | $ | 0.05 |   | $ | 1.49 |   |
| Diluted earnings  (loss) per common share      |       | $                                     | (0.03      | )                                    | $          | 0.36 |   | $ | 0.05 |   | $ | 1.47 |   |
|                                                |            |                                       |            |                                      |            |  |  |  |  |  |  |  |  |  |

 

There is no effect of dilutive awards for purposes ofcalculating earnings per share for the three months ended September 30, 2007,due to being in a net loss position.  In2007, there were 25,122 stock options and 468,324 stock appreciation rightsthat were not included in the computation of diluted earnings per share becausethe effect would be anti-dilutive.

 

***Derivative Financial Instruments*** — We use derivative financialinstruments as part of our risk management strategy as further described underItem 7A of the 2006 Annual Report on Form 10-K. The derivative instruments used include interest rate and foreignexchange instruments.  All derivativeinstruments are recognized on the balance sheet at their estimated fair values.As of September 30, 2007, no derivatives were designated as hedges forfinancial reporting purposes.

 

***Interest Rate Instruments*** — We entered into interest rate swapagreements in 2005 as a means of fixing the interest rate on portions of ourfloating-rate debt.  The total notionalamount of outstanding interest rate swap agreements at September 30, 2007 was$250 million, maturing in March of 2008. Realized gains and losses included in interest expense are as follows:

 
| ** **              | ** ** | **Three Months Ended September 30,** | ** ** | **Nine Months Ended September 30,** | ** ** |
|-------------------------|------------|--------------------------------------|------------|-------------------------------------|------------|
| ** **              | ** ** | **2007**                             | ** ** | **2006**                            | ** ** | **2007** | ** ** | **2006** | ** ** |
| Realized Gain  (Loss)   |       | $                                    | 646        |                                | $          | 689 |   | $ | 1,896 |   | $ | 1,806 |   |
| Unrealized Gain  (Loss) |       | $                                    | (563       | )                                   | $          | (2,108 | ) | $ | (1,357 | ) | $ | 66 |   |

 

 

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***Foreign ExchangeInstruments*** —From time to time we use foreign currency forward contracts and optioncontracts to limit foreign exchange risk on anticipated but not yet committedtransactions expected to be denominated in Canadian dollars. At September 30,2007, we had open foreign exchange forward contracts of $7.9 million.  Included in other income for the three monthsended September 30, 2007 are realized gains of $1.0 million and unrealizedlosses of $0.3 million from these contracts. For the nine months ended September 30, 2007, we had realized gains of$1.9 million and unrealized gains of $1.7 million from these contracts.

***Share-Based Compensation***—We account for share-based compensation programs inaccordance with Statement of Financial Accounting Standards (“SFAS”) No.123(R), *Share-Based Payment*.  In thethree and nine months ended September 30, 2007, $0.6 million and $1.9 millionof pre-tax compensation expense was recognized, respectively.  In the three and nine months ended September30, 2006, $0.3 million and $1.0 million of pre-tax compensation expense wasrecognized, respectively. The total income tax benefit recognized forshare-based compensation exercises in the statements of operations and inadditional paid-in-capital for the three and nine months ended September 30,2007, was $0.1 million and $1.3 million, respectively. In the nine months endedSeptember 30, 2007, 117,728 stock appreciation rights and 51,128 restrictedstock units were granted, with an intrinsic value of $5.2 million. These awardswill vest over approximately a four year period.  As of September 30, 2007, there wasapproximately $6.5 million of unrecognized pre-tax compensation expense relatedto share-based awards not yet vested that will be recognized over aweighted-average period of 1.2 years.

***Recent Accounting Adoptions***

**FIN 48**—In July 2006, the FASB issued Interpretation No. 48,FIN 48, **Accountingfor Uncertainty in Income Taxes,**to address thenoncomparability in reporting tax assets and liabilities resulting from a lackof specific guidance in SFAS No. 109, **Accounting for Income Taxes,**on theuncertainty in income taxes recognized in an enterprise’s financial **statements*. *Specifically, FIN 48 prescribes (a) aconsistent recognition threshold and (b) a measurement attribute for thefinancial statement recognition and measurement of a tax position taken orexpected to be taken in a tax return, and provides related guidance on derecognition,classification, interest and penalties, accounting in interim periods,disclosure, and transition.  FIN 48applies to fiscal years beginning after December 15, 2006.  The impact of the adoption of FIN 48 onJanuary 1, 2007, was to decrease retained earnings by $2.1 million, increasegoodwill by $0.7 million, decrease income taxes payable by $6.1 million,decrease net deferred tax liabilities by $2.7 million, and increase non-currentincome taxes payable by $11.6 million.

 

In conjunction with the adoption of FIN 48, we have classifieduncertain tax positions as non-current income tax liabilities unless they areexpected to be paid within 12 months of the balance sheet date. Penalties andincome tax-related interest expense are reported as a component of income taxexpense and the related liabilities are included in non-current income taxespayable.  As of January 1, 2007, werecorded a liability of approximately $2.7 million and $2.1 million for thepayments of interest and penalties, respectively.  The liability for the payment of interest andpenalties did not materially change as of September 30, 2007. The company doesnot anticipate any significant change in the FIN 48 tax liabilities in the nexttwelve months.

 

As of January 1, 2007, we were open to examination in the U.S. federaltax jurisdiction for the 2003-2006 tax years, in Canada for the years of1997-2006, and in Mexico for the years of 1999-2006. We are currently underaudit in the U.S. federal tax jurisdiction for the 2005 tax year, the state ofIndiana for the 2005 and 2006 tax years, and the state of Wisconsin for the taxyears 2001-2006. We were also open to examination in various state and localjurisdictions for the 2001-2006 tax years, none of which were individuallymaterial.

 

As of January 1, 2007, the total amount of unrecognized tax benefitswas $13.4 million, of which $10.4 million would affect the effective tax rate,if recognized.  The amount ofunrecognized tax benefits did not materially change as of September 30, 2007.

 

***Recent Accounting Pronouncements***

 

***SFAS No. 157***— In September 2006, the FASB issued SFASNo. 157,*Fair Value Measurements*, to eliminatethe diversity in practice that exists due to the different definitions of fairvalue and the limited guidance for applying those definitions in GAAP that aredispersed among the many accounting pronouncements that require fair valuemeasurements.  SFAS No. 157 will apply tofiscal years beginning after November 15, 2007. Management is currentlyevaluating the impact of SFAS No. 157 on the consolidated financial statements.

 

***SFAS No. 159***— In February 2007, the FASB issued SFASNo. 159, *Establishing the Fair Value Option for FinancialAssets and Liabilities*, to permit all entities to choose to elect tomeasure eligible financial instruments at fair value.  SFAS No. 159 

 

 

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applies to fiscal years beginning after November 15, 2007, with earlyadoption permitted for an entity that has also elected to apply the provisionsof SFAS No. 157, *Fair Value Measurements.*Anentity is prohibited from retrospectively applying SFAS No. 159, unless itchooses early adoption. Management is currently evaluating the impact of SFASNo. 159 on the consolidated financial statements.

 

**Note 2 - Inventories**

 

Inventories are stated at the lower of cost or market.  We review inventory on hand and write downexcess and obsolete inventory based on our assessment of future demand andhistorical experience.  The components ofinventory on a FIFO basis, except at our subsidiary in Mexico, which valuesinventories using an average cost basis, are as follows:

 
| ** **                   | ** ** | **September 30, 2007** | ** ** | **December 31, 2006** | ** ** |
|------------------------------|------------|------------------------|------------|-----------------------|------------|
| Raw materials                |       | $                      | 30,079     |                  | $          | 29,437 |   |
| Work in process              |       | 43,911                 |       | 39,796                |       |
| Finished  manufactured goods |       | 35,810                 |       | 34,420                |       |
| Total  inventories, net      |       | $                      | 109,800    |                  | $          | 103,653 |   |

 

**Note 3 — Goodwill and Intangible Assets**

 

SFAS No. 141, *Business Combinations,*and SFAS No. 142, *Goodwill and OtherIntangible Assets,* have been applied to the acquisition of TTI,which occurred on January 31, 2005. Accordingly, the tangible and identifiable intangible assets andliabilities were adjusted to fair values with the remainder of the purchaseprice recorded as goodwill. Additionally, goodwill and indefinite lived intangibles assets (tradenames) are not amortized but are reviewed for impairment at least annually ormore frequently if impairment indicators arise. We estimate that aggregate amortization expense for 2007 will be $5.8million with the following year at $5.3 million, and the following three yearsat approximately $4.7 million each year. The summary of goodwill and other intangible assets is as follows:

 
| ** **                | ** ** | **Weighted Average** | ** ** | **As of September 30, 2007** | ** ** | **As of December 31, 2006**   | ** ** |
|---------------------------|------------|----------------------|------------|------------------------------|------------|-------------------------------|------------|
| ** **                | ** ** | **Useful Lives**     | ** ** | **Gross   Amount**           | ** ** | **Accumulated  Amortization** | ** ** | **Carrying  Amount** | ** ** | **Gross Amount** | ** ** | **Accumulated Amortization** | ** ** | **Carrying   Amount** | ** ** |
| Goodwill                  |       | —               |       | $                            | 386,953    |                          | —     |   | $ | 386,953 |   | $ | 389,513 |   | — |   | $ | 389,513 |   |
| Other intangible  assets: |       |                 |       |                         |       |                          |       |   |   |   |   |   |   |   |   |
| Non-compete  agreements   |       | 3.0                  |       | $                            | 2,600      |                          | $          | 1,703 |   | $ | 897 |   | $ | 2,600 |   | $ | 999 |   | $ | 1,601 |   |
| Trade names               |       | —               |       | 38,080                       |       | —                        |       | 38,080 |   | 38,080 |   | — |   | 38,080 |   |
| Technology                |       | 14.7                 |       | 33,540                       |       | 6,116                         |       | 27,424 |   | 33,540 |   | 4,395 |   | 29,145 |   |
| Customer  relationships   |       | 29.6                 |       | 71,500                       |       | 6,513                         |       | 64,987 |   | 71,500 |   | 4,682 |   | 66,818 |   |
|                      |       |                 |       | $                            | 145,720    |                          | $          | 14,332 |   | $ | 131,388 |   | $ | 145,720 |   | $ | 10,076 |   | $ | 135,644 |   |
|                           |            |                      |            |                              |            |                               |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

The following presentsthe changes in the carrying amount of goodwill for the nine months endedSeptember 30, 2007:

 
| ** **                                           | ** ** | **Wheels** | ** ** | **Components** | ** ** | **Other** | ** ** | **Total** | ** ** |
|------------------------------------------------------|------------|------------|------------|----------------|------------|-----------|------------|-----------|------------|
| Balance at  December 31, 2006                   |       | $          | 123,199    |           | $          | 254,219   |       | $         | 12,095     |   | $ | 389,513 |   |
| Increase from  adoption of FIN 48 on January 1, 2007 |       | —     |       | 731            |       | —    |       | 731       |       |
| Decrease from  other tax resolutions                 |       | —     |       | (3,291         | )          | —    |       | (3,291    | )          |
| Balance at  September 30, 2007                       |       | $          | 123,199    |           | $          | 251,659   |       | $         | 12,095     |   | $ | 386,953 |   |
|                                                      |            |            |            |                |            |           |            |           |            |  |  |  |  |  |  |  |

 

Goodwill was reduced by$3.3 million in accordance with EITF 93-7, *Uncertainties Related toIncome Taxes in a Purchase Business Combination*, in the three monthsended March 31, 2007, due to settlements of tax audits and amendments ofpreviously filed returns.

 

**Note 4 - Property, Plant andEquipment**

 

During the three and nine months ended September 30, 2007, we recorded$0.7 million and $11.8 million, respectively, of additional depreciation ofcertain assets in our Wheels segment as a result of a reduction of the usefullives of these assets, as discussed in the Form 10-K for the year endedDecember 31, 2006.

 

 

8

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**Note 5 - Comprehensive income**

 

Comprehensiveincome for the three and nine months ended September 30 is summarized asfollows:
| ** **                                      | ** ** | **For The Three Months  Ended September 30,** | ** ** | **For The Nine Months  Ended September 30,** | ** ** |
|-------------------------------------------------|------------|-----------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                      | ** ** | **2007**                                      | ** ** | **2006**                                     | ** ** | **2007** | ** ** | **2006** | ** ** |
| Net income  (loss)                              |       | $                                             | (1,220     | )                                            | $          | 12,435 |   | $ | 1,789 |   | $ | 50,813 |   |
| Other  comprehensive income (loss) (net of tax) |       |                                          |       |                                         |       |   |   |   |   |
| Unrealized loss  on derivatives                 |       | —                                        |       | —                                       |       | — |   | (402 | ) |
| Pension  liability adjustment                   |       | (1,087                                        | )          | 82                                           |       | (2,403 | ) | (546 | ) |
| Total  comprehensive income (loss)              |       | $                                             | (2,307     | )                                            | $          | 12,517 |   | $ | (614 | ) | $ | 49,865 |   |

 

Included in accumulated other comprehensive income during 2006 areunrealized losses on derivatives that were designated as cash flow hedges inaccordance with SFAS No. 133, *Accounting for DerivativeInstruments and Hedging Activities*. During 2007, there have been no derivatives designated as cash flowhedges as defined by SFAS No. 133.  Alsoincluded in accumulated other comprehensive income is the impact of pensionliability fluctuations in the Canadian dollar to U.S. dollar exchange raterelated to our Canadian pension plans in our Wheels segment.

 

**Note 6 - Pension and OtherPostretirement Benefit Plans**

 

Components of Net PeriodicBenefit Cost for the three and nine months ended September 30:

 
| ** **                                       | ** ** | **For The Three Months  Ended September 30,** | ** ** | **For The Nine Months  Ended September 30,** | ** ** |
|--------------------------------------------------|------------|-----------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                       | ** ** | **Pension Benefits**                          | ** ** | **Other Benefits**                           | ** ** | **Pension Benefits** | ** ** | **Other Benefits** | ** ** |
| ** **                                       | ** ** | **2007**                                      | ** ** | **2006**                                     | ** ** | **2007** | ** ** | **2006** | ** ** | **2007** | ** ** | **2006** | ** ** | **2007** | ** ** | **2006** | ** ** |
| Service  cost-benefits earned during the year    |       | $                                             | 853        |                                         | $          | 1,125 |   | $ | 211 |   | $ | 392 |   | $ | 2,851 |   | $ | 3,416 |   | $ | 854 |   | $ | 1,178 |   |
| Interest cost on  projected benefit obligation   |       | 2,661                                         |       | 2,523                                        |       | 1,012 |   | 1,213 |   | 7,667 |   | 7,167 |   | 3,394 |   | 3,642 |   |
| Expected return  on plan assets                  |       | (3,622                                        | )          | (3,220                                       | )          | — |   | — |   | (10,343 | ) | (9,254 | ) | — |   | — |   |
| Prior service  cost and other amortization (net) |       | 566                                           |       | 1,108                                        |       | (241 | ) | (31 | ) | 1,749 |   | 2,603 |   | (465 | ) | (95 | ) |
| Net amount  charged to income                    |       | $                                             | 458        |                                         | $          | 1,536 |   | $ | 982 |   | $ | 1,574 |   | $ | 1,924 |   | $ | 3,932 |   | $ | 3,783 |   | $ | 4,725 |   |
| Curtailment  charge (gain)                       |       | —                                        |       | —                                       |       | 1,228 |   | — |   | 3,187 |   | — |   | (151 | ) | — |   |
| Contractual  termination benefits charge         |       | —                                        |       | —                                       |       | — |   | — |   | 6,347 |   | — |   | — |   | — |   |
| Total amount  charged to income                  |       | $                                             | 458        |                                         | $          | 1,536 |   | $ | 2,210 |   | $ | 1,574 |   | $ | 11,458 |   | $ | 3,932 |   | $ | 3,632 |   | $ | 4,725 |   |

 

For the nine months ended September 30,2007, we recorded a pre-tax curtailment and other contractual terminationbenefits of $8.2 million related to a reduction-in-force in our London,Ontario, facility in our Wheels segment. The contractual benefits chargerepresents a potential partial pension wind-up, which was determined to beprobable for purposes of recognizing one-time benefits in accordance with SFASNo. 146, *Accounting for Costs Associatedwith Exit or Disposal Activities,*and SFAS No. 88,*Employers’ Accounting for Settlements andCurtailments of Defined Benefit Plans and Termination Benefits*.  During the three months ended September 30,2007, we recorded a pre-tax curtailment loss of $1.2 million related to achange in post-retirement benefits at our Erie, Pennsylvania, facility.

 

As of September 30, 2007, $13.8 million hasbeen contributed to our sponsored pension plans.  We presently anticipate contributing anadditional $2.2 million to fund our pension plans for a total of $16.0 millionin 2007.

 

Also during the nine months ended September30, 2007, we recorded $8.2 million of severance costs related to thereduction-in-force as a component of cost of goods sold.  Cash paid for severance costs in the ninemonths ended September 30, 2007, totaled $2.4 million.

 

**Note 7 — Secondary Offerings**

 

In May and June 2007, we completed secondarystock offerings for 8.6 million shares of common stock on behalf of certainselling shareholders.  The total numberof shares of common stock outstanding did not change as a result of theseofferings.  

 

 

9

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All of the shares in the secondary offeringswere offered by our current shareholders. We did not receive any proceeds from the offerings.  We incurred $0.4 million of operatingexpenses related to the completion of the secondary stock offerings.

 

**Note 8 — 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 September 30, 2007, we had an environmental reserve of approximately$2.6 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 failurefor 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 $0.2million per year in 2007 through 2010 for monitoring the various environmentalsites associated with the environmental reserve, including attorney andconsultant costs for strategic planning and negotiations with regulators andother potentially responsible parties, and payment of remedial investigationcosts.  Based on all of the informationpresently available to us, we believe that our environmental reserves will beadequate to cover the future costs related to the sites associated with theenvironmental reserves, and that any additional costs will not have a materialadverse effect on our financial condition, results of operations or cashflows.  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 also result in such a material adverse effect.

 

Thefinal Iron and Steel Foundry National Emission Standard for Hazardous AirPollutants, or NESHAP, was developed pursuant to Section 112(d) of theClean Air Act and requires all major sources of hazardous air pollutants toinstall controls representative of maximum achievable control technology. Weare evaluating the applicability of the Iron and Steel Foundry NESHAP to ourfoundry operations. If applicable, compliance with the Iron and Steel FoundryNESHAP may result in future significant capital costs, which we currentlyexpect to be approximately $6 million in total during the period 2007through 2008.  We have incurred noexpenditures as of September 30, 2007.

 

Our operations aresubject to federal, state, and local environmental laws, rules, andregulations. Pursuant to the Recapitalization of the Company on January 21,1998, we were indemnified by Phelps Dodge Corporation with respect to certainenvironmental liabilities at our Henderson and London facilities, subject tocertain limitations.  At our Erie facility,we have obtained an environmental insurance policy to provide coverage withrespect to certain environmental liabilities. Management does not believe that the outcome of any environmentalproceedings will have a material adverse effect on our consolidated financialcondition or results of operations.

 

During the fourth quarterof 2006, we were able to resolve a commercial dispute with Ford Motor Company. As a result of the resolution, we recognized $10.4 million of revenue in2006, $10.4 million in the nine months ended September 30, 2007, and anticipaterecognizing an additional $0.2 million of revenue in the remainder of2007.  In addition, cash flow increased by $10.0 million in 2006 and $11.0million in the three months ended June 30, 2007. In 2006, sales to Fordrepresented less than 6% of our consolidated revenues.

 

As of September 30, 2007, we had 3,534 employees, of which 951 weresalaried employees with the remainder paid hourly. Unions representedapproximately 1,700 employees, or 48% of the total. Union contracts expiring inthe remainder of 2007 represent 142 employees, or 8% of our total unionizedworkforce.  We do not anticipate that theoutcome of the remaining negotiations will have a material adverse effect onour operating performance or costs.

 

On January 19, 2007, the Public Works Superintendent of the City ofPortland, Tennessee issued a cease and desist order to the Company’s ImperialGroup, alleging Imperial Group’s Portland, Tennessee facility was dischargingwastewater into the City of Portland’s wastewater treatment system thatcontained nickel in excess of permit limits. Imperial Group has fully cooperated with the City of Portland to addressthe alleged wastewater discharge issue. On May 1, 2007, Imperial Group received a written demand from the Cityof Portland for damages and penalties totaling approximately $0.8 million.  Imperial Group is vigorously contesting theCity’s demand while engaging in settlement discussions related thereto.Management does not believe that the outcome will have a material adverse effecton our consolidated financial condition or results of operations.

 

 

10

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**Note 9** —**Segment Reporting**

 

During the three months ended June 30, 2007, as a part of our continualmonitoring of the long-term economic characteristics, products and productionprocesses, class of customer, and distribution methods of our operating segments,we determined our seven operating segments aggregate into three reportablesegments:  Wheels, Components, andOther.  Accordingly, we have revised theprior period information to conform to the current period segmentpresentation.  All of our segmentsdesign, manufacture and market products to the commercial vehicleindustry.  The Wheels segment’s productsconsist of wheels for heavy- and medium-duty trucks and commercialtrailers.  The Components segment’sproducts consist of truck body and chassis parts, wheel-end components andassemblies, and seats.  The Other segment’sproducts primarily consist of other commercial vehicle components, includingsteerable drive axles and gearboxes.

 

The accounting policies of the reportable segments are the same as describedin Note 1, Significant Accounting Policies.

 
| ** **                     | ** **   | **Three Months Ended  September 30,** | ** **   | **Nine Months Ended  September 30,** | ** **   |
|--------------------------------|--------------|---------------------------------------|--------------|--------------------------------------|--------------|
| ** **                     | ** **   | **2007**                              | ** **   | **2006**                             | ** **   | **2007** | ** ** | **2006** | ** ** |
| ***Net  Sales***               | *** *** | *** ***                          | *** *** | *** ***                         | *** *** | *** *** | *** *** | *** *** | *** *** |
| Wheels                         |         | $                                     | 103,732      |                                 | $            | 163,492 |   | $ | 376,418 |   | $ | 509,686 |   |
| Components                     |         | 106,607                               |         | 167,543                              |         | 380,022 |   | 517,138 |   |
| Other                          |         | 10,241                                |         | 10,575                               |         | 34,703 |   | 36,444 |   |
| Consolidated  Total            |         | $                                     | 220,580      |                                 | $            | 341,610 |   | $ | 791,143 |   | $ | 1,063,268 |   |
|                           |         |                                  |         |                                 |         |   |   |   |   |
| ***Operating  Income (Loss)*** | *** *** | *** ***                          | *** *** | *** ***                         | *** *** | *** *** | *** *** | *** *** | *** *** |
| Wheels                         |         | $                                     | 6,192        |                                 | $            | 16,421 |   | $ | 22,323 |   | $ | 61,891 |   |
| Components                     |         | (8,458                                | )            | 12,143                               |         | (3,937 | ) | 44,770 |   |
| Other                          |         | 1,867                                 |         | 703                                  |         | 4,511 |   | 4,964 |   |
| Consolidated  Total            |         | $                                     | (399         | )                                    | $            | 29,267 |   | $ | 22,897 |   | $ | 111,625 |   |
|                           |         |                                  |         |                                 |         |   |   |   |   |
| ** **                     | ** **   | ** **                            | ** **   | ** **                           | ** **   | **As of  September 30,** | ** ** |
| ** **                     | ** **   | ** **                            | ** **   | ** **                           | ** **   | **2007** | ** ** | **2006** | ** ** |
| ***Total  Assets***            | *** *** | *** ***                          | *** *** | *** ***                         | *** *** | *** *** | *** *** | *** *** | *** *** |
| Wheels                         |         |                                  |         |                                 |         | $ | 461,439 |   | $ | 543,721 |   |
| Components                     |         |                                  |         |                                 |         | 609,235 |   | 664,700 |   |
| Other                          |         |                                  |         |                                 |         | 41,665 |   | 50,864 |   |
| Consolidated  Total            |         |                                  |         |                                 |         | $ | 1,112,339 |   | $ | 1,259,285 |   |

 

 

11

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**Note 10 — Guarantor and Non-guarantorFinancial Statements**

 

Our 81⁄2% Senior Subordinated Notes due 2015 are fullyand unconditionally guaranteed, on a joint and several basis, by substantiallyall of our 100% owned domestic subsidiaries (“Guarantor Subsidiaries”). Thenon-guarantor subsidiaries are our foreign subsidiaries.

 

The following condensed financial informationillustrates the composition of the combined Guarantor Subsidiaries:

 

**CONDENSEDCONSOLIDATED BALANCE SHEET**

 
| ** **                                     | ** ** | **September 30, 2007** | ** ** |
|------------------------------------------------|------------|------------------------|------------|
| ** **                                     | ** ** | **Parent**             | ** ** | **Guarantor Subsidiaries** | ** ** | **Non-guarantor Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| **ASSETS**                                     | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Cash and cash  equivalents                     |       | $                      | 26,425     |   | $ | (4,831 | ) | $ | 24,758 |   | — |   | $ | 46,352 |   |
| Accounts  receivable, net                      |       | 273,020                |       | 196,082 |   | 22,509 |   | $ | (379,099 | ) | 112,512 |   |
| Inventories and  supplies                      |       | 16,897                 |       | 91,920 |   | 23,947 |   | (1,258 | ) | 131,506 |   |
| Other current  assets                          |       | 10,601                 |       | 10,177 |   | 1,227 |   | — |   | 22,005 |   |
| Total current  assets                          |       | 326,943                |       | 293,348 |   | 72,441 |   | (380,357 | ) | 312,375 |   |
| Property, plant,  and equipment, net           |       | 29,276                 |       | 177,026 |   | 67,132 |   | — |   | 273,434 |   |
| Goodwill                                       |       | 66,973                 |       | 311,939 |   | 8,041 |   | — |   | 386,953 |   |
| Intangible  assets, net                        |       | 785                    |       | 130,603 |   | — |   | — |   | 131,388 |   |
| Investment in  subsidiaries and affiliates     |       | 561,076                |       | — |   | — |   | (560,226 | ) | 850 |   |
| Deferred tax  assets                           |       | 17,801                 |       | 19,711 |   | 18,518 |   | (56,030 | ) | — |   |
| Other  non-current assets                      |       | 7,166                  |       | 108 |   | 65 |   | — |   | 7,339 |   |
| TOTAL                                          |       | $                      | 1,010,020  |   | $ | 932,735 |   | $ | 166,197 |   | $ | (996,613 | ) | $ | 1,112,339 |   |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY** | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Accounts payable                               |       | $                      | 8,246      |   | $ | 47,246 |   | $ | 18,172 |   | — |   | $ | 73,664 |   |
| Accrued payroll  and compensation              |       | 6,556                  |       | 13,073 |   | 11,223 |   | — |   | 30,852 |   |
| Accrued interest  payable                      |       | 5,355                  |       | 11 |   | 16 |   | — |   | 5,382 |   |
| Accrued and  other liabilities                 |       | 151,456                |       | 261,804 |   | (2,207 | ) | $ | (379,099 | ) | 31,954 |   |
| Total current  liabilities                     |       | 171,613                |       | 322,134 |   | 27,204 |   | (379,099 | ) | 141,852 |   |
| Long term debt                                 |       | 569,625                |       | 3,100 |   | — |   | — |   | 572,725 |   |
| Deferred and  non-current income taxes         |       | (12,690                | )          | 76,831 |   | 22,811 |   | (56,030 | ) | 30,922 |   |
| Other  non-current liabilities                 |       | 14,514                 |       | 70,920 |   | 14,448 |   | — |   | 99,882 |   |
| Stockholders’  equity                     |       | 266,958                |       | 459,750 |   | 101,734 |   | (561,484 | ) | 266,958 |   |
| TOTAL                                          |       | $                      | 1,010,020  |   | $ | 932,735 |   | $ | 166,197 |   | $ | (996,613 | ) | $ | 1,112,339 |   |
|                                           |       |                   |       |   |   |   |   |   |   |   |   |
| ** **                                     | ** ** | **December  31, 2006** | ** ** |
| ** **                                     | ** ** | **Parent**             | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| **ASSETS**                                     | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Cash and cash  equivalents                     |       | $                      | 84,855     |   | $ | (4,502 | ) | $ | 29,851 |   | — |   | $ | 110,204 |   |
| Accounts  receivable, net                      |       | 316,159                |       | 212,591 |   | 13,861 |   | $ | (399,946 | ) | 142,665 |   |
| Inventories and  supplies                      |       | 15,961                 |       | 81,935 |   | 28,932 |   | (1,051 | ) | 125,777 |   |
| Other current  assets                          |       | 8,161                  |       | 10,249 |   | 1,184 |   | — |   | 19,594 |   |
| Total current  assets                          |       | 425,136                |       | 300,273 |   | 73,828 |   | (400,997 | ) | 398,240 |   |
| Property, plant,  and equipment, net           |       | 30,725                 |       | 186,136 |   | 83,945 |   | — |   | 300,806 |   |
| Goodwill                                       |       | 66,973                 |       | 314,499 |   | 8,041 |   | — |   | 389,513 |   |
| Intangible  assets, net                        |       | 1,379                  |       | 134,265 |   | — |   | — |   | 135,644 |   |
| Investment in  subsidiaries and affiliates     |       | 528,839                |       | — |   | — |   | (528,489 | ) | 350 |   |
| Deferred tax  assets                           |       | 20,804                 |       | 19,710 |   | 17,278 |   | (57,792 | ) | — |   |
| Other  non-current assets                      |       | 8,066                  |       | 112 |   | 456 |   | — |   | 8,634 |   |
| TOTAL                                          |       | $                      | 1,081,922  |   | $ | 954,995 |   | $ | 183,548 |   | $ | (987,278 | ) | $ | 1,233,187 |   |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY** | ** ** | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Accounts payable                               |       | $                      | 9,552      |   | $ | 81,469 |   | $ | 16,196 |   | — |   | $ | 107,217 |   |
| Accrued payroll  and compensation              |       | 8,852                  |       | 15,120 |   | 4,458 |   | — |   | 28,430 |   |
| Accrued interest  payable                      |       | 4,706                  |       | 22 |   | 6,678 |   | — |   | 11,406 |   |
| Accrued and  other liabilities                 |       | 139,562                |       | 264,455 |   | 35,775 |   | $ | (399,946 | ) | 39,846 |   |
| Total current  liabilities                     |       | 162,672                |       | 361,066 |   | 63,107 |   | (399,946 | ) | 186,899 |   |
| Long term debt                                 |       | 639,625                |       | 3,100 |   | — |   | — |   | 642,725 |   |
| Deferred income  taxes                         |       | 290                    |       | 76,342 |   | 21,105 |   | (57,792 | ) | 39,945 |   |
| Other  non-current liabilities                 |       | 15,753                 |       | 71,552 |   | 12,731 |   | — |   | 100,036 |   |
| Stockholders’  equity                     |       | 263,582                |       | 442,935 |   | 86,605 |   | (529,540 | ) | 263,582 |   |
| TOTAL                                          |       | $                      | 1,081,922  |   | $ | 954,995 |   | $ | 183,548 |   | $ | (987,278 | ) | $ | 1,233,187 |   |

 

 

12

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**CONDENSED CONSOLIDATED STATEMENTS OFOPERATIONS**

 
| ** **                          | ** ** | **Three Months Ended September 30, 2007**  | ** ** |
|-------------------------------------|------------|--------------------------------------------|------------|
| ** **                          | ** ** | **Parent**                                 | ** ** | **Guarantor Subsidiaries** | ** ** | **Non-guarantor Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| Net sales                           |       | $                                          | 62,602     |   | $ | 146,243 |   | $ | 51,763 |   | $ | (40,028 | ) | $ | 220,580 |   |
| Cost of goods  sold                 |       | 56,209                                     |       | 149,049 |   | 42,059 |   | (40,028 | ) | 207,289 |   |
| Gross profit                        |       | 6,393                                      |       | (2,806 | ) | 9,704 |   | — |   | 13,291 |   |
| Operating  expenses                 |       | 9,744                                      |       | 3,691 |   | 255 |   | — |   | 13,690 |   |
| Income (loss)  from operations      |       | (3,351                                     | )          | (6,497 | ) | 9,449 |   | — |   | (399 | ) |
| Other income  (expense):            |       |                                       |       |   |   |   |   |   |   |   |   |
| Interest  expense, net              |       | (10,555                                    | )          | (37 | ) | (1,023 | ) | — |   | (11,615 | ) |
| Equity in  earnings of subsidiaries |       | 4,050                                      |       | — |   | — |   | (4,050 | ) | — |   |
| Other income, net                   |       | 366                                        |       | 104 |   | 2,054 |   | — |   | 2,524 |   |
| Income (loss)  before income taxes  |       | (9,490                                     | )          | (6,430 | ) | 10,480 |   | (4,050 | ) | (9,490 | ) |
| Income tax  provision (benefit)     |       | (8,270                                     | )          | — |   | — |   | — |   | (8,270 | ) |
| Net income  (loss)                  |       | $                                          | (1,220     | ) | $ | (6,430 | ) | $ | 10,480 |   | $ | (4,050 | ) | $ | (1,220 | ) |
|                                |       |                                       |       |   |   |   |   |   |   |   |   |
|                                |       |                                       |       |   |   |   |   |   |   |   |   |
| ** **                          | ** ** | **Three  Months Ended September 30, 2006** | ** ** |
| ** **                          | ** ** | **Parent**                                 | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| Net sales                           |       | $                                          | 106,855    |   | $ | 228,628 |   | $ | 87,585 |   | $ | (81,458 | ) | $ | 341,610 |   |
| Cost of goods  sold                 |       | 100,144                                    |       | 203,766 |   | 77,255 |   | (81,458 | ) | 299,707 |   |
| Gross profit                        |       | 6,711                                      |       | 24,862 |   | 10,330 |   | — |   | 41,903 |   |
| Operating  expenses                 |       | 9,726                                      |       | 2,726 |   | 184 |   | — |   | 12,636 |   |
| Income from  operations             |       | (3,015                                     | )          | 22,136 |   | 10,146 |   | — |   | 29,267 |   |
| Other income  (expense):            |       |                                       |       |   |   |   |   |   |   |   |   |
| Interest  expense, net              |       | (13,147                                    | )          | (14 | ) | (1,163 | ) | — |   | (14,324 | ) |
| Equity in  earnings of subsidiaries |       | 28,455                                     |       | — |   | — |   | (28,318 | ) | 137 |   |
| Other income,  net                  |       | (95                                        | )          | 125 |   | (157 | ) | — |   | (127 | ) |
| Income before  income taxes         |       | 12,198                                     |       | 22,247 |   | 8,826 |   | (28,318 | ) | 14,953 |   |
| Income tax  provision               |       | (237                                       | )          | — |   | 2,755 |   | — |   | 2,518 |   |
| Net income                          |       | $                                          | 12,435     |   | $ | 22,247 |   | $ | 6,071 |   | $ | (28,318 | ) | $ | 12,435 |   |

 

 

13

----

 

 
| ** **                          | ** ** | **Nine Months Ended September 30, 2007**  | ** ** |
|-------------------------------------|------------|-------------------------------------------|------------|
| ** **                          | ** ** | **Parent**                                | ** ** | **Guarantor Subsidiaries** | ** ** | **Non-guarantor Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| Net sales                           |       | $                                         | 238,311    |   | $ | 520,745 |   | $ | 207,194 |   | $ | (175,107 | ) | $ | 791,143 |   |
| Cost of goods  sold                 |       | 219,100                                   |       | 494,594 |   | 186,695 |   | (175,107 | ) | 725,282 |   |
| Gross profit                        |       | 19,211                                    |       | 26,151 |   | 20,499 |   | — |   | 65,861 |   |
| Operating  expenses                 |       | 32,761                                    |       | 9,565 |   | 638 |   | — |   | 42,964 |   |
| Income from  operations             |       | (13,550                                   | )          | 16,586 |   | 19,861 |   | — |   | 22,897 |   |
| Other income  (expense):            |       |                                      |       |   |   |   |   |   |   |   |   |
| Interest  expense, net              |       | (31,621                                   | )          | (107 | ) | (3,178 | ) | — |   | (34,906 | ) |
| Equity in  earnings of subsidiaries |       | 33,400                                    |       | — |   | — |   | (33,400 | ) | — |   |
| Other income,  net                  |       | 3,563                                     |       | 338 |   | 1,919 |   | — |   | 5,820 |   |
| Income (loss)  before income taxes  |       | (8,208                                    | )          | 16,817 |   | 18,602 |   | (33,400 | ) | (6,189 | ) |
| Income tax  provision (benefit)     |       | (9,997                                    | )          | — |   | 2,019 |   | — |   | (7,978 | ) |
| Net income                          |       | $                                         | 1,789      |   | $ | 16,817 |   | $ | 16,583 |   | $ | (33,400 | ) | $ | 1,789 |   |
|                                |       |                                      |       |   |   |   |   |   |   |   |   |
|                                |       |                                      |       |   |   |   |   |   |   |   |   |
| ** **                          | ** ** | **Nine  Months Ended September 30, 2006** | ** ** |
| ** **                          | ** ** | **Parent**                                | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| Net sales                           |       | $                                         | 339,954    |   | $ | 690,368 |   | $ | 273,571 |   | $ | (240,625 | ) | $ | 1,063,268 |   |
| Cost of goods  sold                 |       | 298,291                                   |       | 610,722 |   | 243,843 |   | (240,625 | ) | 912,231 |   |
| Gross profit                        |       | 41,663                                    |       | 79,646 |   | 29,728 |   | — |   | 151,037 |   |
| Operating  expenses                 |       | 30,327                                    |       | 8,523 |   | 562 |   | — |   | 39,412 |   |
| Income from  operations             |       | 11,336                                    |       | 71,123 |   | 29,166 |   | — |   | 111,625 |   |
| Other income  (expense):            |       |                                      |       |   |   |   |   |   |   |   |   |
| Interest  expense, net              |       | (34,562                                   | )          | (68 | ) | (3,603 | ) | — |   | (38,233 | ) |
| Equity in  earnings of subsidiaries |       | 89,173                                    |       | — |   | — |   | (88,645 | ) | 528 |   |
| Other income,  net                  |       | 1,323                                     |       | 424 |   | (878 | ) | — |   | 869 |   |
| Income before income  taxes         |       | 67,270                                    |       | 71,479 |   | 24,685 |   | (88,645 | ) | 74,789 |   |
| Income tax  provision               |       | 16,457                                    |       | — |   | 7,519 |   | — |   | 23,976 |   |
| Net income                          |       | $                                         | 50,813     |   | $ | 71,479 |   | $ | 17,166 |   | $ | (88,645 | ) | $ | 50,813 |   |

 

 

14

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**CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS**

** **
| ** **                                                                         | ** ** | **Nine Months Ended September 30, 2007**  | ** ** |
|------------------------------------------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                                                         | ** ** | **Parent Company**                        | ** ** | **Guarantor Subsidiaries** | ** ** | **Non-guarantor Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| CASH FLOWS FROM  OPERATING ACTIVITIES:                                             |       |                                      |       |   |   |   |   |   |   |   |   |
| Net income                                                                         |       | $                                         | 1,789      |   | $ | 16,817 |   | $ | 16,583 |   | $ | (33,400 | ) | $ | 1,789 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities: |       |                                      |       |   |   |   |   |   |   |   |   |
| Depreciation                                                                       |       | 4,367                                     |       | 21,868 |   | 17,993 |   | — |   | 44,228 |   |
| Amortization –  deferred financing costs                                      |       | 909                                       |       | — |   | 16 |   | — |   | 925 |   |
| Amortization –  other intangible assets                                       |       | 593                                       |       | 3,663 |   | — |   | — |   | 4,256 |   |
| Loss on disposal  of assets                                                        |       | 9                                         |       | 13 |   | 103 |   | — |   | 125 |   |
| Deferred income  taxes                                                             |       | (16,276                                   | )          | — |   | 2,402 |   | — |   | (13,874 | ) |
| Equity in  earnings of subsidiaries and affiliates                                 |       | (33,400                                   | )          | — |   | — |   | 33,400 |   | — |   |
| Non-cash  stock-based compensation                                                 |       | 1,900                                     |       | — |   | — |   | — |   | 1,900 |   |
| Change in other  operating items                                                   |       | 58,710                                    |       | (30,241 | ) | (40,907 | ) | — |   | (12,438 | ) |
| Net cash  provided by operating activities                                         |       | 18,601                                    |       | 12,120 |   | (3,810 | ) | — |   | 26,911 |   |
|                                                                               |       |                                      |       |   |   |   |   |   |   |   |   |
| CASH FLOWS FROM  INVESTING ACTIVITIES:                                             |       |                                      |       |   |   |   |   |   |   |   |   |
| Purchases of  property, plant, and equipment                                       |       | (10,662                                   | )          | (13,217 | ) | (1,283 | ) | — |   | (25,162 | ) |
| Other                                                                              |       | (500                                      | )          | 770 |   | — |   | — |   | 270 |   |
| Net cash used by  investing activities                                             |       | (11,162                                   | )          | (12,447 | ) | (1,283 | ) | — |   | (24,892 | ) |
|                                                                               |       |                                      |       |   |   |   |   |   |   |   |   |
| CASH FLOWS FROM  FINANCING ACTIVITIES:                                             |       |                                      |       |   |   |   |   |   |   |   |   |
| Net payments on  long-term and revolving debt                                      |       | (70,000                                   | )          | — |   | — |   | — |   | (70,000 | ) |
| Other                                                                              |       | 4,129                                     |       | — |   | — |   | — |   | 4,129 |   |
| Net cash used by  financing activities                                             |       | (65,871                                   | )          | — |   | — |   | — |   | (65,871 | ) |
|                                                                               |       |                                      |       |   |   |   |   |   |   |   |   |
| Increase  (decrease) in cash and cash equivalents                                  |       | (58,432                                   | )          | (327 | ) | (5,093 | ) | — |   | (63,852 | ) |
| Cash and cash  equivalents, beginning of period                                    |       | 84,855                                    |       | (4,502 | ) | 29,851 |   | — |   | 110,204 |   |
| Cash and cash  equivalents, end of period                                          |       | $                                         | 26,423     |   | $ | (4,829 | ) | $ | 24,758 |   | $ | — |   | $ | 46,352 |   |
|                                                                               |       |                                      |       |   |   |   |   |   |   |   |   |
|                                                                               | ** ** | **Nine  Months Ended September 30, 2006** | ** ** |
| ** **                                                                         | ** ** | **Parent  Company**                       | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| CASH FLOWS FROM  OPERATING ACTIVITIES:                                             |       |                                      |       |   |   |   |   |   |   |   |   |
| Net income                                                                         |       | $                                         | 50,813     |   | $ | 71,479 |   | $ | 17,166 |   | $ | (88,645 | ) | $ | 50,813 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities: |       |                                      |       |   |   |   |   |   |   |   |   |
| Depreciation and  impairment                                                       |       | 4,195                                     |       | 20,870 |   | 15,027 |   | — |   | 40,092 |   |
| Amortization –  deferred financing costs                                      |       | 905                                       |       | — |   | 157 |   | — |   | 1,062 |   |
| Amortization –  other intangible assets                                       |       | 594                                       |       | 3,555 |   | — |   | — |   | 4,149 |   |
| Loss on disposal  of assets                                                        |       | 1,439                                     |       | 9 |   | 22 |   | — |   | 1,470 |   |
| Deferred income  taxes                                                             |       | 255                                       |       | — |   | (2,641 | ) | — |   | (2,386 | ) |
| Equity in  earnings of subsidiaries and affiliates                                 |       | (89,173                                   | )          | — |   | — |   | 88,645 |   | (528 | ) |
| Non-cash  stock-based compensation                                                 |       | 1,000                                     |       | — |   | — |   | — |   | 1,000 |   |
| Change in other  operating items                                                   |       | 110,027                                   |       | (83,930 | ) | (24,850 | ) | — |   | 1,247 |   |
| Net cash  provided by operating activities                                         |       | 80,055                                    |       | 11,983 |   | 4,881 |   | — |   | 96,919 |   |
|                                                                               |       |                                      |       |   |   |   |   |   |   |   |   |
| CASH FLOWS FROM  INVESTING ACTIVITIES:                                             |       |                                      |       |   |   |   |   |   |   |   |   |
| Purchases of  property, plant, and equipment                                       |       | (2,882                                    | )          | (16,375 | ) | (5,525 | ) | — |   | (24,782 | ) |
| Other                                                                              |       | 1,888                                     |       | 421 |   | — |   | — |   | 2,309 |   |
| Net cash used by  investing activities                                             |       | (994                                      | )          | (15,954 | ) | (5,525 | ) | — |   | (22,473 | ) |
|                                                                               |       |                                      |       |   |   |   |   |   |   |   |   |
| CASH FLOWS FROM  FINANCING ACTIVITIES:                                             |       |                                      |       |   |   |   |   |   |   |   |   |
| Net payments on  long-term and revolving debt                                      |       | (40,000                                   | )          | — |   | — |   | — |   | (40,000 | ) |
| Other                                                                              |       | 3,816                                     |       | — |   | — |   | — |   | 3,816 |   |
| Net cash used by  financing activities                                             |       | (36,184                                   | )          | — |   | — |   | — |   | (36,184 | ) |
|                                                                               |       |                                      |       |   |   |   |   |   |   |   |   |
| Increase  (decrease) in cash and cash equivalents                                  |       | 42,877                                    |       | (3,971 | ) | (644 | ) | — |   | 38,262 |   |
| Cash and cash  equivalents, beginning of period                                    |       | 11,195                                    |       | 1,241 |   | 35,979 |   | — |   | 48,415 |   |
| Cash and cash equivalents,  end of period                                          |       | $                                         | 54,072     |   | $ | (2,730 | ) | $ | 35,335 |   | $ | — |   | $ | 86,677 |   |

 

 

15

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** **

**Item 2. Management’s Discussion and Analysis of Financial Condition and Resultsof Operations.**

 

The following discussion should be read in conjunctionwith the consolidated financial statements and notes included in Item 1 of PartI of this report on Form 10-Q and our report on Form 10-K for the year endedDecember 31, 2006.  Except for thehistorical information contained herein, this report on Form 10-Q containsforward-looking statements that involve risks and uncertainties.  Our actual results may differ materially fromthose indicated by such forward-looking statements.

 

Overview

The commercial vehicle market continued to decline inthe three months ended September 30, 2007, as predicted.  Current industry forecasts by analysts,including America’s Commercial Transportation (“ACT”) Publications, predictthat the North American commercial vehicle industry will decline significantlyin 2007 due to a change in emissions standards that became effective in2007.  Consistent with ACT’s prediction,we experienced reduced demand from the commercial vehicle industry in the firstnine months of 2007 compared to the first nine months of 2006.  Net sales for the nine months ended September30, 2007, were $791.1 million compared to net sales of $1,063.3 million for thenine months ended September 30, 2006.  Weanticipate that this variance compared to 2006 will continue during the remainderof 2007.

 

Our operating challenges are to meet varying levels ofproduction while improving our internal productivity and mitigating the marginpressure from rising material costs.

 

For the nine months ended September 30, 2007, wereduced our senior debt by $70.0 million from existing cash reserves.

 

During the fourth quarter of 2006, we were able toresolve a commercial dispute with Ford Motor Company.  As a result of theresolution, we recognized $10.4 million of revenue in 2006 and $10.4 million inthe nine months ended September 30, 2007.  In addition, cash flowincreased by $10.0 million in 2006 and $11.0 million in the three months endedJune 30, 2007. In 2006, sales to Ford represented less than 6% of ourconsolidated revenues.

 

The Company consists of sevenoperating segments that design, manufacture and distribute components fortrucks, trailers, and other vehicles. These operating segments are aggregatedinto three reportable segments based on long-term economic characteristics,products and production processes, class of customer, and distribution methods.We believe this segmentation is appropriate based upon management’s operatingdecisions and performance assessment.

 

 

16

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** **

**Results of Operations**

 

***Three Months Ended September 30, 2007 Compared to the Three MonthsEnded September 30, 2006***

The following table sets forth certain income statement information ofAccuride for the three months ended September 30:

 
| **(Amounts in thousands, except per share data)**        | ** ** | **September 30, 2007** | ** ** | **September 30, 2006** | ** **                 |
|----------------------------------------------------------|------------|------------------------|------------|------------------------|----------------------------|
| Net sales:                                               |       |                   |       |                   |                       |   |   |   |   |
| Wheels                                                   |       | $                      | 103,732    |                   | 47.0                       | % | $ | 163,492 |   | 47.9 | % |
| Components                                               |       | 106,607                |       | 48.4                   | %                          | 167,543 |   | 49.0 | % |
| Other                                                    |       | 10,241                 |       | 4.6                    | %                          | 10,575 |   | 3.1 | % |
| Total net sales                                          |       | $                      | 220,580    |                   | 100.0                      | % | $ | 341,610 |   | 100.0 | % |
| Gross profit                                             |       | 13,291                 |       | 5.9                    | %                          | 41,903 |   | 12.3 | % |
| Operating  expenses                                      |       | 13,690                 |       | 6.2                    | %                          | 12,636 |   | 3.7 | % |
| Income (loss)  from operations                           |       | (399                   | )          | (0.2                   | )%                         | 29,267 |   | 8.6 | % |
| Interest  expense, net                                   |       | (11,615                | )          | (5.3                   | )%                         | (14,324 | ) | (4.2 | )% |
| Equity in  earnings of affiliate                         |       | —                 |       | —                 |                       | 137 |   | 0.0 | % |
| Other income,  net                                       |       | 2,524                  |       | 1.1                    | %                          | (127 | ) | 0.0 | % |
| Income tax  provision (benefit)                          |       | (8,270                 | )          | (3.7                   | )%     | 2,518 |   | 0.7 | % |
| Net income  (loss)                                       |       | $                      | (1,220     | )                      | (0.6                       | )% | $ | 12,435 |   | 3.6 | % |
| **Other  Data:**                                         | ** ** | ** **             | ** ** | ** **             | ** **                 | ** ** | ** ** | ** ** | ** ** |
| Weighted average  common shares outstanding—basic   |       | 35,324                 |       |                   |                       | 34,308 |   |   |   |
| Basic income  (loss) per share                           |       | $                      | (0.03      | )                      |                       |   | $ | 0.36 |   |   |   |
| Weighted average  common shares outstanding—diluted |       | 35,324                 |       |                   |                       | 34,682 |   |   |   |
| Diluted income  (loss) per share                         |       | $                      | (0.03      | )                      |                       |   | $ | 0.36 |   |   |   |

----

 

**Net Sales.**Net sales for the three months ended September 30,2007 were $220.6 million, which was a decrease of 35.4%, compared to net salesof $341.6 million for the three months ended September 30, 2006. The decreasein net sales was realized in our Wheels and Components segments and was aresult of the reduced demand as a result of emission standards that becameeffective in 2007, partially offset by $9.2 million of increased pricing tooffset increased material costs. We anticipate the revenue variance compared toprior year will continue through the remainder of 2007.

 

**Gross Profit.**Due to the reduced sales demand and operatinginefficiencies related to low production volume, gross profit decreased $28.6million to $13.3 million for the three months ended September 30, 2007 from$41.9 million for the three months ended September 30, 2006. As expected withthe change in sales demand, gross profit as a percent of sales dropped from12.3% to 6.1%. The Components segment was most affected by the reduced salesdemand and low production volume, evident by its gross margin for the threemonths ended September 30, 2006, of 9.4% dropping to (4.0%) for the threemonths ended September 30, 2007. Included in the three months ended September30, 2007, was a $1.2 million charge related to a change in post-employmentbenefits in our facility in Erie, Pennsylvania.

 

**Operating Expenses.** Operating expenses increased by $1.1 million to $13.7million in the three months ended September 30, 2007, from $12.6 million in thethree months ended September 30, 2006, due to $1.0 million of start-up costsrelated to our Anniston, Alabama, facility.

 

**Interest Expense, net.**Net interest expense decreased $2.7 million to $11.6 million for thethree months ended September 30, 2007 from $14.3 million for the three monthsended September 30, 2006. The decrease is attributable to a decrease ininterest expense related to reduced debt and $0.6 million of unrealized lossesfrom our interest rate swap agreements in the current period compared to $2.1million of unrealized losses in the prior year’s results. Debt as of September30, 2007, was $582.7 million compared to debt of $667.7 million as of September30, 2006.

 

**Other Income, net.**Gains****related tocurrency, specifically the Canadian dollar, resulted in a $2.5 million gain inthe three months ended September 30, 2007. The Canadian dollar to U.S. dollarexchange rate moved from $0.939 on June 30, 2007 to $1.006 on September 30,2007, an increase of 7.1%.

 

 

17

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**Income Tax Provision.**The****income taxbenefit recorded of $8.3 million in the three months ended September 30, 2007,was $10.8 million higher than the $2.5 million expense in the three monthsended September 30, 2006, due to the decrease in pre-tax earnings of $24.4million and the impact of foreign currency exchange rates during 2007. Theeffective rate for the three months ended September 30, 2006 was 16.8% whichincluded certain adjustments for management’s change in expected realization ofloss carryforwards and resolutions of tax contingency reserves. The differencesbetween the effective rates and statutory rates for our U.S. and Mexico taxjurisdictions have not changed significantly. However, recent changes in theCanadian dollar to U.S. dollar exchange rates during the quarter have resultedin a pre-tax loss (and, therefore an income tax benefit) for our Canadian taxjurisdiction, whereas we recorded pre-tax income under U.S. GAAP.

 

**Net Income (Loss).**We had net loss of $1.2 million for the three months ended September 30, 2007 compared to netincome of $12.4 million for the three months ended September 30, 2006. This wasprimarily a result of the lower gross profit due to the reduction in salesdemand.

 

***Nine Months Ended September 30, 2007 Compared to the Nine Months EndedSeptember 30, 2006***

The following table sets forth certain income statement information ofAccuride for the nine months ended September 30:

 
| **(Amounts in thousands, except per share data)**        | ** ** | **September 30, 2007** | ** ** | **September 30, 2006** | ** **                 |
|----------------------------------------------------------|------------|------------------------|------------|------------------------|----------------------------|
| Net sales:                                               |       |                   |       |                   |                       |   |   |   |   |
|  Wheels                                             |       | $                      | 376,418    |                   | 47.6                       | % | $ | 509,686 |   | 47.9 | % |
|  Components                                         |       | 380,022                |       | 48.0                   | %                          | 517,138 |   | 48.7 | % |
|  Other                                              |       | 34,703                 |       | 4.4                    | %                          | 36,444 |   | 3.4 | % |
|  Total net sales                                    |       | $                      | 791,143    |                   | 100.0                      | % | $ | 1,063,268 |   | 100.0 | % |
| Gross profit                                             |       | 65,861                 |       | 8.3                    | %                          | 151,037 |   | 14.2 | % |
| Operating  expenses                                      |       | 42,964                 |       | 5.4                    | %                          | 39,412 |   | 3.7 | % |
| Income from  operations                                  |       | 22,897                 |       | 2.9                    | %                          | 111,625 |   | 10.5 | % |
| Interest  expense, net                                   |       | (34,906                | )          | (4.4                   | )%     | (38,233 | ) | (3.6 | )% |
| Equity in  earnings of affiliate                         |       | —                 |       | —                 |                       | 528 |   | 0.1 | % |
| Other income,  net                                       |       | 5,820                  |       | 0.7                    | %                          | 869 |   | 0.1 | % |
| Income tax  provision (benefit)                          |       | (7,978                 | )          | 1.0                    | %                          | 23,976 |   | 2.3 | % |
| Net income                                               |       | $                      | 1,789      |                   | 0.2                        | % | $ | 50,813 |   | 4.8 | % |
| **Other  Data:**                                         |       |                   |       |                   |                       |   |   |   |   |
| Weighted average  common shares outstanding—basic   |       | 35,115                 |       |                   |                       | 34,145 |   |   |   |
| Basic income per  share                                  |       | $                      | 0.05       |                   |                       |   | $ | 1.49 |   |   |   |
| Weighted average  common shares outstanding—diluted |       | 35,209                 |       |                   |                       | 34,577 |   |   |   |
| Diluted income  per share                                |       | $                      | 0.05       |                   |                       |   | $ | 1.47 |   |   |   |

----

 

**Net Sales.**Net sales for the nine months ended September 30, 2007were $791.1 million, which was a decrease of 25.6% compared to net sales of$1,063.3 million for the nine months ended September 30, 2006. The decrease innet sales was realized in our Wheels and Components segments and was primarilya result of the reduced demand due to a change of emission standards thatbecame effective in 2007, partially offset by $10.4 million of revenueresulting from a resolution of a commercial dispute with a customer in ourWheels segment and $20.9 million of other price increases to offset increasedmaterial costs. We anticipate the revenue variance compared to prior year willcontinue through the remainder of 2007.

 

**Gross Profit.**Gross profit decreased $85.1 million to $65.9 millionfor the nine months ended September 30, 2007 from $109.1 million for the ninemonths ended September 30, 2006 due to the reduced sales demand and operatinginefficiencies related to low production volume. Gross profit as a percent ofsales dropped from 14.2% to 8.3%, which is mostly realized in our Componentssegment, evident by its gross margin for the nine months ended September 30,2006, of 10.7% dropping to 2.1% for the nine months ended September 30, 2007.Included in the current year’s results in our Wheels segment is additionaldepreciation expense of $11.8 million due to the reduction in certain assets’useful lives, severance and other benefit charges of $17.5 million related to areduction-in-force in our Canadian facility, and other benefit charges of $1.2million related to a change in post-employment benefits in our facility inErie, Pennsylvania.

 

 

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**Operating Expenses.** Operating expenses increased $3.6 million to $43.0million for the nine months ended September 30, 2007 from $39.4 million for thenine months ended September 30, 2006. This was primarily due to year over yearincreases in non-cash share-based compensation expense of $0.9 million,start-up costs for our facility in Alabama of $1.0 million, and audit and otherconsulting fees of $1.5 million, which includes expenses related to thesecondary stock offerings by selling shareholders in the current year.

 

**Interest Expense, net.**Net interest expense decreased $3.3 million to $34.9 million for thenine months ended September 30, 2007 from $38.2 million for the nine monthsended September 30, 2006. The reduction of expense is attributable to adecrease in interest expense related to reduced debt, partially offset by $1.4million of unrealized losses from our interest rate swap agreements in thecurrent year compared to $0.1 million of unrealized gains in the prior year’sresults. Total debt as of September 30, 2007, was $572.7 million compared to$657.7 million as of September 30, 2006.

 

**Income Tax Provision.**The****income taxbenefit recorded of $8.0 million in the nine months ended September 30, 2007,was $32.0 million higher than the $24.0 million expense in the nine monthsended September 30, 2006, which was due to the decrease in pre-tax earnings of$68.6 million and the impact of foreign currency exchange rates during 2007. Theeffective rate for the nine months ended September 30, 2006, was 32.1%, whichincluded certain adjustments for management’s change in expected realization ofloss carryforwards and resolutions of tax contingency reserves. The differencesbetween the effective rates and statutory rates for our U.S. and Mexico taxjurisdictions have not changed significantly. However, recent changes in theCanadian dollar to U.S. dollar exchange rates during the period have resultedin a pre-tax loss (and, therefore, an income tax benefit) for our Canadian taxjurisdiction, whereas we recorded pre-tax income under U.S. GAAP.

 

**Net Income.**We had net income of $2.6 million for the nine months ended September 30, 2007 compared to netincome of $50.8 million for the nine months ended September 30, 2006. This wasprimarily a result of the lower gross profit due to the reduction in salesdemand and the additional depreciation, severance and other benefit charges.

***Changes in Financial Condition***

At September 30, 2007, we had total assets of $1,112.3million, compared to $1,233.2 million at December 31, 2006. The $120.9 million,or 9.8%, decrease in total assets during the nine months ended September 30,2007 primarily resulted from payments of debt of $70.0 million and a reductionof net property, plant, and equipment due to $44.4 million of depreciationoffset by $17.4 million of additions.

 

Working capital, defined as current assets (excludingcash) less current liabilities, increased $23.1 million from December 31, 2006,to September 30, 2007. Significant changes in working capital from December 31,2006 included:

•            a decrease in net customer receivables of$25.6 million due to reduced sales leading up to the end of the period;

•            a decrease in other receivables of $4.5million primarily due to insurance claim receipts of $3.8 million;

•            an increase in inventories of $6.1million due to the draw-down of inventories at December 31, 2006;

•            a decrease in current income taxespayable of $3.5 million due primarily to timing of tax payments and reducedpre-tax income;

•            a decrease in accounts payable of $33.5million due to reduced purchases for production related to reduced salesdemand;

•            a decrease in accrued interest liabilityof $6.0 million due to timing of interest payments from our notes; and

•            a decrease in other liabilities of $4.4million due to a resolution of a commercial dispute with a customer.

 

## **Capital Resourcesand Liquidity**

 

Our primarysources of liquidity during the nine months ended September 30, 2007 were cashfrom operations, cash reserves, and our $125 million revolving credit facility,which is not currently drawn as discussed below.

 

We believe thatcash from operations, existing cash reserves, and availability under therevolving credit facility will provide adequate funds for our working capitalneeds, planned capital expenditures and debt service obligations for the nexttwelve months and the foreseeable future. Our ability to fund working capitalneeds, planned capital expenditures, scheduled debt payments, and to complywith all of the financial covenants under our credit agreement, depends on ourfuture operating performance and cash flow, which in turn, are subject toprevailing economic conditions and to financial, business and other factors,some of which are beyond our control.

 

 

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##### **OperatingActivities**

 

Net cash providedby operating activities during the first nine months of 2007 amounted to $26.9million compared to $96.9 million for the comparable period in 2006. Theprimary differences were lower net income due to reduced sales demand andchanges in working capital . The fluctuations in working capital were a resultof the reduced sales demand and production in 2007 compared to the same periodin 2006, which saw an increase in revenue from the end of the previous year.

 

##### **InvestingActivities**

 

Net cash used ininvesting activities totaled $24.9 million for the nine months ended September30, 2007 compared to a use of $22.5 million for the nine months ended September30, 2006. Included in 2006 was $1.9 million of proceeds from the sale ofproperty in Tennessee. Included in 2007 was $0.4 million of proceeds from thesale of property in Pennsylvania.

 

Our most significant cashoutlays for investing activities are the purchases of property, plant andequipment. Our capital expenditures in 2006 were $42.2 million. Capitalexpenditures for 2007 are expected to be approximately $40 million, which weexpect to fund through our cash from operations or existing cash reserves.

 

##### **FinancingActivities**

 

Net cash used infinancing activities totaled $65.9 million for the nine months ended September30, 2007 compared to $36.2 million for the comparable period in 2006. Wereduced debt by $70.0 million in the nine months ended September 30, 2007 withcash reserves. The $4.1 million of inflows in the current year are related toemployee stock option exercises.

 

**BankBorrowing.**Inconnection with the TTI merger, we entered into a Fourth Amended and RestatedCredit Agreement consisting of (1) anew term credit facility (the Term B Loan Facility) in an aggregate principalamount of $550.0 million that will mature on January 31, 2012 and(2) a revolving credit facility (the “New Revolver”) in an aggregateprincipal amount of $125.0 million (comprised of a new $95.0 millionU.S. revolving credit facility and the continuation of a $30.0 millionCanadian revolving credit facility) that will terminate on January 31,2010. As of September 30, 2007, $304.6 million was outstanding under the Term BLoan Facility, and the New Revolver was not drawn. The Term B Loan Facilityrequires quarterly amortization payments of $1.4 million that commenced onSeptember 30, 2005, with the balance paid on the maturity date for the Term B LoanFacility. As of September 30, 2007, the regularly scheduled payments duethrough December 31, 2011 were prepaid without penalty. The interest rates perannum applicable to loans under our new senior credit facilities are, at theoption of the Company or Accuride Canada Inc., as applicable, a base rate orEurodollar rate plus, in each case, an applicable margin which is subject toadjustment based on our leverage ratio. The base rate is a fluctuating interestrate equal to the highest of (a) the base rate reported by Citibank, N.A. (or,with respect to the Canadian revolving credit facility, the reference rate ofinterest established or quoted by Citibank Canada for determining interestrates on U.S. dollar denominated commercial loans made by Citibank Canada inCanada), (b) a reserve adjusted three-week moving average of offeringrates for three-month certificates of deposit plus one-half of onepercent (0.5%) and (c) the federal funds effective rate plus one-half ofone percent (0.5%). The obligations under our new senior credit facilities areguaranteed by all of our domestic subsidiaries. The loans under the new seniorcredit facilities are secured by, among other things, a lien on substantiallyall of our U.S. properties and assets and of our domestic subsidiaries and apledge of 65% of the stock of our foreign subsidiaries. The loans under theCanadian revolving facility are also secured by substantially all of theproperties and assets of Accuride Canada Inc.

 

**InitialPublic Offering**. OnApril 26, 2005, we completed our initial public offering (“IPO”). Net proceedsfrom the IPO were $89.6 million. We used all of the net proceeds from the IPOas well as other available cash as part of our repayment in April 2005 of $93.0million of the Term B Loan Facility. This prepayment was not subject to aprepayment penalty.

 

**RestrictiveDebt Covenants**. Oursenior credit facilities contain numerous financial and operating covenantsthat limit the discretion of management with respect to certain businessmatters. These covenants place significantrestrictions on, among other things, our ability to incur additional debt, topay dividends, to create liens, to make certain payments and investments and tosell or otherwise dispose of assets and merge or consolidate with otherentities. We are also required to meet certain financial ratios and tests,including a leverage ratio, an interest coverage ratio and a fixed chargecoverage ratio. Failure to comply with the obligations contained in the creditdocuments could result in an event of default, and possibly the acceleration ofthe related debt and the acceleration of debt under other instrumentsevidencing indebtedness that may contain cross-acceleration or cross-defaultprovisions. As of September 30, 2007, and currently, we are in compliance withour financial covenants and ratios.

 

**Senior Subordinated Notes**. In connection with the TTI merger, we issued $275.0 million aggregate principalamount of 81¤2% seniorsubordinated notes due 2015 in a private placement transaction. Interest on thesenior subordinated notes is payable on February 1 and August 1 ofeach year. The notes mature on February 1, 2015 and may be redeemed, atour option, in whole 

 

 

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orin part, at any time on or before February 1, 2010 at a price equal to100% of the principal amount, plus an applicable make-whole premium, andaccrued and unpaid interest and special interest if any, to the date ofredemption, and on or after February 1, 2010 at certain specifiedredemption prices. In addition, on or before February 1, 2008, we mayredeem up to 40% of the aggregate principal amount of the senior subordinatednotes issued under the indenture with the proceeds of certain equityfinancings. The new senior subordinated notes are general unsecured obligations(1) subordinated in right of payment to all of our and the guarantors’existing and future senior indebtedness, including any borrowings under our newsenior credit facilities; (2) equal in right of payment with any of ourand the guarantors’ existing and future senior subordinated indebtedness;(3) senior in right of payment to all of our and the guarantors’ existingand future subordinated indebtedness and (4) structurally subordinated toall obligations of our subsidiaries that do not guarantee the outstandingnotes. On September 15, 2005, we completed an exchange offer of these seniorsubordinated notes for substantially identical notes registered under theSecurities Act of 1933, as amended. As of September 30, 2007, those Notesremain outstanding.

 

**ContractualObligations.**Our 2006 Annual Report on Form 10-K contains atable detailing our contractual cash obligations as of December 31, 2006. A significant change to our contractual cash obligations since December 31,2006 is an uncertain tax liability of $16.1 million as of September 30,2007.  As described in Recent Accounting Adoptions, we adopted theprovisions of FIN No. 48, *Accounting for Uncertaintyin Income Taxes*, on January 1, 2007.  It is not possible todetermine in which future period the tax liability might be paid out.

 

**Off-BalanceSheet Arrangements.**Wedo not currently have any off-balance sheet arrangements that have or arereasonably likely to have a material current or future effect on our financialcondition, revenues or expenses, results of operations, liquidity, capitalexpenditures or capital resources. From time to time we may enter intooperating leases, letters of credit, or take-or-pay obligations related to thepurchase of raw materials that would not be reflected in our balance sheet.

 

**Recent Accounting Pronouncements. *SFAS No. 157***— In September 2006, the FASB issued SFASNo. 157,*Fair Value Measurements*, to eliminatethe diversity in practice that exists due to the different definitions of fairvalue and the limited guidance for applying those definitions in GAAP that aredispersed among the many accounting pronouncements that require fair valuemeasurements. SFAS No. 157 will apply to fiscal years beginning after November15, 2007. Management is currently evaluating the impact of SFAS No. 157 on theconsolidated financial statements.

 

***SFAS No. 159***— In February 2007, the FASB issued SFASNo. 159, *Establishing the Fair Value Option for FinancialAssets and Liabilities*, to permit all entities to choose to elect tomeasure eligible financial instruments at fair value. SFAS No. 159 applies tofiscal years beginning after November 15, 2007, with early adoption permittedfor an entity that has also elected to apply the provisions of SFAS No. 157, *Fair Value Measurements.*An entity isprohibited from retrospectively applying SFAS No. 159, unless it chooses earlyadoption. Management is currently evaluating the impact of SFAS No. 159 on theconsolidated financial statements.

 

**CriticalAccounting Policies and Estimates.**We have made a number of estimates and assumptionsrelating to the reporting of results of operations and financial position inthe preparation of our financial statements in conformity with accountingprinciples generally accepted in the United States of America. Actual resultscould differ significantly from those estimates under different assumptions andconditions. We included in our Form 10-K for the year ended December 31, 2006 adiscussion of our most critical accounting policies, which are those that havea material impact on our financial condition or operating performance andrequire management’s most difficult, subjective and complex judgments, often asa result of the need to make estimates about the effect of matters that areinherently uncertain.

 

***FactorsAffecting Future Results***

 

In this report, we havemade various statements regarding current expectations or forecasts of futureevents, which speak only as of the date the statements, are made. Thesestatements are “forward-looking statements” within the meaning of that term inSection 27A of the Securities Act of 1933 and Section 21E of the SecuritiesExchange Act of 1934. Forward-looking statements are also made fromtime-to-time in press releases and in oral statements made by the officers ofAccuride. Forward-looking statements are identified by the words “estimate,” “project,”“anticipate,” “will continue,” “will likely result,” “expect,” “intend,” “believe,”“plan,” “predict” and similar expressions. Forward looking statements alsoinclude, but are not limited to, statements regarding commercial vehicle marketrecovery, projections of revenue, income, loss, or working capital, capitalexpenditure levels, ability to mitigate rising raw material costs through increasesin selling 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.

Such forward-looking statements are based on assumptions and estimates,which although believed to be reasonable, may turn out to be incorrect. Therefore,undue reliance should not be placed upon these estimates and statements. Wecannot 

 

 

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assure that any of these statements, estimates, or beliefs will berealized and actual results may differ from those contemplated in these “forward-lookingstatements.” We undertake no obligation to publicly update any forward-lookingstatements, whether as a result of new information, future events, orotherwise. You are advised to consult further disclosures we may make onrelated subjects in our filings with the SEC. In addition to other factorsdiscussed in this report, some of the important factors that could cause actualresults to differ materially from those discussed in the forward-lookingstatements include the following:

 

•                  failure to comply with the obligation in our credit anddebt agreements, including compliance with certain financial ratios and tests,could result in an event of default and possibly the acceleration of therelated debt and the acceleration of debt under other instruments evidencingdebt that may contain cross-acceleration or cross-default provisions;

•                  a more severe than anticipated commercial vehicleindustry downturn in 2007 may adversely effect our business;

•                  the loss of a major customer could have a materialadverse effect on our business;

•                  the demands of original equipment manufacturers forprice reductions may adversely affect profitability;

•                  a labor strike may disrupt our supply to our customerbase;

•                  we use a substantial amount of raw steel and aluminumand are vulnerable to industry shortages, significant price increases, andsurcharges, some of which we may not be able to pass through to our customers;

•                  we may encounter increased competition in the futurefrom existing competitors or new competitors;

•                  our significant indebtedness may have importantconsequences, including, but not limited to, impairment of our ability toobtain additional financing, reduction of funds available for operations andbusiness opportunities or limitations on our ability to dispose of assets;

•                  significant volatility in the foreign currency marketscould have an adverse effect on us;

•                  our ability to service our indebtedness is dependentupon operating cash flow;

•                  an interruption of performance of our machinery andequipment could have an adverse effect on us;

•                  an interruption in supply of metals could reduce ourability to obtain favorable sourcing of such raw materials;

•                  we may be subject to liability under certainenvironmental laws and the cost of compliance with these regulations could havea material adverse effect on our financial condition and may adversely affectour ability to sell or rent such property or to borrow using such property ascollateral;

•                  the interests of our principal stockholder mayconflict with the interests of the holders of our securities; and

•                  our success depends largely upon the abilities and experienceof certain key management personnel. The loss of the services of one or more ofthese key personnel could have a negative impact on our business.

 

For further information, refer to the business description andadditional risk factors sections included in our Form 10-K for the year endedDecember 31, 2006, as filed with the SEC.

 

 

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**Item 3. Quantitative andQualitative Disclosures About Market Risk**

 

In the normal course of doing business, we are exposed to risksassociated with changes in foreign exchange rates, raw material/commodityprices, and interest rates.  We usederivative instruments to manage these exposures.  The objectives for holding derivatives are tominimize the risks using the most effective methods to eliminate or reduce theimpacts of these exposures.

 

Foreign Currency Risk Certain forecasted transactions, assets, and liabilities are exposed to foreigncurrency risk.  We monitor our foreigncurrency exposures to maximize the overall effectiveness of our foreigncurrency derivatives.  The principalcurrency of exposure is the Canadian dollar. Foreign exchange forward contracts and option contracts are used tooffset the impact of the variability in exchange rates on our operations, cashflows, assets and liabilities.  AtSeptember 30, 2007, we had open foreign exchange forward contracts of $7.9million.

 

### **Raw Material/CommodityPrice Risk**

We rely upon thesupply of certain raw materials and commodities in our production processes andhave entered into long-term supply contracts for our steel and aluminumrequirements.  The exposures associatedwith these commitments are primarily managed through the terms of the sales,supply, and procurement contracts.  Fromtime to time, we use commodity price swaps and futures contracts to manage thevariability in certain commodity prices. At September 30, 2007, we had open material commodity price swaps with avalue of $0.2 million.

 

Interest Rate RiskWe use long-term debt as a primary source of capital in our business.  The following table presents the principalcash repayments and related weighted average interest rates by maturity datefor our long-term fixed-rate debt and other types of long-term debt as ofSeptember 30, 2007:

 
| **(Dollars in thousands)** | ** **         | **2007** | ** **         | **2008** | ** **         | **2009** | ** **         | **2010** | ** **         | **2011** | ** **         | **Thereafter** | ** **    | **Total** | ** **    | **Fair Value** | ** ** |
|----------------------------|--------------------|----------|--------------------|----------|--------------------|----------|--------------------|----------|--------------------|----------|--------------------|----------------|---------------|-----------|---------------|----------------|------------|
| Long-term  Debt:           |     |     |     |     |     |     |     |     |     |     |     |           |          |      |          |           |       |
| Fixed                      |               | —   |               | —   |               | —   |               | —   |               | —   |               | $              | 275,000       |      | $             | 275,000        |       | $ | 264,000 |   |
| Average Rate               |               | —   |               | —   |               | —   |               | —   |               | —   |               | 8.50           | %   | 8.50      | %   |           |       |
| Variable                   |               | —   |               | —   |               | —   |               | —   |               | —   |               | $              | 297,725       |      | $             | 297,725        |       | $ | 293,306 |   |
| Average Rate               |               | —   |               | —   |               | —   |               | —   |               | —   |               | 7.84           | %             | 7.84      | %             |           |       |

 

We have usedinterest rate swaps to alter interest rate exposure between fixed and variablerates on a portion of our long-term debt. As of September 30, 2007, we had one interest rate swap agreement of$250.0 million outstanding that will mature in March 2008.  Under the terms of the interest rate swapagreements entered into in March 2005, we agreed with the counterparty toexchange, at specified intervals, the difference between 3.55% from March 2005through March 2006, 4.24% from March 2006 through March 2007, and 4.43% from March2007 through March 2008, and the variable rate interest amounts calculated byreference to the notional principal amount.

 

**Item 4.Controls and Procedures**

 

We maintain disclosure controls and procedures that are designed toensure that information required to be disclosed in our Exchange Act reports isrecorded, processed, summarized and reported within the time periods specifiedin the SEC’s rules and forms, and that such information is accumulated andcommunicated to our management, including our Chief Executive Officer and ChiefFinancial Officer, as appropriate, to allow timely decisions regarding requireddisclosure.  In designing and evaluatingthe disclosure controls and procedures, management recognized that any controlsand procedures, 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.

 

As required by SEC Rule 13a-15(b), we carried out an evaluation, underthe supervision and with the participation of the Company’s management,including our Chief Executive Officer and Chief Financial Officer, of theeffectiveness of the design and operation of our disclosure controls andprocedures as of the end of the period covered by this report.  Based on the foregoing, our Chief ExecutiveOfficer and Chief Financial Officer concluded that our disclosure controls andprocedures were effective at the reasonable assurance level.

 

There have been no changes in our internal controls over financialreporting during our most recent quarter that has materially affected, or isreasonably likely to materially affect, our internal controls over financialreporting.

 

 

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**PART II.  OTHER INFORMATION**

 

**Item1.  Legal Proceedings**

 

Neither Accuride nor anyof our subsidiaries is a party to any legal proceeding which, in the opinion ofmanagement, would have a material adverse effect on our business or financialcondition.  However, we from time-to-timeare involved in ordinary routine litigation incidental to our business,including actions related to product liability, contractual liability,workplace safety and environmental claims. We establish reserves for matters in which losses are probable and canbe reasonably estimated.  While webelieve that we have established adequate accruals for our expected futureliability with respect to our pending legal actions and proceedings, we cannotassure you that our liability with respect to any such action or proceedingwould not exceed our established accruals. Further, we cannot assure that litigation having a material adverseaffect on our financial condition will not arise in the future.

 

On January 19, 2007, thePublic Works Superintendent of the City of Portland, Tennessee issued a ceaseand desist order to the Company’s Imperial Group, alleging Imperial Group’sPortland, Tennessee facility was discharging wastewater into the City ofPortland’s wastewater treatment system that contained nickel in excess ofpermit limits.  Imperial Group has fullycooperated with the City of Portland to address the alleged wastewaterdischarge issue.  On May 1, 2007,Imperial Group received a written demand from the City of Portland for damagesand penalties totaling approximately $0.8 million.  Imperial Group is vigorously contesting theCity’s demand while engaging in settlement discussions related thereto.

 

 

**Item6.  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                  |       | —     |       | Stock Subscription and  Redemption Agreement, dated as of November 17, 1997, among Accuride  Corporation, Hubcap Acquisition L.L.C. and Phelps Dodge Corporation.  Previously filed as an exhibit to the Form S-4 effective July 23,  1998 (Reg. No. 333-50239) and incorporated herein by reference.                                                                                                                                                        |
| 2.3                  |       | —     |       | 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.                                                                            |
| 3.1                  |       | —     |       | Amended and Restated  Certificate of Incorporation of Accuride Corporation. Previously filed as an  exhibit to Amendment 4, filed on April 21, 2005, to the  Form S-1 effective April 25, 2005 (Reg. No. 333-121944) and  incorporated herein by reference.                                                                                                                                                                                             |
| 3.2                  |       | —     |       | Amended and Restated  Bylaws of Accuride Corporation. Previously filed as an exhibit to Form 8-K  filed on December 22, 2005 and incorporated herein by reference.                                                                                                                                                                                                                                                                                                               |
| 4.1                  |       | —     |       | Specimen common stock  certificate of registrant. Previously filed as an exhibit to  Amendment 2, filed March 25, 2005, to Form S-1 effective  April 25, 2005 (Reg. No. 333-121944) and incorporated herein by  reference.                                                                                                                                                                                                                              |
| 4.2                  |       | —     |       | Indenture, dated as of  January 31, 2005, by and among the Registrant, all of the Registrant’s  direct and indirect Domestic Subsidiaries existing on the Issuance Date and  The Bank of New York Trust Company, N.A., with respect to $275.0 million  aggregate principal amount of 8 1/2% Senior Subordinated Notes due 2015. Previously  filed as an exhibit to the Form 8-K filed on February 4, 2005 and  incorporated herein by reference.   |
| 4.3                  |       | —     |       | Amended and Restated  Registration Rights Agreement dated January 31, 2005 by and between the  Registrant and each of the Stockholders (as defined therein). Previously  filed as an exhibit to the Form 8-K filed on February 4, 2005 and  incorporated herein by reference.                                                                                                                                                                                     |
| 4.4                  |       | —     |       | Registration Rights  Agreement, dated January 31, 2005, by and among Accuride Corporation, as  issuer, the Guarantors named in Schedule A thereto and Lehman  Brothers Inc., Citigroup Global Markets Inc. and UBS Securities  LLC, as initial purchasers. Previously filed as an exhibit to  Amendment 2, filed March 25, 2005, to Form S-1 effective  April 25, 2005 (Reg. No. 333-121944) and incorporated herein by  reference. |
| 4.5                  |       | —     |       | Stockholders’  Agreement, dated January 21, 1998, as amended and assigned, by and among  Accuride Corporation, RSTW Partners III, L.P. (as successor to Phelps  Dodge Corporation) and Hubcap Acquisition L.L.C. Previously filed as an exhibit  to Amendment 2, filed March 25, 2005, to Form S-1 effective  April 25, 2005 (Reg. No. 333-121944) and incorporated herein by  reference.                                                |

 

 

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| 4.6*       |   | — |   | Form of Stockholders’  Agreement by and among Accuride Corporation, certain employees and Hubcap  Acquisition L.L.C. Previously filed as an exhibit to the Form S-4  effective July 23, 1998 (Reg. No. 333-50239) and incorporated  herein by reference.                                                         |
|------------|--------|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 4.7*       |   | — |   | Form of Amendment to  Stockholders’ Agreement by and among Accuride Corporation, certain employees  and the Hubcap Acquisition L.L.C. Previously filed as an exhibit to Amendment  No. 1, filed September 22, 2005 (Reg. No. 333-128327) and incorporated herein  by reference.                                                 |
| 4.8        |   | — |   | Bond Guaranty Agreement  dated as of March 1, 1999 by Bostrom Seating, Inc. in favor of NBD  Bank as 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. |
| 10.1*      |   | — |   | Amended and Restated  2005 Incentive Award Plan. Previously filed as an exhibit to the Form 8-K  filed on September 19, 2007, and incorporated herein by reference.                                                                                                                                                                  |
| 10.2*      |   | — |   | Amended and Restated  Directors’ Deferred Compensation Plan, previously filed as an exhibit to the  Form 8-K filed on October 29, 2007, and incorporated herein by reference.                                                                                                                                                   |
| 10.3† |   | — |   | Termination of  Shareholder Rights Agreement, dated September 15, 2007, by and among Accuride  Corporation, Hubcap Acquisition L.L.C., Trimaran Capital, L.L.C., Trimaran  Fund II, L.L.C., Trimaran Parallel Fund II, L.P., CIBC Employee Private  Equity Fund (Trimaran) Partners, and CIBC Capital Corporation.                   |
| 31.1† |   | — |   | Certification Pursuant  to Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 13a-14 of the  Exchange Act of 1934 — John R. Murphy.                                                                                                                                                                                    |
| 31.2† |   | — |   | Certification Pursuant  to Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 13a-14 of the  Exchange Act of 1934 — David K. Armstrong.                                                                                                                                                                                |
| 32.1† |   | — |   | Certifications  Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code.                                                                                                                                                                                                                                        |

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†              Filed herewith

*              Management contract 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.

 

 

| ACCURIDE CORPORATION                        |   |   |
|---------------------------------------------|--------|--------|
|                                        |   |   |
| /s/ John R. Murphy                          |   |   | Dated: | November 2, 2007 |   |
| John R. Murphy                              |   |   |
| President and Chief Executive Officer       |   |   |
|                                        |   |   |
|                                        |   |   |
| /s/ David K. Armstrong                      |   |   | Dated: | November 2, 2007 |   |
| David K. Armstrong                          |   |   |
| Chief Financial Officer and General Counsel |   |   |
| Principal Accounting Officer                |   |   |

 

 

 

26

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