**Tableof Contents**

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**UNITED STATES SECURITIES ANDEXCHANGE COMMISSION**

**WASHINGTON, DC 20549**

** **

**FORM 10-Q**

 

**(MarkOne)**

| **x**                                                   | **Quarterly Report Pursuant to Section 13 or 15  (d) of the Securities Exchange Act of 1934** |
|---------------------------------------------------------|---------------------------------------------------------------------------------------------------------|
|                                                    |                                                                                                    |
| **For the quarterly period ended June 30,  2008.** |
|                                                    |                                                                                                    |
| **OR**                                                  |
|                                                    |                                                                                                    |
| **o**                                                   | **Transition Report Pursuant to  Section 13 or 15(d) of the Securities Exchange Act of 1934** |

 

**For the transition period from                    to                      .**

 

**Commission file number 001-32483**

 

**ACCURIDE CORPORATION**

(Exact Name ofRegistrant as 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 markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe past 90 days.  Yes x  No o

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company. See definitions of“large accelerated filer,” “accelerated filer,” and “smaller reporting company”in Rule 12b-2 of the Exchange Act. 

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

 

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

 

As of August 4,2008, 35,462,172 shares of Accuride Corporation common stock, par value $.01per share, were outstanding. 

 

 

 

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**ACCURIDE CORPORATION**

 

**Table of Contents**

** **
| ** **                                    | ** **                                                                                                       | **Page** |
|-----------------------------------------------|------------------------------------------------------------------------------------------------------------------|----------|
| **PART I  – FINANCIAL INFORMATION** | ** **                                                                                                       |
| ** **                                    | ** **                                                                                                       |
| Item 1.                                       | Condensed Consolidated Financial  Statements (Unaudited)                                                         |     |
|                                          |                                                                                                             |     |
|                                          | Condensed Consolidated  Balance Sheets as of June 30, 2008 and December 31, 2007                       | 3        |
|                                          |                                                                                                             |     |
|                                          | Condensed Consolidated  Statements of Operations for the Three and Six Months Ended June 30,  2008 and 2007 | 4        |
|                                          |                                                                                                             |     |
|                                          | Condensed Consolidated  Statements of Cash Flows for the Six Months Ended June 30, 2008 and 2007            | 5        |
|                                          |                                                                                                             |     |
|                                          | Notes to Condensed  Consolidated Financial Statements                                                            | 6        |
|                                          |                                                                                                             |     |
| Item 2.                                       | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                      | 18       |
|                                          |                                                                                                             |     |
| Item 3.                                       | Quantitative  and Qualitative Disclosures About Market Risk                                                      | 25       |
|                                          |                                                                                                             |     |
| Item 4.                                       | Controls and  Procedures                                                                                         | 25       |
|                                          |                                                                                                             |     |
| **PART II – OTHER  INFORMATION**    |                                                                                                             |
| ** **                                    |                                                                                                             |
| Item 1.                                       | Legal Proceedings                                                                                                | 26       |
|                                          |                                                                                                             |     |
| Item 4.                                       | Submission  of Matter to a Vote of Security Holders                                                              | 26       |
|                                          |                                                                                                             |     |
| Item 6.                                       | Exhibits                                                                                                         | 26       |
|                                          |                                                                                                             |     |
| Signatures                                    |                                                                                                             | 28       |
|                                               |                                                                                                                  |          |  |

 

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**Part I.  FINANCIAL INFORMATION**

 

**Item1.  Financial Statements**

 

**ACCURIDE CORPORATION**

**CONDENSED CONSOLIDATED BALANCE SHEETS(UNAUDITED)**

 
| ** **                                                                                                                                                           | ** ** | **June 30,** | ** ** | **December 31,** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|------------|-----------------------|------------|
| **(In thousands, except for per share data)**                                                                                          | ** ** | **2008**          | ** ** | **2007**              | ** ** |
| ** **                                                                                                                                                           | ** ** | ** **        | ** ** | ** **            | ** ** |
| **ASSETS**                                                                                                                                                           |       |              |       |                  |       |
| CURRENT ASSETS:                                                                                                                                                      |       |              |       |                  |       |
| Cash and cash  equivalents                                                                                                                                           |       | $                 | 33,227     |                  | $          | 90,935 |   |
| Customer  receivables, net of allowance for doubtful accounts of $1,967 and $1,461 in  2008 and 2007, respectively                                                   |       | 106,481           |       | 81,719                |       |
| Other  receivables                                                                                                                                                   |       | 7,364             |       | 5,476                 |       |
| Inventories, net                                                                                                                                                     |       | 98,786            |       | 92,570                |       |
| Supplies, net                                                                                                                                                        |       | 20,506            |       | 20,540                |       |
| Deferred income taxes                                                                                                                                                |       | 19,423            |       | 19,422                |       |
| Income tax  receivable                                                                                                                                               |       | 4,089             |       | —                |       |
| Prepaid expenses  and other current assets                                                                                                                           |       | 4,489             |       | 2,703                 |       |
| Total current  assets                                                                                                                                                |       | 294,365           |       | 313,365               |       |
| PROPERTY, PLANT  AND EQUIPMENT, net                                                                                                                                  |       | 272,156           |       | 279,240               |       |
| OTHER ASSETS:                                                                                                                                                        |       |              |       |                  |       |
| Goodwill                                                                                                                                                             |       | 378,804           |       | 378,804               |       |
| Other intangible  assets, net                                                                                                                                        |       | 126,635           |       | 128,870               |       |
| Investment in  affiliates                                                                                                                                            |       | 1,915             |       | 1,090                 |       |
| Deferred  financing costs, net of accumulated amortization of $4,321 and $3,705 in 2008  and 2007, respectively                                                      |       | 6,178             |       | 6,794                 |       |
| Marketable securities  and other investments                                                                                                                         |       | 5,000             |       | —                |       |
| Other                                                                                                                                                                |       | 7,574             |       | 5,471                 |       |
| TOTAL                                                                                                                                                                |       | $                 | 1,092,627  |                  | $          | 1,113,634 |   |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY**                                                                                                                       |       |              |       |                  |       |
| CURRENT  LIABILITIES:                                                                                                                                                |       |              |       |                  |       |
| Accounts payable                                                                                                                                                     |       | $                 | 77,092     |                  | $          | 80,070 |   |
| Accrued payroll  and compensation                                                                                                                                    |       | 24,717            |       | 30,456                |       |
| Accrued interest  payable                                                                                                                                            |       | 10,625            |       | 11,105                |       |
| Accrued and  other liabilities                                                                                                                                       |       | 32,994            |       | 28,323                |       |
| Total current  liabilities                                                                                                                                           |       | 145,428           |       | 149,954               |       |
| LONG-TERM DEBT                                                                                                                                                       |       | 572,725           |       | 572,725               |       |
| DEFERRED INCOME  TAXES                                                                                                                                               |       | 25,648            |       | 34,644                |       |
| NON-CURRENT  INCOME TAXES PAYABLE                                                                                                                                    |       | 9,915             |       | 9,915                 |       |
| OTHER  POSTRETIREMENT BENEFIT PLAN LIABILITY                                                                                                                         |       | 58,642            |       | 58,519                |       |
| PENSION BENEFIT  PLAN LIABILITY                                                                                                                                      |       | 9,302             |       | 10,939                |       |
| OTHER  LIABILITIES                                                                                                                                                   |       | 3,207             |       | 3,138                 |       |
| COMMITMENTS AND  CONTINGENCIES (Note 6)                                                                                                                              |       | —            |       | —                |       |
| STOCKHOLDERS’  EQUITY:                                                                                                                                          |       |              |       |                  |       |
| Preferred stock,  $0.01 par value; 5,000 shares authorized and unissued                                                                                              |       | —            |       | —                |       |
| Common Stock,  $0.01 par value; 100,000 shares authorized, 36,136 and 36,066 shares issued,  and 35,432 and 35,362 shares outstanding in 2008 and 2007, respectively |       | 354               |       | 354                   |       |
| Additional  paid-in-capital                                                                                                                                          |       | 264,569           |       | 262,645               |       |
| Treasury stock –  76 shares at cost in 2008 and 2007                                                                                                            |       | (751              | )          | (751                  | )          |
| Accumulated  other comprehensive loss                                                                                                                                |       | (8,703            | )          | (9,105                | )          |
| Retained  earnings                                                                                                                                                   |       | 12,291            |       | 20,657                |       |
| Total  stockholders’ equity                                                                                                                                     |       | 267,760           |       | 273,800               |       |
| TOTAL                                                                                                                                                                |       | $                 | 1,092,627  |                  | $          | 1,113,634 |   |

 

See notes to unauditedcondensed consolidated financial statements.

 

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**ACCURIDECORPORATION**

**CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)**

** **
| ** **                                                        | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|-------------------------------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| **(in thousands except per share data)** | ** ** | **2008**                                        | ** ** | **2007**                                      | ** ** | **2008** | ** ** | **2007** | ** ** |
|                                                              |       |                                            |       |                                          |       |   |   |   |   |
| NET SALES                                                         |       | $                                               | 244,919    |                                          | $          | 245,133 |   | $ | 483,129 |   | $ | 570,563 |   |
| COST OF GOODS  SOLD                                               |       | 223,569                                         |       | 216,679                                       |       | 449,510 |   | 517,993 |   |
| GROSS PROFIT                                                      |       | 21,350                                          |       | 28,454                                        |       | 33,619 |   | 52,570 |   |
| OPERATING  EXPENSES:                                              |       |                                            |       |                                          |       |   |   |   |   |
| Selling, general  and administrative                              |       | 12,761                                          |       | 14,223                                        |       | 26,415 |   | 29,274 |   |
| INCOME FROM  OPERATIONS                                           |       | 8,589                                           |       | 14,231                                        |       | 7,204 |   | 23,296 |   |
| OTHER INCOME  (EXPENSE):                                          |       |                                            |       |                                          |       |   |   |   |   |
| Interest income                                                   |       | 193                                             |       | 393                                           |       | 725 |   | 937 |   |
| Interest expense                                                  |       | (8,677                                          | )          | (11,665                                       | )          | (24,923 | ) | (24,228 | ) |
| Other income  (loss), net                                         |       | 933                                             |       | 3,222                                         |       | (121 | ) | 3,296 |   |
| INCOME (LOSS)  BEFORE INCOME TAXES                                |       | 1,038                                           |       | 6,181                                         |       | (17,115 | ) | 3,301 |   |
| INCOME TAX  PROVISION (BENEFIT)                                   |       | (2,337                                          | )          | 1,288                                         |       | (8,749 | ) | 292 |   |
| NET INCOME  (LOSS)                                                |       | $                                               | 3,375      |                                          | $          | 4,893 |   | $ | (8,366 | ) | $ | 3,009 |   |
|                                                              |       |                                            |       |                                          |       |   |   |   |   |
| Weighted average  common shares outstanding—basic            |       | 35,430                                          |       | 35,127                                        |       | 35,421 |   | 35,011 |   |
|                                                              |       |                                            |       |                                          |       |   |   |   |   |
| Basic income  (loss) per share                                    |       | $                                               | 0.10       |                                          | $          | 0.14 |   | $ | (0.24 | ) | $ | 0.09 |   |
|                                                              |       |                                            |       |                                          |       |   |   |   |   |
| Weighted average  common shares outstanding—diluted          |       | 35,518                                          |       | 35,408                                        |       | 35,465 |   | 35,151 |   |
|                                                              |       |                                            |       |                                          |       |   |   |   |   |
| Diluted income  (loss) per share                                  |       | $                                               | 0.10       |                                          | $          | 0.14 |   | $ | (0.24 | ) | $ | 0.09 |   |

 

See notes to unauditedcondensed consolidated financial statements.

 

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**ACCURIDE CORPORATION**

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

 
| ** **                                                                                           | ** ** | **Six Months Ended  June 30,** | ** ** |
|------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------|------------|
| **(In thousands)**                                                                              | ** ** | **2008**                                      | ** ** | **2007** | ** ** |
| CASH FLOWS FROM  OPERATING ACTIVITIES:                                                               |       |                                          |       |   |   |
| Net income  (loss)                                                                                   |       | $                                             | (8,366     | ) | $ | 3,009 |   |
| Adjustments to  reconcile net income (loss) to net cash provided by (used in) operating  activities: |       |                                          |       |   |   |
| Depreciation and  impairment                                                                         |       | 20,373                                        |       | 32,910 |   |
| Amortization –  deferred financing costs                                                        |       | 616                                           |       | 617 |   |
| Amortization –  other intangible assets                                                         |       | 2,795                                         |       | 2,837 |   |
| Loss on disposal  of assets                                                                          |       | 62                                            |       | 29 |   |
| Provision for  deferred income taxes                                                                 |       | (10,230                                       | )          | 204 |   |
| Non-cash  stock-based compensation                                                                   |       | 1,710                                         |       | 1,280 |   |
| Changes in  certain assets and liabilities:                                                          |       |                                          |       |   |   |
| Receivables                                                                                          |       | (26,650                                       | )          | 23,700 |   |
| Inventories and  supplies                                                                            |       | (6,180                                        | )          | (27,027 | ) |
| Prepaid expenses  and other assets                                                                   |       | (8,320                                        | )          | (12,688 | ) |
| Accounts payable                                                                                     |       | 3,521                                         |       | (12,519 | ) |
| Accrued and  other liabilities                                                                       |       | (1,744                                        | )          | 2,703 |   |
| Net cash  provided by (used in) operating activities                                                 |       | (32,413                                       | )          | 15,055 |   |
| CASH FLOWS FROM  INVESTING ACTIVITIES:                                                               |       |                                          |       |   |   |
| Purchases of property,  plant and equipment                                                          |       | (19,852                                       | )          | (15,919 | ) |
| Purchase of  marketable securities                                                                   |       | (5,000                                        | )          | — |   |
| Other                                                                                                |       | (642                                          | )          | (30 | ) |
| Net cash used in  investing activities                                                               |       | (25,494                                       | )          | (15,949 | ) |
| CASH FLOWS FROM  FINANCING ACTIVITIES:                                                               |       |                                          |       |   |   |
| Payments on  long-term debt                                                                          |       | —                                        |       | (60,000 | ) |
| Increase in  revolving credit advance                                                                |       | —                                        |       | 5,000 |   |
| Decrease in  revolving credit advance                                                                |       | —                                        |       | (5,000 | ) |
| Other                                                                                                |       | 199                                           |       | 3,412 |   |
| Net cash  provided by (used in) financing activities                                                 |       | 199                                           |       | (56,588 | ) |
| DECREASE IN CASH  AND CASH EQUIVALENTS                                                               |       | (57,708                                       | )          | (57,482 | ) |
| CASH AND CASH  EQUIVALENTS—Beginning of period                                                  |       | 90,935                                        |       | 110,204 |   |
| CASH AND CASH  EQUIVALENTS—End of period                                                        |       | $                                             | 33,227     |   | $ | 52,722 |   |
|                                                                                                 |       |                                          |       |   |   |
| Supplemental  cash flow information:                                                                 |       |                                          |       |   |   |
| Cash paid for  interest                                                                              |       | $                                             | 22,166     |   | $ | 22,328 |   |
| Cash paid for  income taxes                                                                          |       | $                                             | 3,956      |   | $ | 5,600 |   |
| Purchases of  property, plant, and equipment in accounts payable                                     |       | $                                             | 1,722      |   | $ | 5,449 |   |

 

Seenotes to unaudited condensed consolidated financial statements.

 

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** **

**ACCURIDECORPORATION**

**NOTES TOCONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**

**AS OF JUNE 30, 2008 AND DECEMBER31, 2007 AND FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2008 AND 2007**

**(AMOUNTS IN THOUSANDS, EXCEPTSHARE AND PER SHARE DATA)**

 

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

 

***Basis ofPresentation****–* Theaccompanying unaudited condensed consolidated financial statements have beenprepared in accordance with accounting principles generally accepted in theUnited States of America, except that the unaudited condensed consolidatedfinancial statements do not include all of the information and footnotesrequired by generally accepted accounting principles  (“GAAP”) in the United States of America forcomplete financial statements.  However,in the opinion of Accuride Corporation (“Accuride” or the “Company”), alladjustments (consisting of normal recurring accruals) considered necessary topresent fairly the condensed consolidated financial statements have beenincluded.

 

The results of operationsfor the three and six months ended June 30, 2008 are not necessarilyindicative of the results to be expected for the year ending December 31,2008.  The unaudited condensedconsolidated financial statements and notes thereto should be read inconjunction with the audited condensed consolidated financial statements andnotes thereto disclosed in Accuride’s Annual Report on Form 10-K for theyear ended December 31, 2007.

 

***Management’sEstimates and Assumptions*****- The preparation of financial statements inconformity with accounting principles generally accepted in the United Statesof America requires management to make estimates and assumptions that affectthe reported amounts of assets and liabilities and disclosures of contingentassets and liabilities at the date of the financial statements and the reportedamounts of revenues and expenses during the reporting period.  Actual results could differ from thoseestimates.

 

***DerivativeFinancial Instruments*** – We use derivative financial instruments as part of our overall riskmanagement strategy as further described under Item 7A of our 2007 AnnualReport on Form 10-K.  The derivativeinstruments used from time to time include interest rate and foreign exchangeinstruments.  All derivative instrumentsare recognized on the balance sheet at their estimated fair values. As of June 30,2008, there were no derivatives that were designated as hedges for financialreporting purposes.

 

***Interest Rate Instruments*** – We use interest rate swap agreements as a means offixing the interest rate on portions of our floating-rate debt.  As of June 30, 2008, we had one interestrate swap agreement outstanding, which was established in December 2007.  Pursuant to the terms of the interest rateswap agreement, we exchange with the counterparty, at specified intervals, thedifference between 3.81% from March 2008 through March 2010, and thevariable rate interest amounts calculated by reference to the notionalprincipal amount. The notional principal amounts under the terms are $200million from March 2008 through March 2009, $150 million from March 2009through September 2009 and $125 million from September 2009 through March 2010.

 

Gains and losses includedas a component of interest expense are as follows:

 
| ** **              | ** ** | **Three Months Ended June 30,** | ** ** | **Six Months Ended June 30,** | ** ** |
|-------------------------|------------|-----------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **              | ** ** | **2008**                                            | ** ** | **2007**                                          | ** ** | **2008** | ** ** | **2007** | ** ** |
| Realized Gain  (Loss)   |       | $                                                   | (449       | )                                                 | $          | 581 |   | $ | (199 | ) | $ | 1,250 |   |
| Unrealized Gain  (Loss) |       | $                                                   | 3,356      |                                              | $          | (115 | ) | $ | (1,182 | ) | $ | (795 | ) |

 

***Foreign Exchange Instruments*** – We use foreign currency forwardcontracts and option contracts to limit foreign exchange risk on anticipatedbut not yet committed transactions expected to be denominated in Canadiandollars. At June 30, 2008, we had no open foreign exchange forwardcontracts.

 

Gains and losses included as a component of otherincome (expense) are as follows:

 
| ** **              | ** ** | **Three Months Ended June 30,** | ** ** | **Six Months Ended June 30,** | ** ** |
|-------------------------|------------|-----------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **              | ** ** | **2008**                                            | ** ** | **2007**                                          | ** ** | **2008** | ** ** | **2007** | ** ** |
| Realized Gain           |       | $                                                   | 65         |                                              | $          | 603 |   | $ | 136 |   | $ | 919 |   |
| Unrealized Gain  (Loss) |       | $                                                   | —     |                                              | $          | 1,411 |   | $ | (14 | ) | $ | 1,974 |   |

 

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***Commodity Price Instruments***—We use commodity price swap contracts to limit exposure to changes in certainraw material prices. Commodity price instruments, which do not meet the normalpurchase exception, are not designated as hedges for financial reportingpurposes and, accordingly, are carried in the financial statements at fairvalue, with realized and unrealized gains and losses reflected in currentperiod earnings as a component of “Cost of goods sold.” At June 30, 2008,we had no open commodity price instruments.

 

Gainsand losses included as a component of cost of goods sold are as follows:

 
| ** **      | ** ** | **Three Months Ended June 30,** | ** ** | **Six Months Ended June 30,** | ** ** |
|-----------------|------------|-----------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **      | ** ** | **2008**                                            | ** ** | **2007**                                          | ** ** | **2008** | ** ** | **2007** | ** ** |
| Realized Gain   |       | $                                                   | 207        |                                              | $          | — |   | $ | 410 |   | $ | — |   |
| Unrealized Gain |       | $                                                   | —     |                                              | $          | — |   | $ | 1,589 |   | $ | — |   |

 

***MarketableSecurities and Other Investments -***We have certaininvestments in bonds, which are categorized as marketable securities. Webelieve that these investments have a low risk for significant loss ofprincipal. We regularly assess our marketable security investments for impairmentsand adjust our investment strategy, as we deem appropriate. We classify thesesecurities as available for sale and as non-current in the accompanyingcondensed consolidated balance sheets based on original maturity dates ofgreater than one year.  Any unrealizedgains or losses would be recorded as a component of other comprehensive income.

 

***Earnings Per Common Share*** – Basic and diluted earnings per commonshare were computed as follows:

 
| ** **                                                        | ** ** | **Three Months Ended June 30,** | ** ** | **Six Months Ended June 30,** | ** ** |
|-------------------------------------------------------------------|------------|-----------------------------------------------------|------------|---------------------------------------------------|------------|
| **(in thousands except per share data)** | ** ** | **2008**                                            | ** ** | **2007**                                          | ** ** | **2008** | ** ** | **2006** | ** ** |
| Numerator:                                                        |       |                                                |       |                                              |       |   |   |   |   |
| Net income  (loss)                                                |       | $                                                   | 3,375      |                                              | $          | 4,893 |   | $ | (8,366 | ) | $ | 3,009 |   |
| Denominator:                                                      |       |                                                |       |                                              |       |   |   |   |   |
| Weighted average  shares outstanding – Basic                 |       | 35,430                                              |       | 35,127                                            |       | 35,421 |   | 35,011 |   |
| Effect of  dilutive stock options                                 |       | 88                                                  |       | 281                                               |       | 44 |   | 140 |   |
| Weighted average  shares outstanding – Diluted               |       | 35,518                                              |       | 35,408                                            |       | 35,465 |   | 35,151 |   |
| Basic earnings  (loss) per common share                           |       | $                                                   | 0.10       |                                              | $          | 0.14 |   | $ | (0.24 | ) | $ | 0.09 |   |
| Diluted earnings  (loss) per common share                         |       | $                                                   | 0.10       |                                              | $          | 0.14 |   | $ | (0.24 | ) | $ | 0.09 |   |

 

As of June 30, 2008, there were 407,670 stockoptions and 620,624 stock appreciation rights that were not included in thecomputation of diluted earnings per share because the effect would beanti-dilutive.

 

***Stock-Based Compensation***— We account for share-based compensationprograms in accordance with Statement of Financial Accounting Standards (“SFAS”)No. 123(R), *Share-Based Payment*.  As of June 30, 2008, there wasapproximately $8.2 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.

 

Expense was recognized for share-based compensation asfollows:

 
| ** **                                   | ** ** | **Three Months Ended June 30,** | ** ** | **Six Months Ended June 30,** | ** ** |
|----------------------------------------------|------------|-----------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                   | ** ** | **2008**                                            | ** ** | **2007**                                          | ** ** | **2008** | ** ** | **2007** | ** ** |
| Share-based  compensation expense recognized |       | $                                                   | 1,200      |                                              | $          | 685 |   | $ | 1,710 |   | $ | 1,280 |   |
|                                              |            |                                                     |            |                                                   |            |  |  |  |  |  |  |  |  |

 

***Recent Accounting Adoptions***

 

***SFAS No. 157***—In September 2006, the Financial Accounting Standards Board (“FASB”)issued Statement of Accounting Standard (“SFAS”) No. 157,*Fair Value Measurements*, to eliminate the diversity inpractice that exists due to the different definitions of fair value and thelimited guidance for applying those definitions in GAAP that are dispersed

 

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amongthe many accounting pronouncements that require fair value measurements.  However, on February 12, 2008, the FASBissued Staff Position 157-2 which delays the effective date of SFAS No. 157for all nonfinancial assets and nonfinancial liabilities, except those that arerecognized or disclosed at fair value in the financial statements on arecurring basis. For items within its scope, this Staff Position defers theeffective date of SFAS No. 157 to fiscal years beginning after November 15,2008.  The adoption of SFAS No. 157on January 1, 2008 for financial assets and liabilities had no materialimpact on our consolidated financial statements.  We are currently assessing the impactof SFAS No. 157 for nonfinancial assets and liabilitieson our consolidated financial position and results of operations.

 

***SFAS No. 159***— In February 2007,the FASB issued SFAS No. 159, *Establishing the FairValue Option for Financial Assets and Liabilities*, which permits anentity to measure certain financial assets and financial liabilities at fairvalue. Under SFAS No. 159, entities that elect the fair value option willreport unrealized gains and losses in earnings at each subsequent reportingdate. The fair value option may be elected on an instrument-by-instrumentbasis, with a few exceptions, as long as it is applied to the instrument in itsentirety. The fair value option election is irrevocable, unless a new electiondate occurs. SFAS No. 159 also establishes presentation and disclosurerequirements to help financial statement users understand the effect of theentity’s election on its earnings.  Dueto making no election on any of our instruments, the adoption of SFAS No. 159on January 1, 2008 had no impact on our consolidated financial statements.

 

***RecentAccounting Pronouncements***

 

***SFAS No. 141(R) ***— In December 2007,the FASB issued SFAS No. 141(R),*Business Combinations*, which replaces SFAS No. 141,*Business Combinations*.  SFAS No. 141(R) requires theacquirer of a business to recognize and measure the identifiable assetsacquired, the liabilities assumed, and any non-controlling interest in theacquiree at fair value. SFAS No. 141(R) also requires transactionscosts related to the business combination to be expensed as incurred. SFAS No. 141(R) appliesprospectively to business combinations for which the acquisition date is on orafter the beginning of the first annual reporting period beginning on or after December 15,2008. We are currently evaluating the impact of SFAS No. 141(R) relatedto future acquisitions, if any, on our consolidated financial statements.

 

***SFAS No. 160*** — In December 2007,the FASB issued SFAS No. 160,*Noncontrolling Interests in Consolidated Financial Statements*.  SFAS No. 160 requires all entities toreport noncontrolling (minority) interests in subsidiaries as equity in theconsolidated financial statements. Its intention is to eliminate the diversityin practice regarding the accounting for transactions between an entity andnoncontrolling interests. SFAS No. 160 will apply to fiscal yearsbeginning on or after December 15, 2008. We are currently evaluating the impact of SFAS No. 160 on ourconsolidated financial statements.

 

***SFAS No. 161*** — In March 2008,the FASB issued SFAS No. 161, *Disclosures aboutDerivative Instruments and Hedging Activities - an amendment of FASB Statement No. 133.*  SFAS No. 161 amends and expands thedisclosure requirements of SFAS No. 133 to provide a better understandingof how and why an entity uses derivative instruments, how derivativeinstruments and related hedged items are accounted for, and their effect on anentity’s financial position, financial performance, and cashflows.  SFAS No. 161 is effective for fiscal years beginningafter November 15, 2008. We are currently evaluating the impact of SFAS No. 161on our consolidated financial statements.

 

***SFAS No. 162*** — In May 2008,the FASB issued SFAS No. 162, *The Hierarchy of GenerallyAccepted Accounting Principles.* SFAS No. 162 identifies the sources of accounting principles andthe framework for selecting the principles to be used in the preparation offinancial statements of nongovernmental entities that are presented inconformity with generally accepted accounting principles (GAAP) in the UnitedStates (the GAAP hierarchy). This Statement is effective 60 days following theSEC’s approval of the Public Company Accounting Oversight Board amendments toAU Section 411, *The Meaning of PresentFairly in Conformity With Generally Accepted Accounting Principles*.We are currently evaluating the impact of SFAS No. 162 on our consolidatedfinancial statements.

 

**Note 2 -Inventories**

 

Inventories are stated atthe lower of cost or market.  We reviewinventory on hand and write down excess and obsolete inventory based on ourassessment of future demand and historical experience.  The components of inventory on a FIFO basis,except at our subsidiary in Mexico, which values inventories using an average costbasis, are as follows:

 

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| ** **                   | ** ** | **June 30, 2008** | ** ** | **December 31, 2007** | ** ** |
|------------------------------|------------|-----------------------------|------------|---------------------------------|------------|
| Raw materials                |       | $                           | 37,237     |                            | $          | 30,267 |   |
| Work in process              |       | 27,854                      |       | 28,193                          |       |
| Finished  manufactured goods |       | 33,695                      |       | 34,110                          |       |
| Total  inventories, net      |       | $                           | 98,786     |                            | $          | 92,570 |   |

 

**Note 3 - Goodwill and OtherIntangible Assets**

 

SFAS No. 141, *Business Combinations,* and SFAS No. 142,*Goodwill and Other Intangible Assets,*have been applied to the acquisition of TTI, which occurred on January 31,2005.  Accordingly, the tangible andidentifiable intangible assets and liabilities were adjusted to fair valueswith the remainder of the purchase price recorded as goodwill.  Additionally, goodwill and indefinite-livedintangibles assets (trade names) are not amortized but are reviewed forimpairment at least annually or more frequently if impairment indicators arise.

 

Under SFAS No. 142,we are required to assess goodwill and any indefinite-lived intangible assetsfor impairment annually, or more frequently if circumstances indicateimpairment may have occurred.  Theanalysis of potential impairment of goodwill requires a two-step approach.  The first step is the estimation of fairvalue of each operating segment.  If stepone indicates that impairment potentially exists, the second step is performedto measure the amount of impairment, if any. Goodwill impairment exists when the estimated fair value of goodwill isless than its carrying value.

 

During the last two weeksof the quarter ended June 30, 2008, we experienced a significant declinein our stock price resulting from overall economic and industryconditions.  We determined that this is an indicator of impairment and animpairment analysis is required under SFAS No. 142.   We haveperformed a preliminary step one analysis, the results of which areinconclusive as to whether we have an impairment of one or more of ourreporting units.  Therefore, we are in process of assessing the fair valueof each of our seven reporting units.  In the event that the fair value ofone or some of our reporting units is less than its carrying amount, we willperform a step two calculation to determine the amount of impairment, whichwill be recorded in the quarter ending September 30, 2008.  Such acharge is non-cash and would not affect our liquidity, tangible equity or debtcovenant ratios.

 

The amount of goodwilland intangible assets by reportable segment are as follows:

 
| ** **          | ** ** | **As of June 30, 2008** | ** ** |
|---------------------|------------|---------------------------------------------|------------|
| ** **          | ** ** | **Goodwill**                                | ** ** | **Intangible Assets** | ** ** |
|                |       |                                        |       |   |   |
| Wheels              |       | $                                           | 123,199    |   | — |   |
| Components          |       | 243,915                                     |       | $ | 116,173 |   |
| Other               |       | 11,690                                      |       | 9,668 |   |
| Corporate           |       | —                                      |       | 794 |   |
| Consolidated  Total |       | $                                           | 378,804    |   | $ | 126,635 |   |

 

The summary of goodwilland other intangible assets is as follows:

 
| ** **                | ** ** | **Weighted**               | ** ** | **As of June 30, 2008** | ** ** | **As of December 31, 2007**      | ** ** |
|---------------------------|------------|----------------------------|------------|---------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                | ** ** | **Average  Useful  Lives** | ** ** | **Gross  Amount**                           | ** ** | **Accumulated  Amortization  & Impairment** | ** ** | **Carrying  Amount** | ** ** | **Gross  Amount** | ** ** | **Accumulated  Amortization  & Impairment** | ** ** | **Carrying  Amount** | ** ** |
| Goodwill                  |       | —                     |       | $                                           | 378,804    |                                                 | —     |   | $ | 378,804 |   | $ | 378,804 |   | — |   | $ | 378,804 |   |
| Other intangible  assets: |       |                       |       |                                        |       |                                                 |       |   |   |   |   |   |   |   |   |
| Non-compete  agreements   |       | 3.0                        |       | $                                           | 3,160      |                                                 | $          | 2,365 |   | $ | 795 |   | $ | 2,600 |   | $ | 1,938 |   | $ | 662 |   |
| Trade names               |       | —                     |       | 38,080                                      |       | 1,100                                                |       | 36,980 |   | 38,080 |   | 1,100 |   | 36,980 |   |
| Technology                |       | 14.7                       |       | 33,540                                      |       | 7,834                                                |       | 25,706 |   | 33,540 |   | 6,690 |   | 26,850 |   |
| Customer  relationships   |       | 29.6                       |       | 71,500                                      |       | 8,346                                                |       | 63,154 |   | 71,500 |   | 7,122 |   | 64,378 |   |
|                      |       |                       |       | $                                           | 146,280    |                                                 | $          | 19,645 |   | $ | 126,635 |   | $ | 145,720 |   | $ | 16,850 |   | $ | 128,870 |   |

 

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We estimate thataggregate amortization expense by year as follows:

** **
| 2008 |   | $ | 5,397 |   |
|------|--------|---|-------|--------|
| 2009 |   | $ | 4,923 |   |
| 2010 |   | $ | 4,923 |   |
| 2011 |   | $ | 4,922 |   |
| 2012 |   | $ | 4,736 |   |

 

**Note 4 -Comprehensive income (loss)**

 

Comprehensive income (loss)for the three and six months ended June 30 is summarized as follows:

 
| ** **                               | ** ** | **For The Three Months  Ended June 30,** | ** ** | **For The Six Months  Ended June 30,** | ** ** |
|------------------------------------------|------------|-------------------------------------------------------------------|------------|-----------------------------------------------------------------|------------|
| ** **                               | ** ** | **2008**                                                          | ** ** | **2007**                                                        | ** ** | **2008** | ** ** | **2007** | ** ** |
| Net income  (loss)                       |       | $                                                                 | 3,375      |                                                            | $          | 4,893 |   | $ | (8,366 | ) | $ | 3,009 |   |
| Other  comprehensive income (net of tax) |       |                                                              |       |                                                            |       |   |   |   |   |
| Pension  liability adjustment            |       | (104                                                              | )          | (1,175                                                          | )          | 401 |   | (1,316 | ) |
| Total  comprehensive income (loss)       |       | $                                                                 | 3,271      |                                                            | $          | 3,718 |   | $ | (7,965 | ) | $ | 1,693 |   |

 

Included in accumulatedother comprehensive income is the impact of pension liability fluctuations inthe Canadian dollar to U.S. dollar exchange rate related to our Canadianpension plans.

 

**Note 5 -Pension and Other Postretirement Benefit Plans**

 

Componentsof Net Periodic Benefit Cost for the three and six months ended June 30:

 
| ** **                                         | ** ** | **For The Three Months  Ended June 30,** | ** ** | **For The Six Months  Ended June 30,** | ** ** |
|----------------------------------------------------|------------|-------------------------------------------------------------------|------------|-----------------------------------------------------------------|------------|
| ** **                                         | ** ** | **Pension Benefits**                                         | ** ** | **Other Benefits**                                         | ** ** | **Pension Benefits** | ** ** | **Other Benefits** | ** ** |
| ** **                                         | ** ** | **2008**                                                          | ** ** | **2007**                                                        | ** ** | **2008** | ** ** | **2007** | ** ** | **2008** | ** ** | **2007** | ** ** | **2008** | ** ** | **2007** | ** ** |
| Service  cost-benefits earned during the year      |       | $                                                                 | 812        |                                                            | $          | 916 |   | $ | 156 |   | $ | 312 |   | $ | 1,714 |   | $ | 1,998 |   | $ | 312 |   | $ | 643 |   |
| Interest cost on  projected benefit obligation     |       | 2,883                                                             |       | 2,560                                                           |       | 961 |   | 1,179 |   | 5,795 |   | 5,006 |   | 1,922 |   | 2,382 |   |
| Expected return  on plan assets                    |       | (3,749                                                            | )          | (3,271                                                          | )          | — |   | — |   | (7,513 | ) | (6,721 | ) | — |   | — |   |
| Amortization of  net transition (asset)/obligation |       | 4                                                                 |       | 4                                                               |       | — |   | — |   | 8 |   | 11 |   | — |   | — |   |
| Amortization of  prior service cost (benefit)      |       | 102                                                               |       | 94                                                              |       | (335 | ) | (177 | ) | 204 |   | 264 |   | (670 | ) | (356 | ) |
| Amortization of  (gain)/loss                       |       | 478                                                               |       | 461                                                             |       | (133 | ) | 57 |   | 940 |   | 909 |   | (267 | ) | 132 |   |
| Net amount  charged to income                      |       | $                                                                 | 530        |                                                            | $          | 764 |   | $ | 649 |   | $ | 1,371 |   | $ | 1,148 |   | $ | 1,467 |   | $ | 1,297 |   | $ | 2,801 |   |
| Curtailment  charge (gain)                         |       | —                                                            |       | 4                                                               |       | — |   | (1,096 | ) | — |   | 3,187 |   | — |   | (1,379 | ) |
| Contractual  termination benefits charge           |       | —                                                            |       | —                                                          |       | — |   | — |   | — |   | 6,347 |   | — |   | — |   |
| Total amount  charged to income                    |       | $                                                                 | 530        |                                                            | $          | 768 |   | $ | 649 |   | $ | 275 |   | $ | 1,148 |   | $ | 11,001 |   | $ | 1,297 |   | $ | 1,422 |   |

 

Duringthe three months ended June 30, 2007, we recorded a pre-tax curtailmentgain of $1.1 million related to a reduction-in-force in our London, Ontario,facility in our Wheels segment.  For thesix months ended June 30, 2007, we recorded a pre-tax curtailment andother contractual termination benefits of $8.2 million. The contractualbenefits charge represents a potential partial pension wind-up, which wasdetermined to be probable for purposes of recognizing one-time benefits inaccordance with SFAS No. 146, *Accountingfor Costs Associated with Exit or Disposal Activities,*and SFAS No. 88,*Employers’ Accounting for Settlements andCurtailments of Defined Benefit Plans and Termination Benefits*.

 

Asof June 30, 2008, $5.1 million has been contributed to our sponsoredpension plans.  We presently anticipatecontributing an additional $6.6 million to fund our pension plans in 2008 for atotal of $11.7 million.

 

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Alsoduring the six months ended June 30, 2007, we recorded $8.2 million ofseverance costs related to the reduction-in-force as a component of cost ofgoods sold.  Cash paid for severancecosts in the three months ended June 30, 2007 totaled $1.4 million.

 

**Note 6 –Contingencies**

 

We arefrom time to time involved in various legal proceedings of a character normallyincident 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.

 

As of June 30,2008, we had an environmental reserve of approximately $2.6 million,related primarily to TTI’s foundry operations. This reserve is based on currentcost estimates and does not reduce estimated expenditures to net present value,but does take into account the benefit of a contractual indemnity given to usby a prior owner of our wheel-end subsidiary. The failure for the indemnitor tofulfill its obligations could result in future costs that may be material. Anycash expenditures required by us or our subsidiaries to comply with applicableenvironmental laws and/or to pay for any remediation efforts will not bereduced or otherwise affected by the existence of the environmental reserve. Wecurrently anticipate spending approximately $0.2 million per year in 2008through 2011 for monitoring the various environmental sites associated with theenvironmental reserve, including attorney and consultant costs for strategicplanning and negotiations with regulators and other potentially responsibleparties, and payment of remedial investigation costs. Based on all of theinformation presently available to us, we believe that our environmentalreserves will be adequate to cover the future costs related to the sitesassociated with the environmental reserves, and that any additional costs willnot have a material adverse effect on our financial condition, results ofoperations or cash flows. However, the discovery of additional sites, themodification of existing or promulgation of new laws or regulations, morevigorous enforcement by regulators, the imposition of joint and severalliability under CERCLA or analogous state laws, or other unanticipated eventscould 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) ofthe Clean Air Act and requires all major sources of hazardous air pollutants toinstall controls representative of maximum achievable control technology. Webelieve that our foundry operations are in compliance with the applicablerequirements of the Iron and Steel Foundry NESHAP.

 

Pursuantto the Recapitalization of the Company on January 21, 1998, we wereindemnified by Phelps Dodge Corporation with respect to certain environmentalliabilities at our Henderson and London facilities, subject to certainlimitations.  At the Erie, Pennsylvania,facility, we have obtained an environmental insurance policy to providecoverage with respect to certain environmental liabilities.  Management does not believe that the outcomeof any environmental proceedings will have a material adverse effect on ourconsolidated financial condition or results of operations.

 

As of June 30, 2008, we had approximately 3,500employees, of which 868 were salaried employees with the remainder paid hourly.Unions represent approximately 1,700 of our employees, or 49% of the total. Thereis one contract expiring on August 31, 2008 for our Fabco facility inCalifornia. We do not anticipate that the outcome of these negotiations willhave a material adverse effect on our operating performance or costs.

 

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**Note7 – Financial Instruments**

 

Wehave determined the estimated fair value amounts of financial instruments usingavailable market information and other appropriate valuation methodologies.However, considerable judgment is required in interpreting market data todevelop the estimates of fair value. SFAS No. 157 establishes a fair value hierarchy for thoseinstruments measured at fair value that distinguishes between assumptions basedon market data (observable inputs) and our own assumptions (unobservableinputs).  Determining which category an asset or liability fallswithin the hierarchy requires significant judgment.  We evaluate ourhierarchy disclosures each quarter.

 

The hierarchy consists ofthree levels:

 
| Level 1 |   | Quoted market prices in  active markets for identical assets or liabilities;                                                              |
|---------|--------|-------------------------------------------------------------------------------------------------------------------------------------------|
| Level 2 |   | Inputs other than Level  1 inputs that are either directly or indirectly observable; and                                                  |
| Level 3 |   | Unobservable inputs  developed using estimates and assumptions developed by us, which reflect  those that a market participant would use. |

 

Thecarrying amounts of cash and cash equivalents, trade receivables, and accountspayable approximate fair value because of the relatively short maturity ofthese instruments.  The carrying amountsand related estimated fair values for our remaining financial instruments as ofJune 30, 2008 are as follows:

 
| ** **                    | ** ** | **Carrying** | ** ** | **Fair Value** | ** ** |
|-------------------------------|------------|--------------|------------|---------------------|------------|
| ** **                    | ** ** | **Amount**   | ** ** | **Level 1**    | ** ** | **Level 2** | ** ** | **Level 3** | ** ** | **Total** | ** ** |
|                          |       |         |       |                |       |   |   |   |   |   |   |
| **Assets**                    |       |         |       |                |       |   |   |   |   |   |   |
| Marketable  securities        |       | $            | 5,000      |                |       |   |   |   | $ | 5,000 |   | $ | 5,000 |   |
|                          |       |         |       |                |       |   |   |   |   |   |   |
| **Liabilities**               |       |         |       |                |       |   |   |   |   |   |   |
| Interest rate  swap contracts |       | $            | 1,586      |                |       |   | $ | 1,586 |   |   |   | $ | 1,586 |   |
| Total debt                    |       | $            | 572,725    |                |       |   | $ | 485,217 |   |   |   | $ | 485,217 |   |
|                               |            |              |            |                     |            |  |  |  |  |  |  |  |  |  |  |

 

The fair value related tomarketable securities has been determined by evaluating other similarsecurities.  Fair values relating toderivative financial instruments reflect the estimated amounts that we wouldreceive or pay to terminate the contracts at the reporting date based on quotedmarket prices of comparable contracts as of the balance sheet date. The fairvalue of our long-term debt has been determined on the basis of the specificsecurities issued and outstanding. All of our long-term debt instruments havevariable interest rates except for the senior subordinated notes, which have afixed interest rate of 8.50%.

 

Our Level 3 assetsconsist of municipal bonds with an auction reset feature (“auction ratesecurities”) whose underlying assets are generally student loans which aresubstantially backed by the federal government. In February 2008, auctionsbegan to fail for these securities and each auction since then has failed.Based on the overall failure rate of these auctions, the frequency of thefailures, and the underlying maturities of the securities (40 years), we haveclassified auction rate securities as long-term assets on our balance sheet.

 

The following tableprovides a summary of changes in fair value of our Level 3 assets for the threeand six months ended June 30, 2008:

 
| ** **                         | ** ** | **Three Months Ended  June 30, 2008** | ** ** | **Six Months Ended  June 30, 2008** | ** ** |
|------------------------------------|------------|-----------------------------------------------------------|------------|---------------------------------------------------------|------------|
|                               |       |                                                      |       |                                                    |       |
| Beginning  balance                 |       | $                                                         | 5,000      |                                                    | —     |   |
| Purchase of  securities            |       | —                                                    |       | $                                                       | 5,000      |   |
| Unrealized gain  (loss) recognized |       | —                                                    |       | —                                                  |       |
| Net settlements                    |       | —                                                    |       | —                                                  |       |
| Ending balance                     |       | $                                                         | 5,000      |                                                    | $          | 5,000 |   |

 

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**Note8 – Segment Reporting**

 

As a part of ourcontinual monitoring of the long-term economic characteristics, products andproduction processes, class of customer, and distribution methods of ouroperating segments, we aggregate our seven operating segments into threereportable segments shown below.  Theaccounting policies of the reportable segments are the same as described inNote 1, Summary of Significant Accounting Policies.

 
| ** **          | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|---------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **          | ** ** | **2008**                                        | ** ** | **2007**                                      | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **          | ** ** | ** **                                      | ** ** | ** **                                    | ** ** | ** ** | ** ** | ** ** | ** ** |
| ***Net  Sales***    |       |                                            |       |                                          |       |   |   |   |   |
| Wheels              |       | $                                               | 105,154    |                                          | $          | 113,357 |   | $ | 209,164 |   | $ | 272,686 |   |
| Components          |       | 127,359                                         |       | 120,666                                       |       | 248,118 |   | 273,415 |   |
| Other               |       | 12,406                                          |       | 11,110                                        |       | 25,847 |   | 24,462 |   |
| Consolidated  Total |       | $                                               | 244,919    |                                          | $          | 245,133 |   | $ | 483,129 |   | $ | 570,563 |   |

 
| ***Operating Income (Loss)*** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
|-----------------------------------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|
| Wheels                                  |       | $          | 14,718     |       | $          | 21,542     |       | $          | 32,545     |   | $ | 31,657 |   |
| Components                              |       | 1,112      |       | 1,426      |       | (11,659    | )          | 9,003      |       |
| Other                                   |       | 2,313      |       | 1,573      |       | 4,960      |       | 3,394      |       |
| Corporate                               |       | (9,554     | )          | (10,310    | )          | (18,642    | )          | (20,758    | )          |
| Consolidated  Total                     |       | $          | 8,589      |       | $          | 14,231     |       | $          | 7,204      |   | $ | 23,296 |   |

** **
| ** **          | ** ** | **As of**          | ** ** |
|---------------------|------------|-------------------------|------------|
| ** **          | ** ** | **June 30,  2008** | ** ** | **December 31,  2007** | ** ** |
| ** **          | ** ** | ** **              | ** ** | ** ** | ** ** |
| ***Total  Assets*** |       |                    |       |   |   |
| Wheels              |       | $                       | 193,672    |   | $ | 188,288 |   |
| Components          |       | 597,871                 |       | 578,158 |   |
| Other               |       | 48,408                  |       | 45,466 |   |
| Corporate           |       | 252,676                 |       | 301,722 |   |
| Consolidated  Total |       | $                       | 1,092,6278 |   | $ | 1,113,634 |   |

 

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**Note 9 –Guarantor and Non-guarantor Financial Statements**

 

Our 81⁄2% SeniorSubordinated Notes due 2015 are fully and unconditionally guaranteed, on ajoint and several basis, by substantially all of our 100% owned domesticsubsidiaries (“Guarantor Subsidiaries”). The non-guarantor subsidiaries are ourforeign subsidiaries. The following condensed financial information illustratesthe composition of the combined Guarantor Subsidiaries:

 

**CONDENSEDCONSOLIDATED BALANCE SHEET**

 
| ** **                                     | ** ** | **June 30, 2008** | ** ** |
|------------------------------------------------|------------|-----------------------------|------------|
| ** **                                     | ** ** | **Parent**                  | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| **ASSETS**                                     |       |                        |       |   |   |   |   |   |   |   |   |
| Cash and cash  equivalents                     |       | $                           | 28,961     |   | $ | (3,409 | ) | $ | 7,675 |   | — |   | $ | 33,227 |   |
| Accounts  receivable, net                      |       | 106,481                     |       | 215,593 |   | 8,515 |   | $ | (224,108 | ) | 106,481 |   |
| Inventories and  supplies                      |       | 22,829                      |       | 84,539 |   | 12,423 |   | (499 | ) | 119,292 |   |
| Other current  assets                          |       | 19,954                      |       | 11,680 |   | 3,731 |   | — |   | 35,365 |   |
| Total current  assets                          |       | 178,225                     |       | 308,403 |   | 32,344 |   | (224,607 | ) | 294,365 |   |
| Property, plant,  and equipment, net           |       | 39,467                      |       | 184,259 |   | 48,430 |   | — |   | 272,156 |   |
| Goodwill                                       |       | 66,973                      |       | 303,790 |   | 8,041 |   | — |   | 378,804 |   |
| Intangible  assets, net                        |       | 794                         |       | 125,841 |   | — |   | — |   | 126,635 |   |
| Investment in  subsidiaries and affiliates     |       | 588,766                     |       | — |   | — |   | (586,851 | ) | 1,915 |   |
| Deferred tax  assets                           |       | 36,471                      |       | 14,131 |   | 12,737 |   | (63,339 | ) | — |   |
| Other  non-current assets                      |       | 11,261                      |       | 202 |   | 7,289 |   | — |   | 18,752 |   |
| TOTAL                                          |       | $                           | 921,957    |   | $ | 936,626 |   | $ | 108,841 |   | $ | (874,797 | ) | $ | 1,092,627 |   |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY** |       |                        |       |   |   |   |   |   |   |   |   |
| Accounts payable                               |       | $                           | 12,991     |   | $ | 54,449 |   | 9,652 |   | — |   | $ | 77,092 |   |
| Accrued payroll  and compensation              |       | 3,954                       |       | 13,538 |   | 7,225 |   | — |   | 24,717 |   |
| Accrued interest  payable                      |       | 10,569                      |       | 10 |   | 46 |   | — |   | 10,625 |   |
| Accrued and  other liabilities                 |       | 32,994                      |       | 271,204 |   | 9,230 |   | $ | (280,434 | ) | 32,994 |   |
| Total current  liabilities                     |       | 60,508                      |       | 339,201 |   | 26,153 |   | (280,434 | ) | 145,428 |   |
| Long term debt                                 |       | 569,625                     |       | 3,100 |   | — |   | — |   | 572,725 |   |
| Deferred and  non-current income taxes         |       | 13,064                      |       | 67,990 |   | 17,848 |   | (63,339 | ) | 35,563 |   |
| Other  non-current liabilities                 |       | 11,000                      |       | 49,622 |   | 10,529 |   | — |   | 71,151 |   |
| Stockholders’  equity                     |       | 267,760                     |       | 476,713 |   | 54,311 |   | (531,024 | ) | 267,760 |   |
| TOTAL                                          |       | $                           | 921,957    |   | $ | 936,626 |   | $ | 108,841 |   | $ | (874,797 | ) | $ | 1,092,627 |   |

 
| ** **                                     | ** ** | **December 31, 2007** | ** ** |
|------------------------------------------------|------------|---------------------------------|------------|
| ** **                                     | ** ** | **Parent**                      | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| **ASSETS**                                     |       |                            |       |   |   |   |   |   |   |   |   |
| Cash and cash  equivalents                     |       | $                               | 85,940     |   | $ | (2,474 | ) | $ | 7,469 |   | — |   | $ | 90,935 |   |
| Accounts  receivable, net                      |       | 23,485                          |       | 194,935 |   | 8,222 |   | $ | (139,447 | ) | 87,195 |   |
| Inventories and  supplies                      |       | 23,819                          |       | 76,865 |   | 13,436 |   | (1,010 | ) | 113,110 |   |
| Other current  assets                          |       | 6,952                           |       | 11,836 |   | 3,337 |   | — |   | 22,125 |   |
| Total current  assets                          |       | 140,196                         |       | 281,162 |   | 32,464 |   | (140,457 | ) | 313,365 |   |
| Property, plant,  and equipment, net           |       | 42,020                          |       | 185,948 |   | 51,272 |   | — |   | 279,240 |   |
| Goodwill                                       |       | 66,973                          |       | 303,790 |   | 8,041 |   | — |   | 378,804 |   |
| Intangible  assets, net                        |       | 587                             |       | 128,283 |   | — |   | — |   | 128,870 |   |
| Investment in  subsidiaries and affiliates     |       | 613,448                         |       | — |   | — |   | (612,358 | ) | 1,090 |   |
| Deferred tax  assets                           |       | 26,011                          |       | 14,134 |   | 13,316 |   | (53,461 | ) | — |   |
| Other  non-current assets                      |       | 6,862                           |       | 265 |   | 5,138 |   | — |   | 12,265 |   |
| TOTAL                                          |       | $                               | 896,097    |   | $ | 913,582 |   | $ | 110,231 |   | $ | (806,276 | ) | $ | 1,113,634 |   |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY** |       |                            |       |   |   |   |   |   |   |   |   |
| Accounts payable                               |       | $                               | 8,843      |   | $ | 61,478 |   | $ | 9,749 |   | — |   | $ | 80,070 |   |
| Accrued payroll  and compensation              |       | 7,442                           |       | 14,227 |   | 8,787 |   | — |   | 30,456 |   |
| Accrued interest  payable                      |       | 11,066                          |       | 10 |   | 29 |   | — |   | 11,105 |   |
| Accrued and  other liabilities                 |       | 1,367                           |       | 239,177 |   | 11,344 |   | $ | (223,565 | ) | 28,323 |   |
| Total current  liabilities                     |       | 28,718                          |       | 314,892 |   | 29,909 |   | (223,565 | ) | 149,954 |   |
| Long term debt                                 |       | 569,625                         |       | 3,100 |   | — |   | — |   | 572,725 |   |
| Deferred income  taxes                         |       | 12,790                          |       | 67,991 |   | 17,239 |   | (53,461 | ) | 44,559 |   |
| Other  non-current liabilities                 |       | 11,164                          |       | 50,950 |   | 10,482 |   | — |   | 72,596 |   |
| Stockholders’  equity                     |       | 273,800                         |       | 476,649 |   | 52,601 |   | (529,250 | ) | 273,800 |   |
| TOTAL                                          |       | $                               | 896,097    |   | $ | 913,582 |   | $ | 110,231 |   | $ | (806,276 | ) | $ | 1,113,634 |   |

 

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**CONDENSED CONSOLIDATED STATEMENTS OFOPERATIONS**

 
| ** **                          | ** ** | **Three Months Ended June 30, 2008** | ** ** |
|-------------------------------------|------------|---------------------------------------------------------------|------------|
| ** **                          | ** ** | **Parent**                                                    | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| Net sales                           |       | $                                                             | 69,089     |   | $ | 173,376 |   | $ | 35,796 |   | $ | (33,342 | ) | $ | 244,919 |   |
| Cost of goods  sold                 |       | 60,121                                                        |       | 163,927 |   | 32,863 |   | (33,342 | ) | 223,569 |   |
| Gross profit                        |       | 8,968                                                         |       | 9,449 |   | 2,933 |   | — |   | 21,350 |   |
| Operating  expenses                 |       | 9,708                                                         |       | 2,841 |   | 212 |   | — |   | 12,761 |   |
| Income (loss)  from operations      |       | (740                                                          | )          | 6,608 |   | 2,721 |   | — |   | 8,589 |   |
| Other income  (expense):            |       |                                                          |       |   |   |   |   |   |   |   |   |
| Interest expense,  net              |       | (6,698                                                        | )          | (26 | ) | (1,760 | ) | — |   | (8,484 | ) |
| Equity in  earnings of subsidiaries |       | 8,489                                                         |       | — |   | — |   | (8,489 | ) | — |   |
| Other income,  net                  |       | 607                                                           |       | 114 |   | 212 |   | — |   | 933 |   |
| Income (loss)  before income taxes  |       | 1,658                                                         |       | 6,696 |   | 1,173 |   | (8,489 | ) | 1,038 |   |
| Income tax (benefit)                |       | (1,717                                                        | )          | — |   | (620 | ) | — |   | (2,337 | ) |
| Net income                          |       | $                                                             | 3,375      |   | $ | 6,696 |   | $ | 1,793 |   | $ | (8,489 | ) | $ | 3,375 |   |

 
| ** **                          | ** ** | **Three Months Ended June 30, 2007** | ** ** |
|-------------------------------------|------------|---------------------------------------------------------------|------------|
| ** **                          | ** ** | **Parent**                                                    | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| Net sales                           |       | $                                                             | 74,241     |   | $ | 158,652 |   | 58,026 |   | $ | (45,786 | ) | $ | 245,133 |   |
| Cost of goods  sold                 |       | 56,884                                                        |       | 149,572 |   | 56,009 |   | (45,786 | ) | 216,679 |   |
| Gross profit                        |       | 17,357                                                        |       | 9,080 |   | 2,017 |   | — |   | 28,454 |   |
| Operating  expenses                 |       | 11,403                                                        |       | 2,956 |   | (136 | ) | — |   | 14,223 |   |
| Income from  operations             |       | 5,954                                                         |       | 6,124 |   | 2,153 |   | — |   | 14,231 |   |
| Other income  (expense):            |       |                                                          |       |   |   |   |   |   |   |   |   |
| Interest  expense, net              |       | (10,208                                                       | )          | (35 | ) | (1,029 | ) | — |   | (11,272 | ) |
| Equity in  earnings of subsidiaries |       | 7,527                                                         |       | — |   | — |   | (7,527 | ) | — |   |
| Other income,  net                  |       | 2,683                                                         |       | 119 |   | 420 |   | — |   | 3,222 |   |
| Income before  income taxes         |       | 5,956                                                         |       | 6,208 |   | 1,544 |   | (7,527 | ) | 6,181 |   |
| Income tax  provision               |       | 1,063                                                         |       | — |   | 225 |   | — |   | 1,288 |   |
| Net income                          |       | $                                                             | 4,893      |   | $ | 6,208 |   | $ | 1,319 |   | $ | (7,527 | ) | $ | 4,893 |   |
|                                     |            |                                                               |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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| ** **                          | ** ** | **Six Months Ended June 30, 2008** | ** ** |
|-------------------------------------|------------|-------------------------------------------------------------|------------|
| ** **                          | ** ** | **Parent**                                                  | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| Net sales                           |       | $                                                           | 100,623    |   | $ | 339,110 |   | $ | 80,350 |   | $ | (36,954 | ) | $ | 483,129 |   |
| Cost of goods  sold                 |       | 79,118                                                      |       | 333,206 |   | 74,140 |   | (36,954 | ) | 449,510 |   |
| Gross profit                        |       | 21,505                                                      |       | 5,904 |   | 6,210 |   | — |   | 33,619 |   |
| Operating  expenses                 |       | 19,999                                                      |       | 6,002 |   | 414 |   | — |   | 26,415 |   |
| Income (loss)  from operations      |       | 1,506                                                       |       | (98 | ) | 5,796 |   | — |   | 7,204 |   |
| Other income  (expense):            |       |                                                        |       |   |   |   |   |   |   |   |   |
| Interest  expense, net              |       | (20,696                                                     | )          | (50 | ) | (3,452 | ) | — |   | (24,198 | ) |
| Equity in  earnings of subsidiaries |       | 2,145                                                       |       | — |   | — |   | (2,145 | ) | — |   |
| Other income  (expense), net        |       | (339                                                        | )          | 210 |   | 8 |   | — |   | (121 | ) |
| Income (loss)  before income taxes  |       | (17,384                                                     | )          | 62 |   | 2,352 |   | (2,145 | ) | (17,115 | ) |
| Income tax  provision (benefit)     |       | (9,018                                                      | )          | — |   | 269 |   | — |   | (8,749 | ) |
| Net income  (loss)                  |       | $                                                           | (8,366     | ) | $ | 62 |   | $ | 2,083 |   | $ | (2,145 | ) | $ | (8,366 | ) |

 
| ** **                          | ** ** | **Six Months Ended June 30, 2007** | ** ** |
|-------------------------------------|------------|-------------------------------------------------------------|------------|
| ** **                          | ** ** | **Parent**                                                  | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| Net sales                           |       | $                                                           | 175,709    |   | $ | 374,502 |   | $ | 155,431 |   | $ | (135,079 | ) | $ | 570,563 |   |
| Cost of goods  sold                 |       | 162,891                                                     |       | 345,545 |   | 144,636 |   | (135,079 | ) | 517,993 |   |
| Gross profit                        |       | 12,818                                                      |       | 28,957 |   | 10,795 |   | — |   | 52,570 |   |
| Operating  expenses                 |       | 23,017                                                      |       | 5,874 |   | 383 |   | — |   | 29,274 |   |
| Income (loss)  from operations      |       | (10,199                                                     | )          | 23,083 |   | 10,412 |   | — |   | 23,296 |   |
| Other income  (expense):            |       |                                                        |       |   |   |   |   |   |   |   |   |
| Interest  expense, net              |       | (21,066                                                     | )          | (70 | ) | (2,155 | ) | — |   | (23,291 | ) |
| Equity in  earnings of subsidiaries |       | 29,350                                                      |       | — |   | — |   | (29,350 | ) | — |   |
| Other income  (expense), net        |       | 3,197                                                       |       | 234 |   | (135 | ) | — |   | 3,296 |   |
| Income (loss)  before income taxes  |       | 1,282                                                       |       | 23,247 |   | 8,122 |   | (29,350 | ) | 3,301 |   |
| Income tax  provision (benefit)     |       | (1,727                                                      | )          | — |   | 2,019 |   | — |   | 292 |   |
| Net income  (loss)                  |       | $                                                           | 3,009      |   | $ | 23,247 |   | $ | 6,103 |   | $ | (29,350 | ) | $ | 3,009 |   |

 

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** **

**CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS**

** **
| ** **                                                                                           | ** ** | **Six Months Ended June 30, 2008** | ** ** |
|------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------|------------|
| ** **                                                                                           | ** ** | **Parent  Company**                                         | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| CASH FLOWS FROM  OPERATING ACTIVITIES:                                                               |       |                                                        |       |   |   |   |   |   |   |   |   |
| Net income  (loss)                                                                                   |       | $                                                           | (8,366     | ) | $ | 62 |   | $ | 2,083 |   | $ | (2,145 | ) | $ | (8,366 | ) |
| Adjustments to  reconcile net income (loss) to net cash provided by (used in) operating  activities: |       |                                                        |       |   |   |   |   |   |   |   |   |
| Depreciation                                                                                         |       | 3,833                                                       |       | 13,336 |   | 3,204 |   | — |   | 20,373 |   |
| Amortization –  deferred financing costs                                                        |       | 602                                                         |       | 2 |   | 12 |   | — |   | 616 |   |
| Amortization –  other intangible assets                                                         |       | 353                                                         |       | 2,442 |   | — |   | — |   | 2,795 |   |
| Loss on disposal  of assets                                                                          |       | 16                                                          |       | 17 |   | 29 |   | — |   | 62 |   |
| Deferred income  taxes                                                                               |       | (11,045                                                     | )          | — |   | 815 |   | — |   | (10,230 | ) |
| Equity in  earnings of subsidiaries and affiliates                                                   |       | (2,145                                                      | )          | — |   | — |   | 2,145 |   | — |   |
| Non-cash  stock-based compensation                                                                   |       | 1,710                                                       |       | — |   | — |   | — |   | 1,710 |   |
| Change in other  operating items                                                                     |       | (28,512                                                     | )          | (5,315 | ) | (5,546 | ) | — |   | (39,373 | ) |
| Net cash  provided by (used in) operating activities                                                 |       | (43,554                                                     | )          | 10,544 |   | 597 |   | — |   | (32,413 | ) |
|                                                                                                 |       |                                                        |       |   |   |   |   |   |   |   |   |
| CASH FLOWS FROM  INVESTING ACTIVITIES:                                                               |       |                                                        |       |   |   |   |   |   |   |   |   |
| Purchases of  property, plant, and equipment                                                         |       | (7,798                                                      | )          | (11,663 | ) | (391 | ) | — |   | (19,852 | ) |
| Other                                                                                                |       | (5,826                                                      | )          | 184 |   | — |   | — |   | (5,642 | ) |
| Net cash used in  investing activities                                                               |       | (13,624                                                     | )          | (11,479 | ) | (391 | ) | — |   | (25,494 | ) |
|                                                                                                 |       |                                                        |       |   |   |   |   |   |   |   |   |
| CASH FLOWS FROM  FINANCING ACTIVITIES:                                                               |       |                                                        |       |   |   |   |   |   |   |   |   |
| Net payments on  long-term and revolving debt                                                        |       | —                                                      |       | — |   | — |   | — |   | — |   |
| Other                                                                                                |       | 199                                                         |       | — |   | — |   | — |   | 199 |   |
| Net cash  provided by financing activities                                                           |       | 199                                                         |       | — |   | — |   | — |   | 199 |   |
|                                                                                                 |       |                                                        |       |   |   |   |   |   |   |   |   |
| Increase  (decrease) in cash and cash equivalents                                                    |       | (56,979                                                     | )          | (935 | ) | 206 |   | — |   | (57,708 | ) |
| Cash and cash  equivalents, beginning of year                                                        |       | 85,940                                                      |       | (2,474 | ) | 7,469 |   | — |   | 90,935 |   |
| Cash and cash  equivalents, end of year                                                              |       | $                                                           | 28,961     |   | $ | (3,409 | ) | $ | 7,675 |   | $ | — |   | $ | 33,227 |   |

 
| ** **                                                                                   | ** ** | **Six Months Ended June 30, 2007** | ** ** |
|----------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------|------------|
| ** **                                                                                   | ** ** | **Parent  Company**                                         | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| CASH FLOWS FROM  OPERATING ACTIVITIES:                                                       |       |                                                        |       |   |   |   |   |   |   |   |   |
| Net income                                                                                   |       | $                                                           | 3,009      |   | $ | 23,247 |   | $ | 6,103 |   | $ | (29,350 | ) | $ | 3,009 |   |
| Adjustments to  reconcile net income to net cash provided by (used in) operating activities: |       |                                                        |       |   |   |   |   |   |   |   |   |
| Depreciation                                                                                 |       | 2,858                                                       |       | 14,304 |   | 15,748 |   | — |   | 32,910 |   |
| Amortization –  deferred financing costs                                                |       | 605                                                         |       | — |   | 12 |   | — |   | 617 |   |
| Amortization –  other intangible assets                                                 |       | 395                                                         |       | 2,442 |   | — |   | — |   | 2,837 |   |
| Loss on disposal  of assets                                                                  |       | 2                                                           |       | 5 |   | 22 |   | — |   | 29 |   |
| Deferred income  taxes                                                                       |       | (2,198                                                      | )          | — |   | 2,402 |   | — |   | 204 |   |
| Equity in  earnings of subsidiaries and affiliates                                           |       | (29,350                                                     | )          | — |   | — |   | 29,350 |   | — |   |
| Non-cash  stock-based compensation                                                           |       | 1,280                                                       |       | — |   | — |   | — |   | 1,280 |   |
| Change in other  operating items                                                             |       | 35,816                                                      |       | (31,886 | ) | (29,761 | ) | — |   | (25,831 | ) |
| Net cash  provided by (used in) operating activities                                         |       | 12,417                                                      |       | 8,112 |   | (5,474 | ) | — |   | 15,055 |   |
|                                                                                         |       |                                                        |       |   |   |   |   |   |   |   |   |
| CASH FLOWS FROM  INVESTING ACTIVITIES:                                                       |       |                                                        |       |   |   |   |   |   |   |   |   |
| Purchases of  property, plant, and equipment                                                 |       | (6,991                                                      | )          | (8,218 | ) | (710 | ) | — |   | (15,919 | ) |
| Other                                                                                        |       | (250                                                        | )          | 220 |   | — |   | — |   | (30 | ) |
| Net cash used in  investing activities                                                       |       | (7,241                                                      | )          | (7,998 | ) | (710 | ) | — |   | (15,949 | ) |
|                                                                                         |       |                                                        |       |   |   |   |   |   |   |   |   |
| CASH FLOWS FROM  FINANCING ACTIVITIES:                                                       |       |                                                        |       |   |   |   |   |   |   |   |   |
| Net payments on  long-term and revolving debt                                                |       | (60,000                                                     | )          | — |   | — |   | — |   | (60,000 | ) |
| Other                                                                                        |       | 3,412                                                       |       | — |   | — |   | — |   | 3,412 |   |
| Net cash used in  financing activities                                                       |       | (56,588                                                     | )          | — |   | — |   | — |   | (56,588 | ) |
|                                                                                         |       |                                                        |       |   |   |   |   |   |   |   |   |
| Increase  (decrease) in cash and cash equivalents                                            |       | (51,412                                                     | )          | 114 |   | (6,184 | ) | — |   | (57,482 | ) |
| Cash and cash  equivalents, beginning of year                                                |       | 84,855                                                      |       | (4,502 | ) | 29,851 |   | — |   | 110,204 |   |
| Cash and cash  equivalents, end of year                                                      |       | $                                                           | 33,443     |   | $ | (4,388 | ) | $ | 23,667 |   | $ | — |   | $ | 52,722 |   |

 

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Item2.  Management’s Discussion and Analysisof Financial Condition and Results of Operations.

 

The accompanyingunaudited condensed interim consolidated financial statements are prepared inconformity with accounting principles generally accepted in the United Statesof America and such principles are applied on a basis consistent with theinformation reflected in our Form 10-K for the year ended December 31,2007 filed with the Securities and Exchange Commission (“SEC”).  Certain information and footnote disclosuresnormally included in financial statements prepared in accordance withaccounting principles generally accepted in the United States of America havebeen condensed or omitted pursuant to the rules and regulationspromulgated by the SEC.  In the opinionof management, the interim financial information includes all adjustments andaccruals, consisting only of normal recurring adjustments, which are necessaryfor a fair presentation of results for the respective interim periods.  The results of operations for the three andsix months ended June 30, 2008 are not necessarily indicative of theresults to be expected for the full fiscal year ending December 31, 2008or any interim period.  Except for thehistorical information contained herein, this quarterly report on Form 10-Qcontains forward-looking statements that involve risks and uncertainties.  Our actual results may differ materially fromthose indicated by such forward-looking statements.

 

Overview

 

Our business consists ofseven operating segments that design, manufacture, and distribute componentsfor trucks, trailers, and other vehicles. These operating segments areaggregated into three reportable segments as each reportable segment hassimilar economic characteristics, products and production processes, class ofcustomer and distribution methods. The Wheels segment’s products consist ofwheels for heavy- and medium-duty trucks and commercial trailers.  The Components segment’s products consist oftruck body and chassis parts, wheel-end components and assemblies, andseats.  The Other segment’s productsprimarily consist of other commercial vehicle components, including steerabledrive axles and gearboxes. We believe this segmentation is appropriate basedupon management’s operating decisions and performance assessment.

 

Following a strong 2006,the North American heavy- and medium-duty truck and commercial trailer marketsexperienced a significant decline in 2007 due to stricter emissions standardsthat became effective in January 2007. The emissions regulations that tookeffect in 2007 were expected to result in cleaner operating, yet more costly,trucks. As a result, some of our customers altered their traditional buyingtrends, which resulted in higher than normal demand in late 2006, which wasfollowed by a period of reduced demand in 2007. Industry analysts, including America’s Commercial Transportation (“ACT”)Publications, expect that total demand in 2008 will be similar to 2007.  Delayed or failed economic recovery couldhave a material adverse effect on our business, results of operations, orfinancial condition.

 

We believe that thecommercial vehicle market continued at a relatively slow pace during the firstsix months of 2008.  We experiencedreduced demand from the commercial vehicle industry in the first three monthsof 2008 compared to the first three months of 2007.  Net sales for the three months ended June 30,2008, were $244.9 million compared to net sales of $245.1 million for the threemonths ended June 30, 2007.  Weanticipate that net sales for the second half of 2008 will be above the secondhalf of 2007 as we approach 2009, which is predicted by industry analysts to bea stronger year for production in the North American commercial vehicleindustry.  Our challenge is to meet thevarying levels of production while improving our internal productivity andmitigating the margin pressure from rising material costs.

 

Under SFAS No. 142,we are required to assess goodwill and any indefinite-lived intangible assetsfor impairment annually, or more frequently if circumstances indicateimpairment may have occurred.  Theanalysis of potential impairment of goodwill requires a two step approach.  The first step is the estimation of fairvalue of each operating segment.  If stepone indicates that impairment potentially exists, the second step is performedto measure the amount of impairment, if any. Goodwill impairment exists when the estimated fair value of goodwill isless than its carrying value.

 

During the last two weeksof the quarter ended June 30, 2008, we experienced a significant declinein our stock price resulting from overall economic and industryconditions.  We determined that this is an indicator of impairment and animpairment analysis is required under SFAS No. 142.   We haveperformed a preliminary step one analysis, the results of which areinconclusive as to whether we have an impairment of one or more of ourreporting units.  Therefore, we are in process of assessing the fair valueof each of our seven reporting units.  In the event that the fair value ofone or some of our reporting units is less than its carrying amount, we willperform a step two calculation to determine the amount of impairment, whichwill be recorded in the quarter ending September 30, 2008.  Such acharge is non-cash and would not affect our liquidity, tangible equity or debtcovenant ratios.

 

On January 31, 2005,pursuant to the terms of an agreement and plan of merger, one of ourwholly-owned subsidiaries was merged with and into TTI, resulting in TTIbecoming a wholly-owned subsidiary of Accuride. In 

 

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connection with the TTImerger, we entered into a Fourth Amended and Restated Credit Agreementconsisting of (1) a new term credit facility in an aggregate principalamount of $550.0 million that will mature on January 31, 2012, and (2) arevolving credit facility in an aggregate principal amount of $125.0 millionthat will terminate on January 31, 2010. In addition, we issued $275.0 million aggregate principal amount of 81⁄2%senior subordinated notes due in 2015.

 

On April 26, 2005,our common stock commenced trading on the New York Stock Exchange under thesymbol “ACW.”  During 2006 and 2007, wereduced our senior debt by a total of $125.0 million from cash from operationsand existing cash reserves.

 

Duringthe fourth quarter of 2006, we resolved a commercial dispute with Ford MotorCompany.  As a result of the resolution, we recognized $10.4 million ofrevenue in 2006, $8.0 million in the three months ended March 31, 2007, $2.0million in the three months ended June 30, 2007 and an additional $0.6million in the remainder of 2007.  In addition, cash flow increased by$10.0 million in 2006 and $11.0 million in the three months ended June 30,2007.  Ford re-sourced its Accuridebusiness to another supplier during 2007. In 2007, sales to Ford represented less than 5% of consolidatedrevenues.

 

**Resultsof Operations**

 

***ThreeMonths Ended June 30, 2008 Compared to the Three Months Ended June 30,2007***

 

The following table setsforth certain income statement information of Accuride for the three monthsended June 30, 2008 and June 30, 2007:

 
| **(In thousands except per share data)** | ** ** | **Fiscal 2008** | ** ** | **Fiscal 2007** | ** ** |
|-------------------------------------------------------------------|------------|----------------------|------------|----------------------|------------|
| ** **                                                        | ** ** | ** **           | ** ** | ** **           | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net sales:                                                        |       |                 |       |                 |       |   |   |   |   |
| Wheels                                                            |       | $                    | 105,154    |                 | 43.0       | % | $ | 113,357 |   | 46.2 | % |
| Components                                                        |       | 127,359              |       | 52.0                 | %          | 120,666 |   | 49.2 | % |
| Other                                                             |       | 12,406               |       | 5.0                  | %          | 11,110 |   | 4.6 | % |
| Total net sales                                                   |       | 244,919              |       | 100.0                | %          | 245,133 |   | 100.0 | % |
| Gross profit:                                                     |       |                 |       |                 |       |   |   |   |   |
| Wheels                                                            |       | 17,072               |       | 16.2                 | %          | 23,523 |   | 20.8 | % |
| Components                                                        |       | 2,873                |       | 2.3                  | %          | 3,397 |   | 2.8 | % |
| Other                                                             |       | 3,378                |       | 27.2                 | %          | 2,541 |   | 22.9 | % |
| Corporate                                                         |       | (1,973               | )          | —               | %          | (1,007 | ) | — | % |
| Total gross  profit                                               |       | 21,350               |       | 8.7                  | %          | 28,454 |   | 11.6 | % |
| Operating  expenses                                               |       | 12,761               |       | 5.2                  | %          | 14,223 |   | 5.8 | % |
| Income from  operations                                           |       | 8,589                |       | 3.5                  | %          | 14,231 |   | 5.8 | % |
| Interest  expense, net                                            |       | (8,484               | )          | (3.5                 | )%         | (11,272 | ) | (4.6 | )% |
| Other income                                                      |       | 933                  |       | 0.4                  | %          | 3,222 |   | 1.3 | % |
| Income tax  provision (benefit)                                   |       | (2,337               | )          | (1.0                 | )%         | 1,288 |   | 0.5 | % |
| Net income                                                        |       | $                    | 3,375      |                 | 1.4        | % | $ | 4,893 |   | 2.0 | % |

 

**Net sales -** Consolidated net sales for the threemonths ended June 30, 2008, were $244.9 million compared to net sales of$245.1 million for the three months ended June 30, 2007.  Sales decreased in the Wheels segment by 7.2%due to lower sales demand from the U.S. Trailer industry and $2.0 million ofrevenue recognized in the prior period resulting from a commercial dispute witha customer.  Sales increased in theComponents segment by 5.5% mainly due to increased pricing to offset increasedmaterial costs.

 

**Gross profit -**Consolidated gross profit decreased $7.1million to $21.4 million for the three months ended June 30, 2008, from$28.5 million for the three months ended June 30, 2007.  In the Wheels segment during the three monthsended June 30, 2007, we recorded a curtailment gain of $1.1 millionrelated to a reduction in the labor force and $2.0 million of revenue resultingfrom a commercial dispute with a customer. The Components segment gross profit percentage declined from 2.8% to2.3% due to recognizing $1.2 million (0.9% of Sales) of severance-relatedcharges in the current period.

 

**Operating expenses -**Operating expenses decreased $1.4 millionto $12.8 million for the three months ended June 30, 2008 from $14.2million for the three months ended June 30, 2007.  This was primarily due to reductions inpayroll-related expenses.

 

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**Interest expense, net -**Net interest expense decreased $2.8 million to $8.5 million for thethree months ended June 30, 2008 from $11.3 million for the three monthsended June 30, 2007.  The decreaseis primarily attributable to $3.4 million of non-cash unrealized gains from themark to market of our interest rate swap agreements in the current periodcompared to $0.1 million of unrealized losses in the prior year’s results.

 

**Income tax provision (benefit)** – The income tax benefit recorded in thecurrent period of $2.3 million was due to a favorable settlement of an IRSaudit and a favorable change in our valuation allowance related to netoperating losses in various tax jurisdictions.

 

**Net income (loss) -**We had netincome of $3.4million for the three monthsended June 30, 2008 compared to net income of $4.9 million for the threemonths ended June 30, 2007.  Thereduction was primarily a result of the lower gross profit partially offset bylower interest expense and the income tax benefit recorded in the currentperiod.

 

***SixMonths Ended June 30, 2008 Compared to the Six Months Ended June 30,2007***

 

The following table setsforth certain income statement information of Accuride for the six months endedJune 30, 2008 and June 30, 2007:

 
| **(In thousands except per share data)** | ** ** | **Fiscal 2008** | ** ** | **Fiscal 2007** | ** ** |
|-------------------------------------------------------------------|------------|----------------------|------------|----------------------|------------|
| ** **                                                        | ** ** | ** **           | ** ** | ** **           | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net sales:                                                        |       |                 |       |                 |       |   |   |   |   |
| Wheels                                                            |       | $                    | 209,164    |                 | 43.3       | % | $ | 272,686 |   | 47.8 | % |
| Components                                                        |       | 248,118              |       | 51.3                 | %          | 273,415 |   | 47.9 | % |
| Other                                                             |       | 25,847               |       | 5.4                  | %          | 24,462 |   | 4.3 | % |
| Total net sales                                                   |       | 483,129              |       | 100.0                | %          | 570,563 |   | 100.0 | % |
| Gross profit:                                                     |       |                 |       |                 |       |   |   |   |   |
| Wheels                                                            |       | 37,243               |       | 17.8                 | %          | 36,320 |   | 13.3 | % |
| Components                                                        |       | (7,942               | )          | (3.2                 | )%         | 12,720 |   | 4.7 | % |
| Other                                                             |       | 7,188                |       | 27.8                 | %          | 5,471 |   | 22.4 | % |
| Corporate                                                         |       | (2,870               | )          | —               | %          | (1,941 | ) | — | % |
| Total gross  profit                                               |       | 33,619               |       | 7.0                  | %          | 52,570 |   | 9.2 | % |
| Operating  expenses                                               |       | 26,415               |       | 5.5                  | %          | 29,274 |   | 5.1 | % |
| Income from  operations                                           |       | 7,204                |       | 1.5                  | %          | 23,296 |   | 4.1 | % |
| Interest  expense, net                                            |       | (24,198              | )          | (5.0                 | )%         | (23,291 | ) | (4.1 | )% |
| Other income  (loss), net                                         |       | (121                 | )          | (0.0                 | )%         | 3,296 |   | 0.6 | % |
| Income tax  provision (benefit)                                   |       | (8,749               | )          | (1.8                 | )%         | 292 |   | 0.1 | % |
| Net income  (loss)                                                |       | $                    | (8,366     | )                    | (1.7       | )% | $ | 3,009 |   | 0.5 | % |

 

**Net sales.** Net sales for the six months ended June 30,2008 were $483.1 million, which was a decrease of 15.3% compared to net salesof $570.6 million for the six months ended June 30, 2007.  The decrease in net sales was realized atboth of the larger segments and was primarily a result of the reduced demand in2008 combined with $10.0 million of revenue recognized during 2007 resultingfrom a resolution of a commercial dispute with a customer in our Wheelssegment.

 

**Gross profit. **Gross profit decreased $19.0 million to $33.6 millionfor the six months ended June 30, 2008 from $52.6 million for the sixmonths ended June 30, 2007, primarily due to the $87.5 million reductionin sales.

 

During the first sixmonths of 2007, our Wheels segment recognized $17.5 million of severance andother benefit charges related to a reduction in its work force in Canada and$11.1 million of additional depreciation expense as a result of a reduction inthe useful lives of certain assets partially offset by $10.0 million of revenuementioned above.

 

The gross profit for theComponents segment decreased $20.6 million due to reduced sales volume,recognizing $7.7 million of one-time charges related to a labor interruption atour Rockford, Illinois facility and $1.8 million of severance-related charges.

 

**Operating expenses.** Operating expenses decreased $2.9 million to $26.4 million for the sixmonths ended June 30, 2008 from $29.3 million for the six months ended June 30,2007.  This was primarily due todecreased payroll-related expenses.

 

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**Interestexpense, net.  **Net interest expenseincreased $0.9 million to $24.2 million for the six months ended June 30,2008 from $23.3 million for the six months ended June 30, 2007. Theincrease is attributable to having a higher net debt position and $1.2 millionof unrealized losses from our interest rate swap agreements in the current yearcompared to $0.8 million of unrealized gains in the prior year’s results.

 

**Netincome (loss).  **We had a net loss of $8.4 million for the six months ended June 30, 2008 compared to netincome of $3.0 million for the six months ended June 30, 2007. This wasprimarily a result of the lower gross profit due to the reduction in salesdemand and the $7.7 million of one-time pre-tax charges related to a laborinterruption at our Rockford, Illinois facility.

 

***Changes in Financial Condition***

 

At June 30,2008, we had total assets of $1,092.6 million, as compared to $1,113.6 millionat December 31, 2007. The $21.0 million, or 1.9%, decrease in total assetsduring the six months ended June 30, 2008 primarily resulted from thereduction of cash of $57.7 million partially offset by an increase in workingcapital. We define working capital as current assets (excluding cash) lesscurrent liabilities.

 

We useworking capital and cash flow measures to evaluate the performance of ouroperations and our ability to meet our financial obligations. We requireworking capital investment to maintain our position as a leading manufacturerand supplier of commercial vehicle components. We continue to strive foraligning our working capital investment with our customers’ purchaserequirements and our production schedules.

 

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

 
| ** **                        | ** ** | **June 30,** | ** ** | **December 31,** | ** ** |
|-----------------------------------|------------|-------------------|------------|-----------------------|------------|
| ** **                        | ** ** | **2008**          | ** ** | **2007**              | ** ** |
| Accounts  receivable              |       | $                 | 113,845    |                  | $          | 87,195 |   |
| Inventories and  supplies         |       | 119,292           |       | 113,110               |       |
| Deferred income  taxes (current)  |       | 19,423            |       | 19,422                |       |
| Other current  assets             |       | 8,578             |       | 2,703                 |       |
| Accounts payable                  |       | (77,092           | )          | (80,070               | )          |
| Accrued payroll  and compensation |       | (24,717           | )          | (30,456               | )          |
| Accrued interest  payable         |       | (10,625           | )          | (11,105               | )          |
| Other current  liabilities        |       | (32,994           | )          | (28,323               | )          |
| Working Capital                   |       | $                 | 115,710    |                  | $          | 72,476 |   |

 

Significantchanges in working capital from December 31, 2007 included:

 
| • |   | an increase in  net customer receivables of $26.7 million due to the comparative increase in  revenue in the months leading up to the respective period-end dates;                                                                                            |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | an increase in  inventories and supplies of $6.2 million due to the draw-down of inventories  at year-end and pre-buy of raw materials in March 2008 due to escalating  prices;                                                                          |
| • |   | an increase of  other current assets of $5.9 million due to the $4.1 million income tax  receivable at June 30, 2008, which did not exist at December 31,  2007 and other prepaid insurance expenses that are paid annually in the  second quarter; |
| • |   | a reduction of  accrued payroll and compensation of $5.7 million due to annual incentive payments  which are paid annually in the first quarter; and                                                                                                          |
| • |   | An increase in  other current liabilities of $4.7 million due primarily to a $1.6 million  increase in the mark to market valuation of our interest rate swap agreements  and $2.7 million increase of other liabilities.                                     |

 

## **Capital Resourcesand Liquidity**

## ** **

Ourprimary sources of liquidity during the six months ended June 30, 2008,were cash reserves. We believe that cash from operations, existing cashreserves, and availability under our Revolver will provide adequate funds forour working capital needs, planned capital expenditures and debt serviceobligations for the next 12 months and the foreseeable future. Our ability tofund working capital needs, planned capital expenditures, scheduled debt payments,and to comply with all of the financial covenants under our credit agreement,depends on our future operating performance and cash flow, which in

 

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turn, are subject toprevailing economic conditions and to financial, business and other factors,some of which are beyond our control.

 

##### **Operating Activities**

##### ** **

Netcash used by operating activities during the first six months of 2008 amountedto $32.4 million compared to cash of $15.1 million provided for the comparableperiod in 2007. As expected, the primary difference was the increase in workingcapital requirements due to the increase in production in the current periodcompared to the reduced levels of production experienced during the comparableperiod in 2007.

 

##### **Investing Activities**

##### ** **

Netcash used in investing activities totaled $25.5 million for the six monthsended June 30, 2008, compared to a use of $15.9 million for the six monthsended June 30, 2007. Our most significant cash outlays for investingactivities are the purchases of property, plant and equipment. Our capitalexpenditures in 2007 were $36.5 million. Capital expenditures for 2008 areexpected to be approximately $35 million, which we expect to fund through ourcash from operations or existing cash reserves. Included in the 2008 use ofinvesting cash was an investment in marketable securities of $5.0 million.

 

##### **Financing Activities**

##### ** **

Netcash provided by financing activities totaled $0.2 million for the six monthsended June 30, 2008, compared to $56.6 million of net cash used for thecomparable period in 2007 due to payments made in 2007 to reduce our seniordebt.

 

**BankBorrowing.  **In connection with the TTI merger, weentered into a Fourth Amended and Restated Credit Agreement consisting of (1) aterm credit facility (the Term B Loan Facility) in an aggregate principalamount of $550.0 million that will mature on January 31, 2012 and (2) arevolving credit facility (the “Revolver”) in an aggregate principal amount of$125.0 million (comprised of a $95.0 million U.S. revolving creditfacility and the continuation of a $30.0 million Canadian revolving creditfacility) that will terminate on January 31, 2010. As of June 30,2008, $294.6 million was outstanding under the Term B Loan Facility and theRevolver was undrawn. The Term B Loan Facility requires quarterly amortizationpayments of $1.4 million that commenced on March 31, 2005, with thebalance paid on the maturity date for the Term B Loan Facility. As of June 30,2008, the regularly scheduled payments due through December 31, 2011 wereprepaid without penalty. The interest rates per annum applicable to loans underour senior credit facilities are, at the option of the Company or AccurideCanada Inc., as applicable, a base rate or Eurodollar rate plus, in each case,an applicable margin which is subject to adjustment based on our leverageratio. The base rate is a fluctuating interest rate equal to the highest of (a) thebase rate reported by Citibank, N.A. (or, with respect to the Canadianrevolving credit facility, the reference rate of interest established or quotedby Citibank Canada for determining interest rates on U.S. dollar denominatedcommercial loans made by Citibank Canada in Canada), (b) a reserveadjusted three-week moving average of offering rates for three-monthcertificates of deposit plus one-half of one percent (0.5%) and (c) thefederal funds effective rate plus one-half of one percent (0.5%). Theobligations under our senior credit facilities are guaranteed by all of ourdomestic subsidiaries. The loans under the senior credit facilities are securedby, among other things, a lien on substantially all of our U.S. properties andassets and of our domestic subsidiaries and a pledge of 65% of the stock of ourforeign subsidiaries. The loans under the Canadian revolving facility are alsosecured by substantially all of the properties and assets of Accuride CanadaInc.

 

**RestrictiveDebt Covenants**.  Our senior credit facilitiescontain numerous financial and operating covenants that limit the discretion ofmanagement with respect to certain business matters. These covenants placesignificant restrictions on, among other things, our ability to incuradditional debt, to pay dividends, to create liens, to make certain paymentsand investments and to sell or otherwise dispose of assets and merge orconsolidate with other entities. We are also required to meet certain financialratios and tests, including a leverage ratio, an interest coverage ratio and afixed charge coverage ratio. Failure to comply with the obligations containedin the credit documents could result in an event of default, and possibly theacceleration of the related debt and the acceleration of debt under otherinstruments evidencing indebtedness that may contain cross-acceleration orcross-default provisions.

 

On November 28,2007, we entered into an amendment to the Fourth Amended and Restated CreditAgreement. The amendment increased pricing and modified certain financialcovenants through 2008, including changes to the leverage, interest coverageand fixed charge coverage ratios. As of June 30, 2008, we were incompliance with our financial covenants and ratios.

 

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**SeniorSubordinated Notes**.  In connection with the TTImerger, we issued $275.0 million aggregate principal amount of 81/2% senior subordinated notes due 2015 in a privateplacement transaction. Interest on the senior subordinated notes is payable on February 1and August 1 of each year, beginning on August 1, 2005. The notesmature on February 1, 2015, and may be redeemed, at our option, in wholeor in 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. The senior subordinated notes are general unsecuredobligations (1) subordinated in right of payment to all of our and theguarantors’ existing and future senior indebtedness, including any borrowingsunder our senior credit facilities; (2) equal in right of payment with anyof our and the guarantors’ existing and future senior subordinatedindebtedness; (3) senior in right of payment to all of our and theguarantors’ existing and future subordinated indebtedness and (4) structurallysubordinated to all obligations of our subsidiaries that do not guarantee theoutstanding notes. On June 15, 2005, we completed an exchange offer ofthese senior subordinated notes for substantially identical notes registeredunder the Securities Act of 1933, as amended. As of June 30, 2008, thoseNotes remain outstanding.

 

**Off-BalanceSheet Arrangements.  **We do not currently have anyoff-balance sheet arrangements that have or are reasonably likely to have a materialcurrent or future effect on our financial condition, revenues or expenses,results of operations, liquidity, capital expenditures or capital resources. Fromtime to time we may enter into operating leases, letters of credit, ortake-or-pay obligations related to the purchase of raw materials that would notbe reflected in our balance sheet.

 

**RecentAccounting Pronouncements.**

 

***SFAS No. 141(R) ***—In December 2007, the FASB issued SFAS No. 141(R),*Business Combinations*, which replacesSFAS No. 141,*Business Combinations*.SFAS No. 141(R) requires the acquirer of a business to recognize andmeasure the identifiable assets acquired, the liabilities assumed, and anynon-controlling interest in the acquiree at fair value. SFAS No. 141(R) alsorequires transactions costs related to the business combination to be expensedas incurred. SFAS No. 141(R) applies prospectively to businesscombinations for which the acquisition date is on or after the beginning of thefirst annual reporting period beginning on or after December 15, 2008. Weare currently evaluating the impact of SFAS No. 141(R) related tofuture acquisitions, if any, on our consolidated financial statements.

 

***SFAS No. 160*** —In December 2007, the FASB issued SFAS No. 160,*Noncontrolling Interests in Consolidated FinancialStatements*. SFAS No. 160 requires all entities to reportnoncontrolling (minority) interests in subsidiaries as equity in theconsolidated financial statements. Its intention is to eliminate the diversityin practice regarding the accounting for transactions between an entity andnoncontrolling interests. SFAS No. 160 will apply to fiscal yearsbeginning on or after December 15, 2008. We are currently evaluating theimpact of SFAS No. 160 on our consolidated financial statements.

 

***SFAS No. 161*** —In March 2008, the FASB issued SFAS No. 161, *Disclosuresabout Derivative Instruments and Hedging Activities - an amendment of FASBStatement No. 133.*SFAS No. 161 amends and expands thedisclosure requirements of SFAS No. 133 to provide a better understandingof how and why an entity uses derivative instruments, how derivativeinstruments and related hedged items are accounted for, and their effect on anentity’s financial position, financial performance, and cashflows.  SFAS No. 161 is effective for fiscal years beginningafter November 15, 2008. We are currently evaluating the impact of SFAS No. 161on our consolidated financial statements.

 

***SFAS No. 162*** —In May 2008, the FASB issued SFAS No. 162, *TheHierarchy of Generally Accepted Accounting Principles.*SFAS No. 162identifies the sources of accounting principles and the framework for selectingthe principles to be used in the preparation of financial statements ofnongovernmental entities that are presented in conformity with generally acceptedaccounting principles (GAAP) in the United States (the GAAP hierarchy). ThisStatement is effective 60 days following the SEC’s approval of the PublicCompany Accounting Oversight Board amendments to AU Section 411, *The Meaning of Present Fairly in Conformity With Generally AcceptedAccounting Principles*. We are currently evaluating the impact ofSFAS No. 162 on our consolidated financial statements.

 

**CriticalAccounting Policies and Estimates.  **We have made anumber of estimates and assumptions relating to the reporting of results ofoperations and financial position in the preparation of our financialstatements in conformity with accounting principles generally accepted in theUnited States of America. Actual results could differ significantly from thoseestimates under different assumptions and conditions. We included in our Form 10-Kfor the year ended December 31, 2007 a discussion of our most criticalaccounting policies, which are those that have a material impact on ourfinancial condition or operating performance and require management’s mostdifficult, subjective and complex judgments, often as a result of the need tomake estimates about the effect of matters that are inherently uncertain.

 

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*FactorsAffecting Future Results*

 

Inthis report, we have made various statements regarding current expectations orforecasts of future events, which speak only as of the date the statements, aremade. These statements are “forward-looking statements” within the meaning ofthat term in Section 27A of the Securities Act of 1933 and Section 21Eof the Securities Exchange Act of 1934. Forward-looking statements are also madefrom time-to-time in press releases and in oral statements made by the officersof Accuride. 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 lookingstatements also include, but are not limited to, statements regardingcommercial vehicle market recovery, projections of revenue, income, loss, orworking capital, capital expenditure levels, ability to mitigate rising rawmaterial costs through increases in selling prices, plans for futureoperations, financing needs, the ultimate outcome and impact of any litigationagainst Accuride, the sufficiency of our capital resources and plans and assumptionsrelating to the foregoing.

 

Suchforward-looking statements are based on assumptions and estimates, whichalthough believed to be reasonable, may turn out to be incorrect. Therefore,undue reliance should not be placed upon these estimates and statements. Wecannot 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 obligationto publicly update any forward-looking statements, whether as a result of newinformation, future events, or otherwise. You are advised to consult furtherdisclosures we may make on related subjects in our filings with the SEC. Inaddition to other factors discussed in this report, some of the importantfactors that could cause actual results to differ materially from thosediscussed in the forward-looking statements include the following:

 
| • |   | a more severe  than anticipated commercial vehicle industry downturn in 2008 could have a  material adverse effect on our business;                                                                                                                                                                                                                                                                                                                                                                                                               |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | the loss of a  major customer could have a material adverse effect on our business;                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| • |   | the demands of  original equipment manufacturers for price reductions may adversely affect  profitability;                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| • |   | we use a  substantial amount of raw steel and aluminum and are vulnerable to industry  shortages, significant price increases, and surcharges, some of which we may  not be able to pass through to our customers;                                                                                                                                                                                                                                                                                                                                |
| • |   | our credit  documents contain significant financial and operating covenants that limit  the discretion of management with respect to certain business matters. We  must also meet certain financial ratios and tests as described above. Failure  to comply with the obligations contained in the debt agreements could result  in an event of default, and possibly the acceleration of the related debt and  the acceleration of debt under other instruments evidencing debt that may  contain cross-acceleration or cross-default provisions; |
| • |   | a labor strike  may disrupt our supply to our customer base;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| • |   | we may encounter  increased competition in the future from existing competitors or new  competitors;                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| • |   | our significant  indebtedness may have important consequences, including, but not limited to,  impairment of our ability to obtain additional financing, reduction of funds  available for operations and business opportunities or limitations on our  ability to dispose of assets;                                                                                                                                                                                                                                                             |
| • |   | significant  volatility in the foreign currency markets could have an adverse effect on  us;                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| • |   | our ability to  service our indebtedness is dependent upon operating cash flow;                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| • |   | an interruption  of performance of our machinery and equipment could have an adverse effect on  us;                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| • |   | an interruption  in supply of steel or aluminum could reduce our ability to obtain favorable  sourcing of such raw materials;                                                                                                                                                                                                                                                                                                                                                                                                                     |
| • |   | we may be  subject to liability under certain environmental laws and the cost of  compliance with these regulations could have a material adverse effect on our  financial condition and may adversely affect our ability to sell or rent such  property or to borrow using such property as collateral;                                                                                                                                                                                                                                          |
| • |   | our success  depends largely upon the abilities and experience of certain key management  personnel, and the loss of the services of one or more of these key personnel  could have a negative impact on our business.                                                                                                                                                                                                                                                                                                                            |

 

Forfurther information, refer to the business description and additional riskfactors sections included in our Form 10-K for the year ended December 31,2007, as filed with the SEC.

 

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

 

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

 

**ForeignCurrency Risk** -Certain forecasted transactions, assets, and liabilities are exposed to foreigncurrency risk. We monitor our foreign currency exposures to maximize theoverall effectiveness of our foreign currency derivatives. The principalcurrency of exposure is the Canadian dollar. Foreign exchange forward contractsand option contracts are used to offset the impact of the variability inexchange rates on our operations, cash flows, assets and liabilities. At June 30,2008, we had no open foreign exchange forward contracts.

 

**RawMaterial/Commodity Price Risk -**We rely upon the supply ofcertain raw materials and commodities in our production processes and haveentered into long-term supply contracts for our steel and aluminum requirements.The exposures associated with these commitments are primarily managed throughthe terms of the sales, supply, and procurement contracts. From time to time,we use commodity price swaps and futures contracts to manage the variability incertain commodity prices. At June 30, 2008, we had no open materialcommodity price swaps and futures contracts.

 

**InterestRate Risk** - We use long-term debt as a primary source ofcapital in our business. The following table presents the principal cash repaymentsand related weighted average interest rates by maturity date for our long-termfixed-rate debt and other types of long-term debt at June 30, 2008:

 
| **(Dollars in thousands)** | ** ** | **2008** | ** ** | **2009** | ** ** | **2010** | ** ** | **2011** | ** ** | **2012** | ** ** | **Thereafter** | ** ** | **Total** | ** ** | **Fair Value** | ** ** |
|--------------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------------|------------|-----------|------------|---------------------|------------|
| Long-term Debt:                      |       |     |       |     |       |     |       |     |       |     |       |           |       |      |       |                |       |
| Fixed                                |       | —   |       | —   |       | —   |       | —   |       | —   |       | $              | 275,000    |      | $          | 275,000             |       | $ | 200,750 |   |
| Average Rate                         |       | —   |       | —   |       | —   |       | —   |       | —   |       | 8.50           | %          | 8.50      | %          |                |       |
| Variable                             |       | —   |       | —   |       | —   |       | —   |       | $        | 294,625    |           | $          | 3,100     |       | $                   | 297,725    |   | $ | 284,467 |   |
| Average Rate                         |       | —   |       | —   |       | —   |       | —   |       | 6.03     | %          | 1.86           | %          | 5.99      | %          |                |       |
|                                      |            |          |            |          |            |          |            |          |            |          |            |                |            |           |            |                     |            |  |  |  |  |

 

Wehave used interest rate swaps to alter interest rate exposure between fixed andvariable rates on a portion of our long-term debt. As of June 30, 2008, wehad one interest rate swap agreement outstanding, which was established in December 2007and the terms with the counterparty are to exchange, at specified intervals,the difference between 3.81% from March 2008 through March 2010, andthe variable rate interest amounts calculated by reference to the notionalprincipal amount. The notional principal amounts under the terms are $200million from March 2008 through March 2009, $150 million from March 2009through September 2009 and $125 million from September 2009 through March 2010.

 

**Item 4.Controls and Procedures**

 

Wemaintain disclosure controls and procedures that are designed to ensure thatinformation required to be disclosed in our Exchange Act reports is recorded,processed, summarized and reported within the time periods specified in the SEC’srules and forms, and that such information is accumulated and communicatedto our management, including our Chief Executive Officer and Chief FinancialOfficer, as appropriate, to allow timely decisions regarding requireddisclosure. In designing and evaluating the disclosure controls and procedures,management recognized that any controls and procedures, no matter how welldesigned and operated, can provide only reasonable assurance of achieving thedesired control objectives, and management is required to apply its judgment inevaluating the cost-benefit relationship of possible controls and procedures.

 

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

 

***Changes in Internal Control Over Financial Reporting.  ***Therehave been no changes in our internal controls over financial reporting duringour most recent quarter that has materially affected, or is reasonably likelyto materially affect, our internal controls over financial reporting.

 

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**PART II.OTHER INFORMATION**

 

**Item 1. Legal Proceedings**

 

NeitherAccuride nor any of our subsidiaries is a party to any legal proceeding which,in the opinion of management, would have a material adverse effect on ourbusiness or financial condition. However, we from time-to-time are involved inordinary routine litigation incidental to our business, including actionsrelated to product liability, contractual liability, workplace safety andenvironmental claims. We establish reserves for matters in which losses areprobable and can be reasonably estimated. While we believe that we haveestablished adequate accruals for our expected future liability with respect toour pending legal actions and proceedings, we cannot assure you that ourliability with respect to any such action or proceeding would not exceed ourestablished accruals. Further, we cannot assure that litigation having amaterial adverse affect on our financial condition will not arise in thefuture.

 

**Item 4. Submission of Matters to a Vote of Security Holders**

 

The results of the Company’sannual meeting of shareholders, held on May 16, 2008, were reported in a Form 8-K,filed with the Securities and Exchange Commission on May 20, 2008.

 

**Item 6. Exhibits**

 
| **Exhibit No.** | ** ** | ** ** | **Description** |
|----------------------|------------|------------|-----------------|
|                 |       |       |            |   |
| 2.1                  |       | —     |            | Agreement  and Plan of Merger, dated as of December 24, 2004, by and among Accuride  Corporation, Amber Acquisition Corp., Transportation Technologies  Industries, Inc., certain signing stockholders and the Company  Stockholders Representatives. Previously filed as an exhibit to the  Form 8-K filed on December 30, 2004 and incorporated herein by  reference. |
| 2.2                  |       | —     |            | 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 81/2% 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                  |       | —     |            | Shareholder  Rights Agreement dated January 31, 2005 by and between the Registrant  and 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. |
| 4.5                  |       | —     |            | 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. |
| 4.6                  |       | —     |            | 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, |

 

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|             |   |   |   | 2005 (Reg.  No. 333-121944) and incorporated herein by reference.                                                                                                                                                                                                                                                               |
|------------------|--------|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 4.7*             |   | — |   | 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.                                                    |
| 4.8*             |   | — |   | 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.                             |
| 4.9              |   | — |   | 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             |   | — |   | Commercial Lease  Agreement, effective as of January 1, 2008 between Accuride Erie, L.P. and  Sarum Management, Inc. for property in Cuyahoga Falls,  Ohio. Previously filed as an exhibit to the Form 8-K filed on  May 20, 2008 and is incorporated by reference herein.                                       |
| 10.2             |   | — |   | Third Addendum  to Lease Agreement with Option to Purchase, dated June 12, 2008, by and  among Accuride Corporation and Viking Properties, LLC and Logan Indiana  Properties, LLC. Previously filed as an exhibit to the Form 8-K  filed on June 16, 2008 and is incorporated by reference herein.               |
| 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                                 |
|--------------|--------|------------------------------------------------|
| †† |   | Furnished  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:  | August 7,  2008 |
| John R. Murphy                                   |   |         |                 |
| President and  Chief Executive Officer           |   |         |                 |
| (Principal  Executive Officer)                   |   |         |                 |
|                                             |   |         |                 |
|                                             |   |         |                 |
| /s/ DAVID K.  ARMSTRONG                          |   | Dated:  | August 7,  2008 |
| David K.  Armstrong                              |   |         |                 |
| Senior Vice  President / Chief Financial Officer |   |         |                 |
| (Principal  Financial and Accounting Officer)    |   |         |                 |

 

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