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**UNITED STATES SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, DC 20549**

** **

**FORM 10-Q**

 

**(MarkOne)**

 

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

 

**For thequarterly period ended September 30, 2009.**

 

**OR**

 

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

 

**For thetransition 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’s Telephone 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  Noo

 

Indicate by check markwhether the registrant has submitted electronically and posted on its corporateWeb site, if any, every Interactive Data File required to be submitted andposted pursuant to Rule 405 of Regulation S-T (§232.405 of this Chapter)during the preceding 12 months (or for such shorter period that the registrantwas required to submit and post such files).   Yes o  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 “largeaccelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2of 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 November 12,2009, 47,506,895 shares of Accuride Corporation common stock, par value $.01per share, were outstanding. 

 

 

 

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**ACCURIDE CORPORATION**

 

**Table ofContents**

** **
| ** **                                   | ** **                                                                                                             | **Page** |
|----------------------------------------------|------------------------------------------------------------------------------------------------------------------------|----------|
| **PART I – FINANCIAL INFORMATION** |                                                                                                                   |
| Item 1.                                      | Condensed Financial Statements  (Unaudited)                                                                            |     |
|                                         | Condensed Consolidated  Balance Sheets as of September 30, 2009 and December 31, 2008                        | 3        |
|                                         | Condensed Consolidated  Statements of Operations for the Three and Nine Months Ended  September 30, 2009 and 2008 | 4        |
|                                         | Condensed Consolidated  Statements of Cash Flows for the Nine Months Ended September 30, 2009  and 2008           | 5        |
|                                         | Notes to  Condensed Consolidated Financial Statements                                                                  | 6        |
| Item 2.                                      | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                            | 23       |
| Item 3.                                      | Quantitative  and Qualitative Disclosures About Market Risk                                                            | 33       |
| Item 4.                                      | Controls and  Procedures                                                                                               | 34       |
| **PART II – OTHER  INFORMATION**   |                                                                                                                   |
| Item 1.                                      | Legal Proceedings                                                                                                      | 34       |
| Item 1A.                                     | Risk Factors                                                                                                           | 35       |
| Item 2.                                      | Unregistered  Sales of Equity Securities and use of Proceeds                                                           | 37       |
| Item 6.                                      | Exhibits                                                                                                               | 37       |
| Signatures                                   |                                                                                                                   | 39       |

 

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**Part I.  FINANCIAL INFORMATION**

 

**Item1.  Financial Statements**

**ACCURIDE CORPORATION**

**CONDENSED CONSOLIDATED BALANCE SHEETS(UNAUDITED)**

 
| ** **                                                                                                                                                                                | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| **(In thousands, except for per  share data)**                                                                                                                                            | ** ** | **2009**               | ** ** | **2008**              | ** ** |
| ** **                                                                                                                                                                                | ** ** | ** **             | ** ** | ** **            | ** ** |
| **ASSETS**                                                                                                                                                                                |       |                   |       |                  |       |
| CURRENT  ASSETS:                                                                                                                                                                          |       |                   |       |                  |       |
| Cash  and cash equivalents                                                                                                                                                                |       | $                      | 25,017     |                  | $          | 123,676 |   |
| Customer  receivables, net of allowance for doubtful accounts of $1,899 and $1,743 in  2009 and 2008, respectively                                                                        |       | 69,591                 |       | 70,485                |       |
| Other  receivables                                                                                                                                                                        |       | 7,201                  |       | 7,734                 |       |
| Inventories                                                                                                                                                                               |       | 57,935                 |       | 78,805                |       |
| Supplies,  net                                                                                                                                                                            |       | 16,907                 |       | 18,501                |       |
| Deferred  income taxes                                                                                                                                                                    |       | 1,955                  |       | 1,955                 |       |
| Income  tax receivable                                                                                                                                                                    |       | 3,269                  |       | 1,140                 |       |
| Prepaid  expenses and other current assets                                                                                                                                                |       | 5,939                  |       | 5,463                 |       |
| Total  current assets                                                                                                                                                                     |       | 187,814                |       | 307,759               |       |
| PROPERTY,  PLANT AND EQUIPMENT, net                                                                                                                                                       |       | 237,915                |       | 258,638               |       |
| OTHER  ASSETS:                                                                                                                                                                            |       |                   |       |                  |       |
| Goodwill                                                                                                                                                                                  |       | 127,474                |       | 127,474               |       |
| Other  intangible assets, net                                                                                                                                                             |       | 93,792                 |       | 97,482                |       |
| Deferred  financing costs, net of accumulated amortization of $8,280 and $4,940 in 2009  and 2008, respectively                                                                           |       | 8,661                  |       | 5,559                 |       |
| Marketable  securities and other investments                                                                                                                                              |       | —                 |       | 5,000                 |       |
| Other                                                                                                                                                                                     |       | 7,706                  |       | 6,638                 |       |
| TOTAL                                                                                                                                                                                     |       | $                      | 663,362    |                  | $          | 808,550 |   |
| **LIABILITIES AND STOCKHOLDERS’ DEFICIENCY**                                                                                                                                         |       |                   |       |                  |       |
| CURRENT  LIABILITIES:                                                                                                                                                                     |       |                   |       |                  |       |
| Accounts  payable                                                                                                                                                                         |       | $                      | 32,533     |                  | $          | 63,937 |   |
| Accrued  payroll and compensation                                                                                                                                                         |       | 17,177                 |       | 19,651                |       |
| Accrued  interest payable                                                                                                                                                                 |       | 18,494                 |       | 12,505                |       |
| Accrued  workers compensation                                                                                                                                                             |       | 7,848                  |       | 7,969                 |       |
| Debt                                                                                                                                                                                      |       | 555,108                |       | —                |       |
| Indebtedness  to related parties                                                                                                                                                          |       | 76,585                 |       | —                |       |
| Accrued  and other liabilities                                                                                                                                                            |       | 19,200                 |       | 21,556                |       |
| Total  current liabilities                                                                                                                                                                |       | 726,945                |       | 125,618               |       |
| LONG-TERM  DEBT                                                                                                                                                                           |       | —                 |       | 651,169               |       |
| DEFERRED  INCOME TAXES                                                                                                                                                                    |       | 11,544                 |       | 12,554                |       |
| NON-CURRENT  INCOME TAXES PAYABLE                                                                                                                                                         |       | 8,440                  |       | 8,715                 |       |
| OTHER  POSTRETIREMENT BENEFIT PLAN LIABILITY                                                                                                                                              |       | 49,979                 |       | 50,400                |       |
| PENSION  BENEFIT PLAN LIABILITY                                                                                                                                                           |       | 31,521                 |       | 31,941                |       |
| OTHER  LIABILITIES                                                                                                                                                                        |       | 6,955                  |       | 1,968                 |       |
| COMMITMENTS  AND CONTINGENCIES (Note 7)                                                                                                                                                   |       | —                 |       | —                |       |
| STOCKHOLDERS’  DEFICIENCY:                                                                                                                                                           |       |                   |       |                  |       |
| Preferred  Stock, $0.01 par value; 5,000,000 shares authorized and 1 issued                                                                                                               |       | —                 |       | —                |       |
| Common  Stock, $0.01 par value; 100,000,000 shares authorized, 48,058,000 and  36,573,000 shares issued, and 47,507,000 and 35,869,000 shares outstanding in  2009 and 2008, respectively |       | 475                    |       | 359                   |       |
| Additional  paid-in-capital                                                                                                                                                               |       | 268,026                |       | 263,858               |       |
| Treasury  stock – 76,000 shares at cost in 2009 and 2008                                                                                                                             |       | (751                   | )          | (751                  | )          |
| Accumulated  other comprehensive loss                                                                                                                                                     |       | (31,708                | )          | (29,672               | )          |
| Accumulated  deficiency                                                                                                                                                                   |       | (408,064               | )          | (307,609              | )          |
| Total  stockholders’ deficiency                                                                                                                                                      |       | (172,022               | )          | (73,815               | )          |
| TOTAL                                                                                                                                                                                     |       | $                      | 663,362    |                  | $          | 808,550 |   |

 

See notes to unauditedcondensed consolidated financial statements.

 

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**ACCURIDECORPORATION**

**CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)**

 
| ** **                                               | ** ** | **Three Months Ended********September 30,** | ** ** | **Nine Months Ended********September 30,** | ** ** |
|----------------------------------------------------------|------------|--------------------------------------------------|------------|-------------------------------------------------|------------|
| **(in thousands except per share  data)**                | ** ** | **2009**                                         | ** ** | **2008**                                        | ** ** | **2009** | ** ** | **2008** | ** ** |
|                                                     |       |                                             |       |                                            |       |   |   |   |   |
| NET  SALES                                               |       | $                                                | 145,209    |                                            | $          | 239,487 |   | $ | 423,991 |   | $ | 722,616 |   |
| COST  OF GOODS SOLD                                      |       | 143,335                                          |       | 227,599                                         |       | 431,098 |   | 677,109 |   |
| GROSS  PROFIT (LOSS)                                     |       | 1,874                                            |       | 11,888                                          |       | (7,107 | ) | 45,507 |   |
| OPERATING  EXPENSES:                                     |       |                                             |       |                                            |       |   |   |   |   |
| Selling,  general and administrative                     |       | 22,372                                           |       | 14,807                                          |       | 47,086 |   | 41,222 |   |
| Impairment  of goodwill and other intangibles            |       | —                                           |       | 212,220                                         |       | — |   | 212,220 |   |
| LOSS  FROM OPERATIONS                                    |       | (20,498                                          | )          | (215,139                                        | )          | (54,193 | ) | (207,935 | ) |
| OTHER  INCOME (EXPENSE):                                 |       |                                             |       |                                            |       |   |   |   |   |
| Interest  income                                         |       | 254                                              |       | 304                                             |       | 717 |   | 1,029 |   |
| Interest  expense                                        |       | (18,385                                          | )          | (11,930                                         | )          | (47,742 | ) | (36,853 | ) |
| Loss  on extinguishment of debt                          |       | —                                           |       | —                                          |       | (5,389 | ) | — |   |
| Other  income (loss), net                                |       | 3,231                                            |       | (456                                            | )          | 5,585 |   | (577 | ) |
| LOSS  BEFORE INCOME TAXES                                |       | (35,398                                          | )          | (227,221                                        | )          | (101,022 | ) | (244,336 | ) |
| INCOME  TAX BENEFIT                                      |       | (2,069                                           | )          | (26,042                                         | )          | (567 | ) | (34,791 | ) |
| NET  LOSS                                                |       | $                                                | (33,329    | )                                               | $          | (201,179 | ) | $ | (100,455 | ) | $ | (209,545 | ) |
|                                                     |       |                                             |       |                                            |       |   |   |   |   |
| Weighted  average common shares outstanding—basic   |       | 36,368                                           |       | 35,498                                          |       | 36,197 |   | 35,447 |   |
|                                                     |       |                                             |       |                                            |       |   |   |   |   |
| Basic  loss per share                                    |       | $                                                | (0.92      | )                                               | $          | (5.67 | ) | $ | (2.78 | ) | $ | (5.91 | ) |
|                                                     |       |                                             |       |                                            |       |   |   |   |   |
| Weighted  average common shares outstanding—diluted |       | 36,368                                           |       | 35,498                                          |       | 36,197 |   | 35,447 |   |
|                                                     |       |                                             |       |                                            |       |   |   |   |   |
| Diluted  loss per share                                  |       | $                                                | (0.92      | )                                               | $          | (5.67 | ) | $ | (2.78 | ) | $ | (5.91 | ) |

 

See notes to unauditedcondensed consolidated financial statements.

 

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**ACCURIDE CORPORATION**

**CONDENSED CONSOLIDATED STATEMENTS OFCASH FLOWS (UNAUDITED)**

 
| ** **                                                                   | ** ** | **Nine Months Ended********September 30,** | ** ** |
|------------------------------------------------------------------------------|------------|-------------------------------------------------|------------|
| **(In thousands)**                                                           | ** ** | **2009**                                        | ** ** | **2008** | ** ** |
| CASH  FLOWS FROM OPERATING ACTIVITIES:                                       |       |                                            |       |   |   |
| Net  loss                                                                    |       | $                                               | (100,455   | ) | $ | (209,545 | ) |
| Adjustments  to reconcile net loss to net cash used in operating activities: |       |                                            |       |   |   |
| Depreciation  and impairment                                                 |       | 34,580                                          |       | 30,412 |   |
| Amortization  – deferred financing costs                                |       | 3,340                                           |       | 925 |   |
| Amortization  – other intangible assets                                 |       | 3,690                                           |       | 4,133 |   |
| Loss  on extinguishment of debt                                              |       | 5,389                                           |       | — |   |
| Loss  on disposal of assets                                                  |       | 57                                              |       | 429 |   |
| Provision  for deferred income taxes                                         |       | (136                                            | )          | (34,927 | ) |
| Non-cash  stock-based compensation                                           |       | 249                                             |       | 2,185 |   |
| Loss  on sale of marketable securities                                       |       | 1,100                                           |       | — |   |
| Impairments  of investments                                                  |       | —                                          |       | 2,896 |   |
| Impairments  of goodwill and other intangibles                               |       | —                                          |       | 212,220 |   |
| Change  in warrant liability                                                 |       | (608                                            | )          | — |   |
| Paid-in-kind  interest                                                       |       | 6,519                                           |       | — |   |
| Changes  in certain assets and liabilities:                                  |       |                                            |       |   |   |
| Receivables                                                                  |       | 1,427                                           |       | (34,218 | ) |
| Inventories  and supplies                                                    |       | 22,464                                          |       | 6,052 |   |
| Prepaid  expenses and other assets                                           |       | (5,921                                          | )          | (8,956 | ) |
| Accounts  payable                                                            |       | (26,910                                         | )          | 10,958 |   |
| Accrued  and other liabilities                                               |       | 1,688                                           |       | (9,471 | ) |
| Net  cash used in operating activities                                       |       | (53,527                                         | )          | (26,907 | ) |
| CASH  FLOWS FROM INVESTING ACTIVITIES:                                       |       |                                            |       |   |   |
| Purchases  of property, plant and equipment                                  |       | (16,122                                         | )          | (24,862 | ) |
| Purchase  of marketable securities                                           |       | —                                          |       | (5,000 | ) |
| Sale  of marketable securities                                               |       | 3,900                                           |       | — |   |
| Other                                                                        |       | 213                                             |       | (827 | ) |
| Net  cash used in investing activities                                       |       | (12,009                                         | )          | (30,689 | ) |
| CASH  FLOWS FROM FINANCING ACTIVITIES:                                       |       |                                            |       |   |   |
| Increase  in revolving credit advance                                        |       | 30,626                                          |       | — |   |
| Decrease  in revolving credit advance                                        |       | (53,000                                         | )          | — |   |
| Credit  facility amendment fees                                              |       | (10,797                                         | )          | — |   |
| Other                                                                        |       | 48                                              |       | (934 | ) |
| Net  cash used in financing activities                                       |       | (33,123                                         | )          | (934 | ) |
| DECREASE  IN CASH AND CASH EQUIVALENTS                                       |       | (98,659                                         | )          | (58,530 | ) |
| CASH  AND CASH EQUIVALENTS—Beginning of period                          |       | 123,676                                         |       | 90,935 |   |
| CASH  AND CASH EQUIVALENTS—End of period                                |       | $                                               | 25,017     |   | $ | 32,405 |   |
|                                                                         |       |                                            |       |   |   |
| Supplemental  cash flow information:                                         |       |                                            |       |   |   |
| Cash  paid for interest                                                      |       | $                                               | 32,660     |   | $ | 39,205 |   |
| Cash  paid for income taxes                                                  |       | $                                               | 802        |   | $ | 2,298 |   |
| Non-cash  transactions:                                                      |       |                                            |       |   |   |
| Purchases  of property, plant, and equipment in accounts payable             |       | $                                               | 621        |   | $ | 1,964 |   |
| Issuance  of warrants                                                        |       | $                                               | 4,655      |   | — |   |
| Exercise  of warrants                                                        |       | $                                               | 3,985      |   | — |   |

 

Seenotes to unaudited condensed consolidated financial statements.

 

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**ACCURIDECORPORATION**

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

**AS OF SEPTEMBER 30, 2009 ANDDECEMBER 31, 2008 AND FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009AND 2008**

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

 

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

 

***Basis ofPresentation*****– Theaccompanying unaudited condensed consolidated financial statements have been preparedin accordance with accounting principles generally accepted in the UnitedStates of America, except that the unaudited condensed consolidated financialstatements do not include all of the information and footnotes required byaccounting principles generally accepted 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 nine months ended September 30, 2009 are not necessarilyindicative of the results to be expected for the year ending December 31,2009.  The unaudited consolidatedfinancial statements and notes thereto should be read in conjunction with theaudited consolidated financial statements and notes thereto disclosed inAccuride’s Annual Report on Form 10-K for the year ended December 31,2008.

 

Subsequent events have been evaluated for potentialrecognition and disclosure through November 16, 2009, the date that thesefinancial statements are filed with the Securities and ExchangeCommission.  See Note 12, SubsequentEvents.

 

***Bankruptcy Filing –***On October 8, 2009, The Company and its UnitedStates (“U.S.”) subsidiaries (the “Debtors”) filed voluntary petitions forrelief under Chapter 11 of the United States Bankruptcy Code (the “BankruptcyCode”) in the United States Bankruptcy Court for the District of Delaware (the “BankruptcyCourt”).  The Debtors’ Chapter 11 casesare being jointly-administered under Case No. 09-13449.  The Debtors will continue to operate theirbusinesses as “debtors-in-possession” under the supervision of the BankruptcyCourt and in accordance with the applicable provisions of the Bankruptcy Codeand orders of the Bankruptcy Court.  TheCompany’s Mexico and Canada subsidiaries were not included in the filings andwill continue their business operations without supervision from the BankruptcyCourt and will not be subject to the requirements of the Bankruptcy Code.  See Note 12, Subsequent Events.

 

AccountingStandards Codification (“ASC”) 852 *Reorganizations*(“ASC 852”), which is applicable to companies in Chapter 11, generally does notchange the manner in which financial statements are prepared. However, it doesrequire that the financial statements for periods subsequent to the filing ofthe Chapter 11 petition distinguish transactions and events that are directlyassociated with the reorganization from the ongoing operations of the business.Revenues, expenses, realized gains and losses, and provisions for losses thatcan be directly associated with the reorganization and restructuring of thebusiness must be reported separately as reorganization items in the statementsof operations beginning in the quarter ending December 31, 2009. Thebalance sheet must distinguish prepetition liabilities subject to compromisefrom both those prepetition liabilities that are not subject to compromise andfrom post-petition liabilities. Liabilities that may be affected by a plan ofreorganization must be reported at the amounts expected to be allowed, even ifthey may be settled for lesser amounts. In addition, cash provided by reorganizationitems must be disclosed separately in the statements of cash flows. The Companyadopted ASC 852 effective on October 8, 2009 and will segregate thoseitems as outlined above for all reporting periods subsequent to such date. TheDebtors are currently operating pursuant to Chapter 11 under the BankruptcyCode and continuation of the Company as a going-concern is contingent upon,among other things, the Debtors’ ability (i) to comply with the terms andconditions of the DIP financing agreement described in Note 12; (ii) todevelop a plan of reorganization and obtain confirmation under the BankruptcyCode; (iii) to reduce unsustainable debt and other liabilities andsimplify our complex and restrictive capital structure through the bankruptcyprocess; (iv) to return to profitability; (v) to generate sufficientcash flow from operations; and (vi) to obtain financing sources to meetour future obligations. These matters create uncertainty relating to ourability to continue as a going concern. The accompanying condensed consolidatedfinancial statements do not reflect any adjustments relating to therecoverability and classification of assets or liabilities that might resultfrom the outcome of these uncertainties. In addition, any plan ofreorganization could materially change amounts reported in our condensedconsolidated financial statements, which do not give effect to any adjustmentsof the carrying value of assets and liabilities

 

Feesrelated to the evaluationof alternatives for addressing the failure to comply with certain financialcovenants under our Credit Agreement were recognized as a component ofOperating Expenses.

 

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***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 those estimates.

 

***DerivativeFinancial Instruments*** – We use derivative financial instruments as part of our overall riskmanagement strategy as further described under Item 7A of our 2008 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 September 30,2009, there were no derivatives that were designated as hedges for financial reportingpurposes.

 

***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 September 30, 2009 we had oneinterest rate 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 2009 through March 2010, and thevariable rate interest amounts calculated by reference to the notionalprincipal amount. The notional principal amount under the terms is $125 millionfrom September 2009 through March 2010.

 

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

 
| ** **             | ** ** | **Three Months Ended September 30,** | ** ** | **Nine Months Ended September 30,** | ** ** |
|------------------------|------------|-------------------------------------------|------------|------------------------------------------|------------|
| ** **             | ** ** | **2009**                                  | ** ** | **2008**                                 | ** ** | **2009** | ** ** | **2008** | ** ** |
| Realized Loss          |       | $                                         | (1,190     | )                                        | $          | (555 | ) | $ | (3,044 | ) | $ | (754 | ) |
| Unrealized Gain (Loss) |       | $                                         | 906        |                                     | $          | (435 | ) | $ | 2,287 |   | $ | (1,617 | ) |

 

***Foreign Exchange Instruments*** – We use foreign currency forward contractsand option contracts to limit foreign exchange risk on anticipated but not yetcommitted transactions expected to be denominated in Canadian dollars. As of September 30,2009, the notional amount of open foreign exchange forward contracts was $4.7 million.

 

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

 
| ** **             | ** ** | **Three Months Ended September 30,** | ** ** | **Nine Months Ended September 30,** | ** ** |
|------------------------|------------|-------------------------------------------|------------|------------------------------------------|------------|
| ** **             | ** ** | **2009**                                  | ** ** | **2008**                                 | ** ** | **2009** | ** ** | **2008** | ** ** |
| Realized Gain (Loss)   |       | $                                         | 748        |                                     | $          | (61 | ) | $ | 1,498 |   | $ | 175 |   |
| Unrealized Gain (Loss) |       | $                                         | (58        | )                                        | $          | (164 | ) | $ | 104 |   | $ | (164 | ) |

 

***Commodity Price Instruments***– We use commodity price swap contractsto limit exposure to changes in certain raw material prices. Commodity priceinstruments, which do not meet the normal purchase exception, are notdesignated as hedges for financial reporting purposes and, accordingly, arecarried in the financial statements at fair value, with realized and unrealizedgains and losses reflected in current period earnings as a component of “Costof goods sold.” At September 30, 2009, we had no open commodity priceswaps or futures contracts.

 

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

 
| ** **           | ** ** | **Three Months Ended September 30,** | ** ** | **Nine Months Ended September 30,** | ** ** |
|----------------------|------------|-------------------------------------------|------------|------------------------------------------|------------|
| ** **           | ** ** | **2009**                                  | ** ** | **2008**                                 | ** ** | **2009** | ** ** | **2008** | ** ** |
| Realized Gain (Loss) |       | $                                         | —     |                                     | $          | (562 | ) | $ | — |   | $ | 1,072 |   |
| Unrealized Loss      |       | $                                         | —     |                                     | $          | (1,156 | ) | $ | — |   | $ | (704 | ) |

 

***Earnings PerCommon Share*** —Basic and diluted earnings per common share were computed as follows:

 
| ** **                                         | ** ** | **Three Months Ended September 30,** | ** ** | **Nine Months Ended September 30,** | ** ** |
|----------------------------------------------------|------------|-------------------------------------------|------------|------------------------------------------|------------|
| **(in thousands except per share  data)**          | ** ** | **2009**                                  | ** ** | **2008**                                 | ** ** | **2009** | ** ** | **2008** | ** ** |
| Numerator:                                         |       |                                      |       |                                     |       |   |   |   |   |
| Net loss                                           |       | (33,329                                   | )          | $                                        | (201,179   | ) | $ | (100,455 | ) | $ | (209,545 | ) |
| Denominator:                                       |       |                                      |       |                                     |       |   |   |   |   |
| Weighted average shares outstanding – Basic   |       | 36,368                                    |       | 35,498                                   |       | 36,197 |   | 35,447 |   |
| Effect of dilutive stock options                   |       | —                                    |       | —                                   |       | — |   | — |   |
| Weighted average shares outstanding – Diluted |       | 36,368                                    |       | 35,498                                   |       | 36,197 |   | 35,447 |   |
| Basic loss per common share                        |       | $                                         | (0.92      | )                                        | $          | (5.67 | ) | $ | (2.78 | ) | $ | (5.91 | ) |
| Diluted loss per common share                      |       | $                                         | (0.92      | )                                        | $          | (5.67 | ) | $ | (2.78 | ) | $ | (5.91 | ) |

 

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As of September 30, 2009, there were 544,738stock options, 1,117,113 stock appreciation rights, and a warrant exercisablefor 238,728 shares that were not included in the computation of dilutedearnings per share because the effect would be anti-dilutive.

 

***Stock-Based Compensation***–As of September 30, 2009, there wasapproximately $1.3 million of unrecognized pre-tax compensation expense relatedto share-based awards not yet vested that will be recognized over aweighted-average period of 1.4 years.

 

Expense was recognized for share-based compensation asfollows:

 
| ** **                                  | ** ** | **Three Months Ended September 30,** | ** ** | **Nine Months Ended September 30,** | ** ** |
|---------------------------------------------|------------|-------------------------------------------|------------|------------------------------------------|------------|
| ** **                                  | ** ** | **2009**                                  | ** ** | **2008**                                 | ** ** | **2009** | ** ** | **2008** | ** ** |
| Share-based compensation expense recognized |       | $                                         | 125        |                                     | $          | 475 |   | $ | 249 |   | $ | 2,185 |   |
|                                             |            |                                           |            |                                          |            |  |  |  |  |  |  |  |  |

 

***Income Tax***–Under ASC 270-10 and 740-270, *Interim Financial Reporting*, we compute on a quarterly basisan estimated annual effective tax rate considering ordinary income and relatedincome tax expense. Ordinary income refers to income (loss) before income taxexpense excluding significant, unusual, or infrequently occurring items. Thetax effect of an unusual or infrequently occurring item is recorded in theinterim period in which it occurs. To the extent the Company cannot reliablyestimate annual projected taxes for a taxing jurisdiction, taxes on ordinaryincome for such a jurisdiction are reported in the period in which they areincurred, which is the case for our domestic tax jurisdictions. Other itemsincluded in income tax expense in the periods in which they occur include thecumulative effect of changes in tax laws or rates, foreign exchange gains andlosses, adjustments to uncertain tax positions, and adjustments to ourvaluation allowance due to changes in judgment in the realizability of deferredtax assets in future years.

 

We have assessed the need to maintain a valuationallowance for deferred tax assets based on an assessment of whether it is morelikely than not that deferred tax benefits will be realized through thegeneration of future taxable income. Appropriate consideration is given to allavailable evidence, both positive and negative, in assessing the need for avaluation allowance. Due to our recent history of U.S. operating and taxablelosses, the inconsistency of these profits, and the uncertainty of ourfinancial outlook, we continue to maintain a full valuation allowance againstour domestic deferred tax assets.

 

***Recent Accounting Adoptions***

 

***ASC 805*** – In December 2007, the Financial AccountingStandards Board (“FASB”) issued SFAS No. 141(R), *BusinessCombinations*, which replaces SFAS No. 141, *BusinessCombinations*. SFAS No. 141(R) requires the acquirer of abusiness to recognize and measure the identifiable assets acquired, theliabilities assumed, and any non-controlling interest in the acquiree at fairvalue. SFAS No. 141(R) also requires transaction costs related to thebusiness 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 adopted SFAS No. 141(R) on January 1, 2009 and it hadno material impact on our consolidated financial statements.

 

***ASC810-10*** – In December 2007,the FASB issued the *Noncontrolling Interestsin Consolidated Financial Statements*topic in the FASB AccountingStandards Codification. *Noncontrolling Interestsin Consolidated Financial Statements* 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. *Noncontrolling Interestsin Consolidated Financial Statements* applies to fiscal years andinterim periods beginning on or after December 15, 2008.  We adopted *NoncontrollingInterests in Consolidated Financial Statements* topic on January 1,2009 and it had no material impact on our consolidated financial statements.

 

***ASC 815-10*** – In March 2008, the FASB issued *Disclosures about Derivative Instruments and Hedging Activities*inthe FASB Accounting Standards Codification. *Disclosures about Derivative Instruments andHedging Activities*amends and expands the disclosure requirements toprovide a better understanding of how and why an entity uses derivativeinstruments, how derivative instruments and related hedged items are accountedfor, and their effect on an entity’s financial position, 

 

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financial performance,and cash flows.  *Disclosures aboutDerivative Instruments and Hedging Activities*is effective forfiscal years and interim periods beginning after November 15, 2008.  We adopted *Disclosuresabout Derivative Instruments and Hedging Activities*topic on January 1,2009 and it had no material impact on our consolidated financial statements.

 

***ASC 855-10*** - We adopted *Subsequent Events*topic in the FASB Accounting Standard Codification for the Quarterly Report forthe period ended June 30, 2009.  *Subsequent Events* establishes general standards ofaccounting for and disclosure of events that occur after the balance sheet datebut before financial statements are issued, which are referred to as subsequentevents. The statement clarifies existing guidance on subsequent events,including a requirement that a public entity should evaluate subsequent eventsthrough the issue date of the financial statements, the determination of whenthe effects of subsequent events should be recognized in the financialstatement and disclosures regarding all subsequent events.  Adoptionof the *Subsequent Events* topicdid not have a material affect on our condensed consolidated financialstatements.

 

***ASC820 -***In April 2009,the Financial Accounting Standards Board (FASB) issued accounting guidance oninterim disclosures about fair value of financial instruments.  Thisguidance amends previous guidance to require disclosures about fair value offinancial instruments for interim reporting periods of publicly tradedcompanies as well as in annual financial statements.  This guidancealso amends previous guidance to require disclosures in summarized financialinformation at interim reporting periods.  This guidance waseffective for interim reporting periods ending after June 15,2009.  The adoption of this guidance did not have a material impacton our condensed consolidated financial statements.

 

***ASC 105-10 -***In June 2009, the FASB issued ASC topic 105 (formerly Statement ofFinancial Standards (SFAS) No. 168, *TheHierarchy of Generally Accepted Accounting Principles*)*.*ASC 105 contains guidance which reducesthe U.S. GAAP hierarchy to two levels, one that is authoritative and one thatis not. This pronouncement became effective September 15, 2009. Theadoption of this pronouncement did not have a material impact on ourconsolidated financial statements.

 

***New Accounting Pronouncements***

 

***ASC 820-10***–In February 2008, the FASB issued the *Effective Date of FASB Statement No. 157*topic in theFASB Accounting Standards Codification, which delayed the effective date offair value measurements for nonfinancial assets and liabilities to fiscal yearsbeginning after November 15, 2009, except for items that are recognized ordisclosed at fair value in the financial statements on a recurring basis.  Management is currently evaluating the impactof the topic on our consolidated financial statements.

 

***ASC715-20*** – In March 2008,the FASB issued the *Employers’**Disclosures about Postretirement Benefit Plan Assets*topicin the FASB Accounting Standards Codification*. *The statement requires disclosuresof the objectives of postretirement benefit plan assets, investment policiesand strategies, categories of plan assets, fair value measurements of planassets, and significant concentrations of risk. *Disclosures about Postretirement Benefit PlanAssets* is effective for fiscal years and interim periods beginningafter December 15, 2009.  Theadoption of the *Disclosures about Postretirement BenefitPlan Assets* is expected to increase our disclosures, but it is notexpected to have an impact on our consolidated financial statements.

 

***ASC 810*** – InJune 2009, the FASB finalized SFAS No. 167, Amending FASBinterpretation No. 46(R), which was later superseded by the FASBCodification and included in ASC topic 810. The provisions of ASC 810 provideguidance in determining whether an enterprise has a controlling financialinterest in a variable interest entity. This determination identifies theprimary beneficiary of a variable interest entity as the enterprise that hasboth the power to direct the activities of a variable interest entity that mostsignificantly impacts the entity’s economic performance, and the obligation toabsorb losses or the right to receive benefits of the entity that could potentiallybe significant to the variable interest entity. This pronouncement alsorequires ongoing reassessments of whether an enterprise is the primarybeneficiary and eliminates the quantitative approach previously required fordetermining the primary beneficiary. New provisions of this pronouncement areeffective January 1, 2010. The Company is currently evaluating theimpact of adopting this pronouncement.

 

**Note2 – Restructuring**

 

During2008, in response to the slow commercial vehicle market and the decline insales, management undertook a review of current operations that led to acomprehensive restructuring plan. On September 22, 2008, we approved arestructuring plan to more appropriately align our workforce in response to therelatively slow commercial vehicle market. On December 15, 2008, we announced additional actions in regards tothe restructuring plan that focused on the consolidation of several of ourfacilities. During 2008, we recognized restructuring expenses of$12.4 million in accordance with ASC 420-10, *Accountingfor Costs Associated with Exit or Disposal Activities*.

 

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Costs incurred in 2009are shown below by reportable segment:

 
| ** **                              | ** ** | **Three Months Ended  September 30, 2009** | ** ** | **Nine Months Ended  September 30, 2009** | ** ** |
|-----------------------------------------|------------|-------------------------------------------------|------------|------------------------------------------------|------------|
|                                    |       |                                            |       |                                           |       |
| **Wheels**                              |       |                                            |       |                                           |       |
| Employee severance costs                |       | $                                               | —     |                                           | $          | 643 |   |
| Lease and other contractual commitments |       | —                                          |       | 141                                            |       |
| Subtotal                                |       | —                                          |       | 784                                            |       |
|                                    |       |                                            |       |                                           |       |
| **Components**                          |       |                                            |       |                                           |       |
| Employee severance costs                |       | 88                                              |       | 130                                            |       |
| Lease and other contractual commitments |       | —                                          |       | 3,219                                          |       |
| Subtotal                                |       | 88                                              |       | 3,349                                          |       |
|                                    |       |                                            |       |                                           |       |
| **Corporate**                           |       |                                            |       |                                           |       |
| Employee severance costs                |       | 54                                              |       | 967                                            |       |
| Subtotal                                |       | 54                                              |       | 967                                            |       |
|                                    |       |                                            |       |                                           |       |
| **Total**                               |       | $                                               | 142        |                                           | $          | 5,100 |   |

 

The following is a reconciliationof the beginning and ending restructuring reserve balances for the nine-monthperiod ended September 30, 2009:

 
| ** **                                       | ** ** | **Employee  Severance Costs** | ** ** | **Lease and Other  Contractual Costs** | ** ** | **Total** | ** ** |
|--------------------------------------------------|------------|-------------------------------|------------|----------------------------------------|------------|-----------|------------|
| Balance December 31, 2008                   |       | $                             | 4,281      |                                   | $          | —    |       | $ | 4,281 |   |
| Costs incurred and charged to operating expenses |       | 967                           |       | —                                 |       | 967       |       |
| Costs incurred and charged to cost of goods sold |       | 773                           |       | 3,360                                  |       | 4,133     |       |
| Costs paid or otherwise settled                  |       | (4,771                        | )          | (207                                   | )          | (4,978    | )          |
| Balance  at September 30, 2009              |       | $                             | 1,250      |                                   | $          | 3,153     |       | $ | 4,403 |   |

 

Ofthe remaining severance liability, $1,048 will be paid during 2009 with theremainder of $202 paid in 2010.  Due tothe filing of voluntarypetitions for relief under Chapter 11 of the Bankruptcy Code, the amount ofcash outflows related to the remaininglease liabilities has not been determined.

 

**Note 3 -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 basisare as follows:

 
| ** **                   | ** ** | **September 30, 2009** | ** ** | **December 31, 2008** | ** ** |
|------------------------------|------------|-----------------------------|------------|----------------------------|------------|
| Raw  materials               |       | $                           | 15,299     |                       | $          | 22,839 |   |
| Work  in process             |       | 19,572                      |       | 21,930                     |       |
| Finished  manufactured goods |       | 23,064                      |       | 34,036                     |       |
| Total  inventories, net      |       | $                           | 57,935     |                       | $          | 78,805 |   |

 

**Note 4 - Goodwill and OtherIntangible Assets**

 

Under ASC 350, *Goodwill and Other Intangible Assets,*we are required toassess goodwill and any indefinite-lived intangible assets for impairmentannually, or more frequently if circumstances indicate impairment may haveoccurred.  The analysis of potentialimpairment of goodwill requires a two-step approach.  The first step is the estimation of fairvalue of each reporting unit.  If stepone indicates that impairment potentially exists, the second step is performedto measure the amount of impairment, if any. Goodwill impairment exists when the implied fair value is less than itscarrying value.

 

As disclosed in Note 6 tothe December 31, 2008 consolidated financial statements, the 2009production forecasts published by ACT

 

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Publications for thesignificant commercial vehicle markets we serve were 145,000 for North AmericanClass 8 Vehicles, 131,000 North American Class 5-7 Vehicles and86,000 for U.S. Trailers.  After December 31,2008 actual build rates and projected 2009 build rates declined, coupled with asoftening in the aftermarket.  Ourestimation of fair values during 2008 using an income approach for bothgoodwill and tradenames employed significant discount rate premiums to accountfor the risk associated with the potentially volatile projected cash flows anduncertainty in the economy.  Thedeterioration in the build rates subsequent to December 31, 2008 was notan indicator of impairment for goodwill or the tradenames as the lower buildrates were within the range of what we considered possible and had contemplatedin our 2008 impairment analysis. Therefore, we have qualitatively conclude thateach operating segment would continue to pass the step one test and that theremaining tradename intangible assets of $10.4 million would not be impairedduring the nine months ended September 30, 2009.

 

The carrying amount ofgoodwill as of September 30, 2009 by reportable segment, are as follows:

 
| ** **                             | ** ** | **Wheels** | ** ** | **Components** | ** ** | **Other** | ** ** | **Corporate** | ** ** | **Total** | ** ** |
|----------------------------------------|------------|------------|------------|----------------|------------|-----------|------------|---------------|------------|-----------|------------|
| Balance  as of September 30, 2009 |       | $          | 123,199    |           | $          | —    |       | $             | 4,275      |      | $          | — |   | $ | 127,474 |   |
|                                        |            |            |            |                |            |           |            |               |            |           |            |  |  |  |  |  |

 

The changes in thecarrying amount of other intangible assets for the nine months ended September 30,2009 by reportable segment, are as follows:

 
| ** **                             | ** ** | **Wheels** | ** ** | **Components** | ** ** | **Other** | ** ** | **Corporate** | ** ** | **Total** | ** ** |
|----------------------------------------|------------|------------|------------|----------------|------------|-----------|------------|---------------|------------|-----------|------------|
| Balance  as of December 31, 2008  |       | $          | —     |           | $          | 90,727    |       | $             | 6,195      |      | $          | 560 |   | $ | 97,482 |   |
| Amortization                           |       | —     |       | (3,262         | )          | (288      | )          | (140          | )          | (3,690    | )          |
| Balance  as of September 30, 2009 |       | $          | —     |           | $          | 87,465    |       | $             | 5,907      |      | $          | 420 |   | $ | 93,792 |   |

 

The summary of goodwilland other intangible assets is as follows:

 
| ** **                | ** ** | **Weighted**               | ** ** | **As of September 30, 2009** | ** ** | **As of December 31, 2008**                | ** ** |
|---------------------------|------------|----------------------------|------------|-----------------------------------|------------|-------------------------------------------------|------------|
| ** **                | ** ** | **Average  Useful  Lives** | ** ** | **Gross  Amount**                 | ** ** | **Accumulated  Amortization  & Impairment** | ** ** | **Carrying  Amount** | ** ** | **Gross  Amount** | ** ** | **Accumulated  Amortization  & Impairment** | ** ** | **Carrying  Amount** | ** ** |
| Goodwill                  |       | —                     |       | $                                 | 378,804    |                                            | $          | 251,330 |   | $ | 127,474 |   | $ | 378,804 |   | $ | 251,330 |   | $ | 127,474 |   |
| Other  intangible assets: |       |                       |       |                              |       |                                            |       |   |   |   |   |   |   |   |   |
| Non-compete  agreements   |       | 3.0                        |       | $                                 | 3,160      |                                            | $          | 2,740 |   | $ | 420 |   | $ | 3,160 |   | $ | 2,599 |   | $ | 561 |   |
| Trade  names              |       | —                     |       | 38,080                            |       | 27,650                                          |       | 10,430 |   | 38,080 |   | 27,650 |   | 10,430 |   |
| Technology                |       | 14.7                       |       | 33,540                            |       | 10,704                                          |       | 22,836 |   | 33,540 |   | 8,989 |   | 24,551 |   |
| Customer  relationships   |       | 29.6                       |       | 71,500                            |       | 11,394                                          |       | 60,106 |   | 71,500 |   | 9,560 |   | 61,940 |   |
|                      |       | 24.2                       |       | $                                 | 146,280    |                                            | $          | 52,488 |   | $ | 93,792 |   | $ | 146,280 |   | $ | 48,798 |   | $ | 97,482 |   |

 

We estimate thataggregate amortization expense for our other intangible assets by year asfollows:

** **
| 2009 |   | $ | 4,923 |   |
|------|--------|---|-------|--------|
| 2010 |   | $ | 4,923 |   |
| 2011 |   | $ | 4,922 |   |
| 2012 |   | $ | 4,736 |   |
| 2013 |   | $ | 4,736 |   |

 

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**Note 5 -Comprehensive loss**

 

Comprehensive loss for thethree and nine months ended September 30 is summarized as follows:

 
| ** **                                                  | ** ** | **For The Three Months********Ended September 30,** | ** ** | **For The Nine Months********Ended September 30,** | ** ** |
|-------------------------------------------------------------|------------|----------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                                                  | ** ** | **2009**                                                 | ** ** | **2008**                                                | ** ** | **2009** | ** ** | **2008** | ** ** |
| Net loss                                                    |       | $                                                        | (33,329    | )                                                       | $          | (201,179 | ) | $ | (100,455 | ) | $ | (209,545 | ) |
| Other comprehensive income (net of tax)                     |       |                                                     |       |                                                    |       |   |   |   |   |
| Foreign  currency translation impact on pension liabilities |       | (1,347                                                   | )          | 636                                                     |       | (2,036 | ) | 1,037 |   |
| Total comprehensive income (loss)                           |       | $                                                        | (34,676    | )                                                       | $          | (200,543 | ) | $ | (102,491 | ) | $ | (208,508 | ) |

 

Included in accumulatedother comprehensive loss is the impact of pension liability fluctuations in theCanadian dollar to U.S. dollar exchange rate related to our Canadian pensionplans.

 

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

 

Componentsof Net Periodic Benefit Cost for the three and nine months ended September 30:

 
| ** **                                         | ** ** | **For The Three Months********Ended September 30,** | ** ** | **For The Nine Months********Ended September 30,** | ** ** |
|----------------------------------------------------|------------|----------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                                         | ** ** | **Pension Benefits**                                     | ** ** | **Other Benefits**                                      | ** ** | **Pension Benefits** | ** ** | **Other Benefits** | ** ** |
| ** **                                         | ** ** | **2009**                                                 | ** ** | **2008**                                                | ** ** | **2009** | ** ** | **2008** | ** ** | **2009** | ** ** | **2008** | ** ** | **2009** | ** ** | **2008** | ** ** |
| Service cost-benefits  earned during the year      |       | $                                                        | 390        |                                                    | $          | 813 |   | $ | 83 |   | $ | 131 |   | $ | 1,135 |   | $ | 2,527 |   | $ | 238 |   | $ | 443 |   |
| Interest cost on  projected benefit obligation     |       | 2,962                                                    |       | 2,882                                                   |       | 937 |   | 911 |   | 8,677 |   | 8,677 |   | 2,764 |   | 2,833 |   |
| Expected return on plan  assets                    |       | (3,238                                                   | )          | (3,749                                                  | )          | — |   | — |   | (9,215 | ) | (11,262 | ) | — |   | — |   |
| Amortization of net  transition (asset)/obligation |       | 4                                                        |       | 4                                                       |       | — |   | — |   | 10 |   | 12 |   | — |   | — |   |
| Amortization of prior  service cost (benefit)      |       | 96                                                       |       | 103                                                     |       | (393 | ) | (385 | ) | 267 |   | 307 |   | (1,179 | ) | (1,055 | ) |
| Amortization of  (gain)/loss                       |       | 597                                                      |       | 477                                                     |       | (123 | ) | (134 | ) | 1,684 |   | 1,417 |   | (379 | ) | (401 | ) |
| Net amount charged to  income                      |       | $                                                        | 811        |                                                    | $          | 530 |   | $ | 504 |   | $ | 523 |   | $ | 2,558 |   | $ | 1,678 |   | $ | 1,444 |   | $ | 1,820 |   |
| Curtailment charge                                 |       | 575                                                      |       | 2                                                       |       | 23 |   | — |   | 575 |   | 2 |   | 23 |   | — |   |
| Contractual termination  benefits charge           |       | 2,376                                                    |       | 1,134                                                   |       | — |   | — |   | 2,376 |   | 1,134 |   | — |   | — |   |
| Total amount charged to  income                    |       | $                                                        | 3,762      |                                                    | $          | 1,666 |   | $ | 527 |   | $ | 523 |   | $ | 5,509 |   | $ | 2,814 |   | $ | 1,467 |   | $ | 1,820 |   |

 

Duringthe three months ended September 30, 2009 and 2008, we recorded pre-taxcurtailment losses of $3.0 million and $1.1 million, respectively,  related to reductions of our workforce in ourLondon, Ontario, facility.

 

Alsoduring the nine months ended September 30, 2008, we recorded $7.4 millionof severance costs related to the reduction-in-force.  Cash paid for the 2008 reduction-in-forceduring the nine months ended September 30, 2008, totaled $1.0 million.

 

Asof September 30, 2009, $6.9 million has been contributed to our sponsoredpension plans.  We presently anticipatecontributing an additional $3.4 million to fund our pension plans in 2009 for atotal of $10.3 million.

 

**Note 7 –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 September 30,2009, we had an environmental reserve of approximately $1.5 million,related primarily to our 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 

 

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expenditures required byus or our subsidiaries to comply with applicable environmental laws and/or topay for any remediation efforts will not be reduced or otherwise affected bythe existence of the environmental reserve. We currently anticipate spendingapproximately $0.2 million per year in 2009 through 2012 for monitoring thevarious environmental sites associated with the environmental reserve, includingattorney and consultant costs for strategic planning and negotiations withregulators and other potentially responsible parties, and payment of remedialinvestigation costs. Based on all of the information presently available to us,we believe that our environmental reserves will be adequate to cover the futurecosts related to the sites associated with the environmental reserves, and thatany additional costs will not have a material adverse effect on our financialcondition, results of operations or cash flows. However, the discovery ofadditional sites, the modification of existing or promulgation of new laws orregulations, more vigorous enforcement by regulators, the imposition of jointand several liability under CERCLA or analogous state laws, or otherunanticipated events could also result in such a material adverse effect.

 

Thefinal Iron and Steel Foundry National Emission Standard for Hazardous AirPollutants, or NESHAP, was developed pursuant to Section 112(d) 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 September 30, 2009, we had approximately2,320 employees, of which 619 were salaried employees with the remainder paidhourly. Unions represent approximately 1,150 of our employees, or 50% of thetotal. Each of ourunionized facilities has a separate contract with the union that represents theworkers employed at such facility. The union contracts expire at various timesover the next few years with the exception of our union contract that coversthe hourly employees at our Monterrey, Mexico, facility, which expires on anannual basis in January unless otherwise renewed. The 2009 negotiations inMonterrey were successfully completed prior to the expiration of our unioncontract.  The only contract expiring during the remainder of 2009 is ourfacility at Cuyahoga Falls.  Based on the consolidation of the CuyahogaFalls operations into our Erie plant, we have ceased operations performed bythe collective bargaining unit at the Cuyahoga Falls facility and do notanticipate negotiating for a new contract at that location.  To date in2009, we have successfully completed negotiations for new collective bargainingagreements at our London and Brillion facilities as well as an extension of theagreement at our Elkhart Plant 2 facility.  We do not anticipate anyadditional 2009 negotiations, including any that would have a material adverseeffect on our operating performance or costs.

 

**Note8 – 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.  ASC820-10, *Fair Value Measurements,* establishes afair value hierarchy for those instruments measured at fair value thatdistinguishes between assumptions based on market data (observable inputs) andour own assumptions (unobservable inputs).  Determining whichcategory an asset or liability falls within the hierarchy requires significantjudgment.  We evaluate our hierarchy 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 ofSeptember 30, 2009 are as follows:

 

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| ** **                          | ** ** | **Carrying** | ** ** | **Fair Value** | ** ** |
|-------------------------------------|------------|--------------|------------|----------------|------------|
| ** **                          | ** ** | **Amount**   | ** ** | **Level 1**    | ** ** | **Level 2** | ** ** | **Level 3** | ** ** |
|                                |       |         |       |           |       |   |   |   |   |
| **Assets**                          |       |         |       |           |       |   |   |   |   |
| Foreign  exchange forward contracts |       | $            | 947        |           |       |   | $ | 947 |   |   |   |
|                                |       |         |       |           |       |   |   |   |   |
| **Liabilities**                     |       |         |       |           |       |   |   |   |   |
| Interest  rate swap contracts       |       | 2,185        |       |           |       | 2,185 |   |   |   |
| Common  stock warrant               |       | 62           |       |           |       |   |   | $ | 62 |   |
| Total  debt                         |       | 631,693      |       |           |       | 507,692 |   |   |   |
|                                     |            |              |            |                |            |  |  |  |  |  |  |  |

 

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 debt has been determined on the basis of the specific securitiesissued and outstanding. All of our debt instruments have variable interestrates except for the senior subordinated notes, which have a fixed interestrate of 8.50%.  The fair value of the commonstock warrant has been calculated using a Black-Scholes valuation model.

 

Our Level 3 financialinstruments consist of municipal bonds with an auction reset feature (“auctionrate securities”) and warrants for our common stock.  The bonds’ underlying assets are generallystudent loans which are substantially backed by the federal government. Duringthe quarter ending September 30, 2009 we entered into and executed anagreement in which we sold our auction rate securities.

 

On September 28,2009, Sun Capital exercised 98 percent of the outstanding warrants for ourcommon stock on a cashless basis.  Weissued approximately 11.4 million shares of common stock to Sun Capital.  As of September 30, 2009, a liability of$62 has been recorded to reflect the fair value of the remaining warrantexercisable for 0.5 percent of our fully-diluted common stock.

 

The following tablesummarizes changes in fair value of our Level 3 assets and liabilities as of September 30,2009:

 
| ** **                          | ** ** | **Marketable  Securities** | ** ** | **Common  Stock  Warrant** | ** ** |
|-------------------------------------|------------|----------------------------|------------|----------------------------|------------|
| Balance  at December 31, 2008  |       | $                          | 5,000      |                       | $          | — |   |
| Purchase  (issuance) of securities  |       | —                     |       | (4,655                     | )          |
| Unrealized  gain (loss) recognized  |       | —                     |       | 608                        |       |
| Realized  loss                      |       | (1,100                     | )          | —                     |       |
| Net  settlements                    |       | (3,900                     | )          | 3,985                      |       |
| Balance  at September 30, 2009 |       | $                          | —     |                       | $          | (62 | ) |

 

**Note9 – 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.

 

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| ** **                     | ** ** | **Three Months Ended********September 30,** | ** ** | **Nine Months Ended********September 30,** | ** ** |
|--------------------------------|------------|--------------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                     | ** ** | **2009**                                         | ** ** | **2008**                                        | ** ** | **2009** | ** ** | **2008** | ** ** |
| ***Net Sales***                |       |                                             |       |                                            |       |   |   |   |   |
| Wheels                         |       | $                                                | 63,504     |                                            | $          | 96,178 |   | $ | 174,609 |   | $ | 305,342 |   |
| Components                     |       | 75,412                                           |       | 131,937                                         |       | 222,535 |   | 380,055 |   |
| Other                          |       | 6,293                                            |       | 11,372                                          |       | 26,847 |   | 37,219 |   |
| Consolidated  Total            |       | $                                                | 145,209    |                                            | $          | 239,487 |   | $ | 423,991 |   | $ | 722,616 |   |
|                           |       |                                             |       |                                            |       |   |   |   |   |
| ***Operating  Income (Loss)*** |       |                                             |       |                                            |       |   |   |   |   |
| Wheels                         |       | $                                                | 2,514      |                                            | $          | 8,234 |   | $ | 5,388 |   | $ | 40,779 |   |
| Components                     |       | (4,850                                           | )          | (206,663                                        | )          | (28,395 | ) | (218,322 | ) |
| Other                          |       | 391                                              |       | (6,346                                          | )          | 3,636 |   | (1,386 | ) |
| Corporate                      |       | (18,553                                          | )          | (10,364                                         | )          | (34,822 | ) | (29,006 | ) |
| Consolidated  Total            |       | $                                                | (20,498    | )                                               | $          | (215,139 | ) | $ | (54,193 | ) | $ | (207,935 | ) |

 
| ** **         | ** ** | **As of**                   | ** ** |
|--------------------|------------|-----------------------------|------------|
| ** **         | ** ** | **September 30, 2009** | ** ** | **December 31, 2008** | ** ** |
| Total assets:      |       |                        |       |   |   |
| Wheels             |       | $                           | 278,471    |   | $ | 191,435 |   |
| Components         |       | 249,674                     |       | 285,966 |   |
| Other              |       | 32,060                      |       | 38,064 |   |
| Corporate          |       | 103,157                     |       | 293,085 |   |
| Consolidated total |       | $                           | 663,362    |   | $ | 808,550 |   |

 

**Note10 - Debt**

 

Debt at September 30,2009, and December 31, 2008, consisted of the following:

 
| ** **                                | ** ** | **September 30,  2009** | ** ** | **December 31,  2008** | ** ** |
|-------------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| Term  Facility – Non-related Parties |       | $                            | 224,559    |                        | $          | 294,625 |   |
| Term  Facility – Related Party       |       | 76,585                       |       | —                      |       |
| Senior  Subordinated Notes                |       | 275,000                      |       | 275,000                     |       |
| Revolving  Credit Facility                |       | 56,070                       |       | 78,444                      |       |
| Industrial  Revenue Bond                  |       | 3,100                        |       | 3,100                       |       |
| Term  Facility Discount                   |       | (3,621                       | )          | —                      |       |
| Total                                     |       | $                            | 631,693    |                        | $          | 651,169 |   |

 

On February 4, 2009,we amended (the “Second Amendment”) our Term Facility and Revolving CreditFacility (as defined below) under our Fourth Amended and Restated Credit Agreement,dated January 31, 2005 among Accuride, Accuride Canada, Inc.,Citicorp USA, Inc., as administrative agent, and other lender partiesthereto (as amended, the “Credit Agreement”).  On February 4, 2009,we also completed a transaction (the “Sun Capital Transaction”) with anaffiliate of Sun Capital Securities Group (“Sun Capital”), which currentlyholds approximately $70.1 million principal amount of Last-Out Loans along withapproximately $6.5 million of interest accrued as payable-in-kind.  As of September 30, 2009, fees paidassociated with the Second Amendment were $10.8 million.

 

In connection with themodification of the Last-Out Loans and pursuant to a Last-Out Debt Agreement,we issued a warrant (the “Warrant”) to Sun Capital exercisable for 25 percentof our fully-diluted common stock at an exercise price of $0.01 per share.  The grant date fair value of the warrant of$4,655 was recorded as a liability and a discount to our long-term debt andwill be amortized over the life of our Term Facility, which matures on January 31,2012.  On September 28, 2009, SunCapital exercised a portion of the Warrant for 24.5 percent of ourfully-diluted common stock on a cashless basis. We issued approximately 11.4 million shares of common stock to SunCapital. As of September 30, 2009, a liability of $62 has been recorded toreflect the fair value of the remaining Warrant exercisable for 0.5 percent ofour fully-diluted common stock.

 

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Under the terms of ourCredit Agreement, there are certain restrictive covenants that limit thepayment of cash dividends and establish minimum financial ratios. Our seniorcredit facilities and the indenture governing our Registered SeniorSubordinated Notes restrict our ability to pay dividends. In addition, oursenior credit facilities include other more restrictive covenants and prohibitus from prepaying our other indebtedness, including our Registered SeniorSubordinated Notes, while borrowings under our senior credit facilities areoutstanding.

 

Due to the operatingresults as of and for the three and six month periods ended June 30, 2009,we entered into a series of temporary waiver agreements (the “temporary waivers”)with respect to our Credit Agreement among the Company, Accuride Canada, Inc.,the lender party hereto, the administrative agent for the lenders, and theother agents party thereto.  The temporarywaiver agreements were entered into on July 8, 2009, August 14, 2009,September 15, 2009, and September 30, 2009, respectively.

 

Pursuant to the terms of the temporary waivers, the lenders agreed towaive our compliance with the following financial covenants under the CreditAgreement for the fiscal quarter ended June 30, 2009 and for the durationof the temporary waiver periods: (i) the Senior Secured Leverage Ratio setforth in Section 5.04(a), (ii) the Interest Coverage Ratio set forthin Section 5.04(c) and (iii) the Fixed Charge Coverage Ratio setforth in Section 5.04(d).  The Company’s failure to comply with anyof these covenants would be an immediate event of default under the CreditAgreement (each default a “Potential Default”).  The temporary waiverperiods terminated on October 8, 2009.

 

Under the temporary waivers: (i) interest on advances and alloutstanding obligations under the Credit Agreement accrue at an annual rate of2.0% plus the otherwise applicable rate during the temporary waiver periods, (ii) theCompany and its subsidiaries were required to comply with certain restrictionson incurring additional debt, making investments and selling assets and (iii) theCompany was required to comply with a minimum liquidity requirement. Contemporaneously with the Second Temporary Waiver Agreement, Citicorp USA, Inc.resigned as administrative agent and the lenders appointed Deutsche Bank TrustCompany Americas to serve as administrative agent.

 

Under U.S. GAAP, under anevent of default of financial covenants associated with debt agreements, allamounts outstanding shall be classified within current liabilities onthe balance sheet.  Although the Company obtained the temporary waiversand forbearance agreements, the Company has classified all outstanding amountsunder its Fourth Amended and Restated Credit Agreement and, due tocross-acceleration provisions, its senior subordinated notes as currentliabilities as of September 30, 2009.

 

The Board appointed aspecial committee of independent directors to identify and, with the input ofmanagement and our financial advisors, evaluate alternatives to recommend anappropriate course of action to the full Board. As of September 30, 2009, we were negotiating restructuringalternatives with both our senior and subordinated lenders, such as additionalamendments or waivers, the sale of non-core assets, and/or alternative debtstructures, such as debt for debt or debt for equity agreements.

 

To maintain compliancewith the temporary waivers, the Company did not pay the approximately $11.7million of interest due August 3, 2009, to the holders of its 8 1⁄2 percentSenior Subordinated Notes due 2015 (Notes) and used the 30-day grace periodprovided in the Note indenture to continue discussions regarding a capitalrestructuring with its lenders.  Under the indenture, the failure to makethis interest payment did not constitute an event of default that permittedacceleration of the Notes until the expiration of the 30-day grace period.  Due to the non-payment of interest on theNotes, the Company entered into Forbearance Agreements with certain Noteholderson August 31, 2009, and September 30, 2009, respectively.

 

On October 8, 2009,Accuride Corporation (the “Company”) and its domestic subsidiaries (togetherwith the Company, the “Debtors”) filed voluntary petitions for relief underChapter 11 of the Bankruptcy Code with the United States Bankruptcy Court forthe District of Delaware.  The filing of the voluntary petitionconstitutes an event of default under the terms of our Credit Agreement andSenior Subordinated Notes indenture.  SeeNote 12.

 

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**Note 11 –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**

 
| ** **                                     | ** ** | **September 30, 2009** | ** ** |
|------------------------------------------------|------------|-----------------------------|------------|
| ** **                                     | ** ** | **Parent**                  | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| **ASSETS**                                     |       |                        |       |   |   |   |   |   |   |   |   |
| Cash and cash equivalents                      |       | $                           | 18,050     |   | $ | (516 | ) | $ | 7,483 |   | — |   | $ | 25,017 |   |
| Accounts receivable, net                       |       | 34,002                      |       | 183,754 |   | 6,036 |   | $ | (147,000 | ) | 76,792 |   |
| Inventories and supplies                       |       | 21,473                      |       | 47,652 |   | 6,287 |   | (570 | ) | 74,842 |   |
| Other current assets                           |       | 5,817                       |       | 3,223 |   | 16,298 |   | (14,175 | ) | 11,163 |   |
| Total current assets                           |       | 79,342                      |       | 234,113 |   | 36,104 |   | (161,745 | ) | 187,814 |   |
| Property, plant, and equipment, net            |       | 37,115                      |       | 159,041 |   | 41,759 |   | — |   | 237,915 |   |
| Goodwill                                       |       | 66,973                      |       | 52,460 |   | 8,041 |   | — |   | 127,474 |   |
| Intangible assets, net                         |       | 420                         |       | 93,372 |   | — |   | — |   | 93,792 |   |
| Investment in subsidiaries and affiliates      |       | 296,913                     |       | — |   | — |   | (296,913 | ) | — |   |
| Other non-current assets                       |       | 8,899                       |       | 1,510 |   | 5,958 |   | — |   | 16,367 |   |
| TOTAL                                          |       | $                           | 489,662    |   | $ | 540,496 |   | $ | 91,862 |   | $ | (458,658 | ) | $ | 663,362 |   |
| **LIABILITIES AND STOCKHOLDERS’  EQUITY** |       |                        |       |   |   |   |   |   |   |   |   |
| Accounts payable                               |       | $                           | 5,413      |   | $ | 23,863 |   | $ | 3,257 |   | — |   | $ | 32,533 |   |
| Accrued payroll and compensation               |       | 1,959                       |       | 9,018 |   | 6,200 |   | — |   | 17,177 |   |
| Accrued interest payable                       |       | 18,114                      |       | 9 |   | 371 |   | — |   | 18,494 |   |
| Debt                                           |       | 606,593                     |       | 3,100 |   | 22,000 |   | — |   | 631,693 |   |
| Accrued and other liabilities                  |       | 6,407                       |       | 277,430 |   | 2,113 |   | $ | (258,902 | ) | 27,048 |   |
| Total current liabilities                      |       | 638,486                     |       | 313,420 |   | 33,941 |   | (258,902 | ) | 726,945 |   |
| Deferred and non-current income taxes          |       | 3,771                       |       | 16,061 |   | 152 |   | — |   | 19,984 |   |
| Other non-current liabilities                  |       | 19,427                      |       | 58,058 |   | 10,970 |   | — |   | 88,455 |   |
| Stockholders’ equity (deficiency)         |       | (172,022                    | )          | 152,957 |   | 46,799 |   | (199,756 | ) | (172,022 | ) |
| TOTAL                                          |       | $                           | 489,662    |   | $ | 540,496 |   | $ | 91,862 |   | $ | (458,658 | ) | $ | 663,362 |   |

 
| ** **                                     | ** ** | **December 31, 2008** | ** ** |
|------------------------------------------------|------------|----------------------------|------------|
| ** **                                     | ** ** | **Parent**                 | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| **ASSETS**                                     |       |                       |       |   |   |   |   |   |   |   |   |
| Cash                                           |       | $                          | 95,630     |   | $ | (1,633 | ) | $ | 29,679 |   | — |   | $ | 123,676 |   |
| Accounts receivable, net                       |       | 21,244                     |       | 202,230 |   | 4,416 |   | $ | (149,671 | ) | 78,219 |   |
| Inventories and supplies                       |       | 21,278                     |       | 64,506 |   | 12,056 |   | (534 | ) | 97,306 |   |
| Other current assets                           |       | 2,449                      |       | 3,465 |   | 2,644 |   | — |   | 8,558 |   |
| Total current assets                           |       | 140,601                    |       | 268,568 |   | 48,795 |   | (150,205 | ) | 307,759 |   |
| Property, plant, and equipment, net            |       | 39,365                     |       | 173,255 |   | 46,018 |   | — |   | 258,638 |   |
| Goodwill                                       |       | 66,973                     |       | 52,460 |   | 8,041 |   | — |   | 127,474 |   |
| Intangible assets, net                         |       | 560                        |       | 96,922 |   | — |   | — |   | 97,482 |   |
| Investment in affiliates                       |       | 343,655                    |       | — |   | — |   | (343,655 | ) | — |   |
| Deferred tax assets                            |       | —                     |       | — |   | — |   | — |   | — |   |
| Other non-current assets                       |       | 10,593                     |       | 1,472 |   | 5,132 |   | — |   | 17,197 |   |
| TOTAL                                          |       | $                          | 601,747    |   | $ | 592,677 |   | $ | 107,986 |   | $ | (493,860 | ) | $ | 808,550 |   |
| **LIABILITIES AND STOCKHOLDERS’  EQUITY** |       |                       |       |   |   |   |   |   |   |   |   |
| Accounts payable                               |       | $                          | 10,523     |   | $ | 45,172 |   | $ | 8,242 |   | — |   | 63,937 |   |
| Accrued payroll and compensation               |       | 2,380                      |       | 11,349 |   | 5,922 |   | — |   | 19,651 |   |
| Accrued interest payable                       |       | 12,128                     |       | 9 |   | 368 |   | — |   | 12,505 |   |
| Accrued and other liabilities                  |       | 9,101                      |       | 279,329 |   | 5,082 |   | (263,987 | ) | 29,525 |   |
| Total current liabilities30                    |       | 34,132                     |       | 335,859 |   | 19,614 |   | (263,987 | ) | 125,618 |   |
| Long term debt, net                            |       | 618,069                    |       | 3,100 |   | 30,000 |   | — |   | 651,169 |   |
| Deferred and long-term income taxes            |       | 6,997                      |       | 13,248 |   | 1,024 |   | — |   | 21,269 |   |
| Other non-current liabilities                  |       | 16,364                     |       | 57,422 |   | 10,523 |   | — |   | 84,309 |   |
| Stockholders’ equity (deficiency)         |       | (73,815                    | )          | 183,048 |   | 46,825 |   | $ | (229,873 | ) | (73,815 | ) |
| TOTAL                                          |       | $                          | 601,747    |   | $ | 592,677 |   | $ | 107,986 |   | $ | (493,860 | ) | $ | 808,550 |   |

 

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**CONDENSED CONSOLIDATED STATEMENTS OFOPERATIONS**

 
| ** **                                  | ** ** | **Three Months Ended September 30, 2009** | ** ** |
|---------------------------------------------|------------|------------------------------------------------|------------|
| ** **                                  | ** ** | **Parent**                                     | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| Net sales                                   |       | $                                              | 73,645     |   | $ | 74,675 |   | $ | 27,213 |   | $ | (30,324 | ) | $ | 145,209 |   |
| Cost of goods sold                          |       | 69,926                                         |       | 77,909 |   | 25,824 |   | (30,324 | ) | 143,335 |   |
| Gross profit (loss)                         |       | 3,719                                          |       | (3,234 | ) | 1,389 |   | — |   | 1,874 |   |
| Operating expenses                          |       | 19,128                                         |       | 3,118 |   | 126 |   | — |   | 22,372 |   |
| Income (loss) from operations               |       | (15,409                                        | )          | (6,352 | ) | 1,263 |   | — |   | (20,498 | ) |
| Other income (expense):                     |       |                                           |       |   |   |   |   |   |   |   |   |
| Interest expense, net                       |       | (17,624                                        | )          | (40 | ) | (467 | ) | — |   | (18,131 | ) |
| Equity in earnings (losses) of subsidiaries |       | (3,654                                         | )          | — |   | — |   | 3,654 |   | — |   |
| Other income (expense), net                 |       | (153                                           | )          | 67 |   | 3,317 |   | — |   | 3,231 |   |
| Income (loss) before income taxes           |       | (36,840                                        | )          | (6,325 | ) | 4,113 |   | 3,654 |   | (35,398 | ) |
| Income tax provision (benefit)              |       | (3,511                                         | )          | — |   | 1,442 |   | — |   | (2,069 | ) |
| Net income (loss)                           |       | $                                              | (33,329    | ) | $ | (6,325 | ) | $ | 2,671 |   | $ | 3,654 |   | $ | (33,329 | ) |

 
| ** **                         | ** ** | **Three Months Ended September 30, 2008** | ** ** |
|------------------------------------|------------|------------------------------------------------|------------|
| ** **                         | ** ** | **Parent**                                     | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| Net sales                          |       | $                                              | 64,991     |   | $ | 174,354 |   | $ | 33,504 |   | $ | (33,362 | ) | $ | 239,487 |   |
| Cost of goods sold                 |       | 58,297                                         |       | 171,347 |   | 31,317 |   | (33,362 | ) | 227,599 |   |
| Gross profit                       |       | 6,694                                          |       | 3,007 |   | 2,187 |   | — |   | 11,888 |   |
| Operating expenses                 |       | 11,787                                         |       | 215,051 |   | 189 |   | — |   | 227,027 |   |
| Income (loss) from operations      |       | (5,093                                         | )          | (212,044 | ) | 1,998 |   | — |   | (215,139 | ) |
| Other income (expense):            |       |                                           |       |   |   |   |   |   |   |   |   |
| Interest income (expense), net     |       | (9,841                                         | )          | 7 |   | (1,792 | ) | — |   | (11,626 | ) |
| Equity in earnings of subsidiaries |       | (212,563                                       | )          | — |   | — |   | 212,563 |   | — |   |
| Other income (loss), net           |       | 250                                            |       | 56 |   | (762 | ) | — |   | (456 | ) |
| Income (loss) before income taxes  |       | (227,247                                       | )          | (211,981 | ) | (556 | ) | 212,563 |   | (227,221 | ) |
| Income tax provision (benefit)     |       | (26,068                                        | )          | — |   | 26 |   | — |   | (26,042 | ) |
| Net income (loss)                  |       | $                                              | (201,179   | ) | $ | (211,981 | ) | $ | (582 | ) | $ | 212,563 |   | $ | (201,179 | ) |

 

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| ** **                         | ** ** | **Nine Months Ended September 30, 2009** | ** ** |
|------------------------------------|------------|-----------------------------------------------|------------|
| ** **                         | ** ** | **Parent**                                    | ** ** | **Guarantor Subsidiaries** | ** ** | **Non-guarantor Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| Net sales                          |       | $                                             | 206,503    |   | $ | 223,045 |   | $ | 68,288 |   | $ | (73,845 | ) | $ | 423,991 |   |
| Cost of goods sold                 |       | 199,800                                       |       | 239,525 |   | 65,618 |   | (73,845 | ) | 431,098 |   |
| Gross profit (loss)                |       | 6,703                                         |       | (16,480 | ) | 2,670 |   | — |   | (7,107 | ) |
| Operating expenses                 |       | 37,440                                        |       | 9,180 |   | 466 |   | — |   | 47,086 |   |
| Income (loss) from operations      |       | (30,737                                       | )          | (25,660 | ) | 2,204 |   | — |   | (54,193 | ) |
| Other income (expense):            |       |                                          |       |   |   |   |   |   |   |   |   |
| Interest expense, net              |       | (45,373                                       | )          | (107 | ) | (1,545 | ) | — |   | (47,025 | ) |
| Loss on extinguishment of debt     |       | (5,389                                        | )          | — |   | — |   | — |   | (5,389 | ) |
| Equity in earnings of subsidiaries |       | (21,034                                       | )          | — |   | — |   | 21,034 |   | — |   |
| Other income (expense), net        |       | (413                                          | )          | 221 |   | 5,777 |   | — |   | 5,585 |   |
| Income (loss) before income taxes  |       | (102,946                                      | )          | (25,546 | ) | 6,436 |   | 21,034 |   | (101,022 | ) |
| Income tax provision (benefit)     |       | (2,491                                        | )          | — |   | 1,924 |   | — |   | (567 | ) |
| Net income (loss)                  |       | $                                             | (100,455   | ) | $ | (25,546 | ) | $ | 4,512 |   | $ | 21,034 |   | $ | (100,455 | ) |

 
| ** **                         | ** ** | **Nine Months Ended September 30, 2008** | ** ** |
|------------------------------------|------------|-----------------------------------------------|------------|
| ** **                         | ** ** | **Parent**                                    | ** ** | **Guarantor Subsidiaries** | ** ** | **Non-guarantor Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| Net sales                          |       | $                                             | 198,956    |   | $ | 513,464 |   | $ | 113,854 |   | $ | (103,658 | ) | $ | 722,616 |   |
| Cost of goods sold                 |       | 170,757                                       |       | 504,553 |   | 105,457 |   | (103,658 | ) | 677,109 |   |
| Gross profit                       |       | 28,199                                        |       | 8,911 |   | 8,397 |   | — |   | 45,507 |   |
| Operating expenses                 |       | 31,786                                        |       | 221,053 |   | 603 |   | — |   | 253,442 |   |
| Income (loss) from operations      |       | (3,587                                        | )          | (212,142 | ) | 7,794 |   | — |   | (207,935 | ) |
| Other income (expense):            |       |                                          |       |   |   |   |   |   |   |   |   |
| Interest expense, net              |       | (30,537                                       | )          | (43 | ) | (5,244 | ) | — |   | (35,824 | ) |
| Equity in earnings of subsidiaries |       | (210,418                                      | )          | — |   | — |   | 210,418 |   | — |   |
| Other income (loss), net           |       | (89                                           | )          | 266 |   | (754 | ) | — |   | (577 | ) |
| Income (loss) before income taxes  |       | (244,631                                      | )          | (211,919 | ) | 1,796 |   | 210,418 |   | (244,336 | ) |
| Income tax provision (benefit)     |       | (35,086                                       | )          | — |   | 295 |   | — |   | (34,791 | ) |
| Net income (loss)                  |       | $                                             | (209,545   | ) | $ | (211,919 | ) | $ | 1,501 |   | $ | 210,418 |   | $ | (209,545 | ) |

 

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**CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS**

 
| ** **                                                                                          | ** ** | **Nine Months Ended September 30, 2009** | ** ** |
|-----------------------------------------------------------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                                                          | ** ** | **Parent  Company**                           | ** ** | **Guarantor  Subsidiaries** | ** ** | **Non-guarantor  Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| CASH FLOWS FROM OPERATING ACTIVITIES:                                                               |       |                                          |       |   |   |   |   |   |   |   |   |
| Net income (loss)                                                                                   |       | $                                             | (100,455   | ) | $ | (25,546 | ) | $ | 4,512 |   | $ | 21,034 |   | $ | (100,455 | ) |
| Adjustments to reconcile net income (loss) to net  cash provided by (used in) operating activities: |       |                                          |       |   |   |   |   |   |   |   |   |
| Depreciation                                                                                        |       | 5,623                                         |       | 24,659 |   | 4,298 |   | — |   | 34,580 |   |
| Amortization – deferred financing costs                                                        |       | 3,319                                         |       | 2 |   | 19 |   | — |   | 3,340 |   |
| Amortization – other intangible assets                                                         |       | 140                                           |       | 3,550 |   | — |   | — |   | 3,690 |   |
| Loss on extinguishment of debt                                                                      |       | 5,389                                         |       | — |   | — |   | — |   | 5,389 |   |
| Deferred income taxes                                                                               |       | (136                                          | )          | — |   | — |   | — |   | (136 | ) |
| Change in warrant liability                                                                         |       | (608                                          | )          | — |   | — |   | — |   | (608 | ) |
| Paid-in-kind interest                                                                               |       | 6,519                                         |       | — |   | — |   | — |   | 6,519 |   |
| Loss (gain) on disposal of assets                                                                   |       | (477                                          | )          | 242 |   | 292 |   | — |   | 57 |   |
| Equity in earnings of subsidiaries and affiliates                                                   |       | 21,034                                        |       | — |   | — |   | (21,034 | ) | — |   |
| Non-cash stock-based compensation                                                                   |       | 249                                           |       | — |   | — |   | — |   | 249 |   |
| Change in other operating items                                                                     |       | 10,436                                        |       | 6,398 |   | (22,986 | ) | — |   | (6,152 | ) |
| Net cash provided by (used in) operating activities                                                 |       | (48,967                                       | )          | 9,305 |   | (13,865 | ) | — |   | (53,527 | ) |
|                                                                                                |       |                                          |       |   |   |   |   |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                                               |       |                                          |       |   |   |   |   |   |   |   |   |
| Purchases of property, plant, and equipment                                                         |       | (7,390                                        | )          | (8,401 | ) | (331 | ) | — |   | (16,122 | ) |
| Other                                                                                               |       | 3,900                                         |       | 213 |   | — |   | — |   | 4,113 |   |
| Net cash used in investing activities                                                               |       | (3,490                                        | )          | (8,188 | ) | (331 | ) | — |   | (12,009 | ) |
|                                                                                                |       |                                          |       |   |   |   |   |   |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES:                                                               |       |                                          |       |   |   |   |   |   |   |   |   |
| Net change in revolving credit advance                                                              |       | (35,000                                       | )          | — |   | (8,000 | ) | — |   | (43,000 | ) |
| Other                                                                                               |       | 9,877                                         |       | — |   | — |   | — |   | 9,877 |   |
| Net cash used in financing activities                                                               |       | (25,123                                       | )          | — |   | (8,000 | ) | — |   | (33,123 | ) |
|                                                                                                |       |                                          |       |   |   |   |   |   |   |   |   |
| Increase (decrease) in cash and cash equivalents                                                    |       | (77,580                                       | )          | 1,117 |   | (22,196 | ) | — |   | (98,659 | ) |
| Cash and cash equivalents, beginning of year                                                        |       | 95,630                                        |       | (1,633 | ) | 29,679 |   | — |   | 123,676 |   |
| Cash and cash equivalents, end of period                                                            |       | $                                             | 18,050     |   | $ | (516 | ) | $ | 7,483 |   | $ | — |   | $ | 25,017 |   |

 
| ** **                                                                                          | ** ** | **Nine Months Ended September 30, 2008** | ** ** |
|-----------------------------------------------------------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                                                          | ** ** | **Parent Company**                            | ** ** | **Guarantor Subsidiaries** | ** ** | **Non-guarantor Subsidiaries** | ** ** | **Eliminations** | ** ** | **Total** | ** ** |
| CASH FLOWS FROM OPERATING ACTIVITIES:                                                               |       |                                          |       |   |   |   |   |   |   |   |   |
| Net income (loss)                                                                                   |       | $                                             | (209,545   | ) | $ | (211,919 | ) | $ | 1,501 |   | $ | 210,418 |   | $ | (209,545 | ) |
| Adjustments to reconcile net income (loss) to net  cash provided by (used in) operating activities: |       |                                          |       |   |   |   |   |   |   |   |   |
| Depreciation                                                                                        |       | 5,658                                         |       | 19,923 |   | 4,831 |   | — |   | 30,412 |   |
| Amortization – deferred financing costs                                                        |       | 903                                           |       | 3 |   | 19 |   | — |   | 925 |   |
| Amortization – other intangible assets                                                         |       | 507                                           |       | 3,626 |   | — |   | — |   | 4,133 |   |
| Loss on disposal of assets                                                                          |       | 50                                            |       | 211 |   | 168 |   | — |   | 429 |   |
| Deferred income taxes                                                                               |       | (35,577                                       | )          | — |   | 650 |   | — |   | (34,927 | ) |
| Equity in earnings of subsidiaries and affiliates                                                   |       | 210,418                                       |       | — |   | — |   | (210,418 | ) | — |   |
| Non-cash stock-based compensation                                                                   |       | 2,185                                         |       | — |   | — |   | — |   | 2,185 |   |
| Impairments of investments                                                                          |       | 2,896                                         |       | — |   | — |   | — |   | 2,896 |   |
| Impairments of goodwill and other intangibles                                                       |       | —                                        |       | 212,220 |   | — |   | — |   | 212,220 |   |
| Change in other operating items                                                                     |       | (21,421                                       | )          | (7,120 | ) | (7,094 | ) | — |   | (35,635 | ) |
| Net cash provided by (used in) operating activities                                                 |       | (43,926                                       | )          | 16,944 |   | 75 |   | — |   | (26,907 | ) |
|                                                                                                |       |                                          |       |   |   |   |   |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                                               |       |                                          |       |   |   |   |   |   |   |   |   |
| Purchases of property, plant, and equipment                                                         |       | (9,253                                        | )          | (14,910 | ) | (699 | ) | — |   | (24,862 | ) |
| Other                                                                                               |       | (6,097                                        | )          | 270 |   | — |   | — |   | (5,827 | ) |
| Net cash used in investing activities                                                               |       | (15,350                                       | )          | (14,640 | ) | (699 | ) | — |   | (30,689 | ) |
|                                                                                                |       |                                          |       |   |   |   |   |   |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES:                                                               |       |                                          |       |   |   |   |   |   |   |   |   |
| Other                                                                                               |       | (934                                          | )          | — |   | — |   | — |   | (934 | ) |
| Net cash used in financing activities                                                               |       | (934                                          | )          | — |   | — |   | — |   | (934 | ) |
|                                                                                                |       |                                          |       |   |   |   |   |   |   |   |   |
| Increase (decrease) in cash and cash equivalents                                                    |       | (60,210                                       | )          | 2,304 |   | (624 | ) | — |   | (58,530 | ) |
| Cash and cash equivalents, beginning of year                                                        |       | 85,940                                        |       | (2,474 | ) | 7,469 |   | — |   | 90,935 |   |
| Cash and cash equivalents, end of year                                                              |       | $                                             | 25,730     |   | $ | (170 | ) | $ | 6,845 |   | $ | — |   | $ | 32,405 |   |

 

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**Note 12 —Subsequent Events**

 

On October 8, 2009,Accuride Corporation (the “Company”) and its domestic subsidiaries (togetherwith the Company, the “Debtors”) filed voluntary petitions for relief underChapter 11 of the Bankruptcy Code with the United States Bankruptcy Court forthe District of Delaware.  The Debtors will continue to operate theirbusinesses as debtors-in-possession under the jurisdiction of the bankruptcycourt and in accordance with the applicable provisions of the BankruptcyCode.  On the petition date, the Debtors filed several motions with thebankruptcy court, including a motion to have the Chapter 11 cases jointlyadministered.

 

Prior to making theChapter 11 filings, on October 7, 2009, the Company entered into (i) aRestructuring Support Agreement with the holders of approximately 57% of theprincipal amount of the loans outstanding under the Company’s Fourth Amendedand Restated Credit Agreement, dated as of January 31, 2005, as amended,among the Company, Accuride Canada Inc., the lenders party thereto, theadministrative agent for the lenders, and the other agents party thereto (the “CreditAgreement”), (ii) a Restructuring Support Agreement with the beneficialholders of approximately 70% of the principal amount of the Company’s 8.5%Senior Subordinated Notes due 2015, issued pursuant to the Indenture dated January 31,2005 between the Company, the guarantors named therein and the Bank of New YorkTrust Company, N.A. as trustee (the “Indenture”) and (iii) a ConvertibleNotes Commitment Agreement (together with the Restructuring Support Agreements,the “Restructuring Agreements”) with certain holders of the senior subordinatednotes.  Pursuant to the Restructuring Agreements, the parties thereto haveagreed to support a financial reorganization of the Debtors consistent with theterms and conditions set forth below and the senior lenders and noteholdershave agreed to not transfer any claims except to a transferee who agrees to bebound by the applicable Restructuring Support Agreement.

 

*Restructuring Transaction*

 

The terms of theRestructuring Transaction include:

 

·                  The Credit Agreement will be amended to: (i) extend its maturity(except that of the “last-out” term loans described below) through June 30,2013, (ii) amend the interest rate to LIBOR + 6.75% (with a LIBOR floor of3.00%) and (iii) eliminate all financial covenants except minimumliquidity and minimum EBITDA covenants.

 

·                  The senior subordinated notes will be cancelled and the holders willreceive 98% of the common stock of the reorganized Company, subject todilution, including dilution for common stock issued upon conversion of the newconvertible notes and new warrants issued pursuant to the RestructuringTransaction, as described below.

 

·                  The reorganized Company will complete a $140 million rights offering ofnew senior unsecured convertible notes to current noteholders.  The rightsoffering is fully backstopped by certain current noteholders.  The newnotes will be convertible into 60% of the common stock of the reorganizedCompany.

 

·                  A portion of the proceeds from the rights offering will be used tofully pay down the “last-out” term loans currently outstanding under the CreditAgreement and held by an affiliate of Sun Capital Partners (“Sun Capital”) withthe remainder to provide ongoing liquidity for Debtors’ businesses.

 

·                  The Company’s common stock will be cancelled and the holders willreceive 2% of the common stock of the reorganized Company and warrantsexercisable for up to 15% of the common stock of the reorganized Company,subject to dilution, including dilution for stock issued upon conversion of thenew convertible notes.  The warrants provide the opportunity for additionalrecovery to the pre-petition equity holders in the event that the reorganizedCompany reaches certain equity value targets during the two years following thewarrants’ issue.

 

·                  Unsecured trade creditors will be unimpaired and their claims will bepaid in full.

 

The RestructuringAgreements contain customary terms, are subject to material conditions and maybe terminated upon the occurrence of certain events, including if there is amaterial adverse change to the Company’s business, results of operations,property or financial condition.

 

*Debtor-in-PossessionFinancing*

 

In connection with theChapter 11 filings, Debtors filed a motion seeking the approval of thebankruptcy court for a superpriority secured ABL revolving credit facility of$25 million and a term loan first-in, last-out facility of $25 million 

 

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(together, the “DIPCredit Agreement”), between the Company, Deutsche Bank Trust Company, asadministrative agent for the lenders under the DIP Credit Agreement, andcertain other agents and lenders party thereto.  The $25 million of ABLloans under the DIP Credit Agreement would bear interest, at the election ofthe Company, at a rate of LIBOR + 6.50% (with a LIBOR floor of 2.50%) or BaseRate + 5.50% (with a Base Rate floor of 3.50%), and the $25 million offirst-in, last-out term loans under the DIP Credit Agreement would bearinterest, at the election of the Company, at a rate of LIBOR + 7.50% (with aLIBOR floor of 2.50%) or Base Rate + 6.50% (with a Base Rate floor of 3.50%). Unless otherwise extended, the DIP Credit Agreement would mature ninemonths from the commencement of the bankruptcy case, subject to certainprovisions that may lead to an earlier termination.

 

The use of proceeds underthe DIP Credit Agreement would be limited to working capital and other generalcorporate purposes consistent with a budget that the Company presented to theadministrative agent, including payment of costs and expenses related to theadministration of the bankruptcy proceedings and payment of other expenses asapproved by the bankruptcy court.

 

On November 2, 2009,Debtors received final approval from the U.S. Bankruptcy Court (“Court”) of its$50 Million Debtor in Possession (DIP) financing agreement.

 

*FourthAmendment and Canadian Forbearance Agreement*

 

In connection with the Chapter 11 filings and the RestructuringTransaction, effective October 8, 2009, the Company also entered into aFourth Amendment and Canadian Forbearance Agreement with respect to the CreditAgreement (the “Canadian Forbearance”).  Pursuant to the CanadianForbearance, the senior lenders have agreed to forbear from enforcing any remediesunder the Credit Agreement against Accuride Canada, Inc. with respect toany defaults specified therein.  The Canadian Forbearance will remaineffective until the termination of the DIP Credit Agreement, subject to certainprovisions that may lead to an earlier termination.

 

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**Item 2. Management’s Discussion and Analysis of Financial Condition and Resultsof 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 31,2008 filed with the Securities and Exchange Commission (“SEC”).  Certain information and footnote disclosuresnormally included in financial statements prepared in accordance with accountingprinciples generally accepted in the United States of America have beencondensed or omitted pursuant to the rules and regulations promulgated bythe SEC.  In the opinion of management,the interim financial information includes all adjustments and accruals,consisting only of normal recurring adjustments, which are necessary for a fairpresentation of results for the respective interim periods.  The results of operations for the three andnine months ended September 30, 2009 are not necessarily indicative of theresults to be expected for the full fiscal year ending December 31, 2009or 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 businessconsists of seven operating segments that design, manufacture, and distributecomponents for trucks, trailers, and other vehicles. These operating segmentsare aggregated 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.

 

Recent global market andeconomic conditions have been unprecedented and challenging with tighter creditconditions and recession in most major economies continuing into 2009.  As a result of these market conditions, thecost and availability of credit has been adversely affected by illiquid creditmarkets and wider credit spreads. Concern about the stability of the markets generally and the strength ofcounterparties specifically has led many lenders and institutional investors toreduce, and in some cases, cease to provide credit to businesses and consumers.  These factors have lead to a decrease inspending by businesses and consumers alike. Continued turbulence in the U.S.and international markets and economies and prolonged declines in business andconsumer spending have adversely affect our liquidity and financial condition,and the liquidity and financial condition of our customers, including ourability to refinance maturing liabilities and access the capital markets tomeet liquidity needs.

 

The heavy- andmedium-duty truck and commercial trailer markets and the related aftermarketare the primary drivers of our sales. These markets are, in turn, directlyinfluenced by conditions in the North American truck industry generally and byoverall economic growth and consumer spending.  Accordingly, the current economic conditions described above have led toa severe downturn in the North American truck and vehicle supply industries,which has resulted in a significant decline in our sales volume.  Furthermore, industry analysts expect thatdemand in 2009 will be lower than in 2008. Net sales for the three months ended September 30, 2009, were$145.2 million compared to net sales of $239.5 million for the three monthsended September 30, 2008.  We cannotaccurately predict how prolonged this downturn may be, and this downturn maylead to further reduced spending and deterioration in the North American truckand vehicle supply industries for the foreseeable future. Delayed or failedeconomic recovery could have a material adverse effect on our business, resultsof operations, or financial condition.

 

On October 8, 2009,Accuride Corporation (the “Company”) and its domestic subsidiaries (togetherwith the Company, the “Debtors”) filed voluntary petitions for relief underChapter 11 of the Bankruptcy Code with the United States Bankruptcy Court forthe District of Delaware.  The Debtors will continue to operate theirbusinesses as debtors-in-possession under the jurisdiction of the bankruptcycourt and in accordance with the applicable provisions of the BankruptcyCode.  See *Capital Resources and Liquidity*below for further details.

 

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**Resultsof Operations**

 

***ThreeMonths Ended September 30, 2009 Compared to the Three Months Ended September 30,2008***

 

The following table setsforth certain income statement information of Accuride for the three monthsended September 30, 2009 and September 30, 2008:

 
| **(Dollars in thousands)**                          | ** ** | **Fiscal 2009** | ** ** | **Fiscal 2008** | ** ** |
|-----------------------------------------------------|------------|-----------------|------------|-----------------|------------|
| ** **                                          | ** ** | ** **      | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net  sales:                                         |       |            |       |            |       |   |   |   |   |
| Wheels                                              |       | $               | 63,504     |            | 43.7       | % | $ | 96,178 |   | 40.2 | % |
| Components                                          |       | 75,412          |       | 51.9            | %          | 131,937 |   | 55.1 | % |
| Other                                               |       | 6,293           |       | 4.4             | %          | 11,372 |   | 4.7 | % |
| Total  net sales                                    |       | $               | 145,209    |            | 100        | % | $ | 239,487 |   | 100.0 | % |
| Gross  profit (loss):                               |       |            |       |            |       |   |   |   |   |
| Wheels                                              |       | 3,817           |       | 6.0             | %          | 10,592 |   | 11.0 | % |
| Components                                          |       | (2,828          | )          | (3.8            | )%         | (1,122 | ) | (0.9 | )% |
| Other                                               |       | 1,296           |       | 20.6            | %          | 3,118 |   | 27.4 | % |
| Corporate                                           |       | (411            | )          | —          | %          | (700 | ) | — | % |
| Total  gross profit                                 |       | 1,874           |       | 1.3             | %          | 11,888 |   | 5.0 | % |
| Operating  expenses (excluding impairment)          |       | 22,372          |       | 15.4            | %          | 14,807 |   | 6.2 | % |
| Impairment  of goodwill and other intangible assets |       | —          |       | —          | %          | 212,220 |   | 88.6 | % |
| Loss  from operations                               |       | (20,498         | )          | (14.1           | )%         | (215,139 | ) | (89.8 | )% |
| Interest  expense, net                              |       | (18,131         | )          | (12.5           | )%         | (11,626 | ) | (4.9 | )% |
| Other  income (loss), net                           |       | 3,231           |       | 2.2             | %          | (456 | ) | (0.2 | )% |
| Income  tax benefit                                 |       | (2,069          | )          | (1.4            | )%         | (26,042 | ) | (10.9 | )% |
| Net  loss                                           |       | $               | (33,329    | )               | (23.0      | )% | $ | (201,179 | ) | (84.0 | )% |

 

**Net Sales.** Consolidated net sales for the three months ended September 30,2009, were $145.2 million, which was a decrease of 39.4%, compared to net salesof $239.5 million for the three months ended September 30, 2008.  The decrease in net sales is primarily aresult of the reduced demand in the commercial vehicle industry.  Sales decreased in the Wheels and Componentssegments by 34.0% and 42.8%, respectively.

 

**Gross Profit. **Consolidated gross profit for the three months ended September 30,2009, decreased $10.0 million to $1.9 million. Gross profit in the Wheels segment decreased $6.8 million to $3.8million primarily due to the contribution lost on the reduced sales demand of$32.7 million and the $2.9 million pension curtailment charge recognized in thecurrent period due to a reduction of the workforce in our Canadian facility.

 

**Operating Expenses. **Operating expenses increased $7.6 million to $22.4million for the three months ended September 30, 2009 from $14.8 millionfor the three months ended September 30, 2008.  This was primarily due to $12.7 million ofexpenses incurred in the current period related to professional and other feesrelated to the evaluation of alternatives for addressing the failure to complywith certain financial covenants under our Credit Agreement as of June 30,2009, partially offset by decreases in salary related expenses resulting fromreduced headcount and other elimination or suspension of other certain wagesand benefits.

 

**Impairment of goodwill and otherintangible assets. **The impairment charge of $212.2 millionwas recognized in the Components ($203.8 million) and Other ($8.4 million)segments during the three months ended September 30, 2008.

 

**Interest Expense. **Net interest expenseincreased $6.5 million to $18.1 million for the three months ended September 30,2009 from $11.6 million for the three months ended September 30,2008.  The increase is primarilyattributable to increased rates on our Term Facility resulting in $4.7 millionin incremental expense partially offset by $0.9 million of non-cash unrealizedgains from the mark to market of our interest rate swap agreements in the currentperiod compared to $0.4 million of unrealized losses in the comparable quarterin 2008.  Increased interest expenserecognized in the current period versus prior period included $1.2 millionrelated to the outstanding revolver and $0.9 million of increased amortizationof deferred financing fees and other discounts. Approximately $2.9 million of interest expense recognized in the currentperiod was accrued as payable-in-kind to Sun Capital and does not impact cashduring 2009.

 

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**Income Tax. **Income tax benefit in the three months ended September 30,2009, was $2.1 million on pre-tax losses of $35.4 million compared to a taxbenefit of $26.0 million on pre-tax losses of $227.2 million recognized in thethree months ended September 30, 2008. Due to our recent history of U.S. operating and taxable losses, theinconsistency of these profits, and the uncertainty of our financial outlook,we continue to maintain a full valuation allowance against our domesticdeferred tax assets.

 

**Net Loss. **We had a netloss of $33.3 million for the three months ended September 30,2009 compared to a net loss of $201.2 million for the three months ended September 30,2008.  This was primarily a result of thelower gross profit due to the reduction in sales volume offset by impairmentcharges recognized in 2008 of $212.2 million.

 

***NineMonths Ended September 30, 2009 Compared to the Nine Months Ended September 30,2008***

 

The following table setsforth certain income statement information of Accuride for the nine monthsended September 30, 2009 and September 30, 2008:

 
| **(In thousands except per share  data)**           | ** ** | **Fiscal 2009** | ** ** | **Fiscal 2008** | ** ** |
|-----------------------------------------------------|------------|-----------------|------------|-----------------|------------|
| ** **                                          | ** ** | ** **      | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net  sales:                                         |       |            |       |            |       |   |   |   |   |
| Wheels                                              |       | $               | 174,609    |            | 41.2       | % | $ | 305,342 |   | 42.2 | % |
| Components                                          |       | 222,535         |       | 52.5            | %          | 380,055 |   | 52.6 | % |
| Other                                               |       | 26,847          |       | 6.3             | %          | 37,219 |   | 5.2 | % |
| Total  net sales                                    |       | 423,991         |       | 100.0           | %          | 722,616 |   | 100.0 | % |
| Gross  profit (loss):                               |       |            |       |            |       |   |   |   |   |
| Wheels                                              |       | 10,557          |       | 6.0             | %          | 47,835 |   | 15.7 | % |
| Components                                          |       | (22,379         | )          | (10.1           | )%         | (9,064 | ) | (2.4 | )% |
| Other                                               |       | 6,663           |       | 24.8            | %          | 10,306 |   | 27.7 | % |
| Corporate                                           |       | (1,948          | )          | —          | %          | (3,570 | ) | — | % |
| Total  gross profit (loss)                          |       | (7,107          | )          | (1.7            | )%         | 45,507 |   | 6.3 | % |
| Operating  expenses (excluding impairment)          |       | 47,086          |       | 11.1            | %          | 41,222 |   | 5.7 | % |
| Impairment  of goodwill and other intangible assets |       | —          |       | —          | %          | 212,220 |   | 29.4 | % |
| Loss  from operations                               |       | (54,193         | )          | (12.8           | )%         | (207,935 | ) | (28.8 | )% |
| Interest  expense, net                              |       | (47,025         | )          | (11.1           | )%         | (35,824 | ) | (5.0 | )% |
| Loss  on extinguishment of debt                     |       | (5,389          | )          | (1.3            | )%         | — |   | — | % |
| Other  income (loss), net                           |       | 5,585           |       | 1.3             | %          | (577 | ) | (0.1 | )% |
| Income  tax benefit                                 |       | (567            | )          | (0.1            | )%         | (34,791 | ) | (4.8 | )% |
| Net  loss                                           |       | $               | (100,455   | )               | (23.7      | )% | $ | (209,545 | ) | (29.0 | )% |

 

**Net sales.** Net sales for the nine months ended September 30,2009 were $424.0 million, which was a decrease of 41.3% compared to net salesof $722.6 million for the nine months ended September 30, 2008.  The decrease in net sales was realized atboth of the larger segments and was primarily a result of the reduced demand in2009.

 

**Gross profit. **Gross profit decreased $52.6 million to a loss of $7.1million for the nine months ended September 30, 2009 from profit of $45.5million for the nine months ended September 30, 2008, primarily due to the$298.6 million reduction in sales. Gross profit in the Components segment forthe nine months ended September 30, 2009 included a lease abandonmentcharge of $3.2 million.

 

**Operating expenses.** Operating expenses increased $5.9 million to $47.1 million for the ninemonths ended September 30, 2009 from $41.2 million for the nine monthsended September 30, 2008.  This wasprimarily due to $14.2 million of expenses incurred in the current year relatedto fees related to the evaluation of alternatives for addressing the failure tocomply with certain financial covenants under our Credit Agreement as of June 30,2009, partially offset by decreases in salary related expenses resulting fromreduced headcount and other elimination or suspension of other certain wagesand benefits.

 

**Impairment of goodwill and otherintangible assets. **The impairment charge of $212.2 millionwas recognized in the Components ($203.8 million) and Other ($8.4 million)segments during the nine months ended September 30, 2008.

 

**Interest expense, net. **Net interest expenseincreased $11.2 million to $47.0 million for the nine months ended September 30,2009 from $35.8 million for the nine months ended September 30, 2008.  The increase is attributable to having ahigher rate on our Term Facility, resulting in $8.7 million of incrementalexpense and revolver interest of $2.8 million in the current

 

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year compared to havingno outstanding revolver in the prior year, partially offset by $3.9 million ofadditional unrealized gains from our interest rate swap agreements in thecurrent year.  Additional interestexpense recognized in the current period versus prior year period included $2.4million of increased amortization of deferred financing fees and otherdiscounts.  Approximately $6.5 million ofinterest expense recognized in the current year was accrued as payable-in-kindto Sun Capital and does not impact cash during 2009.

 

**Net loss. **We had a netloss of $100.5million for the nine monthsended September 30, 2009 compared to a net loss of $209.5 million for thenine months ended September 30, 2008. This was primarily a result of 2008 charges related to the $212.2million of impairment charges, the $7.7 million of one-time pre-tax chargesrelated to a labor interruption at our Rockford, Illinois facility, and $11.5million of pre-tax restructuring charges recognized in 2008. These favorablevariances were partially offset by lower gross profit due to the reduction insales demand.

 

***Changes in Financial Condition***

 

At September 30,2009, we had total assets of $663.4 million, as compared to $808.6 million at December 31,2008.  The $145.2 million, or 18.0%,decrease in total assets during the nine months ended September 30, 2009primarily resulted from the reduction of cash of $98.7 million and reduction ofinventory of $20.9 million.

 

We use working capitaland cash flow measures to evaluate the performance of our operations and ourability to meet our financial obligations. We define working capital as currentassets less current liabilities, excluding net debt. We require working capitalinvestment to maintain our position as a leading manufacturer and supplier ofcommercial vehicle components.  Wecontinue to strive to align our working capital investment with our customers’purchase requirements and our production schedules.

 

The following tablesummarizes the major components of our working capital as of the periods listedbelow:

 
| ** **                        | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|-----------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                        | ** ** | **2009**               | ** ** | **2008**              | ** ** |
| Accounts  receivable              |       | $                      | 76,792     |                  | $          | 78,219 |   |
| Inventories  and supplies         |       | 74,842                 |       | 97,306                |       |
| Deferred  income taxes (current)  |       | 1,955                  |       | 1,955                 |       |
| Other  current assets             |       | 9,208                  |       | 6,603                 |       |
| Accounts  payable                 |       | (32,533                | )          | (63,937               | )          |
| Accrued  payroll and compensation |       | (17,177                | )          | (19,651               | )          |
| Accrued  interest payable         |       | (18,494                | )          | (12,505               | )          |
| Accrued  workers compensation     |       | (7,848                 | )          | (7,969                | )          |
| Other  current liabilities        |       | (19,200                | )          | (21,556               | )          |
| Working  Capital                  |       | $                      | 67,545     |                  | $          | 58,465 |   |

 

Significant changes inworking capital from December 31, 2008 include:

 

·                  a decrease in inventories of $22.5million due to reduction in sales volume and demand and management initiativesto reduce inventory on hand;

·                  a decrease of accounts payable of $31.4million primarily due to the reduction in raw material purchases in the monthsleading up to the respective period-end dates;

·                  a decrease in accrued payroll andcompensation of $2.8 million due to payments made for severance related chargesand payments made related to 2008 profit sharing;

·                  an increase in accrued interest payableof $6.0 million primarily due to the company not paying the $11.7 million ininterest due to the holders of our Notes, partially offset by interest paymentsmade associated with our Term B Loan Facility and our Revolving Credit Facilitydebt.

 

## **CapitalResources and Liquidity**

## ** **

Our primarysources of liquidity during the three months ended September 30, 2009,were cash reserves.

 

To maintaincompliance with the temporary waivers, the Company did not pay theapproximately $11.7 million of interest due August 3, 2009, to the holdersof its 8 1⁄2 percent Senior Subordinated Notes due 2015 (Notes) and used the

 

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existing 30-daygrace period provided in the Note indenture to continue discussions regarding acapital restructuring with its lenders.  Under the indenture, the failureto make this interest payment did not constitute an event of default thatpermits acceleration of the Notes until the expiration of the 30-day graceperiod.  Due to the non-payment ofinterest on the Notes, the Company entered into Forbearance Agreements withcertain Noteholders.

 

On October 8, 2009,Accuride Corporation (the “Company”) and its domestic subsidiaries (togetherwith the Company, the “Debtors”) filed voluntary petitions for relief underChapter 11 of the Bankruptcy Code with the United States Bankruptcy Court forthe District of Delaware.  The Debtors will continue to operate theirbusinesses as debtors-in-possession under the jurisdiction of the bankruptcycourt and in accordance with the applicable provisions of the BankruptcyCode.  On the petition date, the Debtors filed several motions with thebankruptcy court, including a motion to have the Chapter 11 cases jointlyadministered.

 

Prior to making theChapter 11 filings, on October 7, 2009, the Company entered into (i) aRestructuring Support Agreement with the holders of approximately 57% of theprincipal amount of the loans outstanding under the Company’s Fourth Amendedand Restated Credit Agreement, dated as of January 31, 2005, as amended,among the Company, Accuride Canada Inc., the lenders party thereto, theadministrative agent for the lenders, and the other agents party thereto (the “CreditAgreement”), (ii) a Restructuring Support Agreement with the beneficialholders of approximately 70% of the principal amount of the Company’s 8.5%Senior Subordinated Notes due 2015, issued pursuant to the Indenture dated January 31,2005 between the Company, the guarantors named therein and the Bank of New YorkTrust Company, N.A. as trustee (the “Indenture”) and (iii) a ConvertibleNotes Commitment Agreement (together with the Restructuring Support Agreements,the “Restructuring Agreements”) with certain holders of the senior subordinatednotes.  Pursuant to the Restructuring Agreements, the parties thereto haveagreed to support a financial reorganization of the Debtors consistent with theterms and conditions set forth in the term sheets attached as Exhibit A tothe Restructuring Support Agreements (the “Restructuring Transaction”) and thesenior lenders and noteholders have agreed to not transfer any claims except toa transferee who agrees to be bound by the applicable Restructuring SupportAgreement.

 

*Restructuring Transaction*

 

The terms of the RestructuringTransaction include:

 

·                  The Credit Agreement will be amended to: (i) extend its maturity(except that of the “last-out” term loans described below) through June 30,2013, (ii) amend the interest rate to LIBOR + 6.75% (with a LIBOR floor of3.00%) and (iii) eliminate all financial covenants except minimumliquidity and minimum EBITDA covenants.

 

·                  The senior subordinated notes will be cancelled and the holders willreceive 98% of the common stock of the reorganized Company, subject todilution, including dilution for common stock issued upon conversion of the newconvertible notes and new warrants issued pursuant to the RestructuringTransaction, as described below.

 

·                  The reorganized Company will complete a $140 million rights offering ofnew senior unsecured convertible notes to current noteholders.  The rightsoffering is fully backstopped by certain current noteholders.  The newnotes will be convertible into 60% of the common stock of the reorganizedCompany.

 

·                  A portion of the proceeds from the rights offering will be used tofully pay down the “last-out” term loans currently outstanding under the CreditAgreement and held by an affiliate of Sun Capital Partners (“Sun Capital”) withthe remainder to provide ongoing liquidity for Debtors’ businesses.

 

·                  The Company’s common stock will be cancelled and the holders willreceive 2% of the common stock of the reorganized Company and warrantsexercisable for up to 15% of the common stock of the reorganized Company,subject to dilution, including dilution for stock issued upon conversion of thenew convertible notes.  The warrants provide the opportunity foradditional recovery to the pre-petition equity holders in the event that thereorganized Company reaches certain equity value targets during the two yearsfollowing the warrants’ issue.

 

·                  Unsecured trade creditors will be unimpaired and their claims will bepaid in full.

 

The RestructuringAgreements contain customary terms, are subject to material conditions and maybe terminated upon the occurrence of certain events, including if there is amaterial adverse change to the Company’s business, results of operations,property or financial condition.

 

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*Debtor-in-PossessionFinancing*

 

In connection with theChapter 11 filings, Debtors filed a motion seeking the approval of thebankruptcy court for a superpriority secured ABL revolving credit facility of$25 million and a term loan first-in, last-out facility of $25 million(together, the “DIP Credit Agreement”), between the Company, Deutsche BankTrust Company, as administrative agent for the lenders under the DIP CreditAgreement, and certain other agents and lenders party thereto.  The $25million of ABL loans under the DIP Credit Agreement would bear interest, at theelection of the Company, at a rate of LIBOR + 6.50% (with a LIBOR floor of2.50%) or Base Rate + 5.50% (with a Base Rate floor of 3.50%), and the $25 millionof first-in, last-out term loans under the DIP Credit Agreement would bearinterest, at the election of the Company, at a rate of LIBOR + 7.50% (with aLIBOR floor of 2.50%) or Base Rate + 6.50% (with a Base Rate floor of 3.50%). Unless otherwise extended, the DIP Credit Agreement would mature ninemonths from the commencement of the bankruptcy case, subject to certainprovisions that may lead to an earlier termination.

 

The use of proceeds underthe DIP Credit Agreement would be limited to working capital and other generalcorporate purposes consistent with a budget that the Company presented to theadministrative agent, including payment of costs and expenses related to theadministration of the bankruptcy proceedings and payment of other expenses asapproved by the bankruptcy court.

 

On November 2, 2009,Debtors received final approval from the U.S. Bankruptcy Court (“Court”) of its$50 Million Debtor in Possession (DIP) financing agreement.

 

*FourthAmendment and Canadian Forbearance Agreement*

 

In connection with the Chapter 11 filings and the RestructuringTransaction, effective October 8, 2009, the Company also entered into aFourth Amendment and Canadian Forbearance Agreement with respect to the CreditAgreement (the “Canadian Forbearance”).  Pursuant to the CanadianForbearance, the senior lenders have agreed to forbear from enforcing anyremedies under the Credit Agreement against Accuride Canada, Inc. withrespect to any defaults specified therein.  The Canadian Forbearance willremain effective until the termination of the DIP Credit Agreement, subject tocertain provisions that may lead to an earlier termination.

 

##### **Operating Activities**

##### ** **

Net cash used inoperating activities during the first nine months of 2009 amounted to $53.5million compared to a use of $26.9 million for the comparable period in2008.  The significant drivers of the netcash used in the current period were a $26.9 million reduction in accountspayable and $32.7 million of cash paid for interest.  The decline in accounts payable was primarilya result of reduced inventory.

 

##### **Investing Activities**

##### ** **

Net cash used ininvesting activities totaled $12.0 million for the nine months ended September 30,2009, compared to a use of $30.7 million for the nine months ended September 30,2008.  Our most significant cash outlaysfor investing activities are the purchases of property, plant andequipment.  Capital expenditures for 2009are expected to be approximately $20 million to $25 million, which we expect tofund through existing cash reserves.  Capital expenditures for the nine months ended September 30, 2009were $16.1 million compared to use of $24.9 million for the comparable periodin 2008.  Included in the 2008 use ofinvesting cash was an investment in marketable securities of $5.0 million andinvestments in joint ventures of $1.1 million. In the nine months ended September 30,2009, the marketable securities were sold for $3.9 million.

 

##### **Financing Activities**

##### ** **

Net cash used infinancing activities totaled $33.1 million for the nine months ended September 30,2009, compared to $0.9 million of net cash used for the comparable period in2008. Included in the 2009 cash used was $22.4 million for decrease inrevolving credit advance and $10.8 million for amendment fees.

 

**BankBorrowing**

 

Effective January 31,2005, we entered into the Fourth Amended and Restated Credit Agreement inconjunction with the acquisition of TTI to refinance substantially all of ourexisting bank facilities, as well as the senior bank debt and subordinated debtof TTI. Under the refinancing, we entered into (i) the Term Facility in anaggregate principal amount of $550 million that requires annualamortization payments of 1% per year, with the balance payable on January 31,2012, and (ii) the Revolving Credit Facility in an aggregate amount of$100 million (comprised of a $76 million U.S. revolving creditfacility and a $24 million Canadian revolving credit facility) whichmatures on January 31, 2010.** **The U.S. and Canadian 

 

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Revolving CreditFacilities were drawn down $34.1 million and $22 million, respectively, as of September 30,2009, leaving availability of approximately $1.5 million, which considersoutstanding letters of credit of $18.2 million and excludes $24.2 million ofthe Revolving Credit Facility held by Lehman Commercial Paper, Inc. Theloans under the Term Facility and the U.S. revolving credit facility are securedby, among other things, a lien on substantially all of our U.S. properties,assets and domestic subsidiaries and a pledge of 65% of the stock of ourforeign subsidiaries. The loans under the Canadian revolving facility aresecured by substantially all the properties and assets of Accuride Canada, Inc.As of September 30, 2009, the outstanding balance on the term debt was$294.6 million.

 

On November 28,2007, we entered into the first amendment (the “First Amendment”) to the FourthAmended and Restated Credit Agreement, dated as of January 31, 2005. TheFirst Amendment increased pricing and modified certain financial covenantsthrough 2008, including changes to the leverage, interest coverage and fixedcharge coverage ratios.

 

As described above, on February 4,2009, we completed the Second Amendment and the Sun Capital Transaction. Sun Capital currently holds approximately $70.1 million principal amount of theLast-Out Loans and approximately $6.5 million of interest accrued aspayable-in-kind.  The Second Amendmentadjusted certain financial covenants under the Credit Agreement from the fourthquarter of 2008 through 2010, including leverage, interest coverage and fixedcharge coverage ratios, and extended the maturity date of the Revolving CreditFacility until January 31, 2011.  In connection with the SecondAmendment, Sun Capital agreed to modify the Last-Out Loans to become last outas to payment to First-Out Loans.  Sun Capital also agreed to modifycertain voting provisions and other rights under the Credit Agreement as aholder of the Last-Out Loans.  As of September 30,2009, fees paid associated with the Second Amendment were $10.8 million.

 

On August 14, 2009,we entered into the Third Amendment and Consent to the Fourth Amended andRestated Credit Agreement (the “Third Amendment”).  The Third Amendment provided for theresignation of Citicorp USA, Inc. (“CitiCorp”) as the administrative agentand the appointment of Deutsche Bank Trust Company (“Deutsche”) to serve as theadministrative agent.  In connection withthe Third Amendment, we also entered into various documents which transfer theagent rights with respect to the collateral to the Credit Agreement fromCitiCorp to Deutsche.

 

In connection with ourChapter 11 filings and the Restructuring Transaction, effective October 8,2009, we entered into a Fourth Amendment and Canadian Forbearance Agreementwith respect to the Credit Agreement (the “Fourth Amendment”).  The FourthAmendment included a technical change to the Credit Agreement and an agreementby the senior lenders to forbear from enforcing any remedies under the CreditAgreement against Accuride Canada, Inc. with respect to any defaultsspecified therein for the duration of the DIP Credit Agreement.

 

**RestrictiveDebt Covenants.**  Our credit documents contain numerousfinancial and operating covenants that limit the discretion of management withrespect to certain business matters. These covenants place significantrestrictions on, among other things, the ability to incur additional debt, topay dividends, to create liens, to make certain payments and investments and tosell or otherwise dispose of assets and merge or consolidate with otherentities. Accuride is also required to meet certain financial ratios and testsincluding a leverage ratio, an interest coverage ratio, and a fixed chargecoverage ratio. A failure to comply with the obligations contained in thecredit documents could result in an event of default, permit our lenders torestrict our access to available cash, and possibly the acceleration of therelated debt and the acceleration of debt under other instruments evidencingindebtedness that may contain cross-acceleration or cross-default provisions.

 

As explained below, weobtained temporary waiver agreements from our senior lendors which waived ourcompliance with our financial covenants and placed additional restrictions onour business for the duration of the term of the temporary waiveragreements.  As of September 30,2009, we were negotiating restructuring alternatives such as additionalamendments or waivers, the sale of non-core assets, and/or alternative debtstructures, such as debt for debt or equity for debt agreements.  The Board appointed a special committee ofindependent directors to identify and, with the input of management and ourfinancial advisors, evaluate alternatives to recommend an appropriate course ofaction to the full Board.

 

Due to the short termnature of the temporary waivers and Forbearance Agreements, we classified ourdebt as current as of September 30, 2009 in accordance with U.S. GAAP.

 

On October 8, 2009, the Company and its domestic subsidiaries(together with the Company, the “Debtors”) filed voluntary petitions for reliefunder Chapter 11 of the Bankruptcy Code with the United States Bankruptcy Courtfor the District of Delaware.  The Debtors will continue to operate theirbusinesses as debtors-in-possession under the jurisdiction of the bankruptcycourt and in accordance with the applicable provisions of the Bankruptcy Code.

 

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**Adjusted EBITDA. **We define Adjusted EBITDA as our net income or lossbefore income tax expense or benefit, interest expense, net, depreciation andamortization, restructuring, severance, and other charges, impairment, andcurrency losses, net. Adjusted EBITDA has been included because we believe thatit is useful for us and our investors to measure our ability to provide cash flowsto meet debt service. Adjusted EBITDA should not be considered an alternativeto net income (loss) or other traditional indicators of operating performanceand cash flows determined in accordance with accounting principles generallyaccepted in the United States (“GAAP”). We present the table of Adjusted EBITDAbecause covenants in the agreements governing our material indebtedness containratios based on this measure on a quarterly basis. While Adjusted EBITDA isused as a measure of liquidity and the ability to meet debt servicerequirements, it is not necessarily comparable to other similarly titledcaptions of other companies due to differences in methods of calculations. Ourreconciliation of net income (loss) to Adjusted EBITDA is as follows:

 
| ** **                                      | ** ** | **Historical Results**                     | ** ** |
|-------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                      | ** ** | **Three Months Ended  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** |
| **(in thousands)**                              | ** ** | **2009**                                   | ** ** | **2008** | ** ** | **2009** | ** ** | **2008** | ** ** |
|                                            |       |                                       |       |   |   |   |   |   |   |
| NET  INCOME (LOSS)                              |       | $                                          | (33,329    | ) | $ | (201,179 | ) | $ | (100,455 | ) | $ | (209,545 | ) |
| Net  interest expense                           |       | 18,131                                     |       | 11,626 |   | 52,414 |   | 35,824 |   |
| Income  tax expense (benefit)                   |       | (2,069                                     | )          | (26,042 | ) | (567 | ) | (34,791 | ) |
| Depreciation  and amortization                  |       | 13,524                                     |       | 11,376 |   | 38,270 |   | 34,545 |   |
| Impairment                                      |       | —                                     |       | 212,220 |   | — |   | 212,220 |   |
| Restructuring,  severance and other charges(1)  |       | 17,936                                     |       | 11,916 |   | 28,521 |   | 22,477 |   |
| Other  items related to our credit agreement(2) |       | (3,039                                     | )          | 1,016 |   | (5,123 | ) | 3,030 |   |
| ADJUSTED  EBITDA                                |       | $                                          | 11,154     |   | $ | 20,933 |   | $ | 13,060 |   | $ | 63,670 |   |

 

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Note:

 

(1)         For the three months ended September 30,2009, Adjusted EBITDA represents net income before net interest expense, incometax expense, depreciation and amortization, plus (i) $12.7 million incosts associated with the negotiation of the temporary waiver agreements andongoing discussions with our lenders, (ii) $2.9 million in non-cashpension curtailment due to the reduction of the workforce in our Canadianfacility, and (iii) $2.3 million in restructuring costs.  Items (ii) and (iii) affected grossprofit and item (i) affected operating expenses.  For the three months ended September 30,2008, Adjusted EBITDA represents net income before net interest expense, incometax expense, depreciation and amortization, plus (i) $11.9 million incosts associated with severance and restructuring, which affected gross profitby $7.2 million and operating expenses by $4.7 million. For the nine monthsended September 30, 2009, Adjusted EBITDA represents net income before netinterest expense, income tax expense, depreciation and amortization, plus (i) $14.2million in costs associated with the negotiation of the temporary waiveragreements and ongoing discussions with our lenders, (ii) $3.4 million incosts associated the abandonment of a warehouse, (iii) $8.0 million inrestructuring costs, and (iv) a $2.9 million non-cash pension curtailmentcharge due to the workforce reduction in our Canadian facility.  Items (ii), (iii), and (iv) affectedgross profit and item (i) affected operating expenses.  For the nine months ended September 30,2008, Adjusted EBITDA represents net income before net interest expense, incometax expense, depreciation and amortization, plus (i) $7.7 million in costsassociated with a labor disruption at our facility in Rockford, Illinois, whichaffected gross profit, and (ii) $14.8 million in restructuring costs whichimpacted gross profit by $10.1 million and operating expenses by $4.7 million.

 

(2)         Other items related to our creditagreement refer to amounts utilized in the calculation of financial covenantsin Accuride’s senior credit facility. For the three months ended September 30, 2009, items related to ourcredit agreement consist of foreign currency income and other net income of$3.2 million and non-cash share-based compensation expense of $0.1million.  For the three months ended September 30,2008, items related to our credit agreement consist of foreign currency incomeand other net income of $0.5 million and non-cash share-based compensationexpense of $0.5 million.  For the ninemonths ended September 30, 2009, items related to our credit agreementconsist of foreign currency income and other income or losses of $5.4 millionand non-cash share-based compensation expense of $0.2 million.  For the nine months ended September 30,2008, items related to our credit agreement consist of foreign currency lossesand other income or losses of $0.8 million and non-cash share-basedcompensation expense of $2.2 million.

 

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Adjusted EBITDA is not intended to represent cash flow as defined bygenerally accepted accounting principles (“GAAP”) and should not be consideredas an indicator of cash flow from operations. Adjusted EBITDA represents net income before net interest expense,income tax (expense) benefit, depreciation and amortization plus non-recurringitems.  However, other companies maycalculate Adjusted EBITDA differently.  Accuridehas included information concerning Adjusted EBITDA because Accuride’smanagement and our board of directors use it as a measure of our performance tointernal business plans to which a significant portion of management incentiveprograms are based.  In addition, futureinvestment and capital allocation decisions are based on Adjusted EBITDA.  Investors and industry analysts use AdjustedEBITDA to measure the Company’s performance to historic results and to theCompany’s peer group.  The Company hashistorically provided the measure in previous disclosures and believes itprovides transparency and continuity to investors for comparable purposes.  Certain financial covenants in our borrowingarrangements are tied to similar measures.

 

**SeniorSubordinated Notes.**  Effective January 31, 2005, we issued$275 million aggregate principal amount of 8 (1)¤2% senior subordinated notes due 2015 (the“Senior Subordinated Notes”) in a private placement transaction. Interest onthe senior subordinated notes is payable on February 1 and August 1of each year, beginning on August 1, 2005. The Senior Subordinated Notesmature on February 1, 2015 and may be redeemed, at our option, in whole orin part, at any time on or before February 1, 2010 in cash at theredemption prices set forth in the indenture, plus interest. The SeniorSubordinated Notes are general unsecured obligations ranking senior in right ofpayment to all of our existing and future subordinated indebtedness. The SeniorSubordinated Notes are subordinated to all of our existing and future seniorindebtedness including indebtedness incurred under the Credit Agreement.

 

In May 2005,we successfully completed an exchange offer as required per the terms of theregistration rights agreement we entered into with the initial purchasers inconnection with the issuance of our Senior Subordinated Notes. Pursuant to aneffective exchange offer registration statement filed with the SEC, holders ofour outstanding senior subordinated notes exchanged such notes for otherwiseidentical 8 (1)¤2% Senior Subordinated Notes due 2015 (the “RegisteredSenior Subordinated Notes”) which have been registered under the SecuritiesAct.

 

To maintaincompliance with the temporary waivers, the Company did not pay theapproximately $11.7 million of interest due August 3, 2009, to the holdersof its 8 1⁄2 percent Senior Subordinated Notes due 2015 (Notes) and used the30-day grace period provided in the Note indenture to continue discussionsregarding a capital restructuring with its lenders.  Under the indenture,the failure to make this interest payment did not constitute an event ofdefault that permitted acceleration of the Notes until the expiration of the30-day grace period.  Due to the non-paymentof interest on the Notes, the Company entered into Forbearance Agreements withcertain Noteholders.

 

**Off-BalanceSheet Arrangements. **We do not currently have any off-balancesheet 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 capitalresources.  From time to time we mayenter into operating leases, letters of credit, or take-or-pay obligationsrelated to the purchase of raw materials that would not be reflected in ourbalance sheet.

 

**ContractualObligations and Commercial Commitments**

 

Due to theclassification of debt from a non-current liability to a current liability (seeNote 1), the corresponding impact to our Contractual Obligations and CommercialCommitments table as filed in our Form 10-K on March 13, 2009, wouldbe to classify cash flow for debt in the less than 1 year category.  Also impacted would be a reduction in thecash flows related to the interest associated with the debt.

 

**RecentDevelopments**

 

***New Accounting Pronouncements***

 

***ASC 820-10***—In February 2008, the FASB issued the *Effective Date of FASB Statement No. 157*topic in theFASB Accounting Standards Codification, which delayed the effective date offair value measurements for nonfinancial assets and liabilities to fiscal yearsbeginning after November 15, 2009, except for items that are recognized ordisclosed at fair value in the financial statements on a recurring basis.  Management is currently evaluating the impactof the topic on our consolidated financial statements.

 

***ASC715-20*** — In March 2008,the FASB issued the *Employers’**Disclosures about Postretirement Benefit Plan Assets*topicin the FASB Accounting Standards Codification*. *The statement requires disclosuresof the objectives of postretirement benefit plan assets, investment policiesand strategies, categories of plan assets, fair value measurements of planassets, and significant concentrations of risk. *Disclosures about Postretirement Benefit PlanAssets* is effective for fiscal 

 

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years and interim periodsbeginning after December 15, 2009. The adoption of the *Disclosures aboutPostretirement Benefit Plan Assets* is expected to increase ourdisclosures, but it is not expected to have an impact on our consolidatedfinancial statements.

 

***ASC810*** — InJune 2009, the FASB finalized SFAS No. 167, Amending FASBinterpretation No. 46(R), which was later superseded by the FASBCodification and included in ASC topic 810. The provisions of ASC 810 provideguidance in determining whether an enterprise has a controlling financialinterest in a variable interest entity. This determination identifies theprimary beneficiary of a variable interest entity as the enterprise that hasboth the power to direct the activities of a variable interest entity that mostsignificantly impacts the entity’s economic performance, and the obligation toabsorb losses or the right to receive benefits of the entity that couldpotentially be significant to the variable interest entity. This pronouncementalso requires ongoing reassessments of whether an enterprise is the primarybeneficiary and eliminates the quantitative approach previously required fordetermining the primary beneficiary. New provisions of this pronouncement areeffective January 1, 2010. The Company is currently evaluating theimpact of adopting this pronouncement.

 

**CriticalAccounting Policies and Estimates. **We have made a number of estimates andassumptions relating to the reporting of results of operations and financialposition in the preparation of our financial statements in conformity withaccounting principles generally accepted in the United States of America.  Actual results could differ significantlyfrom those estimates under different assumptions and conditions.  We included in our Form 10-K for theyear ended December 31, 2008 a discussion of our most critical accountingpolicies, which are those that have a material impact on our financialcondition or operating performance and require management’s most difficult,subjective and complex judgments, often as a result of the need to makeestimates about the effect of matters that are inherently uncertain.

 

*CautionaryStatements Regarding Forward-Looking Statements*

 

In this report, we havemade various statements regarding current expectations or forecasts of futureevents, which speak only as of the date the statements, are made.  These statements are “forward-lookingstatements” within the meaning of that term in Section 27A of theSecurities Act of 1933 and Section 21E of the Securities Exchange Act of1934.  Forward-looking statements arealso made from time-to-time in press releases and in oral statements made bythe officers of Accuride. Forward-looking statements are identified by the words “estimate,” “project,”“anticipate,” “will continue,” “will likely result,” “expect,” “intend,” “believe,”“plan,” “predict” and similar expressions. Forward looking statements also include, but are not limited to,statements regarding commercial vehicle market recovery, projections ofrevenue, income, loss, or working capital, capital expenditure levels, abilityto mitigate rising raw material costs through increases in selling prices,plans for future operations, financing needs, the ultimate outcome and impactof any litigation against Accuride, the sufficiency of our capital resourcesand plans and assumptions relating to the foregoing.

 

Such forward-lookingstatements are based on assumptions and estimates, which although believed tobe reasonable, may turn out to be incorrect. Therefore, undue reliance should not be placed upon these estimates andstatements.  We cannot assure that any ofthese statements, estimates, or beliefs will be realized and actual results maydiffer from those contemplated in these “forward-looking statements.”  We undertake no obligation to publicly updateany forward-looking statements, whether as a result of new information, futureevents, or otherwise.  You are advised toconsult further disclosures we may make on related subjects in our filings withthe SEC.  In addition to other factorsdiscussed in this report, some of the important factors that could cause actualresults to differ materially from those discussed in the forward-lookingstatements include, without limitation, the following:

 

·                  failure to have our pre-negotiated restructuring planconfirmed by the bankruptcy court on a timely basis may have a material adverseeffect on our business;

·                  a more severe or prolonged than anticipated commercialvehicle industry downturn in 2009 could have a material adverse effect on ourbusiness;

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

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

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

·                  our credit documents contain significant financial andoperating covenants that limit the discretion of management with respect tocertain business matters.  We must alsomeet certain financial ratios and tests as described above.  Failure to comply with the obligationscontained in the debt agreements could result in an event of default, andpossibly the acceleration of the related debt and the acceleration of debtunder other instruments evidencing debt that may contain cross-acceleration orcross-default provisions;

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

 

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

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

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

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

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

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

·                  we may be subject to liability under certain environmentallaws and the cost of compliance with these regulations could have a materialadverse effect on our financial condition and may adversely affect our abilityto sell or rent such property or to borrow using such property as collateral;and

·                  our success depends largely upon the abilities andexperience of certain key management personnel and the loss of the services ofone or more of these key personnel could have a negative impact on ourbusiness.

 

For further information,refer to the business description and additional risk factors sections includedin our Form 10-K for the year ended December 31, 2008, as filed withthe SEC.

 

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

 

In the normal course ofdoing business, we are exposed to risks associated with changes in foreignexchange rates, raw material/commodity prices, and interest rates.  We use derivative instruments to manage theseexposures.  The objectives for holdingderivatives are to minimize the risks using the most effective methods toeliminate or reduce the impacts of these exposures.

 

**ForeignCurrency Risk**

 

Certain forecastedtransactions, assets, and liabilities are exposed to foreign currency risk. Wemonitor our foreign currency exposures to maximize the overall effectiveness ofour foreign currency derivatives. The principal currency of exposure is theCanadian dollar. From time to time, we use foreign currency financialinstruments to offset the impact of the variability in exchange rates on ouroperations, cash flows, assets and liabilities. At September 30, 2009, thenotional amount of open foreign exchange forward contracts was $4.7 million.

 

Foreign currencyderivative contracts provide only limited protection against currency risks.Factors that could impact the effectiveness of our currency risk managementprograms include accuracy of sales estimates, volatility of currency marketsand the cost and availability of derivative instruments.

 

The counterparty to theforeign exchange contracts is a financial institution with an investment gradecredit rating. The use of forward contracts protects our cash flows againstunfavorable movements in exchange rates, to the extent of the amount undercontract.

 

**RawMaterial/Commodity Price Risk**

 

We rely upon the supplyof certain raw materials and commodities in our production processes, and wehave entered into firm purchase commitments for certain metals and natural gas.Additionally, from time to time, we use commodity price swaps and futurescontracts to manage the variability in certain commodity prices on ouroperations and cash flows. At September 30, 2009, we had no open commodityprice swaps or futures contracts.

 

**InterestRate Risk**

 

We use long-term debt asa primary source of capital. However, due to the event of default resultingfrom our voluntary petition for relief under Chapter 11 of the Bankruptcy Code,we have classified our debt as current as of September 30, 2009 inaccordance with U.S. GAAP.  The followingtable presents the principal cash repayments and related weighted averageinterest rates by maturity date for our fixed-rate debt and other types of debtat September 30, 2009 assuming no acceleration:

 

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| **(Dollars in thousands)** | ** ** | **2009** | ** ** | **2010** | ** ** | **2011** | ** ** | **2012** | ** ** | **2013** | ** ** | **Thereafter** | ** ** | **Total** | ** ** | **Fair  Value** | ** ** |
|----------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------------|------------|-----------|------------|-----------------|------------|
| Debt:                      |       |     |       |     |       |     |       |     |       |     |       |           |       |      |       |            |       |
| Fixed Rate                 |       | —   |       | —   |       | —   |       | —   |       | —   |       | $              | 275,000    |      | $          | 275,000         |       | $ | 159,500 |   |
| Average Rate               |       | —   |       | —   |       | —   |       | —   |       | —   |       | 8.50           | %          | 8.50      | %          |            |       |
| Variable Rate              |       | —   |       | —   |       | $        | 56,070     |     | $          | 297,523  |       | —         |       | $         | 3,100      |            | $          | 356,693 |   | $ | 348,192 |   |
| Average Rate               |       | —   |       | —   |       | 7.25     | %          | 9.38     | %          | —   |       | 0.57           | %          | 8.97      | %          |            |       |
|                            |            |          |            |          |            |          |            |          |            |          |            |                |            |           |            |                 |            |  |  |  |  |  |

 

We have usedinterest rate swaps to alter interest rate exposure between fixed and variablerates on a portion of our long-term debt. As of September 30, 2009, we had one interest rate swap agreementoutstanding, which was established in December 2007 and the terms with thecounterparty are to exchange, at specified intervals, the difference between3.81% from March 2009 through March 2010, and the variable rateinterest amounts calculated by reference to the notional principal amount. Thenotional principal amount under the terms is $125 million from September 2009through March 2010.

 

**Item 4.Controls and Procedures**

 

We maintain disclosurecontrols and procedures that are designed to ensure that information requiredto be disclosed in our Exchange Act reports is recorded, processed, summarizedand reported within the time periods specified in the SEC’s rules andforms, and that such information is accumulated and communicated to ourmanagement, including our Chief Executive Officer and Chief Financial Officer,as appropriate, to allow timely decisions regarding required disclosure.  In designing and evaluating the disclosurecontrols and procedures, management recognized that any controls andprocedures, no matter how well designed and operated, can provide onlyreasonable assurance of achieving the desired control objectives, andmanagement is required to apply its judgment in evaluating the cost-benefitrelationship of possible controls and procedures.

 

As required by SEC Rule 13a-15(b),we carried out an evaluation, under the supervision and with the participationof the Company’s management, including our Chief Executive Officer and ChiefFinancial Officer, of the effectiveness of the design and operation of ourdisclosure controls and procedures as of the end of the period covered by thisreport.  Based on that evaluation, ourChief Executive Officer and Chief Financial Officer concluded that ourdisclosure controls and procedures were effective at the reasonable assurancelevel.

 

***Changesin Internal Control Over Financial Reporting.*** There have been no changes in our internal controls over financialreporting during our most recent quarter that has materially affected, or isreasonably likely to materially affect, our internal controls over financialreporting.

 

**PART II.  OTHER INFORMATION**

 

**Item1.  Legal Proceedings**

 

On October 8, 2009,Accuride and its domestic subsidiaries (together with the Company, the “Debtors”)filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Codewith the United States Bankruptcy Court for the District of Delaware.  TheDebtors will continue to operate their businesses as debtors-in-possessionunder the jurisdiction of the bankruptcy court and in accordance with theapplicable provisions of the Bankruptcy Code.  The bankruptcy courtapproved Accuride’s motion to have the Chapter 11 cases jointly administeredunder Case No. 09-13449.  TheCompany’s Mexico and Canada subsidiaries were not included in the filings andwill continue their business operations without supervision from the BankruptcyCourt and will not be subject to the requirements of the Bankruptcy Code.

 

*RestructuringSupport Agreements and Convertible Notes Commitment Agreement*

 

Prior to making theChapter 11 filings, on October 7, 2009, the Company entered into (i) aRestructuring Support Agreement with the holders of approximately 57% of theprincipal amount of the loans outstanding under the Company’s Fourth Amendedand Restated Credit Agreement, dated as of January 31, 2005, as amended,among the Company, Accuride Canada Inc., the lenders party thereto, theadministrative agent for the lenders, and the other agents party thereto (the “CreditAgreement”), (ii) a Restructuring Support Agreement with the beneficialholders of approximately 70% of the principal amount of the Company’s 8.5%Senior Subordinated Notes due 2015, issued pursuant to the Indenture dated January 31,2005 between the Company, the guarantors named therein and the Bank of New YorkTrust Company, N.A. as trustee (the “Indenture”) and (iii) a ConvertibleNotes Commitment Agreement (together with the Restructuring Support Agreements,the “Restructuring Agreements”) with certain holders of the senior subordinatednotes.  Pursuant to the Restructuring Agreements, the parties thereto haveagreed to support a financial reorganization of the Debtors consistent with theterms and 

 

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conditions set forth inthe term sheets attached as Exhibit A to the Restructuring SupportAgreements (the “Restructuring Transaction”) and the senior lenders andnoteholders have agreed to not transfer any claims except to a transferee whoagrees to be bound by the applicable Restructuring Support Agreement.

 

*RestructuringTransaction*

 

The terms of theRestructuring Transaction include:

 

·                  The Credit Agreement will be amended to: (i) extendits maturity (except that of the “last-out” term loans described below) throughJune 30, 2013, (ii) amend the interest rate to LIBOR + 6.75% (with aLIBOR floor of 3.00%) and (iii) eliminate all financial covenants exceptminimum liquidity and minimum EBITDA covenants.

 

·                  The senior subordinated notes will becancelled and the holders will receive 98% of the common stock of thereorganized Company, subject to dilution, including dilution for common stockissued upon conversion of the new convertible notes and new warrants issuedpursuant to the Restructuring Transaction, as described below.

 

·                  The reorganized Company will complete a$140 million rights offering of new senior unsecured convertible notes tocurrent noteholders.  The rights offering is fully backstopped by certaincurrent noteholders.  The new notes will be convertible into 60% of thecommon stock of the reorganized Company.

 

·                  A portion of the proceeds from the rightsoffering will be used to fully pay down the “last-out” term loans currentlyoutstanding under the Credit Agreement and held by an affiliate of Sun CapitalPartners (“Sun Capital”) with the remainder to provide ongoing liquidity forDebtors’ businesses.

 

·                  The Company’s common stock will becancelled and the holders will receive 2% of the common stock of thereorganized Company and warrants exercisable for up to 15% of the common stockof the reorganized Company, subject to dilution, including dilution for stockissued upon conversion of the new convertible notes.  The warrants providethe opportunity for additional recovery to the prepetition equity holders inthe event that the reorganized Company reaches certain equity value targetsduring the two years following the warrants’ issue.

 

·                  Unsecured trade creditors will beunimpaired and their claims will be paid in full.

 

The RestructuringAgreements contain customary terms, are subject to material conditions and maybe terminated upon the occurrence of certain events, including if there is amaterial adverse change to the Company’s business, results of operations,property or financial condition.

 

Except as provided above,neither Accuride nor any of our subsidiaries is a party to any pending legalproceeding which, in the opinion of management, would have a material adverseeffect on our business or financial condition. However, we from time-to-time are involved in ordinary routinelitigation incidental to our business, including actions related to productliability, contractual liability, intellectual property, workplace safety andenvironmental claims.  We establishreserves for matters in which losses are probable and can be reasonablyestimated.  While we believe that we haveestablished adequate accruals for our expected future liability with respect toour pending legal actions and proceedings, we cannot assure you that ourliability with respect to any such action or proceeding would not exceed ourestablished accruals.  Further, we cannotassure that litigation having a material adverse affect on our financialcondition will not arise in the future.

 

**Item1A. Risk Factors.**

 

Inaddition to the following risk factors, please see the risk factor disclosureincluded under Part I, Item 1A of our Form 10-K for the year ended December 31,2008.

 

**RisksRelated to the Bankruptcy Case**

 

***We have filed voluntary petitions for reorganization underthe bankruptcy code that may have an adverse effect on our business, financialcondition and results of operation.***

 

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On October 8, 2009,we filed voluntary petitions for reorganization under Chapter 11 of theU.S. Bankruptcy Code in the United States Bankruptcy Court for the District ofDelaware in order to consummate a financial reorganization of Accuride and itsdomestic subsidiaries.  Prior to makingthese filings, we entered into Restructuring Support Agreements with the holdersof approximately 57% of the principal amount of the loans outstanding under oursenior credit agreement and the beneficial holders of approximately 70% of theprincipal amount of our senior subordinated notes, and a Convertible NotesCommitment Agreement (together with the Restructuring Support Agreements, the “RestructuringAgreements”) with certain holders of our senior subordinated notes.  Pursuant to the Restructuring Agreements, theparties thereto have agreed to support a financial reorganization of Accurideand its domestic subsidiaries that is consistent with the terms and conditionsset forth therein.

 

We plan to file a JointPlan of Reorganization and related Disclosure Statement with the bankruptcycourt consistent with the financial reorganization contemplated by theRestructuring Agreements.  There can beno assurance, however, that these key stakeholders, or Accuride itself, willnot cease to support this proposed plan. Moreover, if filed, there can be no assurance that the plan will satisfyall requirements for confirmation under the bankruptcy code, that the plan willbe approved by the bankruptcy court or that the conditions precedent to itsimplementation will be satisfied.  If weare unable to file the plan or are unable to obtain confirmation or satisfysuch conditions to implementation, it may result in lengthier bankruptcyproceedings as we attempt to negotiate and implement an alternative plan ofreorganization.  Any alternative plan ofreorganization may be on terms less favorable to the holders of claims againstAccuride.  Additionally, if the plan isnot confirmed, the bankruptcy case may not continue as a Chapter 11 case andcould be converted into a Chapter 7 liquidation case. If a liquidation orprotracted reorganization were to occur, there is a substantial risk that ourgoing concern value would be substantially eroded to the detriment of allstakeholders.

 

Moreover, our ability tooperate during the pendency of bankruptcy case and to successfully emerge frombankruptcy may be affected by the following factors:

 

·                  our ability to comply with and operateunder the terms of any cash management orders entered by the bankruptcy courtfrom time to time, which subject us to restrictions on transferring cash andother assets;

·                  our ability to maintain adequate cash onhand and to generate cash from operations;

·                  our ability to fund emergence from thebankruptcy process on reasonable terms;

·                  our ability to retain key employees andattract new employees during the pendency of the bankruptcy case;

·                  our ability to maintain good customer andsupplier relationships in light of the bankruptcy case, including thepossibility that our suppliers may require stricter terms and conditions;

·                  the significant time and effort of seniormanagement that will be required to deal with the reorganization, which willdivert focus from our business operations;

·                  potential litigation by parties ininterest, which could be expensive, lengthy, and disruptive to our normalbusiness operations and the plan confirmation process;

·                  the substantial costs for professionalfees and other expenses associated with the bankruptcy case; and

·                  the adverse publicity created by thebankruptcy case, which may negatively impact our efforts to establish andpromote name recognition and a positive image after our emergence frombankruptcy.

 

***We may have insufficient liquidity to successfully operateour business.***

 

The Company expects toincur significant costs as a result of the bankruptcy case. We are currentlyfinancing our operations during the reorganization using cash on hand and cashgenerated by operations, which constitutes cash collateral pursuant to, and inaccordance with, final cash collateral orders which were agreed to by oursenior lenders and approved by the bankruptcy court. In the event that we loseour authority to use cash collateral and do not have sufficient liquidity tofund our operations such that we need to obtain additional financing, there canbe no assurance as to our ability to obtain sufficient financing on acceptableterms or at all. The challenges of obtaining financing, if necessary, would beexacerbated by adverse conditions in the general economy and the volatility andtightness in the financial and credit markets. These conditions and ourbankruptcy case would make it more difficult for us to obtain financing.

 

***Our inability to take advantage of business opportunitiesduring the bankruptcy case, without bankruptcy court approval.***

 

Transactions outside theordinary course of business are subject to the prior approval of the bankruptcycourt, which may limit our ability to respond timely to certain events or takeadvantage of certain opportunities. In addition, the bankruptcy code limits ourability to incur additional indebtedness, make investments, sell assets,consolidate, merge or sell or otherwise dispose of all or substantially all ofour assets or grant liens. These restrictions may place us at a competitive 

 

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disadvantage. We may beunable to continue to grow our business through acquisitions and theserestrictions will limit our ability to pursue other business strategies, unlesswe obtain bankruptcy court approval for those transactions.

 

***The extent of the Company’s leverage may limit its abilityto obtain additional financing for operations.***

 

Although the proposedplan of financial reorganization would result in a reduction in our leverage,we will continue to have a significant amount of indebtedness.  Such levels of indebtedness may limit ourability to refinance, obtain additional financing for working capital, capitalexpenditures, product development, debt service requirements, acquisitions and generalcorporate or other purposes. Such levels of indebtedness may also limit ourability to adjust to changing market conditions and to withstand competitivepressures, possibly leaving us vulnerable in a downturn in general economicconditions or in our businesses or unable to carry out capital spending that isimportant to our growth and productivity improvement programs.

 

**Item 2.   Unregistered Sales of Equity Securities anduse of Proceeds**

 

On September 28, 2009,an affiliate of Sun Capital Securities Group, LLC (“Sun Capital”) exercised aportion of its Warrant exercisable for 25 percent of the Company’sfully-diluted common stock, a copy of which is attached as Exhibit 4.1 tothe Company’s Current Report on Form 8-K filed on February 4,2009.  Upon notice from Sun Capital that it was exercising the Warrant for24.5 percent of the Company’s fully-diluted common stock on a cashless basis,the Company issued 11,386,345 shares of common stock to Sun Capital.  SunCapital may exercise the remaining portion of the Warrant at any time through February 4,2019.

 

**Item6.  Exhibits**

 
| **Exhibit No.** | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|----------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **           | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 2.1                  | —     | Agreement and Plan of  Merger, dated as of December 24, 2004, by and among Accuride  Corporation, Amber Acquisition Corp., Transportation Technologies  Industries, Inc., certain signing stockholders and the Company  Stockholders Representatives. Previously filed as an exhibit to the  Form 8-K filed on December 30, 2004 and incorporated herein by  reference.                                                                                      |
| 2.2                  | —     | Stock Subscription and  Redemption Agreement, dated as of November 17, 1997, among Accuride  Corporation, Hubcap Acquisition L.L.C. and Phelps Dodge Corporation.  Previously filed as an exhibit to the Form S-4 effective July 23,  1998 (Reg. No. 333-50239) and incorporated herein by reference.                                                                                                                                                        |
| 2.3                  | —     | Amendment to Agreement  and Plan of Merger, dated as of January 28, 2005, by and among Accuride  Corporation, Amber Acquisition Corp., Transportation Technologies  Industries, Inc. certain signing stockholders and the Company  Stockholders Representatives. Previously filed as an exhibit to the Form 8-K  filed on February 4, 2005 and incorporated herein by reference.                                                                             |
| 3.1                  | —     | Amended and Restated  Certificate of Incorporation of Accuride Corporation. Previously filed as an  exhibit to Amendment 4, filed on April 21, 2005, to the  Form S-1 effective April 25, 2005 (Reg. No. 333-121944) and  incorporated herein by reference.                                                                                                                                                                                             |
| 3.2                  | —     | Certificate of  Designations for the Series A Preferred Share, dated February 4,  2009. Previously filed as an exhibit to Form 8-K filed on  February 4, 2009 and incorporated herein by reference.                                                                                                                                                                                                                                                          |
| 3.3                  | —     | Amended and Restated  Bylaws of Accuride Corporation (effective February 4, 2009). Previously  filed as an exhibit to Form 8-K filed on February 4, 2009 and  incorporated herein by reference.                                                                                                                                                                                                                                                                   |
| 4.1                  | —     | Specimen common stock  certificate of registrant. Previously filed as an exhibit to  Amendment 2, filed March 25, 2005, to Form S-1 effective  April 25, 2005 (Reg. No. 333-121944) and incorporated herein by  reference.                                                                                                                                                                                                                              |
| 4.2                  | —     | Indenture, dated as of  January 31, 2005, by and among the Registrant, all of the Registrant’s  direct and indirect Domestic Subsidiaries existing on the Issuance Date and  The Bank of New York Trust Company, N.A., with respect to $275.0 million  aggregate principal amount of 8 (1)¤2% Senior Subordinated Notes due 2015. Previously filed  as an exhibit to the Form 8-K filed on February 4, 2005 and  incorporated herein by reference. |
| 4.3                  | —     | Amended and Restated  Registration Rights Agreement dated January 31, 2005 by and between the  Registrant and each of the Stockholders (as defined therein). Previously  filed as an exhibit to the Form 8-K filed on February 4, 2005 and  incorporated herein by reference.                                                                                                                                                                                     |
| 4.4                  | —     | 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                                                                                                                                                                                                                                                                                                                                                                  |

 

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|             |   | 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*             | — | Form of  Stockholders’ Agreement by and among Accuride Corporation, certain employees  and Hubcap Acquisition L.L.C. Previously filed as an exhibit to the  Form S-4 effective July 23, 1998 (Reg. No. 333-50239) and  incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 4.7*             | — | Form of Amendment  to Stockholders’ Agreement by and among Accuride Corporation, certain employees  and Hubcap Acquisition L.L.C. Previously filed as an exhibit to Amendment  No. 1, filed September 22, 2005 to Form S-1 effective  October 3, 2005 (Reg. No. 333-128327) and incorporated herein by  reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 4.8              | — | Bond Guaranty Agreement  dated as of March 1, 1999 by Bostrom Seating, Inc. in favor of NBD  Bank as Trustee. Previously filed as an exhibit to Amendment No. 1 filed  on February 23, 2005 to the Form S-1 effective April 25, 2005  (Reg. No. 333-121944) and incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 4.9              | — | Stock Purchase Warrant,  issued February 4, 2009. Previously filed as an exhibit to Form 8-K  filed on February 4, 2009 and incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 4.10             | — | Registration Agreement,  dated February 4, 2009, between Accuride Corporation and Sun Accuride  Debt Investments, LLC. Previously filed as an exhibit to Form 8-K filed  on February 4, 2009 and incorporated herein by reference                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.1             | — | Temporary Waiver  Agreement, dated July 1, 2009, by and among Accuride, Accuride Canada  Inc., the lenders party thereto, the administrative agent for the lenders,  and the other agents party thereto. Previously filed as an exhibit to  Form 8-K filed on July 9, 2009 and incorporated herein by reference                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.2             | — | Third Amendment and  Consent to the Fourth Amended and Restated Credit Agreement and First  Amendment to the Amended and Restated Guarantee and Collateral Agreement,  dated as of August 14, 2009, to the Fourth Amended and Restated Credit  Agreement, dated as of January 31, 2005, as amended, by and among  Accuride Corporation, Accuride Canada Inc., the subsidiaries of Accuride  Corporation party thereto, the lenders from time to time party thereto,  Citicorp USA, Inc., as resigning administrative agent for the lenders,  Deutsche Bank Trust Company Americas, as successor administrative agent for  the lenders and the other agents party thereto. Previously filed as an  exhibit to Form 8-K filed on August 18, 2009 and incorporated  herein by reference. |
| 10.3             | — | Second Temporary Waiver  Agreement, dated August 14, 2009, by and among Accuride Corporation,  Accuride Canada Inc., the subsidiaries of Accuride Corporation party thereto,  the lenders party thereto, and the administrative agent for the lenders.  Previously filed as an exhibit to Form 8-K filed on August 18, 2009  and incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 10.4             | — | Forbearance Agreement,  dated August 31, 2009, by and among Accuride Corporation, and the  holders of the 8 1/2 percent Senior Subordinated Notes due 2015 party  thereto. Previously filed as an exhibit to Form 8-K filed on  September 3, 2009 and incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.5             | — | Third Temporary Waiver  Agreement, dated September 15, 2009, by and among Accuride Corporation,  Accuride Canada Inc., the subsidiaries of Accuride Corporation party thereto,  the lenders party thereto, and the administrative agent for the lenders.  Previously filed as an exhibit to Form 8-K filed on September 16,  2009 and incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 10.6             | — | Fourth Temporary Waiver  Agreement, dated September 30, 2009, by and among Accuride Corporation,  Accuride Canada Inc., the subsidiaries of Accuride Corporation party thereto,  the lenders party thereto, and the administrative agent for the  lenders.Previously filed as an exhibit to Form 8-K filed on  October 1, 2009 and incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.7             | — | Second Forbearance  Agreement, dated September 30, 2009, by and among Accuride Corporation,  and the holders of the 8 1/2 percent Senior Subordinated Notes due  2015 party thereto. Previously filed as an exhibit to Form 8-K filed on  October 1, 2009 and incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.8             | — | Form of  Restructuring Support Agreement (Lenders). Previously filed as an exhibit to  Form 8-K filed on October 8, 2009 and incorporated herein by  reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 10.9             | — | Form of  Restructuring Support Agreement (Note holders). Previously filed as an  exhibit to Form 8-K filed on October 8, 2009 and incorporated  herein by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 10.10            | — | Form of  Convertible Notes Commitment Agreement. Previously filed as an exhibit to  Form 8-K filed on October 8, 2009 and incorporated herein by  reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.11            | — | Fourth Amendment and  Canadian Forbearance Agreement, dated October 8, 2009. Previously filed  as an exhibit to Form 8-K filed on October 8, 2009 and incorporated  herein by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.12            | — | Senior Secured  Superpriority Debtor-in-Possession Credit Agreement, dated October 9,  2009. Previously filed as an exhibit to Form 8-K filed on  October 13, 2009 and incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 31.1†       | — | Section 302 Certification  of William M. Lasky in connection with the Quarterly Report of Form 10-Q  on Accuride Corporation for the period ended September 30, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 31.2†       | — | Section 302  Certification of James H. Woodward, Jr. in connection with the Quarterly  Report on Form 10-Q of Accuride Corporation for the period ended  September 30, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 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**

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 

 
| ACCURIDE  CORPORATION                              |   |   |
|----------------------------------------------------|--------|--------|
|                                               |   |   |
| /s/ WILLIAM M. LASKY                               |   | Dated: | November 16, 2009 |
| William M. Lasky                                   |   |   |
| Chairman, President and  Chief Executive Officer   |   |   |
| (Principal Executive  Officer)                     |   |   |
|                                               |   |   |
|                                               |   |   |
| /s/ JAMES H. WOODWARD,  JR.                        |   | Dated: | November 16, 2009 |
| James H.  Woodward, Jr.                       |   |   |
| Senior Vice President  and Chief Financial Officer |   |   |
| (Principal Financial  and Accounting Officer)      |   |   |

 

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