**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


WASHINGTON,
      D.C. 20549





______________





**Form
      10-Q**




(Mark
      one)





x
            Quarterly
                Report Pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934For
                the quarterly period ended March 31,
                2006





OR





 ̈
            Transition
                report pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934For
                the transition period from _______________ to
                ________________


______________





**Commission
      File Number**  **333-106356**


______________





**ADVANCED
      ACCESSORY HOLDINGS CORPORATION**


*(Exact
      name of registrant as specified in its charter)*





**Delaware**
            **41-2107245***(State
                or other jurisdiction of*
            *(I.R.S.
                Employer**incorporation
                or organization)*
            *Identification
                No.)*





**12900
                Hall Road, Suite 200, Sterling Heights, MI**
            **48313***(Address
                of principal executive offices)*
            *(Zip
                Code)*





**(586)
      997-2900**


*(Registrant’s
      telephone number, including area code)*





**NOT
      APPLICABLE**


*(Former
      name, former address and former fiscal year, if changed since last
      report)*





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such a period that the registrant was required
      to
      file such reports), and (2) has been subject to such filing requirements for
      the
      past 90 days.




Yes
             ̈
            No
            x


Indicate
      by check mark whether the Registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of åaccelerated
      filer and large accelerated fileræ in Rule 12b-2 of the Exchange Act. (Check
      one):


Large
      accelerated filer  ̈  Accelerated
      filer  ̈  Non-accelerated
      filer x


Indicate
      by check mark whether the Registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).


Yes
             ̈
            No
            x


Indicate
      the number of shares outstanding of each of the issuer’s classes of common
      stock, as of the latest practicable date.




Class
            
            Outstanding
                at May 12, 2006Membership
                Units
            
            100










ADVANCED
            ACCESSORY HOLDINGS CORPORATION
  **INDEX**




Page
                    No.Part
                    I.    Financial InformationItem
                    1.   Financial StatementsConsolidated
                    Condensed Balance Sheets as of March 31, 2006
                    and December 31, 2005
                1Consolidated
                    Condensed Statements of Operations for the
                    three months ended March 31, 2006 and 2005
                2Consolidated
                    Condensed Statements of Cash Flows for the
                    three months ended March 31, 2006 and 2005
                3Consolidated
                    Condensed Statement of Changes in Members’
                    Equity for the three months ended March 31, 2006
                4Notes
                    to Consolidated Condensed Financial
                    Statements
                5Item
                    2.   Management's Discussion and
                    Analysis of Financial Condition and Results of
                    Operations
                7Item
                    3.   Quantitative and Qualitative
                    Disclosures About Market Risk
                12Item
                    4.   Controls and
                    Procedures
                13Part
                    II.   Other Information and SignatureItem
                    1.   Legal
                    Proceedings
                13Item
                    1A.   Risk Factors
                13Item
                    2.   Changes in Securities, Use of
                    Proceeds and Issuer Purchases of Equity Securities
                13Item
                    3.   Defaults Upon Senior
                    Securities
                13Item
                    4.    Submission of Matters to a Vote of
                    Security-Holders
                13Item
                    5.   Other
                    Information
                13Item
                    6.   Exhibits
                14Signature
                15








PART
            I.
            FINANCIAL INFORMATION
  Item
            1.Financial
            Statements
  ADVANCED
            ACCESSORY HOLDINGS CORPORATION
 CONSOLIDATED
            CONDENSED BALANCE SHEETS
 As
            of
            March 31, 2006 and December 31, 2005
 **(Dollars
            in thousands)**











**March
                31,**
            
            **December
                31,****2006**
            
            **2005****ASSETS**
            
            
            **(Unaudited**
            **)**Current
                assetsCash
            
            $
            4,488
            
            $
            13,642Accounts
                receivable, less reservesof
                $1,734 and $1,870, respectively
            
            
            78,018
            
            
            64,318InventoriesRaw
                materials
            
            
            21,938
            
            
            21,740Work-in-process
            
            
            13,058
            
            
            13,153Finished
                goods
            
            
            30,280
            
            
            27,857Reserves
            
            
            (4,359
            )
            
            (4,437
            )Total
                inventories
            
            
            60,917
            
            
            58,313Other
                current assets
            
            
            6,737
            
            
            6,554Total
                current assets
            
            
            150,160
            
            
            142,827Property
                and equipment, net
            
            
            61,446
            
            
            62,871Intangible
                assets, net
            
            
            87,339
            
            
            89,268Deferred
                income taxes
            
            
            63
            
            
            131Other
                noncurrent assets
            
            
            1,821
            
            
            1,838Total
                Assets
            
            $
            300,829
            
            $
            296,935**LIABILITIES
                AND MEMBERS’ EQUITY**Current
                liabilitiesCurrent
                maturities of long-term debt
            
            $
            4,350
            
            $
            3,940Accounts
                payable
            
            
            45,770
            
            
            40,037Accrued
                liabilities
            
            
            27,167
            
            
            22,708Deferred
                income taxes
            
            
            1,552
            
            
            1,513Total
                current liabilities
            
            
            78,839
            
            
            68,198Noncurrent
                liabilitiesDeferred
                income taxes
            
            
            4,502
            
            
            5,119Other
                noncurrent liabilities
            
            
            4,650
            
            
            4,558Long-term
                debt, less current maturities
            
            
            268,627
            
            
            268,173Total
                noncurrent liabilities
            
            
            277,779
            
            
            277,850Members’
                equityUnits
            
            
            58,582
            
            
            58,582Other
                comprehensive income
            
            
            (745
            )
            
            (1,352
            )Accumulated
                deficit
            
            
            (113,626
            )
            
            (106,343
            )Total
                Members’ Equity
            
            
            (55,789
            )
            
            (49,113
            )Total
                Liabilities and Members’ Equity
            
            $
            300,829
            
            $
            296,935














The
            accompanying notes are an integral part of the
 consolidated
            condensed financial statements.
 1
 **ADVANCED
            ACCESSORY HOLDINGS CORPORATION**
 **CONSOLIDATED
            CONDENSED STATEMENTS OF OPERATIONS**
 **(Dollars
            in thousands)**
 (Unaudited)








**Three
                Months Ended****March
                31,********2006**
            
            **2005**Netsales
            
            $
            106,527
            
            $
            111,270Cost
                of sales
            
            
            89,001
            
            
            91,494Gross
                profit
            
            
            17,526
            
            
            19,776Selling,
                administrative and product development expenses
            
            
            15,415
            
            
            16,585Amortization
                of intangible assets
            
            
            2,047
            
            
            2,066Operating
                income
            
            
            64
            
            
            1,125Other
                expenseInterest
                expense
            
            
            (7,687
            )
            
            (7,477
            )Foreign
                currency income (loss), net
            
            
            684
            
            
            (1,331
            )Other
                income (expense)
            
            
            11
            
            
            (10
            )Loss
                before income taxes
            
            
            (6,928
            )
            
            (7,693
            )Provision
                for (benefit from) income taxes
            
            
            355
            
            
            (24
            )Net
                loss
            
            $
            (7,283
            )
            $
            (7,669
            )








The
            accompanying notes are an integral part of the
 consolidated
            condensed financial statements.
 2
 **ADVANCED
            ACCESSORY HOLDINGS CORPORATION**
 **CONSOLIDATED
            CONDENSED STATEMENTS OF CASH FLOW**
 **(Dollars
            in thousands)**
 **(Unaudited)**








**Three
                months Ended****March
                31,****2006**
            
            **2005****CASH
                FLOWS FROM OPERATING ACTIVITIES:**Netloss
            
            $
            (7,283
            )
            $
            (7,669
            )Adjustments
                to reconcile net loss to netcash
                provided by (used for) operating activities:Depreciation
                and amortization
            
            
            6,208
            
            
            6,348Deferred
                taxes
            
            
            (676
            )
            
            (668
            )Foreign
                currency (gain)/loss
            
            
            (684
            )
            
            1,241Loss
                on disposal of assets
            
            
            10
            
            
            8Interest
                accretion on notes
            
            
            2,351
            
            
            2,029Changes
                in assets and liabilities, net:Accounts
                receivable
            
            
            (13,284
            )
            
            (10,187
            )Inventories
            
            
            (1,824
            )
            
            (5,693
            )Other
                current assets
            
            
            184
            
            
            (3,218
            )Other
                noncurrent assets
            
            
            (193
            )
            
            1,144Accounts
                payable
            
            
            6,118
            
            
            7,447Accrued
                liabilities
            
            
            4,133
            
            
            5,227Other
                noncurrent liabilities
            
            
            (3
            )
            
            (78
            )Net
                cash used for operating activities
            
            
            (4,943
            )
            
            (4,069
            )**CASH
                FLOWS USED FOR INVESTING ACTIVITIES:**Acquisition
                of property and equipment
            
            
            (2,404
            )
            
            (4,827
            )Proceeds
                from disposals of property & equipment
            
            
            65
            
            
            —Net
                cash used for investing activities
            
            
            (2,339
            )
            
            (4,827
            )**CASH
                FLOWS USED FOR FINANCING ACTIVITIES:**Debt
                issuance costs
            
            
            (9
            )
            
            (92
            )Net
                decrease in revolving loan
            
            
            (1,275
            )
            
            (211
            )Repayment
                of debt
            
            
            (769
            )
            
            (336
            )Net
                cash used for financing activities
            
            
            (2,053
            )
            
            (639
            )Effect
                of exchange rate changes
            
            
            181
            
            
            (485
            )Net
                decrease in cash
            
            
            (9,154
            )
            
            (10,020
            )Cash
                at beginning of period
            
            
            13,642
            
            
            14,960Cash
                at end of period
            
            $
            4,488
            
            $
            4,940

















The
            accompanying notes are an integral part of the
 consolidated
            condensed financial statements.
 3
 **ADVANCED
            ACCESSORY HOLDINGS CORPORATION**
 **CONSOLIDATED
            CONDENSED STATEMENT OF CHANGES IN MEMBERS' EQUITY**
 For the Three Months Ended
            March 31,
            2006
 **(Dollars
            in thousands)**
 **(Unaudited)**








**Other**
            
            
            
            **Total****Members’**
            
            **comprehensive**
            
            **Accumulated**
            
            **members’****capital**
            
            **income
                (loss)**
            
            **deficit**
            
            **equity**Balanceat
                December 31, 2005
            
            $
            58,582
            
            $
            (1,352
            )
            $
            (106,343
            )
            $
            (49,113
            )Currency
                translation adjustment
            
            
            —
            
            
            607
            
            
            
            
            
            607Net
                loss
            
            
            
            
            
            
            
            
            (7,283
            )
            
            (7,283
            )Balance
                at March 31, 2006
            
            $
            58,582
            
            $
            (745
            )
            $
            (113,626
            )
            $
            (55,789
            )























The
            accompanying notes are an integral part of the
 consolidated
            condensed financial statements.
 4
 **ADVANCED
            ACCESSORY HOLDINGS CORPORATION**
 **NOTES
              TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS**
 **(Dollars
            in thousands)**
 **(Unaudited)**





**1.**  **BASISOF
      PRESENTATION**





On
      April
      15, 2003, substantially all of the equity interests of Advanced Accessory
      Systems, LLC (the "Predecessor") were acquired by Castle Harlan Partners
      IV, L.P. (the "Acquisition"), a private equity investment fund organized
      and managed by Castle Harlan Inc. CHAAS Holdings, LLC ("CHAAS Holdings") was
      formed in April 2003 in connection with the Acquisition and was the direct
      parent of CHAAS Acquisitions, LLC ("CHAAS Acquisitions") which was formed as
      a
      acquisition vehicle to acquire the Predecessor’s equity interest from J.P.
      Morgan Partners (23 SBIC), LLC, directors and officers of the Predecessor,
      and
      other investors (the "Sellers").





The
      aggregate consideration paid at or shortly after the closing of the Acquisition
      was approximately $266,000, approximately $168,000 of which was used to repay,
      assume or defease certain indebtedness at the time of the Acquisition and
      approximately $98,000 (inclusive of subordinated promissory notes and a
      subsequent working capital adjustment) of which was used for the closing
      purchase price of the equity interests of Advanced Accessory Systems,
      LLC.





In
      January 2004, Advanced Accessory Holdings Corporation ("AAHC") was formed by
      CHAAS Holdings in connection with an offering of the $88,000 aggregate principal
      amount at maturity, 131⁄4% Senior Discount Notes due 2011. At that time, CHAAS
      Holdings made a contribution of all of its equity interests in the Company
      to
      AAHC in exchange for all the outstanding membership units of AAHC. CHAAS
      Holdings is the direct parent of AAHC and AAHC is the direct parent of CHAAS
      Acquisitions. Unless the context otherwise requires, all information which
      refers to "we," "our," "us" or "the Company" refers to AAHC and its
      subsidiaries.





The
      Acquisition was accounted for in accordance with the purchase method of
      accounting. Accordingly, the purchase price of the Acquisition has been
      allocated to identifiable assets acquired and liabilities assumed based upon
      the
      estimated fair values at the acquisition date. The Company engaged an
      independent appraiser to assist in the determination of fair value at the
      acquisition date and such independent appraiser completed its work during the
      fourth quarter of 2003. The accompanying financial statements of the Company
      as
      of and for the periods ended March 31, 2005, December 31, 2005 and March 31,
      2006 reflect the allocation of the purchase consideration to tangible assets,
      goodwill and other identifiable intangible assets.





The
      North
      American subsidiaries of the Company use a fiscal month-end that corresponds
      to
      two four-week months and one five-week month per quarter, each ending on
      Saturday. The exception to this rule is at year-end, when the subsidiaries
      close
      on December 31. The Company’s Brink subsidiary uses the calendar month-end and
      year-end. The Company’s financial statements are dated as of the end of the
      calendar period, although they reflect the different closing dates identified
      above.





The
      accompanying unaudited consolidated financial statements have been prepared
      in
      accordance with accounting principles generally accepted in the United States
      of
      America for interim financial information and with the instructions to Form
      10-Q. Accordingly, they do not include all information and footnotes required
      by
      accounting principles generally accepted in the United States of America for
      complete financial statements and should be read in conjunction with the Annual
      Report on Form 10-K for the fiscal year ended December 31,
      2005.





In
      the
      opinion of the Company, the accompanying unaudited consolidated condensed
      financial statements contain all adjustments, which are normal and recurring
      in
      nature, necessary to present fairly its financial position as of March 31,
      2006
      and December 31, 2005 and the results of its operations for the three months
      ended March 31, 2006 and 2005.





5
 **ADVANCED
            ACCESSORY HOLDINGS CORPORATION**
 NOTES
            TO
            CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 (Dollars
            in thousands)
 **(Unaudited)**





**2.**
            **COMPREHENSIVE
                LOSS**





Comprehensive
      loss for the Company is as follows:





Three
                months endedMarch
                31, 2006
            
            March
                31, 2005Net
                loss
            
            $
            (7,283
            )
            $
            (7,669
            )Change
                in the cumulative translation adjustment, net of tax
            
            
            607
            
            
            (1,690
            )Comprehensive
                loss
            
            $
            (6,676
            )
            $
            (9,359
            )








**3.**
            **CURRENCY
                CONTRACTS**





The
      Company has significant operations in Europe where the functional currency
      is
      the Euro. On February 12, 2004, when the Euro to the US Dollar exchange
      rate was 1.28:1.00, the Company entered into a series of foreign currency
      forward option contracts related to the Euro ("Euro Collar"), which matured
      quarterly on a staggered basis. On May 12, 2004 when the Euro to US Dollar
      exchange rate was 1.19:1.00, the Company entered into additional foreign
      currency option contracts. The Company provided a $1,900 letter of credit in
      support of the foreign currency option contracts. To the extent that the quarter
      end exchange rate fell between the Euro Collar exchange rates, fulfillment
      of
      the Euro Collar exchange contracts would have resulted in offsetting foreign
      currency gains and losses upon expiration. For each reporting period, the
      Company recorded the fair value, as determined by independent financial
      institutions, of open obligations and the resultant gains and losses were
      recorded in the Statement of Operations. The final option contracts expired
      during the second quarter of 2005. For the three months ended March 31, 2005,
      the Company recorded an unrealized gain on foreign currency options of $138.





Upon
      expiration of the option contracts in the second quarter of 2005, the $1,900
      letter of credit described above expired.








**4.**  **INTANGIBLE
      ASSETS**





A
      summary
      of intangible assets identified by the Company in the allocation of the April
      15, 2003 purchase consideration follows **:**







**Customer**
              **Contracts**
            
            **Customer**
              **Relationships**
            
            **Technology**
            
            **Intangible**
              **Pension
                Asset**
            
            **Tradename
                /**
              **Trademark**
            
            **Deferred**
              **Financing
                Costs**
            
            **Total**Amortization
                period in years
            
            *8
                - 10*
            
            *15
                - 21*
            
            *10*
            
            *15*
            
            *Indefinite*
            
            *7
                - 8*Balance
                at December 31, 2005
            
            $
            30,989
            
            $
            30,643
            
            $
            13,183
            
            $
            466
            
            $
            7,070
            
            $
            6,917
            
            $
            89,268Additions
            
            
            —
            
            
            —
            
            
            1
            
            
            —
            
            
            —
            
            
            109
            
            
            110Foreign
                currency translation
            
            
            19
            
            
            303
            
            
            (3
            )
            
            —
            
            
            33
            
            
            6
            
            
            358Amortization
            
            
            (1,078
            )
            
            (519
            )
            
            (450
            )
            
            —
            
            
            —
            
            
            (350
            )
            
            (2,397
            )Balance
                at March 31, 2006
            
            $
            29,930
            
            $
            30,427
            
            $
            12,731
            
            $
            466
            
            $
            7,103
            
            $
            6,682
            
            $
            87,339





Amortization
      expense of identifiable intangible assets for the three months ended March
      31,
      2006 was $2,397, which included $350 of amortization of deferred financing
      costs
      included in interest expense.
















6
 **ADVANCED
            ACCESSORY HOLDINGS CORPORATION**


**5.**
            **RESTRUCTURING
                COSTS**





On
      March
      8, 2006 the Company announced its intention to close the Greenwood, Mississippi
      facility. Current production will be transferred to other locations. The costs
      to close the facility will include severance, cost to move equipment and ongoing
      lease costs and are estimated to be from $1,700 to $2,500.




During
      the first quarter of 2006 the Company accrued $58 as a ratable portion of the
      employee termination costs. No payments were made against this accrual and
      the
      liability at March 31, 2006 was $58. The Company anticipates that the closure
      will be complete during the third quarter of 2006.


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





The
      following discussion of our results of operations and financial condition should
      be read in conjunction with our financial statements and notes thereto included
      elsewhere in this Form 10-Q. This Form 10-Q contains forward-looking statements.
      Discussions containing forward-looking statements may be found in the material
      set forth above, in the material set forth below, as well as in this Form 10-Q
      generally. Forward-looking statements generally can be identified by the use
      of
      terms such as "may," "will," "should," "expect," "anticipate," "believe,"
      "intend," "plan," "estimate," "predict," "potential," "forecast," "project,"
      "will be," "continue" or variations of such terms, or the use of these terms
      in
      the negative.  Our actual results may differ significantly from the results
      discussed in the forward-looking statements, and such differences may be
      material.  General risks that may impact the achievement of such forecasts
      include, but are not limited to: compliance with new laws and regulations,
      general economic conditions in the markets in which we operate, fluctuation
      in
      demand for our products and in the production of vehicles for which we are
      a
      supplier, significant raw material price fluctuations, labor disputes with
      our
      employees or those of our significant customers or suppliers, changes in
      consumer preferences, dependence on significant automotive customers, the level
      of competition in the automotive supply industry, pricing pressure from
      automotive customers, our substantial leverage, limitations imposed by our
      debt
      facilities, changes in the popularity of particular vehicle models or towing
      and
      rack systems, the loss of programs on particular vehicle models, risks
      associated with conducting business in foreign countries, other business factors
      and other risks detailed from time to time in the Company’s reports filed with
      the Securities & Exchange Commission.  Any such forward-looking
      statements are not guarantees of future performance and involve risks and
      uncertainties.  Actual events or results may differ materially from those
      discussed in the forward-looking statements.  All of these forward-looking
      statements are based on estimates and assumptions made by our management which,
      although believed to be reasonable, are inherently uncertain.  Given these
      risks and uncertainties, readers are cautioned not to place undue reliance
      on
      forward-looking statements.  We disclaim any obligation to update any
      forward-looking statements.





**OVERVIEW**





***Company
      Background***





We
      believe that we are one of the world’s leading designers and manufacturers of
      exterior accessories for automotive original equipment manufacturers and the
      aftermarket. We design and manufacture a wide array of both rack systems and
      towing systems and related accessories. Our broad offering of rack systems
      includes fixed and detachable racks and accessories, which can be installed
      on
      vehicles to carry items such as bicycles, skis, luggage, surfboards, and
      sailboards. Our towing products and accessories include trailer hitches, trailer
      balls, ball mounts, electrical harnesses, safety chains and locking pins. Our
      products are sold to original equipment manufacturers ("OEMs") as standard
      accessories or options for a variety of light vehicles and to the
      aftermarket.





***Industry
      Trends and Competition***





Several
      trends are affecting the already highly competitive automotive industry,
      including a decline in the US domestic market share with its accompanying price
      pressures, worldwide increases in steel, aluminum and resin demand and prices
      and the ongoing financial distress of the US domestic OEMs and supply
      base.




***US
      Domestic Market Share***





The
      US
      market share for General Motors and Ford has declined and their US domestic
      vehicle production levels continue to decrease. This affects us in lower sales
      volumes to these customers and in increased pressure to lower our selling
      prices. Year-to-year price reductions are common in the industry, and the
      long-term contracts that we use to sell our products often include annual price
      reductions. We do not believe that these price reductions will have a material
      adverse impact on our results because we intend to offset such price reductions
      through cost reductions and other productivity increases.




7
 **ADVANCED
            ACCESSORY HOLDINGS CORPORATION**




***Increases
      in Raw Materials Costs***





Worldwide
      market conditions, including the growth of demand from China and other Asian
      countries, and the tensions in the Mid-East have resulted in higher steel,
      aluminum and resin prices in recent years. These increases in demand are seen
      as
      long-term and we do not expect prices to go down in the short term. We are
      focused on mitigating the impact of this trend through commercial agreements
      with our customers, competitive sourcing arrangements, technology advancements
      and improvements in the efficiency of our production processes.




***Financial
      Distress of US Domestic OEMs and Suppliers***





The
      declining market share of US domestic OEMs, their high legacy costs, and
      increased raw material prices and higher energy costs have resulted in financial
      losses for them. As well, several large automotive suppliers have filed for
      Chapter 11 bankruptcy protection. A result of these issues is that the US
      domestic automotive industry is experiencing a major structural change. The
      Company is not able to predict how long these industry trends will continue,
      but
      a sustained downturn could have a material adverse affect on the Company's
      results of operations, cash flows and financial position.




***The
      Acquisition***





On
      April
      15, 2003, substantially all of the equity interests of Advanced Accessory
      Systems, LLC ("the Predecessor") were acquired by Castle Harlan Partners IV,
      L.P. ("the Acquisition"), a private equity investment fund organized and managed
      by Castle Harlan Inc., a private New York based equity firm. CHAAS Holdings,
      LLC
      ("CHAAS Holdings") was formed in April 2003 in connection with the Acquisition
      and was the direct parent of CHAAS Acquisitions, LLC ("CHAAS Acquisitions")
      which was also formed pursuant to the Acquisition.





In
      January 2004, Advanced Accessory Holdings Corporation ("AAHC") was formed by
      CHAAS Holdings. At that time, CHAAS Holdings made a contribution of all of
      its
      equity interests in CHAAS Acquisitions to AAHC in exchange for all the
      outstanding membership units of AAHC. CHAAS Holdings is the direct parent of
      AAHC and AAHC is the direct parent of CHAAS Acquisitions and the indirect parent
      of the Predecessor. Unless the context otherwise requires, all information
      which
      refers to "we", "our" "us," or "the Company" refers to Advanced Accessory
      Holdings Corporation and its subsidiaries.








**RESULTS
      OF OPERATIONS**





**Three
      Months Ended March 31, 2006 Compared to the Three Months Ended March 31,
      2005**





*Net
      sales.* Net
      sales for the first quarter of 2006 were $106.5 million, representing a decrease
      of $4.8 million, or 4.3%, compared with net sales of $111.3 million for the
      first quarter of 2005. North American OEM sales decreased approximately $5.3
      million, primarily as a result of general overall volume decline in SUVs and
      light trucks. Sales to our aftermarket customers in Europe increased by $3.8
      million as a result of higher unit tow bar sales at Bfrink and in North America
      decreased by $0.3 million. The sales decrease includes approximately $3.0
      million due to the decrease of the average exchange rates between the US Dollar
      and primarily the Euro, the functional currency of Brink and SportRack
      Europe.





*Gross
      profit.* Gross
      profit for the first quarter of 2006 was $17.5 million, which represents a
      decrease of $2.3 million, or 11.6%, compared with gross profit of $19.8 million
      for the first quarter of 2005. Gross profit as a percentage of net sales was
      16.5% for the first quarter of 2006 and 17.8% for the first quarter of 2005.
      The
      decrease in gross profit and margin reflects the impact manufacturing
      performance, increases in raw material costs and the impact of exchange.
      Offsetting the decrease was an overall positive product mix on the lower
      sales.





*Selling,
      administrative and product development expenses.* Selling,
      administrative and product development expenses for the first quarter of 2006
      were $15.4 million, representing a decrease of $1.2 million, or 7.1%, compared
      with $16.6 million for the first quarter of 2005. Excluding the impact of
      exchange of $0.6 million, the decrease was primarily due to lower engineering,
      selling and commission costs as a result of lower overall volumes.





8
 **ADVANCED
            ACCESSORY HOLDINGS CORPORATION**




*Operating
      income.* Our
      operating income for the first quarter of 2006 was $0.1 million representing
      a
      decrease of $1.0 million, or 90.9%, compared with operating income of $1.1
      million for the first quarter of 2005. The decrease resulted from decreased
      gross profit offset slightly by lower selling, administrative and product
      development expenses, as discussed above.





*Interest
      expense.* Interest
      expense for the first quarter of 2006 was $7.7 million representing an increase
      of $0.2 million, or 2.7% compared interest expense for the first quarter of
      2005
      of was $7.5 million. The impact of exchange of the first quarter of 2006 over
      the first quarter of 2005 was favorable by $0.1 million, which was offset by
      slightly higher interest rates.





*Foreign
      currency gain (loss).* Foreign
      currency gain in the first quarter of 2006 was $0.7 million compared to a
      foreign currency loss of $1.3 million in the first quarter of 2005. Both the
      gain and loss were primarily attributable to the US Dollar denominated
      intercompany indebtedness of Brink, whose functional currency is the Euro.
      The
      intercompany indebtedness for our Canadian subsidiaries is deemed to be
      permanently invested and therefore changes in the intercompany balances for
      these subsidiaries caused by foreign currency fluctuations have been recorded
      in
      the currency translation adjustment account and included in other comprehensive
      income.





*Provision
      for (benefit from) income taxes.* During
      the first quarter of 2006 we recorded a loss before income taxes of $6.9 million
      and recorded an income tax provision of $0.4 million. The effective tax rate
      differs from the US federal income tax rate primarily due to changes in
      valuation allowances on the deferred tax assets (including current net operating
      losses) of all North American operations and differences in the tax rates of
      foreign operations.  During the first quarter of 2005 we had a net
      loss before taxes of $7.7 million and recorded an income tax benefit of $24,000.





*Net
      loss* .
      We
      recorded a net loss of $7.3 million in the first quarter of 2006 compared to
      $7.7 million in the first quarter of 2005. The net losses were a result of
      the
      items discussed above related to net sales, gross profit, foreign currency
      loss
      and the other expense and income items.








**LIQUIDITY
      AND CAPITAL RESOURCES**





Our
      principal liquidity requirements are to service our debt and meet our working
      capital and capital expenditure needs. Our indebtedness at March 31, 2006 was
      $273.0 million including current maturities of $4.4 million.





Although
      we were able to meet our senior leverage covenant for the quarter ended December
      31, 2005, we anticipated that we would be unable to meet our fixed charge
      coverage ratio covenant for the quarter ended December 31, 2005 and future
      quarters.





On
      March
      29, 2006, we entered into the Seventh Amendment to the Amended and Restated
      Credit Agreement (the "Seventh Amendment") with General Electric Capital
      Corporation individually as a lender and as agent for the lenders referred
      to
      therein to modify the fixed charge coverage ratio covenant and the senior
      secured leverage ratio covenant.





Prior
      to
      this modification, the required minimum fixed charge coverage ratios for all
      borrowers and their subsidiaries were 1.05 to 1.00 for the fiscal quarter ended
      December 31, 2005 and 1.15 to 1.00 for each fiscal quarter ending thereafter.
      The required minimum fixed charge coverage ratios for the European borrowers
      and
      their subsidiaries were 1.25 to 1.00 for the fiscal quarters ended March 31,
      2005, June 30, 2005 and September 30, 2005. Under the modified fixed charge
      coverage ratio covenant, the required minimum fixed charge coverage ratio for
      all borrowers and their subsidiaries range from 1.15 to 1.00 for the fiscal
      quarter ending March 31, 2007 and for each fiscal quarter ending thereafter.
      The
      required minimum fixed charge coverage ratios for European borrowers and their
      subsidiaries are 1.25 to 1.00 for the fiscal quarter ended December 31, 2005
      and
      1.15 to 1.00 for the following fiscal quarters through December 31, 2006. The
      actual fixed charge coverage ratio for the fiscal quarter ended March 31, 2006
      was 1.53 to 1.00 and we were in compliance with the modified covenant as of
      March 31, 2006.





9
 **ADVANCED
            ACCESSORY HOLDINGS CORPORATION**




Prior
      to
      the modification of the senior secured leverage ratio covenant, the required
      maximum leverage ratios for all borrowers and their subsidiaries were 1.75
      to
      1.00 for the fiscal quarters ended March 31, 2005 and June 30, 2005; 1.50 to
      1.00 for the fiscal quarter ended September 30, 2005; and 1.25 to 1.00 for
      each
      fiscal quarter ending thereafter. Under the modified senior secured leverage
      ratio covenant, the required maximum leverage ratios for all borrowers and
      their
      subsidiaries range from 2.00 to 1.00 for fiscal quarters ended March 31, 2006
      and June 30, 2006; 1.75 to 1.00 for the fiscal quarter ending September 30,
      2006; 1.50 to 1.00 for the fiscal quarter ending December 31, 2006; and 1.25
      to
      1.00 for each fiscal quarter ending thereafter. The actual leverage ratio for
      the quarter ended March 31, 2006 was 1.68 to 1.00 and we were in compliance
      with
      the modified covenant as of March 31, 2006.





In
      addition, the Seventh Amendment modified the definition of "Obligations" under
      the credit agreement to include obligations of any credit party in favor of
      any
      lender party to the credit agreement arising under (i) certain bank products
      offered by such lender or (ii) any agreement with such lender to fix or hedge
      foreign currency risk of up to an aggregate maximum amount of $2.4 million.
      A
      copy of the Seventh Amendment was attached as an exhibit to the Annual Report
      filed on Form 10-K as of December 31, 2005.








**Working
      Capital and Cash Flows**





Working
      capital and key elements of the consolidated statement of cash flows
      are:





March
                31, 2006
            
            December
                31,
              2005(in
                thousands)Working
                Capital
            
            $
            71,321
            
            $
            74,629





Three
                months ended
              March
                31,2006
            
            2005(in
                thousands)Cash
                flows used for operating activities
            
            $
            (4,943
            )
            $
            (4,069
            )Cash
                flows used for investing activities
            
            $
            (2,339
            )
            $
            (4,827
            )Cash
                flows used for financing activities
            
            $
            (2,053
            )
            $
            (639
            )





*Working
      capital*





Working
      capital decreased by $3.3 million to $71.3 million at March 31, 2006 from $74.6
      million at December 31, 2005. This decrease is primarily due to a decrease
      in
      cash of $9.2 million and increases in accounts payable and accrued liabilities
      of $5.7 million and $4.5 million, respectively. These were offset by increases
      in accounts receivable and inventories of $13.7 million and $2.6 million,
      respectively. The net working capital decrease was favorably impacted by the
      increased exchange rate between the US Dollar and local currencies, especially
      the Euro, as of March 31, 2006 as compared with the exchange rate as of December
      31, 2005.





The
      major
      components of the working capital change were accounts receivable, inventory
      and
      accounts payable The increase in these three components was attributable to
      increased sales and production levels on a year-to-date basis as compared with
      the last several months of 2005.





*Investing
      activities*





Cash
      flow
      used for investing activities for the first three months of 2006 and 2005
      represented acquisitions of property and equipment of $2.4 million and $4.8
      million, respectively, and were primarily for the expansion of capacity,
      productivity, process improvements and maintenance.





10
 **ADVANCED
            ACCESSORY HOLDINGS CORPORATION**




*Capital
      expenditures*





Our
      capital expenditures for 2005 were $9.3 million. Approximately $8.0 million
      was
      spent in connection with the expansion of capacity, productivity and process
      improvements and maintenance of machinery, equipment and tooling, $0.9 million
      was spent on furniture, fixtures and computers, $0.4 million on uncompleted
      construction in process and $0.1 million on repairs and improvements to land
      and
      buildings. Our 2005 capital expenditures were paid for from cash flows provided
      by operating activities or borrowings against our revolving credit facilities.
      We estimate that capital expenditures for 2006 will be approximately $11.3
      million, primarily for the expansion of capacity, productivity and process
      improvements and maintenance. Our 2006 capital expenditures are anticipated
      to
      be paid for from our current cash and cash provided by operating
      activities.





*Financing
      activities*





During
      the first three months of 2006, financing cash flows included a decrease in
      borrowings under the revolving line of credit of $1.3 million and repayment
      of
      debt of $0.8 million. For the same period in 2005 the financing cash flows
      included a reduction in the revolving line of credit of $0.2 million and
      repayment of debt of $0.3 million.





*Off-balance
      sheet arrangements*





The
      Company is not party to off-balance sheet arrangements as defined in SEC
      Regulation SK, Item 303(a).





*Contractual
      Obligations*





The
      following table represents our contractual commitments associated with our
      debt
      and other obligations disclosed above as of December 31, 2005.





**Payments
                due by year****Total**
            
            **Year
                1**
            
            **Years
                2-3**
            
            **Years
                4-5**
            
            **Thereafter**Long-term
                debt obligations - fixed rate
            
            $
            160,000
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            160,000Long-term
                debt obligations - variable rate
            
            
            43,189
            
            
            3,256
            
            
            39,933
            
            
            —
            
            
            —Interest
                on long-term fixed rate debt obligations
            
            
            105,747
            
            
            16,125
            
            
            32,250
            
            
            32,250
            
            
            25,122Capital
                lease obligations (including interest)
            
            
            7,927
            
            
            917
            
            
            1,786
            
            
            1,699
            
            
            3,525Operating
                lease obligations
            
            
            41,201
            
            
            7,258
            
            
            12,997
            
            
            6,688
            
            
            14,258Total
            
            $
            358,064
            
            $
            27,556
            
            $
            86,966
            
            $
            40,637
            
            $
            202,905





In
      addition to the above, our senior credit facility includes obligations subject
      to variable interest rates. Borrowings under the credit facility, at the
      Company’s election, may be made as "index rate" loans or LIBOR rate loans, plus
      an applicable margin. As both the interest rate and the relative balances of
      the
      variable rate debt are not determinable, the interest related to the variable
      rate debt is not reflect in the above table. At December 31, 2005 the
      outstanding variable rate obligations were $43.2 million and the weighted
      average interest rate for those obligations was 7.65%.





**Debt
      and Credit Sources**





Our
      indebtedness at March 31, 2006 was $273.0 million. We expect that our primary
      sources of cash will be from operating activities and borrowings under our
      revolving credit facilities. As of March 31, 2006, we had borrowings under
      the
      revolving credit facilities totaling $37.8 million and had $12.1 million of
      available borrowing capacity. Standby letters of credit totaling $3.3 million
      providing security for our US workers compensation program reduced borrowing
      availability.





On
      March
      29, 2006 we entered into the Seventh Amendment to the Amended and Restated
      Credit Agreement. See the discussion of the amendment to the credit facility
      in
      "- Liquidity and Capital Resources".





11
 **ADVANCED
            ACCESSORY HOLDINGS CORPORATION**




*International
      operations*





We
      conduct operations in several foreign countries including Canada, the Czech
      Republic, Denmark, France, Germany, Italy, The Netherlands, Poland, Spain,
      Sweden and the United Kingdom. Net sales from international operations during
      the first three months of 2006 were $41.1 million, or 38.6% of our net sales.
      At
      March 31, 2006, assets associated with these operations were approximately
      42.4%
      of total assets, and we had indebtedness denominated in currencies other than
      the US Dollar of approximately $22.1 million.





Our
      international operations may be subject to volatility because of currency
      fluctuations, inflation and changes in political and economic conditions in
      these countries. Most of the revenues and costs and expenses of our operations
      in these countries are denominated in the local currencies. The financial
      position and results of operations of the Company's foreign subsidiaries are
      measured using the local currency as the functional currency.





*Currency
      contracts*





We
      have
      significant operations in Europe where the functional currency is the Euro.
      On
      February 12, 2004, when the Euro to the US Dollar exchange rate was 1.28:1.00,
      we entered into a series of foreign currency forward option contracts related
      to
      the Euro ("Euro Collar"), which matured quarterly on a staggered basis. On
      May
      12, 2004 when the Euro to US Dollar exchange rate was 1.19:1.00, we entered
      into
      additional foreign currency option contracts. We provided a $1.9 million letter
      of credit in support of the foreign currency option contracts. To the extent
      that the quarter end exchange rate fell between the Euro Collar exchange rates,
      fulfillment of the Euro Collar exchange contracts would have resulted in
      offsetting foreign currency gains and losses upon expiration. For each reporting
      period we recorded the fair value, as determined by independent financial
      institutions, of open obligations and the resultant gains and losses were
      recorded in the Statement of Operations. The final option contracts expired
      during the second quarter of 2005. For the three months ended March 31, 2005,
      the Company recorded an unrealized gain on foreign currency options of
      $138,000.





Upon
      expiration of the option contracts in the second quarter of 2005, the $1.9
      million letter of credit described above expired.





*Recently
      issued accounting standards*





In
      December 2004, the FASB issued SFAS No. 123(R), "Share-Based Payment," which
      requires compensation costs related to share-based payment transactions to
      be
      recognized in the financial statements. This statement also establishes fair
      value as the measurement objective for share-based payment transactions with
      employees. The intrinsic value method prescribed by APB 25, "Accounting for
      Stock Issued to Employees" approximates the fair value method per SFAS No.
      123(R) and there is no additional expense to disclose. Therefore, the cumulative
      impact of adopting this standard effective January 1, 2006 was not significant
      to the Company’s operating results.








**Item3.**  **Quantitative
      and Qualitative Disclosures About Market Risk**





In
      May
      2004, we executed several foreign currency option contracts. See " -
      Management’s Discussion and Analysis of Financial Condition and Results of
      Operations - Debt and Credit Sources - Currency Contracts".








12
 **ADVANCED
            ACCESSORY HOLDINGS CORPORATION**




**Item4.**  **Controls
      and Procedures**





Under
      the
      supervision and with the participation of management, including our principal
      executive officer and principal financial officer, the Company has evaluated
      the
      effectiveness of the design and operation of its disclosure controls and
      procedures as of March 31, 2006 and, based on their evaluation, the principal
      executive officer and principal financial officer have concluded that these
      controls and procedures are effective. There were no changes in internal
      controls or in other factors that could significantly affect these controls
      during the quarter.





Disclosure
      controls and
      procedures are the Company’s controls and other procedures that are designed to
      ensure that information required to be disclosed by the Company in the reports
      that it files or submits under the Securities Exchange Act of 1934, as amended
      (the "Exchange Act"), is recorded, processed, summarized and reported, within
      the time periods specified in the Securities and Exchange Commission’s rules and
      forms. Disclosure controls and procedures include, without limitation, controls
      and procedures designed to ensure that information required to be disclosed
      in
      the reports that the Company files under the Exchange Act is accumulated and
      communicated to management, including the principal executive officer and
      principal financial officer, as appropriate to allow timely decisions regarding
      required disclosure.











**PART
      II. OTHER INFORMATION AND SIGNATURE**








**Item1.**  **Legal
      Proceedings**





From
      time
      to time, we are subject to routine legal proceedings incidental to the operation
      of our business. The outcome of any threatened or pending proceedings is not
      expected to have a material adverse effect on our financial condition, operating
      results or cash flows, based on our current understanding of the relevant facts.
      The Company maintains insurance coverage against claims in an amount that it
      believes to be adequate.








**Item1A.
      Risk Factors**





Not
      Applicable








**Item2.**  **Unregistered
      Sales of Equity Securities and Use of Proceeds**





None








**Item3.**  **Defaults
      Upon Senior Securities**





None








**Item4.**  **Submission
      of Matters to a Vote of Security-Holders**





None








**Item5.**  **Other
      Information**





None





13
 **ADVANCED
            ACCESSORY HOLDINGS CORPORATION**





**Item6.**  **Exhibits**





Exhibit
                31.1
            Certification
                of Chief Executive Officer Pursuant to Rules 13a-14 and 15d-14, as
                Adopted
                Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002





Exhibit
                31.2
            Certification
                of Chief Financial Officer Pursuant to Rules 13a-14 and 15d-14, as
                Adopted
                Pursuant to Section 302 of the Sarbanes-Oxley Act of
                2002





Exhibit
                32.1
            Certification
                of Chief Executive Officer Pursuant To 18 U.S.C. Section 1350, as
                Adopted
                Pursuant To Section 906 of the Sarbanes-Oxley Act Of 2002





Exhibit
                32.2
            Certification
                of Chief Financial Officer Pursuant To 18 U.S.C. Section 1350, as
                Adopted
                Pursuant To Section 906 of the Sarbanes-Oxley Act Of 2002











14
 **ADVANCED
            ACCESSORY HOLDINGS CORPORATION**





Pursuantto
      the requirements of the Securities Exchange Act
      of 1934, the Registrant has duly caused this report to be signed on its behalf
      by the undersigned thereunto duly authorized.











ADVANCED
                ACCESSORY HOLDINGS CORPORATIONDate:
                May 12, 2006
            /s/
                Ronald J. GardhouseRonald
                J. GardhouseChief
                Financial Officer(Principal
                Financial Officerand
                Authorized Signatory)








15
 **ADVANCED
          ACCESSORY HOLDINGS CORPORATION**
 
 **EXHIBIT
          INDEX**











Exhibit
            Description31.1
            Certification
                of Chief Executive Officer Pursuant to
                Rules 13a-14 and 15d-14, as Adopted Pursuant to Section 302 of the
                Sarbanes-Oxley Act of 200231.2
            Certification
                of Chief Financial Officer Pursuant to
                Rules 13a-14 and 15d-14, as Adopted Pursuant to Section 302 of the
                Sarbanes-Oxley Act of 200232.1
            Certification
                of Chief Executive Officer Pursuant to 18
                U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
                Sarbanes-Oxley Act of 200232.2
            Certification
                of Chief Financial Officer Pursuant to 18
                U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002