##### Table of Contents









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 1934


For the quarterly period ended July 31, 2001

OR

o TRANSITION REPORT
PURSUANT TO SECTION 13 or 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934


For the transition period
from to

Commission file number: 1-11592

HAYES LEMMERZ INTERNATIONAL, INC.

(Exact Name of Registrant as Specified in Its
Charter)


|                                                                |  |                                   
|--------------------------------------------------------------- |  | ----------------------------------
|DELAWARE                                                        |  | 13-3384636                        
|(State or Other Jurisdiction of
	Incorporation or Organization) |  | (IRS Employer
	Identification No.)

15300 CENTENNIAL DRIVE

NORTHVILLE, MICHIGAN 48167


(Address of Principal Executive Offices) (Zip
Code)


Registrants telephone number, including
area code: (734) 737-5000

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 shorter 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 o  No x

The number of
shares of common stock outstanding as of March 20, 2002 was
28,455,495 shares.









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TABLE OF CONTENTS



|                                                                                              |  |  |  |  |  |  |  | 
|--------------------------------------------------------------------------------------------- |  |  |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION                                                                
|Item 1. Financial Statements                                                                 
|Consolidated Statements Of Operations                                                        
|Consolidated Balance Sheets                                                                  
|Consolidated Statements of Cash Flows                                                        
|Notes to Consolidated Financial Statements                                                   
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|Item 3. Quantitative and Qualitative Disclosures about Market Risk                           
|PART II. OTHER INFORMATION                                                                   
|Item 1. Legal Proceedings                                                                    
|Item 2. Changes in Securities and Use of Proceeds                                            
|Item 3. Defaults Upon Senior Securities                                                      
|Item 4. Submission of Matters to a Vote of Security Holders                                  
|Item 5. Other Information                                                                    
|Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                                                                                   



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

|                              |         |                                            |                                                                                        |      |   |    | 
|----------------------------- | ------- | ------------------------------------------ | -------------------------------------------------------------------------------------- | ---- | - | -- | 
|                              |         |                                            |                                                                                        | Page
|                              |         |                                            |                                                                                        |     
|PART I. FINANCIAL INFORMATION
|                              | Item 1. |                                            | Financial Statements                                                                   |      |   |    | 
|                              |         | Consolidated Statements of Operations      |                                                                                        |      | 3 |   
|                              |         | Consolidated Balance Sheets                |                                                                                        |      | 4 |   
|                              |         | Consolidated Statements of Cash Flows      |                                                                                        |      | 5 |   
|                              |         | Notes to Consolidated Financial Statements |                                                                                        |      | 6 |   
|                              | Item 2. |                                            | Managements Discussion and Analysis of
	Financial Condition and Results of Operations |      |   | 26 | 
|                              | Item 3. |                                            | Quantitative and Qualitative Disclosures about
	Market Risk                            |      |   | 37 | 
|PART II. OTHER INFORMATION   
|                              | Item 1. |                                            | Legal Proceedings                                                                      |      |   | 38 | 
|                              | Item 2. |                                            | Changes in Securities and Use of Proceeds                                              |      |   | 38 | 
|                              | Item 3. |                                            | Defaults Upon Senior Securities                                                        |      |   | 38 | 
|                              | Item 4. |                                            | Submission of Matters to a Vote of Security
	Holders                                   |      |   | 38 | 
|                              | Item 5. |                                            | Other Information                                                                      |      |   | 38 | 
|                              | Item 6. |                                            | Exhibits and Reports on Form 8-K                                                       |      |   | 39 | 
|SIGNATURES                    |         |                                            | 40                                                                                     |     

UNLESS OTHERWISE INDICATED, REFERENCES TO THE
COMPANY MEAN HAYES LEMMERZ INTERNATIONAL, INC., AND
ITS SUBSIDIARIES AND REFERENCE TO A FISCAL YEAR MEANS THE
COMPANYS YEAR ENDED JANUARY 31 OF THE FOLLOWING YEAR
(E.G., FISCAL 2001 MEANS THE PERIOD BEGINNING FEBRUARY 1, 2001,
AND ENDING JANUARY 31, 2002). THIS REPORT CONTAINS FORWARD
LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995 WITH RESPECT TO THE FINANCIAL
CONDITION, RESULTS OF OPERATIONS, AND BUSINESS OF THE COMPANY.
THESE FORWARD LOOKING STATEMENTS INVOLVE CERTAIN RISKS AND
UNCERTAINTIES. NO ASSURANCE CAN BE GIVEN THAT ANY OF SUCH
MATTERS WILL BE REALIZED. FACTORS THAT MAY CAUSE ACTUAL RESULTS
TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD
LOOKING STATEMENTS INCLUDE, AMONG OTHERS, THE FOLLOWING
POSSIBILITIES: (1) THE OUTCOME AND CONSEQUENCES OF THE
COMPANYS CHAPTER 11 PROCEEDINGS; (2) COMPETITIVE
PRESSURE IN THE COMPANYS INDUSTRY INCREASES SIGNIFICANTLY;
(3) GENERAL ECONOMIC CONDITIONS ARE LESS FAVORABLE THAN
EXPECTED; (4) THE COMPANYS DEPENDENCE ON THE
AUTOMOTIVE INDUSTRY (WHICH HAS HISTORICALLY BEEN CYCLICAL);
(5) CHANGES IN THE FINANCIAL MARKETS AFFECTING THE
COMPANYS FINANCIAL STRUCTURE AND THE COMPANYS COST
OF CAPITAL AND BORROWED MONEY; AND (6) THE UNCERTAINTIES
INHERENT IN INTERNATIONAL OPERATIONS AND FOREIGN CURRENCY
FLUCTUATIONS. THE COMPANY HAS NO DUTY UNDER THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995 TO UPDATE THE FORWARD
LOOKING STATEMENTS IN THIS QUARTERLY REPORT ON FORM 10-Q AND THE
COMPANY DOES NOT INTEND TO PROVIDE SUCH UPDATES.

EXCEPT AS SPECIFICALLY STATED OTHERWISE IN THIS
FORM 10-Q, THE INFORMATION CONTAINED IN THE 10-Q HAS NOT BEEN
UPDATED TO REFLECT THE MATTERS SET FORTH IN NOTE 12,
SUBSEQUENT EVENTS BELOW.

2



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##### Table of Contents









HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES






Consolidated Statements Of
Operations


(Millions of dollars, except share
amounts)


(Unaudited)


|                                                  |                                                                                   |                    |       |                  |   |      |       |               |   |   |         |        |   |   |         |       | 
|------------------------------------------------- | --------------------------------------------------------------------------------- | ------------------ | ----- | ---------------- | - | ---- | ----- | ------------- | - | - | ------- | ------ | - | - | ------- | ----- | 
|                                                  |                                                                                   |                    |       |                 
|                                                  |                                                                                   | Three Months Ended |       | Six Months Ended
|                                                  |                                                                                   | July 31,           |       | July 31,        
|                                                  |                                                                                   |                    |       |                 
|                                                  |                                                                                   |                    |       | (As Restated)    |   |      |       | (As Restated)
|                                                  |                                                                                   | 2001               |       | 2000             |   | 2001 |       | 2000         
|                                                  |                                                                                   |                    |       |                  |   |      |       |              
|Net sales                                         |                                                                                   | $                  | 518.5 |                  |   | $    | 540.3 |               |   | $ | 1,059.5 |        |   | $ | 1,134.0 |      
|Cost of goods sold                                |                                                                                   |                    | 484.9 |                  |   |      | 467.6 |               |   |   | 968.2   |        |   |   | 970.8   |      
|                                                  |                                                                                   |                    |       |                  |   |      |       |               |   |   |         |        |   |   |         |      
|                                                  | Gross profit                                                                      |                    |       | 33.6             |   |      |       | 72.7          |   |   |         | 91.3   |   |   |         | 163.2 | 
|Marketing, general and administration             |                                                                                   |                    | 25.9  |                  |   |      | 21.8  |               |   |   | 52.2    |        |   |   | 46.6    |      
|Engineering and product development               |                                                                                   |                    | 5.7   |                  |   |      | 3.2   |               |   |   | 11.6    |        |   |   | 9.4     |      
|Amortization of intangibles                       |                                                                                   |                    | 6.6   |                  |   |      | 6.9   |               |   |   | 13.3    |        |   |   | 13.9    |      
|Equity in losses (earnings) of joint ventures     |                                                                                   |                    | 0.2   |                  |   |      | 0.6   |               |   |   | 0.5     |        |   |   | (0.5    | )    
|Asset impairments and other restructuring charges |                                                                                   |                    | 7.0   |                  |   |      | 3.9   |               |   |   | 38.0    |        |   |   | 4.4     |      
|Loss on investment in joint venture               |                                                                                   |                    | 3.8   |                  |   |      |      |               |   |   | 3.8     |        |   |   |        |      
|Other (income) expense, net                       |                                                                                   |                    | 1.4   |                  |   |      | 4.2   |               |   |   | 1.3     |        |   |   | (2.0    | )    
|                                                  |                                                                                   |                    |       |                  |   |      |       |               |   |   |         |        |   |   |         |      
|                                                  | Earnings (loss) from operations                                                   |                    |       | (17.0            | ) |      |       | 32.1          |   |   |         | (29.4  | ) |   |         | 91.4  | 
|Interest expense, net                             |                                                                                   |                    | 48.8  |                  |   |      | 40.0  |               |   |   | 92.9    |        |   |   | 78.8    |      
|                                                  |                                                                                   |                    |       |                  |   |      |       |               |   |   |         |        |   |   |         |      
|                                                  | Earnings (loss) before taxes on income, minority
	interest and extraordinary gain |                    |       | (65.8            | ) |      |       | (7.9          | ) |   |         | (122.3 | ) |   |         | 12.6  | 
|Income tax (benefit) provision                    |                                                                                   |                    | 4.1   |                  |   |      | (2.9  | )             |   |   | 10.4    |        |   |   | 4.4     |      
|                                                  |                                                                                   |                    |       |                  |   |      |       |               |   |   |         |        |   |   |         |      
|                                                  | Earnings (loss) before minority interest and
	extraordinary gain                  |                    |       | (69.9            | ) |      |       | (5.0          | ) |   |         | (132.7 | ) |   |         | 8.2   | 
|Minority interest                                 |                                                                                   |                    | 1.0   |                  |   |      | 0.5   |               |   |   | 1.8     |        |   |   | 1.4     |      
|                                                  |                                                                                   |                    |       |                  |   |      |       |               |   |   |         |        |   |   |         |      
|                                                  | Earnings (loss) before extraordinary gain                                         |                    |       | (70.9            | ) |      |       | (5.5          | ) |   |         | (134.5 | ) |   |         | 6.8   | 
|Extraordinary gain, net of tax                    |                                                                                   |                    | 2.7   |                  |   |      |      |               |   |   | 2.7     |        |   |   |        |      
|                                                  |                                                                                   |                    |       |                  |   |      |       |               |   |   |         |        |   |   |         |      
|                                                  | Net income (loss)                                                                 |                    | $     | (68.2            | ) |      | $     | (5.5          | ) |   | $       | (131.8 | ) |   | $       | 6.8   | 
|                                                  |                                                                                   |                    |       |                  |   |      |       |               |   |   |         |        |   |   |         |      
|Basic net income (loss) per share:                |                                                                                   |                    |       |                  |   |      |       |               |   |   |         |        |   |   |         |      
|                                                  | Income (loss) before extraordinary gain                                           |                    | $     | (2.49            | ) |      | $     | (0.18         | ) |   | $       | (4.73  | ) |   | $       | 0.22  | 
|                                                  | Extraordinary gain, net of tax                                                    |                    |       | 0.09             |   |      |       |              |   |   |         | 0.09   |   |   |         |      | 
|                                                  |                                                                                   |                    |       |                  |   |      |       |               |   |   |         |        |   |   |         |      
|Basic net income (loss) per share                 |                                                                                   | $                  | (2.40 | )                |   | $    | (0.18 | )             |   | $ | (4.64   | )      |   | $ | 0.22    |      
|                                                  |                                                                                   |                    |       |                  |   |      |       |               |   |   |         |        |   |   |         |      
|Diluted net income (loss) per share               |                                                                                   |                    |       |                  |   |      |       |               |   |   |         |        |   |   |         |      
|                                                  | Income (loss) before extraordinary gain                                           |                    | $     | (2.49            | ) |      | $     | (0.18         | ) |   | $       | (4.73  | ) |   | $       | 0.22  | 
|                                                  | Extraordinary gain, net of tax                                                    |                    |       | 0.09             |   |      |       |              |   |   |         | 0.09   |   |   |         |      | 
|                                                  |                                                                                   |                    |       |                  |   |      |       |               |   |   |         |        |   |   |         |      
|Diluted net income (loss) per share               |                                                                                   | $                  | (2.40 | )                |   | $    | (0.18 | )             |   | $ | (4.64   | )      |   | $ | 0.22    |      
|                                                  |                                                                                   |                    |       |                  |   |      |       |               |   |   |         |        |   |   |         |      

See accompanying notes to consolidated financial
statements.

3



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES






Consolidated Balance Sheets


(Millions of dollars, except share
amounts)


|                                                |                                                                            |                                                                                                                                                          |       |               |         |             |         |         |         |  |       |         |         |  
|----------------------------------------------- | -------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------- | ----- | ------------- | ------- | ----------- | ------- | ------- | ------- |  | ----- | ------- | ------- | -
|                                                |                                                                            |                                                                                                                                                          |       | (As Restated) |         |            
|                                                |                                                                            | July 31,                                                                                                                                                 |       | July 31,      |         | January 31,
|                                                |                                                                            | 2001                                                                                                                                                     |       | 2000          |         | 2001       
|                                                |                                                                            |                                                                                                                                                          |       |               |         |            
|                                                |                                                                            | (Unaudited)                                                                                                                                              |       | (Unaudited)   |         |            
|Assets                                          |                                                                            |                                                                                                                                                          |       |               |         |             |         |         |         |  |       |        
|Current assets:                                 |                                                                            |                                                                                                                                                          |       |               |         |             |         |         |         |  |       |        
|                                                | Cash and cash equivalents                                                  |                                                                                                                                                          | $     | 45.4          |         |             | $       | 16.6    |         |  | $     |        |        
|                                                | Receivables                                                                |                                                                                                                                                          |       | 315.3         |         |             |         | 192.9   |         |  |       | 248.8   |        
|                                                | Inventories                                                                |                                                                                                                                                          |       | 207.0         |         |             |         | 228.0   |         |  |       | 217.3   |        
|                                                | Prepaid expenses and other                                                 |                                                                                                                                                          |       | 36.9          |         |             |         | 44.1    |         |  |       | 38.7    |        
|                                                |                                                                            |                                                                                                                                                          |       |               |         |             |         |         |         |  |       |        
|                                                |                                                                            | Total current assets                                                                                                                                     |       |               | 604.6   |             |         |         | 481.6   |  |       |         | 504.8   |  
|                                                | Net property, plant and equipment                                          |                                                                                                                                                          |       | 1,039.1       |         |             |         | 1,179.4 |         |  |       | 1,104.8 |        
|                                                | Goodwill and other assets                                                  |                                                                                                                                                          |       | 961.0         |         |             |         | 1,043.8 |         |  |       | 994.3   |        
|                                                |                                                                            |                                                                                                                                                          |       |               |         |             |         |         |         |  |       |        
|                                                |                                                                            | Total assets                                                                                                                                             |       | $             | 2,604.7 |             |         | $       | 2,704.8 |  |       | $       | 2,603.9 |  
|                                                |                                                                            |                                                                                                                                                          |       |               |         |             |         |         |         |  |       |        
|Liabilities and Stockholders Equity
	(Deficit) |                                                                            |                                                                                                                                                          |       |               |         |             |         |         |         |  |       |        
|Current liabilities:                            |                                                                            |                                                                                                                                                          |       |               |         |             |         |         |         |  |       |        
|                                                | Bank borrowings                                                            |                                                                                                                                                          | $     | 74.0          |         |             | $       | 77.8    |         |  | $     | 79.6    |        
|                                                | Current portion of long-term debt                                          |                                                                                                                                                          |       | 1,858.5       |         |             |         | 70.0    |         |  |       | 1,613.7 |        
|                                                | Accounts payable and accrued liabilities                                   |                                                                                                                                                          |       | 463.2         |         |             |         | 471.9   |         |  |       | 491.6   |        
|                                                |                                                                            |                                                                                                                                                          |       |               |         |             |         |         |         |  |       |        
|                                                |                                                                            | Total current liabilities                                                                                                                                |       |               | 2,395.7 |             |         |         | 619.7   |  |       |         | 2,184.9 |  
|Long-term debt, net of current portion          |                                                                            |                                                                                                                                                          | 53.4  |               |         |             | 1,539.3 |         |         |  | 94.6  |        
|Pension and other long-term liabilities         |                                                                            |                                                                                                                                                          | 319.4 |               |         |             | 337.4   |         |         |  | 335.6 |        
|Minority interest                               |                                                                            |                                                                                                                                                          | 11.9  |               |         |             | 8.0     |         |         |  | 10.6  |        
|                                                |                                                                            |                                                                                                                                                          |       |               |         |             |         |         |         |  |       |        
|                                                |                                                                            | Total liabilities                                                                                                                                        |       |               | 2,780.4 |             |         |         | 2,504.4 |  |       |         | 2,625.7 |  
|Commitments and Contingencies                   |                                                                            |                                                                                                                                                          |       |               |         |             |         |         |         |  |       |        
|Common stock subject to put agreement           |                                                                            |                                                                                                                                                          |      |               |         |             | 8.5     |         |         |  |      |        
|Stockholders equity (deficit):                 |                                                                            |                                                                                                                                                          |       |               |         |             |         |         |         |  |       |        
|                                                | Preferred stock, 25,000,000 shares authorized,
	none issued or outstanding |                                                                                                                                                          |       |              |         |             |         |        |         |  |       |        |        
|Common stock, par value $0.01 per share:        |                                                                            |                                                                                                                                                          |       |               |         |             |         |         |         |  |       |        
|                                                |                                                                            | Voting  authorized 99,000,000 shares;
	27,709,919, 27,707,019, and 27,707,919 shares issued;
	25,806,469, 27,707,919, and 25,806,469 shares outstanding |       |               | 0.3     |             |         |         | 0.3     |  |       |         | 0.3     |  
|                                                |                                                                            | Nonvoting  authorized 5,000,000
	shares; issued and outstanding, 2,649,026 shares                                                                       |       |               |        |             |         |         |        |  |       |         |        |  
|                                                | Additional paid in capital                                                 |                                                                                                                                                          |       | 235.1         |         |             |         | 231.4   |         |  |       | 235.1   |        
|                                                | Common stock in treasury at cost, 1,901,450 shares                         |                                                                                                                                                          |       | (25.7         | )       |             |         |        |         |  |       | (25.7   | )      
|                                                | Retained earnings (accumulated deficit)                                    |                                                                                                                                                          |       | (277.5        | )       |             |         | 47.3    |         |  |       | (145.7  | )      
|                                                | Accumulated other comprehensive loss                                       |                                                                                                                                                          |       | (107.9        | )       |             |         | (87.1   | )       |  |       | (85.8   | )      
|                                                |                                                                            |                                                                                                                                                          |       |               |         |             |         |         |         |  |       |        
|                                                |                                                                            | Total stockholders equity (deficit)                                                                                                                     |       |               | (175.7  | )           |         |         | 191.9   |  |       |         | (21.8   | )
|                                                |                                                                            |                                                                                                                                                          |       |               |         |             |         |         |         |  |       |        
|                                                |                                                                            | Total liabilities and stockholders equity                                                                                                               |       | $             | 2,604.7 |             |         | $       | 2,704.8 |  |       | $       | 2,603.9 |  
|                                                |                                                                            |                                                                                                                                                          |       |               |         |             |         |         |         |  |       |        

See accompanying notes to consolidated financial
statements.

4



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES






Consolidated Statements of Cash
Flows


(Millions of dollars)


(Unaudited)


|                                                                                       |                                                                                   |                                          |                                       |               |      |       |      |       |        |       |  
|-------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------- | ---------------------------------------- | ------------------------------------- | ------------- | ---- | ----- | ---- | ----- | ------ | ----- | -
|                                                                                       |                                                                                   |                                         
|                                                                                       |                                                                                   | Six Months Ended                        
|                                                                                       |                                                                                   | July 31,                                
|                                                                                       |                                                                                   |                                         
|                                                                                       |                                                                                   |                                          |                                       | (As Restated)
|                                                                                       |                                                                                   | 2001                                     |                                       | 2000         
|                                                                                       |                                                                                   |                                          |                                       |              
|Cash flows from operating activities:                                                  |                                                                                   |                                          |                                       |               |      |       |      |      
|Net income (loss)                                                                      |                                                                                   | $                                        | (131.8                                | )             |      | $     | 6.8  |      
|Adjustments to reconcile net income (loss) to net
	cash used for operating activities: |                                                                                   |                                          |                                       |               |      |       |      |      
|                                                                                       | Depreciation and tooling amortization                                             |                                          |                                       | 61.2          |      |       |      | 59.0  |       
|                                                                                       | Amortization of intangibles                                                       |                                          |                                       | 13.3          |      |       |      | 13.9  |       
|                                                                                       | Amortization of deferred financing fees                                           |                                          |                                       | 3.8           |      |       |      | 3.2   |       
|                                                                                       | Increase in deferred taxes                                                        |                                          |                                       | 6.0           |      |       |      | 8.6   |       
|                                                                                       | Asset impairments and other restructuring charges                                 |                                          |                                       | 38.0          |      |       |      | 4.4   |       
|                                                                                       | Loss on investment in joint venture                                               |                                          |                                       | 3.8           |      |       |      |      |       
|                                                                                       | Minority interest                                                                 |                                          |                                       | 1.8           |      |       |      | 1.4   |       
|                                                                                       | Equity in losses (earnings) of joint ventures                                     |                                          |                                       | 0.5           |      |       |      | (0.5  | )     
|                                                                                       | Extraordinary gain                                                                |                                          |                                       | (4.2          | )    |       |      |      |       
|                                                                                       | Changes in operating assets and liabilities that
	increase (decrease) cash flows: |                                          |                                       |               |      |       |      |       |       
|                                                                                       |                                                                                   | Receivables                              |                                       |               | (9.4 | )     |      |       | 7.5    |      
|                                                                                       |                                                                                   | Inventories                              |                                       |               | 2.7  |       |      |       | (37.7  | )    
|                                                                                       |                                                                                   | Prepaid expenses and other               |                                       |               | 1.2  |       |      |       | (3.4   | )    
|                                                                                       |                                                                                   | Accounts payable and accrued liabilities |                                       |               | (1.2 | )     |      |       | (119.4 | )    
|                                                                                       |                                                                                   | Other long-term liabilities              |                                       |               | (9.0 | )     |      |       | (10.9  | )    
|                                                                                       |                                                                                   |                                          |                                       |               |      |       |      |      
|                                                                                       |                                                                                   |                                          | Cash used for operating activities    |               |      | (23.3 | )    |       |        | (67.1 | )
|                                                                                       |                                                                                   |                                          |                                       |               |      |       |      |      
|Cash flows from investing activities:                                                  |                                                                                   |                                          |                                       |               |      |       |      |      
|                                                                                       | Acquisition of property, plant and equipment                                      |                                          |                                       | (68.4         | )    |       |      | (93.0 | )     
|                                                                                       | Tooling expenditures                                                              |                                          |                                       | (8.3          | )    |       |      | (2.8  | )     
|                                                                                       | Increased investment in majority-owned subsidiary                                 |                                          |                                       |              |      |       |      | (7.2  | )     
|                                                                                       | Proceeds from termination of cross-currency swap
	agreements                      |                                          |                                       | 14.6          |      |       |      | 15.9  |       
|                                                                                       | Other, net                                                                        |                                          |                                       | (12.9         | )    |       |      | 4.1   |       
|                                                                                       |                                                                                   |                                          |                                       |               |      |       |      |      
|                                                                                       |                                                                                   |                                          | Cash used in investing activities     |               |      | (75.0 | )    |       |        | (83.0 | )
|                                                                                       |                                                                                   |                                          |                                       |               |      |       |      |      
|Cash flows from financing activities:                                                  |                                                                                   |                                          |                                       |               |      |       |      |      
|                                                                                       | Increase in bank borrowings and revolving facility                                |                                          |                                       | 192.8         |      |       |      | 167.4 |       
|                                                                                       | Proceeds from refinancing, net of related fees                                    |                                          |                                       | 435.4         |      |       |      |      |       
|                                                                                       | Repayment of bank borrowings and revolving
	facility from refinancing             |                                          |                                       | (371.3        | )    |       |      |      |       
|                                                                                       | Repayment of long-term debt from refinancing                                      |                                          |                                       | (36.6         | )    |       |      |      |       
|                                                                                       | Payments on accounts receivable securitization                                    |                                          |                                       | (71.6         | )    |       |      | (25.0 | )     
|                                                                                       | Fees to amend Credit Agreement                                                    |                                          |                                       | (2.7          | )    |       |      |      |       
|                                                                                       |                                                                                   |                                          |                                       |               |      |       |      |      
|                                                                                       |                                                                                   |                                          | Cash provided by financing activities |               |      | 146.0 |      |       |        | 142.4 |  
|                                                                                       |                                                                                   |                                          |                                       |               |      |       |      |      
|Effect of exchange rate changes on cash and cash
	equivalents                          |                                                                                   |                                          | (2.3                                  | )             |      |       | (1.6 | )    
|                                                                                       |                                                                                   |                                          |                                       |               |      |       |      |      
|                                                                                       | Increase (decrease) in cash and cash equivalents                                  |                                          |                                       | 45.4          |      |       |      | (9.3  | )     
|Cash and cash equivalents at beginning of year                                         |                                                                                   |                                          |                                      |               |      |       | 25.9 |      
|                                                                                       |                                                                                   |                                          |                                       |               |      |       |      |      
|Cash and cash equivalents at end of period                                             |                                                                                   | $                                        | 45.4                                  |               |      | $     | 16.6 |      
|                                                                                       |                                                                                   |                                          |                                       |               |      |       |      |      
|Supplemental data:                                                                     |                                                                                   |                                          |                                       |               |      |       |      |      
|                                                                                       | Cash paid for interest                                                            |                                          | $                                     | 84.0          |      |       | $    | 86.2  |       
|                                                                                       | Cash paid for income taxes                                                        |                                          | $                                     | 4.4           |      |       | $    | 5.5   |       

See accompanying notes to consolidated financial
statements.

5



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES






Notes to Consolidated Financial
Statements


Six Months Ended July 31, 2001 and
2000


(Unaudited)


(Millions of Dollars Unless Otherwise
Stated)


(1) Description of Business and Basis of
Presentation

Description of Business

Unless otherwise indicated, references to
Company mean Hayes Lemmerz International, Inc. and
its subsidiaries and references to fiscal year mean the
Companys year ended January 31 of the following year
(e.g., fiscal 2001 refers to the period beginning
February 1, 2001 and ending January 31, 2002,
fiscal 2000 refers to the period beginning
February 1, 2000 and ending January 31, 2001 and
fiscal 1999 refers to the period beginning
February 1, 1999 and ending January 31, 2000).

The Company designs, engineers and manufactures
suspension module components, principally for original equipment
manufacturers (OEMs) of passenger cars, light trucks
and commercial highway vehicles worldwide. The Companys
products include one-piece cast aluminum wheels, fabricated
aluminum wheels, fabricated steel wheels, full face cast
aluminum wheels, clad covered wheels, wheel-end attachments,
aluminum structural components, intake and exhaust manifolds,
and brake drums, hubs and rotors.

Basis of Presentation

The accompanying consolidated financial
statements have been prepared on a going concern basis which
contemplates continuity of operations, realization of assets,
and payment of liabilities in the ordinary course of business
and do not reflect adjustments that might result if the Company
is unable to continue as a going concern. The Companys
recent history of significant losses, deficit in
stockholders equity and issues related to compliance with
debt covenants raise substantial doubt about the Companys
ability to continue as a going concern. As is more fully
discussed in Note 12, the Company filed a voluntary
petition for reorganization under Chapter 11 of the
Bankruptcy Code in December 2001. Continuing as a going
concern is dependent upon, among other things, the
Companys formulation of a plan of reorganization that is
confirmed by the Bankruptcy Court, the success of future
business operations, and the generation of sufficient cash from
operations and financing sources to meet the Companys
obligations.

The Companys unaudited interim consolidated
financial statements do not include all of the disclosures
required by accounting principles generally accepted in the
United States of America for annual financial statements. In the
opinion of management, all adjustments considered necessary for
a fair presentation of the interim period results have been
included. Operating results for the six months ended
July 31, 2001 are not necessarily indicative of the results
that may be expected for the full fiscal year ending
January 31, 2002.

Certain prior period amounts have been
reclassified to conform to the current year presentation.

(2) Restatement of Consolidated Financial
Statements

On February 19, 2002, the Company issued
restated consolidated financial statements as of and for the
fiscal years ended January 31, 2001 and 2000, and related
quarterly periods (the 10-K/A), and for the fiscal
quarter ended April 30, 2001 (the 10-Q/A). The
restatement was the result of failure by the Company to properly
apply certain accounting standards generally accepted in the
United States of America, and because certain accounting errors
and irregularities in the Companys financial statements
were identified.

The Company has been advised that the Securities
and Exchange Commission (SEC) is conducting an
investigation into the facts and circumstances giving rise to
the restatement, and the Company has been and intends to
continue cooperating with the SEC. The Company cannot predict
the outcome of such an investigation.

6



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)

Six Months Ended July 31, 2001 and
2000


(Unaudited)


(Millions of Dollars Unless Otherwise
Stated)




(2) Restatement of Consolidated Financial
Statements  (Continued)


The primary categories of restatement adjustments
are discussed more fully in the Companys Annual Report on
Form 10-K/A and the notes to the consolidated financial
statements included therein. Following are the primary
categories of restatement adjustments to the Companys
previously reported financial results for the three month
and six month periods ended July 31, 2000 ($ in
millions):

|                                                          |                                      |                                        |   |                  |      |  |   |       |      | 
|--------------------------------------------------------- | ------------------------------------ | -------------------------------------- | - | ---------------- | ---- |  | - | ----- | ---- | 
|                                                          |                                      | Quarter Ended                          |   | Six Months Ended
|                                                          |                                      | July 31, 2000                          |   | July 31, 2000   
|                                                          |                                      |                                        |   |                 
|Adjustments (increasing) decreasing net
	income:          |                                      |                                        |   |                  |      |  |   |      
|                                                          | Deferred operating expenditures      |                                        | $ | 4.4              |      |  | $ | 6.9   |     
|                                                          | Unrecorded trade payables and claims |                                        |   | 3.7              |      |  |   | 4.5   |     
|                                                          | Acquisition accounting               |                                        |   | 6.5              |      |  |   | 10.2  |     
|                                                          | Customer credits and other           |                                        |   | 3.2              |      |  |   | 4.4   |     
|                                                          | Asset impairment losses              |                                        |   | 2.1              |      |  |   | 2.1   |     
|                                                          |                                      |                                        |   |                  |      |  |   |      
|                                                          |                                      | Total adjustment to pre-tax income     |   |                  | 19.9 |  |   |       | 28.1 | 
|                                                          | Income taxes                         |                                        |   | (7.9             | )    |  |   | (12.7 | )   
|                                                          |                                      |                                        |   |                  |      |  |   |      
|                                                          |                                      | Total adjustment to net income         |   |                  | 12.0 |  |   |       | 15.4 | 
|Adjustments (increasing) decreasing
	stockholders equity |                                      |                                        |   |                  |      |  |   |      
|                                                          | Tax effect of net investment hedges  |                                        |   | 8.6              |      |  |   | 10.3  |     
|                                                          | Other                                |                                        |   | (0.2             | )    |  |   | 0.5   |     
|                                                          |                                      |                                        |   |                  |      |  |   |      
|                                                          |                                      | Total decrease in stockholders equity |   | $                | 20.4 |  |   | $     | 26.2 | 
|                                                          |                                      |                                        |   |                  |      |  |   |      

The restatement adjustments to the consolidated
balance sheet as of July 31, 2000 reflected in the table
below include the cumulative effect of the restatement
adjustments for fiscal 1999 through July 31, 2000.

For purposes of these consolidated financial
statements, certain reclassifications have been made to conform
presentation as follows:



| |   |                                                                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The common stock subject to put agreement was
	reclassified from additional paid in capital at July 31,
	2000 as previously reported.                                                                       
|
| |  | Certain non-current deferred income tax assets
	and liabilities as previously reported at July 31, 2000
	were reclassified either as part of the previously reported
	amounts or as restatement adjustments.

These reclassifications, which did not affect
previously reported net income (loss), have been made to the
consolidated financial statements and are included in the
accompanying tables.

7



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)

Six Months Ended July 31, 2001 and
2000


(Unaudited)


(Millions of Dollars Unless Otherwise
Stated)




(2) Restatement of Consolidated Financial
Statements  (Continued)


Consolidated Statement of Operations

(Millions of dollars, except per share
amounts)


|                                                  |                                                               |                             |       |              |  |          |       |       |   |   |       |      |  
|------------------------------------------------- | ------------------------------------------------------------- | --------------------------- | ----- | ------------ |  | -------- | ----- | ----- | - | - | ----- | ---- | -
|                                                  |                                                               |                            
|                                                  |                                                               | Quarter Ended July 31, 2000
|                                                  |                                                               |                            
|                                                  |                                                               | As Previously               |       |              |  | As      
|                                                  |                                                               | Reported                    |       | Restatements |  | Restated
|                                                  |                                                               |                             |       |              |  |         
|Net sales                                         |                                                               | $                           | 542.8 |              |  | $        | (2.5  | )     |   | $ | 540.3 |     
|Cost of goods sold                                |                                                               |                             | 458.4 |              |  |          | 9.2   |       |   |   | 467.6 |     
|                                                  |                                                               |                             |       |              |  |          |       |       |   |   |       |     
|                                                  | Gross profit                                                  |                             |       | 84.4         |  |          |       | (11.7 | ) |   |       | 72.7 |  
|Marketing, general and administration             |                                                               |                             | 24.0  |              |  |          | (2.2  | )     |   |   | 21.8  |     
|Engineering and product development               |                                                               |                             | 3.2   |              |  |          |      |       |   |   | 3.2   |     
|Amortization of intangible assets                 |                                                               |                             | 7.1   |              |  |          | (0.2  | )     |   |   | 6.9   |     
|Equity in losses of joint ventures                |                                                               |                             | 0.6   |              |  |          |      |       |   |   | 0.6   |     
|Asset impairments and other restructuring charges |                                                               |                             |      |              |  |          | 3.9   |       |   |   | 3.9   |     
|Other (income) expense, net                       |                                                               |                             | (2.5  | )            |  |          | 6.7   |       |   |   | 4.2   |     
|                                                  |                                                               |                             |       |              |  |          |       |       |   |   |       |     
|                                                  | Earnings from operations                                      |                             |       | 52.0         |  |          |       | (19.9 | ) |   |       | 32.1 |  
|Interest expense, net                             |                                                               |                             | 40.0  |              |  |          |      |       |   |   | 40.0  |     
|                                                  |                                                               |                             |       |              |  |          |       |       |   |   |       |     
|                                                  | Earnings (loss) before taxes on income and
	minority interest |                             |       | 12.0         |  |          |       | (19.9 | ) |   |       | (7.9 | )
|Income tax (benefit) provision                    |                                                               |                             | 5.0   |              |  |          | (7.9  | )     |   |   | (2.9  | )   
|                                                  |                                                               |                             |       |              |  |          |       |       |   |   |       |     
|                                                  | Earnings (loss) before minority interest                      |                             |       | 7.0          |  |          |       | (12.0 | ) |   |       | (5.0 | )
|Minority interest                                 |                                                               |                             | 0.5   |              |  |          |      |       |   |   | 0.5   |     
|                                                  |                                                               |                             |       |              |  |          |       |       |   |   |       |     
|                                                  | Net income (loss)                                             |                             | $     | 6.5          |  |          | $     | (12.0 | ) |   | $     | (5.5 | )
|                                                  |                                                               |                             |       |              |  |          |       |       |   |   |       |     
|Basic net income (loss) per share                 |                                                               | $                           | 0.21  |              |  | $        | (0.39 | )     |   | $ | (0.18 | )   
|                                                  |                                                               |                             |       |              |  |          |       |       |   |   |       |     
|Diluted net income (loss) per share               |                                                               | $                           | 0.21  |              |  | $        | (0.39 | )     |   | $ | (0.18 | )   
|                                                  |                                                               |                             |       |              |  |          |       |       |   |   |       |     

8



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)

Six Months Ended July 31, 2001 and
2000


(Unaudited)


(Millions of Dollars Unless Otherwise
Stated)




(2) Restatement of Consolidated Financial
Statements  (Continued)


Consolidated Statement of Operations

(Millions of dollars, except per share
amounts)


|                                                  |                                                        |                                |         |              |  |          |       |       |   |   |         |       | 
|------------------------------------------------- | ------------------------------------------------------ | ------------------------------ | ------- | ------------ |  | -------- | ----- | ----- | - | - | ------- | ----- | 
|                                                  |                                                        |                               
|                                                  |                                                        | Six Months Ended July 31, 2000
|                                                  |                                                        |                               
|                                                  |                                                        | As Previously                  |         |              |  | As      
|                                                  |                                                        | Reported                       |         | Restatements |  | Restated
|                                                  |                                                        |                                |         |              |  |         
|Net sales                                         |                                                        | $                              | 1,137.6 |              |  | $        | (3.6  | )     |   | $ | 1,134.0 |      
|Cost of goods sold                                |                                                        |                                | 951.3   |              |  |          | 19.5  |       |   |   | 970.8   |      
|                                                  |                                                        |                                |         |              |  |          |       |       |   |   |         |      
|                                                  | Gross profit                                           |                                |         | 186.3        |  |          |       | (23.1 | ) |   |         | 163.2 | 
|Marketing, general and administration             |                                                        |                                | 48.5    |              |  |          | (1.9  | )     |   |   | 46.6    |      
|Engineering and product development               |                                                        |                                | 9.4     |              |  |          |      |       |   |   | 9.4     |      
|Amortization of intangible assets                 |                                                        |                                | 14.3    |              |  |          | (0.4  | )     |   |   | 13.9    |      
|Equity in earnings of joint ventures              |                                                        |                                | (0.5    | )            |  |          |      |       |   |   | (0.5    | )    
|Asset impairments and other restructuring charges |                                                        |                                |        |              |  |          | 4.4   |       |   |   | 4.4     |      
|Other (income) expense, net                       |                                                        |                                | (4.9    | )            |  |          | 2.9   |       |   |   | (2.0    | )    
|                                                  |                                                        |                                |         |              |  |          |       |       |   |   |         |      
|                                                  | Earnings from operations                               |                                |         | 119.5        |  |          |       | (28.1 | ) |   |         | 91.4  | 
|Interest expense, net                             |                                                        |                                | 78.8    |              |  |          |      |       |   |   | 78.8    |      
|                                                  |                                                        |                                |         |              |  |          |       |       |   |   |         |      
|                                                  | Earnings before taxes on income and minority
	interest |                                |         | 40.7         |  |          |       | (28.1 | ) |   |         | 12.6  | 
|Income tax provision                              |                                                        |                                | 17.1    |              |  |          | (12.7 | )     |   |   | 4.4     |      
|                                                  |                                                        |                                |         |              |  |          |       |       |   |   |         |      
|                                                  | Earnings before minority interest                      |                                |         | 23.6         |  |          |       | (15.4 | ) |   |         | 8.2   | 
|Minority interest                                 |                                                        |                                | 1.4     |              |  |          |      |       |   |   | 1.4     |      
|                                                  |                                                        |                                |         |              |  |          |       |       |   |   |         |      
|                                                  | Net income                                             |                                | $       | 22.2         |  |          | $     | (15.4 | ) |   | $       | 6.8   | 
|                                                  |                                                        |                                |         |              |  |          |       |       |   |   |         |      
|Basic net income per share                        |                                                        | $                              | 0.73    |              |  | $        | (0.51 | )     |   | $ | 0.22    |      
|                                                  |                                                        |                                |         |              |  |          |       |       |   |   |         |      
|Diluted net income per share                      |                                                        | $                              | 0.73    |              |  | $        | (0.51 | )     |   | $ | 0.22    |      
|                                                  |                                                        |                                |         |              |  |          |       |       |   |   |         |      

9



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)

Six Months Ended July 31, 2001 and
2000


(Unaudited)


(Millions of Dollars Unless Otherwise
Stated)


(2) Restatement of Consolidated Financial
Statements  (Continued)

Consolidated Balance Sheet

(Millions of dollars, except share
amounts)


|                                     |                                         |                                          |                                            |              |       |          |  |       |       |        |   |         |       |         | 
|------------------------------------ | --------------------------------------- | ---------------------------------------- | ------------------------------------------ | ------------ | ----- | -------- |  | ----- | ----- | ------ | - | ------- | ----- | ------- | 
|                                     |                                         |                                         
|                                     |                                         | As of July 31, 2000                     
|                                     |                                         |                                         
|                                     |                                         | As                                       |                                            |             
|                                     |                                         | Previously                               |                                            |              |       | As      
|                                     |                                         | Reported                                 |                                            | Restatements |       | Restated
|                                     |                                         |                                          |                                            |              |       |         
|Assets                               |                                         |                                          |                                            |              |       |          |  |       |       |        |   |        
|                                     | Current assets:                         |                                          |                                            |              |       |          |  |       |       |        |   |         |      
|                                     |                                         | Cash and cash equivalents                |                                            | $            | 16.6  |          |  | $     |      |        |   | $       | 16.6  |        
|                                     |                                         | Receivables                              |                                            |              | 203.8 |          |  |       | (10.9 | )      |   |         | 192.9 |        
|                                     |                                         | Inventories                              |                                            |              | 211.4 |          |  |       | 16.6  |        |   |         | 228.0 |        
|                                     |                                         | Deferred tax assets                      |                                            |              |      |          |  |       | 32.2  |        |   |         | 32.2  |        
|                                     |                                         | Prepaid expenses and other               |                                            |              | 14.1  |          |  |       | (2.2  | )      |   |         | 11.9  |        
|                                     |                                         |                                          |                                            |              |       |          |  |       |       |        |   |        
|                                     |                                         |                                          | Total current assets                       |              |       | 445.9    |  |       |       | 35.7   |   |         |       | 481.6   | 
|                                     | Property, plant and equipment, net      |                                          |                                            | 1,187.4      |       |          |  | (8.0  | )     |        |   | 1,179.4 |      
|                                     | Deferred tax assets                     |                                          |                                            | 97.1         |       |          |  | (69.7 | )     |        |   | 27.4    |      
|                                     | Goodwill and other assets               |                                          |                                            | 1,086.7      |       |          |  | (70.3 | )     |        |   | 1,016.4 |      
|                                     |                                         |                                          |                                            |              |       |          |  |       |       |        |   |        
|                                     |                                         |                                          | Total assets                               |              | $     | 2,817.1  |  |       | $     | (112.3 | ) |         | $     | 2,704.8 | 
|                                     |                                         |                                          |                                            |              |       |          |  |       |       |        |   |        
|Liabilities and Stockholders Equity |                                         |                                          |                                            |              |       |          |  |       |       |        |   |        
|                                     |                                         | Current liabilities:                     |                                            |              |       |          |  |       |       |        |   |         |       |        
|                                     |                                         | Bank borrowings                          |                                            | $            | 77.8  |          |  | $     |      |        |   | $       | 77.8  |        
|                                     |                                         | Current portion of long-term debt        |                                            |              | 70.0  |          |  |       |      |        |   |         | 70.0  |        
|                                     |                                         | Accounts payable and accrued liabilities |                                            |              | 469.0 |          |  |       | 2.9   |        |   |         | 471.9 |        
|                                     |                                         |                                          |                                            |              |       |          |  |       |       |        |   |        
|                                     |                                         |                                          | Total current liabilities                  |              |       | 616.8    |  |       |       | 2.9    |   |         |       | 619.7   | 
|                                     | Long-term debt, net of current portion  |                                          |                                            | 1,539.3      |       |          |  |      |       |        |   | 1,539.3 |      
|                                     | Deferred tax liabilities                |                                          |                                            | 115.0        |       |          |  | (44.9 | )     |        |   | 70.1    |      
|                                     | Pension and other long-term liabilities |                                          |                                            | 288.9        |       |          |  | (21.6 | )     |        |   | 267.3   |      
|                                     | Minority interest                       |                                          |                                            | 8.0          |       |          |  |      |       |        |   | 8.0     |      
|                                     |                                         |                                          |                                            |              |       |          |  |       |       |        |   |        
|                                     |                                         |                                          | Total liabilities                          |              |       | 2,568.0  |  |       |       | (63.6  | ) |         |       | 2,504.4 | 
|                                     | Commitments and contingencies           |                                          |                                            |              |       |          |  |       |       |        |   |         |      
|                                     | Common stock subject to put agreement   |                                          |                                            | 8.5          |       |          |  |      |       |        |   | 8.5     |      
|                                     | Stockholders equity:                   |                                          |                                            |              |       |          |  |       |       |        |   |         |      
|                                     |                                         | Preferred stock                          |                                            |              |      |          |  |       |      |        |   |         |      |        
|                                     |                                         | Common stock:                            |                                            |              |       |          |  |       |       |        |   |         |       |        
|                                     |                                         |                                          | Voting                                     |              |       | 0.3      |  |       |       |       |   |         |       | 0.3     | 
|                                     |                                         |                                          | Nonvoting                                  |              |       |         |  |       |       |       |   |         |       |        | 
|                                     |                                         | Additional paid in capital               |                                            |              | 231.4 |          |  |       |      |        |   |         | 231.4 |        
|                                     |                                         | Retained earnings                        |                                            |              | 80.3  |          |  |       | (33.0 | )      |   |         | 47.3  |        
|                                     |                                         | Accumulated other comprehensive loss     |                                            |              | (71.4 | )        |  |       | (15.7 | )      |   |         | (87.1 | )      
|                                     |                                         |                                          |                                            |              |       |          |  |       |       |        |   |        
|                                     |                                         |                                          | Total stockholders equity                 |              |       | 240.6    |  |       |       | (48.7  | ) |         |       | 191.9   | 
|                                     |                                         |                                          |                                            |              |       |          |  |       |       |        |   |        
|                                     |                                         |                                          | Total liabilities and stockholders equity |              | $     | 2,817.1  |  |       | $     | (112.3 | ) |         | $     | 2,704.8 | 
|                                     |                                         |                                          |                                            |              |       |          |  |       |       |        |   |        

10



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)

Six Months Ended July 31, 2001 and
2000


(Unaudited)


(Millions of Dollars Unless Otherwise
Stated)


(3) Bank Borrowings and Long-Term
Debt

Refinancing

On June 21, 2001, the Company received
formal approval for Consent and Amendment No. 5 to the
Credit Agreement. Such amendment provided for and/or permits,
among other things, the issuance and sale of certain senior
unsecured notes (the Senior Notes) by the Company, a
receivables securitization transaction, and changes to the
various financial covenants contained in the Credit Agreement in
the event that the issuance and sale of the Senior Notes does
occur. The amendment also provided the Company with the option
of establishing a new B tranche of term loans (the
B Term Loan) under the Credit Agreement. The
amendment also provides for the net cash proceeds of the
issuance and sale of the Senior Notes to be applied as follows:
(i) the first $140,000,000, to prepay outstanding term
loans (in direct order of stated maturity) under the Credit
Agreement; (ii) the next $60,000,000, at the Companys
option, to prepay indebtedness of the Companys foreign
subsidiaries; (iii) the next $50,000,000, to prepay
outstanding term loans (in direct order of stated maturity)
under the Credit Agreement; (iv) the next $50,000,000, at
the Companys option, to repurchase or redeem a portion of
the Companys existing senior subordinated notes; and
(v) the remainder, if any, to prepay outstanding term loans
(in direct order of stated maturity) and then to reduce the
revolving credit commitments under the Credit Agreement.

On June 22, 2001, the Company received
$291.1 million in net proceeds from the issuance of
11 7/8% senior unsecured notes due 2006 in the original
principal amount of $300 million (the 11 7/8%
Notes). In addition, on July 2, 2001, the Company
received $144.3 million in net proceeds from the issuance
of the B Term Loan. These aggregate net proceeds totaled
$435.4 million and were used as follows ($ in millions):

|                                                                                                                         |       |   |       |       | 
|------------------------------------------------------------------------------------------------------------------------ | ----- | - | ----- | ----- | 
|Permanent reduction of Credit Agreement
	indebtedness with a principal balance of $334.3, plus $2.2 in
	accrued interest |       | $ | 336.5 |      
|Payment on foreign indebtedness with a principal
	balance of $47.0                                                       |       |   | 47.0  |      
|Repurchase of certain Senior Subordinated Notes
	with a face value of $47.2, plus $1.0 in accrued interest               |       |   | 37.6  |      
|Payment of fees and expenses on the above                                                                                |       |   | 0.8   |      
|Remaining cash proceeds held by Company                                                                                  |       |   | 13.5  |      
|                                                                                                                         |       |   |       |      
|                                                                                                                         | Total |   | $     | 435.4 | 
|                                                                                                                         |       |   |       |      

In connection with the repurchase of the senior
subordinated notes at a discount, the Company recorded an
extraordinary gain of $10.6 million in the second quarter
of fiscal 2001. This gain was offset by $0.9 million of
unamortized deferred financing costs written off as a result of
the repurchase. Further, in connection with the B Term
refinancing and permanent reduction of the Credit Agreement, the
Company recorded an extraordinary loss of $5.5 million for
the write-off of unamortized deferred financing costs associated
with the Credit Agreement. These extraordinary items are
reflected net of tax of $1.5 million on the accompanying
consolidated statement of operations. As a result, the deferred
tax asset valuation allowance was reduced by a corresponding
amount with the benefit included in Income tax provision on the
consolidated statement of operations included herein.

The 11 7/8% Notes mature on June 15,
2006 and require interest payments semi-annually on each
June 15 and December 15 commencing December 15,
2001. The 11 7/8% Notes may not be redeemed prior to
June 15, 2005; provided, however, that the Company may, at
any time and from time to time prior to June 15, 2004,
redeem up to 35% of the aggregate principal amount of the
11 7/8% Notes at a price equal to 111.875% of the aggregate
principal amount so redeemed, plus accrued and unpaid interest
to the date of redemption, with the

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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)

Six Months Ended July 31, 2001 and
2000


(Unaudited)


(Millions of Dollars Unless Otherwise
Stated)




(3) Bank Borrowings and Long-Term
Debt  (Continued)


Net Cash Proceeds (as defined) of one or more
Equity Offerings (as defined), provided that at least
$195.0 million aggregate principal amount of the
11 7/8% Notes remain outstanding. On or after June 15,
2005, the Company may, at its option, redeem the 11 7/8%
Notes upon the terms and conditions set forth in the indenture.

The 11 7/8% Notes rank equally to all other
existing and future senior debt but are effectively subordinated
to the borrowings under the Credit Agreement to the extent of
collateral securing the Credit Agreement. The 11 7/8% Notes
are effectively subordinated to all liabilities (including trade
and intercompany obligations) of the Companys subsidiaries
which are not guarantors of the Credit Agreement and the
B Term Loan. The indenture governing the 11 7/8% Notes
provide for certain restrictions regarding additional debt,
dividends and other distributions, additional stock of
subsidiaries, certain investments, liens, transactions with
affiliates, mergers, consolidations, and the transfer and sales
of assets. The indenture also provides that a holder of the
11 7/8% Notes may, under certain circumstances, have the
right to require that the Company repurchase such holders
11 7/8% Notes upon a change of control of the Company. The
11 7/8% Notes are unconditionally guaranteed as to the
payment of principal, premium, if any, and interest, jointly and
severally by the Companys material domestic subsidiaries.

Pursuant to an Exchange Offer Registration Rights
Agreement (the Registration Rights Agreement), the
Company agreed to use its best efforts to file and have declared
effective an Exchange Offer Registration Statement with respect
to an offer to exchange the 11 7/8% Notes for other notes
of the Company with terms substantially identical to the
11 7/8% Notes. The Company also agreed to consummate such
exchange offer on or prior to December 19, 2001. As a
result of the Chapter 11 Filings by the Company on
December 5, 2001 as discussed in Note 12, such
registration has not occurred.

The B Term Loans amortize at the rate of 1% of
principal per year and mature in full on December 31, 2005
(at which time all remaining unpaid principal will be due and
payable). The B Term Loans rank equally with all other
loans outstanding under the Credit Agreement and share equally
in the guarantees and collateral granted by the Company and its
subsidiaries to secure the amounts outstanding under the Credit
Agreement. The B Term Loans are also subject to the same
covenants and events of default which govern all other loans
outstanding under the Credit Agreement.

The interest rates of the B Term Loans are,
at the option of the Company, based upon either an adjusted
eurocurrency rate (the eurocurrency rate) or the
rate which is equal to the highest of CIBCs prime rate,
the federal funds rate plus 1/2 of 1% and the base certificate
of deposit rate plus 1% (the ABR rate), in each case
plus an applicable margin. For B Term Loans which bear
interest at the eurocurrency rate, the applicable margin is
5.0%, and for B Term Loans which bear interest at the ABR
rate, the applicable margin is 4.0%. The Company may elect
interest periods of one, two, three or six months for
eurocurrency loans. Interest is computed on the basis of actual
number of days elapsed in a year of 360 days (or 365 or
366 days, as the case may be, for ABR loans based on the
prime rate). Interest is payable at the end of each interest
period and, in any event, at least every three months.

The Credit Agreement, as amended, contains
certain financial covenants regarding interest coverage ratios,
fixed charge coverage ratios, leverage ratios and capital
spending limitations. For purposes of these consolidated
financial statements, all amounts outstanding with respect to
the Credit Agreement, the senior subordinated notes, and the
11 7/8% Notes outstanding at July 31, 2001 are classified
as a current liability as of July 31, 2001.

12



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)

Six Months Ended July 31, 2001 and
2000


(Unaudited)


(Millions of Dollars Unless Otherwise
Stated)


(3) Bank Borrowings and Long-Term
Debt  (Continued)

Trade Securitization Agreement

In July 1998, the Company entered into a
three-year trade securitization agreement pursuant to which the
Company and certain of its subsidiaries sold, and continued to
sell on an ongoing basis, a portion of their accounts
receivables to a special purpose entity (Funding
Co.), which is wholly owned by the Company. Accordingly,
the Company and such subsidiaries, irrevocably and without
recourse, transferred and continued to transfer substantially
all of their U.S. dollar denominated trade accounts receivable
to Funding Co. Funding Co. then sold and continued to sell such
trade accounts receivable to an independent issuer of
receivable-backed commercial paper. The Company had collection
and administrative responsibilities with respect to all the
receivables that were sold. There were no receivables sold as of
July 31, 2001.

This trade securitization agreement expired on
May 1, 2001. From that time up to July 31, 2001, the
Company financed the amount of receivables previously sold under
the securitization agreement with its revolving credit facility.
The impact of the discontinued securitization program had an
adverse impact on liquidity of approximately $71.6 million
for the six month period ended July 31, 2001.

(4) Derivative Financial
Instruments

On February 1, 2001, the Company adopted
Financial Accounting Standards Board (FASB)
Statement of Financial Accounting Standards (SFAS)
No. 133, Accounting for Derivative Instruments and
Hedging Activities, SFAS 137, Accounting for
Derivative Instruments and Hedging Activities 
Deferral of the Effective Date of FASB Statement
No. 133 and SFAS 138, Accounting for Certain
Derivative Instruments and Certain Hedging Activities, an
amendment of FASB Statement No. 133. The adoption of
these standards did not have a material impact on the
Companys financial position or results of operations.

The Company has significant investments in
foreign subsidiaries. The majority of these investments are in
Europe wherein the Euro is the functional currency. As a result,
the Company is exposed to fluctuations in exchange rates between
the Euro and the U.S. Dollar. To reduce this exposure, the
Company has entered into cross-currency interest rate swap
agreements. At July 31, 2001 and January 31, 2001, the
Company held $100 million and $281 million,
respectively, notional amount of cross-currency interest rate
swaps which are recorded in the accompanying consolidated
balance sheets at fair value. At July 31, 2001 and
January 31, 2001, the Company had recorded an unrealized
gain of approximately $1.1 million and an unrealized loss
of approximately $0.4 million, respectively. The fair value
of the Companys cross-currency interest rate swaps is the
estimated amount the Company would receive or pay to terminate
the agreement based on third party market quotes. The Company
has designated these swap agreements as hedges of the foreign
currency exposure of its net investment in foreign operations.
In addition, the Company has designated a term loan, totaling
59.7 million Deutschemarks, as a hedge of foreign currency
exposure of its net investment in its German operation.

The Company records the gain or loss on the
derivative financial instruments designated as hedges of the
foreign currency exposure of its net investment in foreign
operations as currency translation adjustments in Accumulated
Other Comprehensive Loss to the extent the hedges are effective.
The gain or loss on the hedging instruments offset the change in
currency translation adjustments resulting from translating the
foreign operations financial statements from their
respective functional currency to the Dollar. In the second
quarter of fiscal 2001, the Company recorded a gain of
$2.1 million on the instruments designated as hedges in
Accumulated Other Comprehensive Loss. The tax effect of this
gain was offset by a reversal of the deferred

13



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)

Six Months Ended July 31, 2001 and
2000


(Unaudited)


(Millions of Dollars Unless Otherwise
Stated)




(4) Derivative Financial
Instruments  (Continued)


tax asset valuation allowance such that there was
no net tax effect in the quarter ended July 31, 2001. As
these derivative financial instruments were accounted for as
qualifying hedges prior to adoption of SFAS No. 133, no
transition adjustment was recorded at the date of adoption.

(5) Inventories

The major classes of inventory are as follows:

|                         |       |          |      |             |  |   |      |       | 
|------------------------ | ----- | -------- | ---- | ----------- |  | - | ---- | ----- | 
|                         |       | July 31, |      | January 31,
|                         |       | 2001     |      | 2001       
|                         |       |          |      |            
|Raw materials            |       | $        | 46.9 |             |  | $ | 49.7 |      
|Work-in-process          |       |          | 53.2 |             |  |   | 60.1 |      
|Finished goods           |       |          | 71.5 |             |  |   | 72.4 |      
|Spare parts and supplies |       |          | 35.4 |             |  |   | 35.1 |      
|                         |       |          |      |             |  |   |      |      
|                         | Total |          | $    | 207.0       |  |   | $    | 217.3 | 
|                         |       |          |      |             |  |   |      |      

(6) Property, Plant and
Equipment

The major classes of property, plant and
equipment are as follows:

|                         |                                   |          |         |             |  |   |         |         | 
|------------------------ | --------------------------------- | -------- | ------- | ----------- |  | - | ------- | ------- | 
|                         |                                   | July 31, |         | January 31,
|                         |                                   | 2001     |         | 2001       
|                         |                                   |          |         |            
|Land                     |                                   | $        | 30.4    |             |  | $ | 31.2    |        
|Buildings                |                                   |          | 234.5   |             |  |   | 248.7   |        
|Machinery and equipment  |                                   |          | 1,119.8 |             |  |   | 1,134.9 |        
|                         |                                   |          |         |             |  |   |         |        
|                         |                                   |          | 1,384.7 |             |  |   | 1,414.8 |        
|Accumulated depreciation |                                   |          | (345.6  | )           |  |   | (310.0  | )      
|                         |                                   |          |         |             |  |   |         |        
|                         | Net property, plant and equipment |          | $       | 1,039.1     |  |   | $       | 1,104.8 | 
|                         |                                   |          |         |             |  |   |         |        

(7) Asset Impairments and Other
Charges

During the first quarter of fiscal 2001, the
Company recognized asset impairment losses of $28.5 million
related to the Companys Petersburg, Michigan facility and
$2.5 million related to the abandonment of plans to
continue to invest in the start-up of certain single-purpose
equipment at another facility. In June 2001, the Company
committed to a plan to close the Petersburg facility, and
accordingly recorded a related charge of $0.6 million.
During the second quarter of fiscal 2001, the Company recognized
an impairment loss of $6.4 million related principally to a
change in managements plan for future use of idled
machinery and equipment in the Automotive Wheel segment, and to
investments in machinery, equipment, and tooling at its
Somerset, Kentucky facility. The Company also recorded a
$3.8 million loss on its investment in a Mexican joint
venture, which had incurred and expects to continue to incur
significant operating losses.

(8) Earnings Per Share

Basic earnings (loss) per share are calculated by
dividing net income (loss) by the weighted average number of
common shares outstanding. Diluted earnings (loss) per share are
computed by dividing net

14



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)

Six Months Ended July 31, 2001 and
2000


(Unaudited)


(Millions of Dollars Unless Otherwise
Stated)




(8) Earnings Per Share 
(Continued)


income (loss) by the diluted weighted average
shares outstanding. Diluted weighted average shares assume the
exercise of stock options and warrants.

Shares outstanding for the three months and six
months ended July 31, 2001 and 2000, were as follows (in
thousands):

|                                        |  |              |        |            |  |      |        |      |  |  |        |  |  |  |        | 
|--------------------------------------- |  | ------------ | ------ | ---------- |  | ---- | ------ | ---- |  |  | ------ |  |  |  | ------ | 
|                                        |  |              |        |           
|                                        |  | Three Months |        | Six Months
|                                        |  | Ended        |        | Ended     
|                                        |  |              |        |           
|                                        |  | 2001         |        | 2000       |  | 2001 |        | 2000
|                                        |  |              |        |            |  |      |        |     
|Weighted average shares outstanding     |  |              | 28,455 |            |  |      | 30,357 |      |  |  | 28,455 |  |  |  | 30,357 | 
|Dilutive effect of options and warrants |  |              |       |            |  |      | 89     |      |  |  |       |  |  |  | 218    | 
|                                        |  |              |        |            |  |      |        |      |  |  |        |  |  |  |        | 
|Diluted shares outstanding              |  |              | 28,455 |            |  |      | 30,446 |      |  |  | 28,455 |  |  |  | 30,575 | 
|                                        |  |              |        |            |  |      |        |      |  |  |        |  |  |  |        | 

For the three month and six month periods ending
July 31, 2001, all options and warrants were excluded from
the calculation of diluted earnings (loss) per share as the
effect was anti-dilutive due to the net loss reflected for such
periods.

(9) Comprehensive Income

SFAS No. 130, Reporting Comprehensive
Income, establishes standards for the reporting and
display of comprehensive income. Comprehensive income is defined
as all changes in a Companys net assets except changes
resulting from transactions with shareholders. It differs from
net income in that certain items currently recorded to equity
would be a part of comprehensive income.

The components of comprehensive income
(loss) for the six months ended July 31, 2001 and 2000
are as follows:

|                                   |                                   |      |        |        |   |   |      |     | 
|---------------------------------- | --------------------------------- | ---- | ------ | ------ | - | - | ---- | --- | 
|                                   |                                   | 2001 |        | 2000  
|                                   |                                   |      |        |       
|Net income (loss)                  |                                   | $    | (131.8 | )      |   | $ | 6.8  |    
|Cumulative translation adjustments |                                   |      | (22.1  | )      |   |   | (5.6 | )  
|                                   |                                   |      |        |        |   |   |      |    
|                                   | Total comprehensive income (loss) |      | $      | (153.9 | ) |   | $    | 1.2 | 
|                                   |                                   |      |        |        |   |   |      |    

(10) Contingencies

Various lawsuits, claims and proceedings have
been or may be instituted or asserted against the Company,
including those pertaining to environmental, product liability,
patent infringement, and employee benefit matters. While the
amounts claimed may be substantial, the ultimate liability
cannot now be determined because of the considerable
uncertainties that exist. Therefore, it is possible that results
of operations or liquidity in a particular period could be
materially affected by certain contingencies. However, based on
facts currently available, management believes that the
disposition of matters that are pending or asserted will not
have a material adverse effect on the financial position of the
Company.

Certain operating leases covering leased assets
with an original cost of approximately $68.0 million,
contain provisions which, if certain events occur or conditions
are met, including termination of the lease, might require the
Company to purchase or re-sell the leased assets within a
specified period of time, generally one year, based on amounts
specified in the lease agreements. On July 18, 2001, the
Company received notification of termination from a lessor with
respect to leased assets having approximately $25.0 million
of

15



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)

Six Months Ended July 31, 2001 and
2000


(Unaudited)


(Millions of Dollars Unless Otherwise
Stated)




(10) Contingencies 
(Continued)


original cost (which termination was not to be
effective for one year). The Company has not agreed with the
lessor that a termination has occurred at the time of the notice
and has continued to use the leased assets.

(11) Segment Reporting

The Company is organized based primarily on
markets served and products produced. Under this organization
structure, the Companys operating segments have been
aggregated into three reportable segments: Automotive Wheels,
Cast Components and Other. The Other category includes
Commercial Highway products, the corporate office and
elimination of intercompany activities, none of which meet the
requirements of being classified as an operating segment.

The following table represents revenues and other
financial information by business segment for the
six months ended July 31:

|                  |       |         |       |                   |  |              |       |               |  |      |       |               |   |   |      |     |  |   |         |         |  |   |         |         | 
|----------------- | ----- | ------- | ----- | ----------------- |  | ------------ | ----- | ------------- |  | ---- | ----- | ------------- | - | - | ---- | --- |  | - | ------- | ------- |  | - | ------- | ------- | 
|                  |       |         |       |                   |  |             
|                  |       | Revenue |       | Net income (loss) |  | Total Assets
|                  |       |         |       |                   |  |             
|                  |       |         |       | (As Restated)     |  |              |       | (As Restated) |  |      |       | (As Restated)
|                  |       | 2001    |       | 2000              |  | 2001         |       | 2000          |  | 2001 |       | 2000         
|                  |       |         |       |                   |  |              |       |               |  |      |       |              
|Automotive wheels |       | $       | 636.8 |                   |  | $            | 699.8 |               |  | $    | (38.7 | )             |   | $ | 9.3  |     |  | $ | 1,286.0 |         |  | $ | 1,438.0 |        
|Cast components   |       |         | 339.9 |                   |  |              | 342.3 |               |  |      | (10.8 | )             |   |   | (4.3 | )   |  |   | 897.2   |         |  |   | 951.3   |        
|Other             |       |         | 82.8  |                   |  |              | 91.9  |               |  |      | (82.3 | )             |   |   | 1.8  |     |  |   | 421.5   |         |  |   | 315.5   |        
|                  |       |         |       |                   |  |              |       |               |  |      |       |               |   |   |      |     |  |   |         |         |  |   |         |        
|                  | Total |         | $     | 1,059.5           |  |              | $     | 1,134.0       |  |      | $     | (131.8        | ) |   | $    | 6.8 |  |   | $       | 2,604.7 |  |   | $       | 2,704.8 | 
|                  |       |         |       |                   |  |              |       |               |  |      |       |               |   |   |      |     |  |   |         |         |  |   |         |        

(12) Subsequent Events

Chapter 11 Filings

On December 5, 2001, the Company, 30 of its
wholly-owned domestic subsidiaries and one wholly-owned Mexican
subsidiary (collectively, the Debtors) filed
voluntary petitions for reorganization (the
Chapter 11 Filings or the Filings)
under Chapter 11 of the Bankruptcy Code in the United
States Bankruptcy Court for the District of Delaware (the
Bankruptcy Court). The Chapter 11 Filings are
being jointly administered, for procedural purposes only, before
the Bankruptcy Court under Case No. 01-11490-MFW.

During the pendancy of these Filings, the Debtors
remain in possession of their properties and assets and
management of the Company continues to operate the businesses of
the Debtors as debtors-in-possession. As a debtor-in-possession,
the Company is authorized to operate the business of the
Debtors, but may not engage in transactions outside of the
ordinary course of business without the approval of the
Bankruptcy Court, after notice and the opportunity for a hearing.

Shortly after the commencement of the
Chapter 11 Filings, on December 21, 2001, the
Bankruptcy Court granted interim approval for the Debtors to
obtain $45 million in debtor-in-possession financing (the
DIP facility). Subsequently, on January 28,
2002, the Bankruptcy Court granted final approval of a
$200 million DIP facility for the Debtors. The amounts that
the Company is able to borrow under the DIP facility are
determined by a borrowing base formula based on certain eligible
assets of the Company. As of March 21, 2002, the Company
had $14.0 million in cash borrowings and had issued
$4.7 million in letters of credit pursuant to this
financing. The amount available under the DIP facility as of
March 21, 2002, after taking into account the
aforementioned borrowings and letters of credit, was
$87.9 million.

16



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)

Six Months Ended July 31, 2001 and
2000


(Unaudited)


(Millions of Dollars Unless Otherwise
Stated)




(12) Subsequent
Events  (Continued)


The Bankruptcy Court has approved payment of
certain of the Debtors pre-petition liabilities, such as
employee wages, benefits, and certain customer, vendor and
freight program related payments. In addition, the Bankruptcy
Court authorized the Debtors to continue and maintain the
majority of their employee benefit programs. Pension and savings
plan funds are in trusts and protected under federal
regulations. All required contributions are current in the
respective plans. The Debtors have received Bankruptcy Court
approval for the retention of legal, financial and management
consulting professionals, and from time to time may seek
Bankruptcy Court approval for the retention of additional
financial and management consulting professionals, to advise the
Debtors in the bankruptcy proceedings and the restructuring of
its businesses.

Pursuant to the automatic stay provisions of
Section 362 of the Bankruptcy Code, actions to collect
pre-petition indebtedness and virtually all litigation against
the Debtors that was, or could have been, brought prior to the
commencement of the Chapter 11 Filings are stayed, and
other contractual obligations of the Debtors may not be enforced
against them. In addition, under Section 365 of the
Bankruptcy Code, subject to the approval of the Bankruptcy
Court, the Debtors may assume or reject executory contracts and
unexpired leases. Parties affected by any such rejections may
file proofs of claim with the Bankruptcy Court in accordance
with the reorganization process. Proof of claims for damages
resulting from the rejection of executory contracts or unexpired
leases generally must be filed with the Bankruptcy Court by the
later of (a) the general claims bar date established by the
Bankruptcy Court (which was not established as of the date of
this filing), or (b) the date that is thirty days after
entry of order approving the rejection. As of the date of this
filing, the Debtors had not yet completed their review of all
contracts and leases for assumption or rejection, but ultimately
will assume or reject all such contracts and leases. The Debtors
cannot presently determine or reasonably predict the ultimate
liability that may result from rejecting such contracts or
leases or from the filing of rejection damage claims, but such
rejections could result in additional liabilities subject to
compromise.

All liabilities subject to compromise are subject
to future adjustment depending on Bankruptcy Court action,
further developments with respect to disputed claims, or other
events. Under a confirmed plan of reorganization, most all
unsecured pre-petition claims may be paid at amounts
substantially less than their allowed amounts. In light of the
number of creditors of the Debtors, the claims resolution
process may take considerable time to complete. Accordingly, the
ultimate number and amount of allowed claims is not presently
known and, because the settlement terms of such allowed claims
is subject to a confirmed plan of reorganization, the ultimate
resolution with respect to allowed claims is not presently
ascertainable.

The consummation of a plan or plans of
reorganization is the principal objective of the Chapter 11
Filings. A plan of reorganization sets forth the means for
satisfying claims against and interests in the Company and its
Debtor subsidiaries, including the liabilities subject to
compromise. Generally, pre-petition liabilities are subject to
settlement under such a plan or plans of reorganization, which
must be voted upon by certain creditors and approved by the
Bankruptcy Court. As provided by the Bankruptcy Code, the
Debtors initially have the exclusive right for 120 days
(April 4, 2002), or a longer period of time subject to
approval by the Bankruptcy Court, to submit a plan or plans of
reorganization. The Debtors have retained Lazard Freres &
Co. LLC, as financial advisors and investment bankers for the
purpose of providing financial advisory and investment banking
services during the Chapter 11 reorganization process. The
Company anticipates that any plan or plans of reorganization it
may propose, if ultimately approved by the Bankruptcy Court,
would result in substantial dilution of the interest of existing
equity holders, so that they would hold little, if any,
meaningful stake in the reorganized enterprise.

Confirmation of a plan of reorganization is
subject to certain findings being made by the Bankruptcy Court,
all of which are required by the Bankruptcy Code. Subject to
certain exceptions set forth in the

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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)

Six Months Ended July 31, 2001 and
2000


(Unaudited)


(Millions of Dollars Unless Otherwise
Stated)




(12) Subsequent
Events  (Continued)


Bankruptcy Code, confirmation of a plan of
reorganization requires the approval of the Bankruptcy Court and
the affirmative vote of each impaired class of creditors and
equity security holders. The Bankruptcy Court may confirm a plan
notwithstanding the non-acceptance of the plan by an impaired
class of creditors or equity security holders if certain
requirements of the Bankruptcy Code are met. There can be no
assurance that a reorganization plan or plans will be proposed
by the Debtors or confirmed by the Bankruptcy Court, or that any
such plan or plans will be consummated.

Currently, it is not possible to predict the
length of time the Company will operate under the protection of
Chapter 11 and the supervision of the Bankruptcy Court,
when the Company will file a plan or plans of reorganization
with the Bankruptcy Court, the outcome of the Chapter 11
proceedings in general, or the effect of the proceedings on the
business of the Company or on the interest of the various
creditors and stakeholders. Under the priority scheme
established by the Bankruptcy Code, certain post-petition
liabilities need to be satisfied before shareholders can receive
any distribution. The ultimate recovery, if any, to shareholders
will not be determined until confirmation of a plan or plans of
reorganization. There can be no assurance as to what value, if
any, will be ascribed to the common stock of the Company in the
bankruptcy proceedings, and the value of the equity represented
by that stock could be substantially diluted or canceled.

The Companys financial statements
commencing with the period that includes December 5, 2001,
the date of filing of the Chapter 11 proceedings, will be
presented in conformity with the AICPAs Statement of
Position 90-7, Financial Reporting By Entities In
Reorganization Under the Bankruptcy Code,
(SOP 90-7). The statement requires a
segregation of liabilities subject to compromise by the
Bankruptcy Court as of the bankruptcy filing date and
identification of all transactions and events that are directly
associated with the reorganization of the Company.

The accompanying consolidated financial
statements do not reflect: (a) the requirements of SOP
90-7, (b) the realizable value of assets on a liquidation
basis or their availability to satisfy liabilities;
(c) aggregate pre-petition liability amounts that may be
allowed for unrecorded claims or contingencies, or their status
or priority; (d) the effect of any changes to the
Debtors capital structure or in the Debtors business
operations as the result of an approved plan of reorganization;
or (e) adjustments to the carrying value of assets
(including goodwill and other intangibles) or liability amounts
that may be necessary as the result of actions by the Bankruptcy
Court.

Facility Closures

In February 2002, the Company committed to a
plan to close its manufacturing facility in Somerset, Kentucky.
The Company will record asset impairment losses with respect to
this facility of $6.3 million in the fourth quarter of
fiscal 2001. In connection with the closure of the Somerset
facility (which commenced during February 2002), the
Company will record an estimated restructuring charge of
$4.4 million in the first quarter of fiscal 2002. This
charge relates to the termination of leases and other closure
costs, including security and maintenance costs subsequent to
the shutdown date, and is expected to be paid during fiscal 2002
and 2003.

Other Subsequent Events

Other events occurring subsequent to
July 31, 2001 regarding a new management team, the market
for the Companys common stock, facility closures, a
reduction of the Companys North American salaried

18



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)

Six Months Ended July 31, 2001 and
2000


(Unaudited)


(Millions of Dollars Unless Otherwise
Stated)




(12) Subsequent
Events  (Continued)


workforce, sale of non-core businesses, and legal
proceedings are more fully discussed in the Companys
Annual Report on Form 10-K/ A, and the notes to the
consolidated financial statements contained therein.

(13) Guarantor and Non-Guarantor
Financial Statements

As of July 31, 2001, the senior subordinated
notes and senior notes are guaranteed by certain of the
Companys domestic subsidiaries. Certain other domestic
subsidiaries and the foreign subsidiaries (the
Non-Guarantor Subsidiaries) do not guarantee the
senior subordinated notes and senior notes. In the third quarter
of fiscal 2001, amendments were entered into by the Company and
holders of the Companys 8 1/4% and 9 1/8% Senior
Subordinated Notes (the 8 1/4% Notes and the
9 1/8% Notes). Such amendments conformed the
lists of guarantor subsidiaries of the respective senior
subordinated notes to that list of subsidiaries guaranteeing the
11 7/8% Notes (the Conformed Guarantor
Subsidiaries). The list of guarantor subsidiaries of the
Companys 11% Senior Subordinated Notes (the 11%
Notes) was not conformed.

The condensed consolidating financial information
as of and for the six months ended July 31, 2001 for those
guarantor subsidiaries of the 11% Notes (the Guarantor
Subsidiaries) has been presented separately below as the
11% Notes are not guaranteed by the Conformed Guarantor
Subsidiaries. Collectively, the Guarantor Subsidiaries and the
Conformed Guarantor Subsidiaries guarantee the 8 1/4%
Notes, the 9 1/8% Notes, and the 11 7/8% Notes.

As of July 31, 2000, the 8 1/4% Notes,
the 9 1/8% Notes, and the 11% Notes were guaranteed by the
Guarantor Subsidiaries. Certain other domestic subsidiaries and
the foreign subsidiaries did not guarantee these notes.

The following condensed consolidating financial
information presents:



| |                                                                                                                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) Condensed consolidating financial
	statements as of July 31, 2001 and January 31, 2001,
	and for the six month periods ended July 31, 2001 and 2000,
	of (a) Hayes Lemmerz International, Inc., the parent,
	(b) the guarantor subsidiaries (as defined), (c) the
	non-guarantor subsidiaries (as defined), and (d) the
	Company on a consolidated basis, and
|
| | (2) Elimination entries necessary to
	consolidate Hayes Lemmerz International, Inc., the parent, with
	guarantor and non-guarantor subsidiaries.                                                                                                                                                                                                                 

The condensed consolidating financial statements
are presented on the equity method. Under this method, the
investments in subsidiaries are recorded at cost and adjusted
for the Companys share of the subsidiaries
cumulative results of operations, capital contributions,
distributions and other equity changes. The principal
elimination entries eliminate investments in subsidiaries and
intercompany balances and transactions.

19



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HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)

Six Months Ended July 31, 2001 and
2000


(Unaudited)


(Millions of Dollars Unless Otherwise
Stated)


(13) Guarantor and Non-Guarantor
Financial Statements  (Continued)

Condensed Consolidating Statements of
Operations

For the Six Months Ended July 31,
2001


|                                                              |                                                                                    |        |       |              |   |              |       |               |   |              |       |              |   |   |       |      |  |   |        |       |  |   |         |        |  
|------------------------------------------------------------- | ---------------------------------------------------------------------------------- | ------ | ----- | ------------ | - | ------------ | ----- | ------------- | - | ------------ | ----- | ------------ | - | - | ----- | ---- |  | - | ------ | ----- |  | - | ------- | ------ | -
|                                                              |                                                                                    |        |       |              |   | Conformed    |       |               |   |              |       |             
|                                                              |                                                                                    |        |       | Guarantor    |   | Guarantor    |       | Non-guarantor |   |              |       | Consolidated
|                                                              |                                                                                    | Parent |       | Subsidiaries |   | Subsidiaries |       | Subsidiaries  |   | Eliminations |       | Total       
|                                                              |                                                                                    |        |       |              |   |              |       |               |   |              |       |             
|Net sales                                                     |                                                                                    | $      | 135.0 |              |   | $            | 252.4 |               |   | $            | 251.7 |              |   | $ | 425.6 |      |  | $ | (5.2   | )     |  | $ | 1,059.5 |       
|Cost of goods sold                                            |                                                                                    |        | 124.5 |              |   |              | 232.0 |               |   |              | 264.5 |              |   |   | 352.4 |      |  |   | (5.2   | )     |  |   | 968.2   |       
|                                                              |                                                                                    |        |       |              |   |              |       |               |   |              |       |              |   |   |       |      |  |   |        |       |  |   |         |       
|                                                              | Gross profit                                                                       |        |       | 10.5         |   |              |       | 20.4          |   |              |       | (12.8        | ) |   |       | 73.2 |  |   |        |      |  |   |         | 91.3   |  
|Marketing, general and administration                         |                                                                                    |        | 8.3   |              |   |              | 12.6  |               |   |              | 10.0  |              |   |   | 21.3  |      |  |   |       |       |  |   | 52.2    |       
|Engineering and product development                           |                                                                                    |        | 1.7   |              |   |              | 3.7   |               |   |              | 1.6   |              |   |   | 4.6   |      |  |   |       |       |  |   | 11.6    |       
|Amortization of intangibles                                   |                                                                                    |        | 0.5   |              |   |              | 3.9   |               |   |              | 5.4   |              |   |   | 3.5   |      |  |   |       |       |  |   | 13.3    |       
|Equity in (earnings) loss of subsidiaries
	and joint ventures |                                                                                    |        | 91.8  |              |   |              | 31.0  |               |   |              | 0.8   |              |   |   | (0.1  | )    |  |   | (123.0 | )     |  |   | 0.5     |       
|Asset impairments and other restructuring charges             |                                                                                    |        | 4.7   |              |   |              |      |               |   |              | 33.3  |              |   |   |      |      |  |   |       |       |  |   | 38.0    |       
|Loss on investment in joint venture                           |                                                                                    |        | 3.8   |              |   |              |      |               |   |              |      |              |   |   |      |      |  |   |       |       |  |   | 3.8     |       
|Other (income) expense, net                                   |                                                                                    |        | 1.1   |              |   |              |      |               |   |              | (0.1  | )            |   |   | 0.3   |      |  |   |        |       |  |   | 1.3     |       
|                                                              |                                                                                    |        |       |              |   |              |       |               |   |              |       |              |   |   |       |      |  |   |        |       |  |   |         |       
|                                                              | Earnings (loss) from operations                                                    |        |       | (101.4       | ) |              |       | (30.8         | ) |              |       | (63.8        | ) |   |       | 43.6 |  |   |        | 123.0 |  |   |         | (29.4  | )
|Interest expense, net                                         |                                                                                    |        | 34.3  |              |   |              | 21.9  |               |   |              | 19.7  |              |   |   | 17.0  |      |  |   |       |       |  |   | 92.9    |       
|                                                              |                                                                                    |        |       |              |   |              |       |               |   |              |       |              |   |   |       |      |  |   |        |       |  |   |         |       
|                                                              | Earnings (loss) before taxes on income,
	minority interest, and extraordinary gain |        |       | (135.7       | ) |              |       | (52.7         | ) |              |       | (83.5        | ) |   |       | 26.6 |  |   |        | 123.0 |  |   |         | (122.3 | )
|Income tax (benefit) provision                                |                                                                                    |        | (1.2  | )            |   |              | 0.3   |               |   |              | 0.5   |              |   |   | 10.8  |      |  |   |       |       |  |   | 10.4    |       
|                                                              |                                                                                    |        |       |              |   |              |       |               |   |              |       |              |   |   |       |      |  |   |        |       |  |   |         |       
|                                                              | Earnings (loss) before minority interest and
	extraordinary gain                   |        |       | (134.5       | ) |              |       | (53.0         | ) |              |       | (84.0        | ) |   |       | 15.8 |  |   |        | 123.0 |  |   |         | (132.7 | )
|Minority interest                                             |                                                                                    |        |      |              |   |              |      |               |   |              |      |              |   |   | 1.8   |      |  |   |       |       |  |   | 1.8     |       
|                                                              |                                                                                    |        |       |              |   |              |       |               |   |              |       |              |   |   |       |      |  |   |        |       |  |   |         |       
|                                                              | Earnings (loss) before extraordinary gain                                          |        |       | (134.5       | ) |              |       | (53.0         | ) |              |       | (84.0        | ) |   |       | 14.0 |  |   |        | 123.0 |  |   |         | (134.5 | )
|Extraordinary gain, net of tax                                |                                                                                    |        | 2.7   |              |   |              |      |               |   |              |      |              |   |   |      |      |  |   |       |       |  |   | 2.7     |       
|                                                              |                                                                                    |        |       |              |   |              |       |               |   |              |       |              |   |   |       |      |  |   |        |       |  |   |         |       
|                                                              | Net income (loss)                                                                  |        | $     | (131.8       | ) |              | $     | (53.0         | ) |              | $     | (84.0        | ) |   | $     | 14.0 |  |   | $      | 123.0 |  |   | $       | (131.8 | )
|                                                              |                                                                                    |        |       |              |   |              |       |               |   |              |       |              |   |   |       |      |  |   |        |       |  |   |         |       

20



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)

Six Months Ended July 31, 2001 and
2000


(Unaudited)


(Millions of Dollars Unless Otherwise
Stated)


(13) Guarantor and Non-Guarantor
Financial Statements  (Continued)

Condensed Consolidating Statements of
Operations

For the Six Months Ended July 31, 2000,
As Restated


|                                                              |                                                               |        |       |              |  |               |       |              |   |              |       |      |  |   |      |     |  |   |         |       | 
|------------------------------------------------------------- | ------------------------------------------------------------- | ------ | ----- | ------------ |  | ------------- | ----- | ------------ | - | ------------ | ----- | ---- |  | - | ---- | --- |  | - | ------- | ----- | 
|                                                              |                                                               |        |       | Guarantor    |  | Non-guarantor |       |              |   | Consolidated
|                                                              |                                                               | Parent |       | Subsidiaries |  | Subsidiaries  |       | Eliminations |   | Total       
|                                                              |                                                               |        |       |              |  |               |       |              |   |             
|Net sales                                                     |                                                               | $      | 156.5 |              |  | $             | 319.5 |              |   | $            | 667.1 |      |  | $ | (9.1 | )   |  | $ | 1,134.0 |      
|Cost of goods sold                                            |                                                               |        | 130.4 |              |  |               | 274.2 |              |   |              | 575.3 |      |  |   | (9.1 | )   |  |   | 970.8   |      
|                                                              |                                                               |        |       |              |  |               |       |              |   |              |       |      |  |   |      |     |  |   |         |      
|                                                              | Gross profit                                                  |        |       | 26.1         |  |               |       | 45.3         |   |              |       | 91.8 |  |   |      |    |  |   |         | 163.2 | 
|Marketing, general and administration                         |                                                               |        | 3.3   |              |  |               | 11.4  |              |   |              | 31.9  |      |  |   |     |     |  |   | 46.6    |      
|Engineering and product development                           |                                                               |        | 0.9   |              |  |               | 3.7   |              |   |              | 4.8   |      |  |   |     |     |  |   | 9.4     |      
|Amortization of intangibles                                   |                                                               |        | 0.5   |              |  |               | 3.9   |              |   |              | 9.5   |      |  |   |     |     |  |   | 13.9    |      
|Equity in (earnings) loss of subsidiaries
	and joint ventures |                                                               |        | (2.4  | )            |  |               | 7.2   |              |   |              | (0.2  | )    |  |   | (5.1 | )   |  |   | (0.5    | )    
|Asset impairments and other restructuring charges             |                                                               |        | 2.1   |              |  |               |      |              |   |              | 2.3   |      |  |   |     |     |  |   | 4.4     |      
|Other (income) expense, net                                   |                                                               |        | (0.2  | )            |  |               |      |              |   |              | (1.8  | )    |  |   |     |     |  |   | (2.0    | )    
|                                                              |                                                               |        |       |              |  |               |       |              |   |              |       |      |  |   |      |     |  |   |         |      
|                                                              | Earnings (loss) from operations                               |        |       | 21.9         |  |               |       | 19.1         |   |              |       | 45.3 |  |   |      | 5.1 |  |   |         | 91.4  | 
|Interest expense, net                                         |                                                               |        | 12.5  |              |  |               | 28.5  |              |   |              | 37.8  |      |  |   |     |     |  |   | 78.8    |      
|                                                              |                                                               |        |       |              |  |               |       |              |   |              |       |      |  |   |      |     |  |   |         |      
|                                                              | Earnings (loss) before taxes on income and
	minority interest |        |       | 9.4          |  |               |       | (9.4         | ) |              |       | 7.5  |  |   |      | 5.1 |  |   |         | 12.6  | 
|Income tax (benefit) provision                                |                                                               |        | 2.6   |              |  |               | (0.8  | )            |   |              | 2.6   |      |  |   |     |     |  |   | 4.4     |      
|                                                              |                                                               |        |       |              |  |               |       |              |   |              |       |      |  |   |      |     |  |   |         |      
|                                                              | Earnings (loss) before minority interest                      |        |       | 6.8          |  |               |       | (8.6         | ) |              |       | 4.9  |  |   |      | 5.1 |  |   |         | 8.2   | 
|Minority interest                                             |                                                               |        |      |              |  |               |      |              |   |              | 1.4   |      |  |   |     |     |  |   | 1.4     |      
|                                                              |                                                               |        |       |              |  |               |       |              |   |              |       |      |  |   |      |     |  |   |         |      
|                                                              | Net income (loss)                                             |        | $     | 6.8          |  |               | $     | (8.6         | ) |              | $     | 3.5  |  |   | $    | 5.1 |  |   | $       | 6.8   | 
|                                                              |                                                               |        |       |              |  |               |       |              |   |              |       |      |  |   |      |     |  |   |         |      

21



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)

Six Months Ended July 31, 2001 and
2000


(Unaudited)


(Millions of Dollars Unless Otherwise
Stated)


(13) Guarantor and Non-Guarantor
Financial Statements  (Continued)

Condensed Consolidating Balance
Sheets

As of July 31, 2001


|                                              |                                            |        |         |              |   |              |       |              |  |              |         |              |  |   |       |         |  |   |          |          |   |   |         |         |  
|--------------------------------------------- | ------------------------------------------ | ------ | ------- | ------------ | - | ------------ | ----- | ------------ |  | ------------ | ------- | ------------ |  | - | ----- | ------- |  | - | -------- | -------- | - | - | ------- | ------- | -
|                                              |                                            |        |         |              |   | Conformed    |       | Non-         |  |              |         |             
|                                              |                                            |        |         | Guarantor    |   | Guarantor    |       | guarantor    |  |              |         | Consolidated
|                                              |                                            | Parent |         | Subsidiaries |   | Subsidiaries |       | Subsidiaries |  | Eliminations |         | Total       
|                                              |                                            |        |         |              |   |              |       |              |  |              |         |             
|Cash and cash equivalents                     |                                            | $      | 13.8    |              |   | $            | (0.7  | )            |  | $            | 1.0     |              |  | $ | 31.3  |         |  | $ |         |          |   | $ | 45.4    |        
|Receivables                                   |                                            |        | 15.0    |              |   |              | 49.8  |              |  |              | 84.5    |              |  |   | 166.0 |         |  |   |         |          |   |   | 315.3   |        
|Inventories                                   |                                            |        | 24.7    |              |   |              | 41.0  |              |  |              | 47.3    |              |  |   | 94.0  |         |  |   |         |          |   |   | 207.0   |        
|Prepaid expenses and other                    |                                            |        | 13.2    |              |   |              | 11.4  |              |  |              | 17.5    |              |  |   | 23.5  |         |  |   | (28.7    | )        |   |   | 36.9    |        
|                                              |                                            |        |         |              |   |              |       |              |  |              |         |              |  |   |       |         |  |   |          |          |   |   |         |        
|                                              | Total current assets                       |        |         | 66.7         |   |              |       | 101.5        |  |              |         | 150.3        |  |   |       | 314.8   |  |   |          | (28.7    | ) |   |         | 604.6   |  
|Net property, plant and equipment             |                                            |        | 125.9   |              |   |              | 236.7 |              |  |              | 253.5   |              |  |   | 423.0 |         |  |   |         |          |   |   | 1,039.1 |        
|Goodwill and other assets                     |                                            |        | 1,097.7 |              |   |              | 237.4 |              |  |              | 623.2   |              |  |   | 296.7 |         |  |   | (1,294.0 | )        |   |   | 961.0   |        
|                                              |                                            |        |         |              |   |              |       |              |  |              |         |              |  |   |       |         |  |   |          |          |   |   |         |        
|                                              | Total assets                               |        | $       | 1,290.3      |   |              | $     | 575.6        |  |              | $       | 1,027.0      |  |   | $     | 1,034.5 |  |   | $        | (1,322.7 | ) |   | $       | 2,604.7 |  
|                                              |                                            |        |         |              |   |              |       |              |  |              |         |              |  |   |       |         |  |   |          |          |   |   |         |        
|Bank borrowings                               |                                            | $      |        |              |   | $            |      |              |  | $            |        |              |  | $ | 74.0  |         |  | $ |         |          |   | $ | 74.0    |        
|Current portion of long-term debt             |                                            |        | 1,840.0 |              |   |              |      |              |  |              |        |              |  |   | 18.5  |         |  |   |         |          |   |   | 1,858.5 |        
|Accounts payable and accrued liabilities      |                                            |        | 22.8    |              |   |              | 88.9  |              |  |              | 156.1   |              |  |   | 218.2 |         |  |   | (22.8    | )        |   |   | 463.2   |        
|                                              |                                            |        |         |              |   |              |       |              |  |              |         |              |  |   |       |         |  |   |          |          |   |   |         |        
|                                              | Total current liabilities                  |        |         | 1,862.8      |   |              |       | 88.9         |  |              |         | 156.1        |  |   |       | 310.7   |  |   |          | (22.8    | ) |   |         | 2,395.7 |  
|Long-term debt, net of current portion        |                                            |        |        |              |   |              |      |              |  |              |        |              |  |   | 53.4  |         |  |   |         |          |   |   | 53.4    |        
|Pension and other long-term liabilities       |                                            |        | 68.6    |              |   |              | 48.4  |              |  |              | 16.3    |              |  |   | 111.3 |         |  |   |         |          |   |   | 244.6   |        
|Deferred tax liabilities                      |                                            |        | 2.0     |              |   |              | 3.0   |              |  |              | 5.0     |              |  |   | 64.8  |         |  |   |         |          |   |   | 74.8    |        
|Minority interest                             |                                            |        |        |              |   |              |      |              |  |              |        |              |  |   | 11.9  |         |  |   |         |          |   |   | 11.9    |        
|Parent loans                                  |                                            |        | (467.4  | )            |   |              | 322.1 |              |  |              | (69.8   | )            |  |   | 215.1 |         |  |   |         |          |   |   |        |        
|                                              |                                            |        |         |              |   |              |       |              |  |              |         |              |  |   |       |         |  |   |          |          |   |   |         |        
|                                              | Total liabilities                          |        |         | 1,466.0      |   |              |       | 462.4        |  |              |         | 107.6        |  |   |       | 767.2   |  |   |          | (22.8    | ) |   |         | 2,780.4 |  
|Common stock                                  |                                            |        | 0.3     |              |   |              |      |              |  |              |        |              |  |   |      |         |  |   |         |          |   |   | 0.3     |        
|Additional paid-in capital                    |                                            |        | 235.1   |              |   |              | 173.4 |              |  |              | 1,161.8 |              |  |   | 294.7 |         |  |   | (1,629.9 | )        |   |   | 235.1   |        
|Common stock in treasury at cost              |                                            |        | (25.7   | )            |   |              |      |              |  |              |        |              |  |   |      |         |  |   |         |          |   |   | (25.7   | )      
|Retained earnings (accumulated deficit)       |                                            |        | (277.5  | )            |   |              | (55.0 | )            |  |              | (137.8  | )            |  |   | 56.4  |         |  |   | 136.4    |          |   |   | (277.5  | )      
|Accumulated other comprehensive income (loss) |                                            |        | (107.9  | )            |   |              | (5.2  | )            |  |              | (104.6  | )            |  |   | (83.8 | )       |  |   | 193.6    |          |   |   | (107.9  | )      
|                                              |                                            |        |         |              |   |              |       |              |  |              |         |              |  |   |       |         |  |   |          |          |   |   |         |        
|                                              | Total stockholders equity (deficit)       |        |         | (175.7       | ) |              |       | 113.2        |  |              |         | 919.4        |  |   |       | 267.3   |  |   |          | (1,299.9 | ) |   |         | (175.7  | )
|                                              |                                            |        |         |              |   |              |       |              |  |              |         |              |  |   |       |         |  |   |          |          |   |   |         |        
|                                              | Total liabilities and stockholders equity |        | $       | 1,290.3      |   |              | $     | 575.6        |  |              | $       | 1,027.0      |  |   | $     | 1,034.5 |  |   | $        | (1,322.7 | ) |   | $       | 2,604.7 |  
|                                              |                                            |        |         |              |   |              |       |              |  |              |         |              |  |   |       |         |  |   |          |          |   |   |         |        

22



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)

Six Months Ended July 31, 2001 and
2000


(Unaudited)


(Millions of Dollars Unless Otherwise
Stated)


(13) Guarantor and Non-Guarantor
Financial Statements  (Continued)

Condensed Consolidating Balance
Sheet

As of January 31, 2001


|                                         |                                            |        |         |              |   |              |       |              |  |              |         |              |   |   |       |         |  |   |          |          |   |   |         |         |  
|---------------------------------------- | ------------------------------------------ | ------ | ------- | ------------ | - | ------------ | ----- | ------------ |  | ------------ | ------- | ------------ | - | - | ----- | ------- |  | - | -------- | -------- | - | - | ------- | ------- | -
|                                         |                                            |        |         |              |   | Conformed    |       | Non-         |  |              |         |             
|                                         |                                            |        |         | Guarantor    |   | Guarantor    |       | guarantor    |  |              |         | Consolidated
|                                         |                                            | Parent |         | Subsidiaries |   | Subsidiaries |       | Subsidiaries |  | Eliminations |         | Total       
|                                         |                                            |        |         |              |   |              |       |              |  |              |         |             
|Cash and cash equivalents                |                                            | $      | (19.3   | )            |   | $            | 0.2   |              |  | $            | 1.9     |              |   | $ | 17.2  |         |  | $ |         |          |   | $ |        |        
|Receivables                              |                                            |        | 68.2    |              |   |              | 2.6   |              |  |              | 9.7     |              |   |   | 168.3 |         |  |   |         |          |   |   | 248.8   |        
|Inventories                              |                                            |        | 34.4    |              |   |              | 41.9  |              |  |              | 50.9    |              |   |   | 90.1  |         |  |   |         |          |   |   | 217.3   |        
|Prepaid expenses and other               |                                            |        | 7.0     |              |   |              | 8.7   |              |  |              | 17.1    |              |   |   | 27.3  |         |  |   | (21.4    | )        |   |   | 38.7    |        
|                                         |                                            |        |         |              |   |              |       |              |  |              |         |              |   |   |       |         |  |   |          |          |   |   |         |        
|                                         | Total current assets                       |        |         | 90.3         |   |              |       | 53.4         |  |              |         | 79.6         |   |   |       | 302.9   |  |   |          | (21.4    | ) |   |         | 504.8   |  
|Net property, plant and equipment        |                                            |        | 143.3   |              |   |              | 240.0 |              |  |              | 271.2   |              |   |   | 450.3 |         |  |   |         |          |   |   | 1,104.8 |        
|Goodwill and other assets                |                                            |        | 1,220.9 |              |   |              | 274.5 |              |  |              | 641.5   |              |   |   | 320.3 |         |  |   | (1,462.9 | )        |   |   | 994.3   |        
|                                         |                                            |        |         |              |   |              |       |              |  |              |         |              |   |   |       |         |  |   |          |          |   |   |         |        
|                                         | Total assets                               |        | $       | 1,454.5      |   |              | $     | 567.9        |  |              | $       | 992.3        |   |   | $     | 1,073.5 |  |   | $        | (1,484.3 | ) |   | $       | 2,603.9 |  
|                                         |                                            |        |         |              |   |              |       |              |  |              |         |              |   |   |       |         |  |   |          |          |   |   |         |        
|Bank borrowings                          |                                            | $      |        |              |   | $            |      |              |  | $            |        |              |   | $ | 79.6  |         |  | $ |         |          |   | $ | 79.6    |        
|Current portion of long-term debt        |                                            |        | 1,597.5 |              |   |              |       |              |  |              | 0.5     |              |   |   | 15.1  |         |  |   | 0.6      |          |   |   | 1,613.7 |        
|Accounts payable and accrued liabilities |                                            |        | 29.0    |              |   |              | 98.1  |              |  |              | 147.4   |              |   |   | 235.6 |         |  |   | (18.5    | )        |   |   | 491.6   |        
|                                         |                                            |        |         |              |   |              |       |              |  |              |         |              |   |   |       |         |  |   |          |          |   |   |         |        
|                                         | Total current liabilities                  |        |         | 1,626.5      |   |              |       | 98.1         |  |              |         | 147.9        |   |   |       | 330.3   |  |   |          | (17.9    | ) |   |         | 2,184.9 |  
|Long-term debt, net of current portion   |                                            |        |        |              |   |              |      |              |  |              |        |              |   |   | 94.6  |         |  |   |         |          |   |   | 94.6    |        
|Deferred tax liabilities                 |                                            |        | 2.0     |              |   |              | 3.0   |              |  |              | 5.0     |              |   |   | 58.7  |         |  |   |         |          |   |   | 68.7    |        
|Pension and other long-term liabilities  |                                            |        | 70.5    |              |   |              | 53.1  |              |  |              | 32.9    |              |   |   | 110.4 |         |  |   |         |          |   |   | 266.9   |        
|Minority interest                        |                                            |        |        |              |   |              |      |              |  |              |        |              |   |   | 10.6  |         |  |   |         |          |   |   | 10.6    |        
|Parent loans                             |                                            |        | (222.7  | )            |   |              | 245.4 |              |  |              | (218.3  | )            |   |   | 195.6 |         |  |   |         |          |   |   |        |        
|                                         |                                            |        |         |              |   |              |       |              |  |              |         |              |   |   |       |         |  |   |          |          |   |   |         |        
|                                         | Total liabilities                          |        |         | 1,476.3      |   |              |       | 399.6        |  |              |         | (32.5        | ) |   |       | 800.2   |  |   |          | (17.9    | ) |   |         | 2,625.7 |  
|Common stock                             |                                            |        | 0.3     |              |   |              |      |              |  |              |        |              |   |   |      |         |  |   |         |          |   |   | 0.3     |        
|Additional paid-in capital               |                                            |        | 235.1   |              |   |              | 173.4 |              |  |              | 1,161.8 |              |   |   | 294.7 |         |  |   | (1,629.9 | )        |   |   | 235.1   |        
|Common stock in treasury at cost         |                                            |        | (25.7   | )            |   |              |      |              |  |              |        |              |   |   |      |         |  |   |         |          |   |   | (25.7   | )      
|Retained earnings (accumulated deficit)  |                                            |        | (145.7  | )            |   |              | (1.9  | )            |  |              | (53.9   | )            |   |   | 42.3  |         |  |   | 13.5     |          |   |   | (145.7  | )      
|Accumulated other comprehensive loss     |                                            |        | (85.8   | )            |   |              | (3.2  | )            |  |              | (83.1   | )            |   |   | (63.7 | )       |  |   | 150.0    |          |   |   | (85.8   | )      
|                                         |                                            |        |         |              |   |              |       |              |  |              |         |              |   |   |       |         |  |   |          |          |   |   |         |        
|                                         | Total stockholders equity (deficit)       |        |         | (21.8        | ) |              |       | 168.3        |  |              |         | 1,024.8      |   |   |       | 273.3   |  |   |          | (1,466.4 | ) |   |         | (21.8   | )
|                                         |                                            |        |         |              |   |              |       |              |  |              |         |              |   |   |       |         |  |   |          |          |   |   |         |        
|                                         | Total liabilities and stockholders equity |        | $       | 1,454.5      |   |              | $     | 567.9        |  |              | $       | 992.3        |   |   | $     | 1,073.5 |  |   | $        | (1,484.3 | ) |   | $       | 2,603.9 |  
|                                         |                                            |        |         |              |   |              |       |              |  |              |         |              |   |   |       |         |  |   |          |          |   |   |         |        

23



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)

Six Months Ended July 31, 2001 and
2000


(Unaudited)


(Millions of Dollars Unless Otherwise
Stated)


(13) Guarantor and Non-Guarantor
Financial Statements  (Continued)

Condensed Consolidating Statement of Cash
Flows

For the six months ended July 31,
2001


|                                                       |                                                                                        |                                    |                                                       |              |     |              |       |               |      |              |       |              |       |       |      |       |       |       |   |   |   |   |       |        |       |       | 
|------------------------------------------------------ | -------------------------------------------------------------------------------------- | ---------------------------------- | ----------------------------------------------------- | ------------ | --- | ------------ | ----- | ------------- | ---- | ------------ | ----- | ------------ | ----- | ----- | ---- | ----- | ----- | ----- | - | - | - | - | ----- | ------ | ----- | ----- | 
|                                                       |                                                                                        |                                    |                                                       |              |     | Conformed    |       |               |      |              |       |             
|                                                       |                                                                                        |                                    |                                                       | Guarantor    |     | Guarantor    |       | Non-guarantor |      |              |       | Consolidated
|                                                       |                                                                                        | Parent                             |                                                       | Subsidiaries |     | Subsidiaries |       | Subsidiaries  |      | Eliminations |       | Total       
|                                                       |                                                                                        |                                    |                                                       |              |     |              |       |               |      |              |       |             
|Cash flows used for operating activities               |                                                                                        | $                                  | (15.0                                                 | )            |     | $            | (20.8 | )             |      | $            | (43.1 | )            |       | $     | 55.6 |       |       |       |  |   |   | $ | (23.3 | )     
|                                                       |                                                                                        |                                    |                                                       |              |     |              |       |               |      |              |       |              |       |       |      |       |       |       |   |   |   |   |       |       
|Cash flows from investing activities:                  |                                                                                        |                                    |                                                       |              |     |              |       |               |      |              |       |              |       |       |      |       |       |       |   |   |   |   |       |       
|                                                       | Acquisition of property, plant, equipment and
	tooling                                 |                                    |                                                       | (3.3         | )   |              |       | (9.3          | )    |              |       | (21.7        | )     |       |      | (42.4 | )     |       |   |  |   |   |       | (76.7  | )    
|                                                       | Other, net                                                                             |                                    |                                                       | 7.1          |     |              |       | (0.3          | )    |              |       | (16.4        | )     |       |      | 11.3  |       |       |   |  |   |   |       | 1.7    |      
|                                                       |                                                                                        |                                    |                                                       |              |     |              |       |               |      |              |       |              |       |       |      |       |       |       |   |   |   |   |       |       
|                                                       |                                                                                        | Cash used for investing activities |                                                       |              | 3.8 |              |       |               | (9.6 | )            |       |              | (38.1 | )     |      |       | (31.1 | )     |   |   |  |   |       |        | (75.0 | )    
|                                                       |                                                                                        |                                    |                                                       |              |     |              |       |               |      |              |       |              |       |       |      |       |       |       |   |   |   |   |       |       
|Cash flows from financing activities:                  |                                                                                        |                                    |                                                       |              |     |              |       |               |      |              |       |              |       |       |      |       |       |       |   |   |   |   |       |       
|                                                       | Increase in bank borrowings and revolving facility                                     |                                    |                                                       | 184.0        |     |              |       |              |      |              |       | (0.6         | )     |       |      | 9.4   |       |       |   |  |   |   |       | 192.8  |      
|                                                       | Proceeds from refinancing, net of related fees                                         |                                    |                                                       | 435.4        |     |              |       |              |      |              |       |             |       |       |      |      |       |       |   |  |   |   |       | 435.4  |      
|                                                       | Repayment of bank borrowings, revolving facility,
	and long term debt from refinancing |                                    |                                                       | (370.9       | )   |              |       |              |      |              |       |             |       |       |      | (37.0 | )     |       |   |  |   |   |       | (407.9 | )    
|                                                       | Proceeds (payments) on accounts receivable
	securitization                             |                                    |                                                       | 43.0         |     |              |       | (47.1         | )    |              |       | (67.5        | )     |       |      |      |       |       |   |  |   |   |       | (71.6  | )    
|                                                       | Fees to amend Credit Agreement                                                         |                                    |                                                       | (2.7         | )   |              |       |              |      |              |       |             |       |       |      |      |       |       |   |  |   |   |       | (2.7   | )    
|                                                       |                                                                                        |                                    |                                                       |              |     |              |       |               |      |              |       |              |       |       |      |       |       |       |   |   |   |   |       |       
|                                                       |                                                                                        |                                    | Cash provided by financing activities                 |              |     | 288.8        |       |               |      | 47.1         |       |              |       | (68.1 | )    |       |       | (27.6 | ) |   |   |  |       |        |       | 146.0 | 
|                                                       |                                                                                        |                                    |                                                       |              |     |              |       |               |      |              |       |              |       |       |      |       |       |       |   |   |   |   |       |       
|Increase (decrease) in parent loans and advances       |                                                                                        |                                    | (244.5                                                | )            |     |              | 76.6  |               |      |              | 148.5 |              |       |       | 19.4 |       |       |       |  |   |   |   |      |       
|Effect of exchange rates of cash and cash
	equivalents |                                                                                        |                                    |                                                      |              |     |              |      |               |      |              |      |              |       |       | (2.3 | )     |       |       |  |   |   |   | (2.3  | )     
|                                                       |                                                                                        |                                    |                                                       |              |     |              |       |               |      |              |       |              |       |       |      |       |       |       |   |   |   |   |       |       
|                                                       |                                                                                        |                                    | Net increase (decrease) in cash and cash
	equivalents |              |     | 33.1         |       |               |      | (0.9         | )     |              |       | (0.8  | )    |       |       | 14.0  |   |   |   |  |       |        |       | 45.4  | 
|Cash and cash equivalents at beginning of period       |                                                                                        |                                    | (19.3                                                 | )            |     |              | 0.2   |               |      |              | 1.8   |              |       |       | 17.3 |       |       |       |  |   |   |   |      |       
|                                                       |                                                                                        |                                    |                                                       |              |     |              |       |               |      |              |       |              |       |       |      |       |       |       |   |   |   |   |       |       
|Cash and cash equivalents at end of period             |                                                                                        | $                                  | 13.8                                                  |              |     | $            | (0.7  | )             |      | $            | 1.0   |              |       | $     | 31.3 |       |       | $     |  |   |   | $ | 45.4  |       
|                                                       |                                                                                        |                                    |                                                       |              |     |              |       |               |      |              |       |              |       |       |      |       |       |       |   |   |   |   |       |       

24



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##### Table of Contents



HAYES LEMMERZ INTERNATIONAL, INC. AND
SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)

Six Months Ended July 31, 2001 and
2000


(Unaudited)


(Millions of Dollars Unless Otherwise
Stated)


(13) Guarantor and Non-Guarantor
Financial Statements  (Continued)

Condensed Consolidating Statement of Cash
Flows

For the six months ended July 31, 2000,
As Restated


|                                                       |                                                            |                                                       |        |              |       |               |       |              |       |              |      |       |       |   |   |   |   |   |       |       |       |  
|------------------------------------------------------ | ---------------------------------------------------------- | ----------------------------------------------------- | ------ | ------------ | ----- | ------------- | ----- | ------------ | ----- | ------------ | ---- | ----- | ----- | - | - | - | - | - | ----- | ----- | ----- | -
|                                                       |                                                            |                                                       |        | Guarantor    |       | Non-guarantor |       |              |       | Consolidated
|                                                       |                                                            | Parent                                                |        | Subsidiaries |       | Subsidiaries  |       | Eliminations |       | Total       
|                                                       |                                                            |                                                       |        |              |       |               |       |              |       |             
|Cash flows used for operating activities               |                                                            | $                                                     | (18.4  | )            |       | $             | (40.4 | )            |       | $            | (8.3 | )     |       |   |  |   |   |   | (67.1 | )    
|                                                       |                                                            |                                                       |        |              |       |               |       |              |       |              |      |       |       |   |   |   |   |   |       |      
|Cash flows from investing activities:                  |                                                            |                                                       |        |              |       |               |       |              |       |              |      |       |       |   |   |   |   |   |       |      
|                                                       | Acquisition of property, plant, equipment and
	tooling     |                                                       |        | (7.4         | )     |               |       | (15.3        | )     |              |      | (73.1 | )     |   |   |  |   |   |       | (95.8 | )    
|                                                       | Other, net                                                 |                                                       |        | 2.1          |       |               |       | (0.3         | )     |              |      | 11.0  |       |   |   |  |   |   |       | 12.8  |      
|                                                       |                                                            |                                                       |        |              |       |               |       |              |       |              |      |       |       |   |   |   |   |   |       |      
|                                                       |                                                            | Cash used for investing activities                    |        |              | (5.3  | )             |       |              | (15.6 | )            |      |       | (62.1 | ) |   |   |  |   |       |       | (83.0 | )
|                                                       |                                                            |                                                       |        |              |       |               |       |              |       |              |      |       |       |   |   |   |   |   |       |      
|Cash flows from financing activities:                  |                                                            |                                                       |        |              |       |               |       |              |       |              |      |       |       |   |   |   |   |   |       |      
|                                                       | Increase in bank borrowings and revolver                   |                                                       |        | 149.6        |       |               |       |             |       |              |      | 17.8  |       |   |   |  |   |   |       | 167.4 |      
|                                                       | Proceeds (payments) on accounts receivable
	securitization |                                                       |        | 6.6          |       |               |       | (24.2        | )     |              |      | (7.4  | )     |   |   |  |   |   |       | (25.0 | )    
|                                                       |                                                            |                                                       |        |              |       |               |       |              |       |              |      |       |       |   |   |   |   |   |       |      
|                                                       |                                                            | Cash provided by financing activities                 |        |              | 156.2 |               |       |              | (24.2 | )            |      |       | 10.4  |   |   |   |  |   |       |       | 142.4 |  
|                                                       |                                                            |                                                       |        |              |       |               |       |              |       |              |      |       |       |   |   |   |   |   |       |      
|Increase (decrease) in parent loans and advances       |                                                            |                                                       | (131.7 | )            |       |               | 80.2  |              |       |              | 51.5 |       |       |   |  |   |   |   |      |      
|Effect of exchange rates of cash and cash
	equivalents |                                                            |                                                       |       |              |       |               |      |              |       |              | (1.6 | )     |       |   |  |   |   |   | (1.6  | )    
|                                                       |                                                            |                                                       |        |              |       |               |       |              |       |              |      |       |       |   |   |   |   |   |       |      
|                                                       |                                                            | Net increase (decrease) in cash and cash
	equivalents |        |              | 0.8   |               |       |              |      |              |      |       | (10.1 | ) |   |   |  |   |       |       | (9.3  | )
|Cash and cash equivalents at beginning of period       |                                                            |                                                       | 6.8    |              |       |               | 0.1   |              |       |              | 19.0 |       |       |   |  |   |   |   | 25.9  |      
|                                                       |                                                            |                                                       |        |              |       |               |       |              |       |              |      |       |       |   |   |   |   |   |       |      
|Cash and cash equivalents at end of period             |                                                            | $                                                     | 7.6    |              |       | $             | 0.1   |              |       | $            | 8.9  |       |       | $ |  |   |   | $ | 16.6  |      
|                                                       |                                                            |                                                       |        |              |       |               |       |              |       |              |      |       |       |   |   |   |   |   |       |      

25



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##### Table of Contents








Item 2. Managements Discussion
and Analysis of Financial Condition and Results of
Operations


The following discussion and analysis should be
read in conjunction with the Companys Consolidated
Financial Statements, related notes thereto and the other
information included elsewhere herein and in the Companys
Annual Report on Form 10-K/ A filed with the SEC on
February 19, 2002. The financial information included in
the following discussion and analysis reflects the results of
the restatements of the consolidated financial statements for
the three month and six month periods ended July 31, 2000
discussed more fully below.

Organization, Chapter 11 Filings and
Other Recent Developments

The Company designs, engineers and manufactures
suspension module components, principally for original equipment
manufacturers (OEMs) of passenger cars, light trucks
and commercial highway vehicles worldwide. The Companys
products include one-piece cast aluminum wheels, fabricated
aluminum wheels, fabricated steel wheels, full face cast
aluminum wheels, clad covered wheels, wheel-end attachments,
aluminum structural components, intake and exhaust manifolds,
and brake drums, hubs and rotors.

Chapter 11 Filings

On December 5, 2001, the Company, 30 of its
wholly-owned domestic subsidiaries and one wholly-owned Mexican
subsidiary (collectively, the Debtors) filed
voluntary petitions for reorganization (the
Chapter 11 Filings or the Filings)
under Chapter 11 of the Bankruptcy Code in the United
States Bankruptcy Court for the District of Delaware (the
Bankruptcy Court). The Chapter 11 Filings are
being jointly administered, for procedural purposes only, before
the Bankruptcy Court under Case No. 01-11490-MFW.

During the pendancy of these Filings, the Debtors
remain in possession of their properties and assets and
management of the Company continues to operate the businesses of
the Debtors as debtors-in-possession. As a debtor-in-possession,
the Company is authorized to operate the business of the
Debtors, but may not engage in transactions outside of the
ordinary course of business without the approval of the
Bankruptcy Court, after notice and the opportunity for a hearing.

Shortly after the commencement of the
Chapter 11 Filings, on December 21, 2001, the
Bankruptcy Court granted interim approval for the Debtors to
obtain $45 million in debtor-in-possession financing.
Subsequently, on January 28, 2002, the Bankruptcy Court
granted final approval of a $200 million
debtor-in-possession financing facility for the Debtors. The
Bankruptcy Court has approved payment of certain of the
Debtors pre-petition liabilities, such as employee wages,
benefits, and certain customer, vendor and freight program
related payments. In addition, the Bankruptcy Court authorized
the Debtors to continue and maintain the majority of their
employee benefit programs. Pension and savings plan funds are in
trusts and protected under federal regulations. All required
contributions are current in the respective plans. The Debtors
have received Bankruptcy Court approval for the retention of
legal, financial and management consulting professionals, and
from time to time may seek Bankruptcy Court approval for the
retention of additional financial and management consulting
professionals, to advise the Debtors in the bankruptcy
proceedings and the restructuring of its businesses.

Pursuant to the automatic stay provisions of
Section 362 of the Bankruptcy Code, actions to collect
pre-petition indebtedness and virtually all litigation against
the Debtors that was, or could have been, brought prior to the
commencement of the Chapter 11 Filings are stayed, and
other contractual obligations of the Debtors may not be enforced
against them. In addition, under Section 365 of the
Bankruptcy Code, subject to the approval of the Bankruptcy
Court, the Debtors may assume or reject executory contracts and
unexpired leases. Parties affected by any such rejections may
file proofs of claim with the Bankruptcy Court in accordance
with the reorganization process. Proof of claims for damages
resulting from the rejection of executory contracts or unexpired
leases generally must be filed with the Bankruptcy Court by the
later of (a) the general claims bar date established by the
Bankruptcy Court (which was not established as of the date of
this filing), or (b) the date that is thirty days after
entry of order approving the rejection. As of the date of this
filing, the Debtors had not yet completed their review of all
contracts and leases for assumption or rejection, but ultimately
will assume or reject all such contracts and leases. The Debtors
cannot presently determine or reasonably predict

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the ultimate liability that may result from
rejecting such contracts or leases or from the filing of
rejection damage claims, but such rejections could result in
additional liabilities subject to compromise.


All liabilities subject to compromise are subject
to future adjustment depending on Bankruptcy Court action,
further developments with respect to disputed claims, or other
events. Under a confirmed plan of reorganization, most all
unsecured pre-petition claims may be paid at amounts
substantially less than their allowed amounts. In light of the
number of creditors of the Debtors, the claims resolution
process may take considerable time to complete. Accordingly, the
ultimate number and amount of allowed claims is not presently
known and, because the settlement terms of such allowed claims
is subject to a confirmed plan of reorganization, the ultimate
resolution with respect to allowed claims is not presently
ascertainable.

The consummation of a plan or plans of
reorganization is the principal objective of the Chapter 11
Filings. A plan of reorganization sets forth the means for
satisfying claims against and interests in the Company and its
Debtor subsidiaries, including the liabilities subject to
compromise. Generally, pre-petition liabilities are subject to
settlement under such a plan or plans of reorganization, which
must be voted upon by certain creditors and approved by the
Bankruptcy Court. As provided by the Bankruptcy Code, the
Debtors initially have the exclusive right for 120 days
(April 4, 2002), or a longer period of time subject to
approval by the Bankruptcy Court, to submit a plan or plans of
reorganization. The Debtors have retained Lazard
Freres & Co. LLC, as financial advisors and investment
bankers for the purpose of providing financial advisory and
investment banking services during the Chapter 11
reorganization process. The Company anticipates that any plan or
plans of reorganization it may propose, if ultimately approved
by the Bankruptcy Court, would result in substantial dilution of
the interest of existing equity holders, so that they would hold
little, if any, meaningful stake in the reorganized enterprise.

Confirmation of a plan of reorganization is
subject to certain findings being made by the Bankruptcy Court,
all of which are required by the Bankruptcy Code. Subject to
certain exceptions set forth in the Bankruptcy Code,
confirmation of a plan of reorganization requires the approval
of the Bankruptcy Court and the affirmative vote of each
impaired class of creditors and equity security holders. The
Bankruptcy Court may confirm a plan notwithstanding the
non-acceptance of the plan by an impaired class of creditors or
equity security holders if certain requirements of the
Bankruptcy Code are met. There can be no assurance that a
reorganization plan or plans will be proposed by the Debtors or
confirmed by the Bankruptcy Court, or that any such plan or
plans will be consummated.

Currently, it is not possible to predict the
length of time the Company will operate under the protection of
Chapter 11 and the supervision of the Bankruptcy Court,
when the Company will file a plan or plans of reorganization
with the Bankruptcy Court, the outcome of the Chapter 11
proceedings in general, or the effect of the proceedings on the
business of the Company or on the interest of the various
creditors and stakeholders. Under the priority scheme
established by the Bankruptcy Code, certain post-petition
liabilities need to be satisfied before shareholders can receive
any distribution. The ultimate recovery, if any, to shareholders
will not be determined until confirmation of a plan or plans of
reorganization. There can be no assurance as to what value, if
any, will be ascribed to the common stock of the Company in the
bankruptcy proceedings, and the value of the equity represented
by that stock could be substantially diluted or canceled.

The Companys financial statements
commencing with the period that includes December 5, 2001,
the date of filing of the Chapter 11 proceedings, will be
presented in conformity with the AICPAs Statement of
Position 90-7, Financial Reporting By Entities In
Reorganization Under the Bankruptcy Code,
(SOP 90-7). The statement requires a
segregation of liabilities subject to compromise by the
Bankruptcy Court as of the bankruptcy filing date and
identification of all transactions and events that are directly
associated with the reorganization of the Company.

The accompanying consolidated financial
statements do not reflect: (a) the requirements of
SOP 90-7, (b) the realizable value of assets on a
liquidation basis or their availability to satisfy liabilities;
(c) aggregate pre-petition liability amounts that may be
allowed for unrecorded claims or contingencies, or their status
or priority; (d) the effect of any changes to the
Debtors capital structure or in the Debtors business
operations as the result of an approved plan of reorganization;
or (e) adjustments to the carrying value of assets

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(including goodwill and other intangibles) or
liability amounts that may be necessary as the result of actions
by the Bankruptcy Court.


Restatement of Consolidated Financial
Statements

On February 19, 2002, the Company issued
restated consolidated financial statements as of and for the
fiscal years ended January 31, 2001 and 2000, and related
quarterly periods, and for the fiscal quarter ended
April 30, 2001. The restatement was the result of failure
by the Company to properly apply certain accounting standards
generally accepted in the United States of America, and because
certain accounting errors and irregularities in the
Companys financial statements were identified.

The Company has been advised that the SEC is
conducting an investigation into the facts and circumstances
giving rise to the restatement, and the Company has been and
intends to continue cooperating with the SEC. The Company cannot
predict the outcome of such an investigation.

Facility Closures

As more fully discussed in Note 12 to the
consolidated financial statements included herein, the Company
committed to a plan in February 2002 to close its
manufacturing facility in Somerset, Kentucky.

Bank Borrowings and Long-Term Debt

See Note 3 to the consolidated financial
statements included herein for a discussion of certain
transactions and events which affect the amount and
classification of a significant portion of the Companys
debt.

Results of Operations

Sales of the Companys wheels, wheel-end
attachments, aluminum structural components, powertrain and
brake components produced in North America are directly affected
by the overall level of passenger car, light truck and
commercial highway vehicle production of North American OEMs,
while sales of its wheels and automotive castings in Europe are
directly affected by the overall vehicle production in Europe.
The North American and European automotive industries are
sensitive to the overall strength of their respective economies.

The Company is organized based primarily on
markets served and products produced. Under this organization
structure, the Companys operating segments have been
aggregated into three reportable segments: Automotive Wheels,
Components and Other. The Automotive Wheels segment includes
results from the Companys operations that primarily
manufacture and distribute fabricated steel and cast aluminum
wheels for original equipment manufacturers in the global
passenger car and light vehicle markets. The Components segment
includes results from the Companys operations that
primarily manufacture and distribute suspension, brake and
powertrain components for original equipment manufacturers in
the global passenger car and light vehicle markets. The Other
segment includes results from the Companys operations that
primarily manufacture and distribute wheel and brake products
for commercial highway and aftermarket customers in North
America. The Other segment also includes financial results
related to the corporate office and elimination of certain
intercompany activities.

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Three Months Ended July 31, 2001
Compared to Three Months Ended July 31, 2000

Net Sales

|                  |       |               |       |       |  |          |       |       |  |  |      |      |  
|----------------- | ----- | ------------- | ----- | ----- |  | -------- | ----- | ----- |  |  | ---- | ---- | -
|                  |       |              
|                  |       | (As Restated)
|                  |       |              
|                  |       | 2001          |       | 2000  |  | % Change
|                  |       |               |       |       |  |         
|                  |       |               |       |      
|                  |       | (millions)    |       |      
|Automotive Wheels |       | $             | 309.4 |       |  | $        | 336.8 |       |  |  | (8.1 | )%  
|Components        |       |               | 163.0 |       |  |          | 162.6 |       |  |  | 0.3  |     
|Other             |       |               | 46.1  |       |  |          | 40.9  |       |  |  | 12.7 |     
|                  |       |               |       |       |  |          |       |       |  |  |      |     
|                  | Total |               | $     | 518.5 |  |          | $     | 540.3 |  |  |      | (4.0 | )
|                  |       |               |       |       |  |          |       |       |  |  |      |     

The Companys net sales for the second
quarter of fiscal 2001 were $518.5 million, a decrease of
4.0% as compared to net sales of $540.3 million for the
second quarter of fiscal 2000. This decrease is primarily due to
the impact of lower light vehicle and heavy-duty vehicle
production levels in North America and the build-out and
termination of certain original equipment manufacturer
(OEM) platforms on the Companys North American
operations.

Net sales from the Companys Automotive
Wheels segment decreased 8.1% from $336.8 million in the
three months ended July 31, 2000 to $309.4 million in
the same period in 2001. This was primarily due to a
$30.5 million reduction in sales from the Companys
North American operations arising from lower OEM production
levels and lower market share in 2001 compared to 2000. This
decrease was partially offset by an increase of
$11.7 million in sales from the Companys foreign
aluminum wheel operations primarily due to increasing
penetration rates of aluminum wheels in the European light
vehicle market. The increase in sales from the Companys
foreign operations was partially offset by an approximate
$15.6 million decline in the value of European currencies
relative to the U.S. dollar between the second quarter of 2001
and 2000.

Components net sales were essentially unchanged
for the three months ending July 31, 2001 compared to the
same period in 2000. The impact of lower OEM production levels
and the build-out and termination of certain customer platforms
reduced net sales from the Companys North American
operations were offset by the increase in net sales arising from
the acquisition of Schenk in Maulbronn, Germany on
September 2, 2000 (Schenk acquisition) and
higher net sales from the Companys non-core aluminum
operations, collectively called Metaalgieterij Giesen B. V.
(MGG) in Europe.

Other net sales increased 12.7% from
$40.9 million in the three months ending July 31, 2000
to $46.1 million in the same period in 2001. This increase
is primarily due to higher sales from the Companys system
service business in Europe. This increase was partially offset
by the significant decrease in heavy duty Class 8 truck and
trailer production in North America between those time periods.

Gross Profit

The Companys gross profit margin for the
second quarter of fiscal 2001 decreased to $33.6 million or
6.5% of net sales as compared to $72.7 million or 13.5% of
net sales for the second quarter of fiscal 2000.

The Companys gross profit from Automotive
Wheels decreased $36.0 million from the second quarter of
fiscal 2000 compared to the same period in fiscal 2001. Gross
profit from the Companys North American operations
decreased $34.8 million from the three months ended
July 31, 2000 compared to the same period in 2001. This
decrease is primarily due to recurring manufacturing
difficulties at the Companys Somerset, Kentucky facility
and lower operating performance at various facilities in North
America, which reduced gross profit by approximately
$20.1 million and $11.7 million, respectively. Lower
OEM production requirements in North America reduced gross
profit by approximately $3.0 million. The decrease in gross
profit from the Companys North American operations was
partially offset by a $1.0 million increase in gross profit
primarily due to improved operating performance at various
foreign operations.

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Gross profit from Components decreased
$2.8 million from the second quarter of fiscal 2000
compared to the same period in fiscal 2001. This decrease is
primarily due to lower operating performance, lower OEM
production requirements and the inefficiencies arising from
lower production.

Other gross profit decreased $0.4 million
from the second quarter of fiscal 2000 compared to the same
period in fiscal 2001. This decrease is primarily due to lower
sales and lower operating margins in the commercial highway
market.

Marketing, General and
Administrative

Marketing, general and administrative expenses
increased to $25.9 million or 5.0% of net sales for the
second quarter of fiscal 2001 from $21.8 million or 4.0% of
net sales for the second quarter of fiscal 2000. This increase
is primarily due to increased provisions for past due accounts
receivable in the North American wheels business.

Engineering and Product Development

Engineering and product development expenses
increased from $3.2 million or 0.6% of net sales in the
second quarter of fiscal 2000 to $5.7 million or 1.1% of
net sales for the second quarter of fiscal 2001. Lower
engineering and product development spending, net of customer
recoveries, in the Companys wheel operations in fiscal
2000 is the primary reason for this variance.

Equity in Losses (Earnings) of Joint
Ventures

Equity in losses of joint ventures improved
$0.4 million to $0.2 million of losses for the second
quarter of fiscal 2001 as compared to $0.6 million of
losses for the same period in fiscal 2000.

Asset Impairments and Other Restructuring
Charges

During the second quarter of fiscal 2001 the
Company recognized an impairment loss of $6.4 million
related principally to a change in managements plan for
future use of idled machinery and equipment in the Automotive
Wheel segment and to investments in machinery, equipment and
tooling at its Somerset, Kentucky facility. Such assets were
written down to fair value based on the expected scrap value, if
any, of such machinery, equipment and tooling. The Company also
recognized closure costs of $0.6 million related to its
Petersburg, Michigan facility.

In the restatement of the Companys
financial statements for the second quarter of fiscal 2000, the
Company recorded an asset impairment loss of $2.1 million
related to assets previously sold or disposed of. The Company
also recorded $1.8 million of severance and other
restructuring costs in its wheel operations in Germany during
the second quarter of fiscal 2000.

Loss on Investment in Joint Venture

The Company recorded a $3.8 million loss on
investment in joint venture related to its Mexican joint
venture, which had incurred and expects to continue to incur
significant operating losses.

Interest Expense, net

Interest expense was $48.8 million for the
second quarter of fiscal 2001 compared to $40.0 million for
the second quarter of fiscal 2000. This increase primarily
reflects higher outstanding borrowings.

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Six Months Ended July 31, 2001
Compared to Six Months Ended July 31, 2000

Net Sales

|                  |       |               |       |         |  |          |       |         |  |  |       |       | 
|----------------- | ----- | ------------- | ----- | ------- |  | -------- | ----- | ------- |  |  | ----- | ----- | 
|                  |       |              
|                  |       | (As Restated)
|                  |       |              
|                  |       | 2001          |       | 2000    |  | % Change
|                  |       |               |       |         |  |         
|                  |       |               |       |        
|                  |       | (millions)    |       |        
|Automotive Wheels |       | $             | 636.8 |         |  | $        | 699.8 |         |  |  | (9.0) | %    
|Components        |       |               | 339.9 |         |  |          | 342.3 |         |  |  | (0.7) |      
|Other             |       |               | 82.8  |         |  |          | 91.9  |         |  |  | (9.9) |      
|                  |       |               |       |         |  |          |       |         |  |  |       |      
|                  | Total |               | $     | 1,059.5 |  |          | $     | 1,134.0 |  |  |       | (6.6) | 
|                  |       |               |       |         |  |          |       |         |  |  |       |      

The Companys net sales for the six months
ended July 31, 2001 were $1,059.5 million, a decrease of
6.6% as compared to net sales of $1,134.0 million in the
same period in 2000. This decrease is primarily due to the
impact of lower sales to light vehicle OEMs and heavy-duty
vehicle manufacturers in North America and the build-out and
termination of certain OEM platforms on the Companys North
American operations.

Net sales from the Companys Automotive
Wheels segment decreased 9.0% from $699.8 million in the
six months ended July 31, 2000 to $636.8 million in
the same period in 2001. This was primarily due to a
$73.6 million reduction in sales from the Companys
North American operations arising from lower OEM production
levels and lower market share in 2001 compared to 2000. This
decrease was partially offset by an increase of
$10.6 million in sales from the Companys foreign
operations primarily due to increasing penetration rates of
aluminum wheels in the European light vehicle market. The
increase in sales from the Companys foreign operations was
partially offset by an approximate $29.9 million decline in the
value of European currencies relative to the U.S. dollar between
the first six months of 2001 and 2000.

Components net sales were essentially unchanged
for the six months ending July 31, 2001 compared to the
same period in 2000. The impact of lower OEM production levels
and the build-out and termination of certain customer platforms
reduced net sales from the Companys North American
operations which were offset by the increase in net sales
arising from the Schenk acquisition and higher net sales from
the Companys MGG operations in Europe.

Other net sales decreased 9.9% from
$91.9 million in the six months ended July 31, 2000 to
$82.8 million in the same period in 2001. This decrease is
primarily due to the significant decrease in heavy duty
Class 8 truck and trailer production in North America
between those time periods. This decrease was partially offset
by higher sales from the Companys system service business
in Europe.

Gross Profit

The Companys gross profit margin for the
six months ended July 31, 2001 decreased to
$91.3 million or 8.6% of net sales as compared to
$167.2 million or 14.7% of net sales for the first six
months of fiscal 2000.

The Companys gross profit from Automotive
Wheels decreased $61.8 million from the first six months of
fiscal 2000 compared to the same period in fiscal 2001. Gross
profit from the Companys North American operations
decreased $63.2 million from the six months ended July 31,
2000 compared to the same period in 2001. This decrease is
primarily due to recurring manufacturing difficulties at the
Companys Somerset, Kentucky facility and lower operating
performance at various facilities in North America, which
reduced gross profit by approximately $29.5 million and
$24.5 million, respectively. Lower OEM production
requirements in North America reduced gross profit by
approximately $9.2 million. The decrease in gross profit
from the Companys North American operations was partially
offset by a $1.4 million increase in gross profit primarily
due to improved operating performance at various foreign
operations.

Gross profit from Components decreased
$10.8 million from the first six months of fiscal 2000
compared to the same period in fiscal 2001. This decrease is
primarily due to lower operating performance, lower OEM
production requirements and the inefficiencies arising from
lower production in the North American operations. The decrease
was partially offset by improved operating performance at the
Companys MGG

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operations in Europe and the Schenk acquisition,
which collectively increased gross profit by approximately $0.9
million in the six months ended July 31, 2001 compared to
the same period in fiscal 2000.


Other gross profit decreased $3.2 million
from the first six months of fiscal 2000 compared to the same
period in fiscal 2001. This decrease is primarily due to lower
sales and lower operating margins in the commercial highway
market.

Marketing, General and
Administration

Marketing, general and administrative expenses
increased from $46.6 million or 4.1% of net sales for the
six months ended July 31, 2000 to $52.2 million or
4.9% of net sales for the six months ended July 31, 2001.
This increase is primarily due to increased provisions for past
due accounts receivable in the North American wheels business.

Engineering and Product Development

Engineering and product development expenses
increased from $9.4 million or 0.8% of net sales in the six
months ended July 31, 2000 to $11.6 million or 1.1% of
net sales in the same period in fiscal 2001. Lower engineering
and product development spending, net of customer recoveries, in
the Companys wheel operations in fiscal 2000 is the
primary reason for this variance.

Equity in Losses (Earnings) of Joint
Ventures

Equity in losses (earnings) of joint
ventures decreased $1.0 million to $0.5 million of losses
for the first six months of fiscal 2001 as compared to $0.5
million of earnings for the same period in fiscal 2000. This
decrease primarily reflects reduced sales volume and profit
associated with the Companys interest in Reynolds-Lemmerz
Industries, Canada.

Asset Impairments and Other Restructuring
Charges

In the six months ended July 31, 2001 the
Company recognized asset impairment losses of
$38.0 million. This is primarily comprised of asset
impairment losses of $28.5 million related to the Companys
Petersburg, Michigan facility, $0.6 million of closure
costs related to the Petersburg facility, $2.5 million
related to the abandonment of plans to continue to invest in the
start-up of certain single-purpose equipment at another
facility, and items previously discussed in this
Managements Discussion and Analysis for the three months
ended July 31, 2001.

As a consequence of the notifications received in
April 2001 by the Company from certain customers of its
Petersburg, Michigan manufacturing facility regarding
significantly lower future product orders and the failure to
obtain adequate customer support required to relocate
production, management should have revised its estimate of
future undiscounted cash flows expected to be generated by the
facility. The Company concluded that this estimated amount was
less than the carrying value of the long-lived assets related to
the Petersburg facility and, accordingly, recognized an
impairment charge of $28.5 million in the three month ended
April 30, 2001.

In the restatement of the Companys
financial statements for the six months ended July 31,
2000, the Company recorded an asset impairment loss of $2.1
million related to assets previously sold or disposed of. The
Company also recorded $2.3 million of severance and other
restructuring costs in its wheel operations in Germany during
the second quarter of fiscal 2000.

Interest Expense, net

Interest expense was $92.9 million for the
second quarter of fiscal 2001 compared to $78.8 million for
the second quarter of fiscal 2000. This increase primarily
reflects higher outstanding borrowings.

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Liquidity and Capital Resources

Chapter 11 Filings

As previously discussed, the Company and certain
subsidiaries filed voluntary petitions for reorganization under
Chapter 11 of the Bankruptcy Code. The matters described
under this caption Liquidity and Capital Resources,
to the extent that they relate to future events or expectations,
may be significantly affected by the Chapter 11 Filings.
Those proceedings will involve, or result in, various
restrictions on the Companys activities, limitations on
financing, the need to obtain Bankruptcy Court approval for
various matters and uncertainty as to relationships with
vendors, suppliers, customers and others with whom the Company
may conduct or seek to conduct business.

DIP Facility

The Bankruptcy Court has approved the
Companys request for a total of $200 million in
debtor-in-possession financing (the DIP facility).
The amounts that the Company is able to borrow under the DIP
facility are determined by a borrowing base formula based on
certain eligible assets of the Company. As of March 21,
2002, the Company had $14.0 million in cash borrowings and
had issued $4.7 million in letters of credit pursuant to
this financing. The amount available under the DIP facility as
of March 21, 2002, after taking into account the
aforementioned borrowings and letters of credit, was
$87.9 million.

Refinancing

On June 22, 2001, the Company received
$291.1 million in net proceeds from the issuance of
11 7/8% senior unsecured notes due 2006 in the original
principal amount of $300 million (the 11 7/8%
Notes). In addition, on July 2, 2001, the Company
received $144.3 million in net proceeds from the issuance
of the B Term Loan. These aggregate net proceeds totaled
$435.4 million and were used as follows ($ in
millions):

|                                                                                                                         |       |   |       |       | 
|------------------------------------------------------------------------------------------------------------------------ | ----- | - | ----- | ----- | 
|Permanent reduction of Credit Agreement
	indebtedness with a principal balance of $334.3, plus $2.2 in
	accrued interest |       | $ | 336.5 |      
|Payment on foreign indebtedness with a principal
	balance of $47.0.                                                      |       |   | 47.0  |      
|Repurchase of certain Senior Subordinated Notes
	with a face value of $47.2, plus $1.0 in accrued interest               |       |   | 37.6  |      
|Payment of fees and expenses on the above                                                                                |       |   | 0.8   |      
|Remaining cash proceeds held by Company                                                                                  |       |   | 13.5  |      
|                                                                                                                         |       |   |       |      
|                                                                                                                         | Total |   | $     | 435.4 | 
|                                                                                                                         |       |   |       |      

In connection with the repurchase of the senior
subordinated notes at a discount, the Company recorded an
extraordinary gain of $10.6 million in the second quarter
of fiscal 2001. This gain was offset by $4.0 million of
unamortized deferred financing costs written off as a result of
the repurchase. Further, in connection with the B Term
refinancing and permanent reduction of the Credit Agreement, the
Company recorded an extraordinary loss of $2.4 million for
the write-off of unamortized deferred financing costs associated
with the Credit Agreement. The tax effect of these extraordinary
items was offset by a reversal of the deferred tax asset
valuation allowance, such that there was no net tax effect in
the quarter ended July 31, 2001.

The Credit Agreement, as amended, contains
certain financial covenants regarding interest coverage ratios,
fixed charge coverage ratios, leverage ratios and capital
spending limitations. At July 31, 2001, there was
$175.9 million outstanding under the term loan facilities
of the Credit Agreement, which amount represents the total
amount available under the facility. At July 31, 2001,
there was $514.1 million outstanding under the revolving
credit facility and $124.6 million available. As a result
of the Debtors Chapter 11 Filings, all additional
availability under the Credit Agreement has been terminated,
although letters of credit amounting to approximately
$11.0 million remain outstanding.

All amounts outstanding with respect to the
Credit Agreement, the aforementioned senior subordinated notes,
and the 11 7/8% Notes are classified as a current liability
in the consolidated financial statements as of July 31,
2001 included herein.

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Trade Securitization Agreement

In July 1998, the Company entered into a
three-year trade securitization agreement pursuant to which the
Company and certain of its subsidiaries sold, and continued to
sell on an ongoing basis, a portion of their accounts
receivables to a special purpose entity (Funding
Co.), which is wholly owned by the Company. Accordingly,
the Company and such subsidiaries, irrevocably and without
recourse, transferred and continued to transfer substantially
all of their U.S. dollar denominated trade accounts receivable
to Funding Co. Funding Co. then sold and continued to sell such
trade accounts receivable to an independent issuer of
receivable-backed commercial paper. The Company had collection
and administrative responsibilities with respect to all the
receivables that were sold. There were no receivables sold as of
July 31, 2001.

This trade securitization agreement expired on
May 1, 2001. From that time up to July 31, 2001, the
Company financed the amount of receivables previously sold under
the securitization agreement with its revolving credit facility.
The impact of the discontinued securitization program had an
adverse impact on liquidity of approximately $71.6 million.

Other Liquidity Matters

During the second quarter of fiscal 2000, the
Board of Directors approved the repurchase of up to an aggregate
of $30.0 million of the Companys outstanding common
stock. The Company repurchased approximately 1.9 million
shares of its common stock for an aggregate purchase price of
approximately $25.7 million during fiscal 2000.

Certain operating leases covering leased assets
with an original cost of approximately $68.0 million,
contain provisions which, if certain events occur or conditions
are met, including termination of the lease, might require the
Company to purchase or re-sell the leased assets within a
specified period of time, generally one year, based on amounts
specified in the lease agreements. On July 18, 2001, the
Company received notification of termination from a lessor with
respect to leased assets having approximately $25.0 million
of original cost (which termination was not to be effective for
one year). The Company has not agreed with the lessor that a
termination has occurred at the time of the notice and has
continued to use the leased assets.

The Company received cash in the amount of
$14.6 million and $15.9 million during the quarters
ended July 31, 2001 and 2000, respectively, in connection
with the early termination of various cross-currency interest
rate swap agreements. These proceeds reduced the receivable
recorded by the Company at the time of the early termination
resulting from accounting for mark-to-market adjustments during
the term of the agreement.

Cash Flows

Between January 31, 2001 and the date of the
Chapter 11 Filings, the Companys operating cash flows
were adversely affected by (i) a further decrease in
operating margins, (ii) the effect of discontinuing the
receivables securitization program, less the effect on the
Company of its participation in separate accelerated payment
programs with some of its major customers starting in
September 2001 and (iii) further contraction of terms
required by trade creditors.

Since the Chapter 11 Filings, the Company
believes its operating cash flows will be impacted by, among
other things, (i) the need to fund the significant
professional fees and other costs directly related to the
Chapter 11 Filings, (ii) the cash requirements for the
closure and restructuring of certain facilities, and
(iii) the rate and level of post-petition trade credit
available to the Company. The amount of interest expense should
be substantially less due to the effect of the stay on payment
of pre-petition obligations.

The Companys operations used
$23.3 million in cash in the first six months of fiscal
2001 compared to a use of $67.1 million in the first six
months of fiscal 2000. The improvement principally reflects
lower inventory levels and supplier payments consistent with
lower sales volumes.

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Capital expenditures for the first six months of
fiscal 2001 were $68.4 million. These expenditures were
primarily for additional machinery and equipment to improve
productivity and reduce costs, to meet demand for new vehicle
platforms, and to meet expected requirements for the
Companys products.

Market Risks

In the normal course of business the Company is
exposed to market risks arising from changes in foreign exchange
rates, interest rates and raw material prices. The Company
selectively uses derivative financial instruments to manage
these risks, but does not enter into any derivative financial
instruments for trading purposes.

Foreign Exchange

The Company has global operations and thus makes
investments and enters into transactions in various foreign
currencies. In order to minimize the risks associated with
global diversification, the Company first seeks to internally
net foreign exchange exposures, and uses derivative financial
instruments to hedge any remaining net exposure. The Company
uses forward foreign currency exchange contracts on a limited
basis to reduce the earnings and cash flow impact of
non-functional currency denominated transactions. The gains and
losses from these hedging instruments generally offset the gains
or losses from the hedged items and are recognized in the same
period the hedged items are settled. In addition, the Company
has entered into three cross currency interest rate swaps to
hedge a portion of its investments in Europe. The currency
effects of these swaps, net of tax, are reflected in the
cumulative translation adjustments component of other
accumulated comprehensive income, where they offset the gain or
loss associated with the investments in Europe. In addition, the
Company has designated a term loan, totaling 59.7 million
Deutschemarks, as a hedge of foreign currency exposure of its
net investment in its German operations.

Commodities

The Company relies upon the supply of certain raw
materials and other inputs for its production process and has
entered into firm purchase commitments for aluminum and steel.
The Company manages the exposures associated with these
commitments primarily through the terms of its supply and
procurement contracts. Additionally, the Company uses forward
contracts to hedge against changes in certain specific commodity
prices of the purchase commitments outstanding. The Company had
no forward contracts during the quarters ended July 31,
2001 and 2000.

Other Matters

The Company does not believe that sales of its
products are materially affected by inflation, although there
can be no assurance that such an effect will not occur in the
future. In accordance with industry practice, the costs or
benefits of fluctuations in aluminum prices are passed through
to customers. In the United States, the Company adjusts the
sales prices of its aluminum wheels every three to six months,
if necessary, to reflect fully any increase or decrease in the
price of aluminum. As a result, the Companys net sales of
aluminum wheels are adjusted, although gross profit per wheel is
not materially affected. From time to time, the Company enters
into futures contracts or purchase commitments solely to hedge
against possible aluminum price changes that may occur between
the dates of aluminum wheel price adjustments. Pricing and
purchasing practices are similar in Europe, but opportunities to
recover increased material costs from customers are more limited
than in the United States.

The value of the Companys consolidated
assets and liabilities located outside the United States (which
are translated at period end exchange rates) and income and
expenses (which are translated using average rates prevailing
during the period) have been affected by the translation values,
particularly the Euro (as defined under Euro
Conversion) and the Brazilian Real. Such translation
adjustments are reported as a separate component of
stockholders equity. Foreign exchange rate fluctuations
could have an increased impact on the Companys reported
results of operations. However, due to the self-sustaining
nature of the Companys foreign operations (which maintain
their own credit facilities, enter into borrowings and swap

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agreements and incur costs in their respective
local currencies), the Company believes it can effectively
manage the effect of these currency fluctuations. In addition,
in order to further hedge against such currency rate
fluctuations, the Company has entered into certain foreign
currency swap arrangements.


The Companys net sales are continually
affected by pressure from its major customers to reduce prices.
The Companys emphasis on reduction of production costs,
increased productivity and improvement of production facilities
has enabled the Company to respond to this pressure.

New Accounting Pronouncements

In August 2001, the Financial Accounting
Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets. SFAS No. 144 supersedes FASB No. 121,
Accounting for the Impairment of Long-lived Assets and for
Long-lived Assets to be Disposed Of. The statement retains
the previously existing accounting requirements related to the
recognition and measurement of the impairment of long-lived
assets to be held and used while expanding the measurement
requirements of long-lived assets to be disposed of by sale to
include discontinued operations. It also expands the previously
existing reporting requirements for discontinued operations to
include a component of an entity that either has been disposed
of or is classified as held for sale. The provisions of this
Statement are effective for fiscal years beginning after
December 15, 2001. The Company has not yet completed its
analysis of the impact of SFAS No. 144 on its consolidated
financial position or results of operations upon adoption.

In June 2001, the FASB issued SFAS No. 143,
Accounting for Asset Retirement Obligations. SFAS
No. 143 requires that the fair value of a liability for an
asset retirement obligation be recognized in the period in which
it is incurred if a reasonable estimate of fair value of the
liability can be made. Such associated asset retirement costs
are to be capitalized as part of the carrying amount of the
long-lived asset. SFAS also contains additional disclosure
requirements regarding descriptions of the asset retirement
obligations and reconciliations of changes therein. The
provisions of this Statement are effective for fiscal years
beginning after June 15, 2002. The Company has not yet
completed its analysis of the impact of SFAS No. 143 on its
consolidated financial position or results of operations upon
adoption.

In June 2001, the FASB issued SFAS
No. 142, Goodwill and Other Intangible Assets.
SFAS No. 142 requires that goodwill be reviewed for
impairment annually, rather than amortized into earnings. The
provisions of this Statement are effective for fiscal years
beginning after December 15, 2001. Amortization of goodwill
will cease upon adoption of the Statement by the Company on
February 1, 2002. At that valuation date, the Company will
test goodwill for impairment, and any losses will be recognized
as a cumulative effect of a change in accounting principle.
Other acquired identifiable intangible assets having estimable
useful lives will be separately stated from goodwill, and will
continue to be amortized over their estimated useful lives. As
of February 1, 2002, the Company expects to have
unamortized goodwill and other intangible assets of
approximately $873.6 million, which will be subject to the
transition provisions of SFAS No. 142. Amortization expense
related to goodwill and other intangible assets was
$27.4 million, $27.5 million and $16.6 million
for fiscal 2000, 1999 and 1998, respectively. The Company
believes it will incur a significant write-down in the value of
its goodwill upon adoption of SFAS No. 142.

In June 2001, the FASB issued SFAS No. 141,
Business Combinations. SFAS No. 141 requires
that all business combinations (initiated after June 30,
2001) be accounted for under the purchase method of accounting.
Use of the pooling-of-interests method is no longer permitted.
Adoption of this standard is not anticipated to have a material
effect on the Companys financial position or results of
operations as a result of future business combinations, as the
Company has historically accounted for such transactions under
the purchase method.

In September 2000, the FASB issued SFAS
No. 140, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities 
a replacement of FASB Statement No. 125. This
statement revises the standards for accounting for
securitizations and other transfers of financial assets and
collateral and requires certain financial statement disclosures.
SFAS 140 is effective for transactions occurring after
March 31, 2001. The new disclosure requirements are
effective for fiscal years ending after December 15,

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2000. Adoption of this replacement standard did
not have a material effect on the Companys financial
position or results of operations.







Item 3. Quantitative and Qualitative
Disclosures about Market Risk


For the period ended July 31, 2001, the
Company did not experience any material change in market risk
exposures affecting the quantitative and qualitative disclosures
as presented in the Companys Annual Report on
Form 10-K/ A for the year ended January 31, 2001.

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PART II. OTHER INFORMATION







Item 1. Legal Proceedings


None






Item 2. Changes in Securities and
Use of Proceeds


None






Item 3. Defaults Upon Senior
Securities


As a result of the Chapter 11 Filings by the
Debtors on December 5, 2001, the following required
interest payments were not made by the Company:

|                                 |  |                   |  |              
|-------------------------------- |  | ----------------- |  | -------------
|                                 |  | Date Due          |  | Interest Due 
|                                 |  |                   |  |              
|8 1/4% Senior Subordinated Notes |  | December 17, 2001 |  | $9,252,168.75
|9 1/2% Senior Subordinated Notes |  | January 15, 2002  |  | 17,754,968.75
|11% Senior Subordinated Notes    |  | January 15, 2002  |  | 13,164,250.00
|11 7/8% Senior Notes             |  | December 17, 2001 |  | 17,218,750.00






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


The Company held its Annual Meeting of
Stockholders on June 14, 2001. At the Annual Meeting, the
following matters were proposed and voted upon by the
Companys stockholders (including the number of votes cast
for, against or withheld, as well as the number of abstentions
for each such matter):



| |    |                                                                                                                                                                                                                                                   
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. | To elect three Class 2 Directors (nominees
	were Ranko Ron Cucuz, Andrew R. Heyer, and
	David Y. Ying) to serve until the Companys 2004
	Annual Meeting of Stockholders. The number of votes cast with
	respect to this matter were as follows:

|                |  |     |            |          |  |  |         | 
|--------------- |  | --- | ---------- | -------- |  |  | ------- | 
|Nominee         |  | For |            | Withheld
|                |  |     |            |         
|Ranko Cucuz     |  |     | 21,065,880 |          |  |  | 266,895 | 
|Andrew R. Heyer |  |     | 21,164,496 |          |  |  | 168,279 | 
|David Y. Ying   |  |     | 20,346,283 |          |  |  | 986,492 | 



| |  |                                                                                                                                                                                                                                     
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The terms of office of each of the following
	directors also continued after the meeting: Cleveland A.
	Christophe, Anthony Grillo, Horst Kukwa-Lemmerz, Paul S.
	Levy, Jeffrey C. Lightcap, Wienand Meilicke, and
	John S. Rodewig.



| |    |                                                                                                                                            
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------
| | 2. | To approve the adoption of the Companys
	Short-Term Incentive Plan. The number of votes cast with respect
	to this matter were as follows:



|                                   |                                     |                                   
|---------------------------------- | ----------------------------------- | ----------------------------------
|For:                    20,792,093 | Against:                    503,618 | Abstain:                    37,064



| |    |                                                                                                                                                                                                  
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 3. | To ratify the appointment of KPMG LLP as the
	Companys independent auditors for the fiscal year ending
	January 31, 2002. The number of votes cast with respect to
	this matter were as follows:



|                                   |                                    |                                   
|---------------------------------- | ---------------------------------- | ----------------------------------
|For:                    21,260,907 | Against:                    59,581 | Abstain:                    12,287

There were no broker held non-voted shares
represented at the Annual Meeting with respect to any of the
foregoing matters.






Item 5. Other Information


None

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Item 6. Exhibits and Reports on
Form 8-K


(a) Exhibits

|               |      |             |  | 
|-------------- | ---- | ----------- |  | 
|Exhibit Number |      | Description
|               |      |            
|               | None |             |  | 

(b) Reports on Form 8-K

During the fiscal quarter ended July 31,
2001, the Company filed Current Reports on Form 8-K with
the Securities and Exchange Commission on June 21, 2001,
June 29, 2001, and July 12, 2001.

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SIGNATURES


Pursuant to 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.



| |                                  
| | ---------------------------------
| | HAYES LEMMERZ INTERNATIONAL, INC.
|
| | /s/ KENNETH A. HILTZ             
| | Kenneth A. Hiltz                 
| | Chief Financial Officer          
|
| | /s/ HERBERT S. COHEN             
| | Herbert S. Cohen                 
| | Chief Accounting Officer         

March 25, 2002

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