HAYZ Hayes Lemmerz International (MM)

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 31, 2008

or

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to

Commission file number: 000-50303

Hayes Lemmerz International, Inc.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		32-0072578 (IRS Employer Identification No.)
15300 Centennial Drive Northville, Michigan (Address of principal executive offices)		48168 (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  þ       No  o

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

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

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

APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

     Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes  þ       No  o

     As of September 2, 2008, the number of shares of common stock outstanding of Hayes Lemmerz International, Inc., was 101,121,203 shares.

 

 

HAYES LEMMERZ INTERNATIONAL, INC.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements			3
Consolidated Statements of Operations			3
Condensed Consolidated Balance Sheets			4
Consolidated Statements of Cash Flows			5
Consolidated Statements of Changes in Stockholders’ Equity			6
Notes to Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			26
Item 3. Quantitative and Qualitative Disclosures about Market Risk			36
Item 4. Controls and Procedures			37
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			37
Item 1A. Risk Factors			37
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			37
Item 3. Defaults upon Senior Securities			37
Item 4. Submission of Matters to a Vote of Security Holders			37
Item 5. Other Information			38
Item 6. Exhibits			38
Signature			38
EX-31.1
EX-31.2
EX-32.1
EX-32.2

Unless otherwise indicated, references to “we,” “us,” or “our” mean Hayes Lemmerz International, Inc., a Delaware corporation, and its subsidiaries. References to fiscal year means the 12-month period commencing on February 1 ^st of that year and ending January 31 ^st of the following year (e.g., fiscal 2008 means the period beginning February 1, 2008 and ending January 31, 2009). This report contains forward looking statements with respect to our financial condition, results of operations, and business. All statements other than statements of historical fact made in this Quarterly Report on Form 10-Q are forward-looking. Such forward-looking statements include, among others, those statements including the words “expect,” “anticipate,” “intend,” “believe,” and similar language. These forward looking statements involve certain risks and uncertainties. Our actual results may differ significantly from those projected in the forward-looking statements. Factors that may cause actual results to differ materially from those contemplated by such forward looking statements include, among others: (1) competitive pressure in our industry; (2) fluctuations in the price of steel, aluminum, and other raw materials; (3) changes in general economic conditions; (4) our dependence on the automotive industry (which has historically been cyclical) and on a small number of major customers for the majority of our sales; (5) pricing pressure from automotive industry customers and the potential for re-sourcing of business to lower-cost providers; (6) changes in the financial markets or our debt ratings affecting our financial structure and our cost of capital and borrowed money; (7) the uncertainties inherent in international operations and foreign currency fluctuations; and (8) the risks described in our Annual Report on Form 10-K for the fiscal year ended January 31, 2008. You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. We have no duty to update the forward looking statements in this Quarterly Report on Form 10-Q and we do not intend to provide such updates

Item 1. Financial Statements

HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

		Three Months Ended July 31,								Six Months Ended July 31,
		2008				2007				2008				2007
		(Dollars in millions, except per share amounts)
Net sales		$	563.5			$	544.1			$	1,137.3			$	1,042.7
Cost of goods sold			491.6				491.0				1,001.7				933.4
Gross profit			71.9				53.1				135.6				109.3
Marketing, general, and administrative			39.4				45.5				78.7				80.8
Amortization of intangibles			2.9				2.6				5.7				5.0
Asset impairments and other restructuring charges			5.8				1.5				9.1				3.9
Other expense, net			34.1				9.5				30.7				7.5
(Loss) earnings from operations			(10.3	)			(6.0	)			11.4				12.1
Interest expense, net			14.3				15.8				27.6				33.9
Loss on early extinguishment of debt			—				21.2				—				21.5
Other non-operating expense			1.0				0.1				2.7				0.1
Loss from continuing operations before taxes and minority interest			(25.6	)			(43.1	)			(18.9	)			(43.4	)
Income tax expense			14.6				13.3				27.6				21.8
Loss from continuing operations before minority interest			(40.2	)			(56.4	)			(46.5	)			(65.2	)
Minority interest			6.8				5.7				13.3				9.5
Loss from continuing operations			(47.0	)			(62.1	)			(59.8	)			(74.7	)
Discontinued operations:
Income from operations, net of tax of $0.0, $0.2, $0.0, $0.2, respectively			—				2.5				—				3.4
Loss on sale of business, net of tax of $0 for all periods			—				(27.5	)			—				(31.1	)
Loss from discontinued operations			—				(25.0	)			—				(27.7	)
Net loss		$	(47.0	)		$	(87.1	)		$	(59.8	)		$	(102.4	)
Loss per common share data
Basic and diluted:
Loss from continuing operations		$	(0.46	)		$	(0.78	)		$	(0.59	)		$	(1.25	)
Loss from discontinued operations			—				(0.32	)			—				(0.46	)
Net loss		$	(0.46	)		$	(1.10	)		$	(0.59	)		$	(1.71	)
Weighted average shares outstanding (in thousands)			101,104				79,336				101,087				59,854

See accompanying notes to consolidated financial statements.

HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

		July 31,				January 31,
		2008				2008
		(Dollars in millions)
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	87.5			$	160.2
Receivables, net of allowance of $1.3 and $1.5 at July 31, 2008 and January 31, 2008, respectively			295.0				305.6
Other receivables			43.2				48.3
Inventories			218.4				179.1
Assets held for sale			26.5				21.4
Deferred tax assets			6.1				5.0
Prepaid expenses			8.5				7.2
Total current assets			685.2				726.8
Property, plant, and equipment, net of accumulated depreciation of $451.9 and $385.0 as of July 31, 2008 and January 31, 2008, respectively			630.8				616.8
Goodwill			252.1				240.5
Customer relationships, net of amortization of $22.8 and $19.7 at July 31, 2008 and January 31, 2008, respectively			106.6				103.7
Other intangible assets, net of amortization of $46.1 and $40.2 at July 31, 2008 and January 31, 2008, respectively			65.3				65.0
Deferred tax assets			1.8				4.2
Other assets			52.4				48.9
Total assets		$	1,794.2			$	1,805.9
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Bank borrowings and other notes		$	54.9			$	32.9
Current portion of long-term debt			5.0				4.8
Accounts payable			342.4				372.0
Accrued payroll and employee benefits			71.4				76.4
Liabilities held for sale			8.6				8.2
Other accrued liabilities			66.4				61.6
Total current liabilities			548.7				555.9
Long-term debt, net of current portion			601.6				572.2
Deferred tax liabilities			78.0				76.1
Pension and other long-term liabilities			322.4				328.9
Minority interest			74.7				70.5
Commitments and contingencies
Stockholders’ equity:
Preferred stock, 1,000,000 shares authorized, none issued or outstanding at July 31, 2008 or January 31, 2008			—				—
Common stock, par value $0.01 per share:
200,000,000 shares authorized; 101,116,801 and 101,057,966 issued and outstanding at July 31, 2008 and January 31, 2008, respectively			1.0				1.0
Additional paid in capital			884.2				882.0
Accumulated deficit			(990.0	)			(928.7	)
Accumulated other comprehensive income			273.6				248.0
Total stockholders’ equity			168.8				202.3
Total liabilities and stockholders’ equity		$	1,794.2			$	1,805.9

See accompanying notes to consolidated financial statements.

HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

		Six Months Ended July 31,
		2008				2007
		(Dollars in millions)
Cash flows from operating activities:
Net loss		$	(59.8	)		$	(102.4	)
Adjustments to reconcile net loss from operations to net cash provided by (used for) operating activities:
Net loss from discontinued operations			—				27.7
Depreciation and amortization			55.9				56.4
Amortization of deferred financing fees and accretion of discount			1.2				2.2
Asset impairments			7.3				0.5
Deferred income taxes			(0.5	)			4.6
Minority interest			13.3				9.5
Equity compensation expense			2.0				4.9
Loss on sale of assets and businesses			37.6				12.2
Loss on early extinguishment of debt			—				21.5
Changes in operating assets and liabilities that increase (decrease) cash flows:
Receivables			30.4				(63.2	)
Other receivables			5.1				(10.7	)
Inventories			(29.3	)			(34.6	)
Prepaid expenses and other			(1.7	)			2.1
Accounts payable and accrued liabilities			(74.3	)			62.6
Cash used for operating activities			(12.8	)			(6.7	)
Cash flows from investing activities:
Purchase of property, plant, equipment, and tooling			(43.0	)			(40.8	)
Sale of assets			(26.4	)			1.1
Cash used for investing activities			(69.4	)			(39.7	)
Cash flows from financing activities:
Changes in bank borrowings and credit facilities			20.8				(0.3	)
Repayment of long-term debt			(1.5	)			(133.3	)
Dividends paid to minority shareholders			(10.8	)			(10.1	)
Proceeds from issuance of common stock			—				193.1
Fees paid for Rights Offering			—				(31.5	)
Cash provided by financing activities			8.5				17.9
Cash flows of discontinued operations:
Net cash provided by operating activities			—				6.6
Net cash provided by investing activities			—				37.4
Net cash used for financing activities			—				(4.6	)
Net cash provided by discontinued operations			—				39.4
Effect of exchange rate changes on cash and cash equivalents			1.0				2.9
(Decrease) increase in cash and cash equivalents			(72.7	)			13.8
Cash and cash equivalents at beginning of period			160.2				38.5
Cash and cash equivalents at end of period		$	87.5			$	52.3
Supplemental data:
Cash paid for interest		$	29.2			$	32.1
Cash paid for income taxes		$	26.2			$	10.8

See accompanying notes to consolidated financial statements.

HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)

										Additional								Accumulated Other
										Paid in				Accumulated				Comprehensive
		Shares				Par Value				Capital				Deficit				Income				Total
		(Dollars in millions, except share amounts)
Balance at January 31, 2008			101,057,966			$	1.0			$	882.0			$	(928.7	)		$	248.0			$	202.3
Preferred stock dividends accrued			—				—				—				(0.3	)			—				(0.3	)
Comprehensive income:
Net loss			—				—				—				(59.8	)			—				(59.8	)
Currency translation adjustment			—				—				—				—				21.5				21.5
Unrealized gain on derivatives			—				—				—				—				4.7				4.7
Total comprehensive loss			—				—				—				—				—				(33.6	)
Shares of redeemable preferred stock of subsidiary converted into common stock			14,152				—				0.2				—				—				0.2
Shares issued for vested RSUs			44,683				—				—				—				—				—
Pension measurement date adjustment			—				—				—				(1.2	)			(0.6	)			(1.8	)
Equity compensation expense			—				—				2.0				—				—				2.0
Balance at July 31, 2008			101,116,801			$	1.0			$	884.2			$	(990.0	)		$	273.6			$	168.8
Balance at January 31, 2007			38,470,434			$	0.4			$	678.6			$	(733.6	)		$	156.4			$	101.8
Preferred stock dividends accrued			—				—				—				(0.4	)			—				(0.4	)
Comprehensive income:
Net loss			—				—				—				(102.4	)			—				(102.4	)
Currency translation adjustment			—				—				—				—				39.9				39.9
Unrealized gain on derivatives			—				—				—				—				1.7				1.7
Total comprehensive loss			—				—				—				—				—				(60.8	)
Shares of redeemable preferred stock of subsidiary converted into common stock			89,932				—				2.1				—				—				2.1
Shares issued for vested RSUs			847,341				—				—				—				—				—
Common stock issued to note holders			1,049,020				—				5.3				—				—				5.3
Common stock issued, net of fees			59,423,077				0.6				184.8				—				—				185.4
Equity compensation expense			—				—				5.0				—				—				5.0
Balance at July 31, 2007			99,879,804			$	1.0			$	875.8			$	(836.4	)		$	198.0			$	238.4

See accompanying notes to consolidated financial statements.

HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Three and six months ended July 31, 2008 and 2007

(Unaudited)

(Dollars in millions, unless otherwise stated)

Note 1. Description of Business

     These financial statements should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended January 31, 2008 as filed with the Securities and Exchange Commission on April 10, 2008.

  Description of Business

     Unless otherwise indicated, references to “us,” “we,” or “our” mean Hayes Lemmerz International, Inc., a Delaware corporation, and our subsidiaries, and references to “fiscal year” mean our fiscal year commencing on February 1 of that year and ending on January 31 of the following year (e.g., “fiscal 2008” refers to the period beginning February 1, 2008 and ending January 31, 2009, “fiscal 2007” refers to the period beginning February 1, 2007 and ending January 31, 2008).

     Originally founded in 1908, Hayes Lemmerz International, Inc. is a leading worldwide producer of aluminum and steel wheels for passenger cars and light trucks and of steel wheels for commercial trucks and trailers. We are also a supplier of automotive powertrain components. We have global operations with 22 facilities, including business and sales offices and manufacturing facilities located in 13 countries around the world. We sell our products to every major North American, Japanese, and European manufacturer of passenger cars and light trucks and to commercial highway vehicle customers throughout the world.

Note 2. Basis of Presentation

     Our unaudited interim consolidated financial statements do not include all of the disclosures required by U.S. generally accepted accounting principles (GAAP) for annual financial statements. In our opinion, all adjustments considered necessary for a fair presentation of the interim period results have been included. Operating results for the fiscal 2008 interim period presented are not necessarily indicative of the results that may be expected for the full fiscal year ending January 31, 2009.

     The preparation of consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Considerable judgment is often involved in making these determinations; the use of different assumptions could result in significantly different results. We believe our assumptions and estimates are reasonable and appropriate; however, actual results could differ from those estimates.

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

Note 3. Stock-Based Compensation

     We have a Long Term Incentive Plan (LTIP) that provides for the grant of incentive stock options (ISOs), stock options that do not qualify as ISOs, restricted shares of common stock, and restricted stock units (collectively, the awards). Any officer, director, or key employee of Hayes Lemmerz International, Inc. or any of its subsidiaries is eligible to be designated a participant in the LTIP. We follow the provisions of the Statement of Financial Accounting Standards (SFAS) 123R, “Share-Based Payment.”

     In July 2008 we issued 914,364 restricted stock units and 180,006 shares of restricted stock to our key employees and members of our Board of Directors. The 914,364 restricted stock units were issued to our key employees and will vest in February 2011. The 180,006 shares of restricted stock were issued to our Board of Directors and will vest in December 2008. As of July 31, 2008 there was $2.0 million of these unvested restricted stock outstanding, which will be expensed based on the respective vesting dates.

     In July 2008 we issued 1,268,984 stock options to our key employees and members of our Board of Directors. There were 144,384 stock options issued to our Board of Directors, which will vest in December 2008. The remaining stock options were issued to our key employees and will vest as to one-third of the options in each of February 2009, 2010, and 2011. As of July 31, 2008 there was $1.4 million of these unvested stock options outstanding, which will be expensed based on the respective vesting dates.

     In July 2008 we also issued performance cash awards to our key employees with a value of $2.4 million at target performance levels. The awards will be determined based on 50% with respect to performance through February 2010 and 50% with respect to performance through February 2011.

Note 4. Inventories

     The major classes of inventory were as follows (dollars in millions):

		July 31,				January 31,
		2008				2008
Raw materials		$	51.5			$	41.4
Work-in-process			45.2				41.8
Finished goods			87.5				62.4
Spare parts and supplies			34.2				33.5
Total		$	218.4			$	179.1

Note 5. Assets Held for Sale

     Assets held for sale consist of the following (dollars in millions):

		July 31,				January 31,
		2008				2008
Nuevo Laredo, Mexico facility		$	23.3			$	16.0
Huntington, Indiana facility			1.7				2.7
Howell, Michigan facility			1.5				2.7
Total		$	26.5			$	21.4

     The balance includes our Nuevo Laredo facility, which met the criteria for an asset held for sale during the last quarter of fiscal 2007 in accordance with Statement of Financial Accounting Standards SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (SFAS 144). The Nuevo Laredo facility is included in our Other segment and is expected to be sold during fiscal 2008. Also included in the balance are land and idle buildings in Huntington, Indiana and Howell, Michigan, which we are currently marketing for sale.

     The assets and liabilities of our Nuevo Laredo facility were as follows (dollars in millions):

		July 31,				January 31,
		2008				2008
Receivables		$	16.0			$	11.3
Inventories			5.8				4.1
Prepaid expenses			0.2				0.1
Property, plant, and equipment, net			1.3				0.5
Total assets held for sale		$	23.3			$	16.0
Accounts payable and accrued liabilities		$	8.6			$	8.0
Total liabilities held for sale		$	8.6			$	8.0

     On June 13, 2008 we sold our Hoboken, Belgium subsidiary to BBS International GmbH (BBS), a subsidiary of Punch International nv (Punch). Under the agreement, BBS acquired all of the outstanding shares of stock of Hayes Lemmerz Belgie B.V.B.A., which had operations in Hoboken (near Antwerp, Belgium). The Hoboken factory produced cast aluminum wheels for passenger cars and employed approximately 315 people. The purchase price of the transaction was not material to either party. We recorded a loss on the sale of approximately $38 million and contributed $27 million in cash as part of the transaction.

Note 6. Discontinued Operations

     On November 9, 2007 we completed the sale of our Brakes business to Brembo North America, Inc. Under the agreement, Brembo North America, Inc., a subsidiary of Brembo S.p.A., acquired all of the stock of two subsidiary companies that ran our brake manufacturing operations in Homer, Michigan and Monterrey, Mexico, and certain assets used in connection with the division’s sales, marketing, and engineering group located at our headquarters in Northville, Michigan. Proceeds from the sale were approximately $57 million. We recognized a gain on the sale of approximately $16.8 million.

     Operating results for the Brakes business were as follows (dollars in millions):

		Three Months Ended July 31,								Six Months Ended July 31,
		2008				2007				2008				2007
Net sales		$	—			$	26.2			$	—			$	56.9
Earnings before income tax expense		$	—			$	1.1			$	—			$	5.1
Income tax expense			—				0.2				—				0.9
Net income		$	—			$	0.9			$	—			$	4.2

     On June 29, 2007 we completed the sale of all of the issued and outstanding shares of capital stock of MGG Group B.V. (MGG Group) to an affiliate of ECF Group, a privately held company based in the Netherlands and Switzerland. MGG Group and its subsidiaries operate aluminum casting and machining facilities located in Tegelen and Nieuw Bergen, the Netherlands and in Antwerp, Belgium, and represented our International Components business. We received proceeds of $17.5 million. We recorded a loss on the sale of $27.5 million.

     Operating results for MGG Group were as follows (dollars in millions):

		Three Months Ended July 31,								Six Months Ended July 31,
		2008				2007				2008				2007
Net sales		$	—			$	23.8			$	—			$	55.5
Loss before income tax expense		$	—			$	(25.3	)		$	—			$	(27.5	)
Income tax benefit			—				—				—				(0.7	)
Net loss		$	—			$	(25.3	)		$	—			$	(26.8	)

     In the beginning of fiscal 2007 we divested Hayes Lemmerz International – Bristol, Inc. and Hayes Lemmerz International – Montague, Inc., which operated our suspension business operations in Bristol, Indiana and Montague, Michigan. We received consideration for the sale of approximately $26.2 million, which consisted of approximately $21.1 million in cash plus the assumption of approximately $5.1 million of debt under capital leases for equipment at the facilities. The loss recorded on the sale through July 31, 2008 was $3.2 million. In October 2006 we sold the outstanding shares of stock of Hayes Lemmerz International – Southfield, Inc., our Southfield, Michigan iron suspension components machining plant. We received net cash proceeds of approximately $18 million and recorded a loss on the sale through July 31, 2008 of $2.1 million. In fiscal 2005 we sold our suspension facility in Cadillac, Michigan. These facilities made up our suspension components business (Suspension business) and were part of our previous reported Components segment We divested these operations in order to streamline our business in North America, provide us with greater financial flexibility, and focus our global resources on core businesses.

     As of January 31, 2008, we had a balance of $0.2 million in accrued liabilities for our Suspension business. Operating results for the Suspension business were as follows (dollars in millions):

		Three Months Ended July 31,								Six Months Ended July 31,
		2008				2007				2008				2007
Net sales		$	—			$	—			$	—			$	6.8
Loss before income tax expense		$	—			$	(0.6	)		$	—			$	(5.1	)
Income tax expense			—				—				—				—
Net loss		$	—			$	(0.6	)		$	—			$	(5.1	)

     The operating results of the Brakes business, MGG Group, and Suspension business were classified as discontinued operations and prior periods have been reclassified in accordance with SFAS 144.

Note 7. Bank Borrowings, Other Notes, and Long-Term Debt

     Short term bank borrowings and other notes were $54.9 million as of July 31, 2008 with a weighted average interest rate of 6.2% and $32.9 million as of January 31, 2008 with a weighted average interest rate of 6.0%. These consist primarily of short-term credit facilities at our foreign subsidiaries.

     Long-term debt consists of the following (dollars in millions):

		July 31,				January 31,
		2008				2008
Various foreign bank and government loans, weighted average interest rates of 4.7% and 4.0% at July 31, 2008 and January 31, 2008, respectively		$	2.9			$	3.3
Term Loan maturing 2014, weighted average interest rate of 7.1% and 7.4% at July 31, 2008 and January 31, 2008, respectively			401.1				381.5
8.25% New Senior Notes due 2015			202.6				192.2
			606.6				577.0
Less current portion of long-term debt			(5.0	)			(4.8	)
Total long-term debt		$	601.6			$	572.2

Euro Denominated Debt

     The balance of our Term Loan maturing 2014 was approximately €257.4 million and €258.1 million as of July 31, 2008 and January 31, 2008 respectively. The balance of our 8.25% New Senior Notes due 2015 was €130 million as of July 31, 2008 and January 31, 2008.  Due to the fluctuation in exchange rates, the US Dollar balance of the Term Loan maturing 2014 increased from $381.5 million as of January 31, 2008 to $401.1 million as of July 31, 2008, and the balance of the 8.25% New Senior Notes due 2015 increased from $192.2 million as of January 31, 2008 to $202.6 million as of July 31, 2008. 

Rights Offering

     On March 16, 2007 we announced that our Board of Directors approved a Rights Offering of up to $180 million of common stock to our stockholders at a subscription price of $3.25 per share. The Board of Directors set the record date of April 10, 2007 for determining the stockholders entitled to participate in the Rights Offering. On April 16, 2007, the Board of Directors amended the Rights Offering, reducing the number of shares available to Deutsche Bank Securities subject to its Direct Investment option at a price of $3.25 per share from a maximum of 5,538,462 shares to a maximum of 4,038,462 shares. In addition, Deutsche Bank agreed that shares exercised pursuant to the Direct Investment would be in addition to, and not reduce the number of shares of the Company’s Common Stock offered in the Rights Offering, raising the total value of the Rights Offering and Direct Investment to $193.1 million. The Rights Offering and the Direct Investment were approved at a special meeting of stockholders held on May 4, 2007.

     In May 2007, we distributed to stockholders of record as of April 10, 2007 non-transferable subscription rights to purchase shares of our common stock in connection with the Rights Offering. Stockholders on the record date received 1.3970 rights for each share of our common stock held on the record date. The Rights Offering included an oversubscription privilege entitling holders of the rights to subscribe for additional shares not purchased upon exercise of rights. The Rights Offering was fully subscribed and Deutsche Bank

Securities, Inc. exercised the Direct Investment. On May 30, 2007 we closed on the Rights Offering and Direct Investment and issued 59,423,077 new shares of common stock. Net proceeds of $185.4 million, after fees and expenses of $7.7 million, were used to repurchase the outstanding 10 ¹ / 2 % Senior Notes due 2010 (Old Notes) pursuant to the tender offer described below, with the excess being used to provide working capital and for general corporate purposes.

   Old Notes

     As of January 31, 2007, HLI Operating Company, Inc. (HLI Opco) had $162.5 million aggregate principal amount of Old Notes that were to mature on June 15, 2010. Interest on the Old Notes accrued at a rate of 10 ¹ / 2 % per annum and was payable semi-annually in arrears on June 15 and December 15. During the first quarter of fiscal 2007, we issued common stock in exchange for $5.0 million of the Old Notes, reducing the principal amount outstanding from $162.5 million to $157.5 million. During the second quarter of fiscal 2007 these notes were repurchased by HLI Opco pursuant to the tender offer.

     Except as set forth below, the Old Notes were not redeemable at the option of HLI Opco prior to June 15, 2007. Starting on that date, HLI Opco could redeem all or any portion of the Old Notes, at once or over time, upon the terms and conditions set forth in the senior note indenture agreement (Old Indenture). At any time prior to June 15, 2007, HLI Opco could redeem all or any portion of the Old Notes, at once or over time, at a redemption price equal to 100% of the principal amount of the Old Notes to be redeemed, plus a specified “make-whole” premium.

     The Old Indenture provided 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 provided that a holder of the Old Notes could, under certain circumstances, have the right to require that we repurchase such holder’s Old Notes upon a change of control of the Company. The Old Notes were unconditionally guaranteed as to the payment of principal, premium, if any, and interest, jointly and severally on a senior, unsecured basis by us and substantially all of our domestic subsidiaries.

Tender Offer for Senior Notes

     On May 8, 2007, HLI Opco commenced a cash tender offer to repurchase all of its outstanding Old Notes, which had an aggregate principal amount outstanding of $157.5 million. Concurrently with the tender offer, HLI Opco solicited consents to amend the indenture governing the Old Notes. The tender offer expired at 11:59 p.m., Eastern Standard time, on Tuesday, June 5, 2007. The purchase price for the tendered Old Notes was based on a fixed spread of 50 basis points over the yield on the 3.625% U.S. Treasury Note due June 30, 2007. Holders who validly tendered their Old Notes and delivered their consents to the proposed amendments to the indenture on or prior to 5:00 p.m., Eastern Standard time, on May 21, 2007, were paid, in addition to the purchase price for the Old Notes, a consent payment equal to $30.00 per $1,000 in principal amount of Old Notes. Holders of approximately $154.2 million principal amount tendered their Old Notes and consented to the amendments to the Indenture. On June 6, 2007 the remaining $3.3 million in Senior Notes were tendered for redemption.

New Senior Notes

     On May 30, 2007 we closed on a new offering of €130 million 8 ¹ / 4 % senior unsecured notes (New Notes) issued by Hayes Lemmerz Finance LLC – Luxembourg S.C.A., a newly formed European subsidiary (Hayes Luxembourg). The New Notes mature in 2015 and contain customary covenants and restrictions. The New Notes and the related Indenture restrict our ability to, among other things, make certain restricted payments, incur debt and issue preferred stock, incur liens, permit dividends and other distributions by our subsidiaries, merge, consolidate, or sell assets, and engage in transactions with affiliates. The New Notes and the Indenture also contain customary events of default, including failure to pay principal or interest on the Notes or the guarantees when due, among others. The New Notes are fully and unconditionally guaranteed on a senior unsecured basis by us and substantially all of our direct and indirect domestic subsidiaries and certain of our indirect foreign subsidiaries. Proceeds from the issuance of the New Notes, together with the proceeds from the New Credit Facilities (as described below), were used to refinance obligations under our Amended and Restated Credit Agreement, dated as of April 11, 2005, to repay in full the approximately $21.8 million mortgage note on our headquarters building in Northville, Michigan, to pay related fees and expenses, and for working capital and other general corporate purposes.

     We were required to exchange the New Senior Notes for substantially identical senior notes that have been registered with the SEC (Exchange Notes).  In connection with this obligation, we were required to file a registration statement with the SEC with respect to the Exchange Notes.

The registration statement was declared effective on April 11, 2008 and the exchange offer was completed on May 12, 2008.

   Credit Facility

     On June 3, 2003 HLI Opco, entered into a $550 million senior secured credit facility (Old Credit Facility), which initially consisted of a $450 million six-year amortizing term loan (Term Loan B) and a five-year $100 million revolving credit facility.

     On April 11, 2005 we amended and restated the Old Credit Facility to establish a new second lien $150 million term loan (Term Loan C), from which 50% of the net proceeds were to be used for general corporate purposes, with the remainder of the net proceeds used to repay a portion of the Term Loan B. The Term Loan C principal balance of $150 million was due on June 3, 2010.

     On May 30, 2007 we amended and restated the credit facility to establish three new senior secured credit facilities in an amount of approximately $495 million (New Credit Facilities). The proceeds from the New Credit Facilities, together with the proceeds of other financing activities, were used to refinance our obligations under the Old Credit Facility. Additional proceeds were used to replace existing letters of credit and to provide for working capital and other general corporate purposes, and to pay the fees and expenses associated with the New Credit Facilities.

     The New Credit Facilities consist of a term loan facility of €260 million maturing in 2014 borrowed by Hayes Luxembourg, a revolving credit facility of $125 million maturing in 2013 available to HLI Opco and Hayes Luxembourg (Revolving Credit Facility), and a synthetic letter of credit facility of €15 million available to both borrowers. The interest rate for the term loan is generally the EURIBOR rate plus 2.75% per annum until the first date after October 31, 2007 that our leverage ratio is equal to or less than 2.5 to 1.0 and, thereafter, the EURIBOR rate plus 2.50% per annum. The interest rate for the Revolving Credit Facility is generally either the LIBOR rate plus 2.75% per annum (for borrowings by HLI Opco) or the EURIBOR rate plus 2.75% per annum (for borrowings by Hayes Luxembourg).

     The obligations of HLI Opco and Hayes Luxembourg under the New Credit Facility are guaranteed by us and substantially all of our direct and indirect domestic subsidiaries. In addition, the obligations of Hayes Luxembourg under the New Credit Facilities are guaranteed, subject to certain exceptions, by certain of our foreign subsidiaries. The obligations of HLI Opco and Hayes Luxembourg under the New Credit Facilities and the guarantors’ obligations under their respective guarantees of the New Credit Facilities are, subject to certain exceptions, secured by a first priority perfected pledge of substantially all capital stock owned by the borrowers and the guarantors (but not more than 65% of the capital stock of Hayes Luxembourg or any foreign subsidiary can secure HLI Opco’s obligations) and substantially all of the other assets owned by the borrowers and the guarantors. All foreign guarantees and collateral are subject to applicable restrictions on cross-stream and upstream guarantees and other legal restrictions, including financial assistance rules, thin capitalization rules, and corporate benefit rules.

     The New Credit Facilities contain negative covenants restricting our ability and the ability of our subsidiaries to, among other actions, declare dividends or repay or repurchase capital stock, cancel, prepay, redeem or repurchase debt, incur liens and engage in sale-leaseback transactions, make loans and investments, incur indebtedness, amend or otherwise alter certain debt documents, engage in mergers, acquisitions and asset sales, engage in transactions with affiliates, and alter their respective businesses. The financial covenants under the New Credit Facilities include covenants regarding a maximum total leverage ratio, a minimum interest coverage ratio and a maximum capital expenditures amount. The New Credit Facilities contain customary events of default including, without limitation, failure to pay principal and interest when due, material inaccuracy of any representation or warranty, failure to comply with any covenant, cross-defaults, failure to satisfy or stay execution of judgments in excess of specified amounts, bankruptcy or insolvency, the existence of certain materially adverse employee benefit liabilities in excess of a certain specified amount, the invalidity or impairment of any loan documents and a change of control.

     As of July 31, 2008 there were no outstanding borrowings and no letters of credit issued under the Revolving Credit Facility, and €13.6 or $21.2 million in letters of credit issued under the synthetic letter of credit facility. As of January 31, 2008 there were no outstanding borrowings, approximately $0.8 million in letters of credit issued under the Revolving Credit Facility, and approximately €14.1 million or $20.8 million in letters of credit issued under the synthetic letter of credit facility. The amount available to borrow under the Revolving Credit Facility at July 31, 2008 and January 31, 2008 was $125.0 million and $124.2 million, respectively. The

amount available to borrow under the synthetic letter of credit at July 31, 2008 and January 31, 2008 was €1.4 million and €0.9 million, respectively.

Note 8. Pension Plans and Postretirement Benefits Other Than Pensions

     We sponsor several defined benefit pension plans (Pension Benefits) and health care and life insurance benefits (Other Benefits) for certain employees around the world. We fund the Pension Benefits based upon the funding requirements of United States and international laws and regulations in advance of benefit payments and the Other Benefits as benefits are provided to the employees.

     The fiscal 2008 and fiscal 2007 amounts shown below present the Pension Benefits and Other Benefits expense for the three and six months ended July 31, 2008 and 2007 (dollars in millions):

		US Plans																International Plans
		Pension Benefits								Other Benefits								Pension Benefits
		Three Months Ended July 31,
		2008				2007				2008				2007				2008				2007
Service cost		$	0.3			$	0.2			$	—			$	—			$	0.2			$	0.1
Interest cost			2.6				2.6				2.3				2.3				1.9				1.7
Expected return on plan assets			(3.3	)			(3.0	)			—				(0.1	)			(0.3	)			(0.2	)
Amortization of net loss			(0.3	)			—				(0.3	)			(0.1	)			—				—
Net periodic benefit cost		$	(0.7	)		$	(0.2	)		$	2.0			$	2.1			$	1.8			$	1.6

		US Plans																International Plans
		Pension Benefits								Other Benefits								Pension Benefits
		Six Months Ended July 31,
		2008				2007				2008				2007				2008				2007
Service cost		$	0.5			$	0.5			$	—			$	—			$	0.4			$	0.3
Interest cost			5.2				5.2				4.7				4.7				3.8				3.3
Expected return on plan assets			(6.6	)			(6.0	)			—				—				(0.6	)			(0.4	)
Amortization of net loss			(0.5	)			—				(0.8	)			(0.2	)			—				—
Net periodic benefit cost		$	(1.4	)		$	(0.3	)		$	3.9			$	4.5			$	3.6			$	3.2

     We contributed $3.1 million to our U.S. Pension Benefits plan during the first six months of fiscal 2008 and expect to contribute an additional $3.6 million during the remainder of fiscal 2008. We contributed $7.2 million to our U.S. Other Benefits plan during the first six months of fiscal 2008 and expect to contribute an additional $6.7 million during the remainder of fiscal 2008. We contributed $5.7 million to our international Pension Benefits plan during the first six months of fiscal 2008 and expect to contribute an additional $4.3 million during the remainder of fiscal 2008.

     Effective January 31, 2007, we adopted SFAS 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans” (SFAS 158), which amends SFAS 87, “Employers’ Accounting for Pensions,” SFAS 88, “Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plan and for Termination Benefits,” SFAS 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions,” and SFAS 132 (revised 2003), “Employers’ Disclosures about Pensions and Other Postretirement Benefits.” SFAS 158 requires an employer to recognize the over funded or under funded status of defined benefit pension and postretirement plans (other than a multi employer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income. This Statement also requires an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions. During the first quarter of fiscal 2008, we recorded $1.2 million as a decrease of beginning retained earnings and $0.6 million as a decrease of accumulated other comprehensive income due to the change in measurement date.

Note 9. Asset Impairments and Other Restructuring Charges

     Asset impairment losses and other restructuring charges for the three and six months ended July 31, 2008 and 2007 were as follows (dollars in millions):

		Three Months Ended July 31, 2008
		Automotive
		Wheels				Other				Total
Facility closure costs		$	0.3			$	0.1			$	0.4
Impairment of facility, machinery, and equipment			4.6				—				4.6
Severance and other restructuring costs			0.8				—				0.8
Total		$	5.7			$	0.1			$	5.8

		Three Months Ended July 31, 2007
		Automotive
		Wheels				Other				Total
Facility closure costs		$	0.6			$	—			$	0.6
Impairment of facility, machinery, and equipment			0.4				—				0.4
Severance and other restructuring costs			—				0.5				0.5
Total		$	1.0			$	0.5			$	1.5

		Six Months Ended July 31, 2008
		Automotive
		Wheels				Other				Total
Facility closure costs		$	0.6			$	0.2			$	0.8
Impairment of facility, machinery, and equipment			7.3				—				7.3
Severance and other restructuring costs			0.9				0.1				1.0
Total		$	8.8			$	0.3			$	9.1

		Six Months Ended July 31, 2007
		Automotive
		Wheels				Other				Total
Facility closure costs		$	2.7			$	0.1			$	2.8
Impairment of facility, machinery, and equipment			0.5				—				0.5
Severance and other restructuring costs			—				0.6				0.6
Total		$	3.2			$	0.7			$	3.9

     In May 2008 we announced the closure of our Gainesville, Georgia aluminum wheels facility. We also announced that Punch Property International nv (Punch Property), the property investment company of the Punch group, entered into a definitive agreement with Hayes Lemmerz International - Georgia, Inc. to purchase the real estate and certain equipment from Gainesville. This acquisition is expected to be completed following cessation of production in connection with the closure of the facility, which is expected to occur by the end of December 2008. The purchase price of the transaction was not material to either party. We expect to incur $1.7 million in one-time termination benefits and severance related to this closure.

Asset Impairment Losses and Other Restructuring Charges for the Three Months Ended July 31, 2008

     During the second quarter of fiscal 2008, we recorded facility closure, employee restructuring charges, and asset impairments of $5.8 million.

     In the Automotive Wheels segment we recorded expense of $5.7 million. Facility closure costs of $0.3 million were related to ongoing costs for our idle aluminum wheel facilities in Howell, Michigan and Huntington, Indiana. Asset impairments of $4.6 million

were related to our aluminum wheel facilities in Gainesville, Georgia and Huntington, Indiana. These facilities were written down to fair value based on current market conditions. Severance and other restructuring costs of $0.8 million were related to our aluminum wheel facility in Gainesville, Georgia.

     Expense of $0.1 million in the Other segment was related to facility closure cost for our Ferndale, Michigan technical center, which was closed in fiscal 2007.

Asset Impairment Losses and Other Restructuring Charges for the Three Months Ended July 31, 2007

     During the second quarter of fiscal 2007, we recorded facility closure, employee restructuring charges, and asset impairments of $1.5 million.

     In the Automotive Wheels segment we recorded expense of $1.0 million, principally related to the closure of our Huntington, Indiana aluminum wheel facility as well as machinery and equipment impairments recorded at our Brazil aluminum wheel facility.

     The Other segment expense of $0.5 million was primarily related to severance expense at our facility in Nuevo Laredo, Mexico.

Asset Impairment Losses and Other Restructuring Charges for the Six Months Ended July 31, 2008

     During the first six months of fiscal 2008, we recorded facility closure, employee restructuring charges, and asset impairments of $9.1 million.

     In the Automotive Wheels segment we recorded expense of $8.8 million. Facility closure costs of $0.6 million were related to ongoing costs for our idle aluminum wheel facilities in Howell, Michigan and Huntington, Indiana. Asset impairments of $7.3 million were related to our aluminum wheel facilities in Gainesville, Georgia; Huntington, Indiana; Howell, Michigan; Hoboken, Belgium; and Chihuahua, Mexico. These facilities were written down to fair value based on current market conditions. Severance and other restructuring costs of $0.9 million were related to our aluminum wheel facility in Gainesville, Georgia.

     Expense of $0.3 million in the Other segment consisted of $0.2 million for facility closure cost and severance of $0.1 million for our Ferndale, Michigan technical center, which was closed in fiscal 2007.

Asset Impairment Losses and Other Restructuring Charges for the Six Months Ended July 31, 2007

     During the first six months of fiscal 2007, we recorded facility closure, employee restructuring charges, and asset impairments of $3.9 million.

     In the Automotive Wheels segment we recorded expense of $3.2 million, principally related to the closure of our Huntington, Indiana aluminum wheel facility as well as machinery and equipment impairments recorded at our Brazil aluminum wheel facility.

     The Other segment expense of $0.7 million consisted of $0.1 million facility closure cost at our Ferndale, Michigan technical center and $0.6 severance expense at our Nuevo Laredo facility in Mexico and our corporate offices.

Facility Exit Costs and Severance Accruals

     The following table describes the activity in the balance sheet accounts affected by severance and other facility exit costs during the six months ended July 31, 2008 (dollars in millions):

										Cash
										Payments and
										Effects of
		January 31,								Foreign				July 31, 2008
		2008 Accrual				Expense				Currency				Accrual
Facility closure costs		$	—			$	0.8			$	(0.8	)		$	—
Severance and other restructuring costs			0.2				1.0				(0.2	)			1.0
Total		$	0.2			$	1.8			$	(1.0	)		$	1.0

Note 10. Weighted Average Shares Outstanding

     Shares outstanding for the three and six months ended July 31, 2008 and 2007 were as follows (thousands of shares):

		Three Months Ended July 31,								Six Months Ended July 31,
		2008				2007				2008				2007
Basic weighted average shares outstanding			101,104				79,336				101,087				59,854
Dilutive effect of options and warrants			—				—				—				—
Diluted weighted average shares outstanding			101,104				79,336				101,087				59,854

     For the three and six months ended July 31, 2008 and 2007 all options, warrants, and unvested restricted stock units were excluded from the calculation of diluted loss per share on the Consolidated Statements of Operations as the effect was anti-dilutive due to the net loss in those periods.

Note 11. Taxes on Income

     Income tax expense allocated to continuing operations for the three and six months ended July 31, 2008 and 2007 were as follows (dollars in millions):

		Three Months Ended July 31,
		2008								2007
		US				Foreign				US				Foreign
Pre-tax loss		$	(23.2	)		$	(2.4	)		$	(23.1	)		$	(20.0	)
Income tax expense			0.4				14.2				0.5				12.8

		Six Months Ended July 31,
		2008								2007
		US				Foreign				US				Foreign
Pre-tax income (loss)		$	(41.3	)		$	22.4			$	(49.4	)		$	6.0
Income tax expense			0.7				26.9				0.7				21.1

     Income tax expense for the three and six months ended July 31, 2008 and 2007 was primarily the result of tax expense in foreign jurisdictions and various states.

     We have determined that a valuation allowance is required against all net deferred tax assets in the United States and certain deferred tax assets in foreign jurisdictions. As such, there is no federal income tax benefit recorded against current losses incurred in the United States.

     Effective February 1, 2007, we adopted Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109” (FIN 48). FIN 48 provides guidance on financial statement recognition and measurement of tax positions taken, or expected to be taken, in tax returns. The initial adoption of FIN 48 did not have a material impact on our financial statements. As of January 31, 2008, the amount of unrecognized tax benefits was $11.1 million, including $1.3 million of related accrued interest and penalties. As of July 31, 2008, the amount of unrecognized tax benefits was $10.7 million, including $1.0 million of related accrued interest and penalties.

     The amount of unrecognized tax benefits may increase or decrease in the future for various reasons including adding amounts for current tax year positions, expiration of open income tax returns due to the statutes of limitation, changes in management’s judgment about the level of uncertainty, status of examinations, litigation and legislative activity, and the addition or elimination of uncertain tax positions. Our policy is to report interest related to unrecognized tax benefits in interest expense and penalties, if any, related to unrecognized tax benefits in income tax expense in our Consolidated Statements of Operations.

     We have open tax years from primarily 2000 to 2007 with various significant taxing jurisdictions including the United States, Germany, Italy, Brazil, Turkey, and Czech Republic. These open years contain matters that could be subject to differing interpretations of applicable tax laws and regulations as they relate to the amount, timing or inclusion of revenue and expenses or the sustainability of income tax credits for a given audit cycle. We have recorded a tax benefit only for those positions that meet the more-likely-than-not standard.

Note 12. Segment Reporting

     We are organized based primarily on markets served and products produced. Under this organizational structure, our operating segments have been aggregated into two reportable segments: Automotive Wheels and Other. The Automotive Wheels segment includes results from our operations that primarily design and manufacture fabricated steel and cast aluminum wheels for original equipment manufacturers in the global passenger car, light vehicle, and commercial vehicle markets. The Other segment includes results from our operations that primarily design and manufacture powertrain components for the passenger car and light vehicle markets as well as financial results related to the corporate office and the elimination of certain intercompany activities.

     The following tables present revenues and other financial information by business segment (dollars in millions):

		Three Months Ended July 31, 2008
		Automotive
		Wheels				Other				Total
Net sales		$	550.1			$	13.4			$	563.5
Asset impairments and other restructuring charges			5.7				0.1				5.8
(Loss) earnings from operations			(12.3	)			2.0				(10.3	)

		Three Months Ended July 31, 2007
		Automotive
		Wheels				Other				Total
Net sales		$	521.2			$	22.9			$	544.1
Asset impairments and other restructuring charges			1.0				0.5				1.5
Earnings (loss) from operations			21.7				(27.7	)			(6.0	)

		Six Months Ended July 31, 2008
		Automotive
		Wheels				Other				Total
Net sales		$	1,112.1			$	25.2			$	1,137.3
Asset impairments and other restructuring charges			8.8				0.3				9.1
Earnings from operations			4.6				6.8				11.4

		Six Months Ended July 31, 2007
		Automotive
		Wheels				Other				Total
Net sales		$	988.0			$	54.7			$	1,042.7
Asset impairments and other restructuring charges			3.2				0.7				3.9
Earnings (loss) from operations			46.3				(34.2	)			12.1

		As of July 31, 2008
		Automotive
		Wheels				Other				Total
Total assets		$	1,971.8			$	(177.6	)		$	1,794.2

		As of January 31, 2008
		Automotive
		Wheels				Other				Total
Total assets		$	1,956.6			$	(150.7	)		$	1,805.9

Note 13. Minority Interest in Equity of Consolidated Subsidiaries

     The consolidated financial statements include the accounts of our majority-owned subsidiaries in which we have control. The balance sheet and results of operations of controlled subsidiaries where ownership is greater than 50 percent, but less than 100 percent,

are included in the consolidated financial statements and are offset by a related minority interest expense and liability recorded for the minority interest ownership.

     Minority interest includes common shares in consolidated subsidiaries where our ownership is less than 100 percent and preferred stock issued by HLI Opco. The preferred stock is redeemable by HLI Opco at any time after June 3, 2013, and may be exchanged at the option of the holders at any time for shares of Hayes Lemmerz International, Inc. common stock. The holders of the preferred stock are entitled to cash dividends of 8% of the liquidation preference per annum when, as, and if declared by the Board of Directors of HLI Opco. Dividends accrue without interest from the date of issuance until declared and paid or until the shares are redeemed by HLI Opco or exchanged by the holders thereof.

     The balance of minority interest is summarized as follows (dollars in millions):

						January 31,
		July 31, 2008				2008
Minority interest in consolidated affiliates		$	63.5			$	59.3
Minority interest in preferred stock			11.2				11.2
Total minority interest		$	74.7			$	70.5

Note 14. New Accounting Pronouncements

     In March 2008 the Financial Accounting Standards Board issued SFAS 161, “ Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133” (SFAS 161). This standard requires enhanced disclosures about an entity’s derivative and hedging activities.  SFAS 161 requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements.  This standard is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008 and only requires disclosures for earlier periods presented for comparative purposes beginning in the first year after the year of initial adoption.  We do not anticipate that the adoption of SFAS 161 will have a significant impact on our financial condition or results of operations.

     In December 2007 the FASB issued SFAS 141R, “ Business Combinations” (SFAS 141R).  This standard establishes principles and requirements for how the acquirer recognizes and measures the acquired identifiable assets, assumed liabilities, noncontrolling interest in the acquiree, and acquired goodwill or gain from a bargain purchase.  SFAS 141R also determines what information the acquirer must disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination.  SFAS 141R applies prospectively to business combinations for which the acquisition date is on or after January 1, 2009.  We do not anticipate that the adoption of SFAS 141R will have a significant impact on our financial condition or results of operations.

     In December 2007 the FASB issued SFAS 160, “Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51” (SFAS 160).  This standard establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary.  SFAS 160 clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements.  SFAS 160 is effective for us as of February 1, 2009 with early adoption prohibited.  SFAS 160 shall be applied prospectively as of the beginning of the fiscal year in which this standard is initially applied.  The presentation and disclosure requirements of this standard shall be applied retrospectively for all periods presented and will impact how we present and disclose noncontrolling interests and income from noncontrolling interests in our financial statements.

     In September 2006 the FASB issued SFAS 157, “Fair Value Measurements” (SFAS 157). SFAS 157 establishes a framework for measuring fair value and expands disclosures about fair value measurements. The changes to current practice resulting from the application of SFAS 157 relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. We adopted the provisions of SFAS 157 with our fiscal year beginning February 1, 2008. The adoption of SFAS 157 did not have an impact on our consolidated financial statements. In February 2008, the FASB issued FASB Staff Position (FSP) 157-2, “Effective Date of FASB Statement No. 157” (FSP 157-2). This FSP delays the effective date of SFAS 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the

financial statements on a recurring basis (at least annually). The effective date for nonfinancial assets and nonfinancial liabilities has been delayed by one year to fiscal years beginning after November 15, 2008 and interim periods within those fiscal years. We do not anticipate that the adoption of FSP 157-2 will have a significant impact on our financial condition and results of operations.

Note 15. Condensed Consolidating Financial Statements

     The following condensed consolidating financial statements present the financial information required with respect to those entities that guarantee certain of our debt.

     The condensed consolidating financial statements are presented based on the equity method of accounting. Under this method, the investments in subsidiaries are recorded at cost and adjusted for our 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.

Guarantor and Nonguarantor Financial Statements

     As of July 31, 2008 Hayes Lemmerz International, Inc. (Hayes), HLI Parent Company, Inc. (Parent), HLI Opco, and substantially all of our domestic subsidiaries and certain of our foreign subsidiaries (collectively, excluding Hayes, the Guarantors) fully and unconditionally guaranteed, on a joint and several basis, the New Notes. This guarantor structure is a result of the restructuring of our debt as discussed in Note 7, Bank Borrowings, Other Notes, and Long-term Debt. At July 31, 2008 certain of our foreign subsidiaries were not obligated to guaranty the New Notes, nor were our domestic subsidiaries that are special purpose entities formed for domestic accounts receivable securitization programs (collectively, the Nonguarantor Subsidiaries). In lieu of providing separate unaudited financial statements for each of the Guarantors, we have included the unaudited supplemental guarantor condensed consolidating financial statements. We do not believe that separate financial statements for each of the Guarantors are material to investors. Therefore, separate financial statements and other disclosures concerning the Guarantors are not presented. In order to present comparable financial statements, we have presented them as if the current guarantor structure had been in place for all periods presented.

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Six Months Ended July 31, 2008
(Unaudited)

										Guarantor				Nonguarantor
		Parent				Issuer				Subsidiaries				Subsidiaries				Eliminations				Total
		(Dollars in millions)
Net sales		$	—			$	—			$	707.8			$	475.6			$	(46.1	)		$	1,137.3
Cost of goods sold			0.1				—				641.4				406.3				(46.1	)			1,001.7
Gross profit			(0.1	)			—				66.4				69.3				—				135.6
Marketing, general, and administrative			—				0.4				54.6				23.7				—				78.7
Equity in (earnings) losses of subsidiaries and joint ventures			59.7				—				—				—				(59.7	)			—
Amortization of intangibles			—				—				0.3				5.4				—				5.7
Asset impairments and other restructuring charges			—				—				8.3				0.8				—				9.1
Other (income) expense, net			—				—				(5.2	)			16.8				19.1				30.7
(Loss) earnings from operations			(59.8	)			(0.4	)			8.4				22.6				40.6				11.4
Interest expense (income), net			—				41.7				(21.0	)			6.9				—				27.6
Other non-operating expense			—				—				0.6				1.4				0.7				2.7
(Loss) earnings from continuing operations before taxes and minority interest			(59.8	)			(42.1	)			28.8				14.3				39.9				(18.9	)
Income tax expense			—				1.7				12.2				13.7				—				27.6
(Loss) earnings from continuing operations before minority interest			(59.8	)			(43.8	)			16.6				0.6				39.9				(46.5	)
Minority interest			—				—				—				13.3								13.3
Net (loss) income		$	(59.8	)		$	(43.8	)		$	16.6			$	(12.7	)		$	39.9			$	(59.8	)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Six Months Ended July 31, 2007
(Unaudited)

										Guarantor				Nonguarantor
		Parent				Issuer				Subsidiaries				Subsidiaries				Eliminations				Total
										(Dollars in millions)
Net sales		$	—			$	—			$	679.4			$	412.1			$	(48.8	)		$	1,042.7
Cost of goods sold			0.1				—				632.8				349.3				(48.8	)			933.4
Gross profit			(0.1	)			—				46.6				62.8				—				109.3
Marketing, general, and administrative			—				—				62.2				18.6				—				80.8
Equity in (earnings) losses of subsidiaries and joint ventures			102.3				33.4				—				—				(135.7	)			—
Amortization of intangibles			—				—				0.5				4.5				—				5.0
Asset impairments and other restructuring charges			—				—				3.9				—				—				3.9
Other expense (income) , net			—				—				5.5				(137.4	)			139.4				7.5
(Loss) earnings from operations			(102.4	)			(33.4	)			(25.5	)			177.1				(3.7	)			12.1
Interest expense, net			—				7.9				21.0				5.0				—				33.9
Loss on early extinguishment of debt			—				—				21.5				—				—				21.5
Other non-operating (income) expense			—				—				(2.3	)			(1.0	)			3.4				0.1
(Loss) earnings from continuing operations before taxes and minority interest			(102.4	)			(41.3	)			(65.7	)			173.1				(7.1	)			(43.4	)
Income tax expense			—				—				11.5				10.3				—				21.8
(Loss) earnings from continuing operations before minority interest			(102.4	)			(41.3	)			(77.2	)			162.8				(7.1	)			(65.2	)
Minority interest			—				—				(0.8	)			10.3				—				9.5
(Loss) earnings from continuing operations			(102.4	)			(41.3	)			(76.4	)			152.5				(7.1	)			(74.7	)
(Loss) earnings from discontinued operations			—				—				(33.9	)			6.2				—				(27.7	)
Net (loss) income		$	(102.4	)		$	(41.3	)		$	(110.3	)		$	158.7			$	(7.1	)		$	(102.4	)