UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM ~~10-Q/A~~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 ~~April 30,~~July 31, 2001

o TRANSITION REPORT PURSUANT TO SECTION 13 ORor 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		~~(IRS Employer~~
Incorporation or Organization)		(IRS Employer Identification No.)

15300 CENTENNIAL DRIVE

NORTHVILLE, MICHIGAN 48167

(Address of Principal Executive Offices)~~(Zip~~ (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 ~~February 19,~~March 20, 2002 was 28,455,495 shares.

TABLE OF CONTENTS

~~QUARTERLY REPORT ON FORM 10-Q/A~~PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Statements Of Operations

Consolidated Balance Sheets

Consolidated Statements of Cash Flows

~~CONDENSED CONSOLIDATING BALANCE SHEET As of January 31, 2001~~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 3.1. 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

HAYES LEMMERZ INTERNATIONAL, INC.

QUARTERLY REPORT ON FORM ~~10-Q/A~~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		2926
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk		4137
PART II. OTHER INFORMATION
	Item 1.	Legal Proceedings		4238
	Item 2.	Changes in Securities and Use of Proceeds		38
	Item 3.	Defaults ~~upon~~Upon Senior Securities		38
	Item 4.	Submission of Matters to a Vote of ~~Security-Holders~~Security Holders		38
	Item 5.	Other Information		38
	Item 6.	Exhibits and Reports on Form 8-K		4239
SIGNATURES				4340

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/A~~10-Q AND THE COMPANY DOES NOT INTEND TO PROVIDE SUCH UPDATES.

~~THE COMPANY IS FILING THIS AMENDED FORM 10-Q/A QUARTERLY REPORT AS A RESULT OF THE MATTERS DISCUSSED IN NOTE 2, “RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS” BELOW.~~ EXCEPT AS SPECIFICALLY STATED OTHERWISE IN THIS ~~AMENDED~~ FORM ~~10-Q/A,~~10-Q, THE INFORMATION CONTAINED IN THE ~~AMENDED FORM 10-Q/A~~10-Q HAS NOT BEEN UPDATED TO REFLECT THE MATTERS SET FORTH IN NOTE ~~11,~~12, “SUBSEQUENT EVENTS” BELOW.

HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES

Consolidated Statements Of Operations

(Millions of dollars, except share amounts)

(Unaudited)



		As Restated

									Three Months Ended						Six Months Ended
		Three Months Ended							July 31,						July 31,
		April 30,
												(As Restated)						(As Restated)
		2001			2000				2001			2000			2001			2000

Net sales	Net sales	$	540.9		$	593.6		Net sales	$	518.5		$	540.3		$	1,059.5		$	1,134.0
Cost of goods sold	Cost of goods sold		483.3			499.3		Cost of goods sold		484.9			467.6			968.2			970.8

	Gross profit		57.6			94.3		Gross profit		33.6			72.7			91.3			163.2
Marketing, general and administration	Marketing, general and administration		26.2			24.8		Marketing, general and administration		25.9			21.8			52.2			46.6
Engineering and product development	Engineering and product development		5.9			6.2		Engineering and product development		5.7			3.2			11.6			9.4
Amortization of intangibles	Amortization of intangibles		6.7			7.0		Amortization of intangibles		6.6			6.9			13.3			13.9
Equity in losses (earnings) of joint ventures	Equity in losses (earnings) of joint ventures		0.4			(1.1	)	Equity in losses (earnings) of joint ventures		0.2			0.6			0.5			(0.5	)
Asset impairments and other restructuring charges	Asset impairments and other restructuring charges		31.0			0.5		Asset impairments and other restructuring charges		7.0			3.9			38.0			4.4
Other income, net			(0.2	)		(2.4	)
Loss on investment in joint venture								Loss on investment in joint venture		3.8			—			3.8			—
Other (income) expense, net								Other (income) expense, net		1.4			4.2			1.3			(2.0	)

	Earnings (loss) from operations		(12.4	)		59.3		Earnings (loss) from operations		(17.0	)		32.1			(29.4	)		91.4
Interest expense, net	Interest expense, net		44.2			38.8		Interest expense, net		48.8			40.0			92.9			78.8

	Earnings (loss) before taxes on income and minority interest		(56.6	)		20.5		Earnings (loss) before taxes on income, minority interest and extraordinary gain		(65.8	)		(7.9	)		(122.3	)		12.6
Income tax provision			6.3			7.3
Income tax (benefit) provision								Income tax (benefit) provision		4.1			(2.9	)		10.4			4.4

	Earnings (loss) before minority interest		(62.9	)		13.2		Earnings (loss) before minority interest and extraordinary gain		(69.9	)		(5.0	)		(132.7	)		8.2
Minority interest	Minority interest		0.8			0.9		Minority interest		1.0			0.5			1.8			1.4

	Net income (loss)	$	(63.7	)	$	12.3		Earnings (loss) before extraordinary gain		(70.9	)		(5.5	)		(134.5	)		6.8
Extraordinary gain, net of tax								Extraordinary gain, net of tax		2.7			—			2.7			—

Per share information:
								Net income (loss)	$	(68.2	)	$	(5.5	)	$	(131.8	)	$	6.8

Basic net income (loss) per share:								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	Basic net income (loss) per share	$	(2.24	)	$	0.41		Basic net income (loss) per share	$	(2.40	)	$	(0.18	)	$	(4.64	)	$	0.22

Basic average shares outstanding (in thousands)			28,455			30,356

Diluted net income (loss) per share	Diluted net income (loss) per share	$	(2.24	)	$	0.40		Diluted net income (loss) per share
								Income (loss) before extraordinary gain	$	(2.49	)	$	(0.18	)	$	(4.73	)	$	0.22
Diluted average shares outstanding (in thousands)			28,455			30,876
								Extraordinary gain, net of tax		0.09			—			0.09			—

Diluted net income (loss) per share								Diluted net income (loss) per share	$	(2.40	)	$	(0.18	)	$	(4.64	)	$	0.22

See accompanying notes to consolidated financial statements.

HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(Millions of dollars, except share amounts)



			As Restated
																	(As Restated)
			April 30,			April 30,			January 31,					July 31,			July 31,			January 31,
			2001			2000			2001					2001			2000			2001

			(Unaudited)			(Unaudited)								(Unaudited)			(Unaudited)
Assets	Assets											Assets
Current assets:	Current assets:											Current assets:
	Cash and cash equivalents		$	28.9			40.4		$	—		Cash and cash equivalents		$	45.4		$	16.6		$	—
	Receivables			252.1			204.6			256.7		Receivables			315.3			192.9			248.8
	Inventories			208.2			208.2			217.3		Inventories			207.0			228.0			217.3
	Deferred tax assets			21.9			32.2			21.9		Prepaid expenses and other			36.9			44.1			38.7
	Prepaid expenses and other			15.6			10.6			16.8
													Total current assets		604.6			481.6			504.8
		Total current assets		526.7			496.0			512.7		Net property, plant and equipment			1,039.1			1,179.4			1,104.8
Net property, plant and equipment				1,055.0			1,166.2			1,104.8
Deferred tax assets				21.5			27.4			21.5
Goodwill and other assets				944.0			1,038.4			964.9
												Goodwill and other assets			961.0			1,043.8			994.3

		Total assets	$	2,547.2		$	2,728.0		$	2,603.9			Total assets	$	2,604.7		$	2,704.8		$	2,603.9

Liabilities and Stockholders’ Equity (Deficit)	Liabilities and Stockholders’ Equity (Deficit)											Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:	Current liabilities:											Current liabilities:
	Bank borrowings		$	81.9			87.3		$	79.6		Bank borrowings		$	74.0		$	77.8		$	79.6
	Current portion of long-term debt			1,675.2			61.5			1,613.7		Current portion of long-term debt			1,858.5			70.0			1,613.7
	Accounts payable and accrued liabilities			457.4			499.3			491.6		Accounts payable and accrued liabilities			463.2			471.9			491.6

		Total current liabilities		2,214.5			648.1			2,184.9			Total current liabilities		2,395.7			619.7			2,184.9
Long-term debt, net of current portion	Long-term debt, net of current portion			87.5			1,532.0			94.6		Long-term debt, net of current portion			53.4			1,539.3			94.6
Deferred tax liabilities				72.3			61.5			68.7
Pension and other long-term liabilities	Pension and other long-term liabilities			253.5			275.9			266.9		Pension and other long-term liabilities			319.4			337.4			335.6
Minority interest	Minority interest			10.6			13.7			10.6		Minority interest			11.9			8.0			10.6

		Total liabilities		2,638.4			2,531.2			2,625.7			Total liabilities		2,780.4			2,504.4			2,625.7
Commitments and Contingencies:
Commitments and Contingencies												Commitments and Contingencies
Common stock subject to put agreement	Common stock subject to put agreement			—			8.5			—		Common stock subject to put agreement			—			8.5			—
Stockholders’ equity (deficit):	Stockholders’ equity (deficit):											Stockholders’ equity (deficit):
												Preferred stock, 25,000,000 shares authorized, none issued or outstanding			—			—			—
Common stock, par value $0.01 per share:												Common stock, par value $0.01 per share:
	Preferred stock, 25,000,000 shares authorized, none issued or outstanding			—			—			—			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
	Common stock, par value $0.01 per share:												Nonvoting — authorized 5,000,000 shares; issued and outstanding, 2,649,026 shares		—			—			—
		Voting — authorized 99,000,000 shares; 27,709,919, 27,707,919, and 27,705,019 shares issued; 25,806,469, 27,709,919, and 25,806,469 shares outstanding		0.3			0.3			0.3		Additional paid in capital			235.1			231.4			235.1
		Nonvoting — authorized 5,000,000 shares; issued and outstanding, 2,649,026 shares		—			—			—		Common stock in treasury at cost, 1,901,450 shares			(25.7	)		—			(25.7	)
	Additional paid in capital			235.1			231.4			235.1		Retained earnings (accumulated deficit)			(277.5	)		47.3			(145.7	)
	Common stock in treasury at cost, 1,901,450 shares			(25.7	)		—			(25.7	)	Accumulated other comprehensive loss			(107.9	)		(87.1	)		(85.8	)
	Retained earnings (accumulated deficit)			(209.4	)		52.8			(145.7	)
	Accumulated other comprehensive loss			(91.5	)		(96.2	)		(85.8	)		Total stockholders’ equity (deficit)		(175.7	)		191.9			(21.8	)

		Total stockholders’ equity (deficit)		(91.2	)		188.3			(21.8	)		Total liabilities and stockholders’ equity	$	2,604.7		$	2,704.8		$	2,603.9

		Total liabilities and stockholders’ equity (deficit)	$	2,547.2		$	2,728.0		$	2,603.9

See accompanying notes to consolidated financial statements.

HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Millions of dollars)

(Unaudited)



				As Restated

													Six Months Ended
				Three Months Ended									July 31,
				April,
																(As Restated)
				2001			2000						2001			2000

Cash flows from operating activities:	Cash flows from operating activities:									Cash flows from operating activities:
Net income (loss)	Net income (loss)			$	(63.7	)	$	12.3		Net income (loss)			$	(131.8	)	$	6.8
Adjustments to reconcile net income (loss) to net cash used for operating activities:	Adjustments to reconcile net income (loss) to net cash used for operating activities:									Adjustments to reconcile net income (loss) to net cash used for operating activities:
	Depreciation and tooling amortization				30.8			29.2		Depreciation and tooling amortization				61.2			59.0
	Amortization of intangibles				6.7			7.0		Amortization of intangibles				13.3			13.9
	Amortization of deferred financing fees				1.8			1.6		Amortization of deferred financing fees				3.8			3.2
	Deferred taxes				3.6			—		Increase in deferred taxes				6.0			8.6
	Asset impairments and other restructuring charges				31.0			0.5		Asset impairments and other restructuring charges				38.0			4.4
	Minority interest				0.8			0.9		Loss on investment in joint venture				3.8			—
	Equity in losses (earnings) of joint ventures				0.4			(1.1	)	Minority interest				1.8			1.4
	Changes in operating assets and liabilities that increase (decrease) cash flows:									Equity in losses (earnings) of joint ventures				0.5			(0.5	)
		Receivables			(53.1	)		(36.3	)	Extraordinary gain				(4.2	)		—
		Inventories			3.8			(17.5	)	Changes in operating assets and liabilities that increase (decrease) cash flows:
		Prepaid expenses and other			0.8			(2.1	)		Receivables			(9.4	)		7.5
		Accounts payable and accrued liabilities			(14.5	)		(110.7	)		Inventories			2.7			(37.7	)
		Other long-term liabilities			(3.8	)		(2.5	)		Prepaid expenses and other			1.2			(3.4	)
											Accounts payable and accrued liabilities			(1.2	)		(119.4	)
			Cash used for operating activities		(55.4	)		(118.7	)		Other long-term liabilities			(9.0	)		(10.9	)

												Cash used for operating activities		(23.3	)		(67.1	)

Cash flows from investing activities:	Cash flows from investing activities:									Cash flows from investing activities:
	Acquisition of property, plant and equipment				(29.9	)		(41.9	)	Acquisition of property, plant and equipment				(68.4	)		(93.0	)
	Tooling expenditures				(1.2	)		—		Tooling expenditures				(8.3	)		(2.8	)
	Other, net				(1.3	)		4.6		Increased investment in majority-owned subsidiary				—			(7.2	)
										Proceeds from termination of cross-currency swap agreements				14.6			15.9
			Cash used for investing activities		(32.4	)		(37.3	)	Other, net				(12.9	)		4.1

												Cash used in investing activities		(75.0	)		(83.0	)

Cash flows from financing activities:	Cash flows from financing activities:									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	)		—
	Increase in bank borrowings and revolver				73.1			159.9		Repayment of long-term debt from refinancing				(36.6	)		—
	Proceeds from accounts receivable securitization				47.6			12.0		Payments on accounts receivable securitization				(71.6	)		(25.0	)
	Financing fees				(2.3	)		—		Fees to amend Credit Agreement				(2.7	)		—

			Cash provided by financing activities		118.4			171.9				Cash provided by financing activities		146.0			142.4

Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents				(1.7	)		(1.4	)	Effect of exchange rate changes on cash and cash equivalents				(2.3	)		(1.6	)

	Increase in cash and cash equivalents				28.9			14.5		Increase (decrease) in cash and cash equivalents				45.4			(9.3	)
Cash and cash equivalents at beginning of year	Cash and cash equivalents at beginning of year				—			25.9		Cash and cash equivalents at beginning of year				—			25.9

Cash and cash equivalents at end of period	Cash and cash equivalents at end of period			$	28.9		$	40.4		Cash and cash equivalents at end of period			$	45.4		$	16.6

Supplemental data:	Supplemental data:									Supplemental data:
	Cash paid for interest				22.0			22.8		Cash paid for interest			$	84.0		$	86.2
	Cash paid for income taxes				0.4			1.0		Cash paid for income taxes			$	4.4		$	5.5

See accompanying notes to consolidated financial statements.

HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

~~Three~~Six Months Ended ~~April 30,~~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.

~~The Company is filing this amended Form 10-Q/ A Quarterly Report as a result of the matters discussed below in Note 2.~~

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 ~~non-compliance~~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 ~~11,~~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 ~~three~~six months ended ~~April 30,~~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 ~~September 5 and December 13, 2001,~~February 19, 2002, the Company ~~announced that it would restate its~~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 ~~because~~(the “10-Q/A”). The restatement was the result of failure by the Company ~~failed in certain instances~~ to properly apply certain accounting ~~principles~~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 also advised that the accompanying independent auditors’ reports regarding the fiscal 2000 and 1999 consolidated financial statements should not be relied upon.~~

~~HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements — (Continued)~~

~~Three Months Ended April 30, 2001 and 2000~~

~~(Unaudited)~~

~~(Millions of Dollars Unless Otherwise Stated)~~

~~(2) Restatement of Consolidated Financial Statements — (Continued)~~

The Audit Committee of the Company’s Board of Directors was given the responsibility to investigate the facts and circumstances relating to the accounting and internal control issues which gave rise to the restatement and the Company’s accounting practices, policies and procedures (the “Audit Committee Investigation”). To assist with the Audit Committee Investigation, the Audit Committee engaged the law firm of Skadden Arps Slate Meagher & Flom LLP (“Skadden Arps”) and Skadden Arps engaged the accounting firm of Ernst & Young LLP.

In addition to the Audit Committee Investigation, the Company conducted a review of its accounting records for the first quarter of fiscal 2001, fiscal 2000, and fiscal 1999 and engaged KPMG LLP to audit the Company’s restated consolidated financial statements for fiscal 2000 and 1999. On February 19, 2002, the Company filed an amended Form 10-K (the “10-K/A”) which included the restated financial statements for fiscal 2000 and fiscal 1999. The restatement adjustments reflected for the consolidated balance sheets at April 30, 2001 and 2000 include the combined effect of the restatement adjustments for fiscal 2000 and fiscal 1999, respectively, which are restated in the 10-K/A.

The Company has been ~~in contact with the staff of~~advised that the Securities and Exchange Commission (“SEC”) ~~concerning the status of the Audit Committee Investigation. 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.

~~Following are the primary categories of restatement adjustments to the Company’s previously reported financial results (millions of dollars):~~

Quarter Ended Quarter Ended
April 30, 2001 April 30, 2000
Adjustments (increasing) decreasing net income:
Deferred operating expenditures $ 8.7 $ 2.5
Unrecorded trade payables and claims 3.5 0.8
Acquisition accounting 2.2 3.7
Customer credits 0.3 1.2
Asset impairment losses 30.0 —

Total adjustments to pre-tax income (loss) 44.7 8.2
Income taxes 11.4 (4.8 )

Total adjustment to net income (loss) 56.1 3.4
Adjustments decreasing stockholders’ equity (deficit):
Tax effect of net investment hedges — 1.7

Total decrease in stockholders’ equity (deficit) $ 56.1 $ 5.1

HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

~~Three~~Six Months Ended ~~April 30,~~July 31, 2001 and 2000

(Unaudited)

(Millions of Dollars Unless Otherwise Stated)

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

~~Descriptions~~The primary categories of restatement adjustments are discussed more fully in the ~~major components~~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 ~~the first quarter of~~ fiscal ~~2001 and 2000 are as follows:~~

~~Adjustments Affecting Net Income (Loss)~~

~~Deferred Operating Expenditures~~

The Company determined that certain costs and expenses, primarily related to freight, payroll, non-reimbursable tooling, and other operating costs and expenses, were improperly capitalized or deferred.

~~Unrecorded Trade Payables and Claims~~

The Company determined that it did not record liabilities primarily for maintenance parts purchases, temporary labor, costs for exceeding certain permitted environmental emissions and other operating supplies.

~~Acquisition Accounting~~

~~The accounting for certain acquisitions did not appropriately reflect the fair values of assets acquired and liabilities assumed in accordance with generally accepted accounting principles as follows:~~

• In connection with certain acquisitions, including the acquisition of CMI International, Inc., the Company recorded an accrued liability for unfavorable customer contracts which could not be substantiated. Additionally, the Company did not record the fair value of acquired supplies inventory.
• In connection with the acquisition of Lemmerz Holding GmbH, the Company recorded an accrued liability for restructuring costs. The restructuring plan did not meet the conditions regarding the period within which the plan was required to be finalized.

~~Amounts previously charged against these accrued liabilities are reflected as operating expenses in the restated consolidated statements of operations.~~

~~Customer Credits~~

~~The Company determined that it did not record certain customer pricing adjustments.~~

~~Asset Impairment Losses~~

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 months ended April 30, 2001.

~~An additional impairment loss was recognized related to the abandonment of plans to continue to invest in the start-up of certain single-purpose equipment at another facility.~~

~~HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements — (Continued)~~

~~Three Months Ended April 30, 2001 and 2000~~

~~(Unaudited)~~

~~(Millions of Dollars Unless Otherwise Stated)~~

~~(2) Restatement of Consolidated Financial Statements — (Continued)~~

~~Income Tax Adjustments~~

The restatement adjustments discussed above affecting earnings (loss) from operations and acquisition accounting also result in adjustments to income taxes in the appropriate period. Additionally, in view of the substantial doubt regarding the Company’s ability to continue as a going concern, the Company cannot conclude that it is more likely than not that the benefits of certain deferred tax assets will be realized. Accordingly, the valuation allowance that was established in fiscal 2000 was increased in the quarter ended April 30, 2001. The tax-effect of the change in the fair value of the net investment hedges was offset by a reversal of the deferred tax asset valuation allowance, such that there was no net tax effect in the quarter ended April 30, 2001.

~~Adjustments Directly Affecting Stockholders’ Equity (Deficit)~~

The restatement adjustment affecting stockholders’ equity recognizes the deferred income tax liability in the first quarter of fiscal 2000 related to cross-currency interest rate swap agreements to hedge a portion of the Company’s net investment in foreign subsidiaries. The deferred income tax charge was recorded in the accumulated other comprehensive income section in consolidated stockholders’ equity (deficit) as part of the restatement. There was no net tax effect related to net investment hedges in the quarter ended April 30, 2001.

~~Reclassifications~~1999 through July 31, 2000.

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

• ~~All amounts outstanding with respect to the Credit Agreement and senior subordinated notes outstanding at April 30, 2001, as more fully discussed in Note (3) are classified as a current liability.~~
• The common stock subject to put agreement was reclassified from additional paid in capital at ~~April 30,~~July 31, 2000 as previously reported.

• Certain non-current deferred income tax assets and liabilities as previously reported at ~~April 30, 2001 and~~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.

HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

~~Three~~Six Months Ended ~~April 30,~~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 April 30, 2001
												Quarter Ended July 31, 2000
		As
		Previously						As				As Previously						As
		Reported			Restatements			Restated				Reported			Restatements			Restated

Net sales	Net sales	$	541.4		$	(0.5	)	$	540.9		Net sales	$	542.8		$	(2.5	)	$	540.3
Cost of goods sold	Cost of goods sold		469.5			13.8			483.3		Cost of goods sold		458.4			9.2			467.6

	Gross profit		71.9			(14.3	)		57.6		Gross profit		84.4			(11.7	)		72.7
Marketing, general and administration	Marketing, general and administration		25.1			1.1			26.2		Marketing, general and administration		24.0			(2.2	)		21.8
Engineering and product development	Engineering and product development		5.9			—			5.9		Engineering and product development		3.2			—			3.2
Amortization of intangible assets	Amortization of intangible assets		7.0			(0.3	)		6.7		Amortization of intangible assets		7.1			(0.2	)		6.9
Equity in losses of joint ventures	Equity in losses of joint ventures		0.4			—			0.4		Equity in losses of joint ventures		0.6			—			0.6
Asset impairments and other restructuring charges	Asset impairments and other restructuring charges		—			31.0			31.0		Asset impairments and other restructuring charges		—			3.9			3.9
Other income, net			(0.2	)		—			(0.2	)
Other (income) expense, net											Other (income) expense, net		(2.5	)		6.7			4.2

	Earnings (loss) from operations		33.7			(46.1	)		(12.4	)	Earnings from operations		52.0			(19.9	)		32.1
Interest expense, net	Interest expense, net		45.6			1.4			44.2		Interest expense, net		40.0			—			40.0

	Loss before taxes on income and minority interest		(11.9	)		(44.7	)		(56.6	)	Earnings (loss) before taxes on income and minority interest		12.0			(19.9	)		(7.9	)
Income tax (benefit) provision	Income tax (benefit) provision		(5.1	)		11.4			6.3		Income tax (benefit) provision		5.0			(7.9	)		(2.9	)

	Loss before minority interest		(6.8	)		(56.1	)		(62.9	)	Earnings (loss) before minority interest		7.0			(12.0	)		(5.0	)
Minority interest	Minority interest		0.8			—			0.8		Minority interest		0.5			—			0.5

	Net loss	$	(7.6	)	$	(56.1	)	$	(63.7	)	Net income (loss)	$	6.5		$	(12.0	)	$	(5.5	)

Basic net loss per share		$	(0.27	)	$	(1.97	)	$	(2.24	)
Basic net income (loss) per share											Basic net income (loss) per share	$	0.21		$	(0.39	)	$	(0.18	)

Diluted net loss per share		$	(0.27	)	$	(1.97	)	$	(2.24	)
Diluted net income (loss) per share											Diluted net income (loss) per share	$	0.21		$	(0.39	)	$	(0.18	)

108

HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

~~Three~~Six Months Ended ~~April 30, 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 April 30, 2001
As
Previously As
Reported Restatements Restated
ASSETS

Current assets:
Cash and cash equivalents $ 28.9 $ — $ 28.9
Receivables 266.3 (14.2 ) 252.1
Inventories 191.9 16.3 208.2
Deferred tax assets 42.4 (20.5 ) 21.9
Prepaid expenses and other 21.2 (5.6 ) 15.6

Total current assets 550.7 (24.0 ) 526.7
Property, plant and equipment, net 1,115.1 (60.1 ) 1,055.0
Deferred tax assets 102.2 (80.7 ) 21.5
Goodwill and other assets 1,033.5 (89.5 ) 944.0

Total assets $ 2,801.5 �� $ (254.3 ) $ 2,547.2

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Bank borrowings $ 81.9 $ — $ 81.9
Current portion of long-term debt 91.4 1,583.8 1,675.2
Accounts payable and accrued liabilities 437.6 19.8 457.4

Total current liabilities 610.9 1,603.6 2,214.5
Long-term debt, net of current portion 1,671.2 (1,583.7 ) 87.5
Deferred tax liabilities 100.2 (27.9 ) 72.3
Pension and other long-term liabilities 266.9 (13.4 ) 253.5
Minority interest 10.6 — 10.6

Total liabilities 2,659.8 (21.4 ) 2,638.4
Commitments and contingencies
Stockholders’ (deficit) equity:
Preferred stock — — —
Common stock:
Voting 0.3 — 0.3
Nonvoting — — —
Additional paid in capital 237.1 (2.0 ) 235.1
Common stock in treasury at cost (26.3 ) 0.6 (25.7 )
Retained earnings (accumulated deficit) 8.6 (218.0 ) (209.4 )
Accumulated other comprehensive loss (78.0 ) (13.5 ) (91.5 )

Total stockholders’ equity (deficit) 141.7 (232.9 ) (91.2 )

Total liabilities and stockholders’ equity (deficit) $ 2,801.5 $ (254.3 ) $ 2,547.2

~~HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements — (Continued)~~

~~Three Months Ended April 30,~~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 April 30, 2000
												Six Months Ended July 31, 2000
		As
		Previously						As				As Previously						As
		Reported			Restatements			Restated				Reported			Restatements			Restated

Net sales	Net sales	$	594.8		$	(1.2	)	$	593.6		Net sales	$	1,137.6		$	(3.6	)	$	1,134.0
Cost of goods sold	Cost of goods sold		492.9			6.4			499.3		Cost of goods sold		951.3			19.5			970.8

	Gross profit		101.9			(7.6	)		94.3		Gross profit		186.3			(23.1	)		163.2
Marketing, general and administration	Marketing, general and administration		24.5			0.3			24.8		Marketing, general and administration		48.5			(1.9	)		46.6
Engineering and product development	Engineering and product development		6.2			—			6.2		Engineering and product development		9.4			—			9.4
Amortization of intangible assets	Amortization of intangible assets		7.2			(0.2	)		7.0		Amortization of intangible assets		14.3			(0.4	)		13.9
Equity in losses of joint ventures			(1.1	)		—			(1.1	)
Equity in earnings of joint ventures											Equity in earnings of joint ventures		(0.5	)		—			(0.5	)
Asset impairments and other restructuring charges	Asset impairments and other restructuring charges		—			0.5			0.5		Asset impairments and other restructuring charges		—			4.4			4.4
Other (income) expense, net	Other (income) expense, net		(2.4	)		—			(2.4	)	Other (income) expense, net		(4.9	)		2.9			(2.0	)

	Earnings from operations		67.5			(8.2	)		59.3		Earnings from operations		119.5			(28.1	)		91.4
Interest expense, net	Interest expense, net		38.8			—			38.8		Interest expense, net		78.8			—			78.8

	Earnings before taxes on income and minority interest		28.7			(8.2	)		20.5		Earnings before taxes on income and minority interest		40.7			(28.1	)		12.6
Income tax provision	Income tax provision		12.1			(4.8	)		7.3		Income tax provision		17.1			(12.7	)		4.4

	Earnings before minority interest		16.6			(3.4	)		13.2		Earnings before minority interest		23.6			(15.4	)		8.2
Minority interest	Minority interest		0.9			—			0.9		Minority interest		1.4			—			1.4

	Net income	$	15.7		$	(3.4	)	$	12.3		Net income	$	22.2		$	(15.4	)	$	6.8

Basic net income per share	Basic net income per share	$	0.52		$	(0.11	)	$	0.41		Basic net income per share	$	0.73		$	(0.51	)	$	0.22

Diluted net income per share	Diluted net income per share	$	0.51		$	(0.11	)	$	0.40		Diluted net income per share	$	0.73		$	(0.51	)	$	0.22

129

HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

~~Three~~Six Months Ended ~~April 30,~~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 April 30, 2000
As
Previously As
Reported Restatements Restated
ASSETS

Current assets:
Cash and cash equivalents $ 40.4 $ — $ 40.4
Receivables 212.9 (8.3 ) 204.6
Inventories 190.6 17.6 208.2
Deferred tax assets — 32.2 32.2
Prepaid expenses and other 11.8 (1.2 ) 10.6

Total current assets 455.7 40.3 496.0
Property, plant and equipment, net 1,172.2 (6.0 ) 1,166.2
Deferred tax assets 128.7 (101.3 ) 27.4
Goodwill and other assets 1,048.1 (9.7 ) 1,038.4

Total assets $ 2,804.7 $ (76.7 ) $ 2,728.0

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Bank borrowings $ 87.3 $ — $ 87.3
Current portion of long-term debt 61.5 — 61.5
Accounts payable and accrued liabilities 464.2 35.1 499.3

Total current liabilities 613.0 35.1 648.1
Long-term debt, net of current portion 1,532.0 — 1,532.0
Deferred tax liabilities 114.4 (52.9 ) 61.5
Pension and other long-term liabilities 306.5 (30.6 ) 275.9
Minority interest 13.7 — 13.7

Total liabilities 2,579.6 (48.4 ) 2,531.2
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 73.8 (21.0 ) 52.8
Accumulated other comprehensive loss (88.9 ) (7.3 ) (96.2 )

Total stockholders’ equity 216.6 (28.3 ) 188.3

Total liabilities and stockholders’ equity $ 2,804.7 $ (76.7 ) $ 2,728.0

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

1310

HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

~~Three~~Six Months Ended ~~April 30,~~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

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.

~~HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements — (Continued)~~

~~Three Months Ended April 30, 2001 and 2000~~

~~(Unaudited)~~

~~(Millions of Dollars Unless Otherwise Stated)~~

~~(3) Bank Borrowings and Long-Term Debt — (Continued)~~

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 ~~Debtors~~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. If compliance with these covenants were calculated using the Company’s restated financial results for the first quarter of fiscal 2001, certain of these covenants as of April 30, 2001 would have been violated.

For purposes of these consolidated financial statements, all amounts outstanding with respect to the Credit Agreement, ~~and~~ the senior subordinated notes, and the 11 7/8% Notes outstanding at ~~April 30,~~July 31, 2001 are classified as a current liability as of ~~April 30,~~July 31, 2001. As more fully discussed above, certain portions of the amounts outstanding at April 30, 2001 under the Credit Agreement and the previous senior subordinated notes were refinanced in the second quarter of fiscal 2001 with the proceeds of the 11 7/8% Notes and the B Term Loan. The amounts outstanding with respect to the 11 7/8% Notes and the B Term Loan will be classified as a current liability upon their issuance.

~~DIP Facility~~

On December 17, 2001, the Company entered into a Revolving Credit and Guaranty Agreement among the Company, as borrower, certain subsidiaries of the Company, as guarantors, the lenders parties thereto,

1512

HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

~~Three~~Six Months Ended ~~April 30,~~July 31, 2001 and 2000

(Unaudited)

(Millions of Dollars Unless Otherwise Stated)

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

CIBC World Markets Corp., as lead arranger, Bank of America, N.A. and Salomon Smith Barney, Inc., as syndication agents, and Canadian Imperial Bank of Commerce, as administrative agent for the lenders (the “DIP Agreement”). Pursuant to the DIPTrade Securitization Agreement

In July 1998, the Company ~~has access to~~entered into a revolving credit facility (the “DIP Facility”) not to exceed $200 million with a sub-limit of $15 million for letters of credit. The Company received Bankruptcy Court approval for the DIP Agreement on December 21, 2001 (on an interim basis) and on January 28, 2002 (on a final basis). The DIP Facility is scheduled to terminate on the earlier of (a) the date of the substantial consummation of a Plan of Reorganization and (b) June 5, 2003 (eighteen months after the date of the Chapter 11 filings). As of February 14, 2002, the Company had $4.0 million in cash borrowings and had obtained $2.7 million in letters of creditthree-year trade securitization agreement pursuant to ~~the DIP Facility.~~

~~Proceeds of loans made under the DIP Facility will be used for working capital and other general corporate purposes of~~which the Company and certain of its subsidiaries ~~generally as set forth in the Company’s budget~~sold, and ~~otherwise as permitted under the DIP Agreement and approved~~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 Bankruptcy Court. The DIP Agreement permits the Company to make loans to, and obtain letters of credit under the DIP Facility to support the operations or obligations of, its foreign subsidiaries in Germany and Mexico, in an aggregate principal amount not to exceed $20 million at any one time outstanding, to fund capital expenditures, required joint venture obligations, rebate exposure of such foreign subsidiaries or costs incurred in connection with plant closures, restructuring or the sale or termination of businesses of foreign subsidiaries in Germany. Such loans may be funded either from the Company’s operations or from borrowings under the DIP Facility.

Beginning January 31, 2002, the DIP Facility requires compliance with monthly minimum consolidated and domestic EBITDA tests and limits on capital expenditures. In addition to the foregoing financial covenants, the DIP Agreement imposes certain other restrictions onCompany. Accordingly, the Company and ~~its~~such subsidiaries, ~~including~~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 ~~their ability~~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 ~~incur liens, enter into mergers, incur indebtedness, give guarantees, make investments, pay dividends or make other distributions and dispose~~July 31, 2001, the Company financed the amount of ~~assets.~~

receivables previously sold under the securitization agreement with its revolving credit facility. The ~~obligations~~impact of the Company and its subsidiary guarantors under the DIP Facility have super-priority administrative claim status as provided under the Bankruptcy Code. Under the Bankruptcy Code, a super-priority claim is senior to secured and unsecured pre-petition claims and all administrative expenses incurred in the Chapter 11 case. In addition, with certain exceptions (including a carve-out for unpaid professional fees and disbursements), the DIP Facility obligations are secured by (1) a first-priority liendiscontinued securitization program had an adverse impact on ~~all unencumbered pre- and post-petition property~~liquidity of the Company and its subsidiary guarantors, (2) a first-priority priming lien on all property of the Company and its subsidiary guarantors that is encumbered by the existing liens securing the Company’s pre-petition secured lenders and (3) a junior lien on all other property of the Company and its subsidiary guarantors that is encumbered by pre-petition liens.

Borrowings under the DIP Facility may be either ABR loans or Eurodollar loans. ABR loans are priced at 2.00% per annum plus the greatest of (i) the prime rate, (ii) the base CD rate plus 1.0% per annum, and (iii) the federal funds effective rate plus 0.5% per annum. Eurodollar loans under the DIP Facility are priced at LIBOR plus 3.50% per annum. In addition, the Company pays a commitment fee of 0.75% per annum on

~~HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements — (Continued)~~

~~Three Months Ended April 30, 2001 and 2000~~

~~(Unaudited)~~

~~(Millions of Dollars Unless Otherwise Stated)~~

~~(3) Bank Borrowings and Long-Term Debt — (Continued)~~

the unused amount of the DIP Facility commitment, payable monthly in arrears. Letters of credit are priced at 3.50% per annum on the undrawn stated amount in addition to a fronting fee of 0.25% per annum.

~~The DIP Facility provides~~approximately $71.6 million for the post-petition cash payment at certain intervals of interest accruing under the Company’s pre-petition credit agreement if certain tests are satisfied relating to the liquidity position and earnings of the Company and its subsidiaries, and the repatriation of funds from foreign subsidiaries.

The principal sources of liquidity for the Company’s future operating, capital expenditure, facility closure and other restructuring requirements are expected to be (i) cash flows from operations, (ii) proceeds from the sale of non-core assets and business, (iii) borrowings under various foreign bank and government loans and (iv) and borrowings under the DIP Facility. While the Company expects that such sources will meet these requirements, there can be no assurances that such sources will prove to be sufficient.six month period ended July 31, 2001.

(4) Derivative Financial Instruments

~~In June 1998, June 1999 and June 2000,~~On February 1, 2001, the Company adopted Financial Accounting Standards Board (“FASB”) ~~issued~~ 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”. These Statements establish accounting and reporting~~133.” The adoption of these standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. These Statements require that changes in the derivative’s fair value be recognized currently in earnings unless specific hedge accounting criteria are met.

Special accounting for qualifying hedges allows a derivative’s gains and losses to offset related results on the hedged item in the income statement or as part of accumulated other comprehensive income, and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. This accounting is effective for fiscal years beginning after June 15, 2000. The Company adopted this standard on February 1, 2001 and adoption 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 and forward currency hedges.~~agreements. At ~~both April 30,~~July 31, 2001 and January 31, 2001, the Company held $100 million and $281 million, respectively, notional amount of cross-currency interest rate swaps ~~and forward currency hedges,~~ which are recorded in the accompanying consolidated balance sheets ~~in goodwill and other assets~~ at fair ~~value~~value. At July 31, 2001 and January 31, 2001, the Company had recorded an unrealized gain of approximately ~~$15.6~~$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 ~~and forward currency hedges~~ 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 ~~146.5~~59.7 million Deutschemarks, as a hedge of foreign currency exposure of its net investment in its German ~~operations.~~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

1713

HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

~~Three~~Six Months Ended ~~April 30,~~July 31, 2001 and 2000

(Unaudited)

(Millions of Dollars Unless Otherwise Stated)

(4) Derivative Financial Instruments — (Continued)

~~hedging instruments offset~~tax asset valuation allowance such that there was no net tax effect in the ~~change in currency translation adjustments resulting from translating the foreign operations’ financial statements from their respective functional currency to the Dollar. In the first~~ quarter ~~of fiscal 2001, the Company recorded a gain of $21.0 million, net of tax of $8.1 million, on the instruments designated as hedges in Accumulated Other Comprehensive Loss.~~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:


		As Restated

		April 30,		January 31,			July 31,		January 31,
		2001		2001			2001		2001

Raw materials	Raw materials	$	55.6	$	62.3	Raw materials	$	46.9	$	49.7
Work-in-process	Work-in-process		61.1		60.1	Work-in-process		53.2		60.1
Finished goods	Finished goods		68.5		72.4	Finished goods		71.5		72.4
Spare parts and supplies	Spare parts and supplies		23.0		22.5	Spare parts and supplies		35.4		35.1

	Total	$	208.2	$	217.3	Total	$	207.0	$	217.3

(6) Property, ~~plant~~Plant and ~~equipment~~Equipment

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


		As Restated

		April 30,			January 31,				July 31,			January 31,
		2001			2001				2001			2001

Land	Land	$	29.7		$	31.2		Land	$	30.4		$	31.2
Buildings	Buildings		238.0			248.7		Buildings		234.5			248.7
Machinery and equipment	Machinery and equipment		1,109.0			1,134.9		Machinery and equipment		1,119.8			1,134.9

			1,376.7			1,414.8				1,384.7			1,414.8
Accumulated depreciation	Accumulated depreciation		(321.7	)		(310.0	)	Accumulated depreciation		(345.6	)		(310.0	)

	Net property, plant and equipment	$	1,055.0		$	1,104.8		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~~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 ~~income (loss) by the diluted weighted average shares outstanding. Diluted weighted average shares assume the exercise of stock options and warrants.~~

1814

HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

~~Three~~Six Months Ended ~~April 30,~~July 31, 2001 and 2000

(Unaudited)

(Millions of Dollars Unless Otherwise Stated)

~~(7)~~(8) Earnings ~~per share~~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 ~~April 30,~~July 31, 2001 and 2000, were as follows (in thousands):


		2001		2000
						Three Months				Six Months
Basic weighted average shares outstanding			28,455		30,356
Dilutive effect of options and warrants			—		520
						Ended				Ended
	Diluted weighted average shares outstanding		28,455		30,876
						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 ~~quarter~~three month and six month periods ending ~~April 30,~~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 quarter. For the quarter ending April 30, 2000, approximately 3.3 million shares attributable to options and warrants were excluded from the calculation of diluted earnings (loss) per share as the effect was anti-dilutive.periods.

~~(8)~~(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 ~~loss~~income (loss) for the ~~three~~six months ended ~~April 30,~~July 31, 2001 and 2000 are as follows:



		As Restated

		2001			2000				2001			2000

Net income (loss)	Net income (loss)	$	(63.7	)	$	12.3		Net income (loss)	$	(131.8	)	$	6.8
Cumulative translation adjustments	Cumulative translation adjustments		(5.7	)		(14.1	)	Cumulative translation adjustments		(22.1	)		(5.6	)

	Total comprehensive loss	$	(69.4	)	$	(1.8	)	Total comprehensive income (loss)	$	(153.9	)	$	1.2

~~(9)~~(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

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

~~HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements — (Continued)~~

~~Three Months Ended April 30, 2001 and 2000~~

~~(Unaudited)~~

~~(Millions of Dollars Unless Otherwise Stated)~~

~~(10) Segment Reporting — (Continued)~~

The following table represents revenues and other financial information by business segment for the ~~three~~six months ended ~~April 30:~~July 31:



						As Restated
		As Restated									As Restated

						Net Income										Revenue				Net income (loss)						Total Assets
		Revenue				(loss)					Total Assets
																		(As Restated)					(As Restated)					(As Restated)
		2001		2000		2001			2000		2001		2000			2001		2000		2001			2000			2001		2000

Automotive wheels	Automotive wheels	$	320.4	$	362.9	$	(9.5	)	$	9.9	$	1,330.8	$	1,496.9	Automotive wheels	$	636.8	$	699.8	$	(38.7	)	$	9.3		$	1,286.0	$	1,438.0
Cast components	Cast components		176.9		179.8		(4.0	)		0.1		917.3		954.2	Cast components		339.9		342.3		(10.8	)		(4.3	)		897.2		951.3
Other	Other		43.6		50.9		(50.2	)		2.3		299.1		276.9	Other		82.8		91.9		(82.3	)		1.8			421.5		315.5

	Total	$	540.9	$	593.6	$	(63.7	)	$	12.3	$	2,547.2	$	2,728.0	Total	$	1,059.5	$	1,134.0	$	(131.8	)	$	6.8		$	2,604.7	$	2,704.8

~~(11)~~(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, of the Bankruptcy Court.~~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.~~financing (the “DIP facility”). Subsequently, on January 28, 2002, the Bankruptcy Court granted final approval toof a $200 million ~~debtor-in-possession financing~~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.

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 ~~programs.~~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 ~~are seeking~~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.

~~HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements — (Continued)~~

~~Three Months Ended April 30, 2001 and 2000~~

~~(Unaudited)~~

~~(Millions of Dollars Unless Otherwise Stated)~~

~~(11) Subsequent Events — (Continued)~~

unexpired leases ~~will~~generally must be ~~subject to separate~~filed with the Bankruptcy Court by the later of (a) the general claims bar ~~dates, generally~~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 ~~the~~ 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. Generally, the Debtors have up to 120 days, or a longer period of time subject to approval by the Bankruptcy Court, after the date of filing to assume or reject executory contracts and certain 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.

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.

~~HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements — (Continued)~~

~~Three Months Ended April 30, 2001 and 2000~~

~~(Unaudited)~~

~~(Millions of Dollars Unless Otherwise Stated)~~

~~(11) Subsequent Events — (Continued)~~

(“ (“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 ~~June 2001,~~February 2002, the Company committed to a plan to close its manufacturing facility in ~~Petersburg, Michigan, and in November 2001, committed to a plan to close its manufacturing facility in Bowling Green,~~Somerset, Kentucky.

The Company ~~recorded~~will record asset impairment losses with respect to ~~the Petersburg~~this facility of ~~$28.5~~$6.3 million during the first quarter of fiscal 2001 (see Note 2). In connection with the closure of this facility (which commenced during December 2001), the Company will record a restructuring charge of $0.5 million duringin the fourth quarter of fiscal 2001. ~~These restructuring charges relate to security and other maintenance costs subsequent to the shutdown date, and are expected to be paid during fiscal 2001 and 2002.~~

In connection with the closure of the ~~Bowling Green~~Somerset facility (which ~~is planned to begin~~commenced during ~~July~~February 2002), the Company will record ~~during~~an estimated restructuring charge of $4.4 million in the ~~fourth~~first quarter of fiscal ~~2001 asset impairment losses of $45.5 million and other restructuring charges of $10.7 million. These restructuring charges relate~~2002. This charge relates to the termination of leases and other closure costs, including security and maintenance costs subsequent to the shutdown date, and ~~are~~is expected to be paid during fiscal 2002 and 2003.

Other Subsequent Events

Other events occurring subsequent to July 31, 2001 ~~and 2002.~~

~~Reduction~~regarding a new management team, the market for the Company’s common stock, facility closures, a reduction of the Company’s North American ~~Salaried Workforce~~salaried

On November 2, 2001, the Company announced the immediate elimination of 145 positions or approximately 11% of its salaried workforce. In addition, the Company announced that it would offer an early retirement option to approximately 45 salaried employees. In connection with the elimination of the 145 positions, the Company will record a restructuring charge of $1.7 million in the fourth quarter of fiscal 2001. Most of the cash required to fund this charge is for severance benefits and will be paid by the end of fiscal 2001. Of the 45 employees offered an early retirement option, 30 have accepted by December 15, 2001, the acceptance date. In connection with this early retirement offer, the Company will record a restructuring charge of $3.9 million in the fourth quarter of fiscal 2001 primarily related to continued medical benefits and supplemental retirement benefits which are expected to be paid over a period of up to 9 years commencing in fiscal 2002.

~~Sale of Non-Core Businesses~~

During the third quarter of fiscal 2001, the Company sold its 25% interest in a Canadian joint venture for cash proceeds of approximately $9 million. During the fourth quarter of fiscal 2001, the Company sold its tire

2218

HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

~~Three~~Six Months Ended ~~April 30,~~July 31, 2001 and 2000

(Unaudited)

(Millions of Dollars Unless Otherwise Stated)

~~(11)~~(12) Subsequent Events — (Continued)

workforce, sale of non-core businesses, and ~~wheel assembly business (including a 49% joint venture~~legal proceedings are more fully discussed in ~~Portugal) for cash proceeds of approximately $12 million.~~the Company’s Annual Report on Form 10-K/ A, and the notes to the consolidated financial statements contained therein.

~~Leases~~

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.

~~Legal Proceedings~~

Following the announcements of the restatement, several lawsuits were filed by and purportedly on behalf of shareholders of the Company naming as defendants a combination of the Company, Ranko Cucuz, former Chairman of the Board and Chief Executive Officer of the Company, and William Shovers, former Vice President — Finance and Chief Financial Officer of the Company. These lawsuits are seeking class action status, but no class has yet been certified in these matters. Due to the Company filing a petition under Chapter 11 of the United States Bankruptcy Code on December 5, 2001, this litigation against the Company is now subject to the automatic stay.

~~(12)~~(13) Guarantor and ~~Nonguarantor~~Non-Guarantor Financial Statements

~~The~~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 ~~April 30,~~July 31, 2001 and January 31, 2001, and for the ~~three~~six month periods ended ~~April 30,~~July 31, 2001 and 2000, of (a) Hayes Lemmerz International, Inc., the parent, (b) the guarantor subsidiaries (as defined), (c) the ~~nonguarantor~~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 ~~nonguarantor~~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.

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 )

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

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

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

HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

~~Three~~Six Months Ended ~~April 30,~~July 31, 2001 and 2000

(Unaudited)

(Millions of Dollars Unless Otherwise Stated)

~~(12)~~(13) Guarantor and ~~Nonguarantor~~Non-Guarantor Financial Statements — (Continued)

Condensed Consolidating ~~Statements~~Statement of ~~Operations~~Cash Flows

For the ~~Three Months Ended April 30,~~six months ended July 31, 2001 ~~As Restated~~

Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
Net sales $ 70.4 $ 123.6 $ 349.2 $ (2.3 ) $ 540.9
Cost of goods sold 61.0 113.9 310.7 (2.3 ) 483.3

Gross profit 9.4 9.7 38.5 — 57.6
Marketing, general and administration 3.9 6.4 15.9 — 26.2
Engineering and product development 0.9 1.8 3.2 — 5.9
Amortization of intangibles 0.3 1.9 4.5 — 6.7
Equity in (earnings) loss of subsidiaries and joint ventures 53.2 12.4 — (65.2 ) 0.4
Asset impairments and other
restructuring charges — — 31.0 — 31.0
Other income, net (0.1 ) — (0.1 ) — (0.2 )

Earnings (loss) from operations (48.8 ) (12.8 ) (16.0 ) 65.2 (12.4 )
Interest expense, net 14.8 11.0 18.4 — 44.2

Earnings (loss) before taxes on income and minority interest (63.6 ) (23.8 ) (34.4 ) 65.2 (56.6 )
Income tax provision 0.1 0.2 6.0 — 6.3

Earnings (loss) before minority interest (63.7 ) (24.0 ) (40.4 ) 65.2 (62.9 )
Minority interest — — 0.8 — 0.8

Net income (loss) $ (63.7 ) $ (24.0 ) $ (41.2 ) $ 65.2 $ (63.7 )

~~Condensed Consolidating Statements of Operations~~

~~For the Three Months Ended April 30, 2000, As Restated~~

Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
Net sales $ 81.1 $ 175.0 $ 342.6 $ (5.1 ) $ 593.6
Cost of goods sold 66.6 145.9 291.9 (5.1 ) 499.3

Gross profit 14.5 29.1 50.7 — 94.3
Marketing, general and administration 1.6 5.8 17.4 — 24.8
Engineering and product development 1.5 1.8 2.9 — 6.2
Amortization of intangibles 0.3 1.9 4.8 — 7.0
Equity in (earnings) loss of subsidiaries and joint ventures (9.1 ) 2.9 (0.2 ) 5.3 (1.1 )
Other expense (income), net — — (1.9 ) — (1.9 )

Earnings (loss) from operations 20.2 16.7 27.7 (5.3 ) 59.3
Interest expense, net 5.6 14.4 18.8 — 38.8

Earnings (loss) before taxes on income and minority interest 14.6 2.3 8.9 (5.3 ) 20.5
Income tax provision 2.3 1.9 3.1 — 7.3

Earnings (loss) before minority interest 12.3 0.4 5.8 (5.3 ) 13.2
Minority interest — — 0.9 — 0.9

Net income (loss) $ 12.3 $ 0.4 $ 4.9 $ (5.3 ) $ 12.3

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

HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

~~Three~~Six Months Ended ~~April 30, 2001 and 2000~~

~~(Unaudited)~~

~~(Millions of Dollars Unless Otherwise Stated)~~

~~(12) Guarantor and Nonguarantor Financial Statements — (Continued)~~

~~Condensed Consolidating Balance Sheets~~

~~As of April 30, 2001, As Restated~~

Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
Cash and cash equivalents $ 2.8 $ 0.1 $ 26.0 $ — $ 28.9
Receivables 50.8 7.2 194.1 — 252.1
Inventories 26.6 36.6 145.0 — 208.2
Prepaid expenses and other 7.9 11.3 29.3 (11.0 ) 37.5

Total current assets 88.1 55.2 394.4 (11.0 ) 526.7
Net property, plant and equipment 142.6 235.8 676.6 — 1,055.0
Goodwill and other assets 1,158.6 189.0 598.9 (981.0 ) 965.5

Total assets $ 1,389.3 $ 480.0 $ 1,669.9 $ (992.0 ) $ 2,547.2

Bank borrowings $ — $ — $ 81.9 $ — $ 81.9
Current portion of long-term debt 1,659.9 — 14.7 0.6 1,675.2
Accounts payable and accrued liabilities 34.9 79.9 348.4 (5.8 ) 457.4

Total current liabilities 1,694.8 79.9 445.0 (5.2 ) 2,214.5
Long-term debt, net of current portion — — 87.5 �� 87.5
Pension and other long-term liabilities 70.1 50.0 133.4 — 253.5
Deferred tax liabilities 2.0 3.0 67.3 — 72.3
Minority interest — — 10.6 — 10.6
Parent loans (286.4 ) 269.3 17.1 — —

Total liabilities 1,480.5 402.2 760.9 (5.2 ) 2,638.4
Common stock 0.3 — — — 0.3
Additional paid-in capital 235.1 135.8 1,114.3 (1,250.1 ) 235.1
Retained earnings (accumulated deficit) (209.4 ) (57.0 ) (80.3 ) 137.3 (209.4 )
Common stock in treasury at cost (25.7 ) — — — (25.7 )
Accumulated other comprehensive income (loss) (91.5 ) (1.0 ) (125.0 ) 126.0 (91.5 )

Total stockholders’ equity (91.2 ) 77.8 909.0 (986.8 ) (91.2 )

Total liabilities and stockholders’ equity $ 1,389.3 $ 480.0 $ 1,669.9 $ (992.0 ) $ 2,547.2

~~HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements — (Continued)~~

~~Three Months Ended April 30, 2001 and 2000~~

~~(Unaudited)~~

~~(Millions of Dollars Unless Otherwise Stated)~~

~~(12) Guarantor and Nonguarantor Financial Statements — (Continued)~~

~~CONDENSED CONSOLIDATING BALANCE SHEET~~

~~As of January~~July 31, ~~2001~~

Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
Cash and cash equivalents $ (19.3 ) $ 0.2 $ 19.1 $ — $ —
Receivables 68.2 2.6 185.9 — 256.7
Inventories 34.4 41.9 141.0 — 217.3
Prepaid expenses and other 7.0 8.7 35.1 (12.1 ) 38.7

Total current assets 90.3 53.4 381.1 (12.1 ) 512.7
Net property, plant and equipment 143.3 240.0 721.5 — 1,104.8
Goodwill and other assets 1,220.9 208.1 631.4 (1,074.0 ) 986.4

Total assets $ 1,454.5 $ 501.5 $ 1,734.0 $ (1,086.1 ) $ 2,603.9

Bank borrowings $ — $ — $ 79.6 $ — $ 79.6
Current portion of long-term debt 1,597.5 — 15.6 0.6 1,613.7
Accounts payable and accrued liabilities 29.0 98.1 373.5 (9.0 ) 491.6

Total current liabilities 1,626.5 98.1 468.7 (8.4 ) 2,184.9
Long-term debt, net of current portion — — 94.6 — 94.6
Deferred tax liabilities 2.0 3.0 63.7 — 68.7
Pension and other long-term liabilities 70.5 53.1 143.1 0.2 266.9
Minority interest — — 10.6 — 10.6
Parent loans (222.7 ) 245.4 (22.7 ) — —

Total liabilities 1,476.3 399.6 758.0 (8.2 ) 2,625.7
Common stock 0.3 — — — 0.3
Additional paid-in capital 235.1 135.8 1,114.3 (1,250.1 ) 235.1
Common stock in treasury at cost (25.7 ) — — — (25.7 )
Retained earnings (accumulated deficit) (145.7 ) (32.9 ) (39.4 ) 72.3 (145.7 )
Accumulated other comprehensive loss (85.8 ) (1.0 ) (98.9 ) 99.9 (85.8 )

Total stockholders’ equity (deficit) (21.8 ) 101.9 976.0 (1,077.9 ) (21.8 )

Total liabilities and stockholder’s equity $ 1,454.5 $ 501.5 $ 1,734.0 $ (1,086.1 ) $ 2,603.9

~~HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements — (Continued)~~

~~Three Months Ended April 30,~~ 2001 and 2000

(Unaudited)

(Millions of Dollars Unless Otherwise Stated)

~~(12)~~(13) Guarantor and ~~Nonguarantor~~Non-Guarantor Financial Statements — (Continued)

Condensed Consolidating Statement of Cash Flows

For the ~~three~~six months ended ~~April 30, 2001, As Restated~~

Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
Cash flows used for operating activities $ 9.9 $ (43.2 ) $ (22.1 ) $ — $ (55.4 )
Cash flows from investing activities:
Acquisition of property, plant and equipment (0.5 ) (1.2 ) (28.2 ) — (29.9 )
Tooling expenditures (0.6 ) (0.6 ) — — (1.2 )
Other, net (5.7 ) 4.2 0.2 — (1.3 )

Cash used for investing activities (6.8 ) 2.4 (28.0 ) — (32.4 )
Cash flows from financing activities:
Increase in bank borrowings and revolver 67.3 — 5.8 — 73.1
Proceeds from accounts receivable securitization 17.6 16.9 13.1 — 47.6
Financing fees (2.3 ) — — — (2.3 )

Cash provided by financing activities 82.6 16.9 18.9 — 118.4
Increase (decrease) in parent loans and advances (63.6 ) 23.8 39.8 — —
Effect of exchange rates of cash and cash equivalents — — (1.7 ) — (1.7 )

Net increase (decrease) in cash and cash equivalents 22.1 (0.1 ) 6.9 — 28.9
Cash and cash equivalents at beginning of period (19.3 ) 0.2 19.1 — —

Cash and cash equivalents at end of period $ 2.8 $ 0.1 $ 26.0 $ — $ 28.9

~~HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Financial Statements — (Continued)~~

~~Three Months Ended April 30, 2001 and 2000~~

~~(Unaudited)~~

~~(Millions of Dollars Unless Otherwise Stated)~~

~~(12) Guarantor and Nonguarantor Financial Statements — (Continued)~~

~~Condensed Consolidating Statement of Cash Flows~~

~~For the three months ended April 30,~~July 31, 2000, As Restated


						Guarantor			Nonguarantor					Consolidated								Guarantor			Non-guarantor					Consolidated
			Parent			Subsidiaries			Subsidiaries			Eliminations		Total					Parent			Subsidiaries			Subsidiaries			Eliminations		Total

Cash flows used for operating activities	Cash flows used for operating activities		$	(13.4	)	$	(66.9	)	$	(38.4	)	$	—	$	(118.7	)	Cash flows used for operating activities		$	(18.4	)	$	(40.4	)	$	(8.3	)		—		(67.1	)

Cash flows from investing activities:	Cash flows from investing activities:																Cash flows from investing activities:
	Acquisition of property, plant and equipment			(14.7	)		(5.8	)		(21.4	)		—		(41.9	)	Acquisition of property, plant, equipment and tooling			(7.4	)		(15.3	)		(73.1	)		—		(95.8	)
	Other, net			8.6			0.6			(4.6	)		—		4.6		Other, net			2.1			(0.3	)		11.0			—		12.8

		Cash used for investing activities		(6.1	)		(5.2	)		(26.0	)		—		(37.3	)		Cash used for investing activities		(5.3	)		(15.6	)		(62.1	)		—		(83.0	)

Cash flows from financing activities:	Cash flows from financing activities:																Cash flows from financing activities:
																	Increase in bank borrowings and revolver			149.6			—			17.8			—		167.4
	Increase in bank borrowings and revolver			139.2			—			20.7			—		159.9		Proceeds (payments) on accounts receivable securitization			6.6			(24.2	)		(7.4	)		—		(25.0	)
	Proceeds from accounts receivable securitization			5.9			3.7			2.4			—		12.0
																		Cash provided by financing activities		156.2			(24.2	)		10.4			—		142.4
		Cash provided by financing activities		145.1			3.7			23.1			—		171.9
Increase (decrease) in parent loans and advances	Increase (decrease) in parent loans and advances			(135.2	)		68.4			66.8			—		—		Increase (decrease) in parent loans and advances			(131.7	)		80.2			51.5			—		—
Effect of exchange rates of cash and cash equivalents	Effect of exchange rates of cash and cash equivalents			—			—			(1.4	)		—		(1.4	)	Effect of exchange rates of cash and cash equivalents			—			—			(1.6	)		—		(1.6	)

		Net increase (decrease) in cash and cash equivalents		(9.6	)		—			24.1			—		14.5			Net increase (decrease) in cash and cash equivalents		0.8			—			(10.1	)		—		(9.3	)
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period			6.8			0.1			19.0			—		25.9		Cash and cash equivalents at beginning of period			6.8			0.1			19.0			—		25.9

Cash and cash equivalents at end of period	Cash and cash equivalents at end of period		$	(2.8	)	$	0.1		$	43.1		$	—	$	40.4		Cash and cash equivalents at end of period		$	7.6		$	0.1		$	8.9		$	—	$	16.6

2825

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,~~Consolidated Financial Statements, related notes thereto and the other information included elsewhere ~~herein.~~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

Chapter 11 Filings

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 toof 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 ~~programs.~~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 ~~are seeking~~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 ~~these~~any such rejections may file proofs of claim with the Bankruptcy Court in accordance with the reorganization process. ~~These~~Proof of claims for damages resulting from the rejection of executory contracts or unexpired leases ~~will~~generally must be ~~subject to separate~~filed with the Bankruptcy Court by the later of (a) the general claims bar ~~dates, generally~~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 ~~the~~ 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. Generally, the Debtors have up to 120 days, or a longer period of time subject to approval by the Bankruptcy Court, after the date of filing to assume or reject executory contracts and certain 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.
29

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.

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.

(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

accounting errors and irregularities in the Company’s financial statements were identified. ~~The Company also advised that the accompanying independent auditors’ reports regarding fiscal 2000 and 1999 consolidated financial statements should not be relied upon.~~

In addition to the Audit Committee Investigation, the Company conducted a review of its accounting records for fiscal 2000 and fiscal 1999 and engaged KPMG LLP to audit the Company’s restated consolidated financial statements for fiscal 2000 and 1999. The cumulative restatement of the Company’s fiscal 2000 and 1999 financial statements reduces the Company’s consolidated stockholders’ equity as of January 31, 2001 by approximately $177.2 million, from amounts previously reported. The amended Form 10-K (the “10-K/A”) was filed on February 19, 2002 and included the restated consolidated financial statements. In addition, the Company’s consolidated financial statements for the quarter ended April 30, 2001 were also restated.

Following the announcements of the restatements, several lawsuits were filed by and purportedly on behalf of the shareholders of the Company naming as defendants, a combination of the Company, Mr. Cucuz and Mr. Shovers. These lawsuits are seeking class action status, but no class has yet been certified in these matters. As discussed above, due to the fact that the Company filed a petition under Chapter 11 of the Bankruptcy Code on December 5, 2001, this litigation against the Company is now subject to the automatic stay.

~~The Company has been in contact with the staff of the Securities and Exchange Commission (the “SEC”) concerning the status of the Audit Committee Investigation.~~ 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.

~~New Management Team~~Facility Closures

As more fully discussed ~~at Part I, Item 1. “Business — Recent Developments — New Management Team”~~ in Note 12 to the ~~Company’s Annual Report Form 10-K/A for fiscal 2000 filed with the SEC on February 19, 2002, a number of changes in the Company’s Officers, Directors and senior operating and~~consolidated financial ~~management occurred since April 30, 2001.~~

~~Facility Closures~~

~~In June 2001,~~statements included herein, the Company committed to a plan in February 2002 to close its manufacturing facility in ~~Petersburg, Michigan, and in November 2001, committed to a plan to close its manufacturing facility in Bowling Green,~~Somerset, Kentucky.

The Company recorded asset impairment losses with respect to the Petersburg facility of $28.5 million during the first quarter of fiscal 2001. In connection with the closure of this facility (which commenced during December 2001), the Company will record a restructuring charge of $0.5 million during the fourth quarter of fiscal 2001. These restructuring charges relate to security and other maintenance costs subsequent to the shutdown date, and are expected to be paid during fiscal 2001 and 2002.

In connection with the closure of the Bowling Green facility (which is planned to begin during July 2002), the Company will record during the fourth quarter of fiscal 2001 asset impairment losses of $45.5 million and other restructuring charges of $10.7 million. These restructuring charges relate to the termination of leases and other closure costs, including security and maintenance costs subsequent to the shutdown date, and are expected to be paid during fiscal 2001 and 2002.

Bank Borrowings and Long-Term Debt

See ~~Part I, Item 1, Notes~~Note 3 to ~~Consolidated Financial Statements, Note (3) “Bank Borrowings and Long-Term Debt”~~the consolidated financial statements included herein for a discussion of certain transactions and events ~~occurring after April 30, 2001~~ which affect the amount and classification of a significant portion of the Company’s debt.

~~Reduction of North American Salaried Workforce~~

Results of Operations

~~Three Months Ended April 30, 2001 Compared to Three Months Ended April 30, 2000~~

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.

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

Net Sales



		As Restated								(As Restated)

		2001		2000		% Change				2001		2000		% Change


		(millions)								(millions)
Automotive Wheels	Automotive Wheels	$	320.4	$	362.9		(11.7	)%	Automotive Wheels	$	309.4	$	336.8		(8.1	)%
Components	Components		176.9		179.8		(1.6	)	Components		163.0		162.6		0.3
Other	Other		43.6		50.9		(14.3	)	Other		46.1		40.9		12.7

	Total	$	540.9	$	593.6		(8.9	)	Total	$	518.5	$	540.3		(4.0	)

The Company’s net sales for the ~~first~~second quarter of fiscal 2001 were ~~$540.9~~$518.5 million, a decrease of ~~8.9%~~4.0% as compared to net sales of ~~$593.6~~$540.3 million for the ~~first~~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 ~~completion~~termination of certain original equipment manufacturer (“OEM”) platforms aton the Company’s North American operations.

Net sales from the Company’s Automotive Wheels segment decreased ~~11.7%~~8.1% from ~~$362.9~~$336.8 million in the ~~first~~ three months ~~of fiscal~~ended July 31, 2000 to ~~$320.4~~$309.4 million in the ~~first three months of fiscal~~same period in 2001. This was primarily due to a ~~$50.1~~$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 ~~$9.7~~$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 ~~is net of~~was partially offset by an approximate $15.6 million decline in the ~~impact of the approximately 7% decrease in~~ value of European currencies relative to the U.S. dollar between the ~~first~~second quarter of ~~2000~~2001 and ~~2001.~~2000.

Components net sales ~~decreased 1.6% from $179.8 million in~~were essentially unchanged for the three months ending ~~April 30, 2000~~July 31, 2001 compared to ~~$176.9 million in~~ the same period in ~~2001. Lower~~2000. The impact of lower OEM production levels and the build-out and ~~completion~~termination of certain customer platforms reduced net sales from the Company’s North American operations ~~by $17.9 million from the three months ending April 30, 2000 to the same period in 2001. This decrease was partially~~were offset by ~~a $15.0 million~~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 ~~MGG~~non-core aluminum operations, collectively called Metaalgieterij Giesen B. V. (“MGG”) in Europe.

Other net sales ~~decreased 14.3%~~increased 12.7% from ~~$50.9~~$40.9 million in the three months ending ~~April 30,~~July 31, 2000 to ~~$43.6~~$46.1 million in the same period in 2001. This ~~decrease~~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 ~~first~~second quarter of fiscal 2001 decreased to ~~$57.6~~$33.6 million or ~~10.7%~~6.5% of net sales as compared to ~~$94.3~~$72.7 million or ~~15.9%~~13.5% of net sales for the ~~first~~second quarter of fiscal 2000.

The Company’s gross profit from Automotive Wheels decreased ~~$25.8~~$36.0 million from ~~first~~the second quarter of fiscal 2000 compared to the same period in fiscal 2001. Gross profit from the Company’s North American operations decreased ~~$28.8~~$34.8 million from the three months ended ~~April 30,~~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 ~~$9.4~~$20.1 million and $11.7 million, respectively. Lower OEM production requirements in North America reduced gross profit by approximately ~~$7.6~~$3.0 million. The decrease in gross profit from the Company’s North American operations was partially offset by a ~~$4.0~~$1.0 million increase in gross profit primarily due to improved operating performance at various foreign operations.

Gross profit from Components decreased ~~$8.0~~$2.8 million from the ~~first~~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 ~~$2.9~~$0.4 million from the ~~first~~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 ~~$26.2~~$25.9 million or ~~4.8%~~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.

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 ~~quarter~~six months of fiscal ~~2001~~2000.

The Company’s gross profit from ~~$24.8~~Automotive Wheels decreased $61.8 million ~~or 4.2% of net sales for~~from the first ~~quarter~~six months of fiscal ~~2000.~~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 ~~as a percent~~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 ~~net sales principally reflects~~fiscal 2000 compared to the same period in fiscal 2001. This decrease is primarily due to lower ~~sales volumes~~operating performance, lower OEM production requirements and the inefficiencies arising from lower production in the ~~first quarter of fiscal~~North American operations. The decrease was partially offset by improved operating performance at the Company’s MGG

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 ~~decreased 4.8%~~increased from ~~$6.2~~$9.4 million or ~~1.0%~~0.8% of net sales in the ~~first quarter of fiscal~~six months ended July 31, 2000 to ~~$5.9~~$11.6 million or 1.1% of net sales ~~for~~in the ~~first quarter of~~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 ~~$1.5~~$1.0 million to ~~$0.4~~$0.5 million of losses for the first ~~quarter~~six months of fiscal 2001 as compared to ~~$1.1~~$0.5 million of earnings for the same period in fiscal 2000. This decrease primarily reflects ~~market conditions impacting the Company’s Mexico joint venture and~~ reduced sales volume and profit associated with the Company’s interest in Reynolds-Lemmerz Industries, Canada.

Asset Impairments and Other Restructuring Charges

~~See Part I, Item 1, Notes~~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 ~~Consolidated Financial Statements, Note (2) “Restatement~~the Company’s Petersburg, Michigan facility, $0.6 million of ~~Consolidated Financial Statements” included herein for a discussion~~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.

In the restatement of the Company’s financial statements for the six months ended July 31, 2000, the Company recorded an asset ~~impairments~~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 ~~charges.~~costs in its wheel operations in Germany during the second quarter of fiscal 2000.

Interest Expense, net

Interest expense was ~~$44.2~~$92.9 million for the ~~first~~second quarter of fiscal 2001 compared to ~~$38.8~~$78.8 million for the ~~first~~second quarter of fiscal 2000. This increase primarily reflects higher outstanding ~~borrowings and increased interest rates.~~borrowings.

Liquidity and Capital Resources

Chapter 11 Filings

As ~~described under Part I, Item 1-Note (11) “Subsequent Events” herein,~~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

~~On December 17, 2001,~~The Bankruptcy Court has approved the ~~Company entered into~~Company’s request for a ~~Revolving Credit and Guaranty Agreement among the Company, as borrower, certain subsidiaries~~total of the Company, as guarantors, the lenders parties thereto, CIBC World Markets Corp., as lead arranger, Bank of America, N.A. and Salomon Smith Barney, Inc., as syndication agents, and Canadian Imperial Bank of Commerce, as administrative agent for the lenders$200 million in debtor-in-possession financing (the “DIP ~~Agreement”~~facility”). Pursuant to the DIP Agreement, the Company has access to a revolving credit facility (the “DIP Facility”) not to exceed $200 million with a sub-limit of $15 million for letters of credit. The Company received Bankruptcy Court approval for the DIP Agreement on December 21, 2001 (on an interim basis) and on January 28, 2002 (on a final basis). The DIP Facility is scheduled to terminate on the earlier of (a) the date of the substantial consummation of a Plan of Reorganization and (b) June 5, 2003 (eighteen months after the date of the Chapter 11 Filings). As of February 14, 2002, the Company had $4.0 million in cash borrowings and had obtained $2.7 million in letters of credit pursuant to the DIP Facility.

Proceeds of loans made under the DIP Facility will be used for working capital and other general corporate purposes of the Company and its subsidiaries, generally as set forth in the Company’s budget and otherwise as permitted under the DIP Agreement and approved by the Bankruptcy Court. The DIP Agreement permits the Company to make loans to, and obtain letters of credit under the DIP Facility to support the operations or obligations of, its foreign subsidiaries in Germany and Mexico, in an aggregate principal amount not to exceed $20 million at any one time outstanding, to fund capital expenditures, required joint venture obligations, rebate exposure of such foreign subsidiaries or costs incurred in connection with plant closures, restructuring or the sale or termination of businesses of foreign subsidiaries in Germany. Such loans may be funded either from the Company’s operations or from borrowings under the DIP Facility.

~~including with respect to their ability to incur liens, enter into mergers, incur indebtedness, give guarantees, make investments, pay dividends or make other distributions and dispose of assets.~~

The obligations of the Company and its subsidiary guarantors under the DIP Facility have super-priority administrative claim status as provided under the Bankruptcy Code. Under the Bankruptcy Code, a super-priority claim is senior to secured and unsecured pre-petition claims and all administrative expenses incurred in the Chapter 11 case. In addition, with certain exceptions (including a carve-out for unpaid professional fees and disbursements), the DIP Facility obligations are secured by (1) a first-priority lien on all unencumbered pre- and post-petition property of the Company and its subsidiary guarantors, (2) a first-priority priming lien on all property of the Company and its subsidiary guarantorsamounts that is encumbered by the existing liens securing the Company’s pre-petition secured lenders and (3) a junior lien on all other property of the Company and its subsidiary guarantors that is encumbered by pre-petition liens.

On January 15, 2002, the Company and the initial lenders under the DIP Agreement entered into a First Amendment to the DIP Agreement. This First Amendment finalized the terms of the borrowing base formula of eligible assets which is used to calculate the amounts which the Company is able to borrow under the DIP ~~Facility.~~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 ~~February 14,~~March 21, 2002, after taking into account the aforementioned borrowings and letters of credit, was ~~$90.1~~$87.9 million.

On June 22, 2001, the Company ~~pays a commitment fee of 0.75% per annum on the unused amount of the DIP Facility commitment, payable monthly~~received $291.1 million in ~~arrears. Letters of credit are priced at 3.50% per annum on the undrawn stated amount in addition to a fronting fee of 0.25% per annum.~~

The DIP Facility provides for the post-petition cash payment at certain intervals of interest accruing under the Company’s pre-petition credit agreement if certain tests are satisfied relating to the liquidity position and earnings of the Company and its subsidiaries, and the repatriation of funds from foreign subsidiaries.

The principal sources of liquidity for the Company’s future operating, capital expenditure, facility closure and other restructuring requirements are expected to be (i) cash flows from operations, (ii)net proceeds from the ~~sale~~issuance of ~~non-core assets and business, (iii) borrowings under various foreign bank and government loans and (iv) and borrowings under~~11 7/8% senior unsecured notes due 2006 in the ~~DIP Facility. While~~original principal amount of $300 million (the “11 7/8% Notes”). In addition, on July 2, 2001, the Company ~~expects that such sources will meet these requirements, there can be no assurances that such sources will prove to be sufficient.~~

~~Credit Agreement~~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

~~On February 3, 1999,~~In connection with the repurchase of the senior subordinated notes at a discount, the Company ~~entered into~~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 ~~third amended~~result of the repurchase. Further, in connection with the B Term refinancing and ~~restated credit agreement (“the Credit Agreement”). Pursuant to~~permanent reduction of the Credit Agreement, ~~a syndicate of lenders agreed to lend to~~ the Company ~~up to $450~~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 ~~form of a senior secured term loan facility~~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 up to $650 million in the form of a senior secured revolving credit facility. The Company and all of its existing and future material domestic subsidiaries guarantee such term loan and revolving credit facilities. Such term loan and revolving facilities are secured by a first priority lien in substantially all of the properties and assets of the Company and its material domestic subsidiaries, now owned or acquired later, including a pledge of all of the shares of certain of the Company’s existing and future domestic subsidiaries and 65% of the shares of certain of the Company’s existing and future foreign subsidiaries. As of April 30,capital spending limitations. At July 31, 2001, there was ~~$362.3~~$175.9 million outstanding under the term loan facilities ~~that~~of the Credit Agreement, which amount represents the total amount available under the facility.

At ~~April 30,~~July 31, 2001, there was ~~$398.6~~$514.1 million outstanding under the revolving credit facility and ~~$240.2~~$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.

~~On July 12, 2000, the Company entered into a first amendment~~All amounts outstanding with respect to the Credit ~~Agreement. Pursuant to such first amendment,~~Agreement, the ~~Company was permitted to repurchase shares of its common stock~~aforementioned senior subordinated notes, and the ~~limitation on capital expenditures was deleted. The changes~~11 7/8% Notes are classified as a current liability in the ~~first amendment have been superseded by~~consolidated financial statements as of July 31, 2001 included herein.

3533

subsequent amendments to the Credit Agreement. On December 8, 2000, the Company entered into a second amendment to the Credit Agreement. Pursuant to such second amendment, financial covenants regarding the leverage ratio, the interest coverage ratio and the fixed charge coverage ratio were modified and a financial covenant regarding the senior leverage ratio was added. In addition, an annual limit on capital expenditures was added, the stock repurchase authority was deleted, a cumulative limit on acquisitions was deleted and the interest rate was increased based on changes in the leverage ratio. On March 9, 2001, the Company entered into a third amendment to the Credit Agreement. Pursuant to such third amendment, financial covenants regarding the leverage ratio were amended and the interest rate was increased based on changes in the leverage ratio. On April 20, 2001, the Company entered into a fourth amendment to the Credit Agreement. Pursuant to such fourth amendment, financial covenants regarding the leverage ratio, the interest coverage ratio, the fixed charge coverage ratio and the senior leverage ratio were amended. In addition, certain limits on indebtedness under the revolving credit facility were deleted, the covenant on use of proceeds from asset sales was amended, the capital expenditure limits were amended and monthly reporting was added.

Trade Securitization Agreement

In ~~April~~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 ~~has~~had collection and administrative responsibilities with respect to all the receivables that ~~are~~were sold. ~~Receivables~~There were no receivables sold ~~at April 30, 2001 total $119.2 million.~~as of July 31, 2001.

This trade securitization agreement expired on May 1, 2001. From that time up to ~~the filing under Chapter 11,~~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 ~~$100~~$71.6 million.

~~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 provided 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.

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):

The 11 7/8% Notes mature on June 15, 2006 and require interest payments semi-annually on each June 15 and December 15. 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 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 2001 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 Debtors on December 5, 2001, no interest payment was made when due on December 15, 2001, and the registration of the Notes has not occurred.

~~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.~~

All amounts outstanding with respect to the Credit Agreement and the aforementioned notes are classified as a current liability in the consolidated financial statements as of April 30, 2001 included herein. As more fully discussed above, certain portions of the amounts outstanding at April 30, 2001 under the Credit Agreement and the previous senior unsecured subordinated debentures were refinanced in the second quarter of fiscal 2001 with the proceeds of the 11 7/8% Notes and the B Term Loan. The amounts outstanding with respect to the 11 7/8% Notes and the B Term Loan will be classified as a current liability upon their issuance.

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 ~~of the~~ 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 ~~$26.4~~$14.6 million and ~~$9.7~~$15.9 million during ~~fiscal years~~the quarters ended July 31, 2001 and 2000, ~~and 1999,~~ 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. ~~There were no terminations of cross-currency interest rate swap agreements during the quarters ended April 30, 2001 and 2000, respectively.~~

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 ~~$55.4~~$23.3 million in cash in the first ~~quarter~~six months of fiscal 2001 compared to a use of ~~$118.7~~$67.1 million in the first ~~quarter~~six months of fiscal 2000. ~~This~~The improvement principally reflects lower inventory levels and supplier payments consistent with lower sales volumes.

Capital expenditures for the first ~~quarter~~six months of fiscal 2001 were ~~$29.9~~$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. ~~The Company anticipates capital expenditures for fiscal 2001 will be approximately $125.0 million relating primarily to new vehicle platforms, and maintenance and cost reduction programs.~~

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 ~~seven~~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 ~~146.5~~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 inand 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 ~~may use~~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 ~~April 30,~~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

3935

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 ~~cross-currency interest rate~~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,
36
2000. Adoption of this replacement standard isdid not ~~anticipated to~~ have a material effect on the Company’s financial position or results of ~~operations when adopted.~~operations.
~~Euro Conversion~~
On January 1, 2000, certain member countries of the European Union irrevocably fixed the conversion rates between their national currencies and a common currency, the “Euro,” which became the legal currency on that date. The participating countries’ former national currencies continue to exist as denominations of the Euro until January 1, 2002. The Company has established a steering committee that is monitoring the business implications of conversion to the Euro, including the need to adapt internal systems to accommodate Euro-denominated transactions. While the Company is still in various stages of assessments and implementation, the Company does not expect the conversion to the Euro to have a material affect on its financial condition or results of operations.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
     For the period ended ~~April 30,~~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.
4137
PART II. OTHER INFORMATION
Item 3.1. Legal Proceedings
     OnNone
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 30held its Annual Meeting of ~~its wholly-owned domestic subsidiaries~~Stockholders on June 14, 2001. At the Annual Meeting, the following matters were proposed and ~~one wholly-owned Mexican subsidiary filed a voluntary petition~~voted upon by the Company’s stockholders (including the number of votes cast for, ~~reorganization under Chapter 11~~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 Bankruptcy Code These petitions were filed in the United States Bankruptcy Court for the District of Delaware, Case No. 01-11490-MFW. Management of the Company continues to operate the business of the Debtors as a debtors-in-possession under Sections 1107 and 1108 of the Bankruptcy Code. In this proceeding, the Debtors intend to propose and seek confirmation of a plan or plans or reorganization. Unless lifted by the order of the Bankruptcy Court, pursuant to the automatic stay provision of the Bankruptcy Code, all pending pre-petition litigation against the Debtors is currently stayed.foregoing matters.
Following the announcements of the restatements, several lawsuits were filed by and purportedly on behalf of the shareholders of the Company naming as defendants a combination of the Company, Mr. Cucuz and Mr. Shovers. These lawsuits are seeking class action status, but no class has yet been certified in these actions. Due to the Company’s bankruptcy filing, this litigation against the Company is subject to the automatic stay.
Item 5. Other Information
     None
38
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 April 30, 2001, the Company filed a Current Report on Form 8-K with the Securities and Exchange Commission on March 9,~~     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.
4239
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
~~February 19,~~March 25, 2002
4340


			Quarter Ended		Quarter Ended
			April 30, 2001		April 30, 2000

Adjustments (increasing) decreasing net income:
	Deferred operating expenditures		$	8.7	$	2.5
	Unrecorded trade payables and claims			3.5		0.8
	Acquisition accounting			2.2		3.7
	Customer credits			0.3		1.2
	Asset impairment losses			30.0		—

		Total adjustments to pre-tax income (loss)		44.7		8.2
	Income taxes			11.4		(4.8	)

		Total adjustment to net income (loss)		56.1		3.4
Adjustments decreasing stockholders’ equity (deficit):
	Tax effect of net investment hedges			—		1.7

		Total decrease in stockholders’ equity (deficit)	$	56.1	$	5.1


			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


	•	In connection with certain acquisitions, including the acquisition of CMI International, Inc., the Company recorded an accrued liability for unfavorable customer contracts which could not be substantiated. Additionally, the Company did not record the fair value of acquired supplies inventory.

	•	In connection with the acquisition of Lemmerz Holding GmbH, the Company recorded an accrued liability for restructuring costs. The restructuring plan did not meet the conditions regarding the period within which the plan was required to be finalized.


	•	~~All amounts outstanding with respect to the Credit Agreement and senior subordinated notes outstanding at April 30, 2001, as more fully discussed in Note (3) are classified as a current liability.~~

	•	The common stock subject to put agreement was reclassified from additional paid in capital at ~~April 30,~~July 31, 2000 as previously reported.

	•	Certain non-current deferred income tax assets and liabilities as previously reported at ~~April 30, 2001 and~~July 31, 2000 were reclassified either as part of the previously reported amounts or as restatement adjustments.



			As of April 30, 2001

			As
			Previously							As
			Reported				Restatements			Restated

ASSETS
Current assets:
	Cash and cash equivalents		$	28.9			$	—		$	28.9
	Receivables			266.3				(14.2	)		252.1
	Inventories			191.9				16.3			208.2
	Deferred tax assets			42.4				(20.5	)		21.9
	Prepaid expenses and other			21.2				(5.6	)		15.6

		Total current assets		550.7				(24.0	)		526.7
Property, plant and equipment, net				1,115.1				(60.1	)		1,055.0
Deferred tax assets				102.2				(80.7	)		21.5
Goodwill and other assets				1,033.5				(89.5	)		944.0

		Total assets	$	2,801.5		��	$	(254.3	)	$	2,547.2

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
	Bank borrowings		$	81.9			$	—		$	81.9
	Current portion of long-term debt			91.4				1,583.8			1,675.2
	Accounts payable and accrued liabilities			437.6				19.8			457.4

		Total current liabilities		610.9				1,603.6			2,214.5
Long-term debt, net of current portion				1,671.2				(1,583.7	)		87.5
Deferred tax liabilities				100.2				(27.9	)		72.3
Pension and other long-term liabilities				266.9				(13.4	)		253.5
Minority interest				10.6				—			10.6

		Total liabilities		2,659.8				(21.4	)		2,638.4
Commitments and contingencies
Stockholders’ (deficit) equity:
	Preferred stock			—				—			—
	Common stock:
		Voting		0.3				—			0.3
		Nonvoting		—				—			—
	Additional paid in capital			237.1				(2.0	)		235.1
	Common stock in treasury at cost			(26.3	)			0.6			(25.7	)
	Retained earnings (accumulated deficit)			8.6				(218.0	)		(209.4	)
	Accumulated other comprehensive loss			(78.0	)			(13.5	)		(91.5	)

		Total stockholders’ equity (deficit)		141.7				(232.9	)		(91.2	)

		Total liabilities and stockholders’ equity (deficit)	$	2,801.5			$	(254.3	)	$	2,547.2



			As of April 30, 2000

			As
			Previously						As
			Reported			Restatements			Restated

ASSETS
Current assets:
	Cash and cash equivalents		$	40.4		$	—		$	40.4
	Receivables			212.9			(8.3	)		204.6
	Inventories			190.6			17.6			208.2
	Deferred tax assets			—			32.2			32.2
	Prepaid expenses and other			11.8			(1.2	)		10.6

		Total current assets		455.7			40.3			496.0
Property, plant and equipment, net				1,172.2			(6.0	)		1,166.2
Deferred tax assets				128.7			(101.3	)		27.4
Goodwill and other assets				1,048.1			(9.7	)		1,038.4

		Total assets	$	2,804.7		$	(76.7	)	$	2,728.0

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Bank borrowings		$	87.3		$	—		$	87.3
	Current portion of long-term debt			61.5			—			61.5
	Accounts payable and accrued liabilities			464.2			35.1			499.3

		Total current liabilities		613.0			35.1			648.1
Long-term debt, net of current portion				1,532.0			—			1,532.0
Deferred tax liabilities				114.4			(52.9	)		61.5
Pension and other long-term liabilities				306.5			(30.6	)		275.9
Minority interest				13.7			—			13.7

		Total liabilities		2,579.6			(48.4	)		2,531.2
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			73.8			(21.0	)		52.8
	Accumulated other comprehensive loss			(88.9	)		(7.3	)		(96.2	)

		Total stockholders’ equity		216.6			(28.3	)		188.3

		Total liabilities and stockholders’ equity	$	2,804.7		$	(76.7	)	$	2,728.0



				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


	(1) Condensed consolidating financial statements as of ~~April 30,~~July 31, 2001 and January 31, 2001, and for the ~~three~~six month periods ended ~~April 30,~~July 31, 2001 and 2000, of (a) Hayes Lemmerz International, Inc., the parent, (b) the guarantor subsidiaries (as defined), (c) the ~~nonguarantor~~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 ~~nonguarantor~~non-guarantor subsidiaries.


								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	)


								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


	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


	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:


	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:


	~~During the fiscal quarter ended April 30, 2001, the Company filed a Current Report on Form 8-K with the Securities and Exchange Commission on March 9,~~ 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.


	HAYES LEMMERZ INTERNATIONAL, INC.

	/s/ KENNETH A. HILTZ

	Kenneth A. Hiltz
	Chief Financial Officer

	/s/ HERBERT S. COHEN

	Herbert S. Cohen
	Chief Accounting Officer