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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q

Commission file number: 1-11592

HAYES LEMMERZ INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)

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 x     No o

     The number of shares of common stock outstanding as of September 16, 2002 was 28,455,995 shares.

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HAYES LEMMERZ INTERNATIONAL, INC.

QUARTERLY REPORT ON FORM 10-Q

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     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 2002 MEANS THE PERIOD BEGINNING FEBRUARY 1, 2002, AND ENDING JANUARY 31, 2003). THIS REPORT CONTAINS FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 WITH RESPECT TO THE FINANCIAL CONDITION, RESULTS OF OPERATIONS, AND BUSINESS OF THE COMPANY. THESE FORWARD LOOKING STATEMENTS INVOLVE CERTAIN RISKS AND UNCERTAINTIES. NO ASSURANCE CAN BE GIVEN THAT ANY OF SUCH MATTERS WILL BE REALIZED. FACTORS THAT MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD LOOKING STATEMENTS INCLUDE, AMONG OTHERS, THE FOLLOWING POSSIBILITIES: (1) THE OUTCOME AND CONSEQUENCES OF THE COMPANY’S CHAPTER 11 PROCEEDINGS; (2) COMPETITIVE PRESSURE IN THE COMPANY’S INDUSTRY INCREASES SIGNIFICANTLY; (3) GENERAL ECONOMIC CONDITIONS ARE LESS FAVORABLE THAN EXPECTED; (4) THE COMPANY’S DEPENDENCE ON THE AUTOMOTIVE INDUSTRY (WHICH HAS HISTORICALLY BEEN CYCLICAL); (5) CHANGES IN THE FINANCIAL MARKETS AFFECTING THE COMPANY’S FINANCIAL STRUCTURE AND THE COMPANY’S COST OF CAPITAL AND BORROWED MONEY; AND (6) THE UNCERTAINTIES INHERENT IN INTERNATIONAL OPERATIONS AND FOREIGN CURRENCY FLUCTUATIONS. THE COMPANY HAS NO DUTY UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 TO UPDATE THE FORWARD LOOKING STATEMENTS IN THIS QUARTERLY REPORT ON FORM 10-Q AND THE COMPANY DOES NOT INTEND TO PROVIDE SUCH UPDATES.

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HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES
(Debtor-in-Possession as of December 5, 2001)

CONSOLIDATED STATEMENTS OF OPERATIONS
(Millions of dollars, except share amounts)
(Unaudited)

See accompanying notes to consolidated financial statements.

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HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES
(Debtor-in-Possession as of December 5, 2001)

CONSOLIDATED BALANCE SHEETS
(Millions of dollars, except share amounts)

See accompanying notes to consolidated financial statements.

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HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES
(Debtor-in-Possession as of December 5, 2001)

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Millions of dollars)
(Unaudited)

See accompanying notes to consolidated financial statements.

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HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
Six Months Ended July 31, 2002 and 2001
(Unaudited)
(Millions of Dollars Unless Otherwise Stated)

(1) Description of Business and Chapter 11 Filings

     These financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year 2001 as filed with the Securities and Exchange Commission on May 1, 2002.

Description of Business

     Unless otherwise indicated, references to “Company” mean Hayes Lemmerz International, Inc. and its subsidiaries and references to fiscal year means the Company’s year ended January 31 of the following year (e.g., “fiscal 2002” refers to the period beginning February 1, 2002 and ending January 31, 2003, “fiscal 2001” refers to the period beginning February 1, 2001 and ending January 31, 2002).

     The Company is a leading supplier of wheels, wheel-end attachments, aluminum structural components and automotive brake components. The Company is the world’s largest manufacturer of automotive wheels. In addition, the Company also designs and manufactures wheels and brake components for commercial highway vehicles, and powertrain components and aluminum non-structural components for the automotive, commercial highway, heating and general equipment industries.

Chapter 11 Filings

     On December 5, 2001, Hayes Lemmerz International, Inc., 30 of its wholly-owned domestic subsidiaries and one wholly-owned Mexican subsidiary (collectively, the “Debtors”) filed voluntary petitions for reorganization relief (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 pendency 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.

     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. Pursuant to an order entered by the Bankruptcy Court on August 19, 2002, the periods during which the Company has the exclusive rights to propose a plan of reorganization and solicit acceptances of a plan of reorganization expire on December 15, 2002 and January 16, 2003, respectively. Under the priority scheme established by the Bankruptcy Code, certain post-petition liabilities and pre- petition liabilities need to be satisfied before shareholders can receive any distribution pursuant to a plan of reorganization. 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.

     On May 30, 2002, an order was entered with the Bankruptcy Court approving, among other things, a critical employee retention plan filed with the Bankruptcy Court in February, 2002 which is designed to compensate certain critical employees in order to assure their retention and availability during the Company’s restructuring. The plan has two components which will (i) reward critical employees who remain with the Company (and certain affiliates of the Company who are not directly involved in the restructuring) during and through the completion of the restructuring (the “Retention Bonus”) and (ii) provide additional incentives to a more limited group of the most senior critical employees if the enterprise value upon completing the restructuring exceeds an established baseline (the “Restructuring Performance Bonus”).

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     The maximum possible aggregate amount of Retention Bonus is approximately $8.5 million and is payable in cash and is due upon the consummation of the restructuring, provided, however, that 35% of such bonus will be paid on October 1, 2002, if the restructuring has not been consummated by that date. The maximum possible aggregate amount of any Restructuring Performance Bonus is $37.5 million and will be payable as soon as reasonably practicable after the consummation of the restructuring. Up to 70% of the amount by which a Restructuring Performance Bonus exceeds a participant’s Retention Bonus may be paid in restricted shares or units of any common stock of the Company that is issued as part of a confirmed plan of reorganization in connection with the restructuring, if the Company’s Board of Directors elects, within the time period specified in the plan, to elect such option. The amount of any Restructuring Performance Bonus to be earned is not currently estimable and will not be determined until confirmation of a plan or plans of reorganization.

     As of July 31, 2002, there were $6.8 million of outstanding borrowings and $4.7 million in letters of credit issued under the Company’s Debtor-In-Possession revolving credit facility (the “DIP Facility”). As of September 12, 2002, there were $40.8 million of outstanding borrowings and $4.7 million in letters of credit issued in connection with the DIP Facility. The amount of availability under the DIP Facility as of September 12, 2002 was $76.6 million, net of the aforementioned borrowings and issued letters of credit.

     Reorganization items as reported in the accompanying consolidated statement of operations for the three months and six months ended July 31, 2002 is comprised of:

     Cash payments with respect to such reorganization items of $11.0 million made during the six months ended July 31, 2002 consisted solely of professional fees.

     The condensed financial statements of the Debtors are presented in Note 11, “Condensed Combined Financial Statements.”

(2) Basis of Presentation

     As discussed in Note 1, the Company filed a voluntary petition for reorganization relief under Chapter 11 of the Bankruptcy Code in December 2001. The accompanying consolidated financial statements have been prepared in accordance with AICPA Statement of Position 90-7 (“SOP 90-7”), “Financial Reporting by Entities in Reorganization under the Bankruptcy Code,” and on a going concern basis. Continuing as a going concern contemplates continuity of operations, realization of assets, and payment of liabilities in the ordinary course of business. The accompanying consolidated financial statements 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 with debt covenants, raise substantial doubt about the Company’s ability to continue as a going concern. 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. SOP 90-7 requires the 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 Company’s unaudited interim consolidated financial statements do not include all of the disclosures required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation of the interim period results have been included. Operating results for the six months ended July 31, 2002 are not necessarily indicative of the results that may be expected for the full fiscal year ending January 31, 2003.

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

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(3) Inventories

     The major classes of inventory are as follows:

(4) Property, Plant and Equipment

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

(5) Asset Impairments and Other Restructuring Charges

     Asset impairments and other restructuring charges recorded by the Company during the three months and six months ended July 31, 2002 and 2001 are as follows (millions of dollars):

Impairment of Manufacturing Facilities

     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 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 first six months of fiscal 2001. An additional impairment charge of $0.3 million was recorded in the second quarter of fiscal 2002 to further write down the Petersburg facility to fair value based on current real estate market conditions.

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Impairment of Machinery and Equipment

     In the second quarter of fiscal 2002, the Company determined, based on its most recent sales projections for the facility, that its current estimate of the future undiscounted cash flows from its manufacturing facility in La Mirada, California will not be sufficient to recover the carrying value of the facility’s fixed assets and production tooling. Accordingly, the Company has recorded an estimated impairment loss of $15.5 million in the second quarter of fiscal 2002 on those assets.

     During the second quarter of fiscal 2002, the Company also recognized asset impairment losses of $1.8 million on certain machinery and equipment due primarily to a change in management’s plan for the future use of idled machinery and equipment.

     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. During the first quarter of fiscal 2001, the Company recognized an asset impairment loss of $2.5 million related to the abandonment of plans to continue to invest in the start-up of certain single-purpose equipment.

Facility Closures

     In the fourth quarter of fiscal 2001, the Company committed to a plan to close its manufacturing facility in Bowling Green, Kentucky and recorded a restructuring charge of $10.7 million. This charge relates to the termination of leases and other closure costs, including security and maintenance costs subsequent to the shutdown date. Originally planned to begin during July 2002, the closure of the plant has been temporarily delayed, and as such, no costs have been paid related to the shutdown. The closure costs are expected to be paid in late fiscal 2002 and in fiscal 2003.

     In February 2002, the Company committed to a plan to close its manufacturing facility in Somerset, Kentucky. In connection with the closure of the Somerset facility (which commenced during February 2002), the Company recorded an estimated restructuring charge of $6.7 million in the first quarter of fiscal 2002. This charge includes amounts related to lease termination costs and other closure costs including security and maintenance costs subsequent to the shut down date. The amount of the charge related to lease terminations of $3.5 million has been classified as a liability subject to compromise at July 31, 2002 and has been excluded from the table below. Of the other closure costs, approximately $2.1 million remained unpaid at July 31, 2002, and is expected to be paid during fiscal 2002 and 2003.

     In June 2001, the Company committed to a plan to close the Petersburg facility, and accordingly recorded an estimated restructuring charge of $0.6 million. This charge includes amounts related to security and other maintenance costs subsequent to the shutdown date. Of this charge, $0.6 million remained unpaid at July 31, 2002, and is expected to be paid during fiscal 2002.

     The following table describes the activity in the balance sheet accounts affected by the severance and other restructuring charges noted above during the six months ended July 31, 2002:

     In connection with an early retirement program in the fourth quarter of fiscal 2001, a charge of $3.8 million related to supplemental retirement benefits was included in the above table at January 31, 2002. This amount is recorded as a component of the Company’s accrued benefit cost of the applicable defined benefit plans and will be funded as part of the requirements of the entire plans. Accordingly, for purposes of the current presentation of the above table, this amount has not been included.

(6) Purchase and Sale of Assets and Businesses

Purchase of Businesses

     In May 2002, the Company acquired the remaining 24% minority interest in its South African subsidiary for $5.1 million. In connection with the acquisition of these minority shares, the Company recorded goodwill of $7.5 million related to the now wholly-owned subsidiary.

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     In March 2002, the Company purchased the facility and assets of a foundry in Chattanooga, Tennessee for $4.1 million. This purchase integrates the foundry, which produces brake drum castings, into the Company’s Commercial Highway operations. The purchase price for this business included cash payments and a note payable in the amount of $2.0 million due in March 2003. Of the purchase price, $2.6 million was allocated to the fair value of the land, building, and machinery and equipment purchase and $1.5 million was allocated to goodwill.

Sale of Assets and Businesses

     During the second quarter of fiscal 2002, the Company sold various non-core assets, including a foundry located in Maulbronn, Germany, its interest in a Portuguese joint venture and various equipment and land. Aggregate proceeds from the aforementioned items were $2.3 million, resulting in a net loss of $2.1 million, which is included in Other Income, net in the consolidated statement of operations.

     During the first quarter of fiscal 2002, the Company sold its Brazilian agricultural business and various equipment for $6.7 million in cash, resulting in a net gain on sale of $1.6 million. Upon settlement of terms of the Brazilian agricultural business sale agreement during the second quarter of fiscal 2002, the Company recognized an additional gain of $0.8 million, which is included in Other Income, net in the consolidated statement of operations.

(7) Earnings Per Share

     Basic earnings (loss) per share are calculated by dividing net income (loss) by the weighted average number of common shares outstanding. Diluted earnings (loss) per share are computed by dividing net income (loss) by the diluted weighted average shares outstanding. Diluted weighted average shares assume the exercise of stock options and warrants, so long as they are not anti-dilutive.

     Shares outstanding for the three months and six months ended July 31, 2002 and 2001, were as follows (thousands of shares):

     For the three month and six month periods ending July 31, 2002 and 2001, respectively, all options and warrants were excluded from the calculation of diluted earnings (loss) per share as the effect was anti-dilutive due to the net loss reflected for such periods.

(8) Comprehensive Income

     Statement of Financial Accounting Standards (“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 for the six months ended July 31, 2002 and 2001 are as follows:

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(9) Liabilities Subject to Compromise

     The principal categories of claims classified as liabilities subject to compromise under reorganization proceedings are identified below. All amounts below may be subject to future adjustment depending on Bankruptcy Court action, further developments with respect to disputed claims, or other events, including the reconciliation of claims filed with the Bankruptcy Court to amounts included in the Company’s records. Additional pre-petition claims may arise from rejection of additional executory contracts or unexpired leases by the Company. Under a confirmed plan of reorganization, all pre-petition claims may be paid and discharged at amounts substantially less than their allowed amounts.

Recorded Liabilities

     On a consolidated basis, recorded liabilities subject to compromise under Chapter 11 proceedings consisted of the following (millions of dollars):

     The increase in accounts payable and accrued liabilities in the above table is due primarily to additional accruals for rejected lease obligations net of payments to certain vendors pursuant to procedures approved by the Bankruptcy Court.

     During the first six months of fiscal 2002, there were $1.7 million in letters of credit drawn against the Credit Agreement. Accordingly, the prepetition claim under the Credit Agreement was increased by this amount. While any additional availability under the Credit Agreement has been terminated, letters of credit amounting to approximately $9.7 million remain outstanding.

     The Bankruptcy Code generally disallows the payment of interest that would otherwise accrue postpetition with respect to unsecured or undersecured claims. The Company has continued to record interest expense accruing postpetition with respect to the Credit Agreement because the Company currently estimates that such accrued interest will be an allowed claim as part of a plan or plans of reorganization. The amount of such unpaid interest recorded at July 31, 2002 was $28.9 million, net of the May and July payments noted below. This amount has been classified as a liability subject to compromise in the accompanying consolidated balance sheet.

     The DIP Facility provides for the postpetition cash payment at certain intervals of interest and fees accrued at the filing date and accruing postpetition under the Company’s prepetition credit agreements, 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. On May 1, 2002, July 1, 2002 and August 1, 2002, payments of $2.1 million, $10.0 million and $8.3 million, respectively, were made for a portion of accrued interest and fees with respect to this provision.

     The Company has not continued to record interest expense accruing postpetition with respect to the Senior Notes and the Senior Subordinated Notes because the Company cannot currently reasonably estimate the amount of such interest, if any, that will be an allowed claim as part of a plan or plans of reorganization. The amount of such interest accruing postpetition that has not been recorded at July 31, 2002 was $77.0 million. If it is determined that such interest is allowable as a claim, the amount might include some or all interest accruing from the date of the Chapter 11 Filing. The recorded amount of prepetition accrued interest was $49.0 million, which has been classified as a liability subject to compromise in the accompanying consolidated balance sheet at July 31, 2002.

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Contingent Liabilities

     Contingent liabilities of the Debtors as of the Chapter 11 Filing date are also subject to compromise. The Company is a party to litigation matters and claims that are normal in the course of its operations. Generally, litigation related to prepetition “claims,” as defined by the Bankruptcy Code, is stayed. Also, as a normal part of their operations, the Company’s subsidiaries undertake certain contractual obligations, warranties and guarantees in connection with the sale of products or services. The outcome of the bankruptcy process on these matters cannot be predicted with certainty.

(10) Segment Reporting

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

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

     The net loss amounts for the six months ended July 31, 2002 presented in the above table include reorganization items of $9.2 million, $(1.0) million and $19.7 million in Automotive Wheels, Components and Other, respectively.

(11) Condensed Combined Financial Statements

     The following condensed combined financial statements present in one format the financial information required for entities that have filed for reorganization relief under Chapter 11 of the Bankruptcy Code pursuant to SOP 90-7, and the financial information required with respect to those entities which guarantee certain of the Company’s debt.

     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.

Guarantor and Nonguarantor Financial Statements

     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 the 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 Company’s 11 7/8% Senior 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, 2002 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% Senior Notes.

Financial Statements for Entities in Reorganization Under Chapter 11

     As discussed in Note 1, Hayes Lemmerz International, Inc. (the “Parent”), 30 of its wholly-owned domestic subsidiaries, and one wholly-owned Mexican subsidiary filed voluntary petitions for reorganization relief under Chapter 11. In accordance with SOP 90-7, condensed consolidating financial information is presented below as of and for the six months ended July 31, 2002.

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CONDENSED COMBINED STATEMENTS OF OPERATIONS
For the Six Months Ended July 31, 2002