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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 December 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
Nine Months Ended October 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, the Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2002 and the Quarterly Report on Form 10-Q for the fiscal quarter ending July 31, 2002, as filed with the Securities and Exchange Commission on May 1, 2002, June 16, 2002 and September 16, 2002, respectively.

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.

     Under the Bankruptcy Code, actions to collect pre-petition indebtedness, as well as most other pending litigation, are stayed and other contractual obligations against the Debtors generally may not be enforced. Absent an order of the Bankruptcy Court, substantially all pre-petition liabilities are subject to settlement under a plan of reorganization to be voted upon by creditors and equity holders proposed to receive distributions thereunder (under the Bankruptcy Code, parties not receiving a distribution are deemed to reject and are not entitled to vote) and approved by the Bankruptcy Court. A plan of reorganization must be confirmed by the Bankruptcy Court, upon certain findings being made by the Bankruptcy Court which are required by the Bankruptcy Code. The Bankruptcy Court may confirm a plan notwithstanding the non-acceptance of such plan by an impaired class of creditors or equity security holders if certain requirements of the Bankruptcy Code are met.

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     Pursuant to an order entered by the Bankruptcy Court on August 19, 2002, the period during which the Company has the exclusive right to propose a plan of reorganization expires on December 16, 2002. Although the current exclusive period may be extended at the discretion of the Bankruptcy Court upon request, the Debtors currently expect to file a proposed plan of reorganization with the Bankruptcy Court prior to the expiration of the current exclusive period. There can, however, be no assurance that such a reorganization plan or plans will be proposed by the Debtors or confirmed by the Bankruptcy Court, or that any such plan(s) will be consummated.

     The Company currently expects that any plan of reorganization it might propose likely will provide that the existing common stock of the Company would be cancelled and that certain creditors of the Company would be issued new common stock in the reorganized Company. Although there can be no assurance that a plan of reorganization proposed by the Debtors would be confirmed by the Bankruptcy Court or consummated, holders of common stock of the Company should assume that they could receive little or no value as part of any plan of reorganization. In light of the foregoing, the Company considers the value of the common stock to be highly speculative.

     Accordingly, the Company urges that appropriate caution be exercised with respect to existing and future investments in common stock of the Company or in claims relating to pre-petition liabilities and/or other securities of the Company.

     Under the priority scheme established by the Bankruptcy Code, substantially all post-petition liabilities and pre-petition liabilities need to be satisfied before shareholders are entitled to receive any distribution. The ultimate recovery, if any, to creditors and/or shareholders will not be determined until confirmation of a plan or plans of reorganization and substantial completion of claims reconciliation by the Company and claims allowance by the Bankruptcy Court.

     On January 31, 2002, the Debtors filed with the Bankruptcy Court schedules and statements of financial affairs setting forth, among other things, the assets and liabilities of the Debtors as shown on the Company’s books and records, subject to the assumptions contained in certain notes filed in connection therewith. The Debtors subsequently amended the schedules and statements on March 21, 2002 and July 12, 2002. All of the schedules are subject to further amendment or modification. On March 26, 2002, the Bankruptcy Court established June 3, 2002 as the deadline for filing proofs of claim with the Bankruptcy Court. The Debtors mailed notice of the proof of claim deadline to all known creditors. Differences between amounts scheduled by the Debtors and claims by creditors currently are being investigated and resolved in connection with the Debtors’ claims resolution process. Although that process has commenced and is ongoing, in light of the number of creditors of the Debtors and certain claims objection blackout periods, the claims resolution process may take considerable time to complete. Accordingly, the ultimate number and amount of allowed claims is not presently known and the ultimate distribution with respect to allowed claims is not presently ascertainable.

     In addition to any plan of reorganization it may file, the Company currently expects to file a disclosure statement intended to provide information sufficient to enable holders of claims or interests to make an informed judgment about the plan. The disclosure statement would set forth, among other things, the Company’s proposed plan of reorganization, proposed distributions that would be made to the Company’s stakeholders under the proposed plan, certain effects of confirmation of the plan, and various risk factors associated with the plan and confirmation thereof. It would also contain information regarding, among other matters, significant events that occurred during the Company’s Chapter 11 proceedings, the anticipated organization, operation and financing of the reorganized Company, as well as the confirmation process and the voting procedures holders of claims and/or interests must follow for their votes to be counted.

     Although the Debtors expect to file a reorganization plan or plans that provide for emergence from bankruptcy during the second quarter of fiscal 2003, there can be no assurance that such a reorganization plan or plans will be proposed by the Debtors or confirmed by the Court, or that any such plan(s) will be consummated in that time period or at any later time. 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, 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 AICPA Statement of Position 90-7 “Financial Reporting by Entities in Reorganization under the Bankruptcy Code,” (“SOP 90-7”), the accounting for the effects of the reorganization will occur once a plan of reorganization is confirmed by the Bankruptcy Court and there are no remaining contingencies material to

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completing the implementation of the plan. The “fresh start” accounting principles pursuant to SOP 90-7 provide, among other things, for the Company to determine the value to be assigned to the equity of the reorganized Company as of a date selected for financial reporting purposes. The accompanying consolidated financial statements do not reflect: (a) the requirements of SOP 90-7 for fresh start accounting, (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 future actions by the Bankruptcy Court.

     On May 30, 2002, the Bankruptcy Court entered an order approving, among other things, the 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”).

     The maximum possible aggregate amount of Retention Bonus is approximately $8.5 million and is payable in cash upon the consummation of the restructuring. Pursuant to plan provisions, thirty-five percent, or approximately $3.2 million, of such Retention Bonus was paid on October 1, 2002. 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. 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 October 31, 2002, there were $42.1 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 December 13, 2002, there were $23.3 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 December 13, 2002 was $74.4 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 nine months ended October 31, 2002 is comprised of:

     Cash payments with respect to such reorganization items of $10.5 million and $21.5 million made during the three months and nine months ended October 31, 2002, respectively, consisted of professional fees and the Retention Bonus.

     The condensed financial statements of the Debtors are presented in Note 10, “Condensed Consolidating Financial Statements.”

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(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 SOP 90-7 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 nine months ended October 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.

(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 nine months ended October 31, 2002 and 2001 are as follows (millions of dollars):

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Impairment of Manufacturing Facilities

     Based on current real estate market conditions, the Company recorded an asset impairment charge of $0.3 million in the third quarter of fiscal 2002 to write down its Somerset, Kentucky facility to fair value.

     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 nine 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.

Impairment of Machinery and Equipment

     During the third quarter of fiscal 2002, the Company recognized asset impairment losses of $5.3 million on certain machinery and equipment in the Automotive Wheel segment due to a change in management’s plan for the future use of idled machinery and equipment and the discontinuance of certain machinery and equipment due to changes in product mix. Such investments in fixed assets were written down to fair value based on the expected scrap value, if any, of such 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 would not be sufficient to recover the carrying value of the facility’s fixed assets and production tooling. Accordingly, the Company 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. Such investments in fixed assets were written down to fair value based on the expected scrap value, if any, of such machinery, equipment and tooling.

     During the third quarter of fiscal 2001 the Company recognized asset impairment losses of $4.6 million related principally to $2.3 million due to the discontinuance of the Company’s Equipment and Engineering business located in Montague, Michigan, $0.9 million related to the abandonment of a greenfield project in Thailand, and impairments of investments in other fixed assets. Such investments in fixed assets were written down to fair value based on the expected scrap value, if any, of such machinery, equipment and tooling.

     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 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 October 31, 2002 and has been excluded from the table below. Of the other closure costs, approximately $1.8 million remained unpaid at October 31, 2002, and is expected to be paid during fiscal 2002 and fiscal 2003.

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     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 fiscal 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 October 31, 2002, and is expected to be paid during fiscal 2002 and fiscal 2003.

Other Restructuring Charges

     In fiscal 2002, the Company offered an early retirement option to approximately 30 employees, of whom 24 accepted by the respective acceptance date. In connection with this early retirement offer, the Company recorded a charge of $3.4 million primarily related to supplemental retirement benefits and continued medical benefits. The retirement benefit portion of the charge 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 those entire plans.

     During the third quarter of fiscal 2002, the Company recorded a charge of $1.0 million related to the shutdown of its Petersburg facility. Additionally, as part of ongoing restructuring and rationalization of its operations, the Company recorded severance costs of $1.0 million in the third quarter of fiscal 2002, all of which had been paid by October 31, 2002.

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

(6) 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 nine months ended October 31, 2002 and 2001, were as follows (thousands of shares):

     For the three month and nine month periods ending October 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.

(7) Comprehensive Income

     The components of comprehensive loss for the nine months ended October 31, 2002 and 2001 are as follows:

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(8) Liabilities Subject to Compromise

     The principal categories of claims classified as liabilities subject to compromise under reorganization proceedings are identified below. Under the Bankruptcy Code, actions to collect pre-petition indebtedness, as well as most other pending litigation, are stayed and other contractual obligations against the Debtors generally may not be enforced. Absent an order of the Bankruptcy Court, substantially all pre-petition liabilities are subject to settlement under a plan of reorganization to be voted upon by creditors and equity holders and approved by the Bankruptcy Court. A plan of reorganization must be confirmed by the Bankruptcy Court, upon certain findings being made by the Bankruptcy Court which are required by the Bankruptcy Code. The Bankruptcy Court may confirm a plan notwithstanding the non-acceptance of such plan by an impaired class of creditors or equity security holders if certain requirements of the Bankruptcy Code are met.

     On January 31, 2002, the Debtors filed with the Bankruptcy Court schedules and statements of financial affairs setting forth, among other things, the assets and liabilities of the Debtors as shown on the Company’s books and records, subject to the assumptions contained in certain notes filed in connection therewith. The Debtors subsequently amended the schedules and statements on March 21, 2002 and July 12, 2002. All of the schedules are subject to further amendment or modification. On March 26, 2002, the Bankruptcy Court established June 3, 2002 as the deadline for filing proofs of claim with the Bankruptcy Court. The Debtors mailed notice of the proof of claim deadline to all known creditors. Differences between amounts scheduled by the Debtors and claims by creditors currently are being investigated and resolved in connection with the Debtors’ claims resolution process. Although that process has commenced and is ongoing, in light of the number of creditors of the Debtors and certain claims objection blackout periods, the claims resolution process may take considerable time to complete. Accordingly, the ultimate number and amount of allowed claims is not presently known and the ultimate distribution with respect to allowed claims is not presently ascertainable.

Recorded Liabilities

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

     During the first nine months of fiscal 2002, there were $1.7 million in letters of credit drawn against the Credit Agreement. Accordingly, the pre-petition 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 post-petition with respect to unsecured or undersecured claims. Lazard Freres & Co. LLC, the Company’s financial advisors and investment bankers, has recently provided the Company with a preliminary estimate of the value of the Company’s operations for reorganization plan purposes. The preliminary valuation supports the Company’s previous estimate that, under certain circumstances, the claims under the Credit Agreement may be fully secured or oversecured. There may also be circumstances in which the claims under the Credit Agreement may be undersecured.

     The Company has continued to record interest expense accruing postpetition with respect to the Credit Agreement. The amount of such unpaid interest recorded at October 31, 2002 was $34.5 million, net of the second and third quarter payments noted below. This amount has been classified as a liability subject to compromise in the

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accompanying consolidated balance sheet. The Company has not continued to record interest expense accruing postpetition with respect to the Senior Notes and the Senior Subordinated Notes. The amount of such interest accruing postpetition that has not been recorded at October 31, 2002 was $106.6 million. The recorded amount of prepetition accrued interest with respect to the Senior Notes and the Senior Subordinated Notes was $49.0 million, which has been classified as a liability subject to compromise in the accompanying consolidated balance sheet at October 31, 2002.

     As discussed above, it is not possible to predict the outcome of the Chapter 11 proceedings in general. The ultimate recovery with respect to these and other claims, if any, will not be determined until confirmation of a plan or plans of reorganization.

     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. During the second and third quarters of fiscal 2002, payments of $12.1 million and $8.3 million, respectively, were made for a portion of accrued interest and fees with respect to this provision. Further, the Company paid $2.9 million on November 1, 2002 with respect to this provision.

     During the third quarter of fiscal 2002, the Company and the lenders to the DIP Credit Agreement discovered that the applicable period(s) during which certain liquidity and earnings tests thereunder are measured had not been properly memorialized therein and the parties’ intentions were frustrated thereby. Accordingly, on December 4, 2002, the Bankruptcy Court granted authority to the Debtors and the lenders to enter into a Third Amendment of the DIP Credit Agreement to correct the measurement period definition. As modified by the Third Amendment, the DIP Credit Agreement would allow the Company to make a $13.8 million payment that is currently prohibited under the DIP Credit Agreement.

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 effect of the bankruptcy process on these matters cannot be predicted with certainty.

(9) 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 nine months ended October 31:

     The net income (loss) amounts for the nine months ended October 31, 2002 presented in the above table include reorganization items of $9.3 million, $(1.0) million and $26.6 million in Automotive Wheels, Components and Other, respectively.

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(10) Condensed Consolidating Financial Statements

     The following condensed consolidating 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 nine months ended October 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 nine months ended October 31, 2002.

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CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Nine Months Ended October 31, 2002
(Unaudited)