HAYES LEMMERZ INTERNATIONAL INC - 10-K Annual Report

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes o No þ

The aggregate market value of voting stock held by non-affiliates of the registrant as of April 1, 2003 (based on the closing price of the registrant’s Common Stock reported on the over-the-counter market on such date) was approximately $0.6 million.

The number of shares of Common Stock outstanding as of April 1, 2003 was 28,455,995 shares.

Hayes Lemmerz International, Inc.’s internet website address is www.hayes-lemmerz.com. The Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to section 13(a) or 15(d) of the Exchange Act are available free of charge through the Company’s website as soon as reasonably practical after those reports are electronically filed with, or furnished to, the Securities and Exchange Commission.

THIS ANNUAL REPORT ON FORM 10-K 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, INCLUDING, BUT NOT LIMITED TO, STATEMENTS UNDER THE CAPTIONS “BUSINESS” AND “MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.” 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 AND COMMERCIAL HIGHWAY INDUSTRIES (WHICH MAY BE ADVERSELY AFFECTED BY A WEAKENING OF THE ECONOMY AND HAVE 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; (6) THE UNCERTAINTIES INHERENT IN INTERNATIONAL OPERATIONS AND FOREIGN CURRENCY FLUCTUATIONS; AND (7) UNCERTAINTIES RELATING TO WAR IN THE MIDDLE EAST. THE COMPANY HAS NO DUTY UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 TO UPDATE THE FORWARD LOOKING STATEMENTS IN THIS ANNUAL REPORT ON FORM 10-K AND THE COMPANY DOES NOT INTEND TO PROVIDE SUCH UPDATES.

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 and “fiscal 2000” refers to the period beginning February 1, 2000 and ending January 31, 2001).

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.

Pursuant to an order entered by the Bankruptcy Court on January 10, 2003, the period during which the Company has the exclusive right to propose a plan of reorganization has been extended to April 15, 2003. On December 16, 2002, the Debtors filed a proposed joint plan of reorganization with the Bankruptcy Court. On February 21, 2003, the Debtors filed a first amended joint plan of reorganization and are currently in the process of soliciting votes to approve such plan. The deadline established by the Bankruptcy Court to vote on the Plan was March 28, 2003, which was extended until April 4, 2003. There can, however, be no assurance that the Debtors’ first amended plan of reorganization or any plan will be approved by creditors authorized to vote thereon or confirmed by the Bankruptcy Court, or that any such plan ultimately will be consummated.

The Debtors’ proposed first amended plan of reorganization provides that the existing common stock of the Company would be cancelled and that certain creditors of the Company would be issued new common stock, new preferred stock and new warrants in the reorganized Company. Although there can be no assurance that the first amended plan of reorganization proposed by the Debtors will be confirmed by the Bankruptcy Court or consummated, holders of common stock of the Company should assume that they would receive no value as part of any plan of reorganization. In light of the foregoing, the common stock currently outstanding has no value. 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 the first amended plan of reorganization filed, the Company filed a disclosure statement with respect thereto intended to provide information sufficient to enable holders of claims or interests to make an informed judgment about the plan. The disclosure statement sets 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 also contains 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 first amended plan of reorganization filed by the Debtors provides for emergence from bankruptcy during the second quarter of fiscal 2003, there can be no assurance that such a reorganization plan will be confirmed by the Court, or that any such plan 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.

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. Approximately 52% of the Company’s fiscal 2002 total sales consisted of sales to Ford, DaimlerChrysler and General Motors on a worldwide basis.

The Company was founded in 1908. From 1908 through 1992, the Company’s operations were predominately in the automotive wheel, brake and commercial highway businesses. In 1992, the non-wheel businesses and assets of the Company, particularly its automotive brake systems business and assets, were transferred to, and certain liabilities related thereto were assumed by, a wholly owned subsidiary of the Company, Kelsey-Hayes Company (“Kelsey-Hayes”), the capital stock of which was then transferred by the Company to its sole stockholder as an extraordinary dividend and the Company consummated an initial public offering of its common stock. Since 1992, the Company’s operations have been diversified through acquisitions and internal growth.

The Company has made three major acquisitions since 1992. On July 2, 1996, the Company consummated a series of transactions pursuant to which Motor Wheel Corporation (“Motor Wheel”) became a wholly owned subsidiary of the Company. On June 30, 1997, the Company acquired Lemmerz Holding GmbH (“Lemmerz”) (the “Lemmerz Acquisition”). Lemmerz was founded in 1919 and was a leading wheel supplier in Europe. On February 3, 1999, the Company acquired CMI International, Inc. (“CMI”). CMI was a leading full service supplier of wheel-end attachments, aluminum structural components and powertrain components to the automotive industry.

Note (17), “Segment Reporting” to the consolidated financial statements is incorporated herein by reference.

The Company currently conducts business in three operating segments: Automotive Wheels, Components and Other. The Automotive Wheels segment includes a wide range of wheels for passenger cars and light trucks. The Company designs and manufactures steel and aluminum wheels using casting, stamping, fabricating and other manufacturing processes. Aluminum wheels are generally lighter in weight, more readily stylized and more expensive than steel wheels. The principal markets for the Automotive Wheels segment include North America, Europe, South America and Asia. Substantially all of the sales in this segment are made directly to original equipment manufacturers (“OEMs”).

The Components segment includes wheel-end attachments, such as steering knuckles, spindles, hub carriers and suspension arms; aluminum structural components, such as crossmembers, subframes and engine cradles and axle assemblies; and automotive brake components, consisting primarily of composite metal drums, full cast drums and cast iron hubs for drum-type brakes and cast iron rotors for disc brakes. The Components segment also includes powertrain and engine components, such as aluminum and polymer intake manifolds, aluminum cylinder heads, water pumps, brackets and ductile iron exhaust manifolds. North America is the principal market for the Components segment. Substantially all of the sales in this segment are made directly to OEMs. The Components segment also includes three non-core aluminum operations, collectively called Metaalgieterij Giesen B.V. (“MGG”). MGG produces heat exchangers used in gas-fired boilers, aluminum housings for automotive and heavy truck applications, a variety of aluminum products for the general machinery and electronics industries, and specialized manufacturing equipment for foundry facilities.

The Other segment includes commercial highway vehicle wheels, rims and brake products sold by the Company to truck manufacturers (including replacement parts sold through original equipment servicers) and aftermarket distributors. These products are installed principally on trucks, trailers and buses. The Company’s Commercial Highway aftermarket division sells passenger car, light truck and trailer wheels and other automotive products, such as brake controllers. The principal markets for the Other Segment includes North America and Europe. The sales in this segment are made directly to OEMs, aftermarket distributors and other manufacturers.

Most of the raw materials (such as steel and aluminum) and semi-processed or finished items (such as castings) used in the Company’s products are purchased from suppliers located within the geographic regions of the Company’s operating units. In many cases, these materials are available from several qualified sources in quantities sufficient for the Company’s needs. However, shortages of a particular material or part occasionally occur. In addition, the Debtors’ Chapter 11 Filing, import tariffs imposed on steel and volatility among the Company’s vendors may affect the overall cost or availability of materials, and may be a risk factor for the Company’s operations.

To minimize materials issues, the Company has taken steps to centralize its materials and logistics function. In addition, the Company has developed multi-tiered materials sourcing strategies to cover extended time periods and new supply chain relationships.

The Company owns significant intellectual property, including numerous U.S. and foreign patents, trade secrets, trademarks and copyrights. While the Company’s intellectual property is important to its business operations and in the aggregate constitutes a valuable asset, the Company does not believe that any single patent, trade secret, trademark or copyright, or group of patents, trade secrets, trademarks or copyrights is critical to the success of the business. The Company’s policy is to seek statutory protection for all significant intellectual property embodied in patents, trademarks and copyrights. The Company, from time to time, grants licenses under its patents and technology and receives licenses under patents and technology of others.

While the Company’s business is not seasonal in the traditional sense, July (in North America), August (in Europe) and December are usually lower volume months. This is because OEMs typically perform model changeovers or take vacation shutdowns during the summer and assembly plants are typically closed for a period from shortly before the year end holiday season until after New Year’s Day.

In fiscal 2002, the Company’s principal customers were Ford, DaimlerChrysler and General Motors (the three of which comprised approximately 52% of the Company’s fiscal 2002 net sales on a worldwide basis), as well as BMW, Volkswagen, Nissan and Honda. Other customers include Toyota, Isuzu, Renault, Fiat, Porsche, Audi, Citroën, Peugeot, Skoda, Mazda, Mitsubishi and Suzuki. The Company also sells some of its components to other Tier I automotive suppliers such as Bosch, Continental Teves, Delphi, TRW and Visteon. In fiscal 2002, the Company also had over 300 commercial highway vehicle customers in North America, Europe and Asia, including Trailmobile, Dana/ Mack, DaimlerChrysler, Iveco, Strick, Great Dane Trailers, Freightliner, PACCAR, Volvo, General Motors, Renault, Western Star, Schmitz Cargobull and Köegal.

The loss of a significant portion of the Company’s sales to any of its principal customers could have a material adverse impact on the Company. The Company has been doing business with each of its principal customers for many years, and sales are composed of a number of different products and of different models or types of the same products and are made to individual divisions of such customers. In addition, the Company supplies products to many of these customers in both North America and Europe, which reduces the Company’s reliance on any single market.

Generally, the Company’s products are not on a backlog status. These products are produced from readily available materials, have a relatively short manufacturing cycle and have short customer lead times. Each operating unit maintains its own inventories and production schedules.

The major domestic and foreign markets for the Company’s products are highly competitive. Competition is based primarily on price, technology, quality, delivery and overall customer service. The Company’s customers have shifted research and development, design and validation responsibilities to their key suppliers, focusing on stronger relationships with fewer suppliers. The Company’s global competitors include a large number of other well-established suppliers. Competitors typically vary among each of the Company’s products and geographic markets.

The Company’s objective is to be a leader in offering superior quality and technologically advanced products to its customers at competitive prices. The Company engages in ongoing engineering, research and development activities to improve the reliability, performance and cost-effectiveness of its existing products and to design and develop new products for existing and new applications. The Company’s spending on engineering, research and development programs was $7.1 million in fiscal 2002, $10.5 million in fiscal 2001 and $14.3 million in fiscal 2000.

In addition, the Company has technical assistance agreements with Colombiana de Frenos S.A., a steel and aluminum wheel manufacturer in Colombia, and Ruedas de Venezuela, C.A., a fabricated wheel manufacturer in Venezuela.

The Company, like most other manufacturing companies, is subject to and is required from time to time to take action at its facilities to comply with federal, state, local and foreign laws and regulations relating to pollution control and protection of the environment. In this regard, the Company maintains an ongoing compliance program to anticipate and, if necessary, correct environmental problems. The Company periodically incurs capital expenditures in order to upgrade its pollution control mechanisms and to comply with applicable laws. The Company has 25 facilities registered or recommended for registration under ISO 14001 and is working to obtain ISO 14001 Registration at all manufacturing facilities worldwide. The Company believes it is in material compliance with applicable federal, state, local and foreign laws and regulations relating to pollution control and protection of the environment. See “Item 3. Legal Proceedings.”

At January 31, 2003, the Company had approximately 11,100 employees. Of the Company’s employees in the United States, approximately 5.8% were represented by the United Auto Workers (“UAW”) or United Steel Workers (“USW”) unions. Collective bargaining agreements with the UAW or USW affecting these employees expire at various times through 2003 and 2004. As is common in many European jurisdictions, substantially all of the Company’s employees in Europe are covered by country-wide collective bargaining agreements. These agreements expire at various times through 2003 and 2004. Additional agreements are often made with the facility Works Council on an individual basis covering miscellaneous topics of local concern. There are no Company-wide or industry-wide bargaining units in the United States. The Company considers its employee relations to be good.

The Company’s world headquarters is located in Northville, Michigan. The Company has a worldwide network of 47 facilities (including three joint venture facilities) in the United States, Germany, Italy, Spain, the Netherlands, Belgium, the Czech Republic, Turkey, Brazil, South Africa, Mexico, Thailand and India. The Company also provides sales, engineering and customer service throughout the world. The Company has

Note (17), “Segment Reporting” to the consolidated financial statements is incorporated herein by reference.

The Company’s world headquarters is located in Northville, Michigan. The Company operates 25 facilities in North America with approximately five million square feet in the aggregate. Within Europe, the Company operates 13 manufacturing facilities with approximately six million square feet in the aggregate. In South America, Asia and South Africa, the Company operates six facilities with approximately two million square feet in the aggregate. The Company believes that its plants are adequate and suitable for the manufacturing of products for the markets in which it sells. In addition to the operating facilities noted above, the Company has four non-operating facilities in the United States and one in Thailand which are currently held for sale.

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

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

On December 5, 2001, the Debtors filed voluntary petitions for reorganization relief under Chapter 11 of the Bankruptcy Code. These petitions were filed in the United States Bankruptcy Court for the District of Delaware and are being jointly administered pursuant to an order of the Bankruptcy Court under Case No. 01-11490-MFW. Management of the Company continues to operate the business of the Debtors as debtors-in-possession under Sections 1107 and 1108 of the Bankruptcy Code. In their Chapter 11 proceedings, the Debtors have proposed, are currently soliciting acceptances of, and expect to seek confirmation of a joint plan of 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.

On May 3, 2002, a group of purported purchasers of the Company’s bonds commenced a putative class action lawsuit against thirteen present or former directors and officers of the Company (but not the Company) and KPMG LLP, the Company’s independent auditor, in the United States District Court for the Eastern District of Michigan. The complaint seeks damages for an alleged class of persons who purchased Company bonds between June 3, 1999 and September 5, 2001 and claim to have been injured because they relied on the Company’s allegedly materially false and misleading financial statements. On June 27, 2002, the plaintiffs

filed an amended class action complaint adding CIBC World Markets Corp. and Credit Suisse First Boston Corporation, underwriters for certain bonds issued by the Company, as defendants.

Additionally, before the date the Company commenced its Chapter 11 Bankruptcy case, four other putative class actions were filed in the United States District Court for the Eastern District of Michigan against the Company and certain of its directors and officers, on behalf of a class of purchasers of Company common stock from June 3, 1999 to December 13, 2001, based on similar allegations of securities fraud. On May 10, 2002, the plaintiffs filed a consolidated and amended class action complaint seeking damages against the Company’s present and former officers and directors (but not the Company) and KPMG.

On June 13, 2002, the Company filed an adversary complaint and motion for a preliminary injunction in the Bankruptcy Court requesting the Court to stay the class action litigation commenced by the bond purchasers and equity purchasers. Additionally, on July 25, 2002, the Company filed with the Bankruptcy Court a motion to lift the automatic stay in the Chapter 11 Filings to allow the insurance company that provides officer and director liability insurance to the Company to pay the defense costs of the Company’s present and former officers and directors in such litigation. The Bankruptcy Court has since entered an order permitting the insurance company to pay up to $500,000 in defense costs incurred by the Company’s present and former officers and directors in the litigation subject to certain conditions, which amount has subsequently been increased to $800,000 pursuant to further authority in the order. The Company has withdrawn its motion for a preliminary injunction.

The Company was party to a license agreement with Kuhl Wheels, LLC (“Kuhl”), whereby Kuhl granted the Company an exclusive patent license concerning “high vent” steel wheel technology known as the Kuhl Wheel (the “Kuhl Wheel”), which agreement was terminated as of January 10, 2003 pursuant to a stipulation between the Company and Kuhl entered in connection with the Company’s bankruptcy proceeding. The original license agreement (as amended, the “License Agreement”), dated May 11, 1999, granted the Company a non-exclusive license for the Kuhl Wheel technology. The License Agreement was subsequently amended to provide the Company with an exclusive worldwide license. On January 14, 2003, the Company filed a Complaint for Declaratory and Injunctive Relief against Kuhl and its affiliate, Epilogics Group, in the United States District Court for the Eastern District of Michigan. The Company commenced such action seeking a declaration of noninfringement of two United States patents and injunctive relief to prevent Epilogics Group and Kuhl from asserting claims of patent infringement against the Company, and disclosing and using the Company’s technologies, trade secrets and confidential information to develop, market, license, manufacture or sell automotive wheels. Kuhl and Epilogics Group have filed a motion to dismiss the Company’s complaint. The Company is unable to predict the outcome of this litigation at this time. However, if the Company is not successful in such litigation, it may have an adverse impact on the Company.

In the ordinary course of its business, the Company is a party to other judicial and administrative proceedings involving its operations and products, which may include allegations as to manufacturing quality, design and safety. After reviewing the proceedings that are currently pending (including the probable outcomes, reasonably anticipated costs and expenses, availability and limits of insurance rights under indemnification agreements and established reserves for uninsured liabilities), management believes that the outcome of these proceedings will not have a material adverse effect on the financial condition or ongoing results of operations of the Company.

Under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (“CERCLA”), the Company currently has potential environmental liability arising out of both its wheel and non-wheel businesses at 17 Superfund sites (the “Sites”). Five of the Sites were related to the operations of Motor Wheel prior to the divestiture of that business by The Goodyear Tire & Rubber Co. (“Goodyear”). In connection with the 1986 purchase of Motor Wheel by MWC Holdings, Inc. (“Holdings”), Goodyear agreed to retain all liabilities relating to these Sites and to indemnify and hold Holdings harmless with respect thereto. Goodyear has acknowledged this responsibility and is presently representing the interests of the Company with respect to all matters relating to these five Sites.

As a result of activities which took place at the Company’s Howell, Michigan facility prior to its acquisition by the Company, the United States Environmental Protection Agency (the “EPA”) is performing,

under CERCLA, a remedial investigation/feasibility study of PCB contamination at this Site, and in the adjacent South Branch of the Shiawasee River. Under the terms of a consent judgment entered into in 1981 by Cast Forge, Inc. (“Cast Forge”) (the previous owner of this Site) and the State of Michigan, any additional PCB cleanup which may be required is the financial responsibility of the State of Michigan, and not of Cast Forge or its successors or assigns (including the Company). The EPA has concurred in the consent judgment.

The Company is working with various government agencies and the other parties identified by the applicable agency as “potentially responsible parties” to resolve its liability with respect to seven Sites. The Company’s potential liability at each of these Sites is not currently anticipated to be material.

The Company has potential environmental liability at the four remaining Sites arising out of businesses presently operated by Kelsey-Hayes. Kelsey-Hayes has assumed and agreed to indemnify the Company with respect to any liabilities associated with these Sites. Kelsey-Hayes has acknowledged this responsibility and is presently representing the interests of the Company with respect to these sites.

Kelsey-Hayes, and in certain cases the Company, may remain liable with respect to environmental cleanup costs in connection with certain divested businesses, relating to aerospace, heavy-duty truck components and farm implements, under Federal and state laws and under agreements with purchasers of these divested businesses. The Company believes, however, that such costs in the aggregate will not have a material adverse effect on the consolidated operations or financial condition of the Company and, in any event, Kelsey-Hayes has assumed and agreed to indemnify the Company with respect to any liabilities arising out of or associated with these divested businesses.

In addition to the Sites, the Company also has potential environmental liability at two state-listed sites in Michigan and one in California. Of the Michigan sites, one is covered under the indemnification agreement with Goodyear described above. The Company is presently working with the Michigan Department of Environmental Quality to resolve its liability with respect to the second Michigan site, for which no significant costs are anticipated. The California site is a former wheel manufacturing site operated by Kelsey-Hayes in the early 1980’s. The Company is working with two other responsible parties and with the State of California on investigation and remediation of this site.

The Company had 28,455,995 shares of Common Stock outstanding and 171 record holders as of January 31, 2003. The Company’s shares trade on the over the counter market (“OTC”) under the symbol “HLMMQ”. From December 1997 until December 20, 2001, the Company’s shares were traded on the New York Stock Exchange (“NYSE”) under the symbol “HAZ.” Set forth below are the high and low closing prices for the Company’s Common Stock as reported for each quarterly period during the last two fiscal years.

The Company has not paid dividends on its Common Stock since fiscal 1996, and does not intend to pay dividends on its Common Stock in the foreseeable future.

Securities authorized for issuance under equity compensation plans at January 31, 2003 are as follows:


(1)	Excludes securities reflected in the first column, “Number of Securities to be issued upon exercise of outstanding options and rights.”

(2)	Curtis J. Clawson, CEO of the company, received grants of stock options to purchase 1,400,000 shares of the Company’s Common Stock in August and September of 2001. These grants are subject to shareholder approval. No such approval has been obtained and, as a result of the Chapter 11 Filings, it is unlikely that any such shareholder approval will be either sought or obtained. These options have not been included in this table.

See Note (16) to the consolidated financial statements included herein for additional information.

The following table sets forth selected consolidated financial data with respect to the Company for the five fiscal years ended January 31, 2003. The information set forth below should be read in conjunction with


(1)	See Note (10) to the Consolidated Financial Statements included herein.

(2)	For the fiscal years ended January 31, 2003 and 2002, interest expense, net, excludes $117.6 million and $18.7 million, respectively, of interest expense that would have accrued from February 1, 2002 to January 31, 2003 and from December 5, 2001 to January 31, 2002, respectively, with respect to certain long-term debt classified as liabilities subject to compromise. See Note (11) to the Consolidated Financial Statements included herein.

(3)	See Note (6) to the Consolidated Financial Statements included herein.

(4)	See Note (11) to the Consolidated Financial Statements included herein.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the Company’s Consolidated Financial Statements, related notes thereto and the other information included elsewhere herein.

The Company has made three major acquisitions since 1992. On July 2, 1996, the Company consummated a series of transactions pursuant to which Motor Wheel Corporation (“Motor Wheel”) became a wholly owned subsidiary of the Company. On June 30, 1997, the Company acquired Lemmerz Holding GmbH (“Lemmerz”) (the “Lemmerz Acquisition”). Lemmerz was founded in 1919 and was the leading full-line wheel supplier in Europe. On February 3, 1999, the Company acquired CMI International, Inc. (“CMI”). CMI was a leading full service supplier of wheel-end attachments, aluminum structural components and powertrain components to the automotive industry.

In addition to the first amended plan of reorganization filed, the Company filed a disclosure statement with respect thereto intended to provide information sufficient to enable holders of claims or interests to make an informed judgment about the plan. The disclosure statement 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 also contains 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.

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 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 $3.0 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 January 31, 2003, there were $49.9 million of outstanding borrowings and $7.2 million in letters of credit issued pursuant to the Company’s Debtor-In-Possession revolving credit facility (the “DIP Facility”). As of March 28, 2003, there were $55.0 million of outstanding borrowings and $5.0 million in letters of credit issued pursuant to the DIP Facility. The amount of availability under the DIP Facility as of March 28, 2003 was $59.5 million, net of the aforementioned borrowings and issued letters of credit.

Reorganization items as reported in the fiscal 2002 and 2001 consolidated statements of operations included herein are comprised of income, expense and loss items that were realized or incurred by the Debtors as a direct result of the Company’s decision to reorganize under Chapter 11. During fiscal 2002 and 2001, respectively, reorganization items were as follows (millions of dollars):

Cash payments with respect to such reorganization items consisted of $25.4 million of professional fees and $3.0 million of Retention Bonus during fiscal 2002, and $5.3 million of professional fees in fiscal 2001.

Sales of the Company’s wheels, wheel-end attachments, aluminum structural components 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 design and manufacture 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 design and manufacture 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 design and manufacture wheel and brake products for commercial highway and aftermarket customers in North America. The Other segment also includes financial results related to the Company’s tire and wheel operations in Europe, the corporate office and elimination of certain intercompany activities.

The Company’s net sales for fiscal 2002 were $2,001.6 million, a decrease of 1.8% as compared to net sales of $2,039.1 million in fiscal 2001. This decrease is primarily due to the impact of lower sales to light vehicle OEMs and heavy-duty vehicle manufacturers in North America.

Net sales from the Company’s Automotive Wheels segment decreased $71.5 million to $1,161.3 million in fiscal 2002 from $1,232.8 million in fiscal 2001. Net sales from the Company’s North American wheel operations decreased by approximately $91 million from fiscal 2001 to fiscal 2002, due primarily to lower OEM production requirements, and the closure of the Somerset, Kentucky aluminum wheels facility. Net sales from the Company’s international wheel operations increased by approximately $20 million, due primarily to favorable changes in product mix and the impact of foreign exchange fluctuations. This increase was partially offset by lower pass-through pricing and the sale of the Company’s Brazilian agriculture wheel business.

Net sales from Components increased $79.8 million to $737.7 million in fiscal 2002 from $657.9 million in fiscal 2001. The increase is primarily due to new program launches at the Company’s Montague, Michigan facility and at the Company’s other suspension component operations that increased sales by approximately $105 million. This was partially offset by the impact of the closure of the Company’s Petersburg, Michigan facility and the sale of the Company’s Maulbronn, Germany foundry during the second quarter of 2002, which reduced net sales by approximately $44 million during 2002. The remainder of the increase in Components net sales is primarily due to higher volumes on existing platforms.

Other net sales decreased $45.8 million to $102.6 million in fiscal 2002 from $148.4 million in fiscal 2001. Net sales from the Company’s commercial highway and aftermarket operations were approximately $20.7 million lower in fiscal 2002 compared to 2001 due primarily to abnormally high military wheel shipments in fiscal 2001 and lower North American heavy duty trailer production in fiscal 2002. The remaining decrease in Other net sales is primarily due to the sale of the Company’s European system service business during the fourth quarter of fiscal 2001.

The Company’s gross profit margin for fiscal 2002 increased by $76.0 million, to $207.7 million or 10.4% of net sales, as compared to $131.7 million or 6.5% of net sales for fiscal 2001.

Gross profit from the Company’s Automotive Wheels operation increased $73.8 million from fiscal 2001 to fiscal 2002. Automotive Wheels gross profit increased by approximately $58 million primarily due to the closure of the Company’s Somerset, Kentucky facility during the first quarter of 2002 and the wind down of the Bowling Green facility. The remaining increase in gross profit is due primarily to improved operating performance, favorable sales mix and the favorable impact of foreign exchange fluctuations. This increase was partially offset by decreased volumes, primarily in North America, lower prices and the sale of the Brazilian agricultural wheel business.

Gross profit from Components increased $21.9 million from fiscal 2001 to fiscal 2002. Components’ gross profit increase is primarily due to improved operating performance and productivity, implementation of lean manufacturing initiatives, and increased volumes across the Company’s North American operations. This was partially offset by substantial program launch and start-up costs recorded at the Company’s Montague, Michigan facility during the first half of fiscal 2002 and lower pricing.

Other gross profit decreased $19.7 million from fiscal 2001 to fiscal 2002. The impact of lower sales in the Company’s commercial highway operations negatively impacted gross profit in fiscal 2002. The Company also recorded higher operating costs due primarily to higher post-retiree medical expenses related to the Company’s North American operations, which decreased Other gross profit. The remaining decrease in Other gross profit is primarily due to the sales of the Company’s European systems service business during the fourth quarter of fiscal 2001.

Marketing, general and administrative expenses increased $2.6 million from fiscal 2001 to 2002. This increase was due primarily to the centralization of certain corporate functions in North America and performance-based incentive compensation earned in fiscal 2002. Decreased spending across most of the Company’s global operations partially offset this increase.

The Company’s engineering and product development expenses decreased $1.4 million to $20.4 million in fiscal 2002. This decrease is primarily due to lower engineering expenses in Automotive Wheels.

The Company recorded asset impairment losses and other restructuring charges of $43.5 million in fiscal year 2002 and $141.6 million in fiscal 2001. These losses and charges consist of the following:

estimated amounts related to lease termination costs and other closure costs consisting primarily of security and maintenance costs subsequent to the shutdown date. The portion of the charge related to lease terminations in the amount of $3.5 million has been classified as a liability subject to compromise at January 31, 2003 and has been excluded from the table below. Of the other closure costs, approximately $1.3 million remained unpaid at January 31, 2003, and is expected to be paid during fiscal 2003. During fiscal 2002, the Company recognized additional impairment losses of $1.9 million related to investments in building, machinery, equipment and tooling primarily due to real estate market conditions and further revisions in management’s estimates regarding the fair value of such assets.

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 related to the termination of leases and other closure costs, including security and maintenance costs subsequent to the shutdown date. The decision to close the plant was based on the weakening of the economy, the tightened domestic auto industry and changing market requirements, which have resulted in reduced demand for fabricated steel wheels. The rationalization of the Company’s fabricated wheel manufacturing capacity will allow it to reduce overhead and manufacturing costs in North America. The Company estimated that the future undiscounted cash flows from this facility would not be sufficient to recover the carrying value of its investment in machinery, equipment and tooling. Accordingly, the Company recognized an asset impairment loss of $42.7 million during the fourth quarter of fiscal 2001. Such assets were written down to fair value based on the expected scrap value, if any, of such machinery, equipment, and tooling. This facility, originally scheduled to close in July 2002, operated through the end of fiscal 2002 to service existing contracts and assist in transitioning production to the Company’s fabricated steel wheel manufacturing facility located in Sedalia, Missouri. Due to the delayed closure, the original $10.7 million restructuring charge was revised to $10.3 million, and no costs related to this charge were paid in fiscal 2002. Such closure costs are expected to be paid in fiscal 2003. In addition, the Company recorded and paid $0.1 million in employee termination and other closure costs during fiscal 2002 related to this facility, of which $0.1 million was paid by January 31, 2003.

As a consequence of notifications received in April 2001 from certain customers of the Petersburg, Michigan facility regarding significantly lower future product orders and of 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 this facility and, accordingly, recognized an impairment loss of $28.5 million in fiscal 2001. Such assets were written down to fair value based on the expected scrap value, if any, of such machinery, equipment, and tooling. In June 2001, the Company committed to a plan to close the Petersburg facility, and accordingly recorded a restructuring charge of $0.6 million. This charge includes estimated amounts related to security and other maintenance costs subsequent to the shutdown date. Of this charge, $0.5 million remained unpaid at January 31, 2003, and is expected to be paid during fiscal 2003. During fiscal 2002, the Company recorded an additional impairment loss of $0.3 million to further write down this facility to fair value based on real estate market conditions.

In the second quarter of fiscal 2002, the Company determined, based on its most recent sales projections for its La Mirada, California facility, that its current estimate of the future undiscounted cash flows from this facility would not be sufficient to recover the carrying value of the facility’s fixed assets and production tooling. Accordingly, the Company recorded an impairment loss of $15.5 million in the second quarter of fiscal 2002 related to those assets. Such assets were written down to fair value based on the expected scrap value, if any, of such machinery, equipment, and tooling.

During the fourth quarter of fiscal 2001, the Company revised its future undiscounted cash flow projections from its foundry located in Maulbronn, Germany. Based on those revisions, the Company determined that those cash flows would not be sufficient to recover the carrying value of the facility’s long-lived assets and accordingly, recognized an asset impairment loss of $8.4 million during the fourth quarter of fiscal 2001. The Company commenced a plan of action to sell this facility during the fourth quarter of fiscal 2001 and subsequently sold it in the second quarter of fiscal 2002 and recorded a loss on sale of $2.5 million.

The Company recorded various asset impairment losses and restructuring charges as part of a multiple year restructuring program to upgrade and improve the Company’s international fabricated wheel operations. During the third quarter of fiscal 2001, the Company recognized an asset impairment loss of $0.9 million related to the abandonment of a greenfield project in Thailand. During the fourth quarter of fiscal 2001, the Company recognized asset impairment losses of $11.1 million related to its investments in building, machinery, equipment and tooling at its fabricated wheel facility in Königswinter, Germany. Such assets were written down to fair value based on estimated real estate market values and the expected scrap value, if any, of related machinery, equipment, and tooling. The Company transferred production of certain products to facilities located in the Czech Republic and in India and further consolidated passenger car and commercial wheel production within an adjacent facility located in Königswinter, Germany. In connection with the decommissioning of a building at its Königswinter, Germany site, the Company recorded a restructuring charge of $0.6 million in the fourth quarter of fiscal 2001. This charge relates to maintenance costs subsequent to the decommissioning date. Of this charge, $0.4 million remains unpaid as of January 31, 2003 and is expected to be paid during fiscal 2003. During fiscal 2002, the Company recorded $2.9 million of costs related to severance and post-termination benefits at its locations in Königswinter, Germany, Manresa, Spain and Sao Paulo, Brazil. The Company also recorded $2.2 million of such costs during fiscal 2001 at its locations in Königswinter, Germany and Manresa, Spain.

In fiscal 2002, the Company offered an early retirement option to approximately 30 employees, of whom 24 accepted by the 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.

On November 2, 2001, the Company announced the immediate elimination of 145 positions or approximately 11% of its salaried workforce across its domestic operations. In connection with the elimination of the 145 positions, the Company recorded a restructuring charge of $2.4 million in the fourth quarter of fiscal 2001, all of which was paid before the end of fiscal 2002. In addition, the Company announced that it would offer an early retirement option to approximately 45 salaried employees. Of the 45 employees offered an early retirement option, 31 accepted by the acceptance date. In connection with this early retirement offer, the Company recorded a restructuring charge of $3.9 million in the fourth quarter of fiscal 2001 primarily related to continued medical benefits and supplemental retirement 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 fiscal 2002, the Company recorded asset impairment losses of $10.7 million on certain machinery and equipment in its Automotive Wheels, Components and Other segments 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, equipment and tooling.

During fiscal 2001, the Company recognized asset impairment losses of $22.6 million on certain machinery and equipment in its Automotive Wheels, Components and Other Segments 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. 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 fourth quarter of fiscal 2002, the Company recorded an asset impairment loss of $0.5 million to write down the White Pigeon, Michigan facility to fair value based on current real estate market conditions. This non-operating facility is currently held for sale by the Company.

As part of ongoing restructuring and rationalization of its North American operations, the Company recorded severance costs of $1.7 million in fiscal 2002, all of which had been paid by January 31, 2003, and $0.2 million in fiscal 2001.

The following table describes the activity in the balance sheet accounts affected by the severance and facility exit costs noted above (millions of dollars):

For fiscal 2002, Other income, net in the consolidated statement of operations of $6.8 million includes the recovery of tooling costs of $3.6 million, various licensing, royalty and technical assistance fees of $1.4 million, various export sales incentives of $1.3 million, net gains on sales of various non-core assets and businesses of $0.5 million, and other miscellaneous income and expense.

Interest expense was $72.7 million for fiscal 2002 compared to $175.2 million in fiscal 2001. This decease reflects the discontinuation of interest accrued on the Company’s Senior Notes and Senior Subordinated Notes, as well as lower interest rates.

Taxes on income for fiscal 2002 were $3.6 million of expense despite the pre-tax loss for the year. This tax expense is primarily the result of taxes in foreign jurisdictions and various states reduced by approximately $14.3 million in United States federal income benefits recorded for the loss carry back claims resulting from United States federal income tax law changes. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. A valuation allowance was recorded against all net deferred tax assets in the United States and certain deferred tax assets recorded at various international locations. The tax expense recorded during fiscal 2002 as a result of the increase in the required valuation allowance was $81.6 million.

Implementation of a plan of reorganization under Chapter 11 is expected to reduce the availability of some or all of the Company’s net operating loss carryforwards and other tax attributes, and is expected to impact the tax basis of certain long-lived assets.

The Company’s net sales for fiscal 2001 were $2,039.1 million, a decrease of 6.0% as compared to net sales of $2,168.2 million in fiscal 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 8.9% from $1,353.1 million in fiscal 2000 to $1,232.8 million in fiscal 2001. This was primarily due to a $107.4 million decrease in sales from the Company’s North American operations arising from lower OEM production levels and lower market share in 2001 compared to 2000. Sales from the Company’s European operations decreased by $12.9 million, net of the effect of an approximate $41.7 million decrease in the average value of European currencies relative to the U.S. dollar. Of the net decrease, sales for the Company’s European fabricated wheels business unit decreased by $48.3 million, primarily due to increasing penetration rates of aluminum wheels in the European light vehicle market. Sales for the Company’s European aluminum wheels business unit partially offset this decrease, increasing by $35.4 million primarily due to higher customer production requirements and higher penetration rates.

Components net sales were slightly higher in fiscal 2001 compared to fiscal 2000, net of the effect of an approximate $3.9 million decrease in the average value of European currencies relative to the U.S. dollar. 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. This reduction was offset by the increase in net sales arising from the Company’s acquisition of the Schenk aluminum foundry in September 2000, and higher net sales from the Company’s MGG operations in Europe.

Other net sales decreased 9.5% from $163.9 million in fiscal 2000 to $148.4 million 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.

The Company’s gross profit margin for fiscal 2001 decreased by $124.9 million, to $131.7 million or 6.5% of net sales, as compared to $256.6 million or 11.8% of net sales for fiscal 2000.

The Company’s gross profit from Automotive Wheels decreased $93.0 million from fiscal 2000 to fiscal 2001. Gross profit from the Company’s North American operations decreased $86.3 million from fiscal 2000 compared to fiscal 2001. This decrease is primarily due to recurring manufacturing difficulties at the Company’s Somerset, Kentucky facility and lower operating performance at various other facilities in North America, which reduced gross profit by approximately $25.1 million and $53.3 million, respectively. Lower OEM production requirements in North America reduced gross profit by approximately $7.9 million. Gross profit from the Company’s European fabricated wheel operations decreased by $20.4 million. Of this decrease, lower operating performance at various foreign fabricated wheel operations and lower OEM customer

production requirements represented approximately $11.7 million and $8.7 million, respectively. These decreases were partially offset by a $13.7 million increase in gross profit from the Company’s foreign aluminum wheel operations.

Gross profit from Components decreased $29.0 million from fiscal 2000 to fiscal 2001. This decrease is primarily due to lower operating performance, lower OEM production requirements and the inefficiencies arising from lower production in the North American operations.

Other gross profit decreased $2.8 million from fiscal 2000 to fiscal 2001. This decrease is primarily due to lower sales and lower operating margins in the commercial highway market partially offset by higher gross profit from the Company’s systems service business in Europe.

Marketing, general and administrative expenses were unchanged from fiscal 2000 to 2001. Increased provisions for past due accounts receivable in the Company’s North American operations and higher spending in the Company’s European wheel operations was offset by lower spending at certain other locations.

Engineering and product development expenses increased from $16.6 million or 0.8% of net sales in fiscal 2000 to $21.8 million or 1.1% of net sales 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 of joint ventures decreased $3.5 million to $0.9 million of losses for fiscal 2001 as compared to $4.4 million of losses for fiscal 2000.

The Company recorded asset impairment losses and other restructuring charges of $141.6 million in fiscal year 2001 and $127.7 million in fiscal 2000. These losses and charges consist of the following:

Based on the levels of operating losses in fiscal 2000 and fiscal 1999, management concluded that the level of estimated future undiscounted cash flows was less than the carrying value of long-lived assets related to the Somerset facility at January 31, 2001. Accordingly, the Company recognized an impairment charge of $42.7 million in fiscal 2000 to reduce the carrying value of property, plant and equipment to estimated fair value.

future undiscounted cash flows from this facility would not be sufficient to recover the carrying value of its investment in machinery, equipment and tooling. Accordingly, the Company recognized an asset impairment loss of $42.7 million during the fourth quarter of fiscal 2001. Such assets were written down to fair value based on the expected scrap value, if any, of such machinery, equipment, and tooling. This facility, originally scheduled to close in July 2002, operated through the end of fiscal 2002 to service existing contracts and assist in transitioning production to the Company’s fabricated steel wheel manufacturing facility located in Sedalia, Missouri.

As a consequence of notifications received in April 2001 from certain customers of the Petersburg, Michigan facility regarding significantly lower future product orders and of 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 this facility and, accordingly, recognized an impairment loss of $28.5 million in fiscal 2001. Such assets were written down to fair value based on the expected scrap value, if any, of such machinery, equipment, and tooling. In June 2001, the Company committed to a plan to close the Petersburg facility, and accordingly recorded a restructuring charge of $0.6 million. This charge includes estimated amounts related to security and other maintenance costs subsequent to the shutdown date. In addition, the Company recognized an impairment charge of $1.5 million related to the Petersburg facility during fiscal 2000.

The Company recorded various asset impairment losses and restructuring charges as part of a multiple year restructuring program to upgrade and improve the Company’s international fabricated wheel operations. During the third quarter of fiscal 2001, the Company recognized an asset impairment loss of $0.9 million related to the abandonment of a greenfield project in Thailand. During the fourth quarter of fiscal 2001, the Company recognized asset impairment losses of $11.1 million related to its investments in building, machinery, equipment and tooling at its fabricated wheel facility in Königswinter, Germany. Such assets were written down to fair value based on estimated real estate market values and the expected scrap value, if any, of related machinery, equipment, and tooling. The Company transferred production of certain products to facilities located in the Czech Republic and in India and further consolidated passenger car and commercial wheel production within an adjacent facility located in Königswinter, Germany. In connection with the decommissioning of a building at its Königswinter, Germany site, the Company recorded a restructuring charge of $0.6 million in the fourth quarter of fiscal 2001. This charge relates to maintenance costs subsequent to the decommissioning date. The Company also recorded $2.2 million of such costs during fiscal 2001 at its locations in Königswinter, Germany and Manresa, Spain. During fiscal 2000, the Company recorded $10.6 million of severance and other restructuring charges in Königswinter, Germany.

would offer an early retirement option to approximately 45 salaried employees. Of the 45 employees offered an early retirement option, 31 accepted by the acceptance date. In connection with this early retirement offer, the Company recorded a restructuring charge of $3.9 million in the fourth quarter of fiscal 2001 primarily related to continued medical benefits and supplemental retirement 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 and fourth quarters of fiscal 2000, the Company implemented a workforce reduction program in which approximately 400 employees were terminated. A charge of $4.4 million was recorded for severance and other termination benefits related to this program.

During fiscal 2000, the Company recorded asset impairment losses of $68.5 million, primarily in the Automotive Wheels segment. These losses resulted primarily from a change in management’s plans for future use of idled machinery and equipment and removal of certain equipment from service due to weakening conditions in the heavy truck and light vehicle markets. Such assets were written down to fair value based on the expected scrap value, if any, of such machinery, equipment and tooling.

The following table describes the activity in the balance sheet accounts affected by the severance and facility exit costs noted above (millions of dollars):

In the second quarter of fiscal 2001, 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.

In the third quarter of fiscal 2000, the Company recorded a $1.5 million loss on investment in joint venture related to its Venezuelan joint venture.

Net interest expense was $175.2 million for fiscal 2001 compared to $163.5 million for fiscal 2000. This increase primarily reflects higher outstanding borrowings and higher interest rates on the refinanced debt. From December 5, 2001 to January 31, 2002, the Company did not accrue any interest expense on its unsecured senior notes and unsecured senior subordinated notes due to the Chapter 11 Filings by the Debtors. Interest not accrued or expensed on these notes approximated $18.7 million.

Taxes on Income for fiscal 2001 were $10.3 million of expense despite the pre-tax loss for the year. This tax expense is primarily the result of taxes in foreign jurisdictions. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company determined as of January 31, 2002 that it could not conclude that it was more likely than not that the benefits of the deferred tax assets would be realized in the future. Accordingly, a valuation allowance was recorded against all net deferred tax assets in the United States and certain deferred tax assets recorded at various international locations. The increase in income tax expense during fiscal 2001 as a result of the required valuation allowance was $141.3 million.

As described under Part I, Item 1 “Recent Developments”, the Company and certain subsidiaries filed voluntary petitions for reorganization relief 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.

The Company’s operations provided $95.3 million in cash during fiscal 2002 compared to $2.7 million during fiscal 2001. This increase is primarily due to improved operating performance and lower interest payments, offset by payments related to the Chapter 11 Filings.

Between January 31, 2001 and the date of the Chapter 11 Filings, the Company’s operating cash flows were adversely affected by (i) a decrease in operating margins, (ii) the effect of discontinuing a receivables securitization program (see “Trade Securitization Agreement” below), 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’s operating cash flows have been and are expected in the future to 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 paid has been substantially less due to the effect of the stay on payment of pre-petition obligations.

Capital expenditures for fiscal 2002 were $106.8 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 that capital expenditures for fiscal 2003 will be approximately $140 million relating primarily to maintenance and cost reduction programs and to meet demand for new vehicle platforms.

The principal sources of liquidity for the Company’s future operating, capital expenditure, facility closure, restructuring and reorganization requirements are expected to be (i) cash flows from operations, (ii) proceeds from the sale of non-core assets and businesses, (iii) borrowings under various foreign bank and government loans, (iv) borrowings under the DIP Facility, as described below, and (v) borrowings under any exit financing associated with the Company’s emergence from the Chapter 11 proceedings resulting from a confirmed plan or plans of reorganization. The DIP Facility is scheduled to terminate on the earlier of (a) the date of substantial consummation of a plan of reorganization or (b) June 5, 2003. As more fully discussed above, while the Company expects to emerge from Chapter 11 prior to the termination of the DIP Facility, there can be no assurances that the emergence will occur prior to such date, or that the Company will be able

to extend the term of or replace the existing DIP facility in the event that the Company has not emerged by June 5, 2003. Moreover, while the Company expects that such sources will meet these requirements, there can be no assurances that such sources will prove to be sufficient, in part, due to inherent uncertainties about applicable future capital market conditions.

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, 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 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).

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. As of March 28, 2003, there were $55.0 million of outstanding borrowings and $5.0 million in letters of credit issued pursuant to the DIP Facility. The amount available under the facility as of March 28, 2003, after taking into account the aforementioned borrowings and letters of credit, was $59.5 million.

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 fiscal 2002, payments totaling $39.0 million were made for a portion of accrued interest and fees with respect to this provision.

The DIP Agreement originally provided that the Debtors would be in default thereunder if they failed to (i) file a plan of reorganization and disclosure statement with the Bankruptcy Court within two hundred seventy (270) days after the Petition Date, or (ii) receive Bankruptcy Court approval of a disclosure statement within thirteen (13) months after the Petition Date. In connection with the Bankruptcy Court’s second extension of the exclusive periods under 11 U.S.C. § 1121(d), on August 6, 2002, the Debtors and the DIP Lenders entered into a Second Amendment of the DIP Agreement, which became effective on August 19, 2002. The Second Amendment provided that the Debtors shall be in default of the DIP Agreement if they failed to (i) file a plan of reorganization and disclosure statement with the Bankruptcy Court on or before December 16, 2002, or (ii) receive Bankruptcy Court approval of a disclosure statement on or before January 16, 2003.

During the third quarter of fiscal 2002, the Company and the lenders to the DIP 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, in addition to receiving Bankruptcy Court authority on December 4, 2002, to reconcile the mistake in the DIP Agreement, on December 16, 2002, the Debtors and the lenders entered into a Third Amendment of the DIP Agreement to correct the measurement period definition. As modified by the Third Amendment, the DIP Agreement allowed the Company to make a $13.8 million payment, which is included in the aforementioned $39.0 million, that previously would have been prohibited under the DIP Agreement.

DIP Agreement, on February 7, 2003, the DIP Agent agreed to extend the deadline for the Debtors to receive Bankruptcy Court approval of the Disclosure Statement from February 7, 2003 to February 28, 2003. The Bankruptcy Court approved the Company’s Disclosure Statement on February 20, 2003. In addition, the Fourth Amendment provided a waiver for the Debtors to effect a reorganization of non-Debtor German Subsidiaries in response to a proposed change in German tax laws.

Proceeds of loans made under the DIP Facility have been and 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.

Beginning January 31, 2002, the DIP Facility requires compliance with monthly minimum consolidated and domestic EBITDA tests (as defined in the DIP Agreement) and limits on capital expenditures. In addition to the foregoing financial covenants, the DIP Agreement imposes certain other restrictions on the Company and its subsidiaries, 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 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 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.

On February 3, 1999, the Company entered into a third amended and restated credit agreement, as further amended, (the “Credit Agreement”). Pursuant to the Credit Agreement, a syndicate of lenders agreed to lend to the Company up to $450 million in the form of a senior secured term loan facility 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 January 31, 2003, there was $176.8 million outstanding under the term loan facility which represents the total amount available under the facility. At January 31, 2003, there was $573.8 million outstanding under the revolving credit facility, including $1.7 million in letters of credit drawn against the Credit Agreement during fiscal 2002. 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 $16.2 million remain outstanding. In conjunction with the repayment on March 7, 2003 of a note payable issued for the purchase of the Wheland foundry in Chattanooga, Tennessee, a letter of credit of $2.0 million was terminated.

In connection with the acquisition of CMI, the Company issued the 8 1/4% Notes, which are redeemable at the Company’s option at specified prices, in whole or in part, at any time on or after December 15, 2003. The 8 1/4% Notes are guaranteed by certain of the Company’s domestic subsidiaries but are subordinated to the Credit Agreement. In connection with previous acquisitions, the Company issued the 9 1/8% and 11% senior subordinated notes which are guaranteed by certain of the Company’s domestic subsidiaries but are subordinated to the Credit Agreement. These notes become redeemable at the Company’s option and at specific prices five years before the respective due dates of the notes. Due to the uncertainty resulting from the Chapter 11 Filings by the Debtors, the fair value of all of the Company’s senior subordinated notes as of January 31, 2003 is not presently determinable.

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.

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):

In connection with the repurchase of the senior subordinated notes at a discount, the Company recorded an extraordinary gain of $10.6 million. 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. 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. The 11 7/8% Notes are effectively subordinated to all liabilities (including trade and intercompany obligations) of the Company’s subsidiaries which are not guarantors of the Credit Agreement and the B Term Loan. The indenture governing the 11 7/8% Notes provides 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. Due to the uncertainty resulting from the Chapter 11 Filings by the Debtors, the fair value of the Company’s 11 7/8% Notes as of January 31, 2003 is not presently determinable.

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 exchange offer for the 11 7/8% Notes 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 which were in effect during fiscal 2001 and fiscal 2000. The Company was in violation of certain of these covenants as of January 31, 2001. For purposes of the accompanying consolidated financial statements, all amounts outstanding with respect to the Credit Agreement, the Senior Notes and the Senior Subordinated Notes outstanding at January 31, 2003 and 2002 are classified as liabilities subject to compromise as of those dates.

In April 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 no retained interest in the receivables sold. The Company had collection and administrative responsibilities with respect to all the receivables that are sold.

This trade securitization agreement expired on May 1, 2001. The Company did not replace the agreement. From the expiration date to the date of the Chapter 11 Filings, the Company financed the amount of receivables previously sold under the securitization agreement with its revolving credit facility. The impact of the discontinued securitization program had an adverse impact on liquidity of approximately $71.6 million during fiscal 2001.

As of January 31, 2003, there were $105.1 million in outstanding borrowings under various foreign bank credit facilities. A portion of those credit facilities require compensating balance arrangements. In addition, the Company maintains cash deposits at certain locations in order to assure the continuation of vendor trade terms. As of January 31, 2003, the total amount of cash deposits maintained for these purposes was approximately $10.9 million.

During fiscal 2002, the Company received $9.6 million in cash proceeds from the sale of certain non-core assets and businesses, primarily the sale of the Company’s Brazilian agricultural wheel business, the Schenk aluminum foundry located in Maulbronn, Germany, and the Company’s interest in a Portuguese joint venture. During fiscal 2002, the Company paid $5.1 million for the remaining 24% interest in its South African subsidiary, and $2.1 million in cash and an additional $2.0 million note payable for the facility and assets of the Wheland foundry in Chattanooga, Tennessee. This note was subsequently paid on March 7, 2003.

During fiscal 2001, the Company sold its interests in its Canadian joint venture for cash proceeds of $9.5 million and its tire and wheel assembly business for cash proceeds of approximately $11.0 million.

The Company received net cash proceeds of $10.1 million during fiscal 2001 in connection with the early termination of all of its cross-currency interest rate swap agreements. As such, the Company held no cross-currency interest rate swap agreements at January 31, 2002 or 2003. The proceeds received reduced the fair market value of the agreements recorded at the time of the early terminations resulting from accounting for mark-to-market adjustments during the terms of the agreements. The Company received cash in the amount of $26.4 million and $9.7 million during fiscal years 2000 and 1999, respectively, in connection with the early termination of various other cross-currency interest rate swap agreements.

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.

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 and utility prices. The Company selectively uses derivative financial instruments to manage these risks, but does not enter into any derivative financial instruments for trading purposes.

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 occasionally entered into cross currency interest rate swaps to hedge a portion of its investments in Europe. The currency effects of these swaps are reflected in the cumulative translation adjustments component of other accumulated comprehensive loss, where they offset the gain or loss associated with the investments in Europe.

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), generally denominated in the Euro and the Brazilian Real, are affected by the translation into the Company’s reporting currency (the U.S. Dollar). 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 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, from time to time, entered into certain foreign currency swap arrangements. Additionally, foreign exchange rate fluctuations effect the comparability of year over year operating results.

The Company periodically analyzes the impact of foreign exchange fluctuations on earnings and has determined that, at January 31, 2003, excluding the translation effects referred to above, a 10% increase or decrease in foreign exchange rates would not have a material effect on earnings.

The Company generally manages its risk associated with interest rate movements through the use of a combination of variable and fixed rate debt. At January 31, 2003, approximately $876 million of the Company’s debt was variable rate debt. The Company believes that a 10% increase or decrease in the interest rate on variable rate debt could affect earnings by approximately $6 million.

The Company relies upon the supply of certain raw materials and other inputs in its production process and has entered into firm purchase commitments for aluminum and steel. The Company manages the exposures associated with these commitments primarily through the terms of its supply and procurement contracts. Additionally, the Company uses forward contracts to hedge against changes in certain specific commodity prices of the purchase commitments outstanding. The Company had no significant forward contracts during the years ended January 31, 2003 and 2002.

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 fully reflect 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 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.

The Company’s consolidated statements of operations included herein reflect an element of operating expenses described as asset impairments and other restructuring charges. The Company periodically evaluates whether events and circumstances have occurred that indicate that the remaining useful life of any of its long lived assets may warrant revision or that the remaining balance might not be recoverable. When factors indicate that the long lived assets should be evaluated for possible impairment, the Company uses an estimate of the future undiscounted cash flows generated by the underlying assets to determine if a write-down is required. If a write-down is required, the Company adjusts the book value of the impaired long-lived assets to their estimated fair values. Fair value is determined through third party appraisals or discounted cash flow calculations. The related charges are recorded as an asset impairment or, in the case of certain exit costs in connection with a plant closure or restructuring, a restructuring or other charge in the consolidated statements of operations.

As discussed above and in the notes to the Company’s consolidated financial statements included herein, a number of decisions have occurred or other factors have indicated that these types of charges are required to be currently recognized. There can be no assurance that there will not be additional charges based on future events and that the additional charges would not have a materially adverse impact on the Company’s financial position and results of operations.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. The Company expects the deferred tax assets, net of the valuation allowance, at January 31, 2003 to be realized as a result of the reversal of existing taxable temporary differences in the United States and as a result of projected future taxable income and the reversal of existing taxable temporary differences in certain foreign locations. As a result of management’s assessment, a valuation allowance was recorded at January 31, 2003 and 2002. The Company determined that it could not conclude that it was more likely than not that the benefits of certain deferred income tax assets would be realized. The valuation allowance recorded by the Company reduces to zero that net carrying value of all United States and certain foreign net deferred tax assets.

Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare the consolidated financial statements included herein in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates.

Generally, assets and liabilities which are subject to management’s estimation and judgment include long-lived assets, due to the use of estimated economic lives for depreciation purposes and future expected cash flow information used to evaluate the recoverability of the long-lived assets, inventory, accounts receivable, deferred tax asset valuation reserves, pension and post retirement costs, restructuring reserves, self insurance accruals and environmental remediation accruals.

In November 2002, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” Interpretation No. 45 requires certain disclosures to be made by a guarantor in its financial statements about its obligations under certain guarantees, including product warranties. The disclosure provisions of this Statement are effective for financial statement periods ending after December 15, 2002. The Company has made the required disclosures in the financial statements. This Statement also requires a guarantor to recognize, at inception, for all guarantees issued or modified after December 31, 2002, a liability for the fair value of the obligations it has undertaken in issuing a guarantee. Adoption of the fair value provisions of this Statement had no impact on the financial statements of the Company.

Effective February 1, 2002, the Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 142 requires that goodwill and indefinite-lived intangible assets be reviewed for impairment annually, rather than amortized into earnings. Any impairment to the amount of goodwill existing at the date of adoption is to be recognized as a cumulative effect of a change in accounting principle on that date.

Upon adoption, the Company discontinued amortizing goodwill and indefinite-lived intangible assets into earnings. In connection with the transitional provisions of the Statement, the Company performed an assessment of whether there was an indication that goodwill was impaired as of the adoption date. To accomplish this, the Company determined the carrying value of each of its six reporting units (i.e., one step below the segment level) by assigning the assets and liabilities, including existing goodwill and intangible assets, to the reporting units on February 1, 2002. As of that date, the Company had unamortized goodwill and other indefinite-lived intangibles of approximately $758.7 million that were subject to the transition provisions of SFAS No. 142. The Company determined the fair value of each reporting unit and compared those fair values to the carrying values of each reporting unit. To the extent the carrying amount of a reporting unit exceeded the fair value of the reporting unit indicating that goodwill may be impaired, the Company performed the second step of the transitional impairment test. This test was required for five reporting units.

In the second step, the Company compared the implied fair value of the reporting units goodwill with the carrying value of that goodwill, both of which were measured at the adoption date. The implied fair value of goodwill was determined by allocating the fair value of the reporting units to all of the assets (both recognized and unrecognized) and liabilities of the reporting units in a similar manner to a purchase price allocation in accordance with SFAS No. 141, “Business Combinations.” The residual fair value after this allocation was the implied fair value of the reporting units’ goodwill. The carrying amounts of these reporting units exceeded the fair values, and the Company recorded an impairment charge of $554.4 million as of February 1, 2002 as a cumulative effect of a change in accounting principle as described above.

The following table presents adjusted net loss on a comparable basis, by eliminating goodwill amortization from the reported amounts of net loss for the years ended January 31, 2002 and 2001 (in millions, except per share amounts):

In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities”. Interpretation No. 46 provides guidance for identifying a controlling interest in a Variable Interest Entity (VIE) established by means other than voting interests. Interpretation No. 46 also requires consolidation of a VIE by an enterprise that holds such a controlling interest when it is determined that the investor will absorb a majority of the VIE’s expected losses or residual returns, if they occur. The effective date for this Interpretation will be July 1, 2003. The Company is assessing the impact of adoption of Interpretation No. 46, and it may be reasonably possible that the Company will be required to consolidate certain VIEs related to certain operating leases beginning in the second quarter of fiscal 2003.

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure, an amendment of FASB Statement No. 123.” This Statement amends SFAS No. 123, “Accounting for Stock Based Compensation,” to provide alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements. Certain of the disclosure modifications are required for fiscal years ending after December 15, 2002 and are included in the notes to the Consolidated Financial Statements included herein.

In December 2002, the Emerging Issues Task Force (“EITF”) issued EITF Issue 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables”. EITF 00-21 provides guidance on determining whether a revenue arrangement contains multiple deliverable items and if so, requires revenue be allocated amongst the different items based on fair value. EITF 00-21 also requires revenue on any item in a revenue arrangement with multiple deliverables not delivered completely must be deferred until delivery of the item is completed. The effective date of this Issue for the Company will be July 1, 2003. The Company does not expect the adoption of this Statement to have a material effect on the financial statements of the Company.

In July 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” SFAS No. 146 requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. Examples of costs covered by this standard include lease termination costs and certain employee severance costs associated with a restructuring or plant closing, or other exit or disposal activity. Previous guidance for such costs was provided by EITF Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)” (“EITF 94-3”). SFAS No. 146 replaces EITF 94-3, and is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. Liabilities recorded under EITF 94-3 prior to adoption of SFAS No. 146 are grandfathered, and thus, adoption of this standard did not have a material effect on the Company’s financial position or results of operations.

In May 2002, the FASB issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections.” SFAS No. 145 eliminates the requirement that gains and losses from the extinguishment of debt be aggregated and, if material, classified as an extraordinary item, net of the related income tax effect. However, an entity is not prohibited from classifying such gains and losses as extraordinary items, so long as they meet the criteria outlined in Accounting Principles Board Opinion No. 30, “Reporting the Results of Operations — Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions.” SFAS No. 145 also eliminates the inconsistency between the accounting for sale-leaseback transactions and certain lease modifications that have economic effects that are similar to sale-leaseback transactions. This statement is effective for financial statements issued for fiscal years beginning after May 15, 2002. The Company will adopt SFAS No. 145 in the fiscal year beginning February 1, 2003, and adoption of this standard is not anticipated to have a material effect on the Company’s financial position or results of operations.

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.

The response to this Item is set forth above in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, under the heading “Market Risks.”

The response to this Item is submitted in the Company’s Consolidated Financial Statements and Notes to Consolidated Financial Statements filed herewith, beginning at page F-1.

The Board of Directors of the Company is currently authorized to consist of eleven directors divided into three classes (Class 1, Class 2 and Class 3) serving staggered three-year terms. The Company’s By-Laws require that the three classes be as nearly equal in number as possible. Class 1 is composed of three directors and Classes 2 and 3 are each composed of four directors. There are currently two vacancies on the Board of Directors for Class 1 Directors, one vacancy for a Class 2 Director and one vacancy for a Class 3 Director.

Stockholders owning approximately 75% of the outstanding Common Stock of the Company are parties to a stockholders agreement (the “Stockholders Agreement”) which provides, among other things, that the Board of Directors shall consist of eleven members and that certain of these stockholders will vote their shares of Common Stock so that the Board of Directors of the Company will be comprised of the Chief Executive Officer of the Company (currently, Curtis J. Clawson), four designees of Joseph Littlejohn & Levy Fund II, L.P. (“JLL Fund II”) (currently, Paul S. Levy, Jeffrey C. Lightcap and David Y. Ying), one designee of TSG Capital Fund II, L.P. (“TSG”) (currently, Cleveland A. Christophe), two designees of

Marianne Lemmerz, Horst Kukwa-Lemmerz, Inge Kruger-Pressl and Renate Kukwa-Lemmerz (collectively, the “Lemmerz Shareholders”), and three individuals determined by the Board who are not affiliated with the Company or any of the parties to the Stockholders Agreement other than one member that may be affiliated with CIBC WG Argosy Merchant Fund 2, L.L.C. (“Argosy”) (currently, John S. Rodewig and Ranko Cucuz). The Stockholders Agreement also provides, among other things, for certain transfer restrictions and registration rights for the stockholder parties thereto. The two designees of the Lemmerz shareholders, Horst Kukua-Lemmerz and Wienand Meilicke resigned as directors on June 4 and 5, 2002, respectively.

Except as described above, there are no arrangements or understandings between any director and any other person pursuant to which he was selected as a director. The following are brief biographies of each of the directors:

Curtis J. Clawson is 43 years old. He is a Class 2 Director and has been a director of the Company since August 2001. He has been Chairman of the Board of Directors since September 2001. From November 1999 until August 2000, Mr. Clawson was the President and Chief Operating Officer of American National Can Group, Inc. From May 1998 until November 1999, Mr. Clawson was an Executive Vice President of American National Can Group, Inc. From March 1995 until January 1998, Mr. Clawson was a Division President of AlliedSignal Inc.

Cleveland A. Christophe is 57 years old. He is a Class 3 Director and has been a director of the Company since July 1996. Mr. Christophe has been a Managing Member of TSG Capital Group, L.L.C. since January 1995, a director and President of TSG Associates II, Inc. since January 1995, and Managing Member of TSG Associates III, L.L.C. since August 1998. Mr. Christophe is also a director of TSGVI Associates, Inc., Midwest Stamping, Inc., Urban Brands, Inc., Millennium Digital Media, L.L.C., Orbseal L.L.C. and TCP Holdings, Inc.

Ron Cucuz is 59 years old. He is a Class 2 Director and has been a director of the Company since 1992. Mr. Cucuz is also a director of Cleveland-Cliffs Inc. and Lincoln Electric Holdings, Inc. Mr. Cucuz was Chief Executive Officer of the Company from October 1992 to August 2001.

Paul S. Levy is 55 years old. He is a Class 3 Director and has been a director of the Company since July 1996. Mr. Levy has been a Senior Managing Director of JLL Partners, Inc. (“JLL”), which is the managing general partner of JLL Fund II, from its inception in 1988. Mr. Levy has served as Chairman of the Board of Directors and Chief Executive Officer of Lancer Industries, Inc. since July 1989. Mr. Levy is also a director of Fairfield Manufacturing Company, Inc., New World Pasta Company, IASIS Healthcare Corp., Builders FirstSource, Inc., Motor Coach Industries International, Inc. and AdvancePCS.

Jeffrey C. Lightcap is 44 years old. He is a Class 1 Director and has been a director of the Company since October 1997. He has been a Senior Managing Director of JLL since June 1997. From February 1993 until May 1997, Mr. Lightcap was employed by Merrill Lynch & Co., an investment banking firm, first as a Director and then, commencing in 1994, as a Managing Director. Mr. Lightcap is also a director of New World Pasta Company, IASIS Healthcare Corp. and Motor Coach Industries International, Inc.

John S. Rodewig is 69 years old. He is a Class 3 Director and has been a director of the Company since December 1992. He served as President of Eaton Corporation from 1992 until his retirement on January 1, 1996. Mr. Rodewig also serves as a director of FKI plc.

David Y. Ying is 48 years old. He is a Class 2 Director and has been a director of the Company since June 1997. Mr. Ying has been a Senior Managing Director of JLL since June 1997. From January 1993 until May 1997, Mr. Ying was a Managing Director of Donaldson Lufkin & Jenrette, an investment banking firm. Mr. Ying is also a director of New World Pasta Company, IASIS Healthcare Corp., Lancer Industries, Inc. and Builders FirstSource, Inc.

The Company’s proposed plan of reorganization provides that on the effective date of the plan of reorganization, the term of the existing board of directors will expire. From and after the effective date of the plan of reorganization, the initial board of directors will consist of seven directors. The initial board of directors will include Mr. Clawson. The remaining six members will be selected as follows: three directors will be

selected by the agent under the Credit Agreement, two directors will be selected by Apollo Management V, L.P., the manager of funds which, collectively, hold in excess of 40% of the Senior Notes, and one director will be selected by mutual agreement of the agent under the Credit Agreement and Apollo Management V, L.P.

The following table sets out the names and ages of each of the executive officers of the Company as of January 31, 2003, their positions as of that date, the date on which they were appointed to such positions and their business experience during the past five years. All positions shown are with the Company or its subsidiaries unless otherwise indicated. All executive officers are elected by the Board of Directors of the Company and serve at its pleasure. There are no family relationships among any of the executive officers and there is no arrangement or understanding between any of the executive officers and any other person pursuant to which he was selected as an officer.

Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires the Company’s directors and certain officers to file with the SEC initial reports of ownership and reports of changes in ownership of the Company’s Common Stock. Copies of all such Section 16(a) reports are required to be furnished to the Company. These filing requirements also apply to holders of more than ten percent of the Company’s Common Stock. To the Company’s knowledge, based solely on a review of the copies of Section 16(a) reports furnished to the Company during fiscal year 2002, or written representations from certain reporting persons that no Forms 5 were required for those persons, all Section 16(a) filing requirements applicable to the Company’s officers and directors and beneficial owners of more than 10% of the Common Stock were complied with on a timely basis.

Directors who are not Company employees and who are not affiliated with certain of the parties to the Stockholders Agreement receive an annual retainer of $20,000, a fee of $1,000 for each Board or committee meeting attended and reimbursement of expenses incurred in attending Board and/or committee meetings. In fiscal year 2002, Messrs. Rodewig and Cucuz were the only directors of the Company who were paid for their participation as a director or member of a committee of the Board.

Mr. Kukwa-Lemmerz, who resigned from the Board on June 4, 2002, was a designee on the Board of Directors of the Lemmerz Shareholders who own an aggregate of 5,050,000 shares of Common Stock. In connection with the Lemmerz Acquisition, Mr. Kukwa-Lemmerz was elected as (i) Vice Chairman of the Company’s Board of Directors, (ii) a nonvoting member of the Compensation Committee, and (iii) Chairman of the Board of the Company’s subsidiary, HLI (Europe) Ltd. The Company also entered into consulting agreements (the “Consulting Agreements”) with Mr. Kukwa-Lemmerz and an affiliate of Mr. Kukwa-Lemmerz pursuant to which, among other things, (i) Mr. Kukwa-Lemmerz retired from all positions held with Lemmerz and its subsidiaries, (ii) the Company agreed to pay Mr. Kukwa-Lemmerz and his affiliate an aggregate of $500,000 annually during the five-year period for which consulting services were provided, and (iii) the Company granted Mr. Kukwa-Lemmerz and his affiliate options to purchase an aggregate of 250,000 shares of Common Stock at an exercise price of $16 per share, such options to become exercisable at the rate of 20% annually on June 30, 1998 and each June 30th thereafter during the term of the Consulting Agreements.

The members of the Compensation Committee of the Board of Directors during fiscal year 2002 were Messrs. Christophe, Rodewig and Ying. Mr. Christophe is a designee of TSG. Mr. Ying is a designee of JLL Fund II. Mr. Clawson attended two meetings of the Compensation Committee as a non-voting member of the Committee.

This section provides summary information regarding the compensation of Mr. Clawson, the Chief Executive Officer, and the four most highly compensated officers other than Mr. Clawson: Scott Harrison, Vice President — President, Suspension Components; James L. Stegemiller, Vice President — President, North American Wheels; Michael J. Edie, Vice President — Materials and Logistics; and Daniel M. Sandberg, Vice President — President, Automotive Brake Components and Powertrain Components, (collectively, the “Named Executive Officers”).

Messrs. Clawson, Harrison, Stegemiller, and Edie were hired by the Company in fiscal year 2001. All of the Named Executive Officers, other than Mr. Sandberg, received a retention bonus in fiscal year 2002. All of the Named Executive Officers received payments under the critical employee retention program approved by the Bankruptcy Court on May 28, 2002 (the “CERP”). All of the Named Executive Officers received a performance bonus with respect to fiscal year 2002. The following summary compensation table sets forth certain information concerning compensation for services in all capacities awarded to, earned by or paid to the Company’s Named Executive Officers for fiscal years 2002, 2001 and 2000.


(1)	For each Named Executive Officers, other than Mr. Sandberg, the amount earned for fiscal year 2002 constitutes in part a retention bonus. If the Named Executive Officer’s employment with the Company is terminated by the Company for cause or by the officer without good reason within three years from the date of his employment, the officer is required to repay to the Company a pro rata portion of the after-tax amount of the retention bonus. The retention bonus earned in fiscal year 2002 for Messrs. Clawson, Stegemiller, Harrison and Edie is the after-tax amount of the retention bonus multiplied by a fraction, the numerator of which is the number of calendar days the officer was employed by the Company in fiscal year 2002 (365 days for each of the Named Executive Officers who received the retention bonus) and the denominator of which is 1,095 days. The total pre-tax retention bonuses for Messrs. Clawson, Harrison, Stegemiller, and Edie were $1,200,000, $600,000, $1,000,000, and $500,000, respectively.

(2)	For each of the Named Executive Officers, the amount earned for fiscal 2002 constitutes in part a payment under the CERP. The CERP is comprised of two components: (a) a retention bonus providing a bonus of 200% of Mr. Clawson’s base salary and 120% of Messrs. Harrison, Stegemiller, Edie and Sandberg’s base salary, paid 35% on October 1, 2002 and the balance upon consummation of the restructuring; and (b) a restructuring performance bonus payable after the consummation of the restructuring. The amount of the retention component of the CERP earned by Messrs. Clawson, Harrison, Stegemiller and Edie was reduced by the amount of the retention bonus, as described above, covering the same period of time. The amount of the retention component of the CERP earned in fiscal 2002 for Messrs. Clawson, Harrison, Stegemiller, Edie and Sandberg were $318,503, $6,304, $0, $19,600 and $114,257, respectively.

(3)	The bonuses earned by the Named Executive Officers include performance bonuses with respect to fiscal year 2002 for Mr. Clawson — $832,527; Mr. Harrison — $164,609; Mr. Stegemiller — $184,339; Mr. Edie — $168,710; and Mr. Sandberg — $210,733.

(4)	For each Named Executive Officer, includes one or more of the following: matching contributions accrued under the Company’s retirement savings plan, contributions under the Company’s non-tax qualified supplemental employee retirement plan for the benefit of the Company’s executive officers based in the United States, long term disability insurance premiums, reimbursement of moving expenses, and other perquisites.

(5)	Mr. Clawson was appointed Chief Executive Officer of the Company on August 1, 2001. Mr. Clawson received grants of stock options to purchase 1,400,000 shares of the Company’s Common Stock.


	However, these grants of options are subject to shareholder approval. No such approval has been obtained and, as a result of the Chapter 11 Filings, it is unlikely that any such shareholder approval will be either sought or obtained.

Aggregate Option Exercises in Fiscal Year 2002 and January 31, 2003 Option Value

The following table shows the number of shares covered by both exercisable and non-exercisable stock options held by the Named Executive Officers as of January 31, 2003. This table also shows the value on that date of their “in-the-money” options, which is the positive spread between the exercise price of existing stock options and $0.12 per share (the closing market price of the Common Stock on January 31, 2003). No options were exercised in fiscal year 2002 by any of the Named Executive Officers.

The Named Executive Officers receive medical, group life insurance and other benefits (including matching contributions under the Company’s 401(k) Plan) that are available generally to all of the Company’s salaried employees. The Named Executive Officers participate in the Company’s salaried employees retirement plans, which are qualified under Section 401(a) of the Code and receive certain other perquisites. The Named Executive Officers based in the United States also participate in the Company’s supplemental employee retirement plan (which is not qualified under Section 401(a) of the Internal Revenue Code). Additional information regarding other compensation and benefits of the Named Executive Officers is described in the Summary Compensation Table set forth above.

The Company maintains a defined benefit pension plan covering all persons who were United States salaried employees of the Company and its subsidiaries on or before December 31, 1994. Pension income at normal retirement age is calculated by averaging the participant’s highest consecutive 60 months of compensation out of the final 120 months of compensation and providing 1% of the first $7,800 thereof and 1 1/3% of the remainder for each of the first 30 years of service, and 1/2% and 2/3% of such compensation, respectively, for each of the next 10 years of service. Benefits under the Company’s pension plan are limited by restrictions imposed by the Internal Revenue Code of 1986, as amended (the “Code”). Prior to the Company’s initial public offering in December 1992 (the “IPO”), the eligible United States salaried employees of the Company participated in a pension plan sponsored by K-H Corporation (“K-H”), which at the time was the parent corporation of the Company. In connection with the IPO, K-H transferred the assets and liabilities of its plan relating to participants employed in the Company’s wheel business to the Company’s pension plan, in accordance with the requirements of the Employee Retirement Income Security Act of 1974, as amended. Effective January 1, 1995, (1) certain provisions of the plan that had frozen final average compensation for purposes of the plan as of December 31, 1991, were rescinded, (2) no new participants may enter the plan and (3) for purposes of calculating benefits payable under the plan, no additional service may

be credited under the plan; however, service continues to be credited under the plan for vesting purposes and to determine eligibility for retirement benefits under the plan. In addition, increases in compensation were recognized under the plan for purposes of determining pensions. On January 31, 2002, the plan was restated to comply with recent legislation and to freeze final average compensation.

The following table illustrates the annual pension benefits payable from the Company’s defined benefit pension plan to a person in the specified earnings and years of service classifications at normal retirement date.

Base salary is the only compensation upon which benefits under this plan are determined. The covered compensation amounts set forth above differ from the amounts set forth in the Summary Compensation Table because of limitations contained in the Code on compensation permitted to be used for pension plan purposes.

Of the Named Executive Officers, only Mr. Sandberg participates in the defined benefit pension plan. Mr. Sandberg had covered compensation of $170,000 and two years of credited service (which amount was frozen as of December 31, 1994).

The Pension Plan Table shows amounts that are payable in the form of a straight-life annuity; such amounts are not subject to offset for Social Security or any other payments.

Effective January 1, 1995, the Company adopted a defined contribution pension plan for its United States salaried employees under which the Company contributes to a retirement account for each eligible employee 5% of compensation up to the amount of the Social Security wage base ($84,900 in 2002) plus 8% of compensation over the amount of the Social Security wage base. Compensation, for purposes of this plan, includes salary, bonus and commissions, but is limited to a maximum of $170,000 under provisions of the Code. The retirement account is invested at the direction and risk of the employee, who is entitled, subject to certain vesting requirements, to the contents of his or her account when employment terminates, at retirement or otherwise. The Company does not assure the employee of the amount of retirement benefit or the value of this account at any time. All of the named Executive Officers participate in the defined contribution pension plan.

Employment Contracts, Termination of Employment and Change-in-Control Arrangements.

The Company entered into separate agreements (the “Employment Agreements”) with Messrs. Clawson, Harrison, Stegemiller, Edie and Sandberg (the “Covered Individuals”) in connection with their appointment as officers of the Company. Each Employment Agreement is for a continuous term of two years, extending one additional day for each day that the Covered Individual is employed by the Company. The annual salaries for Messrs. Clawson, Harrison, Stegemiller, Edie and Sandberg are currently $755,000, $265,000, $285,000, $255,000 and $272,000, respectively, to be reviewed annually, and may be increased, but not decreased, by the Compensation Committee of the Company’s Board of Directors. The Covered Individuals are entitled to be reimbursed for their reasonable out-of-pocket expenses, participate in the Company’s benefit plans and receive customary perquisites. Mr. Clawson’s Employment Agreement provides that he will be nominated to serve on the Board of Directors of the Company.

Pursuant to the Employment Agreements, the Covered Individuals are eligible to earn an annual bonus under the Company’s Short-Term Incentive Plan up to a maximum of 120% of their base salary (200% in the case of Mr. Clawson). Each Covered Individual, other than Mr. Sandberg, also received retention bonuses, as described in the “Summary Compensation Table.” Upon a change in control of the Company (as defined in the Employment Agreements), each Covered Individual is entitled to an immediate payment of all earned but unpaid compensation and a pro rata bonus payment for the current fiscal year under any bonus plan for which he is then eligible.

The Employment Agreements provide that each Covered Individual whose employment with the Company is terminated during the term of the Employment Agreements (i) by the Company without cause, or (ii) by the Covered Individual with good reason, is entitled to receive: (a) earned but unpaid compensation, less any payment previously made in respect of such amount, (b) the product of the individual’s base salary, his bonus percentage and the fraction of the current fiscal year expired at the time of such termination, less any payments previously made in respect of such amounts upon such change of control, (c) one year’s base salary (two year’s salary and bonus, at 60% of base salary, in the case of Mr. Clawson). The Employment Agreements also provide that the Covered Individuals are entitled to have the Company (i) continue for up to one year (two years in the case of Mr. Clawson) all welfare benefit programs, such as medical and life, provided by the Company and its affiliated companies, (ii) pay or provide any other amounts incurred prior to the date of termination, or benefits required or permitted under any program or agreement of the Company, (iii) provide key executive level outplacement services, and (iv) transfer title to the Company vehicle used by the Covered Individual.

In addition, the Employment Agreements provide that each Covered Individual whose employment with the Company is terminated on or following a change in control and during the term of the Employment Agreements, other than (i) by the Company for cause, (ii) by reason of death or disability, or (iii) by the Covered Individual without good reason, is entitled to receive: (a) earned but unpaid compensation, less any payment previously made in respect of such amount, (b) the product of the individual’s base salary, his bonus percentage and the fraction of the current fiscal year expired at the time of such termination, less any payments previously made in respect of such amounts upon such change of control, (c) two times the sum of (x) the individual’s base salary and (y) the product of his base salary and his bonus percentage (60% bonus percentage in the case of Mr. Clawson) and (d) one hundred thousand dollars ($100,000) (except in the case of Mr. Clawson). The Employment Agreements also provide that the Covered Individuals are entitled to have the Company (i) continue for up to two years all welfare benefit programs, such as medical and life, provided by the Company and its affiliated companies, (ii) pay or provide any other amounts incurred prior to the date of termination, or benefits required or permitted under any program or agreement of the Company, (iii) provide key executive level outplacement services, and (iv) pay the Covered Individuals’ legal expenses relating to a dispute under the Employment Agreements.

The Employment Agreements also contain provisions regarding termination of employment upon disability, death, and other certain circumstances. In addition, if any payments or benefits paid to the Covered Individuals under the Employment Agreements or any other plan, arrangement or agreement with the Company are subject to the federal excise tax on excess parachute payments or any similar state or local tax, or any interest or penalties are incurred with respect thereto, the Company will pay to the Covered Individuals an additional amount so that the net amount retained by the Covered Individuals after deduction or payment of those taxes will be as if no such tax, interest or penalty was imposed.

The following contains stockholding information for persons known to the Company to own five percent or more of the Company’s Common Stock, the directors of the Company and the Company’s executive officers.

Ownership of the Company’s Common Stock is shown in terms of “beneficial ownership.” A person generally “beneficially owns” shares if he has either the right to vote those shares or dispose of them. More than one person may be considered to beneficially own the same shares.

In this report, unless otherwise noted, a person has sole voting and dispositive power for those shares shown as beneficially owned by him. Shares shown as beneficially owned by the Company’s executive officers include shares that they have the right to acquire by exercising options on or before January 31, 2003 (the “Record Date”). The percentages shown below compare the person’s beneficially owned shares with the total number of shares of the Company’s Common Stock outstanding on the Record Date (28,455,995 shares).

As of the Record Date, the outstanding Common Stock was held by 171 stockholders of record.


(1)	Each Warrant allows the holder thereof to acquire one share of Common Stock for a purchase price of $24.00. The Warrants are exercisable from July 2, 2000 through July 2, 2003.

(2)	Excludes options to purchase Common Stock held by certain officers and directors of the Company and also excludes Warrants to purchase 2,600,000 shares of Common Stock.

(3)	Excludes options to purchase Common Stock held by certain officers and directors of the Company, but includes Warrants to purchase 2,600,000 shares of Common Stock.

(4)	All of the shares of Common Stock owned by Argosy are Nonvoting Common Stock. Does not include 884,200 shares (3.1% of the Common Stock) owned by Canadian Imperial Holdings Inc. and 362,400 shares (1.3% of the Common Stock) owned by Caravelle Investment Fund, L.L.C. (“Caravelle”), both of whom are affiliates of Argosy; Argosy disclaims beneficial ownership of all such shares.

(5)	Consists of 1,687,420 shares of Common Stock owned by Mr. Kukwa-Lemmerz and an affiliated entity which he controls. It does not include 1,537,580 shares of Common Stock owned by Renate Kukwa-Lemmerz, his wife. Mr. Kukwa-Lemmerz disclaims beneficial ownership of all shares of Common Stock owned by his wife.

(6)	Does not include 1,687,420 shares of Common Stock owned by Horst Kukwa-Lemmerz, her husband. Mrs. Renate Kukwa-Lemmerz disclaims all beneficial ownership of all shares of Common Stock owned by her husband.

The following table sets forth, as of the Record Date, without giving effect to the Warrants, the beneficial ownership of the Company’s Common Stock by each of the Directors and the Named Executive Officers of the Company and by the Directors and executive officers of the Company as a group:


(1)	Includes the following shares of Common Stock issuable upon the exercise of options granted under the Company’s 1992 Stock Incentive Plan (the “1992 Plan”) and the 1996 Plan which are exercisable within 60 days of the Record Date (assuming that no additional options vest during that period):


(2)	In each case, except as to Messrs. Levy, Lightcap and Ying and “all directors and executive officers as a group,” the number of shares owned represents less than 1% of the outstanding shares of Common Stock.

(3)	Mr. Christophe is associated with TSG, which owns 9.9% of the Common Stock of the Company; Mr. Christophe disclaims any beneficial ownership of such Common Stock.

(4)	Messrs. Levy, Lightcap and Ying are all associated with JLL Fund II, which owns 33.9% of the Common Stock of the Company. Messrs. Levy, Lightcap and Ying are general partners of JLL Associates II, L.P., the general partner of JLL Fund II, and, as a result, each of them may be deemed to beneficially own all of the shares of Common Stock of JLL Fund II.

As of the Record Date, all directors and executive officers of the Company as a group may be deemed to beneficially own approximately 47.6% of the outstanding Common Stock.

The Board of Directors of the Company has adopted a resolution providing that the Company will not enter into any transaction with or pay any fee to an affiliate or associate (as such terms are defined under Rule 12b-2 under the Exchange Act) of the Company (other than any subsidiary or associate of the Company in which no direct or indirect parent company of the Company has any interest otherwise than through the

Company), unless (i) the transaction or fee is as fair to the Company as would be the case if such transaction or fee had been negotiated on an arm’s-length basis with an unaffiliated third party and (ii) the transaction or fee (if the value or cost thereof to the Company is $10 million or more) is approved by a majority of the Company’s directors who are not employees of or otherwise associated with significant shareholders of the Company.

On February 19, 2002, the Company issued restated consolidated financial statements included in its filings with the Securities and Exchange Commission (the “SEC”) as of and for the fiscal years ended January 31, 2001 and 2000, and related quarterly periods (the “10-K/A”), and for the fiscal quarter ended April 30, 2001 (the “10-Q/A”). The restatement was the result of failure by the Company to properly apply certain accounting standards generally accepted in the United States of America, and because certain accounting errors and irregularities in the Company’s financial statements were identified. As discussed in the Company’s Annual Report on Form 10-K for the fiscal year 2001 filed with the SEC on May 1, 2002, 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 the commencement of an internal review of its accounting records and procedures and the investigation initiated by the Company’s Audit Committee of the Board of Directors in connection with the restatement process (the “Audit Committee Investigation”), the Company initiated a significant restructuring which included, among other things, (i) a new management team under the leadership of a new chief executive officer and the hiring of a new chief financial officer (initially an interim chief financial officer), (ii) a number of key operating initiatives including an ongoing process to rationalize the manufacturing capacity of the company on a global basis and (iii) the Chapter 11 Filings. These activities, while critical to the successful restructuring of the Company, complicate the Company’s ability to assess the overall effectiveness of (i) disclosure controls and procedures, as defined in Exchange Act Rules 13a-14 and 15d-14 (the “Disclosure Controls and Procedures”) and (ii) internal controls, including those internal controls and procedures for financial reporting (the “Internal Controls”).

Since the inception of the restatement process and Audit Committee Investigation, the Company has made a number of significant changes that strengthened its Disclosure Controls and Procedures and Internal Controls. These changes included, but were not necessarily limited to, (i) communicating clearly and consistently a tone from new senior management regarding the proper conduct in these matters, (ii) terminating or reassigning key managers, (iii) hiring (or retaining on an interim basis), in addition to the chief financial officer position noted above, a new chief accounting officer, a new chief information officer, and several new experienced business unit controllers, (iv) strengthening the North American financial management organizational reporting chain, (v) requiring stricter account reconciliation standards, (vi) establishing an anonymous “TIPLINE” monitored by the general counsel of the Company, (vii) updating and expanding the distribution of the Company’s business conduct questionnaire, (viii) conducting more face-to-face quarterly financial reviews with business unit management, (ix) requiring quarterly as well as annual plant and business unit written representations, (x) expanding the financial accounting procedures in the current year internal audit plan, (xi) temporarily supplementing the Company’s existing staff with additional contractor-based support to collect and analyze the information necessary to prepare the Company’s financial statements, related disclosures and other information requirements contained in the Company’s SEC periodic reporting until the Company implements changes to the current organization and staffing, and (xii) commencing a comprehensive, team-based process to further assess and enhance the efficiency and effectiveness of the Company’s financial processes, including support efforts which better integrate current and evolving financial information system initiatives, and addressing any remaining critical weaknesses including any reported by the Company’s internal audit function and independent public accountants.

As more fully discussed in the American Institute of Certified Public Accountants (“AICPA”) auditing standards pronouncement “Consideration Of Internal Control in a Financial Statement Audit,” AU Section 319, paragraphs .21 to .24, an internal control system no matter how well designed and operated, can

provide only reasonable, not absolute, assurance that the control objectives will be met. Limitations inherent in any system of internal controls might include, among other things, (i) faulty human judgment and simple errors or mistakes, (ii) collusion of two or more people or inappropriate management override of procedures, (iii) imprecision in estimating and judging cost-benefit relationships in designing controls and (iv) reductions in the effectiveness of one deterring component (such as a strong cultural and governance environment) by a conflicting component (such as may be found in certain management incentive plans).

The Company, including its Chief Executive Officer and Chief Financial Officer, believes that the aforementioned limitations apply to any applicable system of internal controls, including the Disclosure Control and Procedures and Internal Controls. The Company will continue the process of identifying and implementing corrective actions where required to improve the effectiveness of its Disclosure Controls and Procedures and Internal Controls. Significant supplemental resources will continue to be required to prepare the required financial and other information during this process, particularly in view of the Company’s current stage of restructuring. The changes made to date as discussed above have enabled the Company to restate its previous filings where required, as well as subsequently prepare and file the remainder of the required periodic reports for fiscal 2001 and 2002 on a timely basis.

During fiscal 2002, the Company formed a disclosure committee reporting to the Chief Executive Officer of the Company to assist the Chief Executive Officer and Chief Financial Officer in fulfilling their responsibility in designing, establishing, maintaining and reviewing the Company’s Disclosure Controls and Procedures (the “Disclosure Committee”). The Disclosure Committee is currently chaired by the Company’s Chief Financial Officer and includes the Company’s Chief Accounting Officer, Interim General Counsel, Vice President of Human Resources and Administration, Corporate Controller, Treasurer and Senior Counsel as its other members. Within 90 days prior to the date of filing this report, the Company’s Chief Executive Officer and Chief Financial Officer, along with the Disclosure Committee, evaluated the Company’s Disclosure Controls and Procedures. The Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Disclosure Controls and Procedures are effective.

Since the date of the last quarterly filing, the Company has continued to take steps intended to increase the effectiveness of its compensating control procedures while it completes a program that, over time, will address the financial process and information systems objectives noted above. These changes included steps to (i) further conform the quarterly review procedures required of each European plant location to those enhanced procedures already required of each North American location, and (ii) realign the North American corporate headquarters accounting staff in order to provide more timely and effective review of global account reconciliations and analysis. Other than the aforementioned items, there were no other significant changes in the Company’s Internal Controls or in other factors that could significantly affect Internal Controls.

The following financial statements of the registrant are filed herewith as part of this report:


	(1) Independent Auditors’ Report

	(2) Consolidated Statements of Operations for the years ended January 31, 2003, 2002 and 2001

	(3) Consolidated Balance Sheets at January 31, 2003 and 2002


	(4)	Consolidated Statements of Changes in Stockholders’ Equity (Deficit) and Comprehensive Loss for the years ended January 31, 2003, 2002 and 2001


	(5) Consolidated Statements of Cash Flows for the years ended January 31, 2003, 2002 and 2001

	(6) Notes to Consolidated Financial Statements

All schedules are omitted because the information required to be contained therein is disclosed elsewhere in the financial statements or the amounts involved are not sufficient to require submission or the schedule is otherwise not required to be submitted.

The Company will furnish to any stockholder a copy of the above exhibits upon the written request of such stockholder and the payment to the Company of the reasonable expenses incurred by the Company in furnishing such copy.

During the fiscal quarter ended January 31, 2003, the Company filed a Current Report on Form 8-K with the SEC on December 18, 2002 announcing the filing of its Plan of Reorganization on December 16, 2002. The Company also filed Current Reports on Form 8-K with the SEC on February 20, 2003 announcing the approval by the U.S. Bankruptcy Court for the District at Delaware of the Company’s Disclosure Statement with Respect to First Amended Joint Plan of Reorganization on that date, and on March 24, 2003 announcing that the Company received a commitment for exit financing to support its Plan of Reorganization and to provide working capital for the Company’s ongoing operations.

Pursuant to the requirements of Section 13 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, on the 2nd day of April, 2003.


	By:


	/s/ JAMES A. YOST

	James A. Yost
	Vice President, Finance, and
	Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated:

1. I have reviewed this annual report on Form 10-K of Hayes Lemmerz International, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:


	a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

	b. evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

	c. presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):


	a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

	b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officer and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.


	/s/ CURTIS J. CLAWSON

	Curtis J. Clawson
	Chairman of the Board,
	President and Chief Executive Officer

1. I have reviewed this annual report on Form 10-K of Hayes Lemmerz International, Inc.;


	a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

	b. evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

	c. presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;


	a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

	b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and


	/s/ JAMES A. YOST

	James A. Yost
	Vice President, Finance, and Chief Financial Officer

We have audited the accompanying consolidated balance sheets of Hayes Lemmerz International, Inc. and subsidiaries as of January 31, 2003 and 2002, and the related consolidated statements of operations, changes in stockholders’ equity (deficit) and comprehensive loss, and cash flows for each of the years in the three-year period ended January 31, 2003. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Hayes Lemmerz International, Inc. and subsidiaries as of January 31, 2003 and 2002, and the results of their operations and their cash flows for each of the years in the three-year period ended January 31, 2003, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note (1), on December 5, 2001, the Company filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. This matter raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to this matter are also described in Note (1). The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

As discussed in Notes (2) and (6), effective February 1, 2002, the Company adopted the provisions of Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets.”

The Company has made three major acquisitions since 1992. On July 2, 1996, the Company consummated a series of transactions pursuant to which Motor Wheel Corporation (“Motor Wheel”) became a wholly owned subsidiary of the Company. On June 30, 1997, the Company acquired Lemmerz Holding GmbH (“Lemmerz”) (the “Lemmerz Acquisition”). Lemmerz was founded in 1919 and was the leading full-line wheel supplier in Europe. On February 3, 1999, the Company acquired CMI International, Inc. (“CMI”). CMI was a leading full service supplier of wheel-end attachments, aluminum structural components and powertrain components to the automotive industry.

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.

Pursuant to an order entered by the Bankruptcy Court on January 10, 2003, the period during which the Company has the exclusive right to propose a plan of reorganization has been extended to April 15, 2003. On December 16, 2002, the Debtors filed a proposed joint plan of reorganization with the Bankruptcy Court. On February 21, 2003, the Debtors filed a first amended joint plan of reorganization and is currently in the process of soliciting votes to approve such plan. The deadline established by the Bankruptcy Court to vote on the Plan was March 28, 2003, which was extended until April 4, 2003. There can, however, be no assurance that the Debtors’ first amended plan of reorganization or any plan will be approved by creditors authorized to vote thereon or confirmed by the Bankruptcy Court, or that any such plan ultimately will be consummated.

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.

Pursuant to American Institute of Certified Public Accountants (“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 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.

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.

A summary of the significant accounting policies followed in the preparation of these consolidated financial statements is as follows:

The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The Company’s investments in joint ventures are accounted for under the equity method. Financial position

and results of operations for these joint venture entities as of, and for the twelve months ended January 31, 2003, 2002 and 2001, respectively, were not material to the consolidated financial statements of the Company. Balance sheet amounts for the Company’s international subsidiaries are as of December 31. The results of operations of the Company’s international subsidiaries included in the consolidated statements of operations are for the twelve month period ended December 31.

The Company recognizes revenue, net of estimated pricing adjustments, when there is evidence of a sale agreement, the delivery of goods has occurred, the sales price is fixed or determinable and the collectibility of revenue is reasonably assured.

Accounts receivable are recorded at the invoiced amount. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable losses in existing accounts receivable.

Changes in the allowance for doubtful accounts are as follows (millions of dollars);

Inventories are stated at the lower of cost or market, with cost determined principally by the first-in, first-out (FIFO) or average cost method. Cost includes the cost of materials, direct labor and the applicable share of manufacturing overhead. Spare parts and indirect supply inventories are stated at cost and charged to earnings as used.

Property, plant and equipment are recorded at cost. Depreciation is generally provided on a straight-line basis at rates which are designed to write off the assets over their estimated useful lives, principally as follows:

Expenditures for maintenance, repairs and minor replacements of $85.6 million, $86.2 million and $91.7 million for the years ended January 31, 2003, 2002 and 2001, respectively, were charged to expense as incurred.

Expenditures made to meet special tooling requirements are capitalized. Special tooling which is reimbursable by the customer is classified as either a current asset in accounts receivable or as other non-current assets in the consolidated balance sheets, depending upon the expected time of reimbursement.

Special tooling which is not reimbursable by the customer is classified as an other non-current asset and is charged to cost of goods sold on a straight-line basis over a five year period or the estimated useful life, whichever is shorter.

On February 1, 2002, the Company adopted Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets.” Under SFAS No. 142, goodwill and other indefinite-lived intangible assets are no longer amortized; rather those assets must be tested for impairment annually. Other definite-lived intangible assets continue to be amortized over their estimated lives. (See Note (6).)

In accordance with SFAS No. 144, “Accounting for Impairment or Disposal of Long-lived Assets,” the Company reviews the carrying value of long-lived assets, including definite-lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to the undiscounted future net cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair values less costs to sell, and are no longer depreciated. (See Notes (6) and (13).)

Research and development costs are expensed as incurred. Amounts expensed during the years ended January 31, 2003, 2002 and 2001, were approximately $7.1 million, $10.5 million and $14.3 million, respectively.

The carrying amounts of cash and cash equivalents, receivables, and accounts payable and accrued liabilities approximate fair value because of the short maturity of these instruments. The carrying amount of bank borrowings, variable rate long-term debt, and other liabilities approximate market value, as interest rates vary with market rates. The fair value of fixed-rate debt is discussed in Note (10).

In accordance with industry practice, the costs or benefits of fluctuations in aluminum prices are passed through to customers. Futures contracts and purchase commitments are entered into by the Company, from time to time, to hedge its exposure to future increases in aluminum prices that may occur between the dates of aluminum wheel price adjustments. Outstanding contracts represent future commitments and are not included in the consolidated balance sheet. Substantially all of such contracts mature within a period of three months to six months. Gains or losses resulting from the liquidation of futures contracts are recognized in the income statement currently as part of cost of goods sold.

On February 1, 2001, the Company adopted SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” SFAS 137, “Accounting for Derivative Instruments and Hedging Activities — Deferral of the Effective Date of FASB Statement No. 133,” and SFAS 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities, an amendment of FASB Statement No. 133.” The adoption of these standards did not have a material impact on the Company’s financial position or results of operations.

The Company has significant investments in foreign subsidiaries. The majority of these investments are in Europe wherein the Euro is the functional currency. As a result, the Company is exposed to fluctuations in exchange rates between the Euro and the U.S. Dollar. To reduce this exposure, the Company entered into cross-currency interest rate swap agreements. At January 31, 2001, the Company held $275 million notional amount of cross-currency interest rate swaps, which are recorded in the accompanying consolidated balance sheet at fair value of approximately $0.4 million. The fair value of the Company’s cross-currency interest rate swaps is the estimated amount the Company would receive or pay to terminate the agreement based on third party market quotes. During fiscal 2001, the Company received net cash in the amount of $10.1 million in connection with the early termination of all cross-currency interest rate swap agreements. These payments reduced the fair market value recorded by the Company resulting from accounting for mark-to-market adjustments during the terms of the agreements. The Company held no cross-currency interest rate swaps at January 31, 2003 or 2002.

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 fiscal 2001, the Company recorded a loss of $7.5 million on the instruments designated as hedges in accumulated other comprehensive loss. 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. During fiscal 2002, the Company held no derivative financial instruments.

Translation of assets and liabilities of subsidiaries denominated in foreign currencies are translated at the rate of exchange in effect on the balance sheet date; income and expenses are translated at the average rates of exchange prevailing during the year. The related translation adjustments are reflected in the accumulated other comprehensive loss section of Stockholders’ Equity (Deficit). Foreign currency gains and losses resulting from transactions in foreign currencies are included in results of operations.

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided to the extent that management considers it unlikely that such deferred tax assets will be realized.

No provision is necessary for future United States taxes on the undistributed portion of the Company’s equity in earnings of foreign affiliates, since it is anticipated that the unremitted earnings will be permanently invested for growth and expansion. However, if as a result of actions that may be taken under a plan or plans of reorganization, certain undistributed profits of foreign affiliates are remitted to the United States, no provision for United States taxes is expected to be necessary because of the Company’s tax loss carryforward position and full valuation allowance in the United States.

For purposes of reporting cash flows, the Company considers all investments with an original maturity of three months or less to be cash equivalents. The following is additional information to the Consolidated Statements of Cash Flows (millions of dollars):

Basic loss per share is calculated by dividing net loss by the weighted average number of common shares outstanding. Diluted loss per share is computed by dividing net 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 years ended January 31, 2003, 2002 and 2001, were as follows (thousands of shares):

For the year ending January 31, 2003, approximately 4.6 million shares attributable to options and warrants were excluded from the calculation of diluted loss per share as the effect was anti-dilutive due to the net loss reflected in fiscal 2002. For the years ending January 31, 2002 and 2001, approximately 5.8 million shares attributable to options and warrants were excluded from the calculation of diluted loss per share as the effect was anti-dilutive due to the net loss reflected in fiscals 2001 and 2000.

During fiscal 2000, a put agreement on the Company’s common stock was settled for $1.7 million less than the amount originally recorded. For purposes of computing loss per share, this $1.7 million is included as an offset in calculating the net loss available for common shareholders in fiscal 2000.

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 accumulated other comprehensive loss were as follows (millions of dollars):

The Company accounts for its stock option plan in accordance with the provisions of Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. As such, compensation expense is recorded on the date of grant only if the current market price of the underlying stock exceeds the exercise price. The Company follows the provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” and discloses pro forma net income (loss) and pro forma earnings (loss) per share as if employee stock option grants were treated as compensation expense using the fair-value-based method defined in SFAS No. 123.

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure, an amendment of FASB Statement No. 123.” This Statement amends SFAS No. 123, “Accounting for Stock Based Compensation,” to provide alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements. Certain of the disclosure modifications are required for fiscal years ending after December 15, 2002 and are included in the notes to these consolidated financial statements.

If compensation cost had been determined based on the fair value at the grant dates consistent with the method prescribed in SFAS No. 123, the Company’s net loss and loss per share would have been adjusted to the pro forma amounts below:

No stock options were granted in fiscal 2002. The fair value of stock options granted in fiscal 2001 and fiscal 2000 was estimated on the date of grant using the Black-Scholes option-pricing model. The weighted average fair values and related assumptions were:

Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates.

Generally assets and liabilities which are subject to management’s estimation and judgment include long-lived assets (due to the use of estimated economic lives for depreciation purposes and future expected cash flow information used to evaluate the recoverability of the long-lived assets), inventory, accounts receivable, deferred tax asset valuation reserves, pension and post retirement costs, restructuring reserves, self insurance accruals and environmental remediation accruals.

The Company’s consolidated statements of operations reflect an element of operating expenses described as asset impairment losses and other restructuring charges. The Company periodically evaluates whether events and circumstances have occurred that indicate that the remaining useful life of any of its tangible and definite-lived intangible assets may warrant revision or that the remaining balance might not be recoverable. When factors indicate that the tangible and definite-lived intangible assets should be evaluated for possible impairment, the Company uses an estimate of the future undiscounted cash flows generated by the underlying assets to determine if a write-down is required. If a write-down is required, the Company adjusts the book value of the impaired long-lived assets to their estimated fair values. Fair value is determined through third party appraisals or discounted cash flow calculations. The related charges are recorded as asset impairment losses or, in the case of certain exit costs in connection with a plant closure or restructuring, a restructuring or other charge in the accompanying consolidated statements of operations.

A number of decisions have occurred or other factors have indicated that these types of charges are required to be currently recognized (see Note (13)). During the Company’s reorganization, there can be no assurance that there will not be additional charges based on future events and that the additional charges would not have a materially adverse impact on the Company’s financial position and results of operations.

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

During fiscal 2002, the Company received $6.6 million in net cash proceeds from the sale of certain non-core businesses, primarily the sale of the Company’s Brazilian agricultural wheel business, the Schenk aluminum foundry located in Maulbronn, Germany and the Company’s interest in a Portuguese fabricated wheel joint venture. In connection with those sales, the Company recognized a net loss of $0.4 million, which is included in Other income, net on the accompanying consolidated statement of operations. During fiscal 2002, the Company paid $5.1 million for the remaining 24% interest in its South African subsidiary, NF Die (Proprietary) Ltd., an aluminum wheel manufacturer, and $2.1 million in cash and an additional $2.0 million note payable for the facility and assets of a foundry in Chattanooga, Tennessee.

During fiscal 2001, the Company sold its interests in its Canadian joint venture, its Venezuelan joint venture and its tire and wheel assembly business for net cash proceeds of $20.5 million. In connection with

those sales, the Company recognized a net loss of $7.2 million, which is included in Other income, net, on the accompanying consolidated statement of operations.

In fiscal 2000, the Company acquired the assets of the Schenk aluminum foundry. The purchase price for land, building, equipment and inventory was $6.4 million in cash. Also in fiscal 2000, the Company purchased an additional 25% interest in NF Die (Proprietary) Ltd. The purchase price of $7.2 million in cash increased the Company’s interest in NF Die at that time from 51% to 76%.

The major classes of property, plant and equipment are as follows (millions of dollars):

Upon adoption, the Company discontinued amortizing goodwill and indefinite-lived intangible assets into earnings. In connection with the transitional provisions of the Statement, the Company performed an assessment of whether there was an indication that goodwill was impaired as of the adoption date. To accomplish this, the Company determined the carrying value of each of its reporting units (i.e., one step below the segment level) by assigning the assets and liabilities, including existing goodwill and intangible assets, to the reporting units on February 1, 2002. As of that date, the Company had unamortized goodwill and other indefinite-lived intangibles of approximately $758.7 million that were subject to the transition provisions of SFAS No. 142. The Company determined the fair value of each reporting unit and compared those fair values

to the carrying values of each reporting unit. To the extent the carrying amount of a reporting unit exceeded the fair value of the reporting unit indicating that goodwill may be impaired, the Company performed the second step of the transitional impairment test. This test was required for five reporting units.

Upon adoption of SFAS No. 142, the Company also made necessary reclassifications to conform with the new classification criteria in SFAS No. 141. Workforce-in-place no longer meets the definitions of an identifiable intangible asset under SFAS No. 141, and as a result, the net balance of workforce-in-place of $13.1 million has been reclassified to goodwill as of February 1, 2002.

The changes in the carrying amount of goodwill, net by segment during fiscal 2002 were as follows (millions of dollars):

Amortization expense for fiscal 2002, 2001 and 2000 was $3.3 million, $26.4 million and $27.4 million, respectively. Under its historical accounting for these assets, the Company expects amortization expense to approximate $3 million in each of the next five fiscal years.

Accounts payable and accrued liabilities exclude any amounts that are classified as liabilities subject to compromise (see Note (11)), and consist of the following (millions of dollars):

The components of pre-tax income (loss), including extraordinary items, are as follows (millions of dollars):

The (benefit) provision for taxes on income is summarized as follows (millions of dollars):

A reconciliation of taxes computed at the United States Federal statutory 35% rate to the actual provision for taxes on income follows (millions of dollars):

Deferred tax assets (liabilities) result from differences in the bases of assets and liabilities for tax and financial statement purposes. The cumulative tax effect of the major items follows (millions of dollars):

The Company has domestic operating loss carryforwards of approximately $689.4 million expiring in years 2005 through 2023, foreign net operating loss carryforwards of approximately $153.2 million which may be carried forward indefinitely, general business tax credit carryforwards of approximately $2.3 million expiring in years 2003 through 2022, and alternative minimum tax credit carryforwards of approximately $7.9 million which do not expire. The carryforwards are based upon tax returns as currently filed or as

anticipated to be filed and are subject to change based upon the Company’s detailed analysis for tax purposes. The Company’s tax returns are subject to periodic audit by the various jurisdictions in which it operates. These audits, including those currently underway, can result in adjustments of taxes due or adjustments of the NOL’s, which are available to offset future taxable income. Implementation of a plan or plans of reorganization under Chapter 11 is expected to reduce the availability of some or all of the Company’s net operating loss carryforwards and other tax attributes, and is expected to impact the tax basis of long-lived assets.

As a result of management’s assessment, a valuation allowance of $336.6 million and $232.6 million was recorded at January 31, 2003 and 2002, respectively. The Company increased the valuation allowance in fiscal 2002 and fiscal 2001 by $104.0 million and $141.3 million, respectively. Of the increase in the valuation allowance in fiscal 2002, $22.4 million was applied to reduce to zero the tax benefit related to the other comprehensive loss associated with the minimum pension liability.

Bank borrowings and other notes of $15.8 million and $25.3 million at January 31, 2003 and 2002, respectively, consist of short-term notes of the Company’s foreign subsidiaries which bear interest at rates ranging from 2.25% to 10.75%, and a $2.0 million note issued in conjunction with the purchase of the Company’s Wheland foundry. (See Note (3).) This note was subsequently repaid on March 7, 2003.

As of January 31, 2003, there were $ 105.1 million in outstanding borrowings under various foreign bank credit facilities. A portion of those credit facilities require compensating balance arrangements. In addition, the Company maintains cash deposits at certain locations in order to assure the continuation of vendor trade terms. As of January 31, 2003, the total amount of cash deposits maintained for these purposes was approximately $10.9 million.

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 as 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 (the “DIP Agreement”). 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 discussed in Note (1)).

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. As of January 31, 2003, there were $49.9 million of outstanding borrowings and $7.2 million in letters of credit issued pursuant to the Company’s DIP Facility. As of March 28, 2003, there were $55.0 million of outstanding borrowings and $5.0 million in letters of credit issued pursuant to the DIP Facility. The amount

available under the facility as of March 28, 2003, after taking into account the aforementioned borrowings and letters of credit, was $59.5 million.

During the third quarter of fiscal 2002, the Company and the lenders to the DIP 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 Agreement to correct the measurement period definition. As modified by the Third Amendment, the DIP Agreement allowed the Company to make a $13.8 million payment, which is included in the aforementioned $39.0 million, that was previously prohibited under the DIP Agreement.

On December 24, 2002, the Debtors and the DIP Lenders entered into the Fourth Amendment to the DIP Agreement. The Fourth Amendment provides that the Debtors shall be in default of the DIP Agreement if the Debtors fail to receive Bankruptcy Court approval of a disclosure statement on or before February 7, 2003 or a later date as determined by the DIP Agent, in its sole discretion, provided that such later date as determined by the DIP Agent cannot occur after March 11, 2003. In accordance with Section 7.01(p) of the DIP Agreement, on February 7, 2003, the DIP Agent agreed to extend the deadline for the Debtors to receive Bankruptcy Court approval of the Disclosure Statement from February 7, 2003 to February 28, 2003. The Bankruptcy Court approved the Company’s Disclosure Statement on February 20, 2003. In addition, the Fourth Amendment provided a waiver for the Debtors to effect a reorganization of non-Debtor German Subsidiaries in response to a proposed change in German tax laws.

Beginning January 31, 2002, the DIP Facility requires compliance with monthly minimum consolidated and domestic EBITDA tests (as defined in the DIP Agreement) and limits on capital expenditures. In

addition to the foregoing financial covenants, the DIP Agreement imposes certain other restrictions on the Company and its subsidiaries, 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 principal sources of liquidity for the Company’s future operating, capital expenditure, facility closure, restructuring and reorganization requirements are expected to be (i) cash flows from operations, (ii) proceeds from the sale of non-core assets and businesses, (iii) borrowings under various foreign bank and government loans, (iv) borrowings under the DIP Facility and (v) borrowings under any exit financing associated with the Company’s emergence from the Chapter 11 proceedings resulting from a confirmed plan of reorganization. The DIP Facility is scheduled to terminate on the earlier of (a) the date of substantial consummation of a plan of reorganization or (b) June 5, 2003. As more fully discussed above, while the Company expects to emerge from Chapter 11 prior to the termination of the DIP Facility, there can be no assurances that the emergence will occur prior to such date, or that the Company will be able to extend the term of or replace the existing DIP facility in the event that the Company has not emerged by June 5, 2003. Moreover, while the Company expects that such sources will meet these requirements, there can be no assurances that such sources will prove to be sufficient, in part, due to inherent uncertainties about applicable future capital market conditions.

On February 3, 1999, the Company entered into a third amended and restated credit agreement, as further amended, (the “Credit Agreement”). Pursuant to the Credit Agreement, a syndicate of lenders agreed to lend to the Company up to $450 million in the form of a senior secured term loan facility 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, then owned or subsequently acquired, 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 January 31, 2003, there was $176.8 million outstanding under the term loan facility, which represents the total amount available under the facility. At January 31, 2003, there was $573.8 million outstanding under the revolving credit facility, including $1.7 million in letters of credit drawn against the Credit Agreement during fiscal 2002. 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 $16.2 million remain outstanding.

Borrowings under the Credit Agreement bear interest at one of the following rates as selected by the Company: (i) the rate per annum equal to the British Bankers’ Association London interbank offered rates (“LIBOR” and “DMBO” in the case of U.S. Dollar and Deutsche Mark debt, respectively) plus the applicable margin or (ii) the CIBC Alternate Base Rate (“ABR”), plus the applicable margin. The CIBC ABR is defined as the highest of (i) the CIBC prime rate or (ii) the Federal Funds rate plus 0.5% or (iii) a certificate of deposit-based rate plus 1%. The weighted average interest rate on borrowings under the Credit Agreement was 6.88% at January 31, 2003. In addition, the Company accrues a commitment fee on the unused portion of the revolving credit facility which was based on a rate of 0.5% at January 31, 2003. As discussed in Note (11), the Company is continuing to record interest accruing on its prepetition borrowings under the Credit Agreement.

In connection with the acquisition of CMI, the Company issued the 8 1/4 % Notes, which are redeemable at the Company’s option at specified prices, in whole or in part, at any time on or after December 15, 2003. The 8 1/4 % Notes are guaranteed by certain of the Company’s domestic subsidiaries but are subordinated to the Credit Agreement. In connection with previous acquisitions, the Company issued the 9 1/8% and 11% senior subordinated notes which are guaranteed by certain of the Company’s domestic subsidiaries but are subordinated to the Credit Agreement. These notes become redeemable at the Company’s option and at specific prices five years before the respective due dates of the notes. Due to the uncertainty resulting from the Chapter 11 Filings by the Debtors, the fair value of all of the Company’s senior subordinated notes as of January 31, 2003 is not presently determinable.

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.

B Term Loan. These aggregate net proceeds totaled $435.4 million and were used as follows (millions of dollars):

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 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.

or prior to December 19, 2001. As a result of the Chapter 11 Filings by the Debtors, no interest payment was made when due on December 15, 2001, and the exchange offer for the 11 7/8% Notes has not occurred.

The Credit Agreement, as amended, contains certain financial covenants regarding interest coverage ratios, fixed charge coverage ratios, leverage ratios and capital spending limitations which were in effect during fiscal 2001 and fiscal 2000. The Company was in violation of certain of these covenants as of January 31, 2001. For purposes of these consolidated financial statements, all amounts outstanding with respect to the Credit Agreement, the Senior Notes and the Senior Subordinated Notes outstanding at January 31, 2003 and 2002 are classified as liabilities subject to compromise as of those dates.

In April 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 receivable 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 no retained interest in the receivables sold. The Company had collection and administrative responsibilities with respect to all receivables that were sold.

This trade securitization agreement expired May 1, 2001. The Company did not replace the agreement. From the expiration date to the date of the Chapter 11 Filings, the Company financed the amount of receivables previously sold under the securitization agreement with its revolving credit facility. The impact of the discontinued securitization program had an adverse impact on liquidity of approximately $71.6 million during fiscal 2001.

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 (see Notes (1) and (14)). Additional pre-petition claims may arise from rejection by the Company of additional

executory contracts or unexpired leases. Under a confirmed plan of reorganization, all pre-petition claims may be paid and discharged at amounts substantially less than their allowed amounts.

On a consolidated basis, recorded liabilities subject to compromise under Chapter 11 proceedings as of January 31, 2003 and 2002, consisted of the following (millions of dollars):

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 interest recorded at January 31, 2003 and 2002 was $29.3 million and $13.4 million, respectively, and has been classified as a liability subject to compromise in the accompanying consolidated balance sheets.

As discussed in Note (10), the DIP Facility provides for the postpetition cash payment at certain intervals of interest and fees 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.

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 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 January 31, 2003 and 2002 was $136.3 million and $18.7 million, respectively. 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 Filings. 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 sheets at January 31, 2003 and 2002, respectively.

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 “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. (See Note (14).)

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

In accordance with SFAS No. 132, “Employers’ Disclosures about Pensions and Other Postretirement Benefits,” the following tables provide a reconciliation of the change in benefit obligation, the change in plan assets and the net amount recognized in the consolidated balance sheets (based on an October 31 measurement date, in millions of dollars) as of January 31:

Of the net amount recognized for North American pension benefits, approximately $7.1 million relates to supplemental executive retirement benefits and has been classified as a liability subject to compromise in the accompanying consolidated balance sheet as of January 31, 2003.

The projected benefit obligation, accumulated projected benefit obligation (“APBO”) and fair value of plan assets for the benefit plans with accumulated benefit obligations in excess of plan assets for the North American plans were $183.4 million, $186.2 million and $121.3 million, respectively, as of January 31, 2003, and $173.8 million, $150.2 million and $140.1 million, respectively, as of January 31, 2002. The components of net periodic benefit costs included in operating results for the years ended January 31, are as follows (millions of dollars):

On January 31, 2002, the Company modified the North American defined benefit plan to comply with recent legislation and to freeze final average compensation.

The actuarial assumptions used in determining the funded status information and net periodic benefit cost information shown above were as follows:

At January 31, 2003, the assumed annual health care cost trend rate used in measuring the APBO approximated 11.5% declining to 5.0% in years 2007 and thereafter. Increasing the assumed cost trend rate by 1% each year would have increased the APBO and service and interest cost components by approximately $16.7 million and $0.8 million, respectively, for fiscal 2002. Decreasing the assumed cost trend rate by 1% each year would have decreased the APBO and service/interest cost components by approximately $14.2 million and $0.7 million, respectively, for fiscal 2002.

The Company also has contributory employee retirement savings plans covering substantially all of its domestic employees. The employer contribution is determined at the discretion of the Company and totaled approximately $16.8 million, $16.9 million and $16.5 million for the years ended January 31, 2003, 2002 and 2001, respectively.

The Company recorded asset impairment losses and other restructuring charges of $43.5 million in fiscal year 2002, $141.6 million in fiscal 2001 and $127.7 million in fiscal 2000. These losses and charges consist of the following:

During fiscal 2001, the Company recognized impairment losses of $6.8 million related to investments in machinery, equipment and tooling at its Somerset, Kentucky facility due to a change in management’s estimates regarding the future use of such assets. 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 2002, the Company closed this facility and recorded a restructuring charge of $6.7 million. This charge included estimated amounts related to lease termination costs and other closure costs consisting primarily of security and maintenance costs subsequent to the shutdown date. The portion of the charge related to lease terminations in the amount of $3.5 million has been classified as a liability subject to compromise at January 31, 2003 and has been excluded from the table below. Of the other closure costs, approximately $1.3 million remained unpaid at January 31, 2003, and is expected to be paid during fiscal 2003. During fiscal 2002, the Company recognized additional impairment losses of $1.9 million related to investments in building, machinery, equipment and tooling primarily due to real estate market conditions and further revisions in management’s estimates regarding the fair value of such assets.

investment in machinery, equipment and tooling. Accordingly, the Company recognized an asset impairment loss of $42.7 million during the fourth quarter of fiscal 2001. Such assets were written down to fair value based on the expected scrap value, if any, of such machinery, equipment, and tooling. This facility, originally scheduled to close in July 2002, operated through the end of fiscal 2002 to service existing contracts and assist in transitioning production to the Company’s fabricated steel wheel manufacturing facility located in Sedalia, Missouri. Due to the delayed closure, the original $10.7 million restructuring charge was revised to $10.3 million, and no costs related to this charge were paid in fiscal 2002. Such closure costs are expected to be paid in fiscal 2003. In addition, the Company recorded $0.3 million in employee termination and other closure costs during fiscal 2002 related to this facility, of which $0.1 million was paid by January 31, 2003.

related to the abandonment of a greenfield project in Thailand. During the fourth quarter of fiscal 2001, the Company recognized asset impairment losses of $11.1 million related to its investments in building, machinery, equipment and tooling at its fabricated wheel facility in Königswinter, Germany. Such assets were written down to fair value based on estimated real estate market values and the expected scrap value, if any, of related machinery, equipment, and tooling. The Company transferred production of certain products to facilities located in the Czech Republic and in India and further consolidated passenger car and commercial wheel production within an adjacent facility located in Königswinter, Germany. In connection with the decommissioning of a building at its Königswinter, Germany site, the Company recorded a restructuring charge of $0.6 million in the fourth quarter of fiscal 2001. This charge relates to maintenance costs subsequent to the decommissioning date. Of this charge, $0.4 million remains unpaid as of January 31, 2003 and is expected to be paid during fiscal 2003. During fiscal 2002, the Company recorded $2.9 million of costs related to severance and post-termination benefits at its locations in Königswinter, Germany, Manresa, Spain and Sao Paulo, Brazil. The Company also recorded $2.2 million of such costs during fiscal 2001 at its locations in Königswinter, Germany and Manresa, Spain. During fiscal 2000, the Company recorded $10.6 million of severance and other restructuring charges in Königswinter, Germany.

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.

The following table describes the activity in the balance sheet accounts affected by the severance and other facility exit costs noted above (millions of dollars):

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.

Pursuant to an order entered by the Bankruptcy Court on January 10, 2003, the period during which the Company has the exclusive right to propose a plan of reorganization has been extended to April 15, 2003. On December 16, 2002, the Debtors filed a proposed joint plan of reorganization with the Bankruptcy Court. On February 21, 2003, the Debtors filed a first amended joint plan of reorganization and is currently in the process of soliciting votes to approve such plan. The deadline established by the Bankruptcy Court to vote on the Plan was March 28, 2003, which was extended until April 4, 2003. There can, however, be no assurance that the Debtors’ first amended plan of reorganization or any plan will be approved by creditors authorized to vote thereon or confirmed by the Bankruptcy Court, or that any such plan(s) ultimately will be consummated.

plan and confirmation thereof. It also contains 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.

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. Due to the Chapter 11 Filings, litigation against the Company is subject to the automatic stay.

The Company leases certain production facilities and equipment under various agreements expiring from 2004 to 2008 and later years. The following is a schedule of future minimum rental payments required under

operating and capital leases that have initial or remaining non-cancelable lease terms in excess of one year as of January 31, 2003 (millions of dollars):

Rent expense was $28.1 million, $31.0 million and $31.2 million for the years ended January 31, 2003, 2002 and 2001, respectively.

Certain of the operating leases above 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.

As of January 31, 2003, the Company held the following investments which are accounted for under the equity method:


	(i) a 40% interest in Hayes Wheels de Mexico, S.A. de C.V., a cast aluminum and fabricated wheel manufacturer in Mexico; and

	(ii) a 25% interest in Jantas Jant Sanayi ve Ticaret A.S., a commercial highway steel wheel manufacturer in Turkey.

During fiscal 2002, the Company sold its 49% interest in a Portuguese fabricated wheel joint venture for cash proceeds of $1.4 million. In connection with the sale, the Company recognized a gain of $0.4 million, which is included in Other income, net, on the accompanying consolidated statement of operations.

In the second quarter of fiscal 2001, the Company recorded a $3.8 million loss on investment in joint venture to write off its investment in its Mexican joint venture, which had incurred and expects to continue to incur significant operating losses.

In the third quarter of fiscal 2000, the Company recorded a $1.5 million loss on investment in joint venture related to its Venezuelan joint venture. This joint venture was sold in November 2001.

During the fourth quarter of fiscal 2001, the Company sold its tire and wheel assembly joint venture for cash proceeds of $11.0 million. In connection with the sale, the Company recognized a loss of $7.8 million, which is included in Other income, net, on the accompanying consolidated statement of operations.

In 1992, the Company adopted the Hayes Lemmerz International, Inc. 1992 Stock Incentive Plan (the “1992 Plan”), under which 1,000,000 shares of Common Stock were available for issuance with respect to awards granted to officers, management and other key employees of the Company. At January 31, 2003, 148,600 options were exercisable at a price of $10.00, 53,400 options were exercisable at a price of $19.94 and 7,500 options were exercisable at a price of $19.69. At January 31, 2003, there were no shares available for issuance under this plan.

During 1996, the Company established the Hayes Lemmerz International, Inc. 1996 Stock Option Plan (the “1996 Plan”), under which 3,000,000 shares of Common Stock were made available for issuance with respect to stock option awards granted to officers, management and other key employees of and consultants to the Company. This plan was amended at the August 3, 2000 Stockholders’ meeting to include an additional 500,000 shares available for issuance. Option grants under the 1996 Plan are approved by the Compensation Committee of the Board of Directors and are subject to such terms and conditions as are established by the Compensation Committee at the time it approves such grants. The exercise prices of options granted under the 1996 Plan in fiscal 2001 and fiscal 2000 ranged from $0.80 to $13.19 per share, which exercise prices represented the Common Stock’s fair market value on the date of each grant. No options were granted during fiscal 2002. The fiscal 2001 option grants become exercisable at the rate of 20% annually on June 15, 2002 and each June 15th thereafter until 2006 if the employee to whom they were granted is then still an employee of the Company. The fiscal 2000 option grants become exercisable at the rate of 25% annually on June 15, 2001 and each June 15th thereafter until 2004 if the employee to whom they were granted is then still an employee of the Company. At January 31, 2003, the following options were exercisable under the 1996 Plan:

In connection with the employment of Mr. Curtis J. Clawson, Chief Executive Officer of the Company, 1,400,000 options were granted during fiscal 2001 subject to shareholder approval. As of January 31, 2003, no such approval has been obtained, and as such, these options are not reflected in the tables below. As a result of the Chapter 11 Filings, it is unlikely that any such shareholder approval will be either sought or obtained.

At January 31, 2003, warrants to purchase 2.6 million shares of common stock were outstanding. Each warrant allows the holder thereof to acquire one share of common stock for a purchase price of $24.00. The warrants are exercisable from July 2, 2000 through July 2, 2003.

SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information,” directs companies to use the “management approach” for segment reporting. This approach reflects management’s organization of business segments and is consistent with how the Company and its key decision-makers assess operating performance, make operating decisions and allocate resources. This approach also considers the existence of managers responsible for each business segment and how information is presented to the Company’s Board of Directors. The statement requires disclosures for each segment that are similar to those previously required and geographic data by country.

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 design and manufacture 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 design and manufacture 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 design and manufacture 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.

The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies described in Note (2). The Company evaluates the performance of its operating segments based primarily on sales, operating profit and cash flow.

The following table presents revenues and other financial information by business segment (millions of dollars):

The following table presents revenues and net property, plant and equipment for each of the geographic areas in which the Company operates (in millions of dollars):

Approximately 52% of the Company’s revenues are from three automotive manufacturers. The following is a summary of the percentage of revenues from these major customers on a worldwide basis:

The following represents the Company’s quarterly results (millions of dollars, except share amounts):

Pursuant to SOP 90-7, 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 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.

The senior subordinated notes and senior notes described in Note (10) 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. Refer to Note (1) regarding the impact of the Chapter 11 Filings on these guarantees. 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 years ended January 31, 2003 and 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% Notes.

As of January 31, 2001, 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.

As discussed in Note (1), Hayes Lemmerz International, Inc. (the “Parent”), 30 of its wholly-owned domestic subsidiaries, and one wholly-owned Mexican subsidiary (the “Nonguarantor Debtor”) filed voluntary petitions for reorganization relief under Chapter 11. In accordance with SOP 90-7, condensed consolidating financial information is presented below as of January 31, 2003 and 2002, and for each of the years in the three-year period ended January 31, 2003.


Delaware (State or Other Jurisdiction of Incorporation or Organization)		13-3384636 (I.R.S. Employer Identification No.)

15300 Centennial Drive, Northville, Michigan (Address of Principal Executive Offices)		48167 (Zip Code)


PART I
	Item 1. Business
	Item 2. Properties
	Item 3. Legal Proceedings
	Item 4. Submission of Matters to a Vote of Security Holders
PART II
	Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters
	Item 6. Selected Financial Data
	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 7A. Quantitative and Qualitative Disclosures About Market Risk
	Item 8. Consolidated Financial Statements and Supplementary Data
	Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
PART III
	Item 10. Directors and Executive Officers of the Registrant
	Item 11. Executive Compensation
	Item 12. Security Ownership of Certain Beneficial Owners and Management
	Item 13. Certain Relationships and Related Transactions
	Item 14. Controls and Procedures
PART IV
	Item 15. Exhibits and Reports on Form 8-K
SIGNATURES
CERTIFICATIONS
INDEX TO FINANCIAL STATEMENTS
INDEPENDENT AUDITORS’ REPORT
CONSOLIDATED STATEMENTS OF OPERATIONS
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) AND COMPREHENSIVE LOSS Years Ended January 31, 2003, 2002, 2001
CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years ended January 31, 2003, 2002 and 2001
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS For the Year Ended January 31, 2001
CONDENSED CONSOLIDATING BALANCE SHEET As of January 31, 2002
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
EXHIBIT INDEX
Second DIP Amendment
Third DIP Amendment
Fourth DIP Amendment
Computation of Ratios
Subsidiaries of the Company
Consent of KPMG LLP
Powers of Attorney
906 Certification of Chief Executive Officer
906 Certification of Chief Financial Officer


		Page

PART I
Item 1.	Business		2
Item 2.	Properties		7
Item 3.	Legal Proceedings		8
Item 4.	Submission of Matters to a Vote of Security Holders		10
PART II
Item 5.	Market for Registrant’s Common Equity and Related Stockholder Matters		10
Item 6.	Selected Financial Data		11
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		13
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		35
Item 8.	Consolidated Financial Statements and Supplementary Data		35
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		35
PART III
Item 10.	Directors and Executive Officers of the Registrant		35
Item 11.	Executive Compensation		40
Item 12.	Security Ownership of Certain Beneficial Owners and Management		44
Item 13.	Certain Relationships and Related Transactions		46
Item 14.	Controls and Procedures		47
PART IV
Item 15.	Exhibits and Reports on Form 8-K		48


	%
Joint Venture	Ownership		Location		Products

Hayes Wheels de Mexico, S.A. de C.V. (2 facilities)		40%		Mexico	Fabricated Wheels
					Cast Aluminum Wheels
Jantas Jant Sanayi ve Ticaret A.S		25%		Turkey	Commercial Highway Wheels


	High		Low

Fiscal Year Ended January 31, 2003
Quarter ended January 31, 2003	$	0.45	$	0.11
Quarter ended October 31, 2002		0.48		0.18
Quarter ended July 31, 2002		0.21		0.14
Quarter ended April 30, 2002		0.27		0.13


	High		Low

Fiscal Year Ended January 31, 2002
Quarter ended January 31, 2002	$	1.01	$	0.26
Quarter ended October 31, 2001		6.58		0.85
Quarter ended July 31, 2001		8.30		6.00
Quarter ended April 30, 2001		7.45		5.48


		Number of securities		Weighted-average		Number of securities
		to be issued upon		exercise price of		remaining available for
		exercise of outstanding		outstanding options		future issuance under
Plant Category		options and rights		and rights		equity compensation plans(1)

Equity compensation plans approved by security holders(2)			2,028,884	$	13.23		2,411,916
Equity compensation plans not approved by security holders			—		—		—

	Total		2,028,884	$	13.23		2,411,916


		Year			Year			Year			Year		Year
		Ended			Ended			Ended			Ended		Ended
		January 31,			January 31,			January 31,			January 31,		January 31,
		2003			2002			2001			2000		1999


		(Amounts in millions, except share amounts)
Income Statement Data:
	Net sales	$	2,001.6		$	2,039.1		$	2,168.2		$	2,295.1	$	1,672.9
	Depreciation and amortization		132.0			156.4			152.1			135.8		87.8
	Asset impairments and other restructuring charges		43.5			141.6			127.7			3.7		—
	Loss on investment in joint venture					3.8			1.5			—		—
	Interest expense, net(1, 2)		72.7			175.2			163.5			153.3		94.9
	Reorganization items		44.5			47.8			—			—		—
	Income tax provision		3.6			10.3			9.7			38.3		39.1
	Cumulative effect of change in accounting principle, net of tax of $0(3)		554.4			—			—			—		—
	Extraordinary (gain) loss, net of tax		—			(2.7	)		—			—		8.3

	Net income (loss)	$	(634.5	)	$	(396.7	)	$	(186.2	)	$	47.6	$	43.7

Balance Sheet Data:
	Total assets	$	1,846.6		$	2,358.1		$	2,603.9		$	2,679.9	$	2,113.7
	DIP facility, bank borrowings and current portion of long-term debt(1)		105.8			42.2			1,693.3			143.2		57.1
	Long-term debt		61.9			91.7			94.6			1,384.6		976.1
	Liabilities subject to compromise(4)		2,133.8			2,121.0			—			—		—
	Stockholders’ equity (deficit)		(1,074.4	)		(460.0	)		(21.8	)		190.7		215.2
Per Share Data:
	Earnings (loss) before cumulative effect of change in accounting principle and extraordinary (gain) loss	$	(2.81	)	$	(14.03	)	$	(6.24	)	$	1.51	$	1.60
	Cumulative effect of change in accounting principle, net of tax(3)		(19.49	)	$	—		$	—		$	—	$	—
	Extraordinary gain (loss), net of tax		—			0.09			—			—		(0.25	)
	Earnings (loss) per share	$	(22.30	)	$	(13.94	)	$	(6.24	)	$	1.51	$	1.35
	Average shares outstanding (in thousands)		28,456			28,456			29,585			31,512		32,411


		2002			2001

Write-off of deferred financing costs related to prepetition domestic borrowings		$	—		$	38.9
Critical employee retention plan provision			7.3			—
Estimated accrued liability for rejected prepetition leases and contracts			10.7			—
Professional fees related to the Filing			28.3			9.0
Gain on settlement of prepetition liabilities			(1.5	)		—
Interest earned during Chapter 11 reorganization proceedings			(0.3	)		(0.1	)

	Total	$	44.5		$	47.8


		2002		2001		% Change


		(Millions)
Automotive Wheels		$	1,161.3	$	1,232.8		(5.8	)%
Components			737.7		657.9		12.1
Other			102.6		148.4		(30.9	)

	Total	$	2,001.6	$	2,039.1		(1.8	)


	January 31,		Fiscal 2002		Fiscal 2002			January 31,
	2002		Severance and		Cash			2003
	Accrual		Other Charges		Payments			Accrual

Facility exit costs	$	11.7	$	3.0	$	(2.1	)	$	12.6
Severance		6.0		4.9		(6.9	)		4.0

	$	17.7	$	7.9	$	(9.0	)	$	16.6


	Impairment and Closure of Bowling Green, Kentucky Facility


	Impairment and Restructuring of International Fabricated Wheel Operations


	North American Early Retirement and Reduction-In-Force Programs


			Fiscal 2001		Fiscal 2001
	January 31, 2001		Severance and		Cash			January 31, 2002
	Accrual		Other Charges		Payments			Accrual

Facility exit costs	$	—	$	11.9	$	(0.2	)	$	11.7
Severance		5.0		4.9		(3.9	)		6.0

	$	5.0	$	16.8	$	(4.1	)	$	17.7


	*Chapter 11 Filings*


	*Joint Ventures*


Item 2.	*Properties*


Item 3.	*Legal Proceedings*


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 and interest earned			1.3
Remaining cash proceeds held by Company			13.0

	Total	$	435.4



	Year Ended January 31,

	2003			2002			2001

Reported net loss	$	(634.5	)	$	(396.7	)	$	(186.2	)
Eliminate goodwill amortization		—			23.2			24.1

Adjusted net loss	$	(634.5	)	$	(373.5	)	$	(162.1	)

Basic and diluted loss per share:
Reported net loss	$	(22.30	)	$	(13.94	)	$	(6.24	)
Eliminate goodwill amortization		—			0.82			0.81

Adjusted net loss	$	(22.30	)	$	(13.12	)	$	(5.43	)


Item 7A.	*Quantitative and Qualitative Disclosures About Market Risk*


Item 8.	*Consolidated Financial Statements and Supplementary Data*


Item 9.	*Changes in and Disagreements with Accountants on Accounting and Financial Disclosure*


Item 10.	*Directors and Executive Officers of the Registrant*


				Date of
Name	Title	Age		Appointment	Experience

Curtis J. Clawson	President and Chief Executive Officer		43	August 2001	President and Chief Operating Officer of American National Can Group, Inc., November 1999 to August 2000; Executive Vice President of American National Can Group, Inc., May 1998 to November 1999; Division President, AlliedSignal Inc., March 1995 to January 1998.
Fred Bentley	Vice President — President, Commercial Highway and Aftermarket Services		37	October 2001	Managing Director, European Operations of Honeywell International, April 2001 to October 2001; General Manager of Heavy Duty Operations of Honeywell International, December 2000 to April 2001; Plant Manager of Honeywell International, August 1995 to December 2000.
Patrick C. Cauley	Interim General Counsel and Assistant Secretary		43	May 2002	Assistant General Counsel, March 1999 to May 2002; Partner, Bodman, Longley & Dahling LLP, January 1993 to March 1999.


										Long Term
										Compensation
				Annual Compensation
										Securities
		Fiscal						All Other		Underlying
Name and Principal Position		Year		Salary		Bonus(1), (2), (3)		Compensation(4)		Options (#)

Clawson, Curtis J.(5)			2002	$	755,004	$	1,413,708	$	241,078		—
			2001		377,502		833,416		187,413		1,400,000
Harrison, Scott			2002	$	265,008	$	302,834	$	130,420		—
	Vice President — President,		2001		73,617		301,179		7,665		140,000
	Suspension Components
Stegemiller, James L			2002	$	285,000	$	368,515	$	76,367		—
	Vice President — President,		2001		106,875		502,484		17,225		125,000
	North American Wheels
Edie, Michael J.			2002	$	255,000	$	298,098	$	94,572		—
	Vice President — Materials and		2001		47,334		190,487		—		100,000
	Logistics
Sandberg, Daniel M			2002	$	272,040	$	324,990	$	60,411		—
	Vice President — President,		2001		272,040		—		43,700		—
	Automotive Brake Components		2000		267,025		—		61,251		5,000
	and Powertrain Components


	Number of Securities		Value of Unexercised
	Underlying		in-the-Money
	Unexercised Options		Options at
	at January 31, 2003		January 31, 2003
	Exercisable/		Exercisable/
Name	Unexercisable		Unexercisable

Clawson, Curtis J.		0/0	$	0/$0
Harrison, Scott		28,000/112,000	$	0/$0
Stegemiller, James L.		25,000/100,000	$	0/$0
Edie, Michael J.		20,000/80,000	$	0/$0
Sandberg, Daniel M.		166,490/6,250	$	0/$0



	Years of Credited Service

Covered Compensation	10		15		20		25		30		35

$50,000.	$	6,407	$	9,610	$	12,813	$	16,017	$	19,220	$	20,822
$100,000	$	13,073	$	19,610	$	26,147	$	32,683	$	39,220	$	42,488
$150,000	$	19,740	$	29,610	$	39,480	$	49,350	$	59,220	$	64,155
$200,000	$	22,407	$	33,610	$	44,813	$	56,017	$	67,220	$	72,823
$250,000	$	22,407	$	33,610	$	44,813	$	56,017	$	67,220	$	72,823
$300,000	$	22,407	$	33,610	$	44,813	$	56,017	$	67,220	$	72,823
$350,000	$	22,407	$	33,610	$	44,813	$	56,017	$	67,220	$	72,823
$400,000	$	22,407	$	33,610	$	44,813	$	56,017	$	67,220	$	72,823


	Number of
Name of Beneficial Owner	Shares(1)(2)

Clawson, Curtis J.		—
Cucuz, Ranko		53,715
Harrison, Scott		28,000
Stegemiller, James L.		25,000
Edie, Michael J.		20,000
Sandberg, Daniel M.		166,490
Christophe, Cleveland A.(3)		—
Levy, Paul S.(4)		9,634,176
Lightcap, Jeffrey(4)		9,634,176
Rodewig, John S.		1,810
Ying, David Y.(4)		9,634,176
All directors and executive officers as a group (19 persons)		10,274,283


	Issuable Upon		Issuable Upon
	Exercise of Options		Exercise of Options
	Granted Under		Granted Under
Name	1992 Plan		1996 Plan

Clawson, Curtis J.		—		—
Harrison, Scott		—		28,000
Stegemiller, James L.		—		25,000
Edie, Michael J.		—		20,000
Sandberg, Daniel M.		26,000		140,490
All directors and executive officers as a group		105,800		448,742


Item 13.	*Certain Relationships and Related Transactions*


(D)	2.1	Agreement and Plan of Merger, dated as of March 28, 1996, between the Company and MWC Holdings, Inc. (“Holdings”).
(G)	2.2	Purchase Agreement, dated as of June 6, 1997, among the Company, Cromodora Wheels S.p.A., Lemmerz Holding GmbH and the shareholders of Lemmerz Holding GmbH.
(L)	2.3	Agreement and Plan of Merger, dated November 19, 1998, among the Company, HL — CMI Holding Co., CMI International, Inc. and Ray H. Witt, as Trustee of the Ray H. Witt Living Trust Agreement dated December 2, 1981, as amended and restated.
(E)	3.1	Restated Certificate of Incorporation of the Company and Certificate of Correction thereof.
(E)	3.2	Amended and Restated By-Laws of the Company.
(E)	3.3	Certificate of Merger of Holdings into the Company, filed with the Secretary of State of Delaware on July 2, 1996.
(J)	3.4	Certificate of Amendment to Restated Certificate of Incorporation of the Company.
(U)	3.5	Amendment to the Amended and Restated By-Laws of the Company dated August 1, 2001.
(A)	4.1	Reference is made to Exhibits 3.1 and 3.2.
(D)	4.6	Form of Subscription Agreement between the Company and the New Investors.
(H)	4.7	Indenture, dated as of June 30, 1997, among the Company, as issuer, certain subsidiaries, as guarantors, and The Bank of New York as Trustee.
(I)	4.8	Registration Rights Agreement, dated as June 30, 1997, among the Company, certain subsidiaries, CIBC Wood Gundy Securities Corp., Merrill Lynch Pierce Fenner & Smith Incorporated, Bear, Stearns & Co. Inc., Morgan Stanley & Co. Inc. and Salomon Brothers Inc.
(I)	4.9	Indenture, dated as of July 22, 1997, among the Company, as issuer, certain subsidiaries, as guarantors, and The Bank of New York as Trustee.
(I)	4.10	Registration Rights Agreement, dated as July 22, 1997, among the Company, certain subsidiaries, CIBC Wood Gundy Securities Corp. and Merrill Lynch Pierce Fenner & Smith Incorporated.
(M)	4.11	Indenture, dated as of December 14, 1998, among the Company, as Issuer, certain subsidiaries of the Company, as Guarantors, and The Bank of New York, a New York banking corporation, as Trustee.
(M)	4.12	Registration Rights Agreement, dated as of December 14, 1998, among the Company, as Issuer, certain subsidiaries of the Company, as Guarantors, and CIBC Oppenheimer Corp., Credit Suisse First Boston Corporation, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as the Initial Purchasers.
(N)	4.13	Indenture, dated as of June 15, 2001, among the Company, as Issuer, certain subsidiaries of the Company, as Guarantors, and BNY Midwest Trust Company, as Trustee.
(N)	4.14	Registration Rights Agreement, dated as of June 22, 2001, among the Company, as Issuer, certain subsidiaries of the Company, as Guarantors, and Credit Suisse First Boston Corporation and CIBC World Markets Corp., as the Initial Purchasers.
(A)	10.2	Tax Sharing Agreement among the Company, Kelsey-Hayes Company and K-H.
(B)	10.3	Conveyance and Transfer Agreement, dated as of December 15, 1992, between the Company and Kelsey-Hayes Company.


(A)	10.5	Michigan Workers’ Compensation Claims Payment Guarantee between the Company and Kelsey-Hayes Company.
(A)	10.6	1992 Incentive Stock Option Plan.
(A)	10.7	Long-Term Savings Plan.
(A)	10.8	Non-competition Agreement between the Company and Varity Corporation.
(A)	10.9	Employment Agreement, dated February 1, 1993, between Hayes Wheels, S.p.A. and Giancarlo Dallera.
(C)	10.13	Project Funds Agreement, dated November 12, 1993, between Hayes Wheels Autokola NH, a.s. (“Autokola”), the Company and International Finance Corporation (“IFC”).
(C)	10.14	Fee Clawback Agreement, dated November 12, 1993, between Autokola, the Company and IFC.
(C)	10.15	Subordination Agreement, dated November 12, 1993, between Autokola, Nova Hut a.s., the Company and IFC.
(C)	10.16	Investment Agreement, dated November 12, 1993, between Autokola and IFC.
(A)	10.17*	Employee Benefits Agreement.
(E)	10.22	Form of Indemnification Agreement between the Company and each of its directors (filed as Exhibit B to the Stockholders’ Agreement filed as Exhibit 2.2).
(F)	10.23*	First Amendment to Employment Agreement, dated June 6, 1996, between Hayes Wheels, S.p.A. and Giancarlo Dallera.
(G)	10.24	Consulting Agreement, dated as of June 6, 1997, between the Company and H.K.L., L.L.C.
(G)	10.25	Consulting Agreement, dated as of June 6, 1997, between the Company and Horst Kukwa-Lemmerz.
(H)	10.26	Amended and Restated Stockholders’ Agreement, dated as of June 30, 1997, among the Company, Joseph Littlejohn & Levy Fund II, L.P., Chase Equity Associates, CIBC WG Argosy Merchant Fund 2, L.L.C., Nomura Holding America, Inc. and TSG Capital Fund II, L.P. and the shareholders of Lemmerz Holding GmbH.
(M)	10.29	Third Amended and Restated Credit Agreement, dated as of February 3, 1999 (the “Credit Agreement”), among the Company, as Borrower, the several banks and other financial institutions from time to time Parties thereto, as Lenders, Canadian Imperial Bank of Commerce, as Administrative Agent and Co-Lead Arranger, Credit Suisse First Boston, as Syndication Agent and Co-Lead Arranger, Merrill Lynch Capital Corporation, as Co-Documentation Agent, and Dresdner Bank AG, as Co-Documentation Agent and European Swing Line Administrator.
(O)	10.30	Amendment No. 2 to Credit Agreement dated December 8, 2000.
(O)	10.31	Form of Severance Agreement, dated June 15, 2000, between the Company and certain of its officers.
(P)	10.32	Amendment No. 3 and Consent to Credit Agreement dated March 9, 2001.
(Q)	10.33	Amendment No. 4 to Credit Agreement dated April 20, 2001.
(R)	10.34	Amendment No. 5 and Consent to Credit Agreement dated June 15, 2001.
(S)	10.35	B Term Loan Agreement, dated as of July 2, 2001 (the “B Term Agreement”), among the Company, the lenders parties thereto, Credit Suisse First Boston, as joint lead arranger and as joint book manager for the term loan facility established by the B Term Agreement, and as syndication agent for the Lenders under the Agreement (as defined in the B Term Agreement) and co-lead arranger, and Canadian Imperial Bank of Commerce, as administrative agent for the Lenders under the Agreement and co-lead arranger, and as joint lead arranger and joint book manager for the term loan facility established by the B Term Agreement.


(T)	10.36	Revolving Credit and Guaranty Agreement, dated as of December 17, 2001 (the “DIP Credit Agreement”), among the Company, certain subsidiaries of the Company, 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.
(T)	10.37	First amendment to the DIP Credit Agreement, dated as of January 15, 2002.
(U)	10.38*	Amended and Restated Employment Agreement between the Company and Curtis J. Clawson dated September 26, 2001.
(U)	10.39*	Form of Employment Agreement between the Company and certain of its officers.
(V)	10.40*	Amended and Restated Settlement Agreement between the Company and Giancarlo Dallera dated December 1, 2001.
(W)	10.41*	Critical Employee Retention Plan as entered by the United States Bankruptcy Court for the District of Delaware on May 30, 2002.
(X)	10.42	Second DIP Amendment.
(X)	10.43	Third DIP Amendment.
(X)	10.44	Fourth DIP Amendment.
(X)	12	Computation of Ratios.
(X)	21	Subsidiaries of the Company.
(X)	23	Consent of KPMG LLP.
(X)	24	Powers of Attorney.
(X)	99.1	Certification of Curtis J. Clawson, Chairman of the Board, President and Chief Executive Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(X)	99.2	Certification of James A. Yost, Vice President, Finance and Chief Financial Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


(A)		Incorporated by reference from the Company’s Registration Statement No. 33-53780 on Form S-l, filed with the SEC on October 27, 1992, as amended.

(B)		Incorporated by reference from the Company’s Annual Report on Form 10-K for the fiscal Year Ended January 31, 1993, filed with the SEC.

(C)		Incorporated by reference from the Company’s Quarterly Report on Form 10-Q for the quarter ended October 31, 1993, filed with the SEC.

(D)		Incorporated by reference from the Company’s Current Report on Form 8-K, dated March 28, 1996, filed with the SEC.

(E)		Incorporated by reference from the Company’s Current Report on Form 8-K, dated July 2, 1996, filed with the SEC.

(F)		Incorporated by reference from the Company’s Annual Report on Form 10-K for the Fiscal Year Ended January 31, 1997, filed with the SEC.

(G)		Incorporated by reference from the Company’s Current Report on Form 8-K, dated June 6, 1997, filed with the SEC.

(H)		Incorporated by reference from the Company’s Current Report on Form 8-K, dated June 30, 1997, filed with the SEC.

(I)		Incorporated by reference from the Company’s Registration Statement No. 333-34319 on Form S-4, filed with the SEC on August 24, 1997, as amended.

(J)		Incorporated by reference from the Company’s Registration Statement on Form 8-A, filed with the SEC on November 14, 1997.

(K)		Incorporated by reference from the Company’s Annual Report on Form 10-K for the Fiscal Year Ended January 31, 1998, filed with the SEC.



Signature		Title	Date


/s/ CURTIS J. CLAWSON Curtis J. Clawson		Chairman of the Board of Directors, Chief Executive Officer, President and Director	April 2, 2003

/s/ JAMES A. YOST James A. Yost		Vice President, Finance, and Chief Financial Officer	April 2, 2003

/s/ HERBERT S. COHEN Herbert S. Cohen		Chief Accounting Officer	April 2, 2003

/s/ CLEVELAND A. CHRISTOPHE* Cleveland A. Christophe		Director	April 2, 2003

Ranko Cucuz		Director

/s/ PAUL S. LEVY* Paul S. Levy		Director	April 2, 2003

/s/ JEFFREY C. LIGHTCAP* Jeffrey C. Lightcap		Director	April 2, 2003

/s/ JOHN S. RODEWIG* John S. Rodewig		Director	April 2, 2003

/s/ DAVID Y. YING* David Y. Ying		Director	April 2, 2003

*By:	/s/ PATRICK CAULEY Patrick Cauley	Attorney-in-fact	April 2, 2003


															Accumulated
		Common Stock										Retained			Other
							Additional					Earnings			Comprehensive
					Par		Paid-in		Treasury			(Accumulated			Income
		Shares			Value		Capital		Stock			Deficit)			(Loss)			Total


		(Millions of dollars, except share amounts)
Balance at January 31, 2000			30,354,045		$	0.3	$	231.4	$	—		$	40.5		$	(81.5	)	$	190.7
	Net loss		—			—		—		—			(186.2	)		—			(186.2	)
	Currency translation adjustment		—			—		—		—			—			(4.1	)		(4.1	)
	Minimum pension liability adjustment		—			—		—		—			—			(0.2	)		(0.2	)

	Comprehensive loss																		(190.5	)
	Issuance of common stock		500			—		—		—			—			—			—
	Exercise of options		2,400			—		—		—			—			—			—
	Purchase of treasury stock		(1,757,700	)		—		—		(23.7	)		—			—			(23.7	)
	Settlement of common stock subject to put agreement		(143,750	)		—		3.7		(2.0	)		—			—			1.7

Balance at January 31, 2001			28,455,495			0.3		235.1		(25.7	)		(145.7	)		(85.8	)		(21.8	)
	Net loss		—			—		—		—			(396.7	)		—			(396.7	)
	Currency translation adjustment		—			—		—		—			—			(6.1	)		(6.1	)
	Minimum pension liability adjustment		—			—		—		—			—			(35.4	)		(35.4	)

	Comprehensive loss																		(438.2	)
	Issuance of common stock		500			—		—		—			—			—			—

Balance at January 31, 2002			28,455,995			0.3		235.1		(25.7	)		(542.4	)		(127.3	)		(460.0	)
	Net loss		—			—		—		—			(634.5	)		—			(634.5	)
	Currency translation adjustment		—			—		—		—			—			47.5			47.5
	Minimum pension liability adjustment		—			—		—		—			—			(27.4	)		(27.4	)

	Comprehensive loss																		(614.4	)

Balance at January 31, 2003			28,455,995		$	0.3	$	235.1	$	(25.7	)	$	(1,176.9	)	$	(107.2	)	$	(1,074.4	)


(2)	Basis of Presentation and Summary of Significant Accounting Policies