Accuride (ACUZW) 10-Q 2007 Q2 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC  20549

FORM 10-Q

(Mark One)

x Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2007.

OR

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                   to                   .

Commission file number 001-32483

ACCURIDE CORPORATION
(Exact Name of Registrant as Specified in Its Charter)

Delaware	61-1109077
(State or Other Jurisdiction of	(I.R.S. Employer Identification No.)
Incorporation or Organization)
7140 Office Circle
Evansville, IN	47715
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s Telephone Number, Including Area Code: (812) 962-5000

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

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

Large Accelerated Filer o Accelerated Filer x Non-Accelerated Filer o

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

As of August 7, 2007, 35,324,217 shares of Accuride Corporation common stock, par value $.01 per share, were outstanding.

ACCURIDE CORPORATION

Table of Contents

PART I – FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets as of June 30, 2007 and December 31, 2006
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2007 and 2006
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2007 and 2006
	Notes to Condensed Consolidated Financial Statements
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.	Quantitative and Qualitative Disclosures About Market Risk
Item 4.	Controls and Procedures
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings
Item 4.	Submission of Matters to a Vote of Security Holders
Item 6.	Exhibits
Signatures

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Part I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

ACCURIDE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

	June 30,			December 31,
(In thousands, except for per share data)	2007			2006
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	52,722		$	110,204
Customer receivables, net of allowance for doubtful accounts of $1,958 and $2,127 in 2007 and 2006, respectively	111,066			132,482
Other receivables	7,899			10,183
Inventories, net	131,012			103,653
Supplies, net	21,792			22,124
Current income taxes receivable	8,275			—
Deferred income taxes	14,573			14,451
Prepaid expenses and other current assets	8,380			5,143
Total current assets	355,719			398,240
PROPERTY, PLANT AND EQUIPMENT, net	278,337			300,806
OTHER ASSETS:
Goodwill	386,953			389,513
Other intangible assets, net	132,807			135,644
Investment in affiliates	600			350
Deferred financing costs, net of accumulated amortization of $3,087 and $2,470 in 2007 and 2006, respectively	7,412			8,029
Other	240			605
TOTAL	$	1,162,068		$	1,233,187
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	89,249		$	107,217
Accrued payroll and compensation	31,518			28,430
Accrued interest payable	11,141			11,406
Income taxes payable	—			4,135
Accrued and other liabilities	30,571			35,711
Total current liabilities	162,479			186,899
LONG-TERM DEBT	582,725			642,725
DEFERRED INCOME TAXES	33,653			39,945
NON-CURRENT INCOME TAXES PAYABLE	11,566			—
OTHER POSTRETIREMENT BENEFIT PLAN LIABILITY	83,474			81,158
PENSION BENEFIT PLAN LIABILITY	16,615			15,096
OTHER LIABILITIES	3,628			3,782
COMMITMENTS AND CONTINGENCIES	—			—
STOCKHOLDERS’ EQUITY:
Preferred stock, $0.01 par value; 5,000 shares authorized and unissued	—			—
Common Stock, $0.01 par value; 100,000 shares authorized, 35,978 and 35,554 shares issued, and 35,274 and 34,850 shares outstanding in 2007 and 2006, respectively	353			349
Additional paid-in-capital	260,438			255,741
Treasury stock – 76 shares at cost in 2007 and 2006	(751		)	(751		)
Accumulated other comprehensive loss	(24,416		)	(23,100		)
Retained earnings	32,304			31,343
Total stockholders’ equity	267,928			263,582
TOTAL	$	1,162,068		$	1,233,187

See notes to unaudited condensed consolidated financial statements.

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ACCURIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands except per share data)	2007			2006			2007			2006
NET SALES	$	245,133		$	361,733		$	570,563		$	721,658
COST OF GOODS SOLD	216,679			308,613			517,993			612,524
GROSS PROFIT	28,454			53,120			52,570			109,134
OPERATING EXPENSES:
Selling, general and administrative	14,223			13,087			29,274			26,776
INCOME FROM OPERATIONS	14,231			40,033			23,296			82,358
OTHER INCOME (EXPENSE):
Interest income	393			343			937			392
Interest expense	(11,665		)	(12,622		)	(24,228		)	(24,301		)
Equity in earnings of affiliate	—			176			—			391
Other income, net	3,222			394			3,296			996
INCOME BEFORE INCOME TAXES	6,181			28,324			3,301			59,836
INCOME TAX PROVISION	1,288			9,981			292			21,458
NET INCOME	$	4,893		$	18,343		$	3,009		$	38,378
Weighted average common shares outstanding—basic	35,127			34,146			35,011			34,064
Basic income per share	$	0.14		$	0.54		$	0.09		$	1.13
Weighted average common shares outstanding—diluted	35,408			34,564			35,151			34,524
Diluted income per share	$	0.14		$	0.53		$	0.09		$	1.11

See notes to unaudited condensed consolidated financial statements.

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ACCURIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Six Months Ended June 30,
(In thousands)	2007			2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	3,009		$	38,378
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and impairment	32,910			23,536
Amortization – deferred financing costs	617			757
Amortization – other intangible assets	2,837			2,766
Loss on disposal of assets	29			1,457
Deferred income taxes	204			6,332
Equity in earnings of affiliates	—			(391		)
Non-cash stock-based compensation	1,280			700
Changes in certain assets and liabilities:
Receivables	23,700			(41,322		)
Inventories and supplies	(27,027		)	3,042
Prepaid expenses and other assets	(12,688		)	(5,288		)
Accounts payable	(12,519		)	7,211
Accrued and other liabilities	2,703			9,621
Net cash provided by operating activities	15,055			46,799
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment	(15,919		)	(15,248		)
Other	(30		)	2,187
Net cash used in investing activities	(15,949		)	(13,061		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt	(60,000		)	(30,000		)
Increase in revolving credit advance	5,000			25,000
Decrease in revolving credit advance	(5,000		)	(25,000		)
Other	3,412			1,475
Net cash used in financing activities	(56,588		)	(28,525		)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(57,482		)	5,213
CASH AND CASH EQUIVALENTS—Beginning of period	110,204			48,415
CASH AND CASH EQUIVALENTS—End of period	$	52,722		$	53,628
Supplemental cash flow information:
Cash paid for interest	$	22,328		$	26,591
Cash paid for income taxes	$	5,600		$	3,283

See notes to unaudited condensed consolidated financial statements.

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ACCURIDE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

AS OF JUNE 30, 2007 AND DECEMBER 31, 2006 AND FOR THE THREE AND SIX MONTHS ENDED JUNE 30,

2007 AND 2006 (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Note 1 - Summary of Significant Accounting Policies

Basis of Presentation– The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, except that the unaudited condensed consolidated financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.  However, in the opinion of Accuride Corporation (“Accuride” or the “Company”), all adjustments (consisting of normal recurring accruals) considered necessary to present fairly the condensed consolidated financial statements have been included.

The results of operations for the three and six months ended June 30, 2007 are not necessarily indicative of the results to be expected for the year ending December 31, 2007.  The unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the audited condensed consolidated financial statements and notes thereto disclosed in Accuride’s Annual Report on Form 10-K for the year ended December 31, 2006.

Management’s Estimates and Assumptions- The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Earnings Per Common Share – Basic and diluted earnings per common share were computed as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands except per share data)	2007		2006		2007		2006
Numerator:
Net Income	$	4,893	$	18,343	$	3,009	$	38,378
Denominator:
Weighted average shares outstanding - Basic	35,127		34,146		35,011		34,064
Effect of dilutive stock options	281		418		140		460
Weighted average shares outstanding - Diluted	35,408		34,564		35,151		34,524
Basic earnings per common share	$	0.14	$	0.54	$	0.09	$	1.13
Diluted earnings per common share	$	0.14	$	0.53	$	0.09	$	1.11

There were 496,062 stock appreciation rights that were not included in the computation of diluted earnings per share because the effect would be anti-dilutive.

Derivative Financial Instruments – We use derivative financial instruments as part of our risk management strategy as further described under Item 7A of the 2006 Annual Report on Form 10-K.  The derivative instruments used from time to time include interest rate and foreign exchange instruments.  All derivative instruments are recognized on the balance sheet at their estimated fair values. As of June 30, 2007, no derivatives were designated as hedges for financial reporting purposes.

Interest Rate Instruments – We entered into interest rate swap agreements in 2005 as a means of fixing the interest rate on portions of our floating-rate debt.  The total notional amount of outstanding interest rate swap agreements at June 30, 2007 was $250 million, maturing in March of 2008.  Realized gains and losses included in interest expense are as follows:

	Three Months Ended June 30,					Six Months Ended June 30,
	2007			2006		2007			2006
Realized Gain	$	581		$	457	$	1,250		$	1,117
Unrealized Gain (Loss)	$	(115	)	$	890	$	(795	)	$	2,174

Foreign Exchange Instruments – From time to time we use foreign currency forward contracts and option contracts to limit foreign exchange risk on anticipated but not yet committed transactions expected to be denominated in Canadian dollars. At June 30, 2007, we had open foreign exchange forward contracts of $17.1 million.  Included in other income for the three months ended June 30, 2007 are realized gains of $0.6 million and unrealized gains of $1.4 million from these contracts.  For

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the six months ended June 30, 2007, we had realized gains of $0.9 million and unrealized gains of $2.0 million from these contracts.

Share-Based Compensation—We account for share-based compensation programs in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 123(R), Share-Based Payment.  In the three months ended June 30, 2007, $0.7 million of pre-tax compensation expense was recognized. The total income tax benefit recognized for share-based compensation exercises in the statements of operations and in additional paid-in-capital for the three and six months ended June 30, 2007, was $0.8 million and $1.1 million, respectively. In the three and six months ended June 30, 2007, 117,728 stock appreciation rights and 51,128 restricted stock units were granted, with an intrinsic value of $5.2 million. These awards will vest over approximately a four year period.  As of June 30, 2007, there was approximately $9.8 million of unrecognized pre-tax compensation expense related to share-based awards not yet vested that will be recognized over a weighted-average period of 2.6 years.

Recent Accounting Adoptions

FIN 48—In July 2006, the FASB issued Interpretation No. 48, FIN 48, Accounting for Uncertainty in Income Taxes, to address the noncomparability in reporting tax assets and liabilities resulting from a lack of specific guidance in SFAS No. 109, Accounting for Income Taxes, on the uncertainty in income taxes recognized in an enterprise’s financial statements.  Specifically, FIN 48 prescribes (a) a consistent recognition threshold and (b) a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and provides related guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.  FIN 48 applies to fiscal years beginning after December 15, 2006.  The impact of the adoption of FIN 48 on January 1, 2007, was to decrease retained earnings by $2.1 million, increase goodwill by $0.7 million, decrease income taxes payable by $6.1 million, decrease net deferred tax liabilities by $2.7 million, and increase non-current income taxes payable by $11.6 million.

In conjunction with the adoption of FIN 48, we have classified uncertain tax positions as non-current income tax liabilities unless they are expected to be paid within 12 months of the balance sheet date. Penalties and income tax-related interest expense are reported as a component of income tax expense and the related liabilities are included in non-current income taxes payable.  As of January 1, 2007, we recorded a liability of approximately $2.7 million and $2.1 million for the payments of interest and penalties, respectively.  The liability for the payment of interest and penalties did not materially change as of June 30, 2007.

As of January 1, 2007, we were open to examination in the U.S. federal tax jurisdiction for the 2003-2006 tax years, in Canada for the years of 1997-2006, and in Mexico for the years of 1999-2006. We were also open to examination in various state and local jurisdictions for the 2001-2006 tax years, none of which were individually material.

As of January 1, 2007, the total amount of unrecognized tax benefits was $13.4 million, of which $10.4 million would affect the effective tax rate, if recognized.  The amount of unrecognized tax benefits did not materially change as of June 30, 2007.

Recent Accounting Pronouncements

SFAS No. 157— In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, to eliminate the diversity in practice that exists due to the different definitions of fair value and the limited guidance for applying those definitions in GAAP that are dispersed among the many accounting pronouncements that require fair value measurements.  SFAS No. 157 will apply to fiscal years beginning after November 15, 2007. Management is currently evaluating the impact of SFAS No. 157 on the consolidated financial statements.

SFAS No. 159— In February 2007, the FASB issued SFAS No. 159, Establishing the Fair Value Option for Financial Assets and Liabilities, to permit all entities to choose to elect to measure eligible financial instruments at fair value.  SFAS No. 159 applies to fiscal years beginning after November 15, 2007, with early adoption permitted for an entity that has also elected to apply the provisions of SFAS No. 157, Fair Value Measurements. An entity is prohibited from retrospectively applying SFAS No. 159, unless it chooses early adoption. Management is currently evaluating the impact of SFAS No. 159 on the consolidated financial statements.

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Note 2 - Inventories

Inventories are stated at the lower of cost or market.  We review inventory on hand and write down excess and obsolete inventory based on our assessment of future demand and historical experience.  The components of inventory on a FIFO basis, except at our subsidiary in Mexico, which values inventories using an average cost basis, are as follows:

	June 30, 2007		December 31, 2006
Raw materials	$	34,016	$	29,437
Work in process	53,857		39,796
Finished manufactured goods	43,139		34,420
Total inventories, net	$	131,012	$	103,653

Note 3 – Goodwill and Intangible Assets

SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets, have been applied to the acquisition of TTI, which occurred on January 31, 2005.  Accordingly, the tangible and identifiable intangible assets and liabilities were adjusted to fair values with the remainder of the purchase price recorded as goodwill.  Additionally, goodwill and indefinite lived intangibles assets (trade names) are not amortized but are reviewed for impairment at least annually or more frequently if impairment indicators arise.  We estimate that aggregate amortization expense for 2007 will be $5,750 with the following year at $5,300, and the following three years at approximately $4,735 each year.  The summary of goodwill and other intangible assets is as follows:

	Weighted	As of June 30, 2007						As of December 31, 2006
	Average
	Useful Lives	Gross Amount		Accumulated Amortization		Carrying Amount		Gross Amount		Accumulated Amortization		Carrying Amount
Goodwill	—	$	386,953	—		$	386,953	$	389,513	—		$	389,513
Other Intangible Assets:
Non-compete Agreements	3.0	$	2,600	$	1,468	$	1,132	$	2,600	$	999	$	1,601
Trade Names	—	38,080		—		38,080		38,080		—		38,080
Technology	14.7	33,540		5,542		27,998		33,540		4,395		29,145
Customer Relationships	29.6	71,500		5,903		65,597		71,500		4,682		66,818
		$	145,720	$	12,913	$	132,807	$	145,720	$	10,076	$	135,644

The following presents the changes in the carrying amount of goodwill for the six months ended June 30, 2007:

	Wheels		Components			Other		Total
Balance at December 31, 2006	$	123,199	$	254,219		$	12,095	$	389,513
Increase from adoption of FIN 48 on January 1, 2007	—		731			—		731
Decrease from other tax resolutions	—		(3,291		)	—		(3,291		)
Balance at June 30, 2007	$	123,199	$	251,659		$	12,095	$	386,953

Goodwill was reduced by $3,291 in accordance with EITF 93-7, Uncertainties Related to Income Taxes in a Purchase Business Combination, in the three months ended March 31, 2007, due to settlements of tax audits and amendments of previously filed returns.

Note 4 - Property, Plant and Equipment

During the three and six months ended June 30, 2007, we recorded $1.3 million and $11.1 million, respectively, of additional depreciation of certain assets in our Wheels segment as a result of a reduction of the useful lives of these assets, as discussed in the Form 10-K for the year ended December 31, 2006.

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Note 5 - Comprehensive income

Comprehensive income for the three and six months ended June 30 is summarized as follows:

	For The Three Months Ended June 30,						For The Six Months Ended June 30,
	2007			2006			2007			2006
Net income	$	4,893		$	18,343		$	3,009		$	38,378
Other comprehensive income (net of tax)
Unrealized gain (loss) on derivatives	—			—			—			(402		)
Pension liability adjustment	(1,175		)	(628		)	(1,316		)	(628		)
Total comprehensive income	$	3,718		$	17,715		$	1,693		$	37,348

Included in accumulated other comprehensive income during 2006 are unrealized losses on derivatives that were designated as cash flow hedges in accordance with SFAS No. 133.  Also included in accumulated other comprehensive income is the impact of pension liability fluctuations in the Canadian dollar to U.S. dollar exchange rate related to our Canadian pension plans in our Wheels segment.

Note 6 - Pension and Other Postretirement Benefit Plans

Components of Net Periodic Benefit Cost for the three and six months ended June 30:

	For The Three Months Ended June 30,												For The Six Months Ended June 30,
	Pension Benefits						Other Benefits						Pension Benefits						Other Benefits
	2007			2006			2007			2006			2007			2006			2007			2006
Service cost-benefits earned during the year	$	916		$	1,173		$	312		$	398		$	1,998		$	2,291		$	643		$	786
Interest cost on projected benefit obligation	2,560			2,366			1,179			1,122			5,006			4,644			2,382			2,429
Expected return on plan assets	(3,271		)	(3,080		)	—			—			(6,721		)	(6,034		)	—			—
Prior service cost and other amortization (net)	558			777			(120		)	(31		)	1,183			1,495			(224		)	(64		)
Net amount charged to income	$	763		$	1,236		$	1,371		$	1,489		$	1,466		$	2,396		$	2,801		$	3,151
Curtailment charge (gain)	4			—			(1,096		)	—			3,187			—			(1,379		)	—
Contractual termination benefits charge	—			—			—			—			6,347			—			—			—
Total amount charged to income	$	767		$	1,236		$	275		$	1,489		$	11,000		$	2,396		$	1,422		$	3,151

During the three months ended June 30, 2007, we recorded a pre-tax curtailment gain of $1.1 million related to a reduction-in-force in our London, Ontario, facility in our Wheels segment.  For the six months ended June 30, 2007, we recorded a pre-tax curtailment and other contractual termination benefits of $8.2 million. The contractual benefits charge represents a potential partial pension wind-up, which was determined to be probable for purposes of recognizing one-time benefits in accordance with SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, and SFAS No. 88, Employers’ Accounting for Settlements and Curtailments of Defined Benefit Plans and Termination Benefits. As of June 30, 2007, $7,981 has been contributed to our sponsored pension plans.  We presently anticipate contributing an additional $9,934 to fund our pension plans in 2007 for a total of $17,915.

Also during six months ended June 30, 2007, we recorded $8.2 million of severance costs related to the reduction-in-force as a component of cost of good sold.  Cash paid for severance costs in the three months ended June 30, 2007, totaled $1.4 million.

Note 7 – Secondary Offerings

In May and June 2007, we completed secondary stock offerings for 8.6 million shares of common stock on behalf of certain selling shareholders.  The total number of shares of common stock outstanding did not change as a result of these offerings.  All of the shares in the secondary offerings were offered by our current shareholders.  We did not receive any proceeds from the offerings.  We incurred $0.3 million of operating expenses related to the completion of the secondary stock offerings.

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Note 8 – Contingencies

We are, from time to time, involved in various legal proceedings of a character normally incident to our business. We do not believe that the outcome of these proceedings will have a material adverse effect on our consolidated financial condition or results of our operations.

As of June 30, 2007, we had an environmental reserve of approximately $2.6 million, related primarily to TTI’s foundry operations. This reserve is based on current cost estimates and does not reduce estimated expenditures to net present value, but does take into account the benefit of a contractual indemnity given to us by a prior owner of our wheel-end subsidiary. The failure for the indemnitor to fulfill its obligations could result in future costs that may be material. Any cash expenditures required by us or our subsidiaries to comply with applicable environmental laws and/or to pay for any remediation efforts will not be reduced or otherwise affected by the existence of the environmental reserve. We currently anticipate spending approximately $0.2 million per year in 2007 through 2010 for monitoring the various environmental sites associated with the environmental reserve, including attorney and consultant costs for strategic planning and negotiations with regulators and other potentially responsible parties, and payment of remedial investigation costs.  Based on all of the information presently available to us, we believe that our environmental reserves will be adequate to cover the future costs related to the sites associated with the environmental reserves, and that any additional costs will not have a material adverse effect on our financial condition, results of operations or cash flows.  However, the discovery of additional sites, the modification of existing or the promulgation of new laws or regulations, more vigorous enforcement by regulators, the imposition of joint and several liability under CERCLA or analogous state laws, or other unanticipated events could also result in such a material adverse effect.

The final Iron and Steel Foundry National Emission Standard for Hazardous Air Pollutants, or NESHAP, was developed pursuant to Section 112(d) of the Clean Air Act and requires all major sources of hazardous air pollutants to install controls representative of maximum achievable control technology. We are evaluating the applicability of the Iron and Steel Foundry NESHAP to our foundry operations. If applicable, compliance with the Iron and Steel Foundry NESHAP may result in future significant capital costs, which we currently expect to be approximately $6 million in total during the period 2007 through 2008.  We have incurred no expenditures as of June 30, 2007.

Our operations are subject to federal, state, and local environmental laws, rules, and regulations. Pursuant to the Recapitalization of the Company on January 21, 1998, we were indemnified by Phelps Dodge Corporation with respect to certain environmental liabilities at our Henderson and London facilities, subject to certain limitations.  At the Erie, Pennsylvania, facility, we have obtained an environmental insurance policy to provide coverage with respect to certain environmental liabilities.  Management does not believe that the outcome of any environmental proceedings will have a material adverse effect on our consolidated financial condition or results of operations.

During the fourth quarter of 2006, we were able to resolve a commercial dispute with Ford Motor Company.  As a result of the resolution, we recognized $10.4 million of revenue in 2006, $8.0 million in the three months ended March 31, 2007, $2.0 million in the three months ended June 30, 2007, and anticipate recognizing an additional $0.6 million of revenue in the remainder of 2007.  In addition, cash flow increased by $10.0 million in 2006 and $11.0 million in the three months ended June 30, 2007. We anticipate that Ford will re-source its Accuride business to another supplier during 2007.  In 2006, sales to Ford represented less than 6% of consolidated revenues.

As of June 30, 2007, we had 3,874 employees, of which 968 were salaried employees with the remainder paid hourly. Unions represented approximately 1,995 employees, or 51% of the total. Union contracts expiring in the second half of 2007 represent approximately 293 employees, or 14% of our total unionized workforce.  We do not anticipate that the outcome of the remaining negotiations will have a material adverse effect on our operating performance or costs.

On January 19, 2007, the Public Works Superintendent of the City of Portland, Tennessee issued a cease and desist order to the Company’s Imperial Group, alleging Imperial Group’s Portland, Tennessee facility was discharging wastewater into the City of Portland’s wastewater treatment system that contained nickel in excess of permit limits.  Imperial Group has fully cooperated with the City of Portland to address the alleged wastewater discharge issue.  On May 1, 2007, Imperial Group received a written demand from the City of Portland for damages and penalties totaling approximately $0.8 million.  Imperial Group is vigorously contesting the City’s demand while engaging in settlement discussions related thereto. Management does not believe that the outcome will have a material adverse effect on our operating performance or costs.

Note 9 – Segment Reporting

During the three months ended June 30, 2007, as a part of our continual monitoring of the long-term economic characteristics, products and production processes, class of customer, and distribution methods of our operating segments, we determined our seven operating segments aggregate into three reportable segments:  Wheels, Components, and Other.  Accordingly, we have revised the prior period information to conform to the current period segment presentation. All of our segments design, manufacture and market products to the commercial vehicle industry. 

10

The Wheels segment’s products consist of wheels for heavy- and medium-duty trucks and commercial trailers.  The Components segment’s products consist of truck body and chassis parts, wheel-end components and assemblies, and seats.  The Other segment’s products primarily consist of other commercial vehicle components, including steerable drive axles and gearboxes.

The accounting policies of the reportable segments are the same as described in Note 1, Significant Accounting Policies.

	Three Months Ended June 30,					Six Months Ended June 30,
	2007			2006		2007		2006
Net Sales
Wheels	$	113,357		$	173,086	$	272,686	$	346,194
Components	120,666			177,296		273,415		349,595
Other	11,110			11,351		24,462		25,869
Consolidated Total	$	245,133		$	361,733	$	570,563	$	721,658
Operating Income (Loss)
Wheels	$	13,834		$	22,051	$	16,131	$	45,470
Components	(801		)	16,615		4,521		32,627
Other	1,198			1,367		2,644		4,261
Consolidated Total	$	14,231		$	40,033	$	23,296	$	82,358

	As of June 30,
	2007		2006
Total Assets
Wheels	$	476,170	$	528,907
Components	637,243		673,018
Other	48,655		50,899
Consolidated Total	$	1,162,068	$	1,252,824

11

Note 10 – Guarantor and Non-guarantor Financial Statements

Our 8½% Senior Subordinated Notes due 2015 are fully and unconditionally guaranteed, on a joint and several basis, by substantially all of our 100% owned domestic subsidiaries (“Guarantor Subsidiaries”). The non-guarantor subsidiaries are our foreign subsidiaries. The following condensed financial information illustrates the composition of the combined Guarantor Subsidiaries:

CONDENSED CONSOLIDATED BALANCE SHEET

	June 30, 2007
	Parent		Guarantor Subsidiaries			Non-guarantor Subsidiaries		Eliminations			Total
ASSETS
Cash and cash equivalents	$	33,443	$	(4,388	)	$	23,667	—			$	52,722
Accounts receivable, net	277,619		203,096			17,349		$	(379,099	)	118,965
Inventories and supplies	20,478		107,354			26,230		(1,258		)	152,804
Other current assets	19,719		10,069			1,440		—			31,228
Total current assets	351,259		316,131			68,686		(380,357		)	355,719
Property, plant, and equipment, net	29,407		180,045			68,885		—			278,337
Goodwill	66,973		311,939			8,041		—			386,953
Intangible assets, net	983		131,824			—		—			132,807
Investment in subsidiaries and affiliates	557,825		—			—		(557,225		)	600
Deferred tax assets	18,365		19,710			17,955		(56,030		)	—
Other non-current assets	7,471		110			71		—			7,652
TOTAL	$	1,032,283	$	959,759		$	163,638	$	(993,612	)	$	1,162,068
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable	$	8,765	$	62,000		$	18,484	—			89,249
Accrued payroll and compensation	5,781		13,339			12,398		—			31,518
Accrued interest payable	11,112		10			19		—			11,141
Accrued and other liabilities	142,133		266,861			676		(379,099		)	30,571
Total current liabilities	167,791		342,210			31,577		(379,099		)	162,479
Long term debt	579,625		3,100			—		—			582,725
Deferred and non-current income taxes	1,607		76,831			22,811		(56,030		)	45,219
Other non-current liabilities	15,332		71,438			16,947		—			103,717
Stockholders’ equity	267,928		466,180			92,303		(558,483		)	267,928
TOTAL	$	1,032,283	$	959,759		$	163,638	$	(993,612	)	$	1,162,068

	December 31, 2006
	Parent		Guarantor Subsidiaries			Non-guarantor Subsidiaries		Eliminations			Total
ASSETS
Cash and cash equivalents	$	84,855	$	(4,502	)	$	29,851	—			$	110,204
Accounts receivable, net	316,159		212,591			13,861		$	(399,946	)	142,665
Inventories and supplies	15,961		81,935			28,932		(1,051		)	125,777
Other current assets	8,161		10,249			1,184		—			19,594
Total current assets	425,136		300,273			73,828		(400,997		)	398,240
Property, plant, and equipment, net	30,725		186,136			83,945		—			300,806
Goodwill	66,973		314,499			8,041		—			389,513
Intangible assets, net	1,379		134,265			—		—			135,644
Investment in subsidiaries and affiliates	528,839		—			—		(528,489		)	350
Deferred tax assets	20,804		19,710			17,278		(57,792		)	—
Other non-current assets	8,066		112			456		—			8,634
TOTAL	$	1,081,922	$	954,995		$	183,548	$	(987,278	)	$	1,233,187
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable	$	9,552	$	81,469		$	16,196	—			107,217
Accrued payroll and compensation	8,852		15,120			4,458		—			28,430
Accrued interest payable	4,706		22			6,678		—			11,406
Accrued and other liabilities	139,562		264,455			35,775		(399,946		)	39,846
Total current liabilities	162,672		361,066			63,107		(399,946		)	186,899
Long term debt	639,625		3,100			—		—			642,725
Deferred income taxes	290		76,342			21,105		(57,792		)	39,945
Other non-current liabilities	15,753		71,552			12,731		—			100,036
Stockholders’ equity	263,582		442,935			86,605		(529,540		)	263,582
TOTAL	$	1,081,922	$	954,995		$	183,548	$	(987,278	)	$	1,233,187

12

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended June 30, 2007
	Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Total
Net sales	$	74,241		$	158,652		58,026			$	(45,786	)	$	245,133
Cost of goods sold	56,884			149,572			56,009			(45,786		)	216,679
Gross profit	17,357			9,080			2,017			—			28,454
Operating expenses	11,403			2,956			(136		)	—			14,223
Income from operations	5,954			6,124			2,153			—			14,231
Other income (expense):
Interest expense, net	(10,208		)	(35		)	(1,029		)	—			(11,272		)
Equity in earnings of subsidiaries	7,527			—			—			(7,527		)	—
Other income, net	2,683			119			420			—			3,222
Income before income taxes	5,956			6,208			1,544			(7,527		)	6,181
Income tax provision	1,063			—			225			—			1,288
Net income	$	4,893		$	6,208		$	1,319		$	(7,527	)	$	4,893

	Three Months Ended June 30, 2006
	Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Total
Net sales	$	120,939		$	231,118		$	93,267		$	(83,591	)	$	361,733
Cost of goods sold	103,035			205,443			83,726			(83,591		)	308,613
Gross profit	17,904			25,675			9,541			—			53,120
Operating expenses	10,372			2,525			190			—			13,087
Income from operations	7,532			23,150			9,351			—			40,033
Other income (expense):
Interest expense, net	(10,655		)	(24		)	(1,600		)	—			(12,279		)
Equity in earnings of subsidiaries	27,954			—			—			(27,778		)	176
Other income, net	1,824			122			(1,552		)	—			394
Income before income taxes	26,655			23,248			6,199			(27,778		)	28,324
Income tax provision	8,312			—			1,669			—			9,981
Net income	$	18,343		$	23,248		$	4,530		$	(27,778	)	$	18,343

13

	Six Months Ended June 30, 2007
	Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Total
Net sales	$	175,709		$	374,502		$	155,431		$	(135,079	)	$	570,563
Cost of goods sold	162,891			345,545			144,636			(135,079		)	517,993
Gross profit	12,818			28,957			10,795			—			52,570
Operating expenses	23,017			5,874			383			—			29,274
Income from operations	(10,199		)	23,083			10,412			—			23,296
Other income (expense):
Interest expense, net	(21,066		)	(70		)	(2,155		)	—			(23,291		)
Equity in earnings of subsidiaries	29,350			—			—			(29,350		)	—
Other income, net	3,197			234			(135		)	—			3,296
Income before income taxes	1,282			23,247			8,122			(29,350		)	3,301
Income tax provision	(1,727		)	—			2,019			—			292
Net income	$	3,009		$	23,247		$	6,103		$	(29,350	)	$	3,009

	Six Months Ended June 30, 2006
	Parent			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Total
Net sales	$	233,099		$	461,740		$	185,986		$	(159,167	)	$	721,658
Cost of goods sold	198,147			406,956			166,588			(159,167		)	612,524
Gross profit	34,952			54,784			19,398			—			109,134
Operating expenses	20,601			5,797			378			—			26,776
Income from operations	14,351			48,987			19,020			—			82,358
Other income (expense):
Interest expense, net	(21,415		)	(54		)	(2,440		)	—			(23,909		)
Equity in earnings of subsidiaries	60,718			—			—			(60,327		)	391
Other income, net	1,418			299			(721		)	—			996
Income before income taxes	55,072			49,232			15,859			(60,327		)	59,836
Income tax provision	16,694			—			4,764			—			21,458
Net income	$	38,378		$	49,232		$	11,095		$	(60,327	)	$	38,378

14

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six Months Ended June 30, 2007
	Parent Company			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Total
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	3,009		$	23,247		$	6,103		$	(29,350	)	$	3,009
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation	2,858			14,304			15,748			—			32,910
Amortization – deferred financing costs	605			—			12			—			617
Amortization – other intangible assets	395			2,442			—			—			2,837
Loss on disposal of assets	2			5			22			—			29
Deferred income taxes	(2,198		)	—			2,402			—			204
Equity in earnings of subsidiaries and affiliates	(29,350		)	—			—			29,350			—
Non-cash stock-based compensation	1,280			—			—			—			1,280
Change in other operating items	35,816			(31,886		)	(29,761		)	—			(25,831		)
Net cash provided by (used in) operating activities	12,417			8,112			(5,474		)	—			15,055
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant, and equipment	(6,991		)	(8,218		)	(710		)	—			(15,919		)
Other	(250		)	220			—			—			(30		)
Net cash used by investing activities	(7,241		)	(7,998		)	(710		)	—			(15,949		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments on long-term and revolving debt	(60,000		)	—			—			—			(60,000		)
Other	3,412			—			—			—			3,412
Net cash used by financing activities	(56,588		)	—			—			—			(56,588		)
Increase (decrease) in cash and cash equivalents	(51,412		)	114			(6,184		)	—			(57,482		)
Cash and cash equivalents, beginning of year	84,855			(4,502		)	29,851			—			110,204
Cash and cash equivalents, end of year	$	33,443		$	(4,388	)	$	23,667		$	—		$	52,722

	Six Months Ended June 30, 2006
	Parent Company			Guarantor Subsidiaries			Non-guarantor Subsidiaries			Eliminations			Total
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	38,378		$	49,232		$	11,095		$	(60,327	)	$	38,378
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and impairment	2,805			14,468			6,263			—			23,536
Amortization – deferred financing costs	603			—			154			—			757
Amortization – other intangible assets	396			2,370			—			—			2,766
Loss (gain) on disposal of assets	1,458			(13		)	12			—			1,457
Deferred income taxes	6,109			—			223			—			6,332
Equity in earnings of subsidiaries and affiliates	(60,718		)	—			—			60,327			(391		)
Non-cash stock-based compensation	700			—			—			—			700
Change in other operating items	53,875			(59,174		)	(21,436		)	—			(26,736		)
Net cash provided by (used in) operating activities	43,606			6,883			(3,689		)	—			46,799
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant, and equipment	(1,837		)	(10,867		)	(2,544		)	—			(15,248		)
Other	1,888			299			—			—			2,187
Net cash provided by (used in) investing activities	51			(10,568		)	(2,544		)	—			(13,061		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments on long-term and revolving debt	(30,000		)	—			—			—			(30,000		)
Other	1,475			—			—			—			1,475
Net cash used by financing activities	(28,525		)	—			—			—			(28,525		)
Increase (decrease) in cash and cash equivalents	15,132			(3,685		)	(6,233		)	—			5,213
Cash and cash equivalents, beginning of year	11,195			1,241			35,979			—			48,415
Cash and cash equivalents, end of year	$	26,327		$	(2,444	)	$	29,746		$	—		$	53,628

15

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with the consolidated financial statements and notes included in Item 1 of Part I of this report on Form 10-Q and our report on Form 10-K for the year ended December 31, 2006.  Except for the historical information contained herein, this report on Form 10-Q contains forward-looking statements that involve risks and uncertainties.  Our actual results may differ materially from those indicated by such forward-looking statements.

Overview

The commercial vehicle market continued to decline in the three months ended June 30, 2007, as predicted.  Current industry forecasts by analysts, including America’s Commercial Transportation (“ACT”) Publications, predict that the North American commercial vehicle industry will decline significantly in 2007 due to a change in emissions standards that became effective in 2007.  Consistent with ACT’s prediction, we experienced reduced demand from the commercial vehicle industry in the first six months of 2007 compared to the first six months of 2006.  Net sales for the six months ended June 30, 2007, were $570.6 million compared to net sales of $721.7 million for the six months ended June 30, 2006.  We anticipate that this variance compared to 2006 will increase more significantly during the remainder of 2007.

Our operating challenges are to meet varying levels of production while improving our internal productivity and mitigating the margin pressure from rising material costs.

For the six months ended June 30, 2007, we reduced our senior debt by $60.0 million from existing cash reserves.

During the fourth quarter of 2006, we were able to resolve a commercial dispute with Ford Motor Company.  As a result of the resolution, we recognized $10.4 million of revenue in 2006, $8.0 million in the three months ended March 31, 2007, and $2.0 million in the three months ended June 30, 2007.  In addition, cash flow increased by $10.0 million in 2006 and $11.0 million in the three months ended June 30, 2007. We anticipate that Ford will re-source its Accuride business to another supplier during 2007.  In 2006, sales to Ford represented less than 6% of consolidated revenues.

The Company consists of seven operating segments that design, manufacture and distribute components for trucks, trailers, and other vehicles. These operating segments are aggregated into three reportable segments based on long-term economic characteristics, products and production processes, class of customer, and distribution methods. We believe this segmentation is appropriate based upon management’s operating decisions and performance assessment.

16

Results of Operations

Three Months Ended June 30, 2007 Compared to the Three Months Ended June 30, 2006

The following table sets forth certain income statement information of Accuride for the three months ended June 30, 2007 and June 30, 2006:

(Amounts in thousands, except per share data)	June 30, 2007					June 30, 2006
Net sales:
Wheels	$	113,357		46.2	%	$	173,086		47.8	%
Components	120,666			49.2	%	177,296			49.0	%
Other	11,110			4.6	%	11,351			3.2	%
Total net sales	$	245,133		100.0	%	$	361,733		100.0	%
Gross profit	28,454			11.6	%	53,120			14.7	%
Operating expenses	14,223			5.8	%	13,087			3.6	%
Income from operations	14,231			5.8	%	40,033			11.1	%
Interest expense, net	(11,272		)	(4.6	%)	(12,279		)	(3.4	%)
Equity in earnings of affiliate	—			—		176			0.1	%
Other income, net	3,222			1.3	%	394			0.1	%
Net income	$	4,893		2.0	%	$	18,343		5.1	%
Other Data:
Weighted average common shares outstanding—basic	35,127					34,146
Basic income per share	$	0.14				$	0.54
Weighted average common shares outstanding—diluted	35,408					34,564
Diluted income per share	$	0.14				$	0.53

Net Sales.  Net sales for the three months ended June 30, 2007 were $245.1 million, which was a decrease of 32.2%, compared to net sales of $361.7 million for the three months ended June 30, 2006.  The decrease in net sales, which was realized at both of our larger segments, was primarily a result of the reduced demand as a result of emission standards that became effective in 2007.  We anticipate that this variance compared to 2006 will increase more significantly during the remainder of 2007. Also included in the current quarter’s results in our Wheels segment was the increase in revenue of $2.0 million resulting from a resolution of a commercial dispute with a customer.

Gross Profit.  Due to the reduced sales demand, gross profit decreased $24.6 million to $28.5 million for the three months ended June 30, 2007 from $53.1 million for the three months ended June 30, 2006. As expected with the change in sales demand, gross profit as a percent of sales dropped from 14.7% to 11.6%, which was driven by our fixed and variable cost structure. Gross profit as a percent of sales on the $116.6 million lower sales was 20.7%. Gross profit in our Component’s segment of $3.1 million in the three months ended June 30, 2007, compared to $19.6 million in the three months ended June 30, 2006, was impacted by reduced sales demand of $56.6 million and approximately $8.0 million of unfavorable economics.

Operating Expenses.  Operating expenses increased $1.1 million to $14.2 million for the three months ended June 30, 2007 from $13.1 million for the three months ended June 30, 2006.  This was primarily due to year over year increases in non-cash share-based compensation expense of $0.6 million and other fees of $0.3 million related to the secondary stock offerings by selling shareholders in the three months ended June 30, 2007.

Interest Expense, net.  Net interest expense decreased $1.0 million to $11.3 million for the three months ended June 30, 2007 from $12.3 million for the three months ended June 30, 2006.  The decrease is attributable to a decrease in interest expense related to reduced debt, partially offset by $0.1 million of unrealized losses from our interest rate swap agreements in the current period compared to $0.9 million of unrealized gains in the prior year’s results.  Debt as of June 30, 2007, was $582.7 million compared to debt of $667.7 million as of June 30, 2006.

Other Income, net.  Gains related to currency, specifically the Canadian dollar, resulted in a $3.2 million gain in the three months ended June 30, 2007.  The Canadian dollar to U.S. dollar exchange rate moved from $0.866 on March 31, 2007 to $0.939 on June 30, 2007, an increase of 8.4%.

Net Income.  We had net income of $4.9 million for the three months ended June 30, 2007 compared to net income of $18.3 million for the three months ended June 30, 2006.  This was primarily a result of the lower gross profit due to the reduction in sales demand.

17

Six Months Ended June 30, 2007 Compared to the Six Months Ended June 30, 2006

The following table sets forth certain income statement information of Accuride for the six months ended June 30, 2007 and June 30, 2006:

(Amounts in thousands, except per share data)	June 30, 2007					June 30, 2006
Net sales:
Wheels	$	272,686		47.8	%	$	346,194		48.0	%
Components	273,415			47.9	%	349,595			48.4	%
Other	24,462			4.3	%	25,869			3.6	%
Total net sales	$	570,563		100.0	%	$	721,658		100.0	%
Gross profit	52,570			9.2	%	109,134			15.1	%
Operating expenses	29,274			5.1	%	26,776			3.7	%
Income from operations	23,296			4.1	%	82,358			11.4	%
Interest expense, net	(23,291		)	(4.1	%)	(23,909		)	(3.3	%)
Equity in earnings of affiliate	—			—		391			0.1	%
Other income, net	3,296			0.6	%	996			0.1	%
Net income	$	3,009		0.5	%	$	38,378		5.3	%
Other Data:
Weighted average common shares outstanding—basic	35,011					34,064
Basic income per share	$	0.09				$	1.13
Weighted average common shares outstanding—diluted	35,151					34,524
Diluted income per share	$	0.09				$	1.11

Net Sales.  Net sales for the six months ended June 30, 2007 were $570.6 million, which was a decrease of 20.9%, compared to net sales of $721.7 million for the six months ended June 30, 2006.  The decrease in net sales, which was realized at both of our larger segments, was primarily a result of the reduced demand as a result of emission standards that became effective in 2007, partially offset by $10.0 million of revenue resulting from a resolution of a commercial dispute with a customer in our Wheels segment.  The reduced demand from the commercial vehicle industry in the first six months of 2007 was milder than anticipated, and we anticipate the revenue variances compared to prior years will be significantly greater for the remainder of 2007.

Gross Profit.  Gross profit decreased $56.5 million to $52.6 million for the six months ended June 30, 2007 from $109.1 million for the six months ended June 30, 2006.  Included in the current year’s results was additional depreciation expense in our wheels business of $11.3 million and severance expense and other benefit charges of $17.5 million related to a reduction-in-force in our London, Ontario, facility of our Wheels segment.

Operating Expenses.  Operating expenses increased $2.5 million to $29.3 million for the six months ended June 30, 2007 from $26.8 million for the six months ended June 30, 2006.  This was primarily due to year over year increases in non-cash share-based compensation expense of $1.2 million and audit and other consulting fees of $1.6 million, which includes $0.3 million related to the secondary stock offerings by selling shareholders in the current year.

Interest Expense, net.  Net interest expense decreased $0.6 million to $23.3 million for the six months ended June 30, 2007 from $23.9 million for the six months ended June 30, 2006.  The reduction of expense is attributable to a decrease in interest expense related to reduced debt, partially offset by $0.8 million of unrealized losses from our interest rate swap agreements in the current year compared to $2.2 million of unrealized gains in the prior year’s results.  Debt as of June 30, 2007, was $582.7 million compared to debt of $667.7 million as of June 30, 2006.

Net Income.  We had net income of $3.0 million for the six months ended June 30, 2007 compared to net income of $38.4 million for the six months ended June 30, 2006.  This was primarily a result of the lower gross profit due to the reduction in sales demand and the additional depreciation, severance and other benefit charges.

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Changes in Financial Condition

At June 30, 2007, we had total assets of $1,162.1 million, as compared to $1,233.2 million at December 31, 2006.  The $71.1 million, or 5.8%, decrease in total assets during the six months ended June 30, 2007 primarily resulted from payments of debt of $60.0 million.

Working capital, defined as current assets (excluding cash) less current liabilities, increased $40.0 million from December 31, 2006, to June 30, 2007.  Significant changes in working capital from December 31, 2006 included:

·a decrease in net customer receivables of $21.4 million due to reduced sales leading up to the end of the period;

·an increase in inventories of $27.3 million due to the draw-down of inventories at December 31, 2006 and the seasonal build of inventories for maintenance shut-downs in July 2007;

·an increase in current income taxes receivable/payable of $12.4 million due to the shift of income tax expense in our Canadian facility due to a reduction in force;

·a decrease in accounts payable of $18.0 million due to reduced production related to reduced sales demand; and

·a decrease in other liabilities of $5.1 million due to a resolution of a commercial dispute with a customer.

Capital Resources and Liquidity

Our primary sources of liquidity during the three months ended June 30, 2007 were cash reserves and our $125 million revolving credit facility, as discussed below, which is not currently drawn.

We believe that cash from operations, existing cash reserves, and availability under the revolving credit facility will provide adequate funds for our working capital needs, planned capital expenditures and debt service obligations for the next 12 months and the foreseeable future.  Our ability to fund working capital needs, planned capital expenditures, scheduled debt payments, and to comply with all of the financial covenants under our credit agreement, depends on our future operating performance and cash flow, which in turn, are subject to prevailing economic conditions and to financial, business and other factors, some of which are beyond our control.

Operating Activities

Net cash provided by operating activities during the first six months of 2007 amounted to $15.1 million compared to $46.8 million for the comparable period in 2006.  The primary differences were lower net income due to reduced sales demand.  The fluctuations in working capital were a result of the reduced sales demand and production in 2007 compared to the same period in 2006, which saw an increase in revenue from the end of the previous year.

Investing Activities

Net cash used in investing activities totaled $15.9 million for the six months ended June 30, 2007 compared to a use of $13.1 million for the six months ended June 30, 2006.  Included in 2006 was $1.9 million of proceeds from the sale of property in Tennessee.

Our most significant cash outlays for investing activities are the purchases of property, plant and equipment.  Our capital expenditures in 2006 were $42.2 million.  Capital expenditures for 2007 are expected to be approximately $40 million to $45 million, which we expect to fund through our cash from operations or existing cash reserves.

Financing Activities

Net cash used in financing activities totaled $56.6 million for the six months ended June 30, 2007 compared to $28.5 million for the comparable period in 2006.  We reduced debt by $60.0 million in the six months ended June 30, 2007 with cash reserves.  The $3.4 million of inflows in the current year are related to employee stock option exercises.

Bank Borrowing.   In connection with the TTI merger, we entered into a Fourth Amended and Restated Credit Agreement consisting of (1) a new term credit facility (the Term B Loan Facility) in an aggregate principal amount of $550.0 million that will mature on January 31, 2012 and (2) a revolving credit facility (the “New Revolver”) in an aggregate principal amount of $125.0 million (comprised of a new $95.0 million U.S. revolving credit facility and the continuation of a $30.0 million Canadian revolving credit facility) that will terminate on January 31, 2010.  As of June 30, 2007, $304.6 million was outstanding under the Term B Loan Facility and the New Revolver was not drawn.  The Term B Loan Facility requires quarterly amortization payments of $1.4 million that commenced on June 30, 2005, with the balance paid on the maturity date for the Term B Loan

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Facility. As of June 30, 2007, the regularly scheduled payments due through December 31, 2011 were prepaid without penalty.  The interest rates per annum applicable to loans under our new senior credit facilities are, at the option of the Company or Accuride Canada Inc., as applicable, a base rate or Eurodollar rate plus, in each case, an applicable margin which is subject to adjustment based on our leverage ratio. The base rate is a fluctuating interest rate equal to the highest of (a) the base rate reported by Citibank, N.A. (or, with respect to the Canadian revolving credit facility, the reference rate of interest established or quoted by Citibank Canada for determining interest rates on U.S. dollar denominated commercial loans made by Citibank Canada in Canada), (b) a reserve adjusted three-week moving average of offering rates for three-month certificates of deposit plus one-half of one percent (0.5%) and (c) the federal funds effective rate plus one-half of one percent (0.5%). The obligations under our new senior credit facilities are guaranteed by all of our domestic subsidiaries.  The loans under the new senior credit facilities are secured by, among other things, a lien on substantially all of our U.S. properties and assets and of our domestic subsidiaries and a pledge of 65% of the stock of our foreign subsidiaries.  The loans under the Canadian revolving facility are also secured by substantially all of the properties and assets of Accuride Canada Inc.

Initial Public Offering.  On April 26, 2005, we completed our initial public offering (“IPO”).  Net proceeds from the IPO were $89.6 million.  We used all of the net proceeds from the IPO as well as other available cash as part of our repayment in April 2005 of $93.0 million of the Term B Loan Facility.  This prepayment was not subject to a prepayment penalty.

Restrictive Debt Covenants.  Our senior credit facilities contain numerous financial and operating covenants that limit the discretion of management with respect to certain business matters.  These covenants place significant restrictions on, among other things, our ability to incur additional debt, to pay dividends, to create liens, to make certain payments and investments and to sell or otherwise dispose of assets and merge or consolidate with other entities.  We are also required to meet certain financial ratios and tests, including a leverage ratio, an interest coverage ratio and a fixed charge coverage ratio.  Failure to comply with the obligations contained in the credit documents could result in an event of default, and possibly the acceleration of the related debt and the acceleration of debt under other instruments evidencing indebtedness that may contain cross-acceleration or cross-default provisions.  As of June 30, 2007, and currently, we are in compliance with our financial covenants and ratios.

Senior Subordinated Notes.   In connection with the TTI merger, we issued $275.0 million aggregate principal amount of 81¤2% senior subordinated notes due 2015 in a private placement transaction.  Interest on the senior subordinated notes is payable on February 1 and August 1 of each year, beginning on August 1, 2005.  The notes mature on February 1, 2015 and may be redeemed, at our option, in whole or in part, at any time on or before February 1, 2010 at a price equal to 100% of the principal amount, plus an applicable make-whole premium, and accrued and unpaid interest and special interest if any, to the date of redemption, and on or after February 1, 2010 at certain specified redemption prices.  In addition, on or before February 1, 2008, we may redeem up to 40% of the aggregate principal amount of the senior subordinated notes issued under the indenture with the proceeds of certain equity financings.  The new senior subordinated notes are general unsecured obligations (1) subordinated in right of payment to all of our and the guarantors’ existing and future senior indebtedness, including any borrowings under our new senior credit facilities; (2) equal in right of payment with any of our and the guarantors’ existing and future senior subordinated indebtedness; (3) senior in right of payment to all of our and the guarantors’ existing and future subordinated indebtedness and (4) structurally subordinated to all obligations of our subsidiaries that do not guarantee the outstanding notes.  On June 15, 2005, we completed an exchange offer of these senior subordinated notes for substantially identical notes registered under the Securities Act of 1933, as amended.  As of June 30, 2007, those Notes remain outstanding.

Contractual Obligations.  Our 2006 Annual Report on Form 10-K contains a table, which details our contractual cash obligations as of December 31, 2006.  A significant change to our contractual cash obligations since December 31, 2006 is an uncertain tax liability of $16.1 million as of June 30, 2007.  As described in Recent Accounting Adoptions, we adopted the provisions of FIN No. 48, Accounting for Uncertainty in Income Taxes, on January 1, 2007.  It is not possible to determine in which future period the tax liability might be paid out.

Off-Balance Sheet Arrangements.  We do not currently have any off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.  From time to time we may enter into operating leases, letters of credit, or take-or-pay obligations related to the purchase of raw materials that would not be reflected in our balance sheet.

Recent Accounting Pronouncements.  SFAS No. 157— In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, to eliminate the diversity in practice that exists due to the different definitions of fair value and the limited guidance for applying those definitions in GAAP that are dispersed among the many accounting pronouncements that require fair value measurements.  SFAS No. 157 will apply to fiscal years beginning after November 15, 2007. Management is currently evaluating the impact of SFAS No. 157 on the consolidated financial statements.

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SFAS No. 159— In February 2007, the FASB issued SFAS No. 159, Establishing the Fair Value Option for Financial Assets and Liabilities, to permit all entities to choose to elect to measure eligible financial instruments at fair value.  SFAS No. 159 applies to fiscal years beginning after November 15, 2007, with early adoption permitted for an entity that has also elected to apply the provisions of SFAS No. 157, Fair Value Measurements. An entity is prohibited from retrospectively applying SFAS No. 159, unless it chooses early adoption. Management is currently evaluating the impact of SFAS No. 159 on the consolidated financial statements.

Critical Accounting Policies and Estimates.  We have made a number of estimates and assumptions relating to the reporting of results of operations and financial position in the preparation of our financial statements in conformity with accounting principles generally accepted in the United States of America.  Actual results could differ significantly from those estimates under different assumptions and conditions.  We included in our Form 10-K for the year ended December 31, 2006 a discussion of our most critical accounting policies, which are those that have a material impact on our financial condition or operating performance and require management’s most difficult, subjective and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

Factors Affecting Future Results

In this report, we have made various statements regarding current expectations or forecasts of future events, which speak only as of the date the statements, are made.  These statements are “forward-looking statements” within the meaning of that term in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  Forward-looking statements are also made from time-to-time in press releases and in oral statements made by the officers of Accuride.  Forward-looking statements are identified by the words “estimate,” “project,” “anticipate,” “will continue,” “will likely result,” “expect,” “intend,” “believe,” “plan,” “predict” and similar expressions.  Forward looking statements also include, but are not limited to, statements regarding commercial vehicle market recovery, projections of revenue, income, loss, or working capital, capital expenditure levels, ability to mitigate rising raw material costs through increases in selling prices, plans for future operations, financing needs, the ultimate outcome and impact of any litigation against Accuride, the sufficiency of our capital resources and plans and assumptions relating to the foregoing.

Such forward-looking statements are based on assumptions and estimates, which although believed to be reasonable, may turn out to be incorrect.  Therefore, undue reliance should not be placed upon these estimates and statements.  We cannot assure that any of these statements, estimates, or beliefs will be realized and actual results may differ from those contemplated in these “forward-looking statements.”  We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise.  You are advised to consult further disclosures we may make on related subjects in our filings with the SEC.  In addition to other factors discussed in this report, some of the important factors that could cause actual results to differ materially from those discussed in the forward-looking statements include the following:

·a more severe than anticipated commercial vehicle industry downturn in 2007 may adversely effect our business;

·the loss of a major customer could have a material adverse effect on our business;

·the demands of original equipment manufacturers for price reductions may adversely affect profitability;

·our credit documents contain significant financial and operating covenants that limit the discretion of management with respect to certain business matters.  We must also meet certain financial ratios and tests as described above.  Failure to comply with the obligations contained in the debt agreements could result in an event of default, and possibly the acceleration of the related debt and the acceleration of debt under other instruments evidencing debt that may contain cross-acceleration or cross-default provisions;

·a labor strike may disrupt our supply to our customer base;

·we use a substantial amount of raw steel and aluminum and are vulnerable to industry shortages, significant price increases, and surcharges, some of which we may not be able to pass through to our customers;

·we may encounter increased competition in the future from existing competitors or new competitors;

·our significant indebtedness may have important consequences, including, but not limited to, impairment of our ability to obtain additional financing, reduction of funds available for operations and business opportunities or limitations on our ability to dispose of assets;

·significant volatility in the foreign currency markets could have an adverse effect on us;

·our ability to service our indebtedness is dependent upon operating cash flow;

·an interruption of performance of our machinery and equipment could have an adverse effect on us;

·an interruption in supply of metals could reduce our ability to obtain favorable sourcing of such raw materials;

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·we may be subject to liability under certain environmental laws and the cost of compliance with these regulations could have a material adverse effect on our financial condition and may adversely affect our ability to sell or rent such property or to borrow using such property as collateral;

·the interests of our principal stockholder may conflict with the interests of the holders of our securities; and

·our success depends largely upon the abilities and experience of certain key management personnel.  The loss of the services of one or more of these key personnel could have a negative impact on our business.

For further information, refer to the business description and additional risk factors sections included in our Form 10-K for the year ended December 31, 2006, as filed with the SEC.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

In the normal course of doing business, we are exposed to risks associated with changes in foreign exchange rates, raw material/commodity prices, and interest rates.  We use derivative instruments to manage these exposures.  The objectives for holding derivatives are to minimize the risks using the most effective methods to eliminate or reduce the impacts of these exposures.

Foreign Currency Risk

Certain forecasted transactions, assets, and liabilities are exposed to foreign currency risk.  We monitor our foreign currency exposures to maximize the overall effectiveness of our foreign currency derivatives.  The principal currency of exposure is the Canadian dollar.  Foreign exchange forward contracts and option contracts are used to offset the impact of the variability in exchange rates on our operations, cash flows, assets and liabilities.  At June 30, 2007, we had open foreign exchange forward contracts of $17.1 million.

Raw Material/Commodity Price Risk

We rely upon the supply of certain raw materials and commodities in our production processes and have entered into long-term supply contracts for our steel and aluminum requirements.  The exposures associated with these commitments are primarily managed through the terms of the sales, supply, and procurement contracts.  From time to time, we use commodity price swaps and futures contracts to manage the variability in certain commodity prices.  At June 30, 2007, we had no material commodity price swaps and futures contracts.

Interest Rate Risk

We use long-term debt as a primary source of capital in our business.  The following table presents the principal cash repayments and related weighted average interest rates by maturity date for our long-term fixed-rate debt and other types of long-term debt as of June 30, 2007:

(Dollars in thousands)	2007	2008	2009	2010	2011	Thereafter			Total			Fair Value
Long-term Debt:
Fixed	—	—	—	—	—	$	275,000		$	275,000		$	273,625
Average Rate	—	—	—	—	—	8.50		%	8.50		%
Variable	—	—	—	—	—	$	307,725		$	307,725		$	304,679
Average Rate	—	—	—	—	—	7.34		%	7.34		%

We have used interest rate swaps to alter interest rate exposure between fixed and variable rates on a portion of our long-term debt.  As of June 30, 2007, we had one interest rate swap agreement of $250.0 million outstanding that will mature in March 2008.  Under the terms of the interest rate swap agreements entered into in March 2005, we agreed with the counterparty to exchange, at specified intervals, the difference between 3.55% from March 2005 through March 2006, 4.24% from March 2006 through March 2007, and 4.43% from March 2007 through March 2008, and the variable rate interest amounts calculated by reference to the notional principal amount.

Item 4. Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.  In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by SEC Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of the Company’s management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report.  Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level.

There have been no changes in our internal controls over financial reporting during our most recent quarter that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

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PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings

Neither Accuride nor any of our subsidiaries is a party to any legal proceeding which, in the opinion of management, would have a material adverse effect on our business or financial condition.  However, we from time-to-time are involved in ordinary routine litigation incidental to our business, including actions related to product liability, contractual liability, workplace safety and environmental claims.  We establish reserves for matters in which losses are probable and can be reasonably estimated.  While we believe that we have established adequate accruals for our expected future liability with respect to our pending legal actions and proceedings, we cannot assure you that our liability with respect to any such action or proceeding would not exceed our established accruals.  Further, we cannot assure that litigation having a material adverse affect on our financial condition will not arise in the future.

On January 19, 2007, the Public Works Superintendent of the City of Portland, Tennessee issued a cease and desist order to the Company’s Imperial Group, alleging Imperial Group’s Portland, Tennessee facility was discharging wastewater into the City of Portland’s wastewater treatment system that contained nickel in excess of permit limits.  Imperial Group has fully cooperated with the City of Portland to address the alleged wastewater discharge issue.  On May 1, 2007, Imperial Group received a written demand from the City of Portland for damages and penalties totaling $0.8 million.  Imperial Group is vigorously contesting the City’s demand while engaging in settlement discussions related thereto.

Item 4.  Submission of Matters to a Vote of Security Holders

The results of the Company’s annual meeting of shareholders, held on June 14, 2007, were reported in a Form 8-K, filed with the Securities and Exchange Commission on June 19, 2007.

Item 6.  Exhibits

Exhibit No.		Description
2.1	—	Agreement and Plan of Merger, dated as of December 24, 2004, by and among Accuride Corporation, Amber Acquisition Corp., Transportation Technologies Industries, Inc., certain signing stockholders and the Company Stockholders Representatives. Previously filed as an exhibit to the Form 8-K filed on December 30, 2004 and incorporated herein by reference.
2.2	—	Stock Subscription and Redemption Agreement, dated as of November 17, 1997, among Accuride Corporation, Hubcap Acquisition L.L.C. and Phelps Dodge Corporation. Previously filed as an exhibit to the Form S-4 effective July 23, 1998 (Reg. No. 333-50239) and incorporated herein by reference.
2.3	—	Amendment to Agreement and Plan of Merger, dated as of January 28, 2005, by and among Accuride Corporation, Amber Acquisition Corp., Transportation Technologies Industries, Inc. certain signing stockholders and the Company Stockholders Representatives. Previously filed as an exhibit to the Form 8-K filed on February 4, 2005 and incorporated herein by reference.
3.1	—	Amended and Restated Certificate of Incorporation of Accuride Corporation. Previously filed as an exhibit to Amendment 4, filed on April 21, 2005, to the Form S-1 effective April 25, 2005 (Reg. No. 333-121944) and incorporated herein by reference.
3.2	—	Amended and Restated Bylaws of Accuride Corporation. Previously filed as an exhibit to Form 8-K filed on December 22, 2005 and incorporated herein by reference.
4.1	—	Specimen common stock certificate of registrant. Previously filed as an exhibit to Amendment 2, filed March 25, 2005, to Form S-1 effective April 25, 2005 (Reg. No. 333-121944) and incorporated herein by reference.
4.2	—	Indenture, dated as of January 31, 2005, by and among the Registrant, all of the Registrant’s direct and indirect Domestic Subsidiaries existing on the Issuance Date and The Bank of New York Trust Company, N.A., with respect to $275.0 million aggregate principal amount of 8 1¤2% Senior Subordinated Notes due 2015. Previously filed as an exhibit to the Form 8-K filed on February 4, 2005 and incorporated herein by reference.
4.3	—	Amended and Restated Registration Rights Agreement dated January 31, 2005 by and between the Registrant and each of the Stockholders (as defined therein). Previously filed as an exhibit to the Form 8-K filed on February 4, 2005 and incorporated herein by reference.
4.4	—	Shareholder Rights Agreement dated January 31, 2005 by and between the Registrant and the Stockholders

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		(as defined therein). Previously filed as an exhibit to the Form 8-K filed on February 4, 2005 and incorporated herein by reference.
4.5	—	Registration Rights Agreement, dated January 31, 2005, by and among Accuride Corporation, as issuer, the Guarantors named in Schedule A thereto and Lehman Brothers Inc., Citigroup Global Markets Inc. and UBS Securities LLC, as initial purchasers. Previously filed as an exhibit to Amendment 2, filed March 25, 2005, to Form S-1 effective April 25, 2005 (Reg. No. 333-121944) and incorporated herein by reference.
4.6	—	Stockholders’ Agreement, dated January 21, 1998, as amended and assigned, by and among Accuride Corporation, RSTW Partners III, L.P. (as successor to Phelps Dodge Corporation) and Hubcap Acquisition L.L.C. Previously filed as an exhibit to Amendment 2, filed March 25, 2005, to Form S-1 effective April 25, 2005 (Reg. No. 333-121944) and incorporated herein by reference.
4.7*	—	Form of Stockholders’ Agreement by and among Accuride Corporation, certain employees and Hubcap Acquisition L.L.C. Previously filed as an exhibit to the Form S-4 effective July 23, 1998 (Reg. No. 333-50239) and incorporated herein by reference.
4.8*	—	Form of Amendment to Stockholders’ Agreement by and among Accuride Corporation, certain employees and the Hubcap Acquisition L.L.C. Previously filed as an exhibit to Amendment No. 1, filed September 22, 2005 (Reg. No. 333-128327) and incorporated herein by reference.
4.9	—	Bond Guaranty Agreement dated as of March 1, 1999 by Bostrom Seating, Inc. in favor of NBD Bank as Trustee. Previously filed as an exhibit to Amendment No. 1 filed on February 23, 2005 to the Form S-1 effective April 25, 2005 (Reg. No. 333-121944) and incorporated herein by reference.
10.1*	—	Amended and Restated 2005 Incentive Award Plan. Previously filed as an exhibit to the Form 8-K filed on June 19, 2007, and incorporated herein by reference.
31.1†	—	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 13a-14 of the Exchange Act of 1934 - Terrence J. Keating.
31.2†	—	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 13a-14 of the Exchange Act of 1934 – David K. Armstrong.
32.1†	—	Certifications Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code.

†	Filed herewith
*	Management contract or compensatory agreement

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ACCURIDE CORPORATION
/s/ Terrence J. Keating	Dated:	August 9, 2007
Terrence J. Keating
Chairman and Chief Executive Officer
/s/ David K. Armstrong	Dated:	August 9, 2007
David K. Armstrong
Chief Financial Officer and General Counsel
Principal Accounting Officer

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