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HAYES LEMMERZ INTERNATIONAL INC
10-Q, 2000-12-15
MOTOR VEHICLE PARTS & ACCESSORIES

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Table of Contents

UNITED STATES

FORM 10-Q

(Mark One)

  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

For the quarterly period ended October 31, 2000

OR

  TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)

For the transition period from                   to                   

Commission file number: 1-11592

HAYES LEMMERZ INTERNATIONAL, INC.

DELAWARE		13-3384636
(State or Other Jurisdiction of		(IRS Employer
Incorporation or Organization)		Identification No.)

15300 CENTENNIAL DRIVE

Registrant’s telephone number, including area code: (734) 737-5000

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

     The number of shares of common stock outstanding as of December 15, 2000, was 28,455,495 shares.

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QUARTERLY REPORT ON FORM 10-Q
Consolidated Statements Of Operations
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
PART II. OTHER INFORMATION
SIGNATURES
EXHIBIT INDEX
Amended & Restated Credit Agreement
Severance Agreement
Financial Data Schedule

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HAYES LEMMERZ INTERNATIONAL, INC.

TABLE OF CONTENTS

					Page
PART I. FINANCIAL INFORMATION
	Item 1.		Financial Statements
			Consolidated Statements of Operations			3
			Consolidated Balance Sheets			4
			Consolidated Statements of Cash Flows			5
			Notes to Consolidated Financial Statements			6
	Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			14
	Item 3.		Quantitative and Qualitative Disclosures about Market Risk			17
PART II. OTHER INFORMATION
	Item 1.		Legal Proceedings			18
	Item 2.		Changes in Securities and Use of Proceeds			18
	Item 3.		Defaults upon Senior Securities			18
	Item 4.		Submission of Matters to a Vote of Security Holders			18
	Item 5.		Other Information			18
	Item 6.		Exhibits and Reports on Form 8-K			18
SIGNATURES						19

      UNLESS OTHERWISE INDICATED, REFERENCES TO THE “COMPANY” MEAN HAYES LEMMERZ INTERNATIONAL, INC., AND ITS SUBSIDIARIES AND REFERENCE TO A FISCAL YEAR MEANS THE COMPANY’S YEAR ENDED JANUARY 31 OF THE FOLLOWING YEAR (E.G., FISCAL 2000 MEANS THE PERIOD BEGINNING FEBRUARY 1, 2000, AND ENDING JANUARY 31, 2001). THIS REPORT CONTAINS FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 WITH RESPECT TO THE FINANCIAL CONDITION, RESULTS OF OPERATIONS, AND BUSINESS OF THE COMPANY. THESE FORWARD LOOKING STATEMENTS INVOLVE CERTAIN RISKS AND UNCERTAINTIES. NO ASSURANCE CAN BE GIVEN THAT ANY OF SUCH MATTERS WILL BE REALIZED. FACTORS THAT MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD LOOKING STATEMENTS INCLUDE, AMONG OTHERS, THE FOLLOWING POSSIBILITIES: (1) COMPETITIVE PRESSURE IN THE COMPANY’S INDUSTRY INCREASES SIGNIFICANTLY; (2) GENERAL ECONOMIC CONDITIONS ARE LESS FAVORABLE THAN EXPECTED; (3) THE COMPANY’S DEPENDENCE ON THE AUTOMOTIVE INDUSTRY (WHICH HAS HISTORICALLY BEEN CYCLICAL); (4) CHANGES IN THE FINANCIAL MARKETS AFFECTING THE COMPANY’S FINANCIAL STRUCTURE AND THE COMPANY’S COST OF CAPITAL AND BORROWED MONEY; AND (5) THE UNCERTAINTIES INHERENT IN INTERNATIONAL OPERATIONS AND FOREIGN CURRENCY FLUCTUATIONS. THE COMPANY HAS NO DUTY UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 TO UPDATE THE FORWARD LOOKING STATEMENTS IN THIS QUARTERLY REPORT ON FORM 10-Q AND THE COMPANY DOES NOT INTEND TO PROVIDE SUCH UPDATES.

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Table of Contents

Item 1.  Financial Statements

HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES

			Three Months Ended								Nine Months Ended
			October 31,								October 31,
			2000				1999				2000				1999
Net sales			$	558.3			$	598.5			$	1,695.9			$	1,730.8
Cost of goods sold				485.1				493.1				1,436.4				1,425.2
	Gross profit			73.2				105.4				259.5				305.6
Marketing, general and administration				28.3				21.8				76.8				70.7
Engineering and product development				3.6				4.4				13.0				15.6
Amortization of intangibles				7.0				8.2				21.3				22.0
Other (income) expense				73.6				(2.0	)			68.7				(6.8	)
Equity in earnings of unconsolidated subsidiaries				(0.2	)			(0.3	)			(0.7	)			(0.6	)
	Earnings (loss) from operations			(39.1	)			73.3				80.4				204.7
Interest expense, net				41.6				37.5				120.4				115.5
	Earnings (loss) before taxes on income and minority interest			(80.7	)			35.8				(40.0	)			89.2
Income tax (benefit) provision				(33.9	)			15.5				(16.8	)			38.4
	Earnings (loss) before minority interest			(46.8	)			20.3				(23.2	)			50.8
Minority interest				0.7				0.4				2.1				1.3
	Net income (loss)		$	(47.5	)		$	19.9			$	(25.3	)		$	49.5
Per share information:
Basic net income (loss) per share			$	(1.63	)		$	0.66			$	(0.85	)		$	1.63
Basic average shares outstanding (in thousands)				29,189				30,337				29,965				30,333
Diluted net income (loss) per share			$	(1.62	)		$	0.63			$	(0.84	)		$	1.55
Diluted average shares outstanding (in thousands)				29,237				31,678				30,089				31,880

See accompanying notes to consolidated financial statements.

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Table of Contents

HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES

				October 31,				January 31,
				2000				2000
				(Unaudited)
Assets
Current assets:
	Cash and cash equivalents			$	23.6			$	25.9
	Receivables (less allowance of $8.0 million at October  31, 2000 and $6.3 million at January 31, 2000)				240.5				188.7
	Inventory				201.2				175.6
	Prepaid expenses and other				16.9				9.4
		Total current assets			482.2				399.6
Property, plant and equipment, net					1,108.6				1,178.4
Goodwill and other assets					1,183.1				1,198.8
		Total assets		$	2,773.9			$	2,776.8
Liabilities and Stockholders’ Equity
Current liabilities:
	Bank borrowings			$	85.4			$	73.6
	Current portion of long-term debt				72.5				69.6
	Accounts payable and accrued liabilities				446.6				583.9
		Total current liabilities			604.5				727.1
Long-term debt					1,600.9				1,384.6
Pension and other long-term liabilities					290.3				316.3
Deferred income taxes					94.4				115.6
Minority interest					10.1				14.3
		Total liabilities			2,600.2				2,557.9
Commitments and Contingencies
Stockholders’ equity:
	Preferred stock, 25,000,000 shares authorized, none issued or outstanding				—				—
	Common stock, par value $0.01 per share:
		Voting — authorized 99,000,000 shares; issued and outstanding, 25,806,469 at October 31, 2000 and 27,705,019 at January 31, 2000			0.3				0.3
		Nonvoting — authorized 5,000,000 shares; issued and outstanding, 2,649,026 at October 31, 2000 and January 31, 2000			—				—
	Additional paid in capital				237.1				237.1
	Retained earnings				32.7				58.0
	Common Stock in treasury at cost, 1,901,450 shares				(26.3	)			—
	Accumulated other comprehensive loss				(70.1	)			(76.5	)
		Total stockholders’ equity			173.7				218.9
		Total liabilities and stockholders’ equity		$	2,773.9			$	2,776.8

	See accompanying notes to consolidated financial statements.

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HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES

					Nine Months Ended
					October 31,
					2000				1999
Cash flows from operating activities:
Net income (loss)					$	(25.3	)		$	49.5
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
	Depreciation and tooling amortization					90.8				79.8
	Amortization of intangibles					21.3				22.0
	Amortization of deferred financing fees					4.8				4.9
	Decrease in deferred taxes					(14.4	)			(2.0	)
	Increase in minority interest					3.9				1.3
	Impairment of long-lived assets and restructuring charges					75.6				—
	Equity in earnings of subsidiaries					(0.7	)			(0.6	)
	Gain on disposal of assets/business					—				(8.0	)
	Changes in operating assets and liabilities that increase (decrease) cash flows:
		Receivables				(49.9	)			(112.8	)
		Inventories				(31.1	)			(0.6	)
		Prepaid expenses and other				(7.9	)			3.2
		Accounts payable and accrued liabilities				(116.1	)			6.1
		Other long-term liabilities				(9.5	)			(6.2	)
		Cash provided by (used for) operating activities				(58.5	)			36.6
Cash flows from investing activities:
	Acquisition of property, plant and equipment					(123.8	)			(136.1	)
	Tooling expenditures					(1.9	)			(9.2	)
	Purchase of businesses, net of cash received					(6.4	)			(630.1	)
	Increased investment in majority-owned subsidiary					(7.3	)			—
	Proceeds from disposal of assets/business					—				40.0
	Other, net					(15.6	)			(13.6	)
			Cash used for investing activities			(155.0	)			(749.0	)
Cash flows from financing activities:
	Increase in bank borrowings and revolver					250.7				630.3
	Proceeds (payments) from accounts receivable securitization					(17.2	)			99.4
	Purchase of treasury stock					(26.3	)			—
	Stock options exercised					—				0.2
	Fees paid to issue long term debt					—				(15.2	)
			Cash provided by financing activities			207.2				714.7
Effect of exchange rate changes on cash and cash equivalents						4.0				(3.0	)
	Decrease in cash and cash equivalents					(2.3	)			(0.7	)
Cash and cash equivalents at beginning of year						25.9				51.3
Cash and cash equivalents at end of period					$	23.6			$	50.6
Supplemental data:
	Cash paid for interest				$	110.5			$	83.9
	Cash paid for income taxes				$	10.9			$	12.5

See accompanying notes to consolidated financial statements.

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HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(1)  Basis of Presentation

      The accompanying consolidated financial statements have been prepared by management and in the opinion of management, contain all adjustments, consisting of normal recurring adjustments, necessary to present fairly the financial position of the Company as of October 31, 2000, and January 31, 2000, and the results of its operations for the three and nine months ended October 31, 2000, and 1999 and cash flows for the nine months ended October 31, 2000, and 1999. The consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2000. Results for interim periods are not necessarily indicative of those to be expected for the year.

(2)  Summary of New Accounting Pronouncements

      In June 1998, June 1999 and June 2000, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities”, SFAS 137, “Accounting for Derivative Instruments and Hedging Activities-Deferral of the Effective Date of FASB Statement No. 133” and SFAS 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities an amendment of FASB Statement No. 133”. These Statements establish accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. These Statements require that changes in the derivative’s fair value be recognized currently in earnings unless specific hedge accounting criteria are met.

      Special accounting for qualifying hedges allows a derivative’s gains and losses to offset related results on the hedged item in the income statement, and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. This accounting is effective for fiscal years beginning after June 15, 2000. The Company will adopt this standard in its fiscal year 2001 and does not, at this time, anticipate a material impact on the Company’s financial position or results of operations when adopted.

(3)  Inventories

      The major classes of inventory are as follows:

			October 31,				January 31,
			2000				2000
Raw Materials			$	68.4			$	62.3
Work-in-process				60.4				55.9
Finished goods				72.4				57.4
	Total		$	201.2			$	175.6

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Notes to Consolidated Financial Statements — (Continued)

(4)  Property, plant and equipment

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

			October 31,				January 31,
			2000				2000
Land			$	29.8			$	30.1
Buildings				260.3				265.5
Machinery and equipment				1,117.6				1,151.6
				1,407.7				1,447.2
Accumulated depreciation				(299.1	)			(268.8	)
	Net property, plant and equipment		$	1,108.6			$	1,178.4

(5)  Earnings per share

      SFAS No. 128, “Earnings per Share” (“EPS”), requires two calculations of earnings per share to be disclosed, basic EPS and diluted EPS. Basic EPS is computed using only the weighted average shares outstanding, while diluted EPS is computed considering the dilutive effect of options and warrants.

      Shares outstanding for the three and nine months ended October 31, 2000 and 1999, were as follows:

			Three Months								Nine Months
			Ended								Ended
			2000				1999				2000				1999
Basic weighted average shares outstanding				29,189				30,337				29,965				30,333
Dilutive effect of options and warrants				48				1,341				124				1,547
	Diluted weighted average shares outstanding			29,237				31,678				30,089				31,880

(6)  Comprehensive Income (Loss)

      SFAS No. 130, “Reporting Comprehensive Income,” establishes standards for the reporting and display of comprehensive income. Comprehensive income is defined as all changes in a Company’s net assets except changes resulting from transactions with shareholders. It differs from net income in that certain items currently recorded to equity would be a part of comprehensive income.

      The components of comprehensive income (loss) for the nine months ended October 31, 2000 and 1999 are as follows:

			Oct. 31,				Oct. 31,
			2000				1999
Net Income (loss)			$	(25.3	)		$	49.5
Cumulative translation adjustments				6.4				(48.6	)
	Total comprehensive income (loss)		$	(18.9	)		$	0.9

(7)  Commitments and Contingencies

      The Company is party to various litigation. Management believes that the outcome of these lawsuits will not have a material adverse effect on the consolidated operations or financial condition of the Company.

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Notes to Consolidated Financial Statements — (Continued)

(8)  Segment Reporting

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

      The following table represents revenues and other financial information by business segment for the nine months ended October 31:

			Revenue								Net Income (Loss)								Total Assets
			2000				1999				2000				1999				2000				1999
Automotive Wheels			$	1,057.5			$	1,012.6			$	9.8			$	32.9			$	1,445.2			$	1,553.9
Cast Components				505.1				539.4				(1.0	)			11.2				966.4				950.3
Other				133.3				178.8				(34.1	)			5.4				362.3				327.8
	Total		$	1,695.9			$	1,730.8			$	(25.3	)		$	49.5			$	2,773.9			$	2,832.0

(9)  Reclassifications

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

(10)  Guarantor and Nonguarantor Financial Statements

      The Company’s senior subordinated notes are guaranteed by certain of the Company’s domestic subsidiaries. Certain other domestic subsidiaries and the foreign subsidiaries (the “Non-Guarantor Subsidiaries”) do not guarantee the senior subordinated notes.

      The following condensed consolidating financial information presents:

	(1)  Condensed consolidating financial statements as of October 31, 2000, and January 31, 2000, and for the nine-month periods ended October 31, 2000, and 1999, of (a) Hayes Lemmerz International, Inc., the parent, (b) the guarantor subsidiaries, (c) the nonguarantor subsidiaries and (d) the Company on a consolidated basis, and
	(2)  Elimination entries necessary to consolidate Hayes Lemmerz International, Inc., the parent, with the guarantor and nonguarantor subsidiaries.

      Investments in foreign subsidiaries are accounted for by the parent on the equity method (domestic subsidiaries are accounted for by the parent on the cost method) for purposes of the consolidating presentation. The principal elimination entries eliminate investments in subsidiaries and intercompany balances and transactions.

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Notes to Consolidated Financial Statements — (Continued)

Condensed Consolidating Statements of Operations

								Guarantor				Nonguarantor								Consolidated
				Parent				Subsidiaries				Subsidiaries				Eliminations				Total
Net sales				$	248.4			$	515.8			$	948.4			$	(16.7	)		$	1,695.9
Cost of goods sold					205.0				455.0				793.1				(16.7	)			1,436.4
	Gross profit				43.4				60.8				155.3				—				259.5
Marketing, general and Administration					8.9				18.9				49.0				—				76.8
Engineering and product development					1.2				5.8				6.0				—				13.0
Amortization of intangibles					0.8				6.1				14.4				—				21.3
Equity in earnings of unconsolidated subsidiaries					(0.4	)			(0.3	)			—				—				(0.7	)
Other income (expense), net					2.0				57.2				9.5				—				68.7
	Earnings (loss) from operations				30.9				(26.9	)			76.4				—				80.4
Interest expense, net					21.8				42.6				56.0				—				120.4
Earnings (loss) before taxes on income, and minority interest					9.1				(69.5	)			20.4				—				(40.0	)
Income tax (benefit) provision					(0.1	)			(25.1	)			8.4				—				(16.8	)
		Earnings (loss) before minority interest			9.2				(44.4	)			12.0				—				(23.2	)
Minority interest					—				—				2.1				—				2.1
Net income (loss)				$	9.2			$	(44.4	)		$	9.9			$	—			$	(25.3	)

Condensed Consolidating Statements of Operations

								Guarantor				Nonguarantor								Consolidated
				Parent				Subsidiaries				Subsidiaries				Eliminations				Total
Net sales				$	261.6			$	555.1			$	916.5			$	(2.4	)		$	1,730.8
Cost of goods sold					220.4				465.5				741.7				(2.4	)			1,425.2
	Gross profit				41.2				89.6				174.8				—				305.6
Marketing, general and Administration					4.0				17.5				49.2				—				70.7
Engineering and product development					3.3				5.0				7.3				—				15.6
Amortization of intangibles					1.1				6.1				14.8				—				22.0
Equity in earnings of unconsolidated subsidiaries					(0.3	)			—				(0.3	)			—				(0.6	)
Other income, net					(3.6	)			(1.6	)			(1.6	)			—				(6.8	)
	Earnings from operations				36.7				62.6				105.4				—				204.7
Interest expense, net					20.8				41.9				52.8				—				115.5
	Earnings before taxes on income, and minority interest				15.9				20.7				52.6				—				89.2
Income tax provision					8.3				9.7				20.4				—				38.4
		Earnings before minority interest			7.6				11.0				32.2				—				50.8
Minority interest					—				0.2				1.1				—				1.3
Net income				$	7.6			$	10.8			$	31.1			$	—			$	49.5

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Notes to Consolidated Financial Statements — (Continued)

Condensed Consolidating Balance Sheet

							Guarantor				Nonguarantor								Consolidated
			Parent				Subsidiaries				Subsidiaries				Eliminations				Total
Cash and cash equivalents			$	7.0			$	0.2			$	16.4			$	—			$	23.6
Receivables				49.8				7.8				182.9				—				240.5
Inventories				33.9				51.9				115.4				—				201.2
Prepaid expenses and other				2.9				7.4				17.3				(10.7	)			16.9
	Total current assets			93.6				67.3				332.0				(10.7	)			482.2
Net property, plant and equipment				155.9				279.9				672.8				—				1,108.6
Goodwill and other assets				1,498.0				301.9				652.7				(1,269.5	)			1,183.1
	Total assets		$	1,747.5			$	649.1			$	1,657.5			$	(1,280.2	)		$	2,773.9
Bank borrowings			$	0.0			$	—			$	85.4			$	—			$	85.4
Current portion of long-term debt				59.3				—				13.2				—				72.5
Accounts payable and accrued liabilities				97.6				73.1				280.5				(4.6	)			446.6
	Total current liabilities			156.9				73.1				379.1				(4.6	)			604.5
Long-term debt, net of current portion				1,504.5				—				96.4				—				1,600.9
Deferred income taxes				18.4				8.2				67.8				—				94.4
Pension and other long-term liabilities				76.8				51.8				161.7				—				290.3
Minority interest				—				—				10.1				—				10.1
Parent loans				(241.9	)			327.0				(75.6	)			(9.5	)			—
	Total liabilities			1,514.7				460.1				639.5				(14.1	)			2,600.2
Common stock				0.3				—				—				—				0.3
Additional paid-in capital				251.9				108.7				1,012.6				(1,136.1	)			237.1
Retained earnings (accumulated deficit)				(51.8	)			80.3				134.2				(130.0	)			32.7
Common stock in treasury				(26.3	)			—				—				—				(26.3	)
Accumulated other comprehensive income (loss)				58.7				—				(128.8	)			—				(70.1	)
	Total stockholders’ equity			232.8				189.0				1,018.0				(1,266.1	)			173.7
	Total liabilities and stockholder’s equity		$	1,747.5			$	649.1			$	1,657.5			$	(1,280.2	)		$	2,773.9

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Notes to Consolidated Financial Statements — (Continued)

Condensed Consolidating Balance Sheet

							Guarantor				Nonguarantor								Consolidated
			Parent				Subsidiaries				Subsidiaries				Eliminations				Total
Cash and cash equivalents			$	6.8			$	0.1			$	19.0			$	—			$	25.9
Receivables				34.1				4.2				150.4				—				188.7
Inventories				38.0				46.1				91.5				—				175.6
Prepaid expenses and other				0.9				4.0				21.9				(17.4	)			9.4
	Total current assets			79.8				54.4				282.8				(17.4	)			399.6
Net property, plant and equipment				158.3				339.1				681.0				—				1,178.4
Goodwill and other assets				1,464.0				304.8				694.3				(1,264.3	)			1,198.8
	Total assets		$	1,702.1			$	698.3			$	1,658.1			$	(1,281.7	)		$	2,776.8
Bank borrowings			$	—			$	—			$	73.6			$	—			$	73.6
Current portion of long-term debt				57.9				—				11.7				—				69.6
Accounts payable and accrued liabilities				126.9				154.1				326.1				(23.2	)			583.9
	Total current liabilities			184.8				154.1				411.4				(23.2	)			727.1
Long-term debt, net of current portion				1,289.2				—				95.4				—				1,384.6
Deferred income taxes				18.5				28.5				68.6				—				115.6
Pension and other long-term liabilities				80.3				57.1				181.4				(2.5	)			316.3
Minority interest				—				—				14.3				—				14.3
Parent loans				(61.9	)			225.2				(166.7	)			3.4				—
	Total liabilities			1,510.9				464.9				604.4				(22.3	)			2,557.9
Common stock				0.3				—				—				—				0.3
Additional paid-in capital				251.9				108.7				1,005.9				(1,129.4	)			237.1
Retained earnings (accumulated deficit)				(61.1	)			124.7				124.4				(130.0	)			58.0
Accumulated other comprehensive Income (loss)				0.1				—				(76.6	)			—				(76.5	)
	Total stockholders’ equity			191.2				233.4				1,053.7				(1,259.4	)			218.9
	Total liabilities and stockholder’s equity		$	1,702.1			$	698.3			$	1,658.1			$	(1,281.7	)		$	2,776.8

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Notes to Consolidated Financial Statements — (Continued)

Condensed Consolidating Statement of Cash Flows

								Guarantor				Nonguarantor								Consolidated
				Parent				Subsidiaries				Subsidiaries				Eliminations				Total
Cash flows provided by (used in) operating activities				$	(0.9	)		$	(75.0	)		$	17.4			$	—			$	(58.5	)
Cash flows from investing activities:
	Acquisition of property, plant and equipment				(8.5	)			(18.3	)			(97.0	)			—				(123.8	)
	Acquisition of tooling				—				—				(1.9	)			—				(1.9	)
	Purchase of businesses, net of cash				—				—				(6.4	)			—				(6.4	)
	Increased investment in majority-owned subsidiary				—				—				(7.3	)			—				(7.3	)
	Other, net				29.5				(8.5	)			(36.6	)			—				(15.6	)
		Cash provided by (used in) investing activities			21.0				(26.8	)			(149.2	)			—				(155.0	)
Cash flows from financing activities:
	Net change in bank borrowings and revolver				216.7				—				34.0				—				250.7
	Proceeds (payments) from accounts receivable securitization				(17.2	)			—				—				—				(17.2	)
	Purchase of treasury stock				(26.3	)			—				—				—				(26.3	)
		Cash provided by financing activities			173.2				—				34.0				—				207.2
Increase (decrease) in parent loans and advances					(193.1	)			101.9				91.2				—				—
Effect of exchange rates of cash and cash equivalents					—				—				4.0				—				4.0
		Net increase (decrease) in cash and cash equivalents			0.2				0.1				(2.6	)			—				(2.3	)
Cash and cash equivalents at beginning of period					6.8				0.1				19.0				—				25.9
Cash and cash equivalents at end of period				$	7.0			$	0.2			$	16.4			$	—			$	23.6

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Notes to Consolidated Financial Statements — (Continued)

Condensed Consolidating Statements of Cash Flows

								Guarantor				Nonguarantor								Consolidated
				Parent				Subsidiaries				Subsidiaries				Eliminations				Total
Cash flows provided by (used in) operating activities				$	(80.2	)		$	(29.1	)		$	145.9			$	—			$	36.6
Cash flows from investing activities:
	Acquisition of property, plant and equipment				(24.1	)			(36.8	)			(75.2	)			—				(136.1	)
	Acquisition of tooling				(9.2	)			—				—				—				(9.2	)
	Purchase of businesses, net of cash				(615.0	)			(0.5	)			(14.6	)			—				(630.1	)
	Proceeds from disposal of assets/business				—				2.6				37.4				—				40.0
	Other, net				21.3				(9.8	)			(25.1	)			—				(13.6	)
		Cash used in investing activities			(627.0	)			(44.5	)			(77.5	)			—				(749.0	)
Cash flows from financing activities:
	Net change in bank borrowings and revolver				570.1				—				60.2				—				630.3
	Fees paid to issue long term debt				(15.2	)			—				—				—				(15.2	)
	Stock options exercised				0.2				—				—				—				0.2
	Net proceeds from accounts receivable securitization				99.4				—				—				—				99.4
		Cash provided by financing activities			654.5				—				60.2				—				714.7
Increase (decrease) in parent loans and advances					56.1				73.6				(129.7	)			—				—
Effect of exchange rates of cash and cash equivalents					—				—				(3.0	)			—				(3.0	)
		Net increase (decrease) in cash and cash equivalents			3.4				—				(4.1	)			—				(0.7	)
Cash and cash equivalents at beginning of period					23.3				0.1				27.9				—				51.3
Cash and cash equivalents at end of period				$	26.7			$	0.1			$	23.8			$	—			$	50.6

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

Results of Operations

Three Months Ended October 31, 2000 Compared to Three Months Ended October 31, 1999

Net Sales

      The Company’s net sales for the third quarter of fiscal 2000 were $558.3 million, a decrease of 6.7% as compared to net sales of $598.5 million for the third quarter of fiscal 1999. Significant reductions in heavy truck production and softening in OEM light vehicle volumes in the United States have resulted in lower sales in the North American Commercial Highway, North American Cast Components and North American Wheel Groups. Increased sales in the European Wheel Groups were offset by the Euro weakening against the Dollar in the third quarter of fiscal 2000 as compared to the third quarter of fiscal 1999.

Gross Profit

      The Company’s gross profit for the third quarter of fiscal 2000 decreased to $73.2 million or 13.1% of net sales as compared to $105.4 million or 17.6% of net sales for the third quarter of fiscal 1999. The Company’s third quarter gross profit margin was negatively impacted by the reduction in the North American heavy truck and OEM sales and production inefficiencies related to the volatile heavy truck and OEM production environment. In addition, gross margin was negatively impacted by the write off of $5.0 million in excess and obsolete inventories pursuant to capacity reductions and softening market conditions.

Marketing, General and Administrative

      Marketing, general and administrative expenses were $28.3 million or 5.1% of net sales for the third quarter of fiscal 2000 as compared to $21.8 million or 3.6% of net sales for the third quarter of fiscal 1999. Marketing, general and administrative expenses for the third quarter of fiscal 2000 were negatively impacted by the write off of $7.2 million principally associated with cancelled transactions, and an increase in the allowance for doubtful accounts and severance costs due to market conditions.

Engineering and Product Development

      Engineering and product development costs were $3.6 million or 0.6% of net sales for the third quarter of fiscal 2000 as compared to $4.4 million or 0.7% of net sales for the third quarter of fiscal 1999. This improvement principally reflects the timing associated with recovery of engineering and development costs from our customers.

Other (Income) Expense

      Pursuant to its acquisition strategy in prior periods, the Company has been in the process of integrating operations as well as evaluating capacity, technology and personnel needs. In response to continued softening in the heavy truck and light vehicle markets, the Company accelerated this process and approved restructuring plans in the third quarter of fiscal 2000. In addition to the items discussed in Gross Profit and Marketing, General and Administrative categories above, impairment and restructuring charges totaling $75.6 million were recorded in the third quarter of fiscal 2000.

      Of the $75.6 million, $63.8 million was attributable to impairment of long-lived assets, principally excess and obsolete machinery and equipment which the Company intends to dispose of in the near future. Impairment was measured based on the estimated net proceeds from the disposal of such equipment.

      Restructuring charges consist of $6.7 million for severance benefits and $0.9 million for future lease costs of closed office facilities. These costs are all related primarily to 387 administrative and operations employees impacted by restructuring programs in Europe. There were no payments made in the third quarter of fiscal 2000.

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      In addition, Other (Income) Expense includes $4.2 million for the write down of the Company’s investment in a joint venture in Venezuela and certain contractual agreements that have no future value.

Interest Expense

      Interest expense was $41.6 million for the third quarter of fiscal 2000 compared to $37.5 million for the same period of fiscal 1999. This increase was due primarily to the increase in interest rates and borrowings.

Nine Months Ended October 31, 2000 Compared to Nine Months Ended October 31, 1999

Net Sales

      The Company’s net sales for the first nine months of fiscal 2000 were $1,695.9 million, a decrease of 2.0%, as compared to net sales of $1,730.8 million for the first nine months of fiscal 1999. This decrease was due to higher sales in the North American and European Wheel Groups offset by lower sales in the North American Commercial Highway and North American Components Groups due to softening marketing conditions and the weakening of the Euro against the Dollar by approximately 12%.

Gross Profit

      The Company’s gross profit for the first nine months of fiscal 2000 decreased to $259.5 million or 15.3% of net sales as compared to $305.6 million or 17.7% of net sales for the first nine months of fiscal 1999. This decrease reflects the reduction in the North American heavy truck and OEM sales and production inefficiencies related to the volatile heavy truck and OEM production environment. In addition, gross margin was negatively impacted by the write off of $5.0 million in excess and obsolete inventories in the third quarter of fiscal 2000 pursuant to capacity reductions and softening market conditions.

Marketing, General and Administrative

      Marketing, general and administrative expenses were $76.8 million or 4.5% of net sales for the first nine months of fiscal 2000 compared to $70.7 million or 4.1% of net sales for the same period of fiscal 1999. The increase in marketing, general and administrative expenses was attributable to $7.2 million in write offs in the third quarter of fiscal 2000 principally related to cancelled transactions, and an increase in the allowance for doubtful accounts and severance costs due to market conditions.

Engineering and Product Development

      Engineering and product development costs were $13.0 million or 0.8% of net sales for the first nine months of fiscal 2000 as compared to $15.6 million or 0.9% of net sales for the first nine months of fiscal 1999.

Other (Income) Expense

      Pursuant to its acquisition strategy in prior periods, the Company has been in the process of integrating operations as well as evaluating capacity, technology and personnel needs. In response to continued softening in the heavy truck and light vehicle markets, the Company accelerated this process and approved restructuring plans in the third quarter of fiscal 2000. In addition to the items discussed in Gross Profit and Marketing, General and Administrative categories above, impairment and restructuring charges totaling $75.6 million were recorded in the third quarter of fiscal 2000.

      Of the $75.6 million, $63.8 million was attributable to impairment of long-lived assets, principally excess and obsolete machinery and equipment which the Company intends to dispose of in the near future. Impairment was measured based on the estimated net proceeds from the disposal of such equipment.

      Restructuring charges consist of $6.7 million for severance benefits and $0.9 million for future lease costs of closed office facilities. These costs are all related primarily to 387 administrative and operations employees impacted by restructuring programs in Europe. There were no payments made in the third quarter of fiscal 2000.

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      In addition, Other (Income) Expense includes $4.2 million for the write down of the Company’s investment in a joint venture in Venezuela and certain contractual agreements that have no future value.

Interest Expense

      Interest expense was $120.4 million for the first nine months of fiscal 2000 compared to $115.5 million for the same period of fiscal 1999. This increase was due primarily to the increase in interest rates and borrowings.

Financial Condition, Liquidity and Capital Resources

      The Company’s operations used $58.5 million in cash in the first nine months of fiscal 2000, an increase of $95.1 million over the same period of fiscal 1999. This increase was due primarily to the timing of payments to suppliers and higher inventories.

      Capital expenditures for the first nine months of fiscal 2000 were $123.8 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 capital expenditures for fiscal 2000 will be less than $170.0 million.

      On February 3, 1999, the Company entered into a third amended and restated credit agreement (the “Third Amended and Restated Credit Agreement”) with Canadian Imperial Bank of Commerce (“CIBC”) and Merrill Lynch Capital Corporation (“Merrill Lynch”), as managing agents. Pursuant to the Third Amended and Restated 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. Such term loan and revolving facilities are guaranteed by the Company and all of its existing and future material domestic subsidiaries. Such term loan and revolving facilities are secured by a first priority lien on substantially all of the properties and assets of the Company and its material domestic subsidiaries, now owned or later 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 October 31, 2000 there was $399 million outstanding under the term loan facility and $386 million available under the revolving facility.

      On December 8, 2000, the Company reached agreement with its senior lenders to amend the Third Amended and Restated Credit Agreement. Pursuant to such agreement, financial covenants regarding the leverage ratio, the interest coverage ratio and the fixed charge coverage ratio were modified and a ratio of senior indebtedness to earnings before interest, taxes, depreciation and amortization was added. In addition, an annual limit on capital expenditures was added, the stock repurchase authority was deleted and a cumulative limit on acquisitions was deleted. The text of the amendment agreement is filed as an exhibit to this Form 10-Q and is incorporated herein by reference.

      In April 1998, the Company entered into a three year agreement pursuant to which the Company and certain of its subsidiaries sold, and will continue 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 will transfer substantially all of their U.S. dollar denominated trade accounts receivable to Funding Co. Funding Co. then sold and will sell such trade accounts receivable to an independent issuer of receivable-backed commercial paper. The Company has collection and administrative responsibilities with respect to all the receivables which are sold. Receivables sold at October 31, 2000 total $145.8 million.

      During the second quarter, the Board of Directors approved the repurchase of up to an aggregate of $30 million of the Company’s outstanding common stock. Through October 31, 2000, the Company repurchased approximately 1.9 million shares of its common stock for an aggregate purchase price of approximately $26.3 million.

      At October 31, 2000, management believes that the Company was in compliance with the various covenants under the agreements pursuant to which it has or may borrow money. Management expects that the Company will remain in compliance with these covenants, as modified by the December 8, 2000 amendment

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Item 3.  Quantitative and Qualitative Disclosures about Market Risk

      For the period ended October 31, 2000, the Company did not experience any material change in market risk exposures affecting the quantitative and qualitative disclosures as presented in the Company’s Annual Report on Form 10-K for the year ended January 31, 2000.

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Item 1.  Legal Proceedings

      None

Item 2.  Changes in Securities and Use of Proceeds

      None

Item 3.  Defaults Upon Senior Securities

      None

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

      The Company held its Annual Meeting of Stockholders on August 3, 2000. The results of the matters submitted to a vote of the Company’s stockholders at the Annual Meeting were reported in the Company’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2000 and are incorporated herein by reference.

Item 5.  Other Information

      None

Item 6. Exhibits and Reports on Form 8-K

      (a)  Exhibits

Exhibit Number				Description
	10.30			Amendment No. 2 to the Third Amended and Restated Credit Agreement dated as of December 8, 2000, 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.
	10.31			Severance Agreements, each dated June 15, 2000, between the Company and certain of its officers.
	27			Financial Data Schedule

      (b)  Reports on Form 8-K

	None

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

	HAYES LEMMERZ INTERNATIONAL, INC.

	By:	/s/ WILLIAM D. SHOVERS

	William D. Shovers
	Vice President — Finance; Chief Financial Officer

December 15, 2000

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						Sequentially
Exhibit						Numbered
Number				Description		Page
	10.30			Amendment No. 2 to the Third Amended and Restated Credit Agreement dated as of December 8, 2000, 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.
	10.31			Severance Agreements, each dated June 15, 2000, between the Company and certain of its officers.
	27			Financial Data Schedule

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