10-Q 1 acw14-110q1.htm FORM 10-Q acw14-110q1.htm






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 March 31, 2014.

OR
 
[  ] 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 ý  No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes ý  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer o
 
         Accelerated Filer ý
 
Non-Accelerated Filero
 
Smaller Reporting Company 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 ý

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.  Yes ý No o

As of April 26, 2014, 47,702,504 shares of Accuride Corporation common stock, par value $.01 per share, were outstanding
 
 

 

ACCURIDE CORPORATION






 
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Item 1.  Financial Statements

ACCURIDE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
             
   
March 31,
   
December 31,
 
(In thousands, except for share and per share data)
 
2014
   
2013
 
ASSETS
           
CURRENT ASSETS:
           
Cash and cash equivalents
  $ 21,640     $ 33,426  
Customer receivables, net of allowance for doubtful accounts of $365 and $431 in 2014 and 2013, respectively
    73,463       51,382  
Other receivables
    9,832       8,138  
Inventories
    45,309       39,329  
Deferred income taxes
    3,805       3,806  
Prepaid expenses and other current assets
    12,000       11,894  
Assets held for sale
          1,293  
Total current assets
    166,049       149,268  
PROPERTY, PLANT AND EQUIPMENT, net
    218,527       219,624  
OTHER ASSETS:
               
Goodwill
    100,697       100,697  
Other intangible assets, net
    123,411       125,430  
Deferred financing costs, net of accumulated amortization of $4,006 and $3,649 in 2014 and 2013, respectively
    6,083       6,440  
Deferred income taxes
    488       503  
Other
    11,501       9,815  
TOTAL
  $ 626,756     $ 611,777  
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
CURRENT LIABILITIES:
               
Accounts payable
  $ 63,061     $ 47,527  
Accrued payroll and compensation
    10,443       8,763  
Accrued interest payable
    5,127       12,535  
Accrued workers compensation
    4,364       4,373  
Accrued and other liabilities
    16,123       16,801  
Total current liabilities
    99,118       89,999  
LONG-TERM DEBT
    340,446       330,183  
DEFERRED INCOME TAXES
    17,792       17,528  
NON-CURRENT INCOME TAXES PAYABLE
    8,367       8,367  
OTHER POSTRETIREMENT BENEFIT PLAN LIABILITY
    70,841       70,584  
PENSION BENEFIT PLAN LIABILITY
    19,637       20,687  
OTHER LIABILITIES
    11,665       12,545  
COMMITMENTS AND CONTINGENCIES (Note 7)
           
STOCKHOLDERS’ EQUITY:
               
Preferred Stock, $0.01 par value; 10,000,000 shares authorized
           
Common Stock, $0.01 par value; 80,000,000 shares authorized, 47,702,504 and 47,515,155 shares issued and outstanding at March 31, 2014 and December 31, 2013, respectively, and additional paid-in-capital
    440,725       440,479  
Accumulated other comprehensive loss
    (18,379 )     (18,712 )
Accumulated deficiency
    (363,456 )     (359,883 )
Total stockholders’ equity
    58,890       61,884  
TOTAL
  $ 626,756     $ 611,777  

See notes to unaudited condensed consolidated financial statements.

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)
   
Three Months Ended March 31,
 
(In thousands except per share data)
 
2014
   
2013
 
             
NET SALES
  $ 166,784     $ 162,987  
COST OF GOODS SOLD
    149,761       156,709  
GROSS PROFIT
    17,023       6,278  
OPERATING EXPENSES:
               
Selling, general and administrative
    10,454       11,075  
INCOME (LOSS) FROM OPERATIONS
    6,569       (4,797 )
OTHER INCOME (EXPENSE):
               
Interest expense, net
    (8,420 )     (8,694 )
Other income, net
    (530 )     145  
LOSS BEFORE INCOME TAXES FROM CONTINUING OPERATIONS
    (2,381 )     (13,346 )
INCOME TAX PROVISION
    904       1,409  
LOSS FROM CONTINUING OPERATIONS
    (3,285 )     (14,755 )
DISCONTINUED OPERATIONS, NET OF TAX
    (288 )     (1,192 )
NET LOSS
  $ (3,573 )   $ (15,947 )
Weighted average common shares outstanding-basic
    47,596       47,453  
Basic loss per share-continuing operations
    (0.07 )     (0.31 )
Basic loss per share-discontinued operations
    (0.01 )     (0.03 )
Basic loss per share
  $ (0.08 )   $ (0.34 )
Weighted average common shares outstanding-diluted
    47,596       47,453  
Diluted loss per share-continuing operations
    (0.07 )     (0.31 )
Diluted loss per share-discontinued operations
    (0.01 )     (0.03 )
Diluted loss per share
  $ (0.08 )   $ (0.34 )
OTHER COMPREHENSIVE INCOME, NET OF TAX:
               
Defined benefit plans
    333       331  
COMPREHENSIVE LOSS
  $ (3,240 )   $ (15,616 )

See notes to unaudited condensed consolidated financial statements.




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CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
(In thousands)
 
Common
Stock and
Additional
Paid-in-
Capital
   
Accumulated
Other
Comprehensive
Income (Loss)
   
Accumulated
Deficiency
   
Total
Stockholders’
Equity
 
BALANCE at January 1, 2013
  $ 438,277     $ (51,834 )   $ (321,570 )   $ 64,873  
Net loss
                (15,947 )     (15,947 )
Share-based compensation expense
    694                   694  
Tax impact of forfeited vested shares
    (103 )                 (103 )
Other comprehensive income
          331             331  
BALANCE—March 31, 2013
  $ 438,868     $ (51,503 )   $ (337,517 )   $ 49,848  

(In thousands)
 
Common
Stock and
Additional
Paid-in-
Capital
   
Accumulated
Other
Comprehensive
Income (Loss)
   
Accumulated
Deficiency
   
Total
Stockholders’
Equity
 
BALANCE—January 1, 2014
  $ 440,479     $ (18,712 )   $ (359,883 )   $ 61,884  
Net loss
                (3,573 )     (3,573 )
Share-based compensation expense
    499                   499  
Tax impact of forfeited vested shares
    (253 )                 (253 )
Other comprehensive income
          333             333  
BALANCE—March 31, 2014
  $ 440,725     $ (18,379 )   $ (363,456 )   $ 58,890  
 
 

See notes to unaudited condensed consolidated financial statements.


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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
       
   
Three Months Ended March 31,
 
(In thousands)
 
2014
   
2013
 
             
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net loss
  $ (3,573 )   $ (15,947 )
Adjustments to reconcile net loss to net cash used in operating activities:
               
Depreciation of property, plant and equipment
    8,253       9,158  
Amortization – deferred financing costs
    620       690  
Amortization – other intangible assets
    2,019       2,273  
(Gain) loss on disposal of assets
    (7 )     857  
Provision for deferred income taxes
    182       686  
Non-cash stock-based compensation
    499       694  
Changes in certain assets and liabilities:
               
Receivables
    (23,775 )     (27,082 )
Inventories
    (5,980 )     3,739  
Prepaid expenses and other assets
    (1,458 )     (5,050 )
Accounts payable
    15,151       21,608  
Accrued and other liabilities
    (8,243 )     (11,448 )
Net cash used in operating activities
    (16,312 )     (19,822 )
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Purchases of property, plant and equipment
    (6,709 )     (15,355 )
Proceeds from sale leaseback transactions
          14,944  
Proceeds from sale of assets
    1,235        
Net cash used in investing activities 
    (5,474 )     (411 )
CASH FLOWS FROM FINANCING ACTIVITIES
               
Proceeds from revolver
    10,000       25,000  
Net cash provided from financing activities
    10,000       25,000  
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    (11,786 )     4,767  
CASH AND CASH EQUIVALENTS—Beginning of period
    33,426       26,751  
CASH AND CASH EQUIVALENTS—End of period
  $ 21,640     $ 31,518  
                 
Supplemental cash flow information:
               
Cash paid for interest
  $ 15,188     $ 15,367  
Cash paid for income taxes
    706       1,097  
Non-cash transactions:
               
Purchases of property, plant and equipment in accounts payable
  $ 3,610     $ 3,730  

See notes to unaudited condensed consolidated financial statements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(AMOUNTS IN THOUSANDS, UNLESS OTHERWISE NOTED, EXCEPT SHARE AND PER SHARE DATA)

Note 1 – Basis of Presentation and 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 (“U.S. GAAP”), except that the unaudited condensed consolidated financial statements do not include all of the information and footnotes required by U.S. GAAP for complete financial statements.  However, in the opinion of Accuride Corporation (“Accuride” or the “Company”), all adjustments (consisting primarily of normal recurring accruals) considered necessary to present fairly the unaudited condensed consolidated financial statements have been included.

The results of operations for the three months ended March 31, 2014 are not necessarily indicative of the results to be expected for the year ending December 31, 2014.  The unaudited 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, 2013.

On August 1, 2013, the Company announced the sale of substantially all of the assets, liabilities and business of its Imperial Group business to Wynnchurch Capital, Ltd. in partnership with Imperial Manufacturing, Inc. for $30.0 million, plus a contingent earn-out opportunity of up to $2.25 million. The sale resulted in the recognition of a $12.0 million loss, including a $2.5 million impairment charge, on our consolidated statement of operations for the year ended December 31, 2013, which has been classified as Discontinued Operations.   See Note 2, “Discontinued Operations”, for further discussion.
 
Management’s Estimates and Assumptions The preparation of financial statements in conformity with U.S. GAAP 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 ShareBasic and diluted earnings per common share were computed as follows:
             
   
Three Months Ended March 31,
 
(In thousands except per share data)
 
2014
   
2013
 
             
Numerator:
           
     Net loss from continuing operations
  $ (3,285 )   $ (14,755 )
     Net loss from discontinued operations
    (288 )     (1,192 )
     Net loss
  $ (3,573 )   $ (15,947 )
Denominator:
               
     Weighted average shares outstanding – Basic
    47,596       47,453  
     Weighted average shares outstanding - Diluted
    47,596       47,453  
                 
Basic loss per common share:
               
     From continuing operations
  $ (0.07 )   $ (0.31 )
     From discontinued operations
    (0.01 )     (0.03 )
     Basic loss per common share
  $ (0.08 )   $ (0.34 )
                 
Diluted loss per common share
               
     From continuing operations
  $ (0.07 )   $ (0.31 )
     From discontinued operations
    (0.01 )     (0.03 )
     Diluted loss per common share
  $ (0.08 )   $ (0.34 )

As of March 31, 2014, there were options exercisable for 153,889 shares that were not included in the computation of diluted earnings per share because the effect would be anti-dilutive.  As of March 31, 2013, there were options exercisable for 194,068 shares that were not included in the computation of diluted earnings per share because the effect would be anti-dilutive.
 
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Stock-Based Compensation Compensation expense for share-based compensation programs recognized as a component of operating expenses, was $0.5 million and $0.7 million for the three months ended March 31, 2014 and March 31, 2013 respectively.
 
As of March 31, 2014, there was approximately $4.0 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 1.5 years.
 
Income Tax Under Accounting Standards Codification (“ASC”) 270, Interim Financial Reporting, we compute on a quarterly basis an estimated annual effective tax rate considering ordinary income and related income tax expense. Ordinary income refers to income (loss) before income tax expense excluding significant, unusual, or infrequently occurring items. The tax effect of an unusual or infrequently occurring item is recorded in the interim period in which it occurs. Other items included in income tax expense in the periods in which they occur include the cumulative effect of changes in tax laws or rates, foreign exchange gains and losses, adjustments to uncertain tax positions, and adjustments to our valuation allowance due to changes in judgment in the realizability of deferred tax assets in future years.
 
Our effective tax rate is (38.0)% and (10.6)% for the three months ended March 31, 2014 and 2013, respectively.  The effective tax rate for the quarter is impacted by the relative impact of discrete items and certain entities for which a full valuation allowance is recognized.
 
We have assessed the need to maintain a valuation allowance for deferred tax assets based on an assessment of whether it is more likely than not that deferred tax benefits will be realized through the generation of future taxable income. Appropriate consideration is given to all available evidence, both positive and negative, in assessing the need for a valuation allowance. Due to our recent history of U.S. operating and taxable losses, the inconsistency of these profits, and the uncertainty of our financial outlook, we continue to maintain a full valuation allowance against our domestic deferred tax assets.
 
Recent Accounting Adoptions

In February 2013, Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)  2013-04, Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation is Fixed at the Reporting Date.  The objective of the amendments in this update is to provide guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date, except for those obligations addressed within existing guidance in U.S. GAAP.  The amendment requires an entity to measure obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date as the sum of the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and an additional amount the reporting entity expects to pay on behalf of its co-obligors.  The entity is required to disclose the nature and amount of the obligation as well as other information about those obligations.  The Company adopted this ASU as of January 1, 2014.  This adoption did not have an effect on our financial statements.
 
On July 18, 2013, the FASB issued ASU 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit when a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.  Topic 740 does not include explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists.  The objective of the amendments in this update is to eliminate that diversity in practice.  The Company adopted this ASU as of January 1, 2014.  This ASU did not have an effect on our financial statements.
 
Note 2 – Discontinued Operations

On August 1, 2013, the Company announced that it completed the sale of substantially all of the assets of its Imperial Group (“Imperial”) business to Imperial Group Manufacturing, Inc., a new company formed and capitalized by Wynnchurch Capital for total cash consideration of $30.0 million at closing, plus a contingent earn-out opportunity of up to $2.25 million.    The sale resulted in recognition of a $12.0 million loss for the year ended December 31, 2013, which was reclassified as discontinued operations.
 
Pursuant to the provisions of the purchase agreement, subject to certain limited exceptions, the purchaser purchased from Imperial all equipment, inventories, accounts receivable, deposits, prepaid expenses, intellectual property, contracts, real property interests, transferable permits and other intangibles related to the business and assumed Imperial’s trade and vendor accounts payable and performance obligations under those contracts included in the purchased assets.  The real property interests acquired by the purchaser include ownership of three plants located in Decatur, Texas, Dublin, Virginia and
 
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Chehalis, Washington and a leasehold interest in a plant located in Denton, Texas.  Imperial retained ownership of its real property located in Portland, Tennessee and included a $2.5 million impairment charge for this property in the loss on sale.   The Company leased such property to the purchaser under a two-year lease, with the option to renew the lease for one additional year.  Rent under the lease is fixed at $75,000 per year.
 
The Company has reclassified certain operating results and the loss on sale transactions for Imperial Group L.P.  to discontinued operations.
 
The following table presents sales and income attributable to discontinued operations.

       
   
Three months ended March 31,
 
(In thousands)
 
2014
   
2013
 
             
Net sales
  $     $ 29,473  
                 
Income (loss) from operations
          (1,192 )
Other Income (Expense)
    (288 )      
Discontinued operations
  $ (288 )   $ (1,192 )

Note 3 - Inventories

Inventories at March 31, 2014 and December 31, 2013, on a FIFO basis, were as follows:

   
March 31, 2014
   
December 31, 2013
 
Raw materials
  $ 8,807     $ 7,483  
Work in process
    12,124       12,996  
Finished manufactured goods
    24,378       18,850  
Total inventories
  $ 45,309     $ 39,329  

Note 4 - Goodwill and Other Intangible Assets

The following represents the carrying amount of goodwill, on a reportable segment basis, as of December 31, 2013 and March 31, 2014:

   
Wheels
   
Brillion Iron Works
   
Total
 
Balance as of December 31, 2013
  $ 96,283     $ 4,414     $ 100,697  
Balance as of March 31, 2014
  $ 96,283     $ 4,414     $ 100,697  
 
The changes in the carrying amount of other intangible assets for the period December 31, 2013 to March 31, 2014, by reportable segment, are as follows:
 
   
Wheels
   
Brillion Iron Works
   
Total
 
Balance as of December 31, 2013
  $ 122,764     $ 2,666     $ 125,430  
Amortization
    (1,977 )     (42 )     (2,019 )
Balance as of March 31, 2014
  $ 120,787     $ 2,624     $ 123,411  

The changes in the carrying amount of other intangible assets for the period December 31, 2012 to March 31, 2013, by reportable segment, are as follows:

   
Wheels
   
Brillion Iron Works
   
Corporate
   
Total
 
Balance as of December 31, 2012
  $ 130,668     $ 2,833     $ 679     $ 134,180  
Amortization
    (1,975 )     (41 )     (257 )     (2,273 )
Balance as of March 31, 2013
  $ 128,693     $ 2,792     $ 422     $ 131,907  
 
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The summary of goodwill and other intangible assets is as follows:

         
As of March 31, 2014
   
As of December 31, 2013
 
   
Weighted Average Useful Lives
   
Gross Amount
   
Accumulated Amortization
   
Carrying Amount
   
Gross Amount
   
Accumulated Amortization
   
Carrying Amount
 
Goodwill
        $ 100,697     $     $ 100,697     $ 100,697     $     $ 100,697  
Other intangible assets:
                                                       
Trade names
        $ 25,200     $     $ 25,200     $ 25,200     $     $ 25,200  
Technology
    10.0       38,849       21,233       17,616       38,849       20,497       18,352  
Customer relationships
    19.9       129,093       48,498       80,595       129,093       47,215       81,878  
Other intangible assets:
          $ 194,694     $ 71,283     $ 123,411     $ 194,694     $ 69,264     $ 125,430  

We estimate that our amortization expense for our other intangible assets for 2014 through 2018 will be approximately $8.1 million for 2014, and $8.1 million for each of the years 2015 through 2018.

Note 5 – Assets Held for Sale

At December 31, 2013, assets totaling $1.3 million were classified as held for sale.  The assets consisted of a building and land related to the Elkhart, IN facility that our Gunite business exited in 2012.  The sale of these assets was completed on February 24, 2014, and the net proceeds totaled $1.2 million.

Note 6 - Pension and Other Postretirement Benefit Plans

Components of net benefit cost credited to income for the three months ended March 31:

   
Pension Benefits
   
Other Benefits
 
   
2014
   
2013
   
2014
   
2013
 
Service cost-benefits earned during the period
  $ 264     $ 286     $ 85     $ 142  
Interest cost on projected benefit obligation
    2,654       2,624       876       890  
Expected return on plan assets
    (3,155 )     (2,988 )            
Amortization of prior service (credit) cost
    11       11       (9 )      
Amortization of loss
    50       663       77       26  
Total benefits cost (credited) charged to income
  $ (176 )   $ 596     $ 1,029     $ 1,058  

As of March 31, 2014, $2.7 million has been contributed to our sponsored pension plans.  We presently anticipate contributing an additional $11.3 million to fund our pension plans during 2014 for a total of $14.0 million.  Not included in the anticipated contributions for the year are any potential payments related to the plan associated with our Elkhart, Indiana facility that was closed in 2012.  The amount of those contributions has not been determined as of the date of this filing.

Note 7 – Commitments and Contingencies

We are from time to time involved in various legal proceedings of a character normally incidental 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 and cash flows.
 
In addition to environmental laws that regulate our ongoing operations, we are also subject to environmental remediation liability. Under the federal Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and analogous state laws, we may be liable as a result of the release or threatened release of hazardous materials into the environment regardless of when the release occurred. We are currently involved in several matters relating to the investigation and/or remediation of locations where we have arranged for the disposal of foundry wastes. Such matters include situations in which we have been named or are believed to be potentially responsible parties in connection with the contamination of these sites. Additionally, environmental remediation may be required to address soil and groundwater contamination identified at certain of our facilities.
 
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As of March 31, 2014, we had an environmental reserve of approximately $1.5 million, related primarily to our foundry operations. This reserve is based on management’s review of potential liabilities as well as cost estimates related thereto. Any expenditures required for us to comply with applicable environmental laws and/or pay for any remediation efforts will not be reduced or otherwise affected by the existence of the environmental reserve. Our environmental reserve may not be adequate to cover our future costs related to the sites associated with the environmental reserve, and any additional costs may have a material adverse effect on our business, results of operations or financial condition. The discovery of additional environmental issues, the modification of existing laws or regulations or the promulgation of new ones, 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 a material adverse effect on our consolidated financial statements.
 
The Iron and Steel Foundry National Emission Standard for Hazardous Air Pollutants (“NESHAP”) was developed pursuant to Section 112(d) of the Clean Air Act and requires major sources of hazardous air pollutants to install controls representative of maximum achievable control technology. Based on currently available information, we do not anticipate material costs regarding ongoing compliance with the NESHAP; however if we are found to be out of compliance with the NESHAP, we could incur liability that could have a material adverse effect on our consolidated financial statements.
 
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 currently pending environmental proceeding will have a material adverse effect on our consolidated financial statements.
 
As of March 31, 2014, we had approximately 2,222 employees, of which 479 were salaried employees with the remainder paid hourly. Unions represent approximately 1,522 of our employees, which is approximately 69 percent of our total employees. Each of our unionized facilities has a separate contract with the union that represents the workers employed at such facility. The union contracts expire at various times over the next few years with the exception of our union contract that covers the hourly employees at our Monterrey, Mexico, facility, which expires on an annual basis in January unless otherwise renewed. The 2014 negotiations in Monterrey were completed prior to the expiration of our union contract.
 
We have collective bargaining agreements expiring at our Erie, Pennsylvania facility in September, 2014 and our Rockford, Illinois facility in November, 2014. These agreements cover 207 and 311 employees, respectively.  We do not anticipate that our 2014 negotiations will have a material adverse effect on our operating performance or cost.

Note 8 – Financial Instruments

We have determined the estimated fair value amounts of financial instruments using available market information and other appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop the estimates of fair value.  A fair value hierarchy accounting standard exists for those instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and our own assumptions (unobservable inputs).  Determining which category an asset or liability falls within the hierarchy requires significant judgment.  We evaluate our hierarchy disclosures each quarter.
 
The hierarchy consists of three levels:
 
Level 1
Quoted market prices in active markets for identical assets or liabilities;
Level 2
Inputs other than Level 1 inputs that are either directly or indirectly observable; and
Level 3
Unobservable inputs developed using estimates and assumptions developed by us, which reflect those that a market participant would use.

The carrying amounts of cash and cash equivalents, customer receivables, and accounts payable approximate fair value because of the relatively short maturity of these instruments.  The fair value of our 9.5% senior secured notes based on market quotes, which we determined to be Level 1 inputs, at March 31, 2014 was approximately $319.6 million compared to the carrying amount of $305.4 million.  The fair value of our 9.5% senior secured notes based on market quotes, which we determined to be Level 1 inputs, at December 31, 2013 was approximately $306.9 million compared to the carrying amount of $305.2 million.  The Company believes the fair value of our asset-based loan (“ABL”) facility at March 31, 2014 and December 31, 2013 equals the carrying value of $35.0 million and $25.0 million, respectively.  As of March 31, 2014 and December 31, 2013 we had no other outstanding financial instruments.

- 11 -

 
Note 9 – Segment Reporting

Based on our continual monitoring of the long-term economic characteristics, products and production processes, class of customer, and distribution methods of our operating segments, we have identified each of our operating segments below as reportable segments.  We believe this segmentation is appropriate based upon operating decisions and performance assessments by our President and Chief Executive Officer.  The accounting policies of the reportable segments are the same as described in Note 1, Summary of Significant Accounting Policies of our Annual Report on Form 10-K for the year ended December 31, 2013.

       
   
Three Months Ended March 31,
 
   
2014
   
2013
 
Net sales:
           
Wheels
  $ 92,218     $ 93,162  
Gunite
    43,973       39,396  
Brillion Iron Works
    30,593       30,429  
Consolidated total
  $ 166,784     $ 162,987  
                 
Operating Income (loss):
               
Wheels
  $ 9,742     $ 5,743  
Gunite
    3,278       (1,777 )
Brillion Iron Works
    1,275       575  
Corporate / Other
    (7,726 )     (9,338 )
Consolidated total
  $ 6,569     $ (4,797 )

Excluded from net sales above are inter-segment sales from Brillion Iron Works to Gunite, as shown in the table below: 

   
Three Months Ended March 31,
 
   
2014
   
2013
 
Inter-segment sales
  $ 3,841     $ 2,448  

   
As of
 
   
March 31, 2014
   
December 31, 2013
 
Total assets:
           
Wheels
  $ 466,969     $ 452,271  
Gunite 
    64,729       55,016  
Brillion Iron Works
    56,751       52,547  
Corporate / Other
    38,307       51,943  
Consolidated total
  $ 626,756     $ 611,777  

Note 10 - Debt

As of March 31, 2014, total debt was $340.4 million consisting of $305.4 million of our outstanding 9.5% senior secured notes, net of discount, and a $35.0 million draw on our ABL facility. As of December 31, 2013, total debt was $330.2 million consisting of $305.2 million of our outstanding 9.5% senior secured notes, net of discount, and a $25.0 million draw on our ABL facility.
 
Our credit documents (the New ABL Facility and the indenture governing the senior secured notes) contain operating covenants that limit the discretion of management with respect to certain business matters.  These covenants place significant restrictions on, among other things, the 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.  In addition, the New ABL Facility contains a fixed charge coverage ratio covenant which will be applicable if the availability under the ABL Facility is less than 10.0% of the amount of the New ABL Facility.  If applicable, that covenant requires us to maintain a minimum ratio of adjusted EBITDA less capital expenditures made during such period (other than capital expenditures financed with the net cash proceeds of asset sales, recovery events, incurrence of indebtedness and the sale or issuance of equity interests) to fixed charges of 1.00 to 1.00.  We are currently and expect to remain in compliance with our covenants through the next twelve months.  However, we continue to operate in a challenging economic environment and our
 
- 12 -

 
ability to maintain liquidity and comply with our debt covenants may be affected by economic or other conditions that are beyond our control and which are difficult to predict.  

On July 29, 2010, we entered into our Prior ABL Facility, which was a senior secured asset based revolving credit facility, in an aggregate principal amount of up to $75.0 million, with the right to increase the availability under the facility by up to $25.0 million in the aggregate.  On February 7, 2012, we exercised our option to increase the loan commitments under the Prior ABL Facility by $25.0 million (for a total aggregate availability of $100.0 million) by entering into an ABL incremental agreement.  The Prior ABL Facility would have matured on July 29, 2014 and provided for loans and letters of credit in an aggregate amount up to the amount of the facility, subject to meeting certain borrowing base conditions, with sub-limits of up to $10.0 million for swingline loans and $25.0 million to be available for the issuance of letters of credit.   Loans under the Prior ABL Facility bore interest at an annual rate equal to, at our option, either LIBOR plus 3.50% or Base Rate plus 2.75%, subject to changes based on our leverage ratio as defined in the Prior ABL Facility.  On July 11, 2013, the Company entered into a new credit facility.  We were also required to pay a commitment fee equal to 0.50% per annum to the lenders under the Prior ABL Facility if utilization under the facility exceeded 50.0% of the total commitments under the facility and a commitment fee equal to 0.75% per annum if utilization under the facility was less than or equal to 50.0% of the total commitments under the facility. Customary letter of credit fees were also payable as necessary.  The obligations under the Prior ABL Facility are secured by (i) first priority liens on substantially all of the Company’s accounts receivable and inventories, subject to certain exceptions and permitted liens (the “ABL Priority Collateral”) and (ii) second priority liens on substantially all of the Company’s owned real property and tangible and intangible assets other than the ABL Priority Collateral, including all of the outstanding capital stock of our domestic subsidiaries, subject to certain exceptions and permitted liens (the “Notes Priority Collateral”).
 
On July 11, 2013, we entered into the New ABL Facility and used $45.3 million of borrowings under the New ABL Facility and cash on hand to repay all amounts outstanding under the Prior ABL Facility and to pay related fees and expenses.
 
The New ABL Facility is a senior secured asset based credit facility in an aggregate principal amount of up to $100.0 million, consisting of a $90.0 million revolving credit facility and a $10.0 million first-in last-out term facility, with the right, subject to certain conditions, to increase the availability under the facility by up to $50.0 million in the aggregate. The New ABL Facility currently matures on July 11, 2018, but may be extended pursuant under certain circumstances pursuant to the terms of the New ABL Facility.
 
The New ABL Facility provides for loans and letters of credit in an amount up to the aggregate availability under the facility, subject to meeting certain borrowing base conditions, with sub-limits of up to $10.0 million for swingline loans and $20.0 million for letters of credit.  Borrowings under the New ABL Facility bear interest through maturity at a variable rate based upon, at our option, either LIBOR or the base rate (which is the greatest of one-half of 1.00% in excess of the federal funds rate, 1.00% in excess of the one-month LIBOR rate and the Agent’s prime rate), plus, in each case, an applicable margin.  The applicable margin for loans under the first-in last-out term facility that are (i) LIBOR loans ranges, based on the our average excess availability, from 2.75% to 3.25% per annum and (ii) base rate loans ranges, based on our average excess availability, from 1.00% to 1.50%.  The applicable margin for other advances under the New ABL Facility that are (i) LIBOR loans ranges, based on our average excess availability, from 1.75% to 2.25% and (ii) base rate loans ranges, based on our average excess availability, from 0.00% to 0.50%.
 
We must also pay an unused line fee equal to 0.25% per annum to the lenders under the New ABL Facility if utilization under the facility is greater than or equal to 50.0% of the total available commitments under the facility and a commitment fee equal to 0.375% per annum if utilization under the facility is less than 50.0% of the total available commitments under the facility. Customary letter of credit fees are also payable, as necessary.
 
- 13 -

 

Note 11 – Guarantor and Non-guarantor Financial Statements

Our senior secured notes are, jointly and severally, fully and unconditionally guaranteed, on a senior basis, by all of our existing and future 100% owned domestic subsidiaries (“Guarantor Subsidiaries”). The non-guarantor subsidiaries are our foreign subsidiaries and discontinued operations.  The following condensed financial information illustrates the composition of the combined Guarantor Subsidiaries:
 
CONDENSED CONSOLIDATED BALANCE SHEET

   
March 31, 2014
 
(In thousands)
 
Parent
   
Guarantor Subsidiaries
   
Non-guarantor Subsidiaries
   
Eliminations
   
Total
 
ASSETS
                             
Cash and cash equivalents
  $ 16,922     $     $ 4,718     $     $ 21,640  
Customer and other receivables, net
    6,330       20,945       62,091       (6,071 )     83,295  
Inventories
    20,531       22,378       2,839       (439 )     45,309  
Other current assets
    6,869       3,309       5,627             15,805  
Total current assets
    50,652       46,632       75,275       (6,510 )     166,049  
Property, plant and equipment, net
    81,036       103,028       34,463             218,527  
Goodwill
    96,283       4,414                   100,697  
Other intangible assets, net
    120,787       2,624                   123,411  
Investments in and advances to subsidiaries and affiliates
    134,549                   (134,549 )      
Deferred income taxes
    36,761             2,895       (39,168 )     488  
Other non-current assets
    6,956       391       10,237             17,584  
TOTAL
  $ 527,024     $ 157,089     $ 122,870     $ (180,227 )   $ 626,756  
LIABILITIES AND STOCKHOLDERS’ EQUITY
                                       
Accounts payable
  $ 16,098     $ 34,780     $ 12,183     $     $ 63,061  
Accrued payroll and compensation
    2,922       5,888       1,633             10,443  
Accrued interest payable
    5,127                         5,127  
Accrued and other liabilities
    10,202       11,974       4,821       (6,510 )     20,487  
Total current liabilities
    34,349       52,642       18,637       (6,510 )     99,118  
Long term debt
    340,446                         340,446  
Deferred and non-current income taxes
    83,503       (20,450 )     2,274       (39,168 )     26,159  
Other non-current liabilities
    9,836       74,205       18,102             102,143  
Stockholders’ equity
    58,890       50,692       83,857       (134,549 )     58,890  
TOTAL
  $ 527,024     $ 157,089     $ 122,870     $ (180,227 )   $ 626,756  

   
December 31, 2013
 
(In thousands)
 
Parent
   
Guarantor Subsidiaries
   
Non-guarantor Subsidiaries
   
Eliminations
   
Total
 
ASSETS
                             
Cash and cash equivalents
  $ 31,018     $     $ 2,408     $     $ 33,426  
Customer and other receivables, net
    97,382       19,955       60,538       (118,355 )     59,520  
Inventories
    16,858       20,759       2,022       (310 )     39,329  
Other current assets
    7,159       4,357       5,477             16,993  
Total current assets
    152,417       45,071       70,445       (118,665 )     149,268  
Property, plant and equipment, net
    80,286       103,800       35,538             219,624  
Goodwill
    96,283       4,414                   100,697  
Other intangible assets, net
    122,764       2,666                   125,430  
Investments in and advances to subsidiaries and affiliates
    128,059                   (128,059 )      
Other non-current assets
    5,971       1,791       8,996             16,758  
TOTAL
  $ 585,780     $ 157,742     $ 114,979     $ (246,724 )   $ 611,777  
LIABILITIES AND STOCKHOLDERS’ EQUITY
                                       
Accounts payable
  $ 12,092     $ 28,215     $ 7,220     $     $ 47,527  
Accrued payroll and compensation
    1,604       5,776       1,383             8,763  
Accrued interest payable
    12,535                         12,535  
Accrued and other liabilities
    112,164       22,705       4,970       (118,665 )     21,174  
Total current liabilities
    138,395       56,696       13,573       (118,665 )     89,999  
Long term debt
    330,183                         330,183  
Deferred and non-current income taxes
    36,970       (19,108 )     (334 )           17,528  
Other non-current liabilities
    18,348       75,769       18,066             112,183  
Stockholders’ equity
    61,884       44,385       83,674       (128,059 )     61,884  
TOTAL
  $ 585,780     $ 157,742     $ 114,979     $ (246,724 )   $ 611,777  



- 14 -

 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

   
Three Months Ended March 31, 2014
 
(In thousands)
 
Parent
   
Guarantor Subsidiaries
   
Non-guarantor Subsidiaries
   
Eliminations
   
Total
 
Net sales
  $ 108,531     $ 74,302     $ 32,654     $ (48,703 )   $ 166,784  
Cost of goods sold
    98,882       69,704       29,439       (48,264 )     149,761  
Gross profit
    9,649       4,598       3,215       (439 )     17,023  
Operating expenses
    10,122       280       52             10,454  
Income (loss) from operations
    (473 )     4,318       3,163       (439 )     6,569  
Other income (expense):
                                       
Interest expense, net
    (8,657 )     (61 )     298             (8,420 )
Equity in earnings of subsidiaries
    5,673                   (5,673 )      
Other income (expense), net
    (77 )     63       (516 )           (530 )
Income (loss) before income taxes from continuing operations
    (3,534 )     4,320       2,945       (6,112 )     (2,381 )
Income tax  provision
    39       143       722             904  
Income (loss from continuing operations
    (3,573 )     4,177       2,223       (6,112 )     (3,285 )
Discontinued operations, net of tax
                (288 )           (288 )
Net Income (loss)
  $ (3,573 )   $ 4,177     $ 1,935     $ (6,112 )   $ (3,573 )
                                         
Comprehensive income (loss)
  $ (3,240 )   $ 4,164     $ 2,270     $ (6,434 )   $ (3,240 )


   
Three Months Ended March 31, 2013
 
(In thousands)
 
Parent
   
Guarantor Subsidiaries
   
Non-guarantor Subsidiaries
   
Eliminations
   
Total
 
Net sales
  $ 105,158     $ 74,200     $ 35,851     $ (52,222 )   $ 162,987  
Cost of goods sold
    101,124       74,479       33,328       (52,222 )     156,709  
Gross profit
    4,034       (279 )     2,523             6,278  
Operating expenses
    10,524       470       81             11,075  
Income (loss) from operations
    (6,490 )     (749 )     2,442             (4,797 )
Other income (expense):
                                       
Interest expense, net
    (8,848 )     (191 )     345             (8,694 )
Equity in earnings of subsidiaries
    150                   (150 )      
Other income (expense), net
    (73 )     12       206             145  
Income (loss) before income taxes from continuing operations
    (15,261 )     (928 )     2,993       (150 )     (13,346 )
Income tax  provision (benefit)
    686             723             1,409  
Income (loss) from continuing operations
    (15,947 )     (928 )     2,270       (150 )     (14.755 )
Discontinued operations, net of tax
                (1,192 )           (1,192 )
Net income (loss)
  $ (15,947 )   $ (928 )   $ 1,078     $ (150 )   $ (15,947 )
                                         
Comprehensive income (loss)
  $ (15,616 )   $ (928 )   $ 1,409     $ (481 )   $ (15,616 )


 

- 15 -

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

   
Three Months Ended March 31, 2014
 
(In thousands)
 
Parent Company
   
Guarantor Subsidiaries
   
Non-guarantor Subsidiaries
   
Eliminations
   
Total
 
CASH FLOWS FROM OPERATING ACTIVITIES:
                             
Net income (loss)
  $ (3,573 )   $ 4,177     $ 1,935     $ (6,112 )   $ (3,573 )
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
                                       
Depreciation                                                        
    2,736       4,456       1,061             8,253  
Amortization – deferred financing costs
    620                         620  
Amortization – other intangible assets
    1,977       42                   2,019  
(Gain) loss on disposal of assets
    (93 )     57       29             (7 )
Deferred income taxes
    182                         182  
Non-cash stock-based compensation
    499                         499  
Equity in earnings of subsidiaries and affiliates
    (5,673 )                 5,673        
Change in other operating items
    (8,538 )     (15,593 )     (613 )     439       (24,305 )
Net cash provided by (used in) operating activities
    (11, 863 )     (6,861 )     2,412             (16,312 )
                                         
CASH FLOWS FROM INVESTING ACTIVITIES:
                                       
Purchases of property, plant, and equipment
    (3,651 )     (2,956 )     (102 )           (6,709 )
Proceeds from notes receivable
    (29,415 )     (28,742 )           58,157        
Payments on notes receivable
    11,607       19,561             (31,168 )      
Other
          1,235                   1,235  
Net cash provided by (used in) investing activities
    (21,459 )     (10,902 )     (102 )     26,989       (5,474 )
                                         
CASH FLOWS FROM FINANCING ACTIVITIES
                                       
Proceeds from notes payable
     38,742        29,370        45       (58,157     10,000  
Payment on notes payable
    (19,516     (11,607     (45 )      31,168        
Net cash provided by (used in) financing activities
    19,226       17,763             (26,989 )     10,000  
Increase (decrease) in cash and cash equivalents
    (14,096 )           2,310             (11,786 )
Cash and cash equivalents, beginning of period
    31,018             2,408             33,426  
Cash and cash equivalents, end of period
  $ 16,922     $     $ 4,718     $     $ 21,640  

   
Three Months Ended March 31, 2013
 
(In thousands)
 
Parent Company
   
Guarantor Subsidiaries
   
Non-guarantor Subsidiaries
   
Eliminations
   
Total
 
CASH FLOWS FROM OPERATING ACTIVITIES:
                             
Net income (loss)
  $ (15,947 )   $ (928 )   $ 1,078     $ (150 )   $ (15,947 )
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
                                       
Depreciation                                                        
    2,761       4,625       1,772             9,158  
Amortization – deferred financing costs
    690                         690  
Amortization – other intangible assets
    2,232       41                   2,273  
(Gain) loss on disposal of assets
    862       8       (13 )           857  
Deferred income taxes
    686                         686  
Non-cash stock-based compensation
    694                         694  
Equity in earnings of subsidiaries and affiliates
    (150 )                 150        
Change in other operating items
    (21,468 )     4,822       (1,587 )           (18,233 )
Net cash provided by (used in) operating activities
    (29,640 )     8,568       1,250             (19,822 )
                                         
CASH FLOWS FROM INVESTING ACTIVITIES:
                                       
Purchases of property, plant, and equipment
    (5,005 )     (8,660 )     (1,690 )           (15,355 )
Other
    14,944                         14,944  
Net cash provided by (used in) investing activities
    9,939       (8,660 )     (1,690 )           (411 )
                                         
CASH FLOWS FROM FINANCING ACTIVITIES
                                       
Proceeds from debt issuance
    25,000                         25,000  
Increase (decrease) in cash and cash equivalents
    5,299       (92 )     (440 )           4,767  
Cash and cash equivalents, beginning of period
    24,113       (29 )     2,667             26,751  
Cash and cash equivalents, end of period
  $ 29,412     $ (121 )   $ 2,227     $     $ 31,518  


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Note 12 – Changes in Accumulated Other Comprehensive Income (Loss) by Component

   
Three Months Ended March 31, 2014
 
(In thousands)
 
Pension Plan
   
Post Retirement Plan
   
Total
 
Accumulated other comprehensive income (loss) as of December 31,  2013
  $ (20,429 )   $ 1,717     $ (18,712 )
Amounts reclassified from accumulated other comprehensive income (loss)
    (4 )     337       333  
Accumulated other comprehensive income (loss) as of March 31, 2014
  $ (20,433 )   $ 2,054     $ (18,379 )


Reclassifications out of Accumulated Other Comprehensive Income (loss):

   
Three Months Ended March 31, 2014
 
(In thousands)
 
Pension Plan
   
Post Retirement Plan
   
Total
 
Amortization of Pension and Postretirement Plan items
                 
Prior Service Costs
  $ 11     $ (9 )   $ 2  
Actuarial (losses)
    50       77       127  
Foreign currency translation related to pension and postretirement plans
    24       269       293  
Total before tax
    85       337       422  
Tax expense
    (89 )           (89 )
Total reclassified for the period                                                      
  $ (4 )   $ 337     $ 333  


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The accompanying unaudited condensed interim consolidated financial statements are prepared in conformity with U.S. GAAP and such principles are applied on a basis consistent with the information reflected in our Annual Report on Form 10-K for the year ended December 31, 2013 filed with the Securities and Exchange Commission (“SEC”).  Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations promulgated by the SEC.  In the opinion of management, the interim financial information includes all adjustments and accruals, consisting only of normal recurring adjustments, which are necessary for a fair presentation of results for the respective interim periods.  The results of operations for the three months ended March 31, 2014 are not necessarily indicative of the results to be expected for the full fiscal year ending December 31, 2014 or any interim period.  Except for the historical information contained herein, this quarterly 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

We are one of the largest and most diversified manufacturers and suppliers of commercial vehicle components in North America. Our products include commercial vehicle wheels, wheel-end components and assemblies, and ductile and gray iron castings. We market our products under some of the most recognized brand names in the industry, including Accuride, Gunite, and Brillion. We serve the leading OEMs and their related aftermarket channels in most major segments of the commercial vehicle market, including heavy- and medium-duty trucks, commercial trailers, light trucks, buses, as well as specialty and military vehicles.
 
Our primary product lines are standard equipment used by many North American heavy- and medium-duty truck OEMs.
 
Our diversified customer base includes substantially all of the leading commercial vehicle OEMs, such as Daimler Truck North America, LLC, with its Freightliner and Western Star brand trucks, PACCAR, with its Peterbilt and Kenworth brand trucks, Navistar, with its International brand trucks, and Volvo/Mack, with its Volvo and Mack brand trucks. Our primary commercial trailer customers include leading commercial trailer OEMs, such as Great Dane Limited Partnership, Utility Trailer Manufacturing Company, and Wabash National, Inc. Our major light truck customer is General Motors Corporation. Our product portfolio is supported by strong sales, marketing and design engineering capabilities and is manufactured in eight strategically located, technologically-advanced facilities across the United States, Mexico and Canada.
 
The heavy- and medium-duty truck and commercial trailer markets, the related aftermarket, and the global industrial, construction, mining, and agricultural markets are the primary drivers of our sales. The commercial vehicle manufacturing and replacement part markets are, in turn, directly influenced by conditions in the North American truck industry and generally by conditions in other industries which indirectly impact the truck industry, such as the home-building industry, and by overall economic growth and consumer spending.  The global industrial, construction, and mining markets are driven by more macro- and global economic conditions such as coal, oil, and gas exploration, demand for mined products that are converted into industrial raw materials, such as steel, iron, copper, and global construction trends.  The North American commercial vehicle and global industrial and construction markets forecast minor economic growth in 2014.  Based upon the overall commercial vehicle industry production forecasts and global industrial, construction and mining markets, we expect results from operations to show slight improvement in 2014 compared to 2013.  We cannot, however, accurately predict the North American commercial vehicle and global industrial and commercial markets and any deterioration of the economic recovery may lead to reduced spending and deterioration in our end markets and have an adverse effect on our results of operations.
 
Our markets and those of our customers are becoming increasingly competitive.   In the North American commercial vehicle market, OEMs are competing to maintain or increase market share in the face of evolving emissions regulations, increasing customer emphasis on light weight and fuel efficient platforms and a an uncertain economic recovery that is holding new equipment purchases at replacement (rather than expansionary) levels.  Shifts in the market share held by each of our OEM customers impact our business to varying degrees depending on whether our products are designated as standard or optional equipment on the various platforms at each OEM.  Recently, a number of platforms on which our products are standard equipment have lost market share, which has impacted our business.  We are also continuing to see the impacts of low cost country sourced products in our markets, which has particularly impacted the aftermarket for steel wheels and brake drums.  Further, broader economic weaknesses in industrial manufacturing impacted our Brillion business through reduced customer orders in 2013 and continuing into 2014.
 
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In response to these conditions, we are working to increase our market share and to control costs while positioning our businesses to compete at current demand levels and still maintain capacity to meet the recoveries in our markets as they occur, which history has shown can be swift and steep.  For example, we have implemented lean manufacturing practices across our facilities, which have resulted in reduced working capital levels that free up cash for other priorities.  We have also completed most of our previously disclosed capital investment projects that have selectively increased our manufacturing capacity on core products, reduced labor and manufacturing costs and improved product quality.  Additionally, we have introduced and will continue to develop and roll-out new products and technologies that we believe offer better value to customers.  Further, we have been pursuing new business opportunities at OEM customers and working to increase our market share at OEMs by developing our relationships with large fleets in order to “pull through” our products when they order new equipment.  We continue to monitor competition from products manufactured in low cost countries and will take steps to combat unfair trade practices, such as filing anti-dumping petitions with the United States government, as warranted.
 
In addition to improving our operations, we have taken steps to improve our liquidity to ensure access to the funds required to finance our business throughout the economic cycle and to focus our efforts on our core markets.  On July 11, 2013, we entered into a new senior secured asset-based lending facility (the “New ABL Facility”) and used borrowing under that facility and cash on hand to repay all amounts outstanding under the our prior ABL Facility, and to pay related fees and expenses.  For additional information on our New ABL Facility, see “Capital Resources and Liquidity”.  Further, on August 1, 2013, the Company announced that it completed the sale of substantially all of the assets of its non-core Imperial Group business to Imperial Group Manufacturing, Inc., a new company formed and capitalized by Wynnchurch Capital for total cash consideration of $30.0 million at closing, plus a contingent earn-out totaling up to $2.25 million.
 
 A portion of the proceeds from the sale were used to repay outstanding indebtedness under our New ABL Facility.
 
We believe that cash from operations, existing cash reserves, and our ABL revolving credit facility will provide adequate funds for our working capital needs, planned capital expenditures and cash interest payments through 2014 and the foreseeable future.

Results of Operations

The following table sets forth certain income statement information of Accuride for the three months ended March 31, 2014 and March 31, 2013.
 
   
Three Months Ended March 31,
 
(Dollars in thousands)
 
2014
   
2013
 
Net sales
  $ 166,784     $ 162,987  
Cost of goods sold
    149,761       156,709  
Gross profit
    17,023       6,278  
Operating expenses
    10,454       11,075  
Income (Loss) from operations
    6,569       (4,797 )
Interest (expense), net
    (8,420 )     (8,694 )
Other income, net
    (530 )     145  
Income tax provision
    904       1,409  
Loss from continuing operations
    (3,285 )     (14,755 )
Discontinued operations, net of tax
    (288 )     (1,192 )
Net loss
  $ (3,573 )   $ (15,947 )


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Net Sales
 
   
Three Months Ended March 31,
 
(Dollars in thousands)
 
2014