10-K 1 acw14-410k.htm  
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
 
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2014

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
Commission File Number 333-50239
 

ACCURIDE CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
 
Delaware
 
61-1109077
(State or Other Jurisdiction of Incorporation or Organization)
 
(I.R.S. Employer Identification No.)
 
 
 
7140 Office Circle, Evansville, Indiana
 
47715
(Address of Principal Executive Offices)
 
(Zip Code)
 
Registrant's telephone number, including area code: (812) 962-5000
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of class
 
Name of exchange on which registered
Common Stock, $0.01 par value
 
New York Stock Exchange
 
Securities registered pursuant to Section 12(g) of the Act:  None 
 
Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes   No

Indicate by check mark whether the registrant is not required to file reports pursuant to Section 13 of Section 15(d) of the Act. Yes   No

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

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   No

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

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
Accelerated Filer
Non-Accelerated Filer
Smaller Reporting Company
 
Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes   No

The aggregate market value of the registrant's common stock held by non-affiliates based on the New York Stock Exchange closing price as of June 30, 2014 (the last business day of registrant's most recently completed second fiscal quarter) was approximately $230,955,072.  This calculation does not reflect a determination that such persons are affiliates of registrant for any other purposes.

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 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   No

The number of shares of Common Stock, $0.01 par value, of Accuride Corporation outstanding as of February 25 was 47,718,818.
 
DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the Registrant's 2015 Annual Meeting of Stockholders are incorporated by reference in Part III of this Form 10-K.

ACCURIDE CORPORATION
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
PART I
 
Item 1. Business

The Company

We believe we are one of the largest 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 ("DTNA"), with its Freightliner and Western Star brand trucks, PACCAR, Inc., with its Peterbilt and Kenworth brand trucks, Navistar, Inc., with its International brand trucks, and Volvo Group North America, 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.

Our business consists of three operating segments that design, manufacture, and distribute components for the commercial vehicle market, including heavy- and medium-duty trucks, commercial trailers, light trucks, buses, as well as specialty and military vehicles and their related aftermarket channels and for the global industrial, mining and construction markets. We have identified each of our operating segments as reportable segments. The Wheels segment's products primarily consist of steel and aluminum wheels. The Gunite segment's products consist primarily of wheel-end components and assemblies. The Brillion Iron Works segment's products primarily consist of ductile, austempered ductile and gray iron castings, including engine and transmission components and industrial components. We believe this segmentation is appropriate based upon operating decisions and performance assessments by our President and Chief Executive Officer, who is our chief operating decision maker.

Our financial results for the previous three fiscal years are discussed in "Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operation" and "Item 8: Financial Statements and Supplementary Data" of this Annual Report and the following descriptions of our business should be read in conjunction with the information contained therein.  For geographic and financial information related to each of our operating segments, see Note 12 to the "Notes to Consolidated Financial Statements" included herein.

Corporate History

Accuride Corporation, a Delaware corporation ("Accuride" or the "Company"), and Accuride Canada Inc., a corporation formed under the laws of the province of Ontario, Canada, and a wholly owned subsidiary of Accuride, were incorporated in November 1986 for the purpose of acquiring substantially all of the assets and assuming certain liabilities of Firestone Steel Products, a division of The Firestone Tire & Rubber Company. The respective acquisitions by the companies were consummated in December 1986.

On January 31, 2005, pursuant to the terms of an agreement and plan of merger, a wholly owned subsidiary of Accuride merged with and into Transportation Technologies Industries, Inc., or TTI, resulting in TTI becoming a wholly owned subsidiary of Accuride, which we refer to as the "TTI merger". TTI was founded as Johnstown America Industries, Inc. in 1991 in connection with the purchase of Bethlehem Steel Corporation's freight car manufacturing operations.

Discontinued Operations

On August 1, 2013, the Company announced that it completed the sale of substantially all of the assets of its 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 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 has been reclassified to discontinued operations.  See Note 2 "Discontinued Operations" to the "Notes to Consolidated Financial Statements" included herein for further discussion.

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 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 recognized a $2.5 million impairment charge for this property as a component of the loss previously mentioned, which has been reclassified to discontinued operations on our consolidated statements of operations and comprehensive loss for the year ended December 31, 2013.  The Company leased the Portland, Tennessee facility to the purchaser from the closing date of the transaction through October 31, 2014. The future function of this facility is currently being evaluated. (See Note 2  to the "Notes to Consolidated Financial Statements" included herein for further explanation)

On September 26, 2011, the Company announced the sale of its wholly-owned subsidiary, Fabco Automotive Corporation ("Fabco") to Fabco Holdings, Inc., a new company formed and capitalized by Wynnchurch Capital, Ltd. in partnership with Stone River Capital Partners, LLC. The sale concluded for a purchase price of $35.0 million, subject to a working capital adjustment, plus a contingent receipt of $2.0 million, which was received in full in 2013. The Company recognized a loss of $6.3 million, including $2.1 million in transactional fees, related to the sale transaction for the year ended December 31, 2011, which is included as a component of discontinued operations. See Note 2 "Discontinued Operations" to the "Notes to Consolidated Financial Statements" included herein for further discussion.

Impairment

During 2012, the Company experienced a decline in its stock price to an amount below the then current book value as well as the impact of business developments in its Gunite reporting unit including a loss of customer market share and evidence of declining aftermarket sales.  The Gunite reporting unit recorded impairments to goodwill of $62.8 million, other intangible assets of $36.8 million, and property, plant and equipment of $34.1 million for the year ended December 31, 2012.

Product Overview

We design, produce, and market broad portfolios of commercial vehicle components for the commercial vehicle, global industrial, mining and construction industries. We classify our products under several categories, including wheels, wheel-end components and assemblies, and ductile and gray iron castings. The following describes our major product lines and brands.

Wheels (Approximately 57% of our 2014 net sales, 57% of our 2013 net sales, and 52% of our 2012 net sales)

We are the largest North American manufacturer and supplier of wheels for heavy- and medium-duty trucks, commercial trailers and related aftermarket channels. We offer the broadest product line in the North American heavy- and medium-duty wheel industry and are the only North American manufacturer and supplier of both steel and forged aluminum heavy- and medium-duty wheels. We also produce wheels for buses, commercial light trucks, heavy-duty pick-up trucks, and military vehicles. We market our wheels under the Accuride brand. We are the standard steel and aluminum wheel supplier to a number of North American heavy- and medium-duty truck and trailer OEMs.  A description of each of our major products is summarized below:

Heavy- and medium-duty steel wheels. We offer the broadest product line of steel wheels for the heavy- and medium-duty truck, commercial trailer markets and related aftermarket channels. The wheels range in diameter from 17.5" to 24.5" and are designed for load ratings ranging from 3,640 to 13,000 lbs. We also offer a number of coatings and finishes which we believe provide the customer with increased durability and exceptional appearance.
Heavy- and medium-duty aluminum wheels. We offer a full product line of aluminum wheels for the heavy- and medium-duty truck, commercial trailer markets and related aftermarket channels. The wheels range in diameter from 19.5" to 24.5" and are designed for load ratings ranging from 4,000 to 13,000 lbs. Aluminum wheels are generally lighter in weight, more readily stylized, and are approximately 2.0 to 3.0 times as expensive as steel wheels.
Light truck steel wheels. We manufacture light truck single and dual steel wheels that range in diameter from 16" to 19.5" for customers such as General Motors. We are focused on larger diameter wheels designed for select truck platforms used for carrying heavier loads.
Military Wheels. We produce steel wheels for military applications under the Accuride brand name.


Wheel-End Components and Assemblies (Approximately 24% of our 2014 net sales, 26% of our 2013 net sales, and 28% of our 2012 net sales)

We are a supplier of wheel-end components and assemblies to the North American heavy- and medium-duty truck markets and related aftermarket channels. We market our wheel-end components and assemblies under the Gunite brand. We produce four basic wheel-end assemblies: (1) disc wheel hub/brake drums, (2) spoke wheel/brake drums, (3) spoke wheel/brake rotors and (4) disc wheel hub/brake rotors. We also manufacture an extensive line of wheel-end components for the heavy- and medium-duty truck markets, such as brake drums, disc wheel hubs, spoke wheels, rotors and automatic slack adjusters. The majority of these components are critical to the safe operation of vehicles. A description of each of our major wheel-end components is summarized below:

Brake Drums. We offer a variety of heavy- and medium-duty brake drums for truck, commercial trailer, bus, and off-highway applications. A brake drum is a braking device utilized in a "drum brake" which is typically made of iron and has a machined surface on the inside. When the brake is applied, air or brake fluid is forced, under pressure, into a wheel cylinder which, in turn, pushes a brake shoe into contact with the machined surface on the inside of the drum and stops the vehicle. Our brake drums are custom-engineered to exact requirements for a broad range of applications, including logging, mining, and more traditional over-the-road vehicles. To ensure product quality, we continually work with brake and lining manufacturers to optimize brake drum and brake system performance. Brake drums are our primary aftermarket product. The aftermarket opportunities in this product line are substantial as brake drums continually wear with use and eventually need to be replaced, although the timing of such replacement depends on the severity of use.
Disc Wheel Hubs. We manufacture a complete line of traditional ferrous disc wheel hubs for heavy- and medium-duty trucks and commercial trailers. A disc wheel hub is the component that connects the brake system to the axle upon which the wheel and tire are mounted. In addition, we offer a line of lightweight cast iron hubs that provide users with improved operating efficiency. Our lightweight hubs utilize advanced metallurgy and unique structural designs to offer both significant weight savings and lower costs due to reduced maintenance requirements. Our product line also includes finely machined hubs for anti-lock braking systems, or ABS, which enhance vehicle safety.
Spoke Wheels. We manufacture a broad line of spoke wheels for heavy-and medium-duty trucks and commercial trailers. While disc wheel hubs have largely displaced spoke wheels for on-highway applications, they are still popular for severe-duty applications such as off-highway vehicles, refuse vehicles, and school buses, due to their greater strength. Our product line also includes finely machined wheels for ABS systems, similar to our disc wheel hubs.
Disc Brake Rotors. We develop and manufacture durable, lightweight disc brake rotors for a variety of heavy-duty vehicle applications. A disc rotor is a braking device that is typically made of iron with highly machined surfaces. When the brake is applied in a disc brake system, brake fluid from the master cylinder (Hydraulic Disc Brakes) or air from the air compressor (Air Disc Brakes) is forced into a caliper where it presses against a piston, which squeezes two brake pads against the disc rotor and stops the vehicle. Disc brakes are generally viewed as more efficient, although more expensive, than drum brakes and are often found in the front of a vehicle with drum brakes often located in the rear. We manufacture ventilated disc brake rotors that significantly improve heat dissipation as required for applications on Class 7 and 8 vehicles. We offer one of the most complete lines of heavy-duty and medium-duty disc brake rotors in the industry.
Automatic Slack Adjusters. Automatic slack adjusters react to, and adjust for, variations in brake shoe-to-drum clearance and maintain the proper amount of space between the brake shoe and brake drum. Our automatic slack adjusters automatically adjust the brake shoe-to-brake drum clearance, ensuring consistent clearance at the time of braking. The use of automatic slack adjusters reduces maintenance costs, improves braking performance and minimizes side-pull and stopping distance.

Ductile, Austempered Ductile and Gray Iron Castings (Approximately 19% of our 2014 net sales, 17% of our 2013 net sales, and 20% of our 2012 net sales)

We produce ductile, austempered ductile and gray iron castings under the Brillion brand name. Our Brillion Foundry facility is one of North America's largest iron foundries focused on the supply of complex, highly-cored cast products to market leading customers in the commercial vehicle, diesel engine, construction, agricultural, hydraulic, mining, oil and gas and industrial markets. Brillion utilitizes both vertical and horizontal green sand molding processes to produce cast products that include:

Transmission and Engine-Related Components. We believe that our Brillion foundry is a leading source for the casting of transmission and engine-related components to the heavy- and medium-duty truck markets, including flywheels, transmission and engine-related housings and brackets.
Industrial Components. Our Brillion foundry produces components for a wide variety of applications to the industrial machinery, construction, agricultural equipment and oil and gas markets, including flywheels, pump housings, valve body housings, small engine components, and other industrial components. Our industrial components are made to specific customer requirements and, as a result, our product designs are typically proprietary to our customers.


Cyclical and Seasonal Industry

The commercial vehicle components industry is highly cyclical and, in large part, depends on the overall strength of the demand for heavy- and medium-duty trucks. The industry has historically experienced significant fluctuations in demand based on factors such as general economic conditions, including industrial production and consumer spending, as well as, gas prices, credit availability, and government regulations among others. Cyclical peaks of commercial vehicle production in 1999 and 2006 were followed by sharp production declines of 48% and 69% to trough production levels in 2001 and 2009, respectively. Since 2009, commercial vehicle production levels have recovered, and demand for vehicles that use our products, as predicted by analysts, including America's Commercial Transportation ("ACT") and FTR Associates ("FTR") Publications, is expected to improve in 2015 as economic conditions continue to improve. OEM production of major markets that we serve in North America, from 2008 to 2014, are shown below:

 
For the Year Ended December 31,
 
2014
 
2013
 
2012
 
2011
 
2010
 
2009
 
2008
North American Class 8
297,097
 
245,496
 
277,490
 
255,261
 
154,173
 
118,396
 
205,639
North American Classes 5-7
225,681
 
201,311
 
188,165
 
166,792
 
117,901
 
97,733
 
158,294
U.S. Trailers
270,757
 
238,527
 
236,841
 
209,582
 
124,162
 
79,027
 
143,901

Our operations are typically seasonal as a result of regular OEM customer maintenance and model changeover shutdowns, which usually occur in the third and fourth quarter of each calendar year. This seasonality may result in decreased net sales and profitability during the third and fourth fiscal quarters of each calendar year.  In addition, our Gunite product line typically experiences higher aftermarket purchases of wheel-end components in the first and second quarters of each calendar year.

Customers

We market our components to more than 1,000 customers, including most of the major North American heavy- and medium-duty truck and commercial trailer OEMs, as well as to the major aftermarket participants, including OEM dealer networks, wholesale distributors, and aftermarket buying groups. Our largest customers are Navistar, DTNA, Volvo/Mack, PACCAR, and Advanced Wheels which combined accounted for approximately 50.2 percent of our net sales in 2014, and individually constituted approximately 14.1 percent, 13.2 percent, 10.5 percent, 6.5 percent, and 5.8 percent, respectively, of our 2014 net sales. We have long-term relationships with our larger customers, many of whom have purchased components from us or our predecessors for more than 45 years. We garner repeat business through our reputation for quality and our position as a standard supplier for a variety of truck lines. We believe that we will continue to be able to effectively compete for our customers' business due to the high quality of our products, the breadth of our product portfolio, and our continued product innovation.

Sales and Marketing

We have an integrated, corporate-wide sales and marketing group. We have dedicated salespeople and sales engineers who reside near the headquarters of each of the four major truck OEMs and who spend substantially all of their professional time managing existing business relationships, coordinating new sales opportunities and strengthening our relationships with the OEMs. These sales professionals function as a single point of contact with the OEMs, providing "one-stop shopping" for all of our products. Each brand has marketing personnel who, together with applications engineers, have in-depth product knowledge and provide support to the designated OEM sales professionals.

We also market our products directly to end users, particularly large truck fleet operators, with a focus on wheels and wheel-end products to create "pull-through" demand for our products. This effort is intended to help convince the truck and trailer OEMs to designate our products as standard equipment and to create sales by encouraging fleets to specify our products on the equipment that they purchase, even if our product is not offered as standard equipment on the products being purchased. The fleet sales group also provides aftermarket sales coverage for our various products, particularly wheels and wheel-end components. These sales professionals promote and sell our products to the aftermarket, including OEM dealers, warehouse distributors and aftermarket buying groups.

We have a consolidated aftermarket distribution strategy for our wheels and wheel-end components. In support of this strategy, we have a centralized distribution center in Batavia, Illinois. As a result, customers can order steel and aluminum wheels, brake drums, rotors, hubs and automatic slack adjusters on one purchase order, improving freight efficiencies and inventory turns for our customers.  The aftermarket infrastructure enables us to increase direct shipments from our manufacturing plant to larger aftermarket customers utilizing a virtual distribution strategy that allows us to maintain and enhance our competitiveness by eliminating unnecessary freight and handling through the distribution center.


International Sales

We consider sales to customers outside of the United States as international sales. International sales for the years ended December 31, 2014, 2013, and 2012 are as follows:

(In millions)
 
International Sales
   
Percent of Net Sales
 
2014
 
$
137.1
     
19.4
%
2013
 
$
130.1
     
20.2
%
2012
 
$
139.2
     
17.5
%

For additional information, see Note 12 to the "Notes to Consolidated Financial Statements" included herein.

Manufacturing

We operate eight facilities, which are characterized by advanced manufacturing capabilities, in North America. Our U.S. manufacturing operations are located in Illinois, Kentucky, Ohio, Pennsylvania, South Carolina, and Wisconsin. In addition, we have manufacturing facilities in Canada and Mexico. These facilities are strategically located to meet our manufacturing needs and the demands of our customers.

All of our significant production operations are ISO-9000/TS 16949 certified, which means that they comply with certain quality assurance standards for truck component suppliers. We believe our manufacturing operations are highly regarded by our customers, and we have received numerous quality and lean awards from our customers including PACCAR's Preferred Supplier award and Daimler Truck North America's Masters of Quality award, and the Association of Manufacturing Excellence ("AME") Plant of the Year award (Henderson, KY-2014).  The Brillion foundry was featured for its advanced lean and quality systems by The American Casting Society in 2014.

All of our facilities incorporate extensive lean visual operating systems in the management of their day to day operations. This helps improve our product and process flow and on-time-delivery to our customers while minimizing required inventory levels across the business.

Competition

We operate in highly competitive markets. However, no single manufacturer competes with all of the products manufactured and sold by us in the heavy- and medium-duty truck markets, and the degree of competition varies among the different products that we sell. In each of our markets, we compete on the basis of price, manufacturing and distribution capabilities, product quality, product design, product line breadth, delivery, and service.

The competitive landscape for each of our brands is unique. Our primary competitors in the wheel markets include Alcoa Inc. and Maxion Wheels. Our primary competitors in the wheel-ends and assemblies markets for heavy- and medium-duty trucks and commercial trailers are KIC Holdings, Inc., Meritor, Inc., Consolidated Metco Inc., and Webb Wheel Products Inc. Our major competitors in the industrial components market include ten to twelve foundries operating in the Midwest and Southern regions of the United States and in Mexico.

Raw Materials and Suppliers

We typically purchase steel for our wheel products from a number of different suppliers by negotiating high-volume one year contracts directly with steel mills or steel service centers.  While we believe that our supply contracts can be renewed on acceptable terms, we may not be able to renew these contracts on such terms, or at all. However, we do not believe that we are overly dependent on long-term supply contracts for our steel requirements as we have alternative sources available if need requires. Depending on market dynamics and raw material availability, the market is occasionally in tight supply, which may result in occasional industry allocations and surcharges.

We obtain aluminum for our wheel products from aluminum billet casting manufacturers.  We believe that aluminum is readily available from a variety of sources.  Aluminum prices have been volatile from time-to-time. We attempt to minimize the impact of such volatility through selected customer supported hedge agreements, supplier agreements and contractual price adjustments with customers.

Major raw materials for our wheel-end and industrial component products are steel scrap and pig iron. We do not have any long-term pricing agreements with any steel scrap or pig iron suppliers, but we do not anticipate having any difficulty in obtaining steel scrap or pig iron due to the large number of potential suppliers and our position as a major purchaser in the industry. A portion of the increases in steel scrap prices for our wheel-ends and industrial components are passed-through to most of our customers by way
of a fluctuating surcharge, which is calculated and adjusted on a periodic basis. Other major raw materials include silicon sand, binders, sand additives and coated sand, which are generally available from multiple sources. Coke and natural gas, the primary energy sources for our melting operations, have historically been generally available from multiple sources, and electricity, another of these energy sources, has historically been generally available.

Employees and Labor Unions

As of December 31, 2014, we had approximately 2,247 employees, of which 497 were salaried employees with the remainder paid hourly. Unions represent approximately 1,512 of our employees, which is approximately 67% percent of our total employees. We have collective bargaining agreements with several unions, including (1) the United Auto Workers, (2) the United Steelworkers, (3) the International Association of Machinists and Aerospace Workers, (4) the National Automobile, Aerospace, Transportation, and General Workers Union of Canada and (5) El Sindicato Industrial de Trabajadores de Nuevo Leon.

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 2015 negotiations in Monterrey were successfully completed prior to the expiration of our union contract. In 2014, we successfully negotiated new bargaining agreements for our Erie, Pennsylvania and Rockford, Illinois facilities, which will expire on September 3, 2018 and March 25, 2019, respectively. We have a contract expiring at our London, Ontario facility on March 12, 2015, but have already negotiated a successor agreement that will be effective from March 13, 2015 through March 12, 2018. No other collective bargaining agreements expire in 2015.

Intellectual Property

We believe the protection of our intellectual property is important to our business. Our principal intellectual property consists of product and process technology, a number of patents, trade secrets, trademarks and copyrights. Although our patents, trade secrets, and copyrights are important to our business operations and in the aggregate constitute a valuable asset, we do not believe that any single patent, trade secret, or copyright is critical to the success of our business as a whole. We also own common law rights and U.S. federal and foreign trademark registrations for several of our brands, which we believe are valuable, including Accuride®, BrillionTM, and Gunite®. Our policy is to seek statutory protection for all significant intellectual property embodied in patents and trademarks. From time to time, we may grant licenses under our intellectual property and receive licenses under intellectual property of others.

Backlog

Our production is based on firm customer orders and estimated future demand. Since firm orders generally do not extend beyond 15-45 days, backlog volume is generally not significant.

Environmental Matters

Our operations, facilities, and properties are subject to extensive and evolving laws and regulations pertaining to air emissions, wastewater and stormwater discharges, the handling and disposal of solid and hazardous materials and wastes, the investigation and remediation of contamination, and otherwise relating to health, safety, and the protection of the environment and natural resources. The violation of such laws can result in significant fines, penalties, liabilities or restrictions on operations. From time to time, we are involved in administrative or legal proceedings relating to environmental, health and safety matters, and have in the past incurred and will continue to incur capital costs and other expenditures relating to such matters. For example, we are currently involved in a proceeding regarding alleged violations of stormwater regulations at our Brillion facility, which could subject us to fines, penalties or other liabilities. In connection with that matter, we have completed certain capital improvements related to the underlying allegations. Based on current information, we do not expect that this matter will have a material adverse effect on our business, results of operations or financial conditions; however, we cannot assure you that this or any other future environmental compliance matters will not have such an effect.

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.

As of December 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.

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 business, results of operations or financial condition.

At our Erie, Pennsylvania, facility, we have obtained an environmental insurance policy to provide coverage with respect to certain environmental liabilities.

Management does not believe that the outcome of any environmental proceedings will have a material adverse effect on our consolidated financial condition or results of operations.

Research and Development Expense

Expenditures relating to the development of new products and processes, including significant improvements and refinements to existing products, are expensed as incurred. The amount expensed in the years ended December 31, 2014, 2013 and 2012 totaled $5.6 million, $5.7 million and $6.6 million, respectively.

Website Access to Reports

We make our periodic and current reports available, free of charge, on our website as soon as practicable after such material is electronically filed with the Securities and Exchange Commission (the "SEC"). Our website address is www.accuridecorp.com and the reports are filed under "SEC Filings" in the Investor Information section of our website.   Our website and information included in or linked to our website are not part of this 2014 Annual Report filed on Form 10-K.  The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The SEC's website is www.sec.gov.

Item 1A.                          Risk Factors
 
Factors That May Affect Future Results

In this report, we have made various statements regarding current expectations or forecasts of future events. These statements are "forward-looking statements" within the meaning of that term in Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements are also made from time-to-time in press releases and in oral statements made by our officers. Forward-looking statements are identified by the words "estimate," "project," "anticipate," "will continue," "will likely result," "expect," "intend," "believe," "plan," "predict" and similar expressions.

Such forward-looking statements are based on assumptions and estimates, which although believed to be reasonable, may turn out to be incorrect. Therefore, undue reliance should not be placed upon these statements and estimates. These statements or estimates may not be realized and actual results may differ from those contemplated in these "forward-looking statements." Some of the factors that may cause these statements and estimates to differ materially include, among others, market demand in the commercial vehicle industry, general economic, business and financing conditions, labor relations, government action, competitor pricing activity, expense volatility, and each of the risks highlighted below.

We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise. You are advised to consult further disclosures we may make on related subjects in our filings with the SEC. Our expectations, beliefs, or projections may not be achieved or accomplished. In addition to other factors discussed in the report, some of the important factors that could cause actual results to differ from those discussed in the forward-looking statements include the following risk factors.

Risks Related to Our Business and Industry

We rely on, and make significant operational decisions based, in part, upon industry forecasts for commercial vehicles and for the end markets that Brillion serves, and these forecasts may prove to be inaccurate.

We continue to operate in a challenging economic environment and our ability to maintain liquidity may be affected by economic or other conditions that are beyond our control and which are difficult to predict. The 2015 OEM production forecasts by ACT Publications for the significant commercial vehicle markets that we serve, as of February 10, 2015, are as follows:
 
North American Class 8
340,226
North American Classes 5-7
228,534
U.S. Trailers
303,300

Brillion's end markets include commercial truck, mobile off-highway construction, agricultural, and mining equipment, and oil and gas infrastructure.  These markets are very sensitive to commodity pricing of agricultural products, metals, and oil and gas.

We are dependent on sales to a small number of our major customers in our Wheels and Gunite segments and on our status as standard supplier on certain truck platforms of each of our major customers.

Sales, including aftermarket sales, to Navistar, DTNA, Volvo/Mack, PACCAR, and Advanced Wheel constituted approximately 14.1 percent, 13.2 percent, 10.5 percent, 6.5 percent, and 5.8 percent, respectively, of our 2014 net sales. No other customer accounted for more than 5 percent of our net sales for this period. The loss of any significant portion of sales to any of our major customers would likely have a material adverse effect on our business, results of operations or financial condition.

We are a standard supplier of various components at many of our major OEM customers, which results in recurring revenue as our standard components are installed on most trucks ordered from that platform, unless the end user specifically requests a different product, generally at an additional charge. The selection of one of our products as a standard component may also create a steady demand for that product in the aftermarket. We may not maintain our current standard supplier positions in the future, and may not become the standard supplier for additional truck platforms. The loss of a significant standard supplier position or a significant number of standard supplier positions with a major customer could have a material adverse effect on our business, results of operations or financial condition.  For example, during 2012 Gunite lost standard position at two OEMs for certain products, which led to impairment charges as described in Note 4 and Note 6 to the "Notes to Consolidated Financial Statements" included herein.

We are continuing to engage in efforts intended to improve and expand our relations with each of the customers named above. We have supported our position with these customers through direct and active contact with end users, trucking fleets, and dealers, and have located certain of our marketing personnel in offices near these customers and most of our other major customers. We may not be able to successfully maintain or improve our customer relationships so that these customers will continue to do business with us as they have in the past or be able to supply these customers or any of our other customers at current levels. The loss
of a significant portion of our sales to any of these named customers could have a material adverse effect on our business, results of operations or financial condition. In addition, the delay or cancellation of material orders from, or problems at, any of our other major customers could have a material adverse effect on our business, results of operations, or financial condition.

Increased cost or reduced supply of raw materials and purchased components may adversely affect our business, results of operations or financial condition.

Our business is subject to the risk of price increases and fluctuations and periodic delays in the delivery of raw materials and purchased components that are beyond our control. Our operations require substantial amounts of raw steel, aluminum, steel scrap, pig iron, electricity, coke, natural gas, bearings, purchased components, silicon sand, binders, sand additives, and coated sand. Fluctuations in the delivery of these materials may be driven by the supply/demand relationship for material, factors particular to that material or governmental regulation for raw materials such as electricity and natural gas.  In addition, if any of our suppliers seek bankruptcy relief or otherwise cannot continue their business as anticipated or we cannot renew our supply contracts on favorable terms, the availability or price of raw materials could be adversely affected.  Fluctuations in prices and/or availability of the raw materials or purchased components used by us, which at times may be more pronounced during periods of increased industry demand, may affect our profitability and, as a result, have a material adverse effect on our business, results of operations, or financial condition. In addition, as described above, a shortening or elimination of our trade credit by our suppliers may affect our liquidity and cash flow and, as a result, have a material adverse effect on our business, results of operations, or financial condition.

We use substantial amounts of raw steel and aluminum in our production processes to produce our steel and aluminum wheels. Although raw steel is generally available from a number of sources, we have obtained favorable sourcing by negotiating and entering into high-volume contracts with terms of usually no longer than 1 year. We obtain raw steel and aluminum from various suppliers. We may not be successful in renewing our supply contracts on favorable terms or at all. A substantial interruption in the supply of raw steel or aluminum or inability to obtain a supply of raw steel or aluminum on commercially desirable terms could have a material adverse effect on our business, results of operations or financial condition. We are not always able, and may not be able in the future, to pass on increases in the price of raw steel or aluminum to our customers on a timely basis or at all. In particular, when raw material prices increase rapidly or to significantly higher than normal levels, we may not be able to pass price increases through to our customers on a timely basis, if at all, which could adversely affect our operating margins and cash flow. Any fluctuations in the price or availability of raw steel or aluminum may have a material adverse effect on our business, results of operations or financial condition.

Steel scrap and pig iron are also major raw materials used in our business to produce our wheel-end and industrial components. Steel scrap is derived from, among other sources, junked automobiles, industrial scrap, railroad cars, agricultural and heavy machinery, and demolition steel scrap from obsolete structures, containers and machines. Pig iron is a low-grade cast iron that is a product of smelting iron ore with coke and limestone in a blast furnace. The availability and price of steel scrap and pig iron are subject to market forces largely beyond our control, including North American and international demand for steel scrap and pig iron, freight costs, speculation and foreign exchange rates. Steel scrap and pig iron availability and price may also be subject to governmental regulation. We are not always able, and may not be able in the future, to pass on increases in the price of steel scrap and pig iron to our customers. In particular, when raw material prices increase rapidly or to significantly higher than normal levels, we may not be able to pass price increases through to our customers on a timely basis, if at all, which could have a material adverse effect on our operating margins and cash flow. Any fluctuations in the price or availability of steel scrap or pig iron may have a material adverse effect on our business, results of operations or financial condition. See "Item 1—Business—Raw Materials and Suppliers".

Our business is affected by the seasonality and regulatory nature of the industries and markets that we serve.

Our operations are typically seasonal as a result of regular customer maintenance and model changeover shutdowns, which typically occur in the third and fourth quarter of each calendar year.  This seasonality may result in decreased net sales and profitability during the third and fourth fiscal quarters and have a material adverse effect on our business, results of operations, or financial condition. In addition, our Gunite product line typically experiences higher aftermarket purchases of wheel-end components during the first and second quarters of the calendar year. In addition, federal and state regulations (including engine emissions regulations, tariffs, import regulations and other taxes) may have a material adverse effect on our business and are beyond our control.

Cost reduction and quality improvement initiatives by OEMs could have a material adverse effect on our business, results of operations or financial condition.

We are primarily a components supplier to the heavy- and medium-duty truck industries, which are characterized by a small number of OEMs that are able to exert considerable pressure on components suppliers to reduce costs, improve quality and provide additional design and engineering capabilities. Given the fragmented nature of the industry, OEMs continue to demand and receive price reductions and measurable increases in quality through their use of competitive selection processes, rating programs, and various other arrangements. We may be unable to generate sufficient production cost savings in the future to offset such price reductions. OEMs may also seek to save costs by relocating production to countries with lower cost structures, which could in turn lead them to purchase components from local suppliers with lower production costs. Additionally, OEMs have generally required component
suppliers to provide more design engineering input at earlier stages of the product development process, the costs of which have, in some cases, been absorbed by the suppliers. Future price reductions, increased quality standards and additional engineering capabilities required by OEMs may reduce our profitability and have a material adverse effect on our business, results of operations, or financial condition.

We operate in highly competitive markets and we may not be able to compete successfully.

The markets in which we operate are highly competitive. We compete with a number of other manufacturers and distributors that produce and sell similar products. Our products primarily compete on the basis of price, manufacturing and distribution capability, product design, product quality, product delivery and product service. Some of our competitors are companies, or divisions, units or subsidiaries of companies that are larger and have greater financial and other resources than we do. For these reasons, our products may not be able to compete successfully with the products of our competitors. In addition, our competitors may foresee the course of market development more accurately than we do, develop products that are superior to our products, or have the ability to produce similar products at a lower cost than we can, or adapt more quickly than we do to new technologies or evolving regulatory, industry, or customer requirements. As a result, our products may not be able to compete successfully with their products. In addition, OEMs may expand their internal production of components, shift sourcing to other suppliers, or take other actions that could reduce the market for our products and have a negative impact on our business. We may encounter increased competition in the future from existing competitors or new competitors. We expect these competitive pressures in our markets to remain strong. See "Item 1—Business—Competition".

In addition, competition from foreign truck components suppliers, especially in the aftermarket, may lead to an increase in truck components imported into North America, adversely affecting our market share and negatively affecting our ability to compete. Foreign truck components suppliers, including those in China, may in the future increase their current share of the markets for truck components in which we compete. Some of these foreign suppliers may be owned, controlled or subsidized by their governments, and their decisions with respect to production, sales and exports may be influenced more by political and economic policy considerations than by prevailing market conditions. In addition, foreign truck components suppliers may be subject to less restrictive regulatory and environmental regimes that could provide them with a cost advantage relative to North American suppliers. Therefore, there is a risk that some foreign suppliers, including those in China, may increase their sales of truck components in North American markets despite decreasing profit margins or losses.  Brillion is also influenced unfavorably by the import of iron castings from China and India, which is a growing threat.

On March 30, 2011, we, along with one other United States domestic commercial vehicle steel wheel supplier, filed antidumping and countervailing duty petitions with the United States International Trade Commission and the United States Department of Commerce alleging that manufacturers of certain steel wheels in China are dumping their products in the United States and that these manufacturers have been subsidized by their government in violation of United States trade laws.  In May 2011, the International Trade Commission issued a preliminary determination that there was a reasonable indication that the U.S. steel wheel industry is materially injured or threatened with material injury by reason of imports from China of certain steel wheels, and began the final phase of its investigation.  In August 2011, the U.S. Department of Commerce issued a preliminary determination of countervailing duties on steel wheels imported from China ranging from 26.2 percent to 46.6 percent ad valorem, and in October 2011, the U.S. Department of Commerce issued a preliminary determination of antidumping duty margins ranging from 110.6 percent to 243.9 percent ad valorem.  On March 19, 2012, the Department of Commerce made final determinations of dumping and subsidy margins which cumulatively were approximately 70 percent to 228 percent ad valorem.  However, on April 17, 2012, the International Trade Commission determined that the domestic industry has not been injured and was not presently threatened with injury from subject imports, and consequently withdrew all import duties on the subject imports.  If future trade cases do not provide relief from unfair trade practices, U.S. protective trade laws are weakened or international demand for trucks and/or truck components decreases, an increase of truck component imports into the United States may occur, which could have a material adverse effect on our business, results of operation or financial condition.

Economic and other conditions may adversely impact the valuation of our assets resulting in impairment charges that could have a material adverse effect on our business, results of operations, or financial condition.
 
We review goodwill and our indefinite lived intangible assets (trade names) for impairment annually or more frequently if impairment indicators exist. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include, among others: a significant decline in our expected future cash flows, a sustained, significant decline in our stock price and market capitalization, a significant adverse change in industry or economic trends, unanticipated competition, slower growth rates, and significant changes in the manner of the use of our assets or the strategy for our overall business. Such adverse trends could include a swift and significant cyclical downturn in the North American commercial vehicle industry or shirt in purchasing strategies toward products imported from low cost countries.  Any adverse change in these factors could have a significant impact on the recoverability of these assets and could have a material impact on our consolidated financial statements. For example, due to business developments during 2012, including the loss of standard position for some of its products at two OEM customers, our

Gunite reporting unit recorded goodwill, intangibles, and property, plant and equipment impairments of $62.8 million, $36.8 million and $34.1 million, respectively, for the year ended December 31, 2012.  In the most recent rest for impairment, our analysis concluded that the Wheels reporting unit had 7 percent of value in excess of its carrying value.  Considering the cyclical nature of the North American commercial vehicle industry and other end-markets along with the other economic trends mentioned previously, we will continue to closely monitor the performance of the Wheels and Brillion reporting segments for any indication of potential impairment triggering events.  If we determine in the future that there are other potential impairments in any of our reporting units, we may be required to record additional charges to earnings that could have a material adverse effect on our business, results of operations, or financial condition.

We are subject to risks associated with our international operations.
 
We sell products in international locations and operate plants in Canada and Mexico. In addition, it is part of our strategy to continue to expand internationally. Our current and future international sales and operations are subject to risks and uncertainties, including:
 
possible government legislation;
 
difficulties and costs associated with complying with a wide variety of complex and changing laws, treaties and regulations;
 
unexpected changes in regulatory environments;
 
limitations on our ability to enforce legal rights and remedies;
 
economic and political conditions, war and civil disturbance;
 
tax rate changes;
 
tax inefficiencies and currency exchange controls that may adversely impact our ability to repatriate cash from non-United States subsidiaries;
 
the imposition of tariffs or other import or export restrictions;
 
costs and availability of shipping and transportation;
 
increased competition from global competitors; and
 
nationalization of properties by foreign governments.
 
We may have difficulty anticipating and effectively managing these and other risks that our international operations may face, which may adversely impact our business outside the United States and our business, financial condition and results of operations.  In addition, international expansion will also require significant attention from our management and could require us to add additional management and other resources in these markets.
 
In addition, we operate in parts of the world that have experienced governmental corruption, and we could be adversely affected by violations of the Foreign Corrupt Practices Act ("FCPA") and similar worldwide anti-bribery laws. The FCPA and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business. If we were found to be liable for FCPA violations, we could be liable for criminal or civil penalties or other sanctions, which could have a material adverse impact on our business, financial condition and results of operations.

We face exposure to foreign business and operational risks including foreign exchange rate fluctuations and if we were to experience a substantial fluctuation, our profitability may change.

In the normal course of doing business, we are exposed to risks associated with changes in foreign exchange rates, particularly with respect to the Canadian Dollar and Mexican Peso. From time to time, we use forward foreign exchange contracts, and/or other derivative instruments, to help offset the impact of the variability in exchange rates on our operations, cash flows, assets and liabilities. At December 31, 2014, however, we had $$7.0 million in open foreign exchange forward contracts. Factors that could further impact the risks associated with changes in foreign exchange rates include the accuracy of our sales estimates, volatility of currency markets and the cost and availability of derivative instruments. See "Item 7A— Quantitative and Qualitative Disclosure about Market Risk —Foreign Currency Risk". In addition, changes in the laws or governmental policies in the countries in which we operate could have a material adverse effect on our business, results of operations, or financial condition.


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We may not be able to continue to meet our customers' demands for our products and services.

In order to remain competitive, we must continue to meet our customers' demand for our products and services. However, we may not be successful in doing so. If our customers' demand for our products and/or services exceeds our ability to meet that demand, we may be unable to continue to provide our customers with the products and/or services they require to meet their business needs. Factors that could result in our inability to meet customer demands include an unforeseen spike in demand for our products and/or services, a failure by one or more of our suppliers to supply us with the raw materials and other resources that we need to operate our business effectively or poor management of our Company or one or more divisions or units of our Company, among other factors. Our ability to provide our customers with products and services in a reliable and timely manner, in the quantity and quality desired and
with a high level of customer service, may be severely diminished as a result. If this happens, we may lose some or all of our customers to one or more of our competitors, which could have a material adverse effect on our business, results of operations, or financial condition.

In addition, it is important that we continue to meet our customers' demands in the truck components industry for product innovation, improvement and enhancement, including the continued development of new-generation products, design improvements and innovations that improve the quality and efficiency of our products. Developing product innovations for the truck components industry has been and will continue to be a significant part of our strategy. However, such development will require us to continue to invest in research and development and sales and marketing. In the future, we may not have sufficient resources to make such necessary investments, or we may be unable to make the technological advances necessary to carry out product innovations sufficient to meet our customers' demands. We are also subject to the risks generally associated with product development, including lack of market acceptance, delays in product development and failure of products to operate properly. We may, as a result of these factors, be unable to meaningfully focus on product innovation as a strategy and may therefore be unable to meet our customers' demand for product innovation.

Equipment failures, delays in deliveries or catastrophic loss at any of our facilities could lead to production or service curtailments or shutdowns.

We manufacture our products and provide services at eight facilities and provide logistical services at our just-in-time sequencing facilities in the United States. An interruption in production or service capabilities at any of these facilities as a result of equipment failure or other reasons could result in our inability to produce our products, which would reduce our net sales and earnings for the affected period. In the event of a stoppage in production at any of our facilities, even if only temporary, or if we experience delays as a result of events that are beyond our control, delivery times to our customers could be severely affected. Any significant delay in deliveries to our customers could lead to increased returns or cancellations and cause us to lose future sales. Our facilities are also subject to the risk of catastrophic loss due to unanticipated events such as fires, explosions or violent weather conditions. We may experience plant shutdowns or periods of reduced production as a result of equipment failure, delays in deliveries or catastrophic loss, which expenses in excess of insurance, if any, could have a material adverse effect on our business, results of operations or financial condition.

We are subject to risks relating to our information technology systems, and any failure to adequately protect our critical information technology systems could materially affect our operations.
 
We rely on information technology systems across our operations, including for management, supply chain and financial information and various other processes and transactions. In addition, we are in the process of a corporate-wide migration to a new enterprise resource planning ("ERP") software system.  Our ability to effectively manage our business depends on the security, reliability and capacity of these systems. Information technology system failures, network disruptions or breaches of security could disrupt our operations, causing delays or cancellation of customer orders or impeding the manufacture or shipment of products, processing of transactions or reporting of financial results. An attack or other problem with our systems could also result in the disclosure of proprietary information about our business or confidential information concerning our customers or employees, which could result in significant damage to our business and our reputation.

In addition, we could be required to expend significant additional amounts to respond to information technology issues or to protect against threatened or actual security breaches. We may not be able to implement measures that will protect against all of the significant risks to our information technology systems.

We may be subject to product liability claims, recalls or warranty claims, which could be expensive, damage our reputation and result in a diversion of management resources.

As a supplier of products to commercial vehicle OEMs, we face an inherent business risk of exposure to product liability claims in the event that our products, or the equipment into which our products are incorporated, malfunction and result in property damage, personal injury or death. Product liability claims could result in significant losses as a result of expenses incurred in defending claims
or the award of damages. While we do maintain product liability insurance, we cannot assure you that it will be sufficient to cover all product liability claims, that such claims will not exceed our insurance coverage limits or that such insurance will continue to be available on commercially reasonable terms, if at all. Any product liability claim brought against us could have a material adverse effect on our results of operations.
In addition, we may be required to participate in evaluations, investigations, or recalls involving products sold by us if any are alleged to be or prove to be defective or noncompliant with applicable federal motor vehicle safety standards.  Further, we may voluntarily initiate a recall or make payments related to such claims as a result of various industry or business practices or the need to maintain good customer relationships. For example, in January 2015, the National Highway Traffic Safety Administration ("NHTSA") initiated a preliminary evaluation of certain steel wheels alleged to have cracks resulting in a loss of tire air pressure. Although we believe that NHTSA should close the preliminary evaluation without a finding of defect and do not expect that this matter will have a material adverse effect on our business, results of operations or financial conditions, we cannot assure you that this or any other future investigation will not have such an effect.  Any evaluation, investigation or recall could involve significant expense and diversion of management attention and other resources, and could adversely affect our brand image as well as our business, results of operations or financial conditions.

Work stoppages or other labor issues at our facilities or at our customers' facilities could have a material adverse effect on our operations.

As of December 31, 2014, unions represented approximately 67 percent of our workforce. As a result, we are subject to the risk of work stoppages and other labor relations matters. Any prolonged strike or other work stoppage at any one of our principal unionized facilities could have a material adverse effect on our business, results of operations or financial condition. We have collective bargaining agreements with different unions at various facilities. These collective bargaining agreements expire at various times over the next few years, with the exception of our union contract at our Monterrey, Mexico facility, which expires on an annual basis. The 2015 negotiations in Monterrey were successfully completed prior to the expiration of our union contract. In 2012, we extended the labor contracts at our London, Ontario facility through March 2018.  Also, in 2013 we successfully negotiated our collective bargaining agreement at our Brillion, Wisconsin facility, extending that agreement through June, 2018.  In 2014, we successfully negotiated our collective bargaining agreements at Erie, Pennsylvania and Rockford, Illinois facilities, extending those agreements through September 3, 2018 and March 25, 2019, respectively. We do not anticipate any work stoppages or labor issues during 2015; however, we cannot assure you that a significant labor issue will not arise.  

In addition, if any of our customers experience a material work stoppage, that customer may halt or limit the purchase of our products. This could cause us to shut down production facilities relating to these products, which could have a material adverse effect on our business, results of operations or financial condition.

We are subject to a number of environmental laws and regulations that may require us to make substantial expenditures or cause us to incur substantial liabilities.

Our operations, facilities, and properties are subject to extensive and evolving laws and regulations pertaining to air emissions, wastewater and stormwater discharges, the handling and disposal of solid and hazardous materials and wastes, the investigation and remediation of contamination, and otherwise relating to health, safety, and the protection of the environment and natural resources. The violation of such laws can result in significant fines, penalties, liabilities or restrictions on operations. From time to time, we are involved in administrative or legal proceedings relating to environmental, health and safety matters, and have in the past incurred and will continue to incur capital costs and other expenditures relating to such matters. For example, we are involved in a proceeding regarding alleged violations of stormwater regulations at our Brillion facility, which could subject us to fines, penalties or other liabilities. In connection with that matter, we have made certain capital improvements related to the underlying allegations. Based on current information, we do not expect that this matter will have a material adverse effect on our business, results of operations or financial conditions; however, we cannot assure you that these or any other future environmental compliance matters will not have such an effect.

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.

As of December 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.

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 business, results of operations or financial condition.

At the Erie, Pennsylvania, facility, we have obtained an environmental insurance policy to provide coverage with respect to certain environmental liabilities.

Management does not believe that the outcome of any environmental proceedings will have a material adverse effect on our consolidated financial condition or results of operations. See "Item 1—Business—Environmental Matters."

Future climate change regulation may require us to make substantial expenditures or cause us to incur substantial liabilities.

Many scientists, legislators and others attribute climate change to increased emissions of greenhouse gases ("GHGs"), which has led to significant legislative and regulatory efforts to limit GHGs. In the recent past, Congress has considered legislation that would have reduced GHG emissions through a cap-and-trade system of allowances and credits, under which emitters would be required to buy allowances to offset emissions. In addition, in late 2009, the EPA promulgated a rule requiring certain emitters of GHGs to monitor and report data with respect to their GHG emissions and, in May 2010, finalized its "tailoring" rule for determining which stationary sources are required to obtain permits, or implement best available control technology, on account of their GHG emission levels. The EPA is also expected to adopt additional rules in the future that will require permitting for ever-broader classes of GHG emission sources. Moreover, several states, including states in which we have facilities, are considering or have begun to implement various GHG registration and reduction programs. Certain of our facilities use significant amounts of energy and may emit amounts of GHGs above certain existing and/or proposed regulatory thresholds. GHG laws and regulations could increase the price of the energy we purchase, require us to purchase allowances to offset our own emissions, require us to monitor and report our GHG emissions or require us to install new emission controls at our facilities, any one of which could significantly increase our costs or otherwise negatively affect our business, results of operations or financial condition. In addition, future efforts to curb transportation-related GHGs could result in a lower demand for our products, which could negatively affect our business, results of operation or financial condition. While future GHG regulation appears likely, it is difficult to predict how these regulations will affect our business, results of operations or financial condition.

We might fail to adequately protect our intellectual property, or third parties might assert that our technologies infringe on their intellectual property.

The protection of our intellectual property is important to our business. We rely on a combination of trademarks, copyrights, patents, and trade secrets to provide protection in this regard, but this protection might be inadequate. For example, our pending or future trademark, copyright, and patent applications might not be approved or, if allowed, they might not be of sufficient strength or scope. Conversely, third parties might assert that our technologies or other intellectual property infringe on their proprietary rights. Any intellectual property-related litigation could result in substantial costs and diversion of our efforts and, whether or not we are ultimately successful, the litigation could have a material adverse effect on our business, results of operations or financial condition. See "Item 1—Business—Intellectual Property."

Litigation against us could be costly and time consuming to defend.

We are regularly subject to legal proceedings and claims that arise in the ordinary course of business, such as workers' compensation claims, OSHA investigations, employment disputes, unfair labor practice charges, customer and supplier disputes, intellectual property disputes, and product liability claims arising out of the conduct of our business. Litigation may result in substantial costs and may divert management's attention and resources from the operation of our business, which could have a material adverse effect on our business, results of operations or financial condition.

Anti-takeover provisions could discourage or prevent potential acquisition proposals and a change of control, and thereby adversely impact the performance of our common stock.

Certain anti-takeover provisions that are contained in our governing documents, including our advance notice bylaw and the fact that our stockholders may not call special meetings or take action by written consent, could deter a change of control and negatively affect the price of our common stock.

Additionally, if a person or entity is able to acquire a substantial amount of our common stock, a change of control could be triggered under Delaware General Corporation Law, our Asset Based Loan ("ABL") credit facility or the indenture governing our senior notes. If a change of control under our ABL credit facility were to occur, we would need to obtain a waiver from our lenders or amend the facility. If a change of control under the indenture were to occur, we could be required to repurchase our senior notes at the option of the holders. If we are unable to obtain a waiver/amendment or repurchase the notes, as applicable, or otherwise refinance these debts, the lenders or noteholders, as applicable, could potentially accelerate these debts, and our liquidity and capital resources could be significantly limited and our business operations could be materially and adversely affected.

If we fail to retain our executive officers, our business could be harmed.

Our success largely depends on the efforts and abilities of our executive officers. Their skills, experience and industry contacts significantly contribute to the success of our business and our results of operations. The loss of any one of them could be detrimental to our business, results of operations or financial condition. All of our executive officers are at will, but, as noted below, many of them have a severance agreement. In addition, our future success and profitability will also depend, in part, upon our continuing ability to attract and retain highly qualified personnel throughout our Company.

We have entered into typical severance arrangements with certain of our senior management employees, which may result in certain costs associated with strategic alternatives.

Severance and retention agreements with certain senior management employees provide that the participating executive is entitled to a regular severance payment if we terminate the participating executive's employment without "cause" or if the participating executive terminates his or her employment with us for "good reason" (as these terms are defined in the agreement) at
any time other than during a "Protection Period." The regular severance benefit is equal to the participating executive's base salary for one year. See "Item 10—Directors, Executive Officers, and Corporate Governance." A Protection Period begins on the date on which a "change in control" (as defined in the agreement) occurs and ends 18 months after a "change in control".

The change in control severance benefit is payable to an executive if his or her employment is terminated during the Protection Period either by the participating executive for "good reason" or by us without "cause." The change in control severance benefits for Tier II executives (Messrs. Dauch, Adams, Hazlett, Martin, Risch, and Ms. Blair) consist of a payment equal to 200% of the executive's salary plus 200% of the greater of (i) the annualized incentive compensation to which the executive would be entitled as of the date on which the change of control occurs or (ii) the average incentive compensation award over the three years prior to termination. The change in control severance benefits for Tier III executives (other key executives) consist of a payment equal to 100% of the executive's salary and 100% of the greater of (i) the annualized incentive compensation to which the executive would be entitled as of the date on which the change of control occurs or (ii) the average incentive compensation award over the three years prior to termination. If the participating executive's termination occurs during the Protection Period, the severance and retention agreement also provides for the continuance of certain other benefits, including reimbursement for forfeitures under qualified plans and continued health, disability, accident and dental insurance coverage for the lesser of 18 months (or 12 months in the case of Tier III executives) from the date of termination or the date on which the executive receives such benefits from a subsequent employer. We no longer use the form of Tier I severance and retention agreements.

Neither the regular severance benefit nor the change in control severance benefit is payable if we terminate the participating executive's employment for "cause," if the executive voluntarily terminates his or her employment without "good reason" or if the executive's employment is terminated as a result of disability or death. Any payments to which the participating executive may be entitled under the agreement will be reduced by the full amount of any payments to which the executive may be entitled due to termination under any other severance policy offered by us. These agreements would make it costly for us to terminate certain of our senior management employees and such costs may also discourage potential acquisition proposals, which may negatively affect our stock price.

Our products may be rendered obsolete or less attractive by changes in regulatory, legislative or industry requirements.

Changes in regulatory, legislative or industry requirements may render certain of our products obsolete or less attractive. Our ability to anticipate changes in these requirements, especially changes in regulatory standards, will be a significant factor in our ability to remain competitive. We may not be able to comply in the future with new regulatory, legislative and/or industrial standards that may be necessary for us to remain competitive and certain of our products may, as a result, become obsolete or less attractive to our customers.

Our strategic initiatives may be unsuccessful, may take longer than anticipated, or may result in unanticipated costs.

Future strategic initiatives could include divestitures, acquisitions, and restructurings, the success and timing of which will depend on various factors. Many of these factors are not in our control. In addition, the ultimate benefit of any acquisition would

depend on the successful integration of the acquired entity or assets into our existing business. Failure to successfully identify, complete, and/or integrate future strategic initiatives could have a material adverse effect on our business, our results of operations, or financial condition.

Additionally, our strategy contemplates significant growth in international markets in which we have significantly less market share and experience than we have in our domestic operations and markets. In addition, some of our competitors have established a global footprint.  An inability to penetrate these international markets could adversely affect our results of operations.

Our ability to use net operating losses to offset future taxable income may be subject to certain limitations.
 
In general, under Section 382 of the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code, a corporation that undergoes an "ownership change" is subject to limitations on its ability to utilize its pre-change net operating losses ("NOLs"), to offset future taxable income. Future changes in our stock ownership, some of which are outside of our control, could result in an ownership change under Section 382 of the Internal Revenue Code. For these reasons, we may not be able to utilize a material portion of the NOLs reflected on our balance sheet, even if we return to profitability.

Risks Related to Our Indebtedness

Our leverage and debt service obligations could have a material adverse effect on our financial condition or our ability to fulfill our obligations and make it more difficult for us to fund our operations.

As of December 31, 2014, our total gross indebtedness was $327.0 million. Our indebtedness and debt service obligations could have important negative consequences to us, including:

Difficulty satisfying our obligations with respect to our indebtedness;
Difficulty obtaining financing in the future for working capital, capital expenditures, acquisitions or other purposes;
Increased vulnerability to general economic downturns and adverse industry conditions;
Limited flexibility in planning for, or reacting to, changes in our business and in our industry in general; and
Placing us at a competitive disadvantage compared to our competitors that have less debt.

Despite our leverage, we and our subsidiaries will be able to incur more indebtedness. This could further exacerbate the risk described immediately above, including our ability to service our indebtedness.

We and our subsidiaries may be able to incur additional indebtedness in the future. Although our ABL credit facility and indenture governing our senior notes contain restrictions on the incurrence of additional indebtedness, such restrictions are subject to a number of qualifications and exceptions, and under certain circumstances indebtedness incurred in compliance with such restrictions (or with the consent of our lenders) could be substantial. For example, we may incur additional debt to, among other things, finance future acquisitions, expand through internal growth, fund our working capital needs, comply with regulatory requirements, respond to competition or for general financial reasons alone. To the extent new debt is added to our and our subsidiaries' current debt levels, the risks described above would increase.

To service our indebtedness, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control.

Our ability to make payments on and to refinance our indebtedness and to fund planned capital expenditures and research and development efforts will depend on our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory, and other factors that are beyond our control.

Our business may not, however, generate sufficient cash flow from operations. Future borrowings may not be available to us under our ABL credit facility in an amount sufficient to enable us to pay our indebtedness or to fund other liquidity needs. If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell material assets or operations, obtain additional equity capital or refinance all or a portion of our indebtedness. We are unable to predict the timing of such sales or the proceeds which we could realize from such sales, or whether we would be able to refinance any of our indebtedness on commercially reasonable terms or at all.

We are subject to a number of restrictive covenants, which, if breached, may restrict our business and financing activities.

Our ABL facility and the indenture governing our senior secured notes contain various covenants that impose operating and financial restrictions on us and/or our subsidiaries. Our failure to comply with any of these covenants, or our failure to make payments

of principal or interest on our indebtedness, could result in an event of default, or trigger cross-default or cross-acceleration provisions under other agreements, which could result in these obligations becoming immediately due and payable, and cause our creditors to terminate their lending commitments. Any of the foregoing occurrences could have a material adverse effect on our business, results of operations or financial condition.


Item 1B. Unresolved Staff Comments
 
None.

Item 2. Properties

The table below sets forth certain information regarding the material owned and leased properties of Accuride as of December 31, 2014. We believe these properties are suitable and adequate for our business.

Facility Overview

Location
Business function
Brands
Manufactured
Owned/
Leased
Size
(sq. feet)
Evansville, IN                           
Corporate Headquarters
Corporate
Leased
37,229
London, Ontario, Canada
Heavy- and Medium-duty Steel Wheels, Light Truck Steel Wheels
Accuride
Owned
536,259
Henderson, KY     
Heavy- and Medium-duty Steel Wheels, R&D
Accuride
Owned
364,365
Monterrey, Mexico
Heavy- and Medium-duty Steel and Aluminum Wheels, Light Truck Wheels
Accuride
Owned
262,000
Camden, SC                             
Forging and Machining-Aluminum Wheels
Accuride
Owned
80,000
Erie, PA                             
Forging and Machining-Aluminum Wheels
Accuride
Leased
421,229
Springfield, OH                        
Assembly Line and Sequencing
Accuride
Owned
136,036
Whitestown, IN                         
Subleased to unrelated third party
None
Leased
364,000
Batavia, IL                             
Warehouse
None
Leased
170,462
Rockford, IL                             
Wheel-end Foundry and Machining, Administrative Office
Gunite
Owned
619,000
Brillion, WI                             
Molding, Finishing, Administrative Office
Brillion
Owned
593,200
Portland, TN                             
Idle
None
Owned
86,000

Our Erie, Pennsylvania property may be purchased for a nominal sum, subject to refinancing of $1.7 million from the local government economic development organization.  There are no plans to purchase this property.

Our former Whitestown, Indiana distribution operations were moved to Batavia, Illinois in the second half 2013 and this facility is currently subleased to an unrelated third party.  Our Portland, Tennessee facility operations were ceased by Imperial Group on August 1, 2013 upon the sale of our Imperial business to a third party, and the facility was leased by the purchaser through October 2014. The future function of this facility is currently being evaluated. (See Note 2  to the "Notes to Consolidated Financial Statements" included herein for further explanation)

Item 3. Legal Proceedings
 
Neither Accuride nor any of our subsidiaries is a party to any legal proceeding which, in the opinion of management, would have a material adverse effect on our business or financial condition. However, we from time-to-time are involved in ordinary routine litigation incidental to our business, including actions related to product liability, contractual liability, intellectual property, workplace safety and environmental claims. We establish reserves for matters in which losses are probable and can be reasonably estimated. While we believe that we have established adequate accruals for our expected future liability with respect to our pending legal actions and proceedings, our liability with respect to any such action or proceeding may exceed our established accruals. Further, litigation that may arise in the future may have a material effect on our financial condition.

Item 4. Mine Safety Disclosures
 
None.

PART II
 
Item 5.                          Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Common Stock

As of February 27, 2015, there were approximately 11 holders of record of our Common Stock, although there are substantially more beneficial owners.

The following table sets forth the high and low sale prices of our Common Stock, which is listed on the New York Stock Exchange, during 2013 and 2014.

 
 
High
   
Low
 
Fiscal Year Ended December 31, 2013
 
   
 
First Quarter
 
$
5.74
   
$
3.12
 
Second Quarter
 
$
5.83
   
$
4.26
 
Third Quarter
 
$
6.88
   
$
4.80
 
Fourth Quarter
 
$
5.33
   
$
3.10
 
Fiscal Year Ended December 31, 2014
               
First Quarter
 
$
5.05
   
$
3.44
 
Second Quarter
 
$
5.10
   
$
4.28
 
Third Quarter
 
$
5.75
   
$
3.75
 
Fourth Quarter
 
$
5.91
   
$
3.54
 

On February 25, 2015, the closing price of our Common Stock was $5.30.

DIVIDEND POLICY

We have never declared or paid any cash dividends on our Common Stock. For the foreseeable future, we intend to retain any earnings, and we do not anticipate paying any cash dividends on our Common Stock. In addition, our ABL credit facility and indenture governing the senior secured notes restrict our ability to pay dividends. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Capital Resources and Liquidity." Any future determination to pay dividends will be at the discretion of our Board of Directors and will be dependent upon then existing conditions, including our financial condition and results of operations, capital requirements, contractual restrictions, business prospects and other factors that our Board of Directors considers relevant.

2010 RESTRICTED STOCK UNIT AWARDS

In May 2010, we entered into individual restricted stock unit agreements with certain employees of the Company and its subsidiaries that provided for the issuance of up to 178,268 shares of Common Stock. The RSUs entitled the recipients to receive a corresponding number of shares of the Company's Common Stock on the date the RSU vests. The RSUs were not granted under the terms of any plan and are evidenced by the previously filed form Restricted Stock Unit Agreement. The RSUs vested one-third annually over three years subject to the employee's continued employment with the Company. The final tranche of these RSU awards vested in May 2013.

In August 2010, we entered into individual restricted stock unit agreements with members of our Board of Directors that provided for the issuance of up to 55,790 shares of Common Stock. The RSUs entitled the recipients to receive a corresponding number of shares of the Company's Common Stock on the date the RSU vests. The RSUs were not granted under the terms of any plan and are evidenced by the previously filed form Restricted Stock Unit Agreement. The final tranche of these RSU awards vested in March 2014.

STOCK INCENTIVE

In August 2010, we adopted the Accuride Corporation 2010 Incentive Award Plan (the "2010 Incentive Plan") and reserved 1,260,000 shares of Common Stock for issuance under the plan, plus such additional shares of Common Stock that the plan administrator deemed necessary to prevent unnecessary dilution upon issuance of shares pursuant to terms of our then outstanding convertible notes, up to a maximum number shares of Common Stock such that the total number of shares available for issuance under the 2010 Incentive Plan would not exceed ten percent (10%) of the fully diluted shares outstanding from time to time calculated by adding the total shares issued and outstanding at any given time plus the number of shares issued upon conversion of any of the convertible notes at the time of such conversion. During 2010, we effectively converted all outstanding convertible notes to equity, and we subsequently amended the 2010 Incentive Plan to reserve 3,500,000 shares of Common Stock for issuance under the 2010 Incentive Plan.

On March 13, 2014, our Board of Directors adopted, subject to shareholder approval, the Second Amended and Restated 2010 Incentive Award Plan, which increased the number of shares of our common stock available for grants under the plan by

1,700,000 shares, extended the term of the plan until 2024, and made certain other adjustments. Our shareholders approved the Second Amended and Restated 2010 Incentive Award Plan at our Annual Meeting in April 2014, which resulted in a total of 5,200,000 shares of Common Stock being reserved for issuance under the plan.

On April 28, 2011, the Board of Directors of the Company approved restricted stock unit grants to management which will vest annually over a four year period, with 20 percent vesting on each of May 18, 2012, May 18, 2013, and May 18, 2014, and the final 40 percent vesting on May 18, 2015. The RSUs will fully vest upon a change in control of the Company, as defined in the Restricted Stock Unit Agreement.

On February 28, 2012, the Compensation Committee of the Board of Directors approved restricted stock unit and non-qualified stock option grants to certain employees of the Company that were effective as of March 5, 2012. The restricted stock unit awards will vest annually over a four year period, with 20 percent vesting on each of March 5, 2013, March 5, 2014, and March 5, 2015, and the final 40 percent vesting on March 5, 2016. The stock option awards will vest ratably over three years. Both the restricted stock unit and option awards include double trigger change in control vesting provisions, as described in the award agreements.

On March 21, 2013, the Compensation Committee of the Board of Directors approved equity grants to certain employees of the Company. Each grant was split evenly into service-based and performance based-awards.  The service-based restricted stock unit awards will vest annually over a four year period, with 20 percent vesting on each of March 5, 2014, March 5, 2015, and March 5, 2016, and the final 40 percent vesting on March 5, 2017. The performance-based awards will vest upon meeting the threshold criteria for the performance period, which is January 1, 2013 through December 31, 2015.  The restricted stock unit awards include double trigger change in control vesting provisions, as described in the award agreements.

On February 26, 2014, the Compensation Committee of the Board of Directors approved equity grants to certain employees of the Company. Each grant was split evenly into service-based and performance-based awards. The service-based restricted stock unit awards will vest annually over a four year period, with 20 percent vesting on each of March 5, 2015, March 5, 2016, and March 5, 2017, and the final 40 percent vesting on March 5, 2018. The performance-based awards will vest upon meeting the threshold criteria for the performance period, which is January 1, 2014 through December 31, 2016. The restricted stock unit awards include double trigger change in control vesting provisions, as described in the award agreements.

The following table gives information about equity awards as of December 31, 2014:

Plan Category
 
Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights
 
Weighted-average
exercise price of
outstanding options,
warrants, and rights
   
Number of securities remaining
available for future issuance
under equity compensation plans
(excluding securities reflected in
column (a))
 
 
 
(a)
 
(b)
   
(c)
 
Equity compensation plans approved by security holders
   
2,006,721
   
$
5.63
     
2,791,167
 


PERFORMANCE GRAPH

The following graph shows the total stockholder return of an investment of $100 in cash on March 3, 2010, the date public trading commenced in our postpetition Common Stock, to December 31, 2014 for (i) our postpetition Common Stock, (ii) the S&P 500 Index, and (iii) a peer group of companies we refer to as "Commercial Vehicle Suppliers." Five year historical data is not presented as a result of the bankruptcy and since the financial results of the Successor Company are not comparable with the results of the Predecessor Company. We believe that a peer group of representative independent commercial vehicle suppliers is appropriate for comparing shareowner return. The Commercial Vehicle Suppliers group consists of Meritor, Inc., Commercial Vehicle Group, Inc., Cummins, Inc., Eaton Corporation, and Stoneridge, Inc. All values assume reinvestment of the full amount of all dividends and are calculated through December 31, 2014.







 
 
March 3, 2010
   
December 31, 2010
   
December 31, 2011
   
December 31, 2012
   
December 31, 2013
   
December 31, 2014
 
Accuride Corporation
 
$
100.0
   
$
117.6
   
$
52.7
   
$
23.8
   
$
27.6
   
$
32.1
 
S&P 500 Index
 
$
100.0
   
$
112.4
   
$
112.4
   
$
127.5
   
$
165.2
   
$
184.0
 
Commercial Vehicle Suppliers
 
$
100.0
   
$
173.8
   
$
136.3
   
$
169.9
   
$
224.4
   
$
228.1
 

RECENT SALES OF UNREGISTERED SECURITIES

None.

ISSUER PURCHASES OF EQUITY SECURITIES

None.

Item 6.                          Selected Consolidated Financial Data
 
The following financial data is an integral part of, and should be read in conjunction with the "Consolidated Financial Statements" and notes thereto. Information concerning significant trends in the financial condition and results of operations is contained in "Item 7—Management's Discussion and Analysis of Financial Condition and Results of Operations."   Certain operating results from prior periods, including the predecessor periods, have been reclassified to discontinued operations to reflect the sale of certain businesses.

Selected Historical Operations Data (In thousands, except per share data)

 
 
Successor
Year Ended December 31,
   
   
 
(In thousands except per share data)
 
2014
   
2013
   
2012
   
2011
   
Successor
Period from
February 26
through December 31,
2010
   
Predecessor
Period from
January 1
through
February
26, 2010
 
Operating Data:
 
   
   
   
   
   
 
Net sales
 
$
705,178
   
$
642,883
   
$
794,634
   
$
804,537
   
$
513,581
   
$
79,633
 
Gross profit (a)
   
73,478
     
43,956
     
51,001
     
77,610
     
40,957
     
3,048
 
Operating expenses(b)
   
40,840
     
45,188
     
56,499
     
56,883
     
54,135
     
6,278
 
Goodwill and other intangible asset impairment expenses(c)
   
     
     
99,606
     
     
     
 
Property, Plant and Equipment Impairment Expense
   
     
     
34,126
     
     
     
 
Income (loss) from continuing operations
   
32,638
     
(1,232
)
   
(139,230
)
   
20,727
     
(13,178
)
   
(3,230
)
Operating income (loss) margin(d)
   
4.6
%
   
0.2
%
   
(17.5
)%
   
2.6
%
   
(2.6
)%
   
(4.1
)%
Interest expense, net
   
(33,713
)
   
(35,027
)
   
(34,938
)
   
(34,097
)
   
(33,450
)
   
(7,496
)
Other income (expense), net(e)
   
(3,506
)
   
(320
)
   
(864
)
   
3,627
     
2,575
     
566
 
Inducement expense
   
     
     
     
     
(166,691
)
   
 
Non-cash gains on mark-to-market valuation of convertible debt
   
     
     
     
     
75,574
     
 
Reorganization items (f)
   
     
     
     
     
     
59,311
 
Income tax (expense) benefit
   
2,527
     
10,244
     
1,657
     
(7,761
)
   
2,207
     
1,931
 
Discontinued operations, net of tax
   
(253
)
   
(11,978
)
   
(4,632
)
   
473
     
6,431
     
(280
)
Net income (loss)
   
(2,307
)
   
(38,313
)
   
(178,007
)
   
(17,031
)
   
(126,532
)
   
50,802
 
 
                                               
Other Data (2):
                                               
Net cash provided by (used in):
                                               
Operating activities
 
$
32,515
   
$
(1,926
)
 
$
28,728
   
$
(1,537
)
 
$
10,410
   
$
(20,773
)
Investing activities
   
(25,011
)
   
8,089
     
(58,194
)
   
(40,014
)
   
6,085
     
(2,012
)
Financing activities
   
(11,157
)
   
512
     
(698
)
   
20,000
     
(18,376
)
   
46,611
 
Adjusted EBITDA(g)
   
77,994
     
46,037
     
62,788
     
86,085
     
61,555
     
4,683
 
Depreciation, amortization, and impairment(h)
   
41,873
     
44,329
     
192,847
     
51,278
     
43,759
     
7,532
 
Capital expenditures
   
25,645
     
38,855
     
59,194
     
58,371
     
16,328
     
1,457
 
Ratio: Earnings to Fixed Charges(i)
   
0.9
     
(0.4
)
   
(4.01
)
   
0.71
     
(3.04
)
   
7.56
 
Deficiency(i)
   
     
36,579
     
175,032
     
9,743
     
135,170
     
 
 
                                               
Balance Sheet Data (end of period):
                                               
Cash and cash equivalents
 
$
29,773
   
$
33,426
     
26,751
   
$
56,915
   
$
78,466
   
$
80,347
 
Working capital(j)
   
23,036
     
25,843
     
29,202
     
54,745
     
37,518
     
40,245
 
Total assets
   
598,422
     
611,777
     
677,816
     
868,862
     
874,050
     
905,246
 
Total debt
   
323,234
     
330,183
     
324,133
     
323,082
     
302,031
     
604,113
 
Stockholders' equity
   
30,803
     
61,884
     
64,873
     
257,383
     
298,099
     
39,034
 
 
                                               
Earnings (Loss) Per Share Data:(k)
                                               
Basic/Diluted – Continuing operations
 
$
(0.04
)
 
$
(0.56
)
 
$
(3.66
)
 
$
(0.37
)
 
$
(8.48
)
 
$
1.06
 
Basic/Diluted – Discontinued operations
   
(0.01
)
   
(0.25
)
   
(0.10
)
   
0.01
     
0.41
     
0.01
 
Basic/Diluted – Total
 
$
(0.05
)
 
$
(0.81
)
 
$
(3.76
)
 
$
(0.36
)
 
$
(8.07
)
 
$
1.07
 
Weighted average common shares outstanding:
                                               
Basic
   
47,708
     
47,548
     
47,378
     
47,277
     
15,670
     
47,572
 
Diluted
   
47,708
     
47,548
     
47,378
     
47,277
     
15,670
     
47,572
 

(a) Gross profit for 2010 for the Successor Company was impacted by $3.0 million for fresh-start inventory valuation adjustments. Gross profit for 2011 was impacted by $2.0 million of costs related to the consolidation of our Imperial Portland, TN location. Gross profit in 2012 was impacted by $3.0 million of costs related to the facilities consolidation of our Gunite operations, $4.7 million accelerated depreciation for idle equipment at our Wheels reporting segment, and $3.2 million of accelerated
depreciation for obsolete equipment at our Brillion reporting segment. Gross profit in 2013 was impacted by $0.9 million in loss on the Camden sale/leaseback transaction.

(b) Includes $2.5 million, $2.4 million, $3.1 million, $2.4 million, and $1.1 million of stock-based compensation expense during the years ended December 31, 2014, 2013, 2012, 2011, and 2010, respectively. The stock-based compensation expense in 2010 was fully recognized by the Successor Company. Operating expenses for the Successor Company during 2010 reflect $14.9 million of charges and fees related to bankruptcy, relisting and our senior secured notes offering.

(c) In 2012, an impairment of goodwill and other intangible assets and property plant and equipment of $99.7 million and $34.1 million, respectively, was related to our Gunite business unit.

(d) Represents income (loss) from continuing operations as a percentage of sales.

(e) Consists primarily of realized and unrealized gains and losses related to the changes in foreign currency exchange rates. During 2010, the Successor Company recognized a gain of $2.6 million related to the valuation of then outstanding Common Stock warrants. In 2011, a gain of $4.0 million was recognized related to the valuation of then outstanding Common Stock warrants. The Common Stock warrants expired on February 26, 2012 unexercised.

(f) Applicable standards require the recognition of certain transactions directly related to the reorganization as reorganization expense in the statements of operations and comprehensive income (loss). In 2010, the Predecessor Company recognized the following reorganization income (expense) in our financial statements:

(In thousands)
 
Period from
January 1 to
February 26,
2010
 
 
 
 
Debt discharge – Senior subordinate notes and interest
 
$
252,798
 
Market valuation of $140 million convertible notes
   
(155,094
)
Professional fees
   
(25,030
)
Market valuation of warrants issued
   
(6,618
)
Deferred financing fees
   
(3,847
)
Term loan facility discount
   
(2,974
)
Other
   
76
 
Total
 
$
59,311
 

(g) We define Adjusted EBITDA as our income or loss before income tax expense or benefit, interest expense, net, depreciation and amortization, restructuring, severance, and other charges, impairment, and currency losses, net. Adjusted EBITDA has been included because we believe that it is useful for us and our investors as a measure of our performance and our ability to provide cash flows to meet debt service. Adjusted EBITDA should not be considered an alternative to net income (loss) or other traditional indicators of operating performance and cash flows determined in accordance with accounting principles generally accepted in the United States of America ("GAAP"). We present the table of Adjusted EBITDA because covenants in certain of the agreements governing our material indebtedness contain ratios based on this measure that require evaluation on a quarterly basis. Due to the amount of our excess availability (as calculated under the ABL facility), the Company is not currently in a compliance period. Adjusted EBITDA is not necessarily comparable to other similarly titled captions of other companies due to differences in methods of calculations. Our reconciliation of net income (loss) to Adjusted EBITDA is as follows:

 
 
 
Successor
Year Ended December 31,
   
   
 
(In thousands)
 
2014
   
2013
   
2012
   
2011
   
Successor
Period from
February 26
through
December 31,
2010
   
Predecessor
Period
from
January 1
through
February
26, 2010
 
Net income (loss)
 
$
(2,307
)
 
$
(38,313
)
 
$
(178,007
)
 
$
(17,031
)
 
$
(126,532
)
 
$
50,802
 
Income tax expense (benefit)
   
(2,527
)
   
(10,244
)
   
(1,657
)
   
7,408
     
1,591
     
(1,534
)
Interest expense, net
   
33,713
     
35,027
     
34,938
     
34,097
     
33,450
     
7,496
 
Depreciation and amortization
   
41,873
     
44,329
     
59,115
     
51,278
     
43,759
     
7,532
 
Goodwill & other intangible asset impairment
   
     
     
99,606
     
     
     
 
Property, plant, and equipment impairment
   
     
     
34,126
     
     
     
 
Restructuring, severance and other charges1
   
1,069
     
11,550
     
10,113
     
4,806
     
19,091
     
(59,092
)
Other items related to our credit agreement2
   
6,173
     
3,688
     
4,554
     
5,527
     
90,196
     
(521
)
Adjusted EBITDA
 
$
77,994
   
$
46,037
   
$
62,788
   
$
86,085
   
$
61,555
   
$
4,683
 

1. Restructuring, severance and other charges are as follows:

 
 
Successor
Year Ended December 31,
   
   
 
(In thousands)
 
2014
   
2013
   
2012
   
2011
   
Successor
Period from
February 26
through
December 31,
2010
   
Predecessor
Period from
January 1
through
February 26,
2010
 
Restructuring, severance, and curtailment charges
 
$
1,069
   
$
1,235
   
$
5,071
   
$
2,216
   
$
338
   
$
219
 
(Gain) Loss on sale of assets (i)
   
     
9,985
     
     
     
     
 
Other items (ii)
   
     
330
     
5,042
     
2,590
     
18,753
     
(59,311
)
Total
 
$
1,069
   
$
11,550
   
$
10,113
   
$
4,806
   
$
19,091
   
$
(59,092
)

i. In 2013, we recognized a loss on the sale of assets at our Imperial segment of $11.8 million and a gain of $2.0 million from the receipt of earn-out in connection with the sale of our Fabco subsidiary.

ii. Other items in 2013 included $0.3 million of fees related to divestiture and acquisition.  Other items in 2012 included $4.5 million of fees related to divestiture and acquisition and $0.3 million of fees related to the Company's anti-dumping petition before the U.S. International Trade Commission. Other items in 2011 included $1.3 million of fees related to divestitures and acquisitions. Other items in 2010 for the Successor Company included $15.7 million of fees related to bankruptcy, relisting, activities related to divestitures and our senior secured notes offering and $3.0 million for fresh-start inventory valuation adjustments.

2. Items related to our credit agreement refer to other amounts utilized in the calculation of financial covenants in Accuride's senior debt facility. Items related to our credit agreement that are included in this summary are primarily currency gains or losses and non-cash related charges for share-based compensation.

 
 
Successor
Year Ended December 31,
   
   
 
(In thousands)
 
2014
   
2013
   
2012
   
2011
   
Successor
Period from
February 26
through
December 31,
2010
   
Predecessor
Period from
January 1
through
February 26,
2010
 
Currency gains and losses
 
$
3,717
   
$
418
   
$
1,435
   
$
3,130
   
$
(2,022
)
 
$
(521
)
Non-cash mark-to-market valuation (gains) and losses on convertible debt
   
     
     
     
     
(75,574
)
   
 
Loss on operating lease
   
     
859
     
     
     
     
 
Inducement expense
   
     
     
     
     
166,691
     
 
Non-cash share-based compensation
   
2,456
     
2,441
     
3,119
     
2,397
     
1,101
     
 
Total
 
$
6,173
   
$
3,688
   
$
4,554
   
$
5,527
   
$
90,196
   
$
(521
)

(h) During 2012 we recognized impairment losses of $133.7 million.
(i) The ratio of earnings to fixed charges and deficiency, as defined by SEC rules, is calculated as follows:

 
 
Successor
Year Ended December 31,
   
   
 
(In thousands except ratio data)
 
2014
   
2013
   
2012
   
2011
   
Successor
Period from
February 26
through
December 31,
2010
   
Predecessor
Period from
January 1
through
February 26,
2010
 
Net income (loss)
 
$
(2,307
)
 
$
(38,313
)
 
$
(178,007
)
 
$
(17,031
)
 
$
(126,532
)
 
$
50,802
 
Less:
                                               
Discontinued operations, net of tax
   
(253
)
   
(11,978
)
   
(4,632
)
   
473
     
6,431
     
(280
)
Income tax (expense) benefit
   
2,527
     
10,244
     
1,657
     
(7,761
)
   
2,207
     
1,931
 
Income (loss) before income taxes from continuing operations
   
(4,581
)
   
(36,579
)
   
(175,032
)
   
(9,743
)
   
(135,170
)
   
49,151
 
"Fixed Charges" (interest expense, net)
   
33,713
     
35,027
     
34,938
     
34,097
     
33,450
     
7,496
 
"Earnings"
 
$
29,132
   
$
(1,552
)
 
$
(140,094
)
 
$
24,354
   
$
(101,720
)
 
$
56,647
 
 
                                               
Ratio: Earnings to Fixed Charges
   
0.86
     
(0.04
)
   
(4.01
)
   
0.71
     
(3.04
)
   
7.56
 
Deficiency
 
$
   
$
36,579
   
$
175,032
   
$
9,743
   
$
135,170
   
$
 

(j)            Working capital represents current assets less cash and current liabilities, excluding debt.

(k)            Basic and diluted earnings per share data are calculated by dividing net income (loss) by the weighted average basic and diluted shares outstanding.
Item 7.                          Management's Discussion and Analysis of Financial Condition and Results of Operations

This Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") describes matters we consider important to understanding the results of our operations for each of the three years in the period ended December 31, 2014, and our capital resources and liquidity as of December 31, 2014 and 2013.

The following discussion should be read in conjunction with "Selected Consolidated Financial Data" and our "Consolidated Financial Statements" and the notes thereto, all included elsewhere in this report. The information set forth in this MD&A includes forward-looking statements that involve risks and uncertainties. Many factors could cause actual results to differ from those contained in the forward-looking statements including, but not limited to, those discussed in Item 7A. "Quantitative and Qualitative Disclosure about Market Risk," Item 1A. "Risk Factors" and elsewhere in this report.

General 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, Inc., with its Peterbilt and Kenworth brand trucks, Navistar, Inc., 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, Wabash National, Inc., Utility Trailer Manufacturing Company, and Wabash National, Inc. Our largest product distribution customer is Advanced Wheel Sales, LLC.  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.

Key economic factors on our cost structure are raw material costs and production levels. Higher production levels enable us to spread costs that are more fixed in nature over a greater number of commercial vehicle products. We use the commercial vehicle production levels forecasted by industry experts to help us predict our production levels in our wheel and wheel-end businesses along with other assumptions for aftermarket demand. Raw material costs represent the most significant component of our product cost and are driven by a combination of purchase contracts and spot market purchases as discussed in Item 1. "Raw Materials and Suppliers" and elsewhere in this report.

Business Outlook

Recent global market and economic conditions have been challenging with slow economic growth in most major economies during 2014. These factors have led to continued softness in spending by businesses and consumers alike. Continued slow economic growth in the U.S. and international markets and economies coupled with relative flatness in business and consumer spending may adversely affect our liquidity and financial condition, and the liquidity and financial condition of our customers.

The heavy- and medium-duty truck and commercial trailer markets, the related aftermarket, and the global industrial, construction, and mining, 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 and copper, and global construction trends.  Industry forecasts predict marginal growth in class 5-8 commercial vehicle builds in 2015 compared to 2014 as the industry began improving with customers focused on replacing older commercial vehicles during the second half of 2014.  With regards to trailer production, industry experts also expect year-over-year sales in 2015 to increase versus 2014.  With our core aftermarket business, industry experts predict year-over-year sales that show flat to marginal growth.  Our Brillion castings business, driven more by global industrial, construction, and mining markets expects moderate year-over-year growth.


The 2015 OEM production forecasts by ACT Publications for the significant commercial vehicle markets that we serve, as of February 10, 2015, are as follows:
 
North American Class 8
340,226
North American Classes 5-7
228,534
U.S. Trailers
303,300

Our markets and those of our customers are becoming increasingly competitive as the global and North American economic recoveries remain sluggish.  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 an economic recovery that is holding new equipment purchases at or near replacement 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.  A number of platforms on which our products are standard equipment have lost market share, which has impacted our business.   Approximately 70 percent of our wheel business is tied to the OEM markets, the remaining 30 percent is tied to the aftermarket.  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.  Approximately 75 percent of our Gunite business is tied to the North American Aftermarket, with the remaining 25 percent tied to the North American Class 8 segment.  Further, broader economic weaknesses in industrial manufacturing impacted our Brillion business through reduced customer orders during the first half 2014.  We expect this weakness and lower demand in Brillion's end markets to subside with the slightly increased demand in 2015; however, recent substantial reductions in commodity prices could negatively impact this slight demand increase. 

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.

The "Fix" portion of the Accuride "Fix and Grow" strategy is substantially complete, including the increases to our aluminum wheel capacity, and we stand ready to service the industry as it recovers.  The consolidation of machining assets from our Elkhart, Indiana and Brillion, Wisconsin facilities to our Gunite Rockford, Illinois facility has been completed.  Installation of new machining assets has also been completed at our Gunite Rockford, Illinois facility.  In combination with our lean manufacturing efforts, overall operational costs have been reduced so that Accuride has greater flexibility to adjust with fluctuations in customer volume in the future.  Note that we cannot accurately predict the commercial vehicle or broader economic cycle, and any deterioration of the current economic recovery may lead to further reduced spending and deterioration in the markets we serve.

On March 30, 2011, we, along with one other United States domestic commercial vehicle steel wheel supplier, filed antidumping and countervailing duty petitions with the United States International Trade Commission and the United States Department of Commerce alleging that manufacturers of certain steel wheels in China are dumping their products in the United States and that these manufacturers have been subsidized by their government in violation of United States trade laws.  In May 2011, the International Trade Commission issued a preliminary determination that there was a reasonable indication that the U.S. steel wheel industry is materially injured or threatened with material injury by reason of imports from China of certain steel wheels, and began the final phase of its investigation.  In August 2011, the U.S. Department of Commerce issued a preliminary determination of countervailing duties on steel wheels imported from China ranging from 26.2 percent to 46.6 percent ad valorem, and in October 2011, the U.S. Department of Commerce issued a preliminary determination of antidumping duty margins ranging from 110.6 percent to 243.9 percent ad valorem.  On March 19, 2012, the Department of Commerce made final determinations of dumping and subsidy margins which cumulatively were approximately 70 percent to 228 percent ad valorem.  However, on April 17, 2012, the International Trade Commission determined that the domestic industry has not been injured and was not presently threatened with injury from subject imports, and consequently withdrew all import duties on the subject imports.  Subsequent to the International Trade Commission's decision, we have seen a resurgence of steel wheel imports from China in the aftermarkets we serve, creating a challenging competitive environment for the foreseeable future.  We will continue to evaluate the trade practices related to these and other imports impacting our markets as well as the merits of filing a new petition with the International Trade Commission.

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 cycle and to focus our efforts on our core markets.  On July 11, 2013, we entered into a senior secured asset-based lending facility (the "ABL Facility") and used borrowing under that facility and cash on hand to repay all amounts outstanding under the Prior ABL Facility, and to pay related fees and expenses.  For additional information on our New ABL Facility,
see "Capital Resources and Liquidity-Bank Borrowing.  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.  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 Chehalis, Washington and a leasehold interest in a plant located in Denton, Texas. Imperial retained ownership of a plant property located in Portland, Tennessee and recorded a $2.5 million impairment charge related to that facility. The company leased the Portland, Tennessee facility to the purchaser from the closing date of the transaction through October 31, 2014.

Results of Operations

Certain operating results from prior periods have been reclassified to discontinued operations to conform to the current year presentation.

Comparison of Fiscal Years 2014 and 2013

 
 
Year Ended December 31,
 
(In thousands)
 
2014
   
2013
 
Net sales
 
$
705,178
   
$
642,883
 
Cost of goods sold
   
631,700
     
598,927
 
Gross profit
   
73,478
     
43,956
 
Operating expenses
   
40,840
     
45,188
 
Income (loss) from operations
   
32,638
     
(1,232
)
Interest (expense), net
   
(33,713
)
   
(35,027
)
Other income, net
   
(3,506
)
   
(320
)
Income tax provision (benefit)
   
(2,527
)
   
(10,244
)
Loss from continuing operations
   
(2,054
)
   
(26,335
)
Discontinued operations, net of tax
   
(253
)
   
(11,978
)
Net loss
 
$
(2,307
)
 
$
(38,313
)

Net Sales

 
 
Year Ended December 31,
 
(In thousands)
 
2014
   
2013
 
Wheels
 
$
402,146
   
$
364,614
 
Gunite
   
171,263
     
168,988
 
Brillion
   
131,769
     
109,281
 
Total
 
$
705,178
   
$
642,883
 

Our net sales for 2014 of $705.2 million were $62.3 million, or 9.7 percent, above our net sales for 2013 of $642.9 million. Net sales increased by approximately $60.2 million primarily due to higher volume demand resulting from increased production levels of the commercial vehicle OEM market. Net sales were additionally improved by $2.1 million in increased pricing, which primarily represented a pass-through of increased raw material and commodity costs.

Net sales for our Wheels segment increased by $37.5 million, or 10.3 percent, during 2014 primarily due to $41.5 million in increased combined volume for the three major OEM segments (see OEM production builds in the table below), offset by a reduction of $4.0 million in pricing. Net sales for our Gunite segment increased by $2.3 million, or 1.3 percent, due to a reduction of $2.7 million due to decreased volume, offset by $5.0 million in increased pricing. Our Gunite products have a higher concentration of aftermarket demand due to its brake drum products, which are replaced more frequently than our other products. Our Brillion segment's net sales increased by $22.5 million, or 20.6 percent during 2014 due to a recovery in the various markets that Brillion serves.
 

North American commercial vehicle industry production builds per ACT (see Item 1) were, as follows:

 
For the year ended December 31,
 
2014
 
2013
Class 8
297,097
 
 
245,496
Classes 5-7
225,681
 
 
201,311
Trailer
270,757
 
 
238,527

While we serve the commercial vehicle aftermarket segment, there is no industry data to compare our aftermarket sales to industry demand from period to period.  However, we do expect to continue to experience increased competition from low-cost country sourced products that compete with products produced by our Wheels and Gunite operating segments.  Approximately 70 percent of our Wheels business is tied to the OEM markets, with the remaining 30 percent tied to the aftermarket.  We are also continuing to see the impact of low cost country sourced products in our markets, which has particularly impacted the aftermarket for steel wheels and brake drums. Approximately 75 percent of our Gunite business is tied to the North American Aftermarket, with the remaining 25 percent tied to the North American Class 8 segment.  Further, broader economic weakness in industrial manufacturing impacted our Brillion business through reduced customer orders during the first half of 2014. We expect this weakness and lower demand in Brillion's end markets to subside with the slightly increased demand in 2015.  

Cost of Goods Sold

The table below represents the significant components of our cost of goods sold.

 
 
Year Ended December 31,
 
(In thousands)
 
2014
   
2013
 
Raw materials
 
$
315,770
   
$
288,866
 
Depreciation
   
33,669
     
34,682
 
Labor and other overhead
   
282,261
     
275,379
 
Total
 
$
631,700
   
$
598,927
 

Raw materials costs increased by $26.9 million, or 9.3 percent, during the year ended December 31, 2014 due to increased pricing of approximately $4.1 million, or 1.5 percent, and increased sales volume of approximately $22.8 million, or 7.9 percent. The price increases were primarily related to steel and aluminum material mechanisms with customers, which represent nearly all of our material costs.

Depreciation decreased by $1.0 million, or 2.9 percent during the year ended December 31, 2014 due to the age of the fixed assets in relation to the amount of new capital spending.

Labor increased 2.5% due to increased production partially offset by cost reduction initiatives.

Operating Expenses

 
 
Year Ended December 31,
 
(In thousands)
 
2014
   
2013
 
Selling, general, and administration
 
$
27,094
   
$
30,735
 
Research and development
   
5,584
     
5,695
 
Depreciation and amortization
   
8,162
     
8,758
 
Total
 
$
40,840
   
$
45,188
 

Selling, general, and administrative costs decreased by $3.6 million, or  11.8 percent in 2014 compared to 2013 due to focused cost management activities within each functional departments including implementation of lean administrative principles.


Operating Income (Loss)

 
 
Year Ended December 31,
 
(In thousands)
 
2014
   
2013
 
Wheels
 
$
41,823
   
$
30,883
 
Gunite
   
16,710
     
2,599
 
Brillion
   
4,523
     
1,027
 
Corporate/Other
   
(30,418
)
   
(35,741
)
Total
 
$
32,638
   
$
(1,232
)
 
Operating income for the Wheels segment was 10.4 percent of its net sales for the year ended December 31, 2014 compared to 8.5 percent for the year ended December 31, 2013. The increase in operating income was primarily a result of stronger commercial vehicle industry conditions in 2014.  

Operating income for the Gunite segment was 9.8 percent of its net sales for the year ended December 31, 2014 compared to 1.5 percent of its net sales for the year ended December 31, 2013. The increase in operating income was primarily due to the impact of synergies gained from recently installed equipment and the consolidation of Gunite's Elkhart and Brillion machining assets into its Rockford facility, coupled with integration of lean manufacturing principles within the business.

Operating income for the Brillion segment was 3.4 percent of its net sales for the year ended December 31, 2014 compared to 0.9 percent of its net sales for the year ended December 31, 2013. This increase was driven primarily by increased volume, as well as improved pricing to customers.

The operating loss for the Corporate segment was $30.4 million, or 4.3 percent of sales from continuing operations for the year ended December 31, 2014 compared to $35.7 million, or 5.6 percent of sales from continuing operations, for the year ended December 31, 2013.  The decrease in overall spending was primarily related to cost reduction efforts mentioned in the operating expenses section above. The percent of sales from continuing operations for the year compared to the operating loss was impacted by increased consolidated sales.

Interest Expense

Net interest expense decreased by $1.3 million to $33.7 million for the year ended December 31, 2014 from $35.0 million for the year ended December 31, 2013, due to having less debt outstanding during 2014 compared to 2013.

Income Tax Provision

Our effective tax rate for 2014 and 2013 was (55.1) percent and (28.0) percent, respectively. Our tax rate is affected by recurring items, such as change in valuation allowance, tax rates in foreign jurisdictions and the relative amount of income we earn in jurisdictions, which we expect to be fairly consistent in the near term. It is also affected by discrete items that may occur in any given year, but are not consistent from year to year. In 2014, we experienced a $1.5 million increase, or a 31.7 percent increase in rates attributable to continuing operations.

Income tax expense or benefit from continuing operations is generally determined without regard to other categories of earnings, such as discontinued operations and Other Comprehensive Income ("OCI"). An exception is provided in ASC 740, Accounting for Income Taxes, when there is aggregate income from categories other than continuing operations and a loss from continuing operations in the current year. In this case, the tax benefit allocated to continuing operations is the amount by which the loss from continuing operations reduces the tax expenses recorded with respect to the other categories of earnings, even when a valuation allowance has been established against the deferred tax assets. In instances where a valuation allowance is established against current year losses, income from other sources, including unrealized gains from pension and post-retirement benefits recorded as a component of OCI, is considered when determining whether sufficient future taxable income exists to realize the deferred tax assets. As a result, for the year ended December 31, 2013, we recognized a tax expense of $12.6 million in OCI related to the unrealized gains on pension and post-retirement benefits, and recognized a corresponding tax benefit of $12.6 million in our results continuing operations.



Results of Operations

Certain operating results from prior periods, including the predecessor periods, have been reclassified to discontinued operations to conform to the current year presentation.

Comparison of Fiscal Years 2013 and 2012

 
 
Year Ended December 31,
 
(In thousands)
 
2013
   
2012
 
Net sales
 
$
642,883
   
$
794,634
 
Cost of goods sold
   
598,927
     
743,633
 
Gross profit
   
43,956
     
51,001
 
Operating expenses
   
45,188
     
56,499
 
Goodwill and other intangible asset impairment expenses
   
     
99,606
 
Property, plant, and equipment impairment expense
   
     
34,126
 
Income (loss) from operations
   
(1,232
)
   
(139,230
)
Interest (expense), net
   
(35,027
)
   
(34,938
)
Other income, net
   
(320
)
   
(864
)
Income tax provision (benefit)
   
(10,244
)
   
(1,657
)
Loss from continuing operations
   
(26,335
)
   
(173,375
)
Discontinued operations, net of tax
   
(11,978
)
   
(4,632
)
Net loss
 
$
(38,313
)
 
$
(178,007
)

Net Sales

 
 
Year Ended December 31,
 
(In thousands)
 
2013
   
2012
 
Wheels
 
$
364,614
   
$
414,340
 
Gunite
   
168,988
     
221,974
 
Brillion
   
109,281
     
158,320
 
Total
 
$
642,883
   
$
794,634
 

Our net sales for 2013 of $642.9 million were $151.7 million, or 19.1 percent, below our net sales for 2012 of $794.6 million. Net sales declined by approximately $144.2 million primarily due to lower volume demand resulting from decreased production levels of the commercial vehicle OEM market, loss of OEM and aftermarket business, reduced sales by our Gunite business unit due to the loss of OEM business in the second half of 2012 and a continued downturn in the global industrial, construction, and mining markets that Brillion serves. Also, adding to the reduced sales was $7.5 million in decreased pricing, which primarily represented a pass-through of decreased raw material and commodity costs.

Net sales for our Wheels segment decreased by $49.7 million, or 12.0 percent, during 2013 primarily due to decreased combined volume for the three major OEM segments (see OEM production builds in the table below) and loss of aftermarket business due to an unfavorable antidumping ruling in the first half of 2012. Net sales for our Gunite segment declined by $53.0 million, or 23.9 percent, due to a reduction of $55.0 million due to the previously disclosed loss of standard position at two of its major OEM customers, partially offset by $2.0 million in increased pricing related to a pass-through of raw material costs. Our Gunite products have a higher concentration of aftermarket demand due to its brake drum products, which are replaced more frequently than our other products. Our Brillion segment's net sales decreased by $49.0 million, or 31.0 percent during 2013 due to a continued downturn in the global industrial, construction, and mining markets that Brillion serves.

North American commercial vehicle industry production builds per ACT (see Item 1) were, as follows:

 
For the year ended December 31,
 
2013
 
2012
Class 8
 
245,496
 
 
277,490
Classes 5-7
 
201,311
 
 
188,165
Trailer
 
238,527
 
 
236,841

While we serve the commercial vehicle aftermarket segment, there is no industry data to compare our aftermarket sales to industry demand from period to period.  However, we do expect to experience increased competition from low-cost country sourced

products that compete with our Wheels and Gunite operating segments.   Approximately 70 percent of our Wheels business is tied to the OEM markets noted in the table above, with the remaining 30 percent tied to the aftermarket.  Approximately 75 percent of our Gunite's business is tied to the North American Aftermarket, with the remaining 25 percent tied to the North American Class 8 segment.

Cost of Goods Sold

The table below represents the significant components of our cost of goods sold.

 
 
Year Ended December 31,
 
(In thousands)
 
2013
   
2012
 
Raw materials
 
$
288,866
   
$
369,563
 
Depreciation
   
34,682
     
47,103
 
Labor and other overhead
   
275,379
     
326,967
 
Total
 
$
598,927
   
$
743,633
 

Raw materials costs decreased by $80.7 million, or 21.8 percent, during the year ended December 31, 2013 due to decreased pricing of approximately $6.1 million, or 1.7 percent, and reduced sales volume of approximately $74.6 million, or 20.1 percent. The price decreases were primarily related to steel and aluminum material mechanisms with customers, which represent nearly all of our material costs.

Depreciation decreased by $12.4 million, or 26.5 percent during the year ended December 31, 2013 due to the reduction in the capital basis of the three business units' fixed assets as of December 31, 2012, offset partially by capital investments across those same business units during 2013.

Operating Expenses

 
 
Year Ended December 31,
 
(In thousands)
 
2013
   
2012
 
Selling, general, and administration
 
$
30,735
   
$
38,851
 
Research and development
   
5,695
     
6,623
 
Depreciation and amortization
   
8,758
     
11,025
 
Total
 
$
45,188
   
$
56,499
 

Selling, general, and administrative costs decreased by $8.2 million in 2013 compared to 2012 due to specific cost reduction programs and reduction in headcount. Not included in the table above were impairment charges for the Gunite reporting segment for the year ended December 31, 2012 of $99.6 million related to goodwill and other intangible assets and $34.1 million related to property, plant, and equipment.

Operating Income (Loss)

 
 
Year Ended December 31,
 
(In thousands)
 
2013
   
2012
 
Wheels
 
$
30,883
   
$
44,928
 
Gunite
   
2,599
     
(151,940
 
Brillion
   
1,027
     
11,969
 
Corporate/Other
   
(35,741
)
   
(44,187
)
Total
 
$
(1,232
)
 
$
(139,230
)
 
Operating income for the Wheels segment was 8.5 percent of its net sales for the year ended December 31, 2013 compared to 10.8 percent for the year ended December 31, 2012. The decline in operating income was primarily a result of weak Class 8 commercial vehicle industry conditions in 2013 coupled with reduced commercial vehicle market share held by one of our main OEM customers, which resulted in fewer vehicles sold by that OEM and correspondingly fewer wheels purchased from us.  Accuride's market share this OEM customer remained steady, however, only that customer's share within their own industry deteriorated. Operating income for the Gunite segment was 1.5 percent of its net sales for the year ended December 31, 2013 compared to a loss of 68.4 percent of its net sales for the year ended December 31, 2012. The increase in operating income was primarily due to the non-recurrence of $133.7 million in impairment charges (see Footnotes 4 and 6 to the consolidated financial statements in Part IV, Item 15) and  the impact of synergies gained from new equipment installed and the consolidation of Gunite's Elkhart and Brillion machining assets into its Rockford facility.

Operating income for the Brillion segment was 0.9 percent of its net sales for the year ended December 31, 2013 compared to 7.6 percent of its net sales for the year ended December 31, 2012. Sales volume for our Brillion segment reflected a decrease in the global industrial, construction, and mining markets they serve and key customers looked to significantly reduce their "on hand" inventory.   The margins associated with the higher volume sales in 2012 decreased with the decrease in demand in 2013.

The operating loss for the Corporate segment was $35.7 million, or 5.6 percent of sales from continuing operations for the year ended December 31, 2013 compared to $44.2 million, or 5.9 percent of sales from continuing operations, for the year ended December 31, 2012.  The decrease in overall spending was primarily related to cost reduction efforts by management in response to lower sales.

Impairment

As of November 30, 2012, the Company considered the impact of business developments in its Gunite reporting unit including a loss of customer market share and evidence of declining aftermarket sales due to increased competition in the marketplace.  The Gunite reporting unit had goodwill of $62.8 million and other intangible assets of $36.8 million at November 30, 2012. In addition, the Company had also experienced a recent decline in its stock price to an amount below the then existing book value as of November 30, 2012.  As part of the Company's annual impairment review, the Gunite reporting segment failed the step one goodwill impairment test, meaning that the estimate of fair value of the segment was below book value.  The Company estimated the fair value utilizing a discounted cash flow model, as the Company believed it was the most reliable indicator of fair value.  Therefore, the second step of the analysis was performed and resulted in recognizing goodwill and other intangible asset impairment charges of $62.8 million and $36.8 million, respectively.  The impairment charges were the result of lower volume demands due to lost market share at Gunite, overall reduced production levels of the commercial vehicle market and its aftermarket segments in North America, operating losses for the 3 years leading up to the analysis, as well as other factors.

Interest Expense

Net interest expense remained relatively stable, increasing $0.1 million to $35.0 million for the year ended December 31, 2013 from $34.9 million for the year ended December 31, 2012.

Income Tax Provision

Our effective tax rate for 2013 and 2012 was (28.0) percent and (0.9) percent, respectively. Our tax rate is affected by recurring items, such as change in valuation allowance, tax rates in foreign jurisdictions and the relative amount of income we earn in jurisdictions, which we expect to be fairly consistent in the near term. It is also affected by discrete items that may occur in any given year, but are not consistent from year to year. In 2013, we experienced a $3.2 million increase, and a 8.8 percent increase in rates attributable to continuing operations.

Income tax expense or benefit from continuing operations is generally determined without regard to other categories of earnings, such as discontinued operations and Other Comprehensive Income ("OCI"). An exception is provided in ASC 740, Accounting for Income Taxes, when there is aggregate income from categories other than continuing operations and a loss from continuing operations in the current year. In this case, the tax benefit allocated to continuing operations is the amount by which the loss from continuing operations reduces the tax expenses recorded with respect to the other categories of earnings, even when a valuation allowance has been established against the deferred tax assets. In instances where a valuation allowance is established against current year losses, income from other sources, including unrealized gains from pension and post-retirement benefits recorded as a component of OCI, is considered when determining whether sufficient future taxable income exists to realize the deferred tax assets. As a result, for the year ended December 31, 2013, we recognized a tax expense of $12.6 million in OCI related to the unrealized gains on pension and post-retirement benefits, and recognized a corresponding tax benefit of $12.6 million in our results continuing operations.

Discontinued Operations

Discontinued operations represent reclassification of operating results, including gain/loss on sale, for Imperial Group, Fabco Automotive, Bostrom Seating and Brillion Farm, net of tax. The sale of Imperial Group was in 2013, Fabco and Bostrom were in 2011 and the Brillion Farm assets were sold during 2010. We have reclassified current and prior period operating results, including the gain/loss on the sale transactions, to discontinued operations.


Changes in Financial Condition

At December 31, 2014, we had total assets of $598.4 million, as compared to $611.8 million at December 31, 2013. The $13.4 million, or 2.2 percent, decrease in total assets primarily resulted from normal depreciation expense outpacing capital spending and the net impact of lower intangible assets partially offset by increase in pension assets.

We define working capital as current assets (excluding cash) less current liabilities. We use working capital and cash flow measures to evaluate the performance of our operations and our ability to meet our financial obligations. We require working capital investment to maintain our position as a leading manufacturer and supplier of commercial vehicle components. We continue to strive to align our working capital investment with our customers' purchase requirements and our production schedules.

The following table summarizes the major components of our working capital as of the periods listed below:

(In thousands)
 
December 31, 2014
   
December 31, 2013
 
Accounts receivable
 
$
63,570
   
$
59,520
 
Inventories
   
43,065
     
39,329
 
Deferred income taxes (current)
   
2,687
     
3,806
 
Other current assets
   
10,785
     
13,187
 
Accounts payable
   
(56,452
)
   
(47,527
)
Accrued payroll and compensation
   
(10,620
)
   
(8,763
)
Accrued interest payable
   
(12,428
)
   
(12,535
)
Accrued workers compensation
   
(3,137
)
   
(4,373
)
Other current liabilities
   
(14,434
)
   
(16,801
)
Working Capital
 
$
23,036
   
$
25,843
 

Significant changes in working capital included:
 
an increase in accounts receivable of $4.1 million related to increased sales from continuing operations in the months leading up to the respective period ends;
an increase in inventory of $3.7 million from the buildup of inventories for year-end shutdowns that did not occur in previous years;
a decrease in other current assets due primarily to the disposition of the assets held for sale; and
an increase in accounts payable of $8.9 related to increased inventory-related purchases during the fourth quarter of 2014.

Capital Resources and Liquidity

Our primary sources of liquidity during the year ended December 31, 2014 were cash reserves and our ABL facility. We believe that cash from operations, existing cash reserves, and our ABL facility will provide adequate funds for our working capital needs, planned capital expenditures and cash interest payments through 2015 and the foreseeable future.

As of December 31, 2014, we had $29.8 million of cash plus $40.5 million in availability under our ABL credit facility for total liquidity of $70.3 million.

No provision has been made for U.S. income taxes related to undistributed earnings of our Canadian foreign subsidiary that we intend to permanently reinvest in order to finance capital improvements and/or expand operations either through the expansion of the current operations or the purchase of new operations. At December 31, 2014, Accuride Canada had $20.7 million of cumulative retained earnings. We distribute earnings for the Mexican foreign subsidiary and expect to distribute earnings annually. Therefore, no deferred tax liabilities have been established for the undistributed earnings of our Mexican foreign subsidiary.

Our ability to fund working capital needs, planned capital expenditures, scheduled debt payments, and to comply with any financial covenants under our ABL credit facility, depends on our future operating performance and cash flow, which in turn are subject to prevailing economic conditions and to financial, business and other factors, some of which are beyond our control.  We continue to manage our capital expenditures closely in order to preserve liquidity, while still maintaining our production capacity and making investments necessary to meet competitive threats and to seize upon growth opportunities.

Operating Activities

Net cash provided by operating activities for the year ended December 31, 2014 was $32.5 million compared to net cash used in operating activities for the year ended December 31, 2013 of $1.9 million. The most significant factor underlying this improvement is the increase in net income, which is a result of increased demand from the markets that we serve and our focus on reducing costs
through performance based projects. Additionally, we have maintained our significant improvement of working capital management from 2013, which is a result of our better operational performance as discussed above.

Investing Activities

Net cash used in investing activities was $25.0 million for the year ended December 31, 2014 compared to cash provided by investing activities of $8.1 million for the year ended December 31, 2013. Our most significant cash outlays for investing activities in 2014 were the purchases of property, plant, and equipment, which totaled approximately $25.6 million. Our required cash outflows for capital expenditures were reduced by $14.9 million during 2013 related to two sale/leaseback transactions that were entered into during the year and cash inflow of $30.0 million in proceeds from the sale of our Imperial segment. Also, during 2013, we had cash inflows of $2.0 million related to the settlement of a contingent earnout resulting from the sale of our Fabco subsidiary during 2011.

Financing Activities

Net cash used in financing activities for the year ended December 31, 2014 totaled $11.2 million related to a net decrease in amounts drawn under our ABL credit facility.  Net cash provided by financing activities for the year ended December 31, 2013 was $0.5 million.

Bank Borrowing and Senior Notes

The ABL Facility

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 Prior ABL Facility was terminated as of July 11, 2013.

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 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 the earlier of (i) July 11, 2018 and (ii) 90 days prior to the maturity date of the Company's 9.5% first priority senior security notes due August 1, 2018, which may be extended further under certain circumstances pursuant to the terms of the New ABL Facility.  See Note 7 to the "Notes to Consolidated Financial Statements" included herein.

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.

The obligations under the 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 the outstanding capital stock of our domestic subsidiaries, subject to certain exceptions and permitted liens (the "Notes Priority Collateral").

Senior Secured Notes

On July 29, 2010, we issued $310.0 million aggregate principal amount of senior secured notes.  Under the terms of the indenture governing the senior secured notes, the senior secured notes bear interest at a rate of 9.5% per year, paid semi-annually in February and August, and mature on August 1, 2018.  Prior to maturity we may redeem the senior secured notes on the terms set forth in the indenture governing the senior secured notes. The senior secured notes are guaranteed by the Guarantors, and the senior secured

notes and the related guarantees are secured by first priority liens on the Notes Priority Collateral and second priority liens on the ABL Priority Collateral.  On February 15, 2011, we completed an exchange offer pursuant to which all our outstanding senior secured notes were exchanged for registered securities with identical terms (other than terms related to registration rights) to the senior secured notes issued July 29, 2010.

Restrictive Debt Covenants

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 not currently in a compliance period and do not expect to be in a compliance period in the next twelve months.  However, we continue to operate in a challenging economic environment and our 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.

Off-Balance Sheet Arrangements

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

Contractual Obligations and Commercial Commitments

The following table summarizes our contractual obligations as of December 31, 2014 and the effect such obligations and commitments are expected to have on our liquidity and cash flow in future periods:

 
 
Payments due by period
 
(In millions)
 
Total
   
Less than 1 year
   
1 - 3 years
   
3 - 5 years
   
More than 5 years
 
Long-term debt(a)
 
$
327.0
   
$
   
$
   
$
327.0
   
$
 
Interest on long-term debt(b)
   
118.0
     
29.5
     
59.0
     
29.5
     
 
Interest on variable rate debt(c)
   
2.0
     
0.5
     
1.0
     
0.5
     
 
Capital leases
   
12.3
     
2.8
     
5.6
     
3.9
     
 
Operating leases
   
25.6
     
5.9
     
11.5
     
6.1
     
2.1
 
Purchase commitments(d)
   
33.1
     
25.4
     
5.3
     
2.4
     
 
Other long-term liabilities(e)
   
191.5
     
18.4
     
37.2
     
37.9
     
98.0
 
Total obligations(f)
 
$
709.5
   
$
82.5
   
$
119.6
   
$
407.3
   
$
100.1
 

 
(a) Amounts represent face value of debt instruments due, comprised of $310.0 million aggregate principal amount of senior secured notes and a $17.0 million draw on our ABL facility.

(b) Interest expense for our senior secured notes, computed at 9.5% per annum.

(c) Interest expense for our ABL facility initially bears interest at an annual rate subject to changes based on our average excess availability as defined in the ABL facility, equal to, at our option, either LIBOR plus 3.00% or Base Rate plus 1.25%, for loans under the first-in, last-out facility and either LIBOR plus 2.00% or Base Rate plus 0.25%.

(d) The unconditional purchase commitments are principally take-or-pay obligations related to the purchase of certain materials, including natural gas, consistent with customary industry practice.

(e) Consists primarily of estimated post-retirement and pension contributions for 2015 and estimated future post-retirement and pension benefit payments for the years 2016 through 2024. Amounts for 2025 and thereafter are unknown at this time.

(f) Since it is not possible to determine in which future period it might be paid, excluded above is the $6.5 million uncertain tax liability recorded in accordance with ASC 740-10, Income Taxes.

Critical Accounting Policies and Estimates

Our consolidated financial statements and accompanying notes have been prepared in accordance with U.S. GAAP applied on a consistent basis. 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, liabilities, revenues, and expenses during the reporting periods.

We continually evaluate our accounting policies and estimates used to prepare the consolidated financial statements. In general, management's estimates are based on historical experience, on information from third party professionals and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

Critical accounting policies and estimates are those where the nature of the estimates or assumptions is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change, and the impact of the estimates and assumptions on financial condition or operating performance is material. We believe our critical accounting policies and estimates, as reviewed and discussed with the Audit Committee of our Board of Directors include impairment of long-lived assets, goodwill, pensions, and income taxes.

Impairment of Long-lived AssetsWe evaluate long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. In performing the review of recoverability, we estimate future cash flows expected to result from the use of the asset and our eventual disposition. The estimates of future cash flows, based on reasonable and supportable assumptions and projections, require our subjective judgments. The time periods for estimating future cash flows is often lengthy, which increases the sensitivity to assumptions made. Depending on the assumptions and estimates used, such as the determination of the primary asset group, the estimated life of the primary asset, and projected profitability, the estimated future cash flows projected in the evaluation of long-lived assets can vary within a wide range of outcomes. We consider the likelihood of possible outcomes in determining the best estimate of future cash flows.

For 2014 and 2013, we evaluated long-lived assets for potential impairment indicators and concluded there were none.

In 2012, the Company considered the impact of business developments in its Gunite reporting unit including a loss of customer market share and evidence of declining aftermarket sales.  In addition to our concerns with our Gunite business, the Company has also experienced a decline in its stock price to an amount below then current book value.   These events triggered a long-lived asset impairment analysis for Gunite.

We performed a recoverability test of the Gunite's long-lived assets by using an undiscounted cash flow method.  We first determined the asset group to be the Gunite reporting unit, which represents the lowest level of identifiable cash flows.  Our test concluded that the Gunite asset group was not recoverable as the resulting undiscounted cash flows were less than the carrying amount of the asset group.  Accordingly, we estimated the fair value of the long lived assets to determine the impairment amount.  Determining fair value is judgmental in nature and requires the use of significant estimates and assumptions, considered to be Level 3 inputs.

To determine the estimated fair value of real and personal property, the market approach and cost approach were considered.  The income approach was not considered as we concluded it not feasible to allocate or attribute income to individual assets given our asset group determination to be the Gunite reporting unit.  Under the cost approach, the determination of fair value considered the estimates of the cost to replace or reproduce assets of equal utility at current prices with adjustments in value for physical deterioration and functional obsolescence based on the condition of the assets. Under the market approach, the determination of fair value considered the market prices in transactions for similar assets and certain direct market values based on quoted prices from brokers and market professionals.  For real estate, we concluded that the market approach was the most appropriate valuation method.  For buildings, we concluded that the cost approach was the most valuation appropriate method.  For personal property, we concluded that the cost approach, adjusted for an in-exchange or salvage premise, was the most appropriate method for determining fair value.

Significant Level 3 inputs for real estate and building measurements included location of the property, zoning, physical deterioration, functional obsolescence and external obsolescence.  Significant Level 3 inputs for personal property included physical deterioration, functional obsolescence and economic obsolescence.

As a result of our fair value estimates, we adjusted the carrying amount of the Gunite's personal property to fair value and recognized asset impairment charges of $34.1 at December 31, 2012.  These charges were separately disclosed as a component of operating expenses.  The fair value estimates for the Gunite personal property are based on a valuation premise that assumes the assets' highest and best use are different than their current use as a result of lower volume demands for Gunite's products due to the loss of customers, reduced production levels in the commercial vehicle market, and its declining aftermarket segments in North America.  See Note 6 , "Property, Plant and Equipment," in the "Consolidated Financial Statements" for further discussion.


Accounting for Goodwill and Other Intangible AssetsThe Company performs its annual assessment for impairment of goodwill at November 30 for all reporting units and tests these balances more frequently if indicators are present or changes in circumstances suggest that impairment may exist.  The estimates and assumptions underlying the fair value calculations used in the Company's annual impairment tests are uncertain by their nature and can vary significantly from actual results.  Factors that management must estimate include, but are not limited to, industry and market conditions, sales volume and pricing, raw material costs, capital expenditures, working capital changes, cost of capital, and tax rates.  These factors are especially difficult to predict when U.S. and global financial markets are volatile. The estimates and assumptions used in its impairment tests are consistent with those the Company uses in its internal planning. These estimates and assumptions may change from period to period.  If the Company uses different estimates and assumptions in the future, impairment charges may occur and could be material.

In performing the annual impairment test for goodwill, the Company utilizes the two-step approach.  The first step under this guidance requires a comparison of the carrying value of the reporting units to the fair value of these reporting units.  Only the Wheels and Brillion reporting units have Goodwill, therefore, the test only applies to those reporting units.  The Company uses a blend of the income and market value approaches to determine the fair value of each reporting unit.  The income approach calculates fair value by estimating the after-tax cash flows attributable to a reporting unit and then discounting these after-tax cash flows to a present value using a risk-adjusted discount rate and a market approach that uses guideline companies.  The market approach uses financial measures from guideline companies to apply the Company's reporting units' revenue and earnings.  If the blended fair value of the reporting unit exceeds the carrying value of the net assets including goodwill assigned to that unit, goodwill is not impaired.  If the carrying value of a reporting unit exceeds its fair value, the Company performs the second step of the goodwill impairment test to measure the amount of impairment loss, if any.  The second step of the goodwill impairment test compares the implied fair value of a reporting unit's goodwill to its carrying value.

For 2014 and 2013, we evaluated the value of goodwill for each reporting unit and determined there were no impairment indicators.   In the most recent test for impairment, the Wheels reporting unit had 7 percent of value in excess of its carrying value.  Considering the cyclical nature of the North American commercial vehicle industry and our other end-markets, along with other economic trends, the Company will continue to closely monitor the performance of the Wheels and Brillion reporting units for any indication of potential impairment triggering events.  .

In 2012, business developments in the Gunite reporting unit including a loss of customer market share, evidence of declining aftermarket sales, overall reduced production levels of the commercial vehicle market, operating losses for the past several years, and recent declines in the Company's stock price to an amount below book value, the Gunite reporting unit failed the step one goodwill impairment test.  The Company estimated the fair value of the Gunite reporting unit utilizing a discounted cash flow model, as the Company believes it is the most reliable indicator of fair value.  Therefore, the second step of the analysis was performed resulting in the Company recognizing goodwill impairment charges of $62.8 million.  The Wheels and Brillion reporting units both passed the step one test.  However, the valuation for the Wheels reporting unit is highly dependent upon projected builds for Class 5-8, heavy duty trucks.  A permanent, long-term decline in projected builds for these trucks could have a significant impact on the Wheels reporting unit's ability to pass the step one test in future periods.

The Company determines the fair value of other indefinite lived intangible assets, primarily trade names, using the relief-from-royalty method, an income based approach. The approach calculates fair value by estimating the after-tax cash flows attributable to the asset and then discounting these after-tax cash flows to a present value using a risk-adjusted discount rate. The calculated fair value is compared to the carrying value to determine if any impairment exists.

If events or circumstances change, a determination is made by management to ascertain whether certain finite-lived intangibles have been impaired based on the sum of expected future undiscounted cash flows from operating activities. If the estimated net cash flows are less than the carrying amount of such assets, an impairment loss is recognized in an amount necessary to write down the assets to fair value as determined from expected future discounted cash flows.

 We performed a recoverability test of the Gunite's finite-lived intangible assets by using an undiscounted cash flow method.  We first determined the asset group to be the Gunite reporting unit, which represents the lowest level of identifiable cash flows.  Our test concluded that the Gunite asset group was not recoverable as the resulting undiscounted cash flows were less than the carrying amount of the asset group.  Accordingly, we estimated the fair value of the finite-lived intangible assets to determine the impairment amount.  Determining fair value is judgmental in nature and requires the use of significant estimates and assumptions, considered to be Level 3 inputs.

To determine the estimated fair value of customer relationships, the multi-period excess earnings method was used.  This method is based on the concept that cash flows attributable to the assets analyzed are available after deducting costs associated with the business as well as a return on the assets employed in the generation of the cash flows.  Significant Level 3 inputs for this valuation model include determining the attrition rate associated with customer revenues, contributory asset charges and required rates of return on tangible and intangible assets, as well as a discount rate for the cash flows.  To determine the fair value of technology, the relief-from-royalty method described above was used.  In applying this method to technology, significant Level 3 inputs include determining the technology obsolescence rate, a royalty rate, and an appropriate discount rate.

As a result of the fair value measurements, no trade names, customer relationship or technology impairment was recognized for the years ended December 31, 2014 and 2013.

For the year ended December 31, 2012 the Company recorded additional impairment of Gunite's trade names, customer relationships, and technology totaling $36.8 million.

Pensions and Other Post-Employment BenefitsWe account for our defined benefit pension plans and other post-employment benefit plans in accordance with ASC 715-30, Defined Benefit Plans - Pensions, ASC 715-60, Defined Benefit Plans – Other Postretirement, and ASC 715-20, Defined Benefit Plans - General, which require that amounts recognized in financial statements be determined on an actuarial basis. As permitted by ASC 715-30, we use a smoothed value of plan assets (which is further described below). ASC 715-30 requires that the effects of the performance of the pension plan's assets and changes in pension liability discount rates on our computation of pension income (cost) be amortized over future periods. ASC 715-20 requires an employer to fully recognize the obligations associated with single-employer defined benefit pension, retiree healthcare, and other postretirement plans in their financial statements.

The most significant element in determining our pension income (cost) in accordance with ASC 715-30 is the expected return on plan assets and discount rates. In 2014, we assumed that the expected long-term rate of return on plan assets would be 6.7 percent for our U.S. plans and 5.6 percent for our Canadian plans. The assumed long-term rate of return on assets is applied to a calculated value of plan assets, which recognizes changes in the fair value of plan assets in a systematic manner over five years. This produces the expected return on plan assets that is included in pension income (cost). The difference between this expected return and the actual return on plan assets is deferred. The net deferral of past asset gains (losses) affects the calculated value of plan assets and, ultimately, future pension income (cost).

The expected return on plan assets is reviewed annually, and if conditions should warrant, will be revised. If we were to lower this rate, future pension cost would increase. For 2015, we currently anticipate reducing our long-term rate of return assumption to 6.4 percent for our U.S. plans and reducing our rate to 4.3 percent for our Canadian plans.

At the end of each year, we determine the discount rates to be used to calculate the present value of each of the plan liabilities. The discount rate is an estimate of the current interest rate at which the pension liabilities could be effectively settled at the end of the year. In estimating this rate, we look to rates of return on high-quality, fixed-income investments that receive one of the two highest ratings given by a recognized ratings agency. At December 31, 2014, we determined the blended rate to be 4.79 percent. The net effect of changes in the discount rate, as well as the net effect of other changes in actuarial assumptions and experience, has been deferred, in accordance with ASC 715-30.

For the year ended December 31, 2014, we recognized consolidated pretax pension benefit of $0.7 million compared to $2.4 million expense in 2013. We currently expect to contribute $8.3 million to our pension plans during 2015, however, we may elect to adjust the level of contributions based on a number of factors, including performance of pension investments, changes in interest rates, and changes in workforce compensation.

For the year ended December 31, 2014, we recognized consolidated pre-tax post-employment welfare expense cost of $4.3 million compared to $4.1 million in 2013. We expect to contribute $4.2 million during 2015 to our post-employment welfare benefit plans.

Income TaxesOur income tax expense, deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect management's best assessment of estimated future taxes to be paid. We are subject to income taxes in both the United States and numerous foreign jurisdictions. Significant judgments and estimates are required in determining the consolidated income tax expense.

Deferred income taxes arise from temporary differences between the tax and financial statement recognition of revenue and expense. In evaluating our ability to recover our deferred tax assets within the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations. In projecting future taxable income, we begin with historical results adjusted for the results of discontinued operations and changes in accounting policies and incorporate assumptions including the amount of future state, federal and foreign pretax operating income, the reversal of temporary differences, and the implementation of feasible and prudent tax-planning strategies. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates we are using to manage the underlying businesses. In evaluating the objective evidence that historical results provide, we consider three years of cumulative operating income (loss).
Upon emergence from bankruptcy in 2010, the Company adjusted its recorded deferred tax assets and liabilities using the valuation adjustments resulting from fresh start accounting. We concluded at that time that we remained in a net deferred tax asset position and re-evaluated the realizability of our U.S. net deferred tax assets by assessing the likelihood of our ability to utilize them against future taxable income and availability of tax planning strategies. We determined that a valuation allowance against the deferred tax assets continued to be appropriate. The Company will continue to evaluate the likelihood of realization on a quarterly basis and adjust the valuation allowance accordingly.

Changes in tax laws and rates could also affect recorded deferred tax assets and liabilities in the future. Management is not aware of any such changes that would have a material effect on the Company's results of operations, cash flows, or financial position.

The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in a multitude of jurisdictions across our global operations.

ASC 740 provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits. ASC 740 also provides guidance on measurement, de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.

We recognize tax liabilities in accordance with ASC 740 and we adjust these liabilities when our judgment changes as a result of the evaluation of new information not previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current estimate of the tax liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which new information is available.

We believe that it is reasonably possible that an increase of up to $0.2 million in unrecognized tax benefits related to state exposures may be necessary within the coming year. In addition, we believe that it is reasonably possible that approximately none of our currently remaining unrecognized tax benefits, each of which are individually insignificant, may be recognized by the end of 2015 as a result of a lapse of the statute of limitations.

Recent Developments

See Note 1 of the "Consolidated Financial Statements" for discussions related to recent developments.

Effects of Inflation

The effects of inflation were not considered material during fiscal years 2014, 2013, or 2012.

Item 7A. Quantitative and Qualitative Disclosure about Market Risk

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

Foreign Currency Risk

Certain forecasted transactions, assets, and liabilities are exposed to foreign currency risk. We monitor our foreign currency exposures to maximize the overall effectiveness of our foreign currency derivatives. The principal currencies of exposure are the Canadian Dollar and Mexican Peso. From time to time, we use foreign currency financial instruments, namely foreign currency derivative contracts, to offset the impact of the variability in exchange rates on our operations, cash flows, assets and liabilities. At December 31, 2014, we had $0.6 million in open forward contracts.

Foreign currency derivative contracts provide only limited protection against currency risks. Factors that could impact the effectiveness of our currency risk management programs include accuracy of sales estimates, volatility of currency markets and the cost and availability of derivative instruments. The counterparty to the foreign exchange contracts is a financial institution with an investment grade credit rating. The use of forward contracts protects our cash flows against unfavorable movements in exchange rates to the extent of the amount under contract.

Raw Material/Commodity Price Risk

We rely upon the supply of certain raw materials and commodities in our production processes, and we have entered into contractual purchase commitments for certain metals and natural gas. A 10% adverse change in pricing (considering 2014 production volume) would cause an increase in expenses of approximately $31.0 million, which would be reduced through the terms of the sales,
supply, and procurement contracts that would allow us to pass along some of these expenses, although in some cases on a delayed basis. Additionally, from time to time, we use commodity price swaps and futures contracts to manage the variability in certain commodity prices on our operations and cash flows. At December 31, 2014, we had no open commodity price swaps or futures contracts.

Interest Rate Risk

We use long-term debt as a primary source of capital. The following table presents the principal cash repayments and related weighted average interest rates by maturity date for our long-term fixed-rate debt and other types of long-term debt at December 31, 2014:

(In thousands)
 
2015
   
2016
   
2017
   
2018
   
2019
   
Thereafter
   
Total
 
Fair
Value
Long-term Debt:
 
   
   
   
   
   
   
 
Fixed Rate
   
     
     
   
$
310,000
     
     
   
$
310,000
 
$
319,207
Average Rate
   
     
     
     
9.5
%
   
     
     
9.50
%
   
Variable Rate
   
     
     
   
$
17,000
     
     
   
$
17,000
 
$
17,000
Average Rate
   
     
     
     
2.89
%
   
     
     
2.89
%
   

Item 8. Financial Statements and Supplementary Data

Attached, see Item 15.

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

None.

Item 9A. Controls and Procedures
 
Evaluation of disclosure controls and procedures. In accordance with Rule 13a-15(b) of the Exchange Act, our management evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of December 31, 2014. Based upon their evaluation of these disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of December 31, 2014 to ensure that information required to be disclosed under the Exchange Act is recorded, processed, summarized, and reported, within the time period specified in the SEC rules and forms, and to ensure that information required to be disclosed under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.
 
Management's Annual Report on Internal Control Over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of published financial statements in accordance with U.S. GAAP.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has assessed the effectiveness of our internal control over financial reporting based on the framework and criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013). Based on this assessment, our management has concluded that, as of December 31, 2014, our internal controls over financial reporting were effective based on that framework.
 
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of the effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Deloitte & Touche LLP, the Company's independent registered public accounting firm, issued an audit report on the effectiveness of the Company's internal control over financial reporting as of December 31, 2014, which is included herein.


Changes in Internal Controls Over Financial Reporting. During the fourth quarter of fiscal 2014, there were no changes to our internal controls over financial reporting that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

Item 9B. Other Information
 
None.

PART III
 
Item 10.                          Directors, Executive Officers, and Corporate Governance
 
The information required by Item 10 is incorporated by reference to the information set forth in our Proxy Statement in connection to our 2015 Annual Meeting of Shareholders ("2015 Proxy Statement") to be filed with the SEC not later than 120 days after the end of our fiscal year covered by this Form 10-K.

Code of Ethics for CEO and Senior Financial Officers

As part of our system of corporate governance, our Board of Directors has adopted a code of conduct (the "Accuride Code of Conduct") that is applicable to all employees including our Chief Executive Officer and senior financial officers. The Accuride Code of Conduct is available on our website at http://www.accuridecorp.com. We intend to disclose on our website any amendments to, or waivers from, the Accuride Code of Conduct that are required to be publicly disclosed pursuant to the rules of the SEC.

Item 11. Executive Compensation
 
The information required by Item 11 is incorporated by reference to the information set forth in our 2015 Proxy Statement.

Item 12.       Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
 
The information required by Item 12 is incorporated by reference to the information set forth in our 2015 Proxy Statement.

Item 13. Certain Relationships and Related Transactions and Director Independence

The information required by Item 13 is incorporated by reference to the information set forth in our 2015 Proxy Statement.

Item 14. Principal Accountant Fees and Services
 
The information required by Item 14 is incorporated by reference to the information set forth in our 2015 Proxy Statement.

PART IV
 
Item 15. Exhibits and Financial Statement Schedules
 
(a) The following constitutes a list of Financial Statements and Financial Statement Schedules required to be included in this report:

1. Financial Statements

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

Report of Independent Registered Public Accounting Firm.
Consolidated Balance Sheets—As of December 31, 2014 and 2013.
Consolidated Statements of Operations and Comprehensive Loss— For the years ended December 31, 2014, 2013, and 2012.
Consolidated Statements of Stockholders' Equity — For the years ended December 31, 2014, 2013 and 2012.
Consolidated Statements of Cash Flows—For the years ended December 31, 2014, 2013 and 2012.
Notes to Consolidated Financial Statements—For the years ended December 31, 2014, 2013 and 2012.

2. Financial Statement Schedules

Schedules are omitted because of the absence of conditions under which they are required or because the required information is presented in the Financial Statements or notes thereto.

3. Exhibits

2.1
 
Agreement and Plan of Merger, dated as of December 24, 2004, by and among Accuride Corporation, Amber Acquisition Corp., Transportation Technologies Industries, Inc., certain signing stockholders and the Company Stockholders Representatives. Previously filed as an exhibit to the Form 8-K filed on December 30, 2004 and incorporated herein by reference.
2.2
 
Amendment to Agreement and Plan of Merger, dated as of January 28, 2005, by and among Accuride Corporation, Amber Acquisition Corp., Transportation Technologies Industries, Inc. certain signing stockholders and the Company Stockholders Representatives. Previously filed as an exhibit to the Form 8-K filed on February 4, 2005 and incorporated herein by reference.
2.3
 
ThirdAmended Joint Plan of Reorganization for Accuride Corporation, et al. Previously filed as an exhibit to the Form 8-K filed on February 22, 2010, and incorporated herein by reference.
2.4
 
Confirmation Order for Third Amended Plan of Reorganization. Previously filed as an exhibit to the Form 8-K filed on February 22, 2010, and incorporated herein by reference.
2.5
 
Stock Purchase Agreement by and among Accuride Corporation, Truck Components, Inc., Fabco Automotive Corporation and Fabco Holdings Inc., dated September 26, 2011. Previously filed as an exhibit to the Form 8-K filed on September 30, 2011, and incorporated herein by reference.
3.1
 
Amended and Restated Certificate of Incorporation of Accuride Corporation. Previously filed as an exhibit to the Form 8-K (Acc. No. 0001104659-10-012168) filed on March 4, 2010, and incorporated herein by reference.
3.2
 
Certificate of Amendment to the Amended and Restated Certificate of Incorporation. Previously filed as an exhibit to the Form 8-K (ACC No. 0001104659-10-059191) filed on November 18, 2010, and incorporated herein by reference.
3.3
 
Amended and Restated Bylaws of Accuride Corporation. Previously filed as an exhibit to the Form 8-K (Acc. No. 0001104659-10-004054) filed on February 1, 2011, and incorporated herein by reference.
4.1
 
Registration Rights Agreement, dated February 26, 2010, by and between Accuride Corporation and each of the Holders party thereto. Previously filed as an exhibit to the Form 8-K (Acc. No. 0001104659-10-012168) filed on March 4, 2010 and incorporated herein by reference.
4.2
 
Indenture, dated as of July 29, 2010, by and among Accuride Corporation, the guarantors named therein, Wilmington Trust FSB, as trustee and Deutsche Bank Trust Company Americas, with respect to 9.5% First Priority Senior Secured Notes due 2018. Previously filed as an exhibit to the Form 8-K filed on August 2, 2010 (Acc. No. 0001104659-10-012168) and incorporated herein by reference.
4.3
 
Form of 9.5% First Priority Senior Secured Notes due 2018. Previously filed as an exhibit to Form 8-K filed on August 2, 2010 and incorporated herein by reference.
4.4
 
Intercreditor Agreement, dated as of July 29, 2010, among Deutsche Bank Trust Company Americas, as initial ABL Agent, and Deutsche Bank Trust Company Americas, as Senior Secured Notes Collateral Agent. Previously filed as an exhibit to the Form 8-K filed on August 2, 2010 (Acc. No. 0001104659-10-012168) and incorporated herein by reference.
4.5
 
Joinder and Amendment to Intercreditor Agreement, dated July 11, 2013, by and among Wells Fargo, National Association, a national banking association, as the New ABL Agent and Deutsche Bank Trust Company Americas, as Senior Secured Notes Collateral Agent. Previously filed as an exhibit to the Form 8-K filed on July 12, 2013 and incorporated herein by reference
10.1
 
Lease Agreement, dated October 26, 1998, as amended, by and between Accuride Corporation and Viking Properties, LLC, regarding the Evansville, Indiana office space. Previously filed as an exhibit to Amendment No. 1 filed on February 23, 2005 to the Form S-1 effective April 25, 2005 (Reg. No. 333-121944) and incorporated herein by reference.
10.2
 
Fourth Addendum to Lease Agreement With Option to Purchase, dated December, 22 2009, by and between Accuride Corporation, Viking Properties, LLC, and Logan Indiana Properties, LLC. Previously filed as an exhibit to the Form 8-K filed on March 4, 2010 and incorporated herein by reference.
10.3
 
Fifth Addendum to Lease Agreement With Option to Purchase, dated September 2, 2014, by and among Viking Properties, LLC, Logan Properties, LLC and Accuride Corporation. Previously filed as an exhibit to the Form 8-K filed on September 5, 2014 and incorporated herein by reference.
10.4
 
Amended and Restated Plant Parcel Lease Agreement, dated as of March 31, 2005 and amended and restated as of March 1, 2010, by and between Accuride Erie L.P. and Greater Erie Industrial Development Corporation, as further amended by the attached Subordination, Non-disturbance and Attornment Agreement, dated June 9, 2009, between First National Bank of Pennsylvania, Greater Erie Industrial Development Corporation and Accuride Erie, L.P. Previously filed as an exhibit to the Form 8-K filed on June 15, 2009 and incorporated herein by reference.
10.5*
 
Accuride Executive Retirement Allowance Policy, dated December 2008. Previously filed as an exhibit to the Form 10-K filed on March 13, 2009 and incorporated herein by reference.
10.6*
 
Form of Amended & Restated Severance and Retention Agreement (Tier II executives).Previously filed as an exhibit to the Form 10-K filed on March 15, 2012, and incorporated herein by reference.
- 44 -

10.7*
 
Form of Amended & Restated Severance and Retention Agreement (Tier III executives).Previously filed as an exhibit to the Form 10-K filed on March 15, 2012, and incorporated herein by reference.
10.8*
 
Form of Indemnification Agreement between Accuride and each member of the pre-petition Board of Directors. Previously filed as an exhibit to Form 8-K filed on February 4, 2009 and incorporated herein by reference.
10.9*
 
Form of Indemnification Agreement. Previously filed as an exhibit to Amendment 4, filed on April 21, 2005, to the Form S-1 effective April 25, 2005 (Reg. No. 333-121944) and incorporated herein by reference.
10.10*
 
Form of Indemnification Agreement between Accuride and its post-petition Directors and Officers. Previously filed as an exhibit to Form 8-K filed on May 5, 2010 and incorporated herein by reference.
10.11*
 
Accuride Corporation Directors' Deferred Compensation Plan, as amended. Previously filed as an exhibit to the Form 10-K filed on March 28, 2011, and incorporated herein by reference.
10.12*
 
Accuride Corporation Second Amended and Restated 2010 Incentive Award Plan. Previously filed as an exhibit to the Form 8-K filed on April 29, 2014, and incorporated herein by reference.
10.13*
Amended and Restated Accuride Corporation Incentive Compensation Plan. Previously filed as an exhibit to the Form 8-K filed on April 29, 2014 and incorporated herein by reference.
10.14*
 
Letter agreement, dated January 14, 2011, between Accuride Corporation and Richard F. Dauch. Previously filed as an exhibit to Form 8-K filed on February 1, 2011, and incorporated herein by reference.
10.15
 
Agreement of Lease, effective as of January 5, 2009, by and between Accuride Corporation and I-65 Corridor 1, L.L.C. Previously filed as an exhibit to the Form 8-K filed on January 12, 2009, and incorporated herein by reference.
10.16
 
Credit Agreement, dated July 11, 2013, by and among Wells Fargo, National Association, as Administrative Agent, Lead Arranger and Book Runner, BMO Harris Bank N.A., as Syndication Agent, the lenders party thereto, and the Accuride Corporation and its subsidiaries parties thereto, as Borrowers. Previously filed as an exhibit to the Form 8-K filed on July 12, 2013 and incorporated herein by reference.
10.17*
 
Form of Accuride Corporation 2010 Initial Grant Restricted Stock Unit Award entered into by Accuride Corporation and individual directors of Accuride Corporation. Previously filed as Exhibit 4.4 to Form S-8 filed on August 3, 2010 and incorporated herein by reference.
10.18*
 
Form of Restricted Stock Unit Award Agreement. Previously filed as an exhibit to Form 10-Q filed on May 17, 2010 and incorporated herein by reference.
10.19*
 
Form of Restricted Stock Unit Award Agreement. Previously filed as an exhibit to Form 8-K filed on April 29, 2011 and incorporated herein by reference.
10.20*
 
Form of Restricted Stock Unit Award Agreement (2012 Employee Long Term Incentive Plan). Previously filed as an exhibit to Form 10-K filed on March 15, 2012, and incorporated herein by reference.
10.21*
 
Form of Stock Option Award Agreement (2012 Employee Long Term Incentive Plan). Previously filed as an exhibit to Form 10-K filed on March 15, 2012, and incorporated herein by reference.
10.22*
 
Form of Performance Share Unit Award Agreement (2013). Previously filed as an exhibit to the Form 8-K filed on March 25, 2013 and incorporated herein by reference.
10.23*
 
Form of Restricted Stock Unit Award Agreement (2013). Previously filed as an exhibit to the Form 8-K filed on March 25, 2013 and incorporated herein by reference.
10.24
 
Asset Purchase Agreement among Accuride EMI, LLC, Accuride Corporation, Forgitron Technologies LLC and Kamylon Partners TBG, LLC, dated June 20, 2011. Previously filed as an exhibit to Form 8-K filed on June 21, 2011 and incorporated herein by reference.
10.25
 
Capital Lease Agreements, dated February 10, 2012, between Accuride Corporation and General Electric Capital Corporation and its affiliates. Previously filed as an exhibit to the Form 8-K filed on February 16, 2012 and incorporated herein by reference.
10.26
 
Modification Agreement dated December 19, 2014 and made effective as of December 1, 2014, by and between Gunite Corporation and GE Capital Commercial, Inc. Previously filed as an Exhibit to the Form 8-K filed on December 23, 2014 and incorporated herein by reference.
10.27
 
Investors Agreement, dated December 9, 2012 by and among Accuride Corporation and the Investors party hereto.Previously filed as an exhibit to the Form 8-K filed on December 20, 2012 and incorporated herein by reference.
10.28
 
Sublease, entered into as of August 8, 2013, by and between Accuride Corporation and Menlo Logistics, Inc.
Previously filed as an exhibit to the Form 8-K filed on August 13, 2013 and incorporated herein by reference.
10.29
 
Lease, entered into as of August 8, 2013, by and between Accuride Corporation and Cabot Acquisition, LLC.Previously filed as an exhibit to the Form 8-K filed on August 13, 2013 and incorporated herein by reference.
10.30
 
Asset Purchase Agreement, dated August 1, 2013, by and among Accuride Corporation, Imperial Group, L.P., and Imperial Group Manufacturing, Inc. Previously filed as an exhibit to Form 8-K filed on August 6, 2013 and incorporated herein by reference.
14.1
 
Accuride Corporation Code of Conduct-2005. Previously filed as an exhibit to Amendment No. 2 filed on March 25, 2005 to the Form S-1 effective April 25, 2005 (Reg. No. 333-121944) and incorporated herein by reference.
21.1†
 
Subsidiaries of the Registrant.
23.1†
 
Consent of Independent Registered Public Accounting Firm.

31.1†
 
Section 302 Certification of Richard F. Dauch in connection with the Annual Report of Form 10-K of Accuride Corporation for the fiscal year ended December 31, 2014.
31.2†
 
Section 302 Certification of Gregory A. Risch in connection with the Annual Report of Form 10-K of Accuride Corporation for the fiscal year ended December 31, 2014.
32.1††
 
Section 906 Certification of Richard F. Dauch in connection with the Annual Report on Form 10-K of Accuride Corporation for the fiscal year ended December 31, 2014.
32.2††
 
Section 906 Certification of Gregory A. Risch in connection with the Annual Report on Form 10-K of Accuride Corporation for the fiscal year ended December 31, 2014.
101.INS†
 
XBRL Instance Document
101.SCH†
 
XBRL Taxonomy Extension Schema Document
101.CAL†
 
XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB†
 
XBRL Taxonomy Extension Label Linkbase Document
101.PRE†
 
XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF†
 
XBRL Taxonomy Extension Definition Linkbase Document
 

†  Filed herewith
††  Furnished herewith
Management contract or compensatory agreement

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

Dated: March 3, 2015

 
ACCURIDE CORPORATION
 
 
 
 
 
By:
/s/ RICHARD F. DAUCH
 
 
 
Richard F. Dauch
 
 
 
President and Chief Executive Officer
 

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

Signature
 
Title
 
Date
 
 
 
 
 
/s/ RICHARD F. DAUCH
 
President and Chief Executive Officer
 
March 3, 2015
Richard F. Dauch
 
(Principal Executive Officer)
 
 
 
 
 
 
 
/s/ GREGORY A. RISCH
 
Senior Vice President and Chief Financial Officer
 
March 3, 2015
Gregory A. Risch
 
(Principal Financial and Accounting Officer)
 
 
 
 
 
 
 
/s/ JOHN W. RISNER
 
Chairman of the Board of Directors
 
March 3, 2015
John W. Risner
 
 
 
 
 
 
 
 
 
/s/ ROBIN J. ADAMS
 
Director
 
March 3, 2015
Robin J. Adams
 
 
 
 
 
 
 
 
 
/s/ KEITH E. BUSSE
 
Director
 
March 3, 2015
Keith E. Busse
 
 
 
 
 
 
 
 
 
/s/ ROBERT E. DAVIS
 
Director
 
March 3, 2015
Robert E. Davis
 
 
 
 
 
 
 
 
 
/s/ LEWIS M. KLING
 
Director
 
March 3, 2015
Lewis M. Kling
 
 
 
 
 
 
 
 
 
/s/ JAMES R. RULSEH
 
Director
 
March 3, 2015
James R. Rulseh
 
 
 
 

ACCURIDE CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm
49
 
 
Consolidated Balance Sheets as of December 31, 2014 and 2013
50
 
 
Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2014, 2013 and 2012
51
 
 
Consolidated Statements of Stockholders' Equity for the years ended December 31, 2014, 2013 and 2012
52
 
 
Consolidated Statements of Cash Flows for the years ended December 31, 2014, 2013 and 2012
53
 
 
Notes to Consolidated Financial Statements
54

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Accuride Corporation and subsidiaries
Evansville, Indiana

We have audited the accompanying consolidated balance sheets of Accuride Corporation and subsidiaries (the "Company") as of December 31, 2014 and 2013, and the related consolidated statements of operations and comprehensive loss, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2014. We also have audited the Company's internal control over financial reporting as of December 31, 2014, based on Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Company's internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Accuride Corporation and subsidiaries as of December 31, 2014 and 2013, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2014, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based on the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.



/s/ DELOITTE & TOUCHE LLP
Indianapolis, Indiana
March 3, 2015

ACCURIDE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(In thousands, except for share and per share data)
 
December 31, 2014
   
December 31, 2013
 
ASSETS
 
   
 
CURRENT ASSETS:
 
   
 
Cash and cash equivalents
 
$
29,773
   
$
33,426
 
Customer receivables, net of allowance for doubtful accounts of $327 and $259 in 2014 and 2013, respectively
   
56,271
     
51,382
 
Other receivables
   
7,299
     
8,138
 
Inventories
   
43,065
     
39,329
 
Deferred income taxes
   
2,687
     
3,806
 
Prepaid expenses and other current assets
   
10,785
     
11,894
 
Assets held for sale
   
     
1,293
 
Total current assets
   
149,880
     
149,268
 
PROPERTY, PLANT AND EQUIPMENT, net
   
212,183
     
219,624
 
OTHER ASSETS:
               
Goodwill
   
100,697
     
100,697
 
Other intangible assets, net
   
117,963
     
125,430
 
Deferred financing costs, net of accumulated amortization of $5,077 and $3,649 in 2014 and 2013, respectively
   
5,012
     
6,440
 
Deferred income taxes
   
1,289
     
503
 
Other
   
11,398
     
9,815
 
TOTAL
 
$
598,422
   
$
611,777
 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
CURRENT LIABILITIES:
               
Accounts payable
 
$
56,452
   
$
47,527
 
Accrued payroll and compensation
   
10,620
     
8,763
 
Accrued interest payable
   
12,428
     
12,535
 
Accrued workers compensation
   
3,137
     
4,373
 
Accrued and other liabilities
   
14,434
     
16,801
 
Total current liabilities
   
97,071
     
89,999
 
LONG-TERM DEBT
   
323,234
     
330,183
 
DEFERRED INCOME TAXES
   
14,837
     
17,528
 
NON-CURRENT INCOME TAXES PAYABLE
   
6,534
     
8,367
 
OTHER POSTRETIREMENT BENEFIT PLAN LIABILITY
   
82,157
     
70,584
 
PENSION BENEFIT PLAN LIABILITY
   
32,348
     
20,687
 
OTHER LIABILITIES
   
11,438
     
12,545
 
COMMITMENTS AND CONTINGENCIES
   
     
 
STOCKHOLDERS' EQUITY :
               
Preferred Stock, $0.01 par value; 10,000,000 shares authorized