10-Q 1 acw16-310q3.htm FORM 10-Q  
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC  20549

FORM 10-Q

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

For the quarterly period ended September 30, 2016.

OR
 
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the transition period from __________ to ___________.

Commission file number 001-32483


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

Delaware
 
61-1109077
(State or Other Jurisdiction of Incorporation or Organization)
 
(I.R.S. Employer Identification No.)
 
 
 
7140 Office Circle, Evansville, IN
 
47715
(Address of Principal Executive Offices)
 
(Zip Code)
 
Registrant's Telephone Number, Including Area Code: (812) 962-5000
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   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 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 Rule 12b-2 of the Exchange Act). Yes  No
 
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.  Yes  No
 
As of October 27, 2016, 48,323,007 shares of Accuride Corporation common stock, par value $0.01 per share, were outstanding.

 
ACCURIDE CORPORATION

Table of Contents

PART I – FINANCIAL INFORMATION
Page
 
 
 
 
 
 
PART II – OTHER INFORMATION
 

 
Part I.  FINANCIAL INFORMATION

Item 1.
Condensed Consolidated Financial Statements (Unaudited)

ACCURIDE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In thousands, except for share and per share data)
 
September 30, 2016
   
December 31, 2015
 
ASSETS
           
CURRENT ASSETS:
           
Cash and cash equivalents
 
$
26,954
   
$
29,759
 
Customer receivables, net of allowance for doubtful accounts of $1,350 and $1,266 in 2016 and 2015, respectively
   
49,008
     
53,065
 
Other receivables
   
7,375
     
7,010
 
Inventories
   
35,213
     
41,761
 
Prepaid expenses and other current assets
   
8,180
     
7,347
 
Current assets of discontinued operations
   
     
12,988
 
Total current assets
   
126,730
     
151,930
 
PROPERTY, PLANT AND EQUIPMENT, net
   
184,814
     
194,821
 
OTHER ASSETS:
               
Goodwill
   
96,283
     
96,283
 
Other intangible assets, net
   
103,293
     
109,461
 
Deferred financing costs, net of accumulated amortization of $3,384 and $3,073 in 2016 and 2015, respectively
   
666
     
977
 
Deferred income taxes
   
778
     
741
 
Pension asset
   
15,433
     
12,060
 
Other
   
5,221
     
5,075
 
Non-current assets of discontinued operations
   
     
32,271
 
TOTAL
 
$
533,218
   
$
603,619
 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
CURRENT LIABILITIES:
               
Accounts payable
 
$
51,089
   
$
63,870
 
Accrued payroll and compensation
   
6,090
     
6,178
 
Accrued interest payable
   
5,043
     
12,521
 
Accrued workers compensation
   
2,894
     
2,392
 
Short-term debt obligations
   
10,635
     
10,286
 
Accrued and other liabilities
   
12,145
     
13,599
 
Current liabilities of discontinued operations
   
     
13,052
 
Total current liabilities
   
87,896
     
121,898
 
LONG-TERM DEBT
   
307,435
     
304,254
 
DEFERRED INCOME TAXES
   
13,302
     
13,133
 
NON-CURRENT INCOME TAXES PAYABLE
   
6,745
     
6,676
 
OTHER POSTRETIREMENT BENEFIT PLAN LIABILITY
   
49,360
     
48,976
 
PENSION BENEFIT PLAN LIABILITY
   
23,761
     
26,545
 
OTHER LIABILITIES
   
7,841
     
10,350
 
NON-CURRENT LIABILITIES OF DISCONTINUED OPERATIONS
   
     
933
 
COMMITMENTS AND CONTINGENCIES (Note 7)
   
     
 
STOCKHOLDERS' EQUITY:
               
Preferred Stock, $0.01 par value; 10,000,000 shares authorized
   
     
 
Common Stock, $0.01 par value; 80,000,000 shares authorized, 48,323,007 and 47,953,555 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively, and additional paid-in-capital
   
445,787
     
444,253
 
Accumulated other comprehensive loss
   
(20,607
)
   
(17,425
)
Accumulated deficiency
   
(400,718
)
   
(369,824
)
Total stockholders' equity
   
24,462
     
57,004
 
Noncontrolling interest
   
12,416
     
13,850
 
Total equity
   
36,878
     
70,854
 
TOTAL
 
$
533,218
   
$
603,619
 

See notes to unaudited condensed consolidated financial statements.
ACCURIDE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

 
 
Three Months Ended September 30,
   
Nine Months Ended September 30,
 
(In thousands except per share data)
 
2016
   
2015
   
2016
   
2015
 
 
                       
NET SALES
 
$
125,202
   
$
145,656
   
$
417,230
   
$
453,094
 
COST OF GOODS SOLD
   
113,259
     
124,033
     
361,119
     
386,006
 
GROSS PROFIT
   
11,943
     
21,623
     
56,111
     
67,088
 
OPERATING EXPENSES:
                               
Selling, general and administrative
   
10,460
     
10,505
     
34,565
     
33,244
 
INCOME FROM OPERATIONS
   
1,483
     
11,118
     
21,546
     
33,844
 
OTHER EXPENSE:
                               
Interest expense, net
   
(8,442
)
   
(8,249
)
   
(25,248
)
   
(24,953
)
Other income (loss), net
   
(9
)
   
(1,142
)
   
582
     
(2,398
)
INCOME (LOSS) BEFORE INCOME TAXES FROM CONTINUING OPERATIONS
   
(6,968
)
   
1,727
     
(3,120
)
   
6,493
 
INCOME TAX EXPENSE (BENEFIT)
   
410
     
(3,671
)
   
1,166
     
(3,663
)
INCOME (LOSS) FROM CONTINUING OPERATIONS
   
(7,378
)
   
5,398
     
(4,286
)
   
10,156
 
DISCONTINUED OPERATIONS, NET OF TAX
   
(21,861
)
   
(3,578
)
   
(28,042
)
   
(2,585
)
NET INCOME (LOSS)
 
$
(29,239
)
 
$
1,820
   
$
(32,328
)
 
$
7,571
 
NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS
   
(627
)
   
     
(1,434
)
   
 
NET INCOME (LOSS) ATTRIBUTABLE TO STOCKHOLDERS
 
$
(28,612
)
 
$
1,820
   
$
(30,894
)
 
$
7,571
 
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
                               
Amounts reclassified from accumulated other comprehensive income
   
(2,128
)
   
(3,259
)
   
(3,182
)
   
15,581
 
COMPREHENSIVE INCOME (LOSS)
 
$
(30,740
)
 
$
(1,439
)
 
$
(34,076
)
 
$
23,152
 
                                 
Amounts attributable to stockholders:
                               
Income (loss) from continuing operations, net of tax
   
(6,751
)
   
5,398
     
(2,852
)
   
10,156
 
Discontinued operations, net of tax
   
(21,861
)
   
(3,578
)
   
(28,042
)
   
(2,585
)
Net income (loss) attributable to stockholders
 
$
(28,612
)
 
$
1,820
   
$
(30,894
)
 
$
7,571
 
                                 
Weighted average common shares outstanding—basic
   
48,332
     
48,015
     
48,247
     
47,943
 
Basic income (loss) per share – continuing operations
 
$
(0.14
)
 
$
0.11
   
$
(0.06
)
 
$
0.21
 
Basic loss per share – discontinued operations
   
(0.45
)
   
(0.07
)
   
(0.58
)
   
(0.05
)
Basic income (loss) per share
 
$
(0.59
)
 
$
0.04
   
$
(0.64
)
 
$
0.16
 
Weighted average common shares outstanding—diluted
   
48,332
     
49,422
     
48,247
     
48,844
 
Diluted income (loss) per share – continuing operations
 
$
(0.14
)
 
$
0.11
   
$
(0.06
)
 
$
0.21
 
Diluted loss per share – discontinued operations
   
(0.45
)
   
(0.07
)
   
(0.58
)
   
(0.05
)
Diluted income (loss) per share
 
$
(0.59
)
 
$
0.04
   
$
(0.64
)
 
$
0.16
 

See notes to unaudited condensed consolidated financial statements.


ACCURIDE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)

(In thousands)
 
Common
Stock and
Additional
Paid-in-
Capital
   
Accumulated
Other
Comprehensive
Income (Loss)
   
Accumulated
Deficiency
   
Noncontrolling
Interest
   
Total
Stockholders'
Equity
 
                               
BALANCE—July 1, 2015
 
$
443,669
   
$
(30,798
)
 
$
(356,439
)
 
$
   
$
56,432
 
Net income
   
     
     
1,820
     
     
1,820
 
Share-based compensation expense
   
698
     
     
     
     
698
 
Tax impact of forfeited vested shares
   
(7
)
   
     
     
     
(7
)
Other comprehensive loss, net of tax
   
     
(3,259
)
   
     
     
(3,259
)
BALANCE—September 30, 2015
 
$
444,360
   
$
(34,057
)
 
$
(354,619
)
 
$
   
$
55,684
 
 
                                       
BALANCE—July 1, 2016
 
$
445,106
   
$
(18,479
)
 
$
(372,106
)
 
$
13,043
   
$
67,564
 
Net loss
   
     
     
(28,612
)
   
(627
)
   
(29,239
)
Share-based compensation expense
   
681
     
     
     
     
681
 
Tax impact of forfeited vested shares
   
     
     
     
     
 
Other comprehensive loss, net of tax
   
     
(2,128
)
   
     
     
(2,128
)
BALANCE—September 30, 2016
 
$
445,787
   
$
(20,607
)
 
$
(400,718
)
 
$
12,416
   
$
36,878
 


(In thousands)
 
Common
Stock and
Additional
Paid-in-
Capital
   
Accumulated
Other
Comprehensive
Income (Loss)
   
Accumulated
Deficiency
   
Noncontrolling
Interest
   
Total
Stockholders'
Equity
 
                               
BALANCE— January 1, 2015
 
$
442,631
   
$
(49,638
)
 
$
(362,190
)
 
$
   
$
30,803
 
Net income
   
     
     
7,571
     
     
7,571
 
Share-based compensation expense
   
2,147
     
     
     
     
2,147
 
Tax impact of forfeited vested shares
   
(418
)
   
     
     
     
(418
)
Other comprehensive income, net of tax
   
     
15,581
     
     
     
15,581
 
BALANCE—September 30, 2015
 
$
444,360
   
$
(34,057
)
 
$
(354,619
)
 
$
   
$
55,684
 
 
                                       
BALANCE—January 1, 2016
 
$
444,253
   
$
(17,425
)
 
$
(369,824
)
 
$
13,850
   
$
70,854
 
Net loss
   
     
     
(30,894
)
   
(1,434
)
   
(32,328
)
Share-based compensation expense
   
1,750
     
     
     
     
1,750
 
Tax impact of forfeited vested shares
   
(216
)
   
     
     
     
(216
)
Other comprehensive loss, net of tax
   
     
(3,182
)
   
     
     
(3,182
)
BALANCE—September 30, 2016
 
$
445,787
   
$
(20,607
)
 
$
(400,718
)
 
$
12,416
   
$
36,878
 

See notes to unaudited condensed consolidated financial statements.

ACCURIDE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 
 
 
Nine Months Ended September 30,
 
(In thousands)
 
2016
   
2015
 
 
           
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net income (loss)
 
$
(32,328
)
 
$
7,571
 
Adjustments to reconcile net income (loss) to net cash used in operating activities:
               
Depreciation of property, plant and equipment
   
26,614
     
25,326
 
Amortization – deferred financing costs and debt discount
   
1,859
     
1,859
 
Amortization – other intangible assets
   
6,279
     
6,174
 
Loss on disposal of discontinued operation
   
19,280
     
 
Loss on disposal of assets
   
398
     
240
 
Deferred income taxes
   
15
     
(4,864
)
Non-cash share-based compensation
   
1,750
     
2,147
 
Changes in certain assets and liabilities:
               
Receivables
   
2,449
     
(165
)
Inventories
   
7,618
     
6,370
 
Prepaid expenses and other assets
   
(3,512
)
   
(1,839
)
Accounts payable
   
(11,470
)
   
2,158
 
Accrued and other liabilities
   
(13,501
)
   
(13,882
)
Net cash provided by operating activities
   
5,451
     
31,095
 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Purchases of property, plant and equipment
   
(19,947
)
   
(15,879
)
Purchase of intangible asset
   
     
(1,903
)
Proceeds from disposal of discontinued operation, net of transaction fees
   
11,682
     
 
Net cash used in investing activities
   
(8,265
)
   
(17,782
)
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Proceeds from revolver and other borrowings
   
22,819
     
21,000
 
Payments on revolver
   
(20,837
)
   
(23,000
)
Principal payments on capital leases
   
(1,973
)
   
(1,937
)
Other
   
     
(24
)
Net cash provided by (used in) financing activities
   
9
     
(3,961
)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
   
(2,805
)
   
9,352
 
CASH AND CASH EQUIVALENTS—Beginning of period
   
29,759
     
29,773
 
CASH AND CASH EQUIVALENTS—End of period
 
$
26,954
   
$
39,125
 
 
               
Supplemental cash flow information:
               
Cash paid for interest
 
$
30,424
   
$
30,428
 
Cash paid for income taxes
 
$
1,450
   
$
678
 
Non-cash transactions:
               
Purchases of property, plant and equipment in accounts payable
 
$
2,645
   
$
3,675
 
 
See notes to unaudited condensed consolidated financial statements.

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

Note 1 - Summary of Significant Accounting Policies

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

On September 2, 2016, the Company announced and consummated the sale of its wholly-owned subsidiary, Brillion Iron Works, Inc. ("Brillion"), to Grede Holdings LLC.  The sale concluded for a purchase price of $14.0 million in cash, subject to a working capital adjustment.  The Company recognized a loss of $19.3 million, including $2.3 million of transactional fees, related to the disposal.  In connection with the disposal of Brillion, we have reclassified certain prior-period amounts to discontinued operations in order to conform to the current-period presentation.

The results of operations for the nine months ended September 30, 2016 are not necessarily indicative of the results to be expected for the year ending December 31, 2016.  The unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements and notes thereto disclosed in Accuride's Annual Report on Form 10-K for the year ended December 31, 2015.

On September 2, 2016  Accuride entered into a definitive agreement (the "Merger Agreement") to be acquired by Crestview Partners, L.L.C. ("Crestview"), for $2.58 per share in cash.  It is expected that the transaction process will result in a sale closing during the fourth quarter of 2016, subject to, among other things, approval by Accuride's stockholders and the completion of customary regulatory reviews.  Afterwards, Accuride will operate as an independent business within Crestview's portfolio of companies.

Noncontrolling Interest—Noncontrolling interests represent ownership interest in the Company's majority-owned subsidiary, Gianetti Ruote, S.r.l. ("Gianetti"), held by third parties. Noncontrolling interest is recognized as a component of equity in the Company's consolidated balance sheets and as net income (loss) attributable to noncontrolling interest in the consolidated statements of operations and comprehensive income (loss) and is captured within the summary of changes in equity attributable to controlling and noncontrolling interest. 

Management's Estimates and Assumptions – The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.  Actual results could differ from those estimates.

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

 
 
Three Months Ended September 30,
   
Nine Months Ended September 30,
 
(In thousands except per share data)
 
2016
   
2015
   
2016
   
2015
 
Numerator:
                       
Net income (loss) from continuing operations
 
$
(6,751
)
 
$
5,398
   
$
(2,852
)
 
$
10,156
 
Net loss from discontinued operations
   
(21,861
)
   
(3,578
)
   
(28,042
)
   
(2,585
)
Net income (loss) attributable to stockholders
 
$
(28,612
)
 
$
1,820
   
$
(30,894
)
 
$
7,571
 
Denominator:
                               
Weighted average shares outstanding – Basic
   
48,332
     
48,015
     
48,247
     
47,943
 
Weighted average shares outstanding – Diluted
   
48,332
     
49,422
     
48,247
     
48,844
 
 
                               
Basic income (loss) per common share
                               
From continuing operations
 
$
(0.14
)
 
$
0.11
   
$
(0.06
)
 
$
0.21
 
From discontinued operations
   
(0.45
)
   
(0.07
)
   
(0.58
)
   
(0.05
)
Basic income (loss) per common share
 
$
(0.59
)
 
$
0.04
   
$
(0.64
)
 
$
0.16
 
 
                               
Diluted income (loss) per common share
                               
From continuing operations
 
$
(0.14
)
 
$
0.11
   
$
(0.06
)
 
$
0.21
 
From discontinued operations
   
(0.45
)
   
(0.07
)
   
(0.58
)
   
(0.05
)
Diluted income (loss) per common share
 
$
(0.59
)
 
$
0.04
   
$
(0.64
)
 
$
0.16
 

As of September 30, 2016, there were options exercisable for 138,231 shares that were not included in the computation of diluted earnings per share because the effect would be anti-dilutive.  As of September 30, 2015, there were options exercisable for 144,095 shares that were not included in the computation of diluted earnings per share because the effect would be anti-dilutive.

Share-Based Compensation  Compensation expense for share-based compensation programs recognized as a component of operating expenses was $0.7 million for both three months ended September 30, 2016 and September 30, 2015.  Compensation expense for share-based compensation programs recognized as a component of operating expenses was $1.8 million and $2.1 million for the nine months ended September 30, 2016 and September 30, 2015, respectively.
 
As of September 30, 2016, there was approximately $2.7 million of unrecognized pre-tax compensation expense related to share-based awards not yet vested that will be recognized over a weighted-average period of 1.5 years.  The closing of the pending merger transaction between Accuride and Crestview, as described above, would result in a change of control under outstanding share-based award agreements, which would result in such awards vesting on an accelerated basis or being terminated as of closing.

Income Tax – We compute on a quarterly basis an estimated annual effective tax rate considering ordinary income and related income tax (benefit) expense. Ordinary income refers to income (loss) before income tax expense excluding significant, unusual, or infrequently occurring items. The tax effect of an unusual or infrequently occurring item is recorded in the interim period in which it occurs. Other items included in income tax expense in the periods in which they occur include the cumulative effect of changes in tax laws or rates, foreign exchange gains and losses, adjustments to uncertain tax positions, and adjustments to our valuation allowance due to changes in judgment in the realizability of federal and state deferred tax assets in future years.
 
We have assessed the need to maintain a valuation allowance for deferred tax assets based on an assessment of whether it is more likely than not that deferred tax benefits will be realized through the generation of future taxable income.  Appropriate consideration is given to all available evidence, both positive and negative, in assessing the need for a valuation allowance.  Due to our recent history of U.S. and Italian operating and taxable losses, the inconsistency of income, and the uncertainty of our financial outlook, we continue to maintain a full valuation allowance against our U.S. and Italian deferred tax assets in those jurisdictions.  Deferred tax assets in our Canadian and Mexican jurisdictions are more likely than not to be recognized, therefore, no valuation allowance has been recorded for these assets.

New Accounting Pronouncements - On May 28, 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers.  The amendments in this update create Topic 606, Revenue from Contracts with Customers, and supersede the revenue recognition requirements in Topic 605. The objective of the amendment is to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP and International Financial Reporting Standards ("IFRS"). The amendment is effective for annual reporting periods beginning after December 15, 2016, and interim periods therein. Early adoption is not permitted.

On August 12, 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606):  Deferral of the Effective Date".  The amendments in this update defer the effective date of Update 2014-09 for all entities by one year. The Company is evaluating the effect, if any, on its financial statements.

On August 27, 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements-Going Concern. The amendments in this update provide guidance in U.S. GAAP about management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosures. In doing so, the amendments should reduce diversity in the timing and content of footnote disclosures. The amendments in this update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company is evaluating the effect, if any, on its financial statements.

On July 22, 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. The FASB is using this update as part of its Simplification Initiative. The amendments in this update more closely align the measurement of inventory in GAAP with the measurement of Inventory in IFRS. This amendment is for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. The amendment should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. The Company is evaluating the effect, if any, on its financial statements.

On January 5, 2016, the FASB issued ASU 2016-01, Financial Instructions-Overall (Topic 825-10).  The amendments in this update address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. This amendment is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is evaluating the effect, if any, on its financial statements.

On February 25, 2016, the FASB issued ASU 2016-02, Leases (Topic 842).  The amendments in this update will increase the transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This amendment is effective for fiscal years beginning after December 15, 2018. Early adoption is permitted. The Company is evaluating the effect, if any, on its financial statements.

On March 17, 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606).  The amendments in this update clarify the implementation guidance on principal versus agent considerations. The amendments in this update are effective and the transition requirements are the same as the effective date and transition requirements of ASU 2014-09.  The Company is evaluating the effect, if any, on its financial statements.

On March 30, 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensations (Topic 718).  The amendments in this update are intended to simplify accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The amendments in this update are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods.  Early adoption is permitted.  The Company is evaluating the effect, if any, on its financial statements.

On April 14, 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. The amendments in this update clarify guidance related to identifying performance obligations and licensing implementation guidance contained in ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The effective date and transition requirements for the amendments in this update are the same as the effective date and transition requirements in Topic 606 (and any other Topic amended by ASU 2014-09). ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, defers the effective date of ASU 2014-09 by one year. The Company is evaluating the effect, if any, on its financial statements.

On May 9, 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. The amendments in this update address narrow-scope improvements to the guidance on collectibility, noncash consideration, and completed contracts at transition. Additionally, the amendments in this update provide a practical expedient for contract modifications at transition and an accounting policy election related to the presentation of sales taxes and other similar taxes collected from customers. The effective date and transition requirements for the amendments in this update are the same as the effective date and transition requirements in Topic 606 (and any other Topic amended by ASU 2014-09). ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, defers the effective date of ASU 2014-09 by one year. The Company is evaluating the effect, if any, on its financial statements.

On June 16, 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instrument.  The amendments in this update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.  For public business entities that are U.S. Securities and Exchange Commission (SEC) filers, the amendments in the ASU are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.  The Company is evaluating the effect, if any, on its financial statements.

On August 26, 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force).  The amendments in this updated address how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230, Statement of Cash Flows, and other Topics.  The updated specifically address cash flow issues with debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies; distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle.  For public business entities, the amendments in the ASU are effective for the fiscal years beginning after December 15, 2017, and interim periods within those fiscal years.  The Company is evaluating the effect, if any, on its financial statements.
 
 
Recent Accounting Adoptions – On June 19, 2014, the FASB issued ASU 2014-12, Compensation-Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide that a Performance Target Could Be Achieved after the Requisite Service Period.   This update is intended to resolve the diverse accounting treatment of those awards in practice. The amendment is effective for annual and interim periods within those annual periods beginning after December 15, 2015.  This amendment did not have a material effect on the financial statements.
 
               On February 18, 2015, the FASB issued ASU 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis.  This update is intended to change the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. The amendment is effective for annual and interim periods within those annual periods beginning after December 15, 2015. This amendment did not have a material effect on the financial statements.
 
On April 15, 2015, the FASB issued ASU 2015-05, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer's Accounting for Fees Paid in a Cloud Computing Arrangement.   The amendments in this update provide guidance to customers about whether a cloud computing arrangement includes a software license. The amendment is effective for annual and interim periods within those annual periods beginning after December 15, 2015. This amendment did not have a material effect on the financial statements.

On April 7, 2015, the FASB issued ASU 2015-03, Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. FASB issued this update as part of its initiative to reduce complexity in accounting standards (the Simplification Initiative). To simplify presentation of debt issuance costs, the amendments in this update require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts.

The Company has recently adopted ASU 2015-03. Accordingly, costs relating to obtaining the senior secured notes, which are capitalized and amortized over the term of the related debt using the effective interest method, have been reclassified to Long Term Debt in the accompanying condensed consolidated balance sheets. The prior year consolidated balance sheet has been adjusted to conform to the current year presentation, in accordance with the retroactive requirements of ASU 2015-03.  Deferred financing costs net of accumulated amortization associated with the senior secured notes as of September 30, 2016 and December 31, 2015 were $2.4 million and $3.1 million, respectively.

At its Emerging Issues Task Force meeting on June 18, 2015, the SEC staff clarified that ASU 2015-03 does not address issuance costs associated with revolving-debt arrangements and announced that it would not object to an entity deferring and presenting such costs as an asset and subsequently amortizing the costs ratably over the term of the revolving debt arrangement. Based on the SEC staff's comments, the Company has elected to recognize costs incurred in connection with the revolving ABL Credit Facility (the "ABL Facility") as a deferred asset. These deferred financing costs are subsequently amortized over the life of the related debt using the effective interest method. Deferred financing costs net of accumulated amortization associated with the ABL Facility as of September 30, 2016 and December 31, 2015 were $0.7  million and $1.0 million, respectively.
 
Note 2 - Acquisitions

On November 3, 2015, Accuride subscribed to a controlling seventy percent (70%) ownership interest in Gianetti, an Italian manufacturer of steel wheels for heavy- and medium-duty commercial vehicles and motorcycles, in exchange for a commitment to invest €19.75 million ($21.8 million) in Gianetti. The remaining 30 percent ownership interest in Gianetti was retained by MW Italia S.r.l., a subsidiary of Coils Lamiere Nastri - C.L.N. S.p.A.  Accuride contributed €3.75 million ($4.1 million) to Gianetti after closing and has agreed to invest the remaining commitments no later than as follows:  €5.4 million ($5.9 million) in 2016, €9.1 million ($10.1 million) in 2017, and the remainder in 2018.  Accuride will finance its remaining investment in Gianetti through general working capital and availability under its existing credit agreements.  Gianetti's principle manufacturing and engineering facility is located in Ceriano Laghetto, near Milan, Italy. The Company acquired the controlling interest to expand into the European market under its "Grow" strategy. The results of operations have been included in the consolidated financial statements since the date of acquisition.
 
The following summarizes the allocation of the purchase price (in thousands) to the fair value of the assets and liabilities acquired including noncontrolling interest:

Accounts receivable
 
$
11,063
 
Inventory
   
6,571
 
Other current assets
   
41
 
Property, plant and equipment
   
21,124
 
Accounts payable
   
(9,911
)
Short-term debt
   
(8,406
)
Other current liabilities
   
(3,364
)
Severance indemnity
   
(2,772
)
Long-term debt
   
(66
)
Noncontrolling interest
   
(14,280
)
Total consideration
 
$
 

The pro forma revenue and losses of the combined entity had the acquisition occurred on January 1, 2015 are as follows:

 
Three Months Ended September 30, 2015
 
Nine Months Ended September 30, 2015
 
(In thousands)
Revenue
 
Net Income
 
Revenue
 
Net Income
 
 
               
Supplemental pro forma financial information
 
$
155,623
   
$
990
   
$
482,445
   
$
3,515
 

Pro forma financial information includes an adjustment for depreciation based on the step up value of property, plant and equipment.
 
 
Note 3 – Discontinued Operations

In connection with the sale of Brillion, we have reclassified current and prior period operating results, including the gain/loss on the sale transaction, to discontinued operations.  In addition, we have reclassified certain operating results related to our Imperial Group and Bostrom businesses, which had previously been concluded as immaterial, to discontinued operations.

The following table presents reconciliations of the major line items constituting profit (loss) from discontinued operations:

   
Three Months Ended September 30,
   
Nine Months Ended September 30,
 
(In thousands)
 
2016
   
2015
   
2016
   
2015
 
 
                       
Net sales
 
$
10,531
   
$
18,813
   
$
45,562
   
$
84,322
 
Cost of goods sold
   
12,950
     
22,173
     
53,592
     
86,310
 
Gross loss
   
(2,419
)
   
(3,360
)
   
(8,030
)
   
(1,988
)
Selling, general and administrative expenses
   
(122
)
   
(270
)
   
(665
)
   
(877
)
Other income (loss)
   
(40
)
   
52
     
(67
)
   
280
 
Loss on disposal of Brillion
   
(19,280
)
   
     
(19,280
)
   
 
Pretax loss from discontinued operations
   
(21,861
)
   
(3,578
)
   
(28,042
)
   
(2,585
)
Income tax provision
   
     
     
     
 
Net loss from discontinued operations
 
$
(21,861
)
 
$
(3,578
)
 
$
(28,042
)
 
$
(2,585
)

Under the purchase agreement, we sold all of our stock of Brillion.  For tax purposes the Company has made an election under Section 338(h)10 to treat the transaction as an asset sale.  The tax benefit of the loss on the sale of the company has been offset by a full valuation allowance.  The following table presents reconciliations of the carrying amounts of major classes of assets and liabilities of Brillion as of December 31, 2015:

(In thousands)
 
December 31, 2015
 
ASSETS
     
Trade receivables
 
$
5,801
 
Inventories
   
6,031
 
Property, plant, and equipment, net
   
29,941
 
Other classes of assets that are not major
   
3,486
 
TOTAL
 
$
45,259
 
         
LIABILITIES
       
Accounts payable
 
$
7,912
 
Accrued payroll and compensation
   
3,054
 
Other classes of liabilities that are not major
   
3,019
 
TOTAL
 
$
13,985
 

Operating and investing cash flow activities from discontinued operations are as follows:

(In thousands)
 
Nine Months Ended
September 30, 2016
   
Nine Months Ended
September 30, 2015
 
Cash used in operating activities
 
$
7,122
   
$
350
 
Cash used in investing activities
 
$
4,094
   
$
4,626
 

 
 
Note 4 - Inventories

Inventories at September 30, 2016 and December 31, 2015, on a first-in, first-out ("FIFO") basis, are as follows:

(In thousands)
 
September 30, 2016
   
December 31, 2015
 
Raw materials
 
$
8,362
   
$
8,739
 
Work in process
   
11,303
     
11,765
 
Finished manufactured goods
   
15,548
     
21,257
 
Total inventories
 
$
35,213
   
$
41,761
 

Note 5 - Goodwill and Other Intangible Assets

Gross goodwill was $159.1 million as of September 30, 2016 and December 31, 2015. The accumulated impairment was $62.8 million for the periods ended September 30, 2016 and December 31, 2015.  As of September 30, 2016 and December 31, 2015, the accumulated impairment was related to our Gunite reporting unit.  The carrying value of our goodwill as of September 30, 2016 and December 31, 2015 was $96.3 million, related exclusively to our Wheels reporting unit.

The changes in the carrying amount of other intangible assets for the period December 31, 2015 to September 30, 2016, by reportable segment, are as follows:

(In thousands)
 
Wheels
   
Gunite
   
Total
 
Balance as of December 31, 2015
 
$
107,475
   
$
1,986
   
$
109,461
 
Amortization
   
(5,993
)
   
(175
)
   
(6,168
)
Balance as of September 30, 2016
 
$
101,482
   
$
1,811
   
$
103,293
 

The changes in the carrying amount of other intangible assets for the period December 31, 2014 to September 30, 2015, by reportable segment, are as follows:

(In thousands)
 
Wheels
   
Gunite
   
Total
 
Balance as of December 31, 2014
 
$
115,465
   
$
   
$
115,465
 
Additions
   
     
1,903
     
1,903
 
Amortization
   
(5,992
)
   
(56
)
   
(6,048
)
Balance as of September 30, 2015
 
$
109,473
   
$
1,847
   
$
111,320
 

The summary of other intangible assets is as follows:

 
       
September 30, 2016
   
December 31, 2015
 
(In thousands)
 
Weighted
Average
Useful
Lives
   
Gross Amount
   
Accumulated
Amortization/
Impairment
   
Carrying
Amount
   
Gross Amount
   
Accumulated
Amortization/
Impairment
   
Carrying
Amount
 
Other intangible assets:
                                         
Trade names
   
   
$
25,200
   
$
   
$
25,200
   
$
25,200
   
$
   
$
25,200
 
Technology
   
10.6
     
41,273
     
28,748
     
12,525
     
41,273
     
26,299
     
14,974
 
Customer relationships
   
16.8
     
124,304
     
58,736
     
65,568
     
124,304
     
55,017
     
69,287
 
Other intangible assets
         
$
190,777
   
$
87,484
   
$
103,293
   
$
190,777
   
$
81,316
   
$
109,461
 

We estimate that the annual amortization expense for our other intangible assets for 2016 through 2020 will be approximately $8.2 million each year.

 
 
Note 6 - Pension and Other Postretirement Benefit Plans

Components of net periodic benefit cost for continuing operations for the three and nine months ended September 30, 2016 and September 30, 2015 are as follows:

 
 
For the Three Months Ended September 30,
   
For the Nine Months Ended September 30,
 
 
 
Pension Benefits
   
Other Benefits
   
Pension Benefits
   
Other Benefits
 
(In thousands)
 
2016
   
2015
   
2016
   
2015
   
2016
   
2015
   
2016
   
2015
 
Service cost-benefits earned during the period
 
$
176
   
$
170
   
$
65
   
$
95
   
$
532
   
$
526
   
$
200
   
$
294
 
Interest cost on projected benefit obligation
   
1,855
     
2,297
     
469
     
635
     
5,593
     
7,021
     
1,410
     
2,197
 
Expected return on plan assets
   
(2,710
)
   
(2,697
)
   
     
     
(8,172
)
   
(8,254
)
   
     
 
Amortization of prior service (credit) cost
   
11
     
11
     
(322
)
   
(227
)
   
33
     
33
     
(965
)
   
(312
)
Amortization of loss
   
179
     
304
     
103
     
118
     
541
     
935
     
314
     
370
 
Total benefit cost charged (credited) to income
 
$
(489
)
 
$
85
   
$
315
   
$
621
   
$
(1,473
)
 
$
261
   
$
959
   
$
2,549
 

As of September 30, 2016, $3.5 million has been contributed in 2016 to our sponsored pension plans.  We presently anticipate contributing an additional $0.2 million to fund our pension plans during 2016 for a total of $3.7 million.  

Certain of our post-retirement benefit programs were re-measured as of May 31, 2015 to reflect post-65 health benefits transitioning from a self-insured plan to a Medicare Advantage Plan. The transition to the Medicare Advantage plan provides comparable benefits while taking advantage of certain government subsidies which help to manage the continually rising costs of medical and prescription drug coverage.  The re-measurement resulted in a liability reduction of $17.9 million and corresponding gain in Accumulated Other Comprehensive Income.  This re-measurement takes into account the impact of the anticipated future program cost savings and current interest rate environments.

Starting in 2016, we refined the method to estimate the current service cost for pension and other postretirement benefits. Previously, the current service cost was estimated using a single weighted-average discount rate derived from the yield curve used to measure the defined benefit obligation at the beginning of the year. Under the refined method, different discount rates are derived from the same yield curve, reflecting the different timing of benefit payments for past service (the defined benefit obligation) and future service (the current service cost). Differentiating in this way represents a refinement in the basis of estimation applied in prior periods. This change does not affect the measurement of the total defined benefit obligation recorded on the consolidated balance sheet as of December 31, 2015 or any other period. The refinement compared to the previous method resulted in a decrease in the current service cost and interest components with an equal offset to actuarial gains (losses) with no net impact on the total benefit obligation. The refinement did not have a material impact on the September 30, 2016 consolidated statement of operations. This change is accounted for prospectively as a change in accounting estimate.

 
 
Note 7 – Commitments and Contingencies

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

Since the announcement of the proposed transaction with Crestview on September 2, 2016, five putative class action complaints have been filed by and purportedly on behalf of alleged Accuride stockholders. Three of these complaints were filed in state courts in the State of Indiana, County of Vanderburgh: (i) Alexander v. Accuride Corp., et al., filed on September 14, 2016 in Vanderburgh Superior Court; (ii) Raul v. Adams, et al., filed on September 20, 2016 in Vanderburgh Circuit Court; and (iii) Rosenfeld v. Accuride Corp., et al., filed on October 18, 2016 in Vanderburgh Superior Court (together, the "State Actions"). Two of these complaints were filed in the United States District Court for the Southern District of Indiana: (i) Jones v. Accuride Corp., et al., filed on October 20, 2016 and (ii) Suokko v. Accuride Corp., et al., filed on October 24, 2016 (the "Federal Actions" and together with the State Actions, the "Actions").

The State Actions name as defendants, among others, Accuride, the members of Accuride's board of directors and an affiliate of Crestview. The State Actions allege, among other things, that the members of Accuride's board of directors, aided and abetted by, among others, Accuride and Crestview, breached their fiduciary duties in agreeing to the proposed transaction for inadequate consideration and that certain provisions in the Merger Agreement unfairly deter a potential alternative transaction. The Rosenfeld action also alleges that the members of Accuride's board of directors breached their fiduciary duties by failing to disclose purportedly material information to stockholders in connection with the proposed transaction. The Federal Actions name as defendants Accuride and the members of its board of directors. The Federal Actions allege, among other things, that defendants violated various federal securities laws in failing to disclose purportedly material information to stockholders in connection with the proposed transaction. The Federal Actions further allege violations of Section 14(a) and 20(a) of the Securities Exchange Act of 1934, as amended, and various regulations promulgated thereunder. The Actions seek, among other things, damages, attorneys' fees and injunctive relief to prevent the proposed transaction from closing.

On October 18, 2016, the Vanderburgh Circuit Court and Vanderburgh Superior Court granted the parties' joint motion to transfer the Raul action to Vanderburgh Superior Court, and the Vanderburgh Superior Court granted the parties' joint motion to consolidate the Raul and Alexander actions under the caption In Re Accuride Corporation Shareholder Litigation. On October 25, 2016, the Vanderburgh Superior Court granted the parties' stipulated motion for a change of venue to Marion County Superior Court. Plaintiffs in the Rosenfeld action filed a motion for expedited proceedings on October 24, 2016 and a motion for a temporary restraining order and preliminary injunction on October 27, 2016. On October 25, 2016, plaintiffs in the Suokko action filed an ex parte motion for an expedited preliminary injunction hearing.

Accuride believes these claims are entirely without merit and intends to vigorously defend against the Actions.

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 subject to joint and several liability without regard to fault or the legality of the original conduct 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 offsite disposal locations. Additionally, environmental remediation may be required to address soil and groundwater contamination identified at certain of our facilities.

Although reserves had been previously held, remediation efforts have led to the Company not carrying any environmental reserves as of September 30, 2016. Management did not identify any environmental matters that represented loss contingencies for which the likelihood of incurrence was probable at the balance sheet date or in the future. Our environmental reserve may not be adequate to cover our future costs related to the sites associated with the environmental reserve, and any additional costs may have a material adverse effect on our business, results of operations or financial condition. The discovery of additional environmental issues, the modification of existing laws or regulations or the promulgation of new ones, more vigorous enforcement by regulators, the imposition of joint and several liability under CERCLA or analogous state laws, or other unanticipated events could also result in a material adverse effect on our consolidated financial statements.

The Iron and Steel Foundry National Emission Standard for Hazardous Air Pollutants ("NESHAP") was developed pursuant to Section 112(d) of the Clean Air Act and requires major sources of hazardous air pollutants to achieve compliance with emission limits representative of maximum achievable control technology. Based on currently available information, we do not anticipate material costs regarding ongoing compliance with NESHAP; however if we are found to be out of compliance with NESHAP, we could incur a liability that could have a material adverse effect on our consolidated financial statements.

Management does not believe that the outcome of any currently pending environmental proceeding will have a material adverse effect on our consolidated financial statements.

As of September 30, 2016, we had approximately 1,766 employees, of which 440 were salaried employees with the remainder paid hourly. Unions represent approximately 1,156 of our employees, which is approximately 65 percent of our total employees.  Each of our unionized facilities has a separate contract with the union that represents the workers employed at such facility. The union contracts expire at various times over the next few years with the exception of our union contract that covers the hourly employees at our Monterrey, Mexico, facility, which expires on an annual basis in January unless otherwise renewed.  The 2016 negotiations in Monterrey were completed prior to the expiration of such 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. The union contract at our London, Ontario facility expires on March 12, 2018. No other collective bargaining agreements expire in 2016.  Union workers at Gianetti work under clarification documents and local variances to the collective labor agreement for the metalworking and mechanical engineering industry, whose national contract expired on December 31, 2015.  However, as is typical in Italy, all parties continue to work under the previous agreement while a new national contract is negotiated.  The on-going national-level negotiations between the trade unions and employer federations have periodically led to brief and temporary work stoppages at various plants throughout Italy, including at Gianetti, in order for workers to show solidarity, but management currently does not believe that any such solidarity strikes will have a material impact to operations at Gianetti.

 
 
Note 8– Financial Instruments

We have determined the estimated fair value amounts of financial instruments using available market information and other appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop the estimates of fair value.  A fair value hierarchy accounting standard exists for those instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and our own assumptions (unobservable inputs).  Determining which category an asset or liability falls within the hierarchy requires significant judgment.  We evaluate our hierarchy disclosures each quarter.

The hierarchy consists of three levels:

Level 1
Quoted market prices in active markets for identical assets or liabilities;
Level 2
Inputs other than Level 1 inputs that are either directly or indirectly observable; and
Level 3
Unobservable inputs developed using estimates and assumptions developed by us, which reflect those that a market participant would use.

The carrying amounts of cash and cash equivalents, customer receivables, and accounts payable approximate fair value because of the relatively short maturity of these instruments.  The fair value of our 9.5% senior secured notes based on market quotes, which we determined to be Level 1 inputs, at September 30, 2016 was $309.1 million compared to the carrying amount of $305.8 million.  The fair value of our 9.5% senior secured notes based on market quotes, which we determined to be Level 1 inputs, at December 31, 2015 was approximately $263.8 million compared to the carrying amount of $304.3 million.  As of September 30, 2016 and December 31, 2015 we had no other significant long-term financial instruments.

Note 9 – Segment Reporting

Based on our continual monitoring of the long-term economic characteristics, products and production processes, class of customer, and distribution methods of our operating segments, we have identified each of our operating segments below as reportable segments.  We believe this segmentation is appropriate based upon operating decisions and performance assessments by our President and Chief Executive Officer.  The accounting policies of the reportable segments are the same as described in Note 1, Summary of Significant Accounting Policies of our Annual Report on Form 10-K for the year ended December 31, 2015.

 
 
Three Months Ended September 30,
   
Nine Months Ended September 30,
 
(In thousands)
 
2016
   
2015
   
2015
   
2015
 
Net sales:
                       
Wheels
 
$
90,923
   
$
101,833
   
$
300,713
   
$
324,525
 
Gunite
   
34,279
     
43,823
     
116,517
     
128,569
 
Consolidated total
 
$
125,202
   
$
145,656
   
$
417,230
   
$
453,094
 
 
                               
Operating income (loss):
                               
Wheels
 
$
4,658
   
$
13,715
   
$
30,773
   
$
44,372
 
Gunite
   
3,435
     
5,061
     
13,321
     
15,140
 
Corporate / Other
   
(6,610
)
   
(7,658
)
   
(22,548
)
   
(25,668
)
Consolidated total
 
$
1,483
   
$
11,118
   
$
21,546
   
$
33,844
 



 
As of
 
(In thousands)
September 30, 2016
 
December 31, 2015
 
Total assets:
       
Wheels
 
$
442,785
   
$
469,405
 
Gunite
   
54,102
     
62,045
 
Brillion
   
     
45,259
 
Corporate / Other
   
36,331
     
26,910
 
Consolidated total
 
$
533,218
   
$
603,619
 

Note 10 - Debt

As of September 30, 2016, total debt was $318.1 million, consisting of $305.8 million of our outstanding 9.5% senior secured notes, net of discount and debt issuance costs, and $12.3 million debt obligations related to our majority interest in Gianetti.  As of September 30, 2016, Accuride had $27.0 million of cash plus $37.0 million in availability under the ABL Facility for total liquidity of $64.0 million.  As of December 31, 2015, total debt was $314.5 million, consisting of $304.3 million of our outstanding 9.5% senior secured notes, net of discount and debt issuance costs, and $10.3 million in short term obligations related to our majority interest in Gianetti.  As of December 31, 2015, Accuride had $29.8 million of cash plus $46.8 million in availability under the ABL Facility for total liquidity of $76.6 million.  

On July 5, 2016, Gianetti secured a €1.5 million ($1.7 million) bank loan.  The loan is for a term of 24 months at a rate of 3.40% with equal monthly repayment installments.  The first 5 months are deferred, followed by 19 equal monthly installments of €0.1 million ($0.1 million) beginning December 1, 2016.  It requires Accuride Corporation to maintain a letter of credit with a financial institution in the full amount of €1.5 million ($1.7 million) for the life of the loan.

Our credit documents (the 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 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 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 we do not expect to be in a compliance period during the next twelve months.  However, we continue to operate in a challenging commercial environment and our ability to maintain liquidity and comply with our debt covenants may be affected by changes in economic or other conditions that are beyond our control and which are difficult to predict.

The 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 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 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 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 ABL Facility if utilization under the facility is greater than or equal to 50.0% of the total available commitments under the facility, or an unused line 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 applicable.

Note 11 – Guarantor and Non-guarantor Financial Statements

Our senior secured notes are, jointly and severally, fully and unconditionally guaranteed, on a senior basis, by all of our existing and future 100% owned domestic subsidiaries (collectively, the "Guarantor Subsidiaries").  The following condensed financial information illustrates the composition of the Guarantor Subsidiaries.  The divested Brillion subsidiary was released from the Guarantor Subsidiaries upon its divestiture on September 2, 2016.  In order to portray the operational history of the guarantor, Brillion remains in the Guarantor Subsidiaries columns through the date of such disposal, with no retrospective application of loss of guarantor status.

CONDENSED CONSOLIDATING BALANCE SHEETS

 
 
September 30, 2016
 
(In thousands)
 
Parent
   
Guarantor Subsidiaries
   
Non-guarantor Subsidiaries
   
Eliminations
   
Total
 
ASSETS
                             
Cash and cash equivalents
 
$
19,468
   
$
   
$
7,486
   
$
   
$
26,954
 
Customer and other receivables, net
   
36,634
     
6,041
     
13,705
     
3
     
56,383
 
Intercompany receivables
   
84,756
     
214,180
     
86,964
     
(385,900
)
   
 
Inventories
   
13,681
     
13,077
     
8,458
     
(3
)
   
35,213
 
Other current assets
   
6,242
     
865
     
1,073
     
     
8,180
 
Total current assets
   
160,781
     
234,163
     
117,686
     
(385,900
)
   
126,730
 
Property, plant and equipment, net
   
74,008
     
58,491
     
52,315
     
     
184,814
 
Goodwill
   
96,283
     
     
     
     
96,283
 
Other intangible assets, net
   
103,293
     
     
     
     
103,293
 
Investments in and advances to subsidiaries and affiliates
   
198,960
     
     
     
(198,960
)
   
 
Deferred income taxes
   
     
5,805
     
1,442
     
(6,469
)
   
778
 
Other non-current assets
   
2,549
     
345
     
18,426
     
     
21,320
 
TOTAL
 
$
635,874
   
$
298,804
   
$
189,869
   
$
(591,329
)
 
$
533,218
 
LIABILITIES AND STOCKHOLDERS' EQUITY
                                       
Accounts payable
 
$
12,813
   
$
19,446
   
$
18,830
   
$
   
$
51,089
 
Intercompany payables
   
217,970
     
139,680
     
28,250
     
(385,900
)
   
 
Accrued payroll and compensation
   
1,348
     
1,885
     
2,857
     
     
6,090
 
Accrued interest payable
   
5,043
     
     
     
     
5,043
 
Accrued and other liabilities
   
4,600
     
6,970
     
14,104
     
     
25,674
 
Total current liabilities
   
241,774
     
167,981
     
64,041
     
(385,900
)
   
87,896
 
Long term debt
   
305,736
     
     
1,699
     
     
307,435
 
Deferred and non-current income taxes
   
26,516
     
     
     
(6,469
)
   
20,047
 
Other non-current liabilities
   
24,970
     
37,007
     
18,985
     
     
80,962
 
Stockholders' equity
   
36,878
     
93,816
     
105,144
     
(198,960
)
   
36,878
 
TOTAL
 
$
635,874
   
$
298,804
   
$
189,869
   
$
(591,329
)
 
$
533,218
 

 
 
December 31, 2015
 
(In thousands)
 
Parent
   
Guarantor Subsidiaries
   
Non-guarantor Subsidiaries
   
Eliminations
   
Total
 
ASSETS
                             
Cash and cash equivalents
 
$
12,127
   
$
   
$
17,632
   
$
   
$
29,759
 
Customer and other receivables, net
   
34,900
     
8,443
     
16,366
     
366
     
60,075
 
Intercompany receivables
   
123,479
     
67,504
     
58,430
     
(249,413
)
   
 
Inventories
   
20,352
     
13,138
     
8,637
     
(366
)
   
41,761
 
Other current assets
   
3,689
     
1,905
     
1,753
     
     
7,347
 
Current assets of discontinued operations
   
     
12,988
     
     
     
12,988
 
Total current assets
   
194,547
     
103,978
     
102,818
     
(249,413
)
   
151,930
 
Property, plant and equipment, net
   
78,527
     
65,585
     
50,709
     
     
194,821
 
Goodwill
   
96,283
     
     
     
     
96,283
 
Other intangible assets, net
   
109,461
     
     
     
     
109,461
 
Investments in and advances to subsidiaries and affiliates
   
221,676
     
     
     
(221,676
)
   
 
Other non-current assets
   
2,806
     
345
     
15,702
     
     
18,853
 
Non-current assets of discontinued operations
   
     
32,271
     
     
     
32,271
 
TOTAL
 
$
703,300
   
$
202,179
   
$
169,229
   
$
(471,089
)
 
$
603,619
 
LIABILITIES AND STOCKHOLDERS' EQUITY
                                       
Accounts payable
 
$
18,239
   
$
27,978
   
$
17,653
   
$
   
$
63,870
 
Intercompany payables
   
239,042
     
     
10,371
     
(249,413
)
   
 
Accrued payroll and compensation
   
1,485
     
2,394
     
2,299
     
     
6,178
 
Accrued interest payable
   
12,521
     
     
     
     
12,521
 
Accrued and other liabilities
   
4,549
     
6,706
     
15,022
     
     
26,277
 
Current liabilities of discontinued operations
   
     
13,052
     
     
     
13,052
 
Total current liabilities
   
275,836
     
50,130
     
45,345
     
(249,413
)
   
121,898
 
Long term debt
   
304,188
     
     
66
     
     
304,254
 
Deferred and non-current income taxes
   
17,969
     
(4,754
)
   
(82
)
   
     
13,133
 
Other non-current liabilities
   
34,453
     
39,642
     
18,452
     
     
92,547
 
Non-current liabilities of discontinued operations
   
     
933
     
     
     
933
 
Stockholders' equity
   
70,854
     
116,228
     
105,448
     
(221,676
)
   
70,854
 
TOTAL
 
$
703,300
   
$
202,179
   
$
169,229
   
$
(471,089
)
 
$
603,619
 

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

 
 
Three Months Ended September 30, 2016
 
(In thousands)
 
Parent
   
Guarantor
Subsidiaries
   
Non-guarantor
Subsidiaries
   
Eliminations
   
Total
 
Net sales
 
$
99,483
   
$
35,620
   
$
35,310
   
$
(45,211
)
 
$
125,202
 
Cost of goods sold
   
87,857
     
34,959
     
35,651
     
(45,208
)
   
113,259
 
Gross profit (loss)
   
11,626
     
661
     
(341
)
   
(3
)
   
11,943
 
Operating expenses
   
10,026
     
(259
)
   
693
     
     
10,460
 
Income (loss) from operations
   
1,600
     
920
     
(1,034
)
   
(3
)
   
1,483
 
Other income (expense):
                                       
Interest income (expense), net
   
(8,859
)
   
(33
)
   
450
     
     
(8,442
)
Equity in earnings of subsidiaries
   
(21,263
)
   
     
     
21,263
     
 
Other expense, net
   
(44
)
   
     
35
     
     
(9
)
Income (loss) before income taxes from continuing operations
   
(28,566
)
   
887
     
(549
)
   
21,260
     
(6,968
)
Income tax provision (benefit)
   
46
     
     
364
     
     
410
 
Income (loss) from continuing operations
   
(28,612
)
   
887
     
(913
)
   
21,260
     
(7,378
)
Discontinued operations, net of tax
   
     
(21,810
)
   
(51
)
   
     
(21,861
)
Net income (loss)
   
(28,612
)
   
(20,923
)
   
(964
)
   
21,260
     
(29,239
)
Loss attributable to noncontrolling interest
   
     
     
(627
)
   
     
(627
)
Net income (loss) attributable to stockholders
 
$
(28,612
)
 
$
(20,923
)
 
$
(337
)
 
$
21,260
   
$
(28,612
)
 
                                       
Comprehensive income (loss)
 
$
(30,740
)
 
$
(23,870
)
 
$
525
   
$
23,345
   
$
(30,740
)
 
 
 
Three Months Ended September 30, 2015
 
(In thousands)
 
Parent
   
Guarantor
Subsidiaries
   
Non-guarantor
Subsidiaries
   
Eliminations
   
Total
 
Net sales
 
$
123,912
   
$
48,490
   
$
30,576
   
$
(57,322
)
 
$
145,656
 
Cost of goods sold
   
117,925
     
37,068
     
26,014
     
(56,974
)
   
124,033
 
Gross profit
   
5,987
     
11,422
     
4,562
     
(348
)
   
21,623
 
Operating expenses
   
10,363
     
109
     
33
     
     
10,505
 
Income (loss) from operations
   
(4,376
)
   
11,313
     
4,529
     
(348
)
   
11,118
 
Other income (expense):
                                       
Interest income (expense), net
   
(8,749
)
   
(47
)
   
547
     
     
(8,249
)
Equity in earnings of subsidiaries
   
10,038
     
     
     
(10,038
)
   
 
Other income (expense), net
   
(384
)
   
     
(758
)
   
     
(1,142
)
Income (loss) before income taxes from continuing operations
   
(3,471
)
   
11,266
     
4,318
     
(10,386
)
   
1,727
 
Income tax  provision (benefit)
   
(5,291
)
   
925
     
695
     
     
(3,671
)
Income (loss) from continuing operations
   
1,820
     
10,341
     
3,623
     
(10,386
)
   
5,398
 
Discontinued operations, net of tax
   
     
(3,620
)
   
42
     
     
(3,578
)
Net income (loss)
   
1,820
     
6,721
     
3,665
     
(10,386
)
   
1,820
 
Loss attributable to noncontrolling interest
   
     
     
     
     
 
Net income (loss) attributable to stockholders
 
$
1,820
   
$
6,721
   
$
3,665
   
$
(10,386
)
 
$
1,820
 
 
                                       
Comprehensive income (loss)
 
$
(1,439
)
 
$
2,866
   
$
4,735
   
$
(7,601
)
 
$
(1,439
)


 
 
Nine Months Ended September 30, 2016
 
(In thousands)
 
Parent
   
Guarantor
Subsidiaries
   
Non-guarantor
Subsidiaries
   
Eliminations
   
Total
 
Net sales
 
$
327,125
   
$
121,670
   
$
105,743
   
$
(137,308
)
 
$
417,230
 
Cost of goods sold
   
279,893
     
113,371
     
105,153
     
(137,298
)
   
361,119
 
Gross profit (loss)
   
47,232
     
8,299
     
590
     
(10
)
   
56,111
 
Operating expenses
   
33,542
     
(833
)
   
1,856