Note 1 - Summary of Significant Accounting Policies

Basis of Consolidation-The accompanying consolidated financial statements include the accounts of Accuride Corporation (the “Company”) and its wholly-owned subsidiaries, including Accuride Canada, Inc. (“Accuride Canada”), Accuride Erie L.P. (“Accuride Erie”), Accuride de Mexico, S.A. de C.V. (“AdM”), AOT, Inc. (“AOT”), and Transportation Technologies Industries, Inc. (“TTI”). TTI's subsidiaries include, Brillion Iron Works, Inc. (“Brillion”), Gunite Corporation (“Gunite”), and Imperial Group, L.P. (“Imperial”). All significant intercompany transactions have been eliminated. Certain operating results from prior periods, including the predecessor periods, have been reclassified to discontinued operations to conform to the current year presentation.

On January 31, 2011, substantially all of the assets, liabilities and business of our Bostrom Seating subsidiary were sold to a subsidiary of Commercial Vehicle Group, Inc. for approximately $8.8 million and resulted in recognition of a $0.3 million loss on our consolidated statement of operations in the twelve months ended December 31, 2011, which have been reclassified to discontinued operations. Of the purchase price, $1.0 million was placed into a one year escrow securing the indemnification obligations of Bostrom to Commercial Vehicle Group, Inc. See Note 2 “Discontinued Operations” for further discussion.

On June 20, 2011, the Company entered into, and consummated the acquisition contemplated by, an Asset Purchase Agreement (the “Agreement”), pursuant to which the Company's subsidiary, Accuride EMI, LLC (“Buyer”), acquired substantially all of the assets and assumed certain liabilities of Forgitron Technologies LLC (“Seller”), a manufacturer and supplier of aluminum wheels for commercial vehicles. Pursuant to the Agreement, Buyer purchased the acquired assets for a purchase price of $22.4 million in cash. This acquisition included an 80,000 square foot forged aluminum wheel manufacturing facility in Camden, South Carolina (“Camden”) and is consistent with the Company's planned capacity expansion of its core aluminum wheel product line.

The Camden acquisition was accounted for by the acquisition method of accounting. Under acquisition accounting, the total purchase price has been allocated to the tangible and intangible assets and liabilities of Camden based upon their fair values. We finalized the fair valuation of net assets acquired, for property, plant, and equipment, intangible assets, and goodwill, during the fourth quarter of 2011. In connection with the allocation of the purchase price, we recorded goodwill of approximately $1.1 million as shown in the following table:

(In thousands)

Purchase price (cash consideration)	$	22,381
Net assets at fair value		21,320
Excess of purchase price over net assets acquired	$	1,061

The purchase price allocation as of December 31, 2011 was as follows:

(In thousands)

Customer receivables	$	1,289
Inventories		816
Prepaid expenses and other current assets		101
Property, plant, and equipment		17,225
Goodwill		1,061
Intangible assets		3,400
Current liabilities		(1,511	)
Purchase price (cash consideration)	$	22,381

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 payment of up to $2.0 million depending on Fabco's financial performance during calendar year 2012. The Company recognized a loss of $6.3 million, including $2.1 million in transactional fees, related to the sale transaction during the twelve months ended December 31, 2011, which is included as a component of discontinued operations. See Note 2 “Discontinued Operations” for further discussion.

Bankruptcy Filing – On October 8, 2009, Accuride and its domestic subsidiaries filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code with the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). Prior to filing for bankruptcy, we were in default under our prepetition senior credit facility and the indenture governing our prepetition senior subordinated notes due to our failure to comply with certain financial covenants in the prepetition senior credit facility and to make the $11.7 million interest payment due August 3, 2009 on our prepetition senior subordinated notes. Beginning in July 2009, we entered into a series of amendments and temporary waivers with our senior lenders and forbearances with our prepetition noteholders related to these defaults, which prevented acceleration of the indebtedness outstanding under these debt instruments and enabled us to negotiate a financial reorganization to be implemented through the bankruptcy process with these key constituents prior to our bankruptcy filing. On October 7, 2009, we entered into restructuring support agreements with the holders of approximately 57% of the principal amount of the loans outstanding under our prepetition senior credit facility and the holders of approximately 70% of the principal amount of our prepetition senior subordinated notes, pursuant to which the parties agreed to support a financial reorganization of the Company and its domestic subsidiaries consistent with the terms set forth therein.

On November 18, 2009, we filed our Joint Plan of Reorganization and the related Disclosure Statement with the Bankruptcy Court. All classes of creditors entitled to vote voted to approve the Plan of Reorganization. A confirmation hearing for the Plan of Reorganization was held beginning on February 17, 2010. At the confirmation hearing, we and all of our constituents reached a settlement to fully resolve all disputes related to the Plan of Reorganization and all of our key constituents agreed to support the Plan of Reorganization. On February 18, 2010, the Bankruptcy Court entered an order confirming the Third Amended Joint Plan of Reorganization, which approved and confirmed the Plan of Reorganization, as modified by the confirmation order. On February 26, 2010 (the “Effective Date”), the Plan of Reorganization became effective and we emerged from Chapter 11 bankruptcy proceedings. During the pendency of the bankruptcy, we operated our business as debtors-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code.

Liabilities Subject to Compromise-As a result of the Chapter 11 filing, the payment of prepetition indebtedness was subject to compromise or other treatment under the Debtors' plan of reorganization. Generally, actions to enforce or otherwise effect payment of prepetition liabilities were stayed. Although prepetition claims are generally stayed, at hearings held on October 9, 2009, the Court approved the Debtors' “first day” motions generally designed to stabilize the Debtors' operations and cover, among other things, human capital obligations, supplier relations, customer relations, business operations, tax matters, cash management, utilities, case management and retention of professionals.

Undisputed postpetition claims in the ordinary course of business were paid. In addition, the Debtors may have rejected prepetition executory contracts and unexpired leases with respect to the Debtors' operations, with the approval of the Court. Damages resulting from rejection of executory contracts and unexpired leases are treated as general unsecured claims and were classified as liabilities subject to compromise. On November 3, 2009, the Court established November 30, 2009 as the bar date. The bar date is the date by which claims against the Debtors arising prior to the Debtors' Chapter 11 filings must be filed if the claimants wish to receive any distribution in the Chapter 11 cases. On November 9, 2009, the Debtors commenced notification, including publication, to all known actual and potential creditors informing them of the bar date and the required procedures with respect to the filing of proofs of claim with the Court.

Liabilities subject to compromise consisted of the following:

	December 31, 2009
Debt	$	275,000
Accrued interest		15,976
Accounts payable		7,978
Executory contracts and leases		3,160
Liabilities subject to compromise	$	302,114

On the Effective Date of our Plan of Reorganization, the debt and accrued interest was cancelled. The subordinated senior note holders received 9.8 million shares of our postpetition Common Stock and the accounts payable liabilities were subsequently paid in cash.

Reorganization Items-Reorganization items such as certain revenues, expenses such as professional fees directly related to the process of reorganizing the Debtors under Chapter 11, realized gains and losses, and provisions for losses resulting from the reorganization and restructuring of the business are separately disclosed. Professional fees directly related to the reorganization include fees associated with advisors to the Debtors, unsecured creditors and secured creditors. From October 8, 2009 through December 31, 2009, approximately $5.6 million of professional fees were paid. Reorganization income (expense) recognized for the year ended December 31, 2009 and for the period January 1, 2010 to February 26, 2010 consists of the following:

	Predecessor
	Period from January 1 to February 26,			Year Ended December 31,
(In thousands)	2010			2009

Debt discharge – Senior subordinate notes and interest	$	252,798		$	-
Market valuation of $140 million convertible notes		(155,094	)		-
Professional fees		(25,030	)		(10,829	)
Market valuation of warrants issued		(6,618	)		-
Deferred financing fees		(3,847	)		(3,550	)
Term loan facility discount		(2,974	)		-
Other		76			-
Total	$	59,311		$	(14,379	)

Fresh-Start Reporting-Upon our emergence from Chapter 11 bankruptcy proceedings, we adopted fresh-start accounting in accordance with the provisions of Accounting Standards Codification (“ASC”) 852, Reorganizations, pursuant to which the midpoint of the range of our reorganization value of $563 million was allocated to our assets and liabilities in conformity with the procedures specified by ASC 805, Business Combinations. We adopted fresh-start accounting for all of subsidiaries, although our foreign subsidiaries did not file for bankruptcy protection in their jurisdictions.

The following fresh-start balance sheet illustrates the financial effects on the Company of the implementation of the Plan of Reorganization and the adoption of fresh-start reporting. This fresh-start balance sheet reflects the effect of the consummation of the transactions contemplated in the Plan of Reorganization, including issuance of new indebtedness and repayment and settlement of old indebtedness.

As a result of the adoption of fresh-start reporting, our consolidated balance sheets and consolidated statements of operations subsequent to February 26, 2010, will not be comparable in many respects to our consolidated balance sheets and consolidated statements of operations prior to February 26, 2010. References to “Successor Company” refer to the Company after February 26, 2010, after giving effect to the application of fresh-start reporting. References to “Predecessor Company” refer to the Company on or prior to February 26, 2010.

The effects of the Plan of Reorganization and fresh-start reporting on the Company's consolidated balance sheet as of February 26, 2010 are as follows:

	Fresh-Start Adjustments
(in thousands)	Predecessor			Debt Discharge and Issuance (a)			Reinstatement of Liabilities (b)			Revaluation of Assets and Liabilities (c)			Successor
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	34,880		$	45,467		$	-		$	-		$	80,347
Customer receivables, net		73,636			-			-			-			73,636
Other receivables		8,498			-			-			-			8,498
Inventories		56,639			-			-			3,028			59,667
Deferred income taxes		4,371			-			-			(1,836	)		2,535
Income tax receivable		720			-			-			-			720
Prepaid expenses and other current assets		20,518			-			-			(16,439	)		4,079
Total current assets		199,262			45,467			-			(15,247	)		229,482
PROPERTY, PLANT AND EQUIPMENT, net		224,270			-			-			31,425			255,695
OTHER ASSETS:
Goodwill		127,474			-			-			50,098			177,572
Other intangible assets, net		88,409			-			-			135,991			224,400
Deferred financing fees, net		3,847			(3,847	)		-			-			-
Other		22,221			66			-			(4,190	)		18,097
TOTAL	$	665,483		$	41,686		$	-		$	198,077		$	905,246
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES
Accounts Payable	$	57,074		$	-		$	7,978		$	-		$	65,052
Accrued payroll and compensation		18,058			-			-			-			18,058
Accrued interest payable		242			-			-			-			242
Debt		399,500			(399,500	)		-			-			-
Accrued and other liabilities		27,044			(1,012	)		346			(840	)		25,538
Total current liabilities		501,918			(400,512	)		8,324			(840	)		108,890
LONG-TERM DEBT		-			604,113			-			-			604,113
DEFERRED INCOME TAXES		14,274			-			-			11,305			25,579
NON-CURRENT INCOME TAXES PAYABLE		7,914			-			-			-			7,914
OTHER POSTRETIREMENT BENEFIT PLAN LIABILITY		61,037			-			-			12,033			73,070
PENSION BENEFIT PLAN LIABILITY		35,915			-			-			(959	)		34,956
OTHER LIABILITIES		4,108			6,542			2,814			(1,774	)		11,690
LIABILITIES SUBJECT TO COMPROMISE		302,114			(290,976	)		(11,138	)		-			-
STOCKHOLDERS' EQUITY (DEFICIENCY):
Common stock and Additional Paid-in-Capital		268,590			38,178			-			(267,734	)		39,034
Treasury stock		(751	)		-			-			751			-
Accumulated other comprehensive loss		(48,376	)		-			-			48,376			-
Retained earnings (deficiency)		(481,260	)		84,341			-			396,919			-
Total stockholders' equity (deficiency)		(261,797	)		122,519			-			178,312			39,034
TOTAL	$	665,483		$	41,686		$	-		$	198,077		$	905,246

(a)

Included in the debt discharge and issuance is the receipt of the $140 million aggregate principal amount of convertible notes, which was used to pay off the $71.1 million of Last-Out-Loans under our prepetition senior credit facility and our DIP facility of $25.0 million. The net gain recognized is a result of the discharge of our prepetition senior subordinated notes of $275.0 million along with interest of $16.0 million being partially offset by the issuance of the convertible notes and the corresponding equity received from the Plan of Reorganization.

(b)	The liabilities subject to compromise other than debt were reinstated to the appropriate liability classification as part of the Plan of Reorganization.

(c)	The allocations of fair value were based upon valuation information and other studies that were completed during the fourth quarter of 2010 and discussed below.

Fresh-Start Reporting Adjustments

In applying fresh-start reporting, we applied ASC 805, Business Combinations, and recorded our assets and liabilities at fair value on February 26, 2010. These fresh-start adjustments were finalized during the fourth quarter of 2010. Aside from the assets and liabilities that already represented fair value on our consolidated balance sheet, the significant assumptions related to the valuations of our assets and liabilities that were revalued in connection with fresh-start reporting are subsequently discussed.

Inventory

We recorded inventories at their fair value of $59.7 million, which was an increase of $3.0 million. Historically, our inventories were stated at the lower of cost or market on a first-in, first-out (“FIFO”) basis. The fair value valuation was determined based on the estimated selling price less costs to sell for finished goods and work-in-process, which also considered costs to completion. Raw material values were based on replacement cost. The increase of fair value over our stated values was amortized during 2010 as a component of cost of goods sold.

Supplies

At emergence the Successor Company adopted a supplies accounting policy that requires capitalization of critical supplies that are above a threshold limit with subsequent amortization over their useful lives. Supplies purchased that are valued below the threshold limit will be immediately recognized as an expense in our consolidated statements of operations. Approximately $16.4 million of supplies for our Predecessor Company were removed from other current assets and $2.6 million were added to other non-current assets, which represented the fair value of the supplies the met the requirements of the accounting policy.

Property, Plant and Equipment

We recorded property, plant and equipment which includes land, land improvements, buildings, machinery and equipment, and construction in progress at its fair value of $255.7 million. Fair value was based on the highest and best use of specific properties. Specific approaches by asset class are as follows:

Land and land improvement values were determined based on the sales comparison approach, which considers the value of the land parcels if vacant. In the sales comparison approach, comparable land sales and listing in each property's geographic area were obtained and compared to the property being valued, focusing most heavily on recent sales of similar size, location, and zoning.

The buildings and building improvements were valued using a direct cost method whereby the replacement cost was estimated based on building class using square foot costs. An estimate of physical deterioration as well as functional and external obsolescence was then applied to arrive at a final fair value.

Machinery and equipment were valued on a continued-use basis. Using the indirect method of the cost approach, the replacement cost was indexed according to the historical cost, with allowances for physical deterioration as well as functional and external obsolescence to arrive at a final fair value. Construction in progress was reported using original cost basis.

Other intangible assets

We recorded other intangible assets of $224.4 million at their fair values. The following is a summary of and approaches used to determine the fair value of our significant intangible assets:

Trade names and technology were valued at $34.1 million and $40.4 million, respectively, which was determined using the relief from royalty method, which capitalizes the cost savings associated with owning, rather than licensing the trade names and technology. Other significant considerations include revenues applicable to the trade names and technology with a declining obsolescence factor for technology, useful life, royalty rates, income tax rates, discount rates, and the tax benefits from amortization expense.

Customer relationships were valued at $149.9 million using the multi-period excess earnings approach, which is a form of the income approach. This method is based on the concept that cash flows attributable to the assets are available after deducting the costs associated with the business as well as the return on assets employed in the generation of the cash flows. Significant considerations include cash flows from existing customer relationships, estimating contributory asset charges and required rates of return on tangible and intangible assets, the tax amortization benefit, and discount rates.

Goodwill

We recorded Goodwill of $177.6 million upon application of fresh-start reporting. When applying fresh-start reporting, the difference between the business enterprise value and the fair value of our assets and liabilities gives rise to goodwill, which is a residual.

Deferred Income Taxes

We recorded deferred income tax assets and liabilities of $2.5 million and $25.6 million, respectively, for temporary differences resulting from applying fresh-start reporting.

Debt

We recorded our long-term debt at their total fair value of $604.1 million, which had two major components, as follows:

·	The senior credit facility of $309.0 million.

The $140 million aggregate principal amount of convertible notes was recorded at fair value of $124.2 million and its embedded conversion option at $170.9 million. The fair values related to the convertible notes and the embedded conversion option considered several factors, such as the price of our Common Stock, volatility, the risk-free rate, and credit spreads. Also significant are the coupon interest rate, the rate of conversion of the notes into shares of our Common Stock, and the term of the instrument.

Pensions and Other Postretirement Benefit Plan Liabilities, current and non-current

We recorded pensions of $35.0 million and other postretirement benefit plan liabilities of $73.1 million, which includes the actuarial measurement of all of our benefit plans. These liabilities increased by $11.1 million compared to the Predecessor's valuations due to changes in the market value of our assets and liabilities, eliminating accumulated other comprehensive income, and revised discount rates, which declined between 75 and 100 basis points from the Predecessor's valuations.

Stockholder's Equity (Deficiency)

The changes to our Stockholder's Equity (Deficiency) reflect our recapitalization using $563 million, which is the midpoint of the range of our enterprise valuations in our Plan of Reorganization and the application of fresh-start reporting. Also included is the elimination of our Predecessor Common Stock, Treasury Stock, Accumulated Other Comprehensive Loss, and Accumulated Deficiency.

Prepetition Professional Fees-Special legal and other advisors fees associated with our prepetition reorganization efforts, including preparation for the bankruptcy filing, are reflected in prepetition professional fees in the consolidated statement of operations for the year ended December 31, 2009.

Business of the Company-We are engaged primarily in the design, manufacture and distribution of components for trucks, trailers and certain military and construction vehicles. We sell our products primarily within North America and Latin America to original equipment manufacturers and to the aftermarket.

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

Revenue Recognition-Revenue from product sales is recognized primarily upon shipment whereupon title passes and we have no further obligations to the customer. Provisions for discounts and rebates to customers, and returns and other adjustments are provided for as a reduction of sales in the same period the related sales are recorded.

Cash and Cash Equivalents-Cash and cash equivalents include all highly liquid investments with original maturities of three months or less. The carrying value of these investments approximates fair value due to their short maturity.

Inventories-Inventories are stated at the lower of cost or market. Cost for substantially all inventories is determined by the first-in, first-out method (“FIFO”). We review inventory on hand and write down excess and obsolete inventory based on our assessment of future demand and historical experience. We also recognize abnormal items as current-period charges. Fixed production overhead costs are based on the normal capacity of the production facilities. As a result of our fresh-start accounting analysis, our valuation for inventories was approximately $3.0 million higher than the lower of cost or market on February 26, 2010. That value was amortized during 2010 and recognized as a component of cost of goods sold.

Supplies-For the Successor Company, critical supplies are recorded at cost and depreciated over their useful lives. For supplies valued below the threshold, we immediately recognize as expense in our statements of operations.

Property, Plant and Equipment-Property, plant and equipment are recorded at cost and are depreciated using the straight-line method over their expected useful lives. Generally, buildings and improvements have useful lives of 15-30 years, and factory machinery and equipment have useful lives of 10 years. As a result of the fresh-start accounting analysis, our property, plant, and equipment was adjusted to fair value at February 26, 2010.

Deferred Financing Costs-Costs incurred in connection with the ABL Credit Agreement and issuance of our senior secured notes (see Note 6) were originally deferred and are being amortized over the life of the related debt using the effective interest method. Deferred financing costs related to prepetition senior subordinated debt that was subject to compromise were recognized as reorganization items during the year ended December 31, 2009. Debt issuance costs and discounts on prepetition senior debt were removed as part of our fresh start valuation, settlement of prepetition debt and issuance of postpetition debt.

Goodwill-Goodwill represents the excess of the reorganization value of the Successor Company over the fair value of net tangible assets and identifiable assets and liabilities resulting from the application of ASC 852. See Note 4 for further discussion.

Intangible Assets-Identifiable intangible assets consist of trade names, technology and customer relationships. Indefinite lived intangibles assets (trade names) are not amortized. The lives for the definite-lived intangibles assets are reviewed to ensure recoverability whenever events or changes in economic circumstances indicate the carrying amount of such assets may not be recoverable. As a result of the fresh-start accounting analysis, our intangible assets were established at fair value on February 26, 2010. See Note 4 for further discussion.

Impairment-We evaluate our long-lived assets to be held and used and our amortizing intangible assets for impairment when events or changes in economic circumstances indicate the carrying amount of such assets may not be recoverable. Impairment is determined by comparison of the carrying amount of the asset to the undiscounted net cash flows expected to be generated by the related asset group. Long-lived assets to be disposed of are carried at the lower of cost or fair value less the costs of disposal.

Goodwill and our indefinite lived intangible assets (trade names) are reviewed for impairment annually or more frequently if impairment indicators exist. Impairment is determined for trade names by comparison of the carrying amount to the fair value, which is determined using an income approach (relief from royalty method). Impairment is determined for goodwill using the two-step approach. The first step is the estimation of fair value of each reporting unit, which is compared to the carrying value. If step one indicates that impairment potentially exists, the second step is performed to measure the amount of impairment, if any. Goodwill impairment exists when the implied fair value of goodwill is less than its carrying value.

Pension Plans-We have trusteed, non-contributory pension plans covering certain U.S. and Canadian employees. For certain plans, the benefits are based on career average salary and years of service and, for other plans, a fixed amount for each year of service. Our net periodic pension benefit costs are actuarially determined. Our funding policy provides that payments to the pension trusts shall be at least equal to the minimum legal funding requirements.

Postretirement Benefits Other Than Pensions-We have postretirement health care and life insurance benefit plans covering certain U.S. non-bargained and Canadian employees. We account for these benefits on an accrual basis and provide for the expected cost of such postretirement benefits accrued during the years employees render the necessary service. Our funding policy provides that payments to participants shall be at least equal to our cash basis obligation.

Postemployment Benefits Other Than Pensions-We have certain post-employment benefit plans, which provide severance benefits, covering certain U.S. and Canadian employees. We account for these benefits on an accrual basis.

Income Taxes-Our 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 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).

We have concluded that it is more likely than not that we will not realize the benefits of certain deferred tax assets, totaling $55.4 million, for which we have provided a valuation allowance. See Note 9 for a discussion of valuation allowances.

We record uncertain tax positions in accordance with ASC 740 on the basis of a two-step process whereby (1) we determine whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position and (2) those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is greater than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

Research and Development Costs-Expenditures relating to the development of new products and processes, including significant improvements and refinements to existing products, are expensed as incurred and are reported as a component of operating expenses in the consolidated statements of operations. The amount expensed in the year ended December 31, 2011 totaled $4.8 million. For the period January 1, 2010 to February 26, 2010 and for the period February 26, 2010 to December 31, 2010 we expensed $0.7 million and $3.4 million, respectively. The amount expensed in the year ended December 31, 2009 totaled $4.3.

Foreign Currency-The assets and liabilities of Accuride Canada and AdM that are receivable or payable in cash are converted at current exchange rates, and inventories and other non-monetary assets and liabilities are converted at historical rates. Revenues and expenses are converted at average rates in effect for the period. The functional currencies of Accuride Canada and AdM have been determined to be the U.S. dollar. Accordingly, gains and losses resulting from conversion of such amounts, as well as gains and losses on foreign currency transactions, are included in operating results as “Other income (loss), net.” We had an aggregate foreign currency gain of $7.1 million for the year ended December 31, 2009. For the year ended December 31, 2011 and for the period February 26, 2010 to December 31, 2010 we had aggregate foreign currency losses of $0.1 million and $0.7 million, respectively.

Concentrations of Credit Risk-Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash, cash equivalents, customer receivables, and derivative financial instruments. We place our cash and cash equivalents and execute derivatives with high quality financial institutions. Generally, we do not require collateral or other security to support customer receivables.

Derivative Financial Instruments-We periodically use derivative instruments to manage exposure to foreign currency, commodity prices, and interest rate risks. We do not enter into derivative financial instruments for trading or speculative purposes. The derivative instruments used by us include interest rate, foreign exchange, and commodity price instruments. All derivative instruments are recognized on the consolidated balance sheet at their estimated fair value. As of December 31, 2011, there were no derivatives designated as hedges for financial reporting purposes.

Interest Rate Instruments-From time to time, we use interest rate swap agreements as a means of fixing the interest rate on portions of our floating-rate debt. The interest rate swap agreements were not designated as hedges for financial reporting purposes and were carried in the consolidated financial statements at fair value, with all realized and unrealized gains or losses reflected in current period earnings as a component of interest expense. As of December 31, 2009, we had one interest rate swap agreement to exchange, at specified intervals, the difference between 3.81% from March 2008 through March 2010, and the variable rate interest amounts calculated by reference to the notional principal amount of $125 million. As of December 31, 2009, we had a liability of $1.1 million included in accrued and other liabilities on the consolidated balance sheet. On March 10, 2010 we terminated the swap agreement and paid the outstanding liability.

Foreign Exchange Instruments-At December 31, 2011, the notional amount of open foreign exchange forward contracts was $1,160. We had no outstanding instruments at December 31, 2010.

Commodity Price Instruments-We periodically use commodity price swap contracts to limit exposure to changes in certain raw material prices. Commodity price instruments, which do not meet the normal purchase exception, are not designated as hedges for financial reporting purposes and, accordingly, are carried in the financial statements at fair value, with realized and unrealized gains and losses reported in current period earnings as a component of “Cost of goods sold.” We had no commodity price instruments outstanding at December 31, 2011 and 2010.

The pre-tax realized and unrealized gains (losses) on our derivative financial instruments for the Successor Company for the year ended December 31, 2011, and the period from February 26, 2010 to December 31, 2010, and for the Predecessor Company for the period from January 1, 2010 to February 26, 2010, and for year ended December 31, 2009 recognized in our consolidated statements of operations are as follows:

	Interest Rate Instruments					Foreign Exchange Instruments
	Realized Loss			Unrealized Gain (Loss)		Realized Gain (Loss)			Unrealized Gain (Loss)
2009	$	(4,968	)	$	4,217	$	2,396		$	(843	)
2010 (Predecessor)		-			-		(50	)		-
2010 (Successor)		-			-		(46	)		-
2011		-			-		(26	)		(17	)

Reverse Stock Split -Effective November 18, 2010, Accuride Corporation implemented a one-for-ten reverse stock split of its Common Stock. Unless otherwise indicated, all share amounts and per share data for the Successor Company have been adjusted to reflect this reverse stock split.

Earnings Per Share-Earnings per share are calculated as net income (loss) divided by the weighted average number of common shares outstanding during the period. Diluted earnings per share are calculated by dividing net income (loss) by this weighted-average number of common shares outstanding plus Common Stock equivalents outstanding during the year. Employee stock options outstanding to acquire 1,566,428 shares in 2009, and warrants exercisable for 2,205,882, 2,205,882 and 239,003 shares outstanding in 2011, 2010 and 2009, respectively, were not included in the computation of diluted earnings per common share because the effect would be anti-dilutive.

	Successor						Predecessor
	Years Ended December 31,			Period from February 26 to December 31,			Period from January 1 to February 26,		Years Ended December 31,
	2011			2010			2010		2009
Numerator:
Net income (loss)	$	(17,031	)	$	(126,532	)	$	50,802	$	(140,112	)

Denominator:
Basic weighted average shares outstanding		47,277			15,670			47,572		39,028
Effect of dilutive share-based awards		-			-			-		-
Dilutive weighted average shares outstanding		47,277			15,670			47,572		39,028

The following table summarizes the changes in the Successor's number of common shares from the Effective date to the period ended December 31, 2010:


	Period from February 26 to December 31,
	2010
Number of common shares outstanding:
Shares outstanding at February 26, 2010		126,295,024
Adjustment for one-for-ten reverse stock split		(113,665,542	)
Shares issued – conversion offer		34,600,145
Shares outstanding at December 31, 2010		47,229,627

Stock Based Compensation-As described in Note 10, we maintain stock-based compensation plans which allow for the issuance of incentive stock options, or ISOs, as defined in section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), nonstatutory stock options, restricted stock, restricted stock units, stock appreciation rights (“SARs”), deferred stock, dividend equivalent rights, performance awards and stock payments (referred to collectively as Awards), to officers, our key employees, and to members of the Board of Directors. We recognize compensation expense under the modified prospective method as a component of operating expenses.

On November 9, 2011, our Board of Directors adopted a Rights Agreement pursuant to which one purchase right was distributed as a dividend on each share of our common stock held of record as of the close of business on November 23, 2011. Upon becoming exercisable, each right will entitle its holder to purchase from the Company one one-hundredth of a share of our Series A Junior Participating Preferred Stock for the purchase price of $30.00. Generally, the rights will become exercisable ten business days after the date on which any person or group becomes the beneficial owner of 15% or more of our common stock or has commenced a tender or exchange offer which, if consummated, would result in any person or group becoming the beneficial owner of 15% or more of our common stock, subject to the terms and conditions set forth in the rights agreement. The rights are attached to the certificates representing outstanding shares of common stock until the rights become exercisable, at which point separate certificates will be distributed to the record holders of our common stock. If a person or group becomes the beneficial owner of 15% or more of our common stock, which we refer to as an “acquiring person,” each right will entitle its holder, other than the acquiring person, to receive upon exercise a number of shares of our common stock having a market value of two times the purchase price of the right.

New Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board (“FASB”) issued ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS. The update amends U.S. GAAP to conform with measurement and disclosure requirements in International Financial Reporting Standards (“IFRS”). The amendments in this update change the wording used to describe the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. The amendments include the following:

1. Those that clarify the Board's intent about the application of existing fair value measurement and disclosure requirements

2. Those that change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements.

In addition, to improve consistency in application across jurisdictions some changes in wording are necessary to ensure that U.S. GAAP and IFRS fair value measurement and disclosure requirements are described in the same way. The amendments in this update are to be applied prospectively and are effective during interim and annual periods beginning after December 15, 2011. We are currently evaluating the impact of adopting ASU 2011-04 on the consolidated financial statements.

In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income. The objective of this update is to facilitate convergence of U.S. GAAP and IFRS. This update revises the manner in which entities present comprehensive income in their financial statements. Entities have the option to present total comprehensive income, the components of net income, and the components of other comprehensive income as either a single, continuous statement of comprehensive income or as two separate but consecutive statements. The amendments of this update do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income.

The amendments in this update are to be applied retrospectively for all periods presented in the financial statements and are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Early adoption is permitted. We are currently evaluating the impact of adopting ASU 2011-05 on the consolidated financial statements.

In August 2011, the FASB issued ASU 2011-08, Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment. This update will allow an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. Under these amendments, an entity would not be required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. This update is effective prospectively for interim and annual goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted. We are currently evaluating the impact of adopting ASU 2011-08 on the consolidated financial statements.

In December 2011, the FASB issued ASU 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. The amendments in this update require an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. This update will enhance disclosures required by U.S. GAAP by requiring improved information about financial instruments and derivative instruments. The requirements of this update are effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. Entities should provide the disclosures required retrospectively for all comparative periods presented. We are currently evaluating the impact of adopting ASU 2011-11 on the consolidated financial statements.