Disclosures

Accuride Corp.

I, Jimmy Baker , certify that this report reflects my personal beliefs about this company and that no portion of my compensation was, is or will be directly or indirectly related to the specific recommendations or views discussed in this report.

Disclosure

• B. Riley & Co., LLC does and seeks to do business with companies covered in its research reports.
• A portion of this analyst’s compensation is based on the sales, trading and investment banking activities of B. Riley & Co., LLC.

Explanation of B. Riley & Co. LLC's Rating System

• Buy: We generally expect "Buy" rated stocks to materially outperform both the S&P 500 and Russell 2000 as well as other stocks in their sector. Further, we believe that the potential reward relative to the potential risk is particularly attractive.
• Neutral: We generally believe "Neutral" rated stocks will perform roughly in line with the S&P 500 and Russell 2000 over the intermediate and long term.
• Sell: We generally expect "Sell" rated stocks to materially underperform both the S&P 500 and Russell 2000 as well as other stocks in their sector. Further, we believe that the potential reward relative to the potential risk is particularly unattractive.

Risks and Considerations

• Cyclical Nature of the Company's Business - Revenue from the Company's businesses have historically correlated positively with both US and world GDP. A cyclical downturn in GDP growth domestically and/or abroad may lead to a material deterioration in the Company's results.
• Loss of Key Personnel - In our opinion, the current management team will be instrumental in executing the Company's growth strategy. The resignation of a key member of management would have a negative impact on the Company.
• General Industry - The Company could miss our estimates and/or their financial guidance.
• Further Potential Risks - See the Company's SEC filings, particularly its 10-K filing, for a discussion of further potential risks.

Additional Risks and Considerations

 

 

• Future Capital Raises - The company may need to raise additional capital to fund its growth initiatives.  This presents a risk of dilution to existing shareholders if the company does not deliver sufficient returns on the additional capital.
  • Near-Term Pressures on Cash Flow - The company plans to make excess contributions to its underfunded pension.  Additionally, it will likely need to make abnormally large capital investments in its Component division to improve manufacturing capabilities and capacity.  As such, near-term cash flows will likely lag earnings, which could be viewed negatively by investors.
  • International Expansion - The company is likely to pursue international expansion opportunities.  This presents additional execution risk as it will be entering markets that it is presumably less familiar with.
  • Capacity Constraints - The company is attempting to add capacity at several of its business units to meet rapidly rising demand.  If it cannot add capacity in a timely fashion, it may risk losing market share.
  • Decrease in Commercial Vehicle Production - Ultimately, the company is dependent upon production levels of Class 8 trucks, Class 5-7 trucks, and trailers.  Any slowdown in production rates of these products is likely to harm the company's sales, margins, and profitability.
  • Pricing Pressures in Steel Wheels - As North American demand shifts from steel to aluminum, the steel wheel market may experience a period of pricing pressure stemming from excess capacity.  This could be exarcerbated if steel wheel producers currently serving the light truck market move into the commercial vehicle market due to a demand shift away from light trucks and into more fuel efficient automobiles.
  • Gunite Quality Failure - The company may suffer additional quality spills at Gunite (or other divisions) which could impact both near and long-term performance should the quality spill be severe enough to trigger customer attrition.
  • Inability to Pass Through Non-material Price Increases - A concentrated customer base of commercial vehicle OEMs may be resistive to price increases, which could inhibit the company's ability to grow margins throughout the up cycle.