<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 23, 1997.
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
ALLIED HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------------
<TABLE>
<S> <C> <C>
GEORGIA 4213 58-0360550
(State or other jurisdiction (PRIMARY STOCK AND INDUSTRIAL (I.R.S. Employer Identification
of incorporation or CLASSIFICATION CODE NUMBER) No.)
organization)
</TABLE>
160 CLAIREMONT AVENUE, SUITE 510
DECATUR, GEORGIA 30030
(404) 370-1100
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------------
DANIEL H. POPKY
VICE PRESIDENT, FINANCE
ALLIED HOLDINGS, INC.
160 CLAIREMONT AVENUE, SUITE 510
DECATUR, GEORGIA 30030
(404) 370-1100
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------
Copies to:
<TABLE>
<C> <C>
THOMAS M. DUFFY, ESQ. IAN B. BLUMENSTEIN, ESQ.
TROUTMAN SANDERS LLP LATHAM & WATKINS
NATIONSBANK PLAZA, SUITE 5200 885 THIRD AVENUE
600 PEACHTREE STREET, N.E. NEW YORK, NEW YORK 10022
ATLANTA, GEORGIA 30308 (212) 906-1326
(404) 885-3000
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
---------------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this form, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
---------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===============================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
AMOUNT TO BE AGGREGATE PRICE AGGREGATE OFFERING AMOUNT OF
TITLE OF SHARES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, no par value........ 3,450,000 shares $18.37 $63,376,500 $19,205
===============================================================================================================
</TABLE>
(1) Includes 450,000 shares that the Underwriters have the option to purchase
solely to cover over-allotments, if any.
(2) Estimated solely for the purpose of determining the registration fee and
calculated in accordance with Rule 457(c) under the Securities Act of 1933
on the basis of the last reported sales price of the Company's Common Stock
on October 21, 1997 as reported on the Nasdaq National Market.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THE REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION
OCTOBER 23, 1997
3,000,000 SHARES
[ALLIED HOLDINGS LOGO]
COMMON STOCK
---------------------
Of the 3,000,000 shares of Common Stock offered hereby (the "Offering"),
2,000,000 shares are being sold by Allied Holdings, Inc. (the "Company" or
"Allied") and 1,000,000 shares are being sold by the Selling Stockholders. See
"Principal and Selling Stockholders." The Company will not receive any proceeds
from the sale of shares by the Selling Stockholders. The Common Stock is traded
on the Nasdaq National Market under the symbol "HAUL." On October 22, 1997, the
last reported sale price of the Common Stock on the Nasdaq National Market was
$20.25 per share. See "Price Range of Common Stock and Dividend Policy."
---------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
=================================================================================================================
PRICE UNDERWRITING PROCEEDS PROCEEDS TO
TO DISCOUNTS AND TO SELLING
PUBLIC COMMISSIONS COMPANY(1) STOCKHOLDERS
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share.................... $ $ $ $
- -----------------------------------------------------------------------------------------------------------------
Total(2)..................... $ $ $ $
=================================================================================================================
</TABLE>
(1) Before deducting expenses of $ payable by the Company.
(2) The Selling Stockholders have granted the Underwriters a 30-day option to
purchase up to 450,000 additional shares of Common Stock solely to cover
over-allotments, if any. To the extent that the option is exercised, the
Underwriters will offer the additional shares to the public at the Price to
Public shown above. If the option is exercised in full, the total Price to
Public, Underwriting Discounts and Commissions, Proceeds to Company and
Proceeds to Selling Stockholders will be $ , $ ,
$ and $ , respectively. See "Underwriting."
---------------------
The shares of Common Stock are offered by the several Underwriters subject
to prior sale, when, as, and if delivered to and accepted by them, and subject
to the right of the Underwriters to reject any order in whole or in part. It is
expected that the delivery of the shares will be made at the offices of BT Alex.
Brown Incorporated, Baltimore, Maryland, on or about , 1997.
BT ALEX. BROWN BEAR, STEARNS & CO. INC.
THE DATE OF THIS PROSPECTUS IS , 1997
<PAGE> 3
[PHOTOGRAPHS TO BE INCLUDED]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THE COMMON
STOCK OFFERING AND PURCHASE COMMON STOCK TO COVER SYNDICATE SHORT POSITIONS. FOR
A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
IN CONNECTION WITH THIS OFFERING, CERTAIN PERSONS PARTICIPATING IN THIS
OFFERING MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON
NASDAQ IN ACCORDANCE WITH RULE 103 OF REGULATION M OF THE SECURITIES AND
EXCHANGE COMMISSION. SEE "UNDERWRITING."
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by, and
should be read in conjunction with, the more detailed information and financial
data, including the Consolidated Financial Statements and notes thereto,
contained and incorporated by reference in this Prospectus. The terms "Allied"
and the "Company" refer to Allied Holdings, Inc. and its subsidiaries, unless
otherwise stated or indicated by the context. References herein to 1996 pro
forma operating data are to the operating data of the Company for the year ended
December 31, 1996, after giving effect to the Offering (assuming a public
offering price of $20.25 per share, the last reported sale price of the Common
Stock on the Nasdaq National Market on October 22, 1997), the Ryder Acquisition
and the Senior Note Offering as if they had occurred on January 1, 1996. See
"Unaudited Pro Forma Financial Information." Unless otherwise indicated, all
information in this Prospectus assumes no exercise of the Underwriters'
over-allotment option.
THE COMPANY
The Company, founded in 1934, is the largest motor carrier in North America
specializing in the transportation of new and used automobiles and light trucks
and serves all of the major domestic and foreign automotive manufacturers. The
Company offers a full range of automotive delivery services including
transporting new, used and off-lease vehicles to dealers from plants, rail
ramps, ports and auctions, and providing vehicle rail-car loading and unloading
services. The Company also provides logistics solutions and other services to
the new and used vehicle distribution market and other segments of the
automotive industry, including the rapidly growing used car superstore market.
The Company transported approximately 65% of the new vehicles sold in the United
States and Canada in 1996 and had 1996 revenues nearly five times greater than
the Company's closest competitor, after giving pro forma effect to the
acquisition by the Company of Ryder Automotive Carrier Services, Inc. and RC
Management Corp. (collectively "Ryder") from Ryder System, Inc. ("Ryder System")
on September 30, 1997 (the "Ryder Acquisition"). For the year ended December 31,
1996, after giving pro forma effect to the Ryder Acquisition, revenues and
operating income of the Company would have been approximately $960.7 million and
$31.7 million, respectively.
The Company operates primarily in the short-haul segment of the automotive
transportation industry with an average length of haul of less than 200 miles.
The Company delivers new and used vehicles throughout the United States and
Canada for all of the major domestic and foreign manufacturers of automobiles
and light trucks and certain of the used car superstores. General Motors, Ford
and Chrysler represent the Company's largest customers, accounting for
approximately 35%, 26% and 14%, respectively, of 1996 pro forma revenues. The
Company also provides services to all of the major foreign manufacturers,
including Honda, Mazda, Nissan, Toyota, Isuzu, Volkswagen and Mitsubishi.
The Company also provides logistics solutions that complement its new and
used vehicle distribution services operations and is pursuing additional
opportunities in the growing remarketed vehicle sector, which includes the
delivery of used and previously leased vehicles and vehicles sold through the
automotive auction process. For example, the Company has entered into agreements
with AutoNation and DriversMart to provide transportation logistics services for
the movement of vehicles to their reconditioning centers and stores. In August
1997, the Company also entered into a contract with Aucnet to provide
transportation logistics services relating to the movement of vehicles sold
through live interactive auctions and bulletin board sales on the Internet.
The Company's executive offices are located at 160 Clairemont Avenue,
Decatur, Georgia 30030, and its telephone number is (404) 370-1100.
3
<PAGE> 5
KEY STRENGTHS
The Company's key strengths and distinguishing characteristics, which
management believes have been enhanced as a result of the Ryder Acquisition,
include the following:
Leading Market Position. The Company is the largest motor carrier of
automobiles and light trucks in North America. The Company transported
approximately 65% of the new vehicles sold in the United States and Canada
in 1996 and had 1996 revenues nearly five times greater than the Company's
closest competitor, after giving effect to the Ryder Acquisition. The
Company believes that its significant market position as a result of the
Ryder Acquisition, combined with its specialized equipment and service,
will strengthen the Company's position as a leader in the automotive
transportation industry.
Long-Term Customer Relationships. Over the past six decades, the
Company has built a reputation as a reliable vehicle transporter and, as a
result, has developed and maintained long-term relationships with its major
customers. For example, the Company has been serving Ford since 1934,
Chrysler since 1979, and General Motors since 1914. These long-term
relationships, combined with consistent quality service, have resulted in
the Company hauling more than 50% of General Motors', Ford's and Chrysler's
1996 North American production, after giving effect to the Ryder
Acquisition. The Company believes that its long-term relationships, along
with the integration of its information systems with those of its
customers, provide the Company with a significant competitive advantage.
Proprietary Information Systems. The Company believes that its
commitment to being a leader in the development of proprietary information
systems provides enhanced customer service and improved operating
efficiencies. Through electronic data interchange ("EDI") capabilities, the
Company communicates directly with manufacturers throughout the vehicle
delivery process and electronically bills and collects from its customers,
significantly decreasing cycle time and enabling customers to reduce
inventory costs. The Company's proprietary information systems design an
optimal load for each of its specialized tractor-trailers ("Rigs") and
determine the most economical and efficient delivery sequence thereby
enhancing operating efficiencies. Since 1994, the Company has spent $5.4
million to enhance the capability of these systems.
Emphasis on Productivity Improvements. The Company continually seeks
to enhance and improve performance and productivity through measures such
as efficient management of its fleet of Rigs, the use of performance
improvement programs for employees, and information systems development.
Additionally, the Company has implemented a management strategy designed to
increase the productivity of its employees through various programs which
recognize employee performance, such as rewarding damage-free deliveries,
employee efficiency and driver safety. During the first six months of 1997,
the Company maintained a damage-free delivery rate of 99.6%.
Experienced Management Team with Significant Ownership Interest. The
Company's management team provides a depth and continuity of experience.
The Company's senior management group averages over 20 years experience in
the automotive transportation industry with certain officers having over 30
years experience with the Company. Additionally, after giving effect to the
Offering, the Company's management team will continue to own an aggregate
of approximately 29.2% of the outstanding Common Stock.
GROWTH STRATEGY
The Company's objective is to consistently meet its customers' needs by
maintaining its position as a leading provider of high quality and cost
effective automotive distribution services. The
4
<PAGE> 6
following are the primary elements of the Company's strategy to continue to
enhance revenue growth and profitability:
Increase Share of Used Vehicle Transportation Market. The Company
believes it can generate additional revenue by continuing to pursue
opportunities in the growing remarketed vehicle sector, which is undergoing
significant consolidation. The remarketed vehicle sector includes the
delivery of used and previously leased vehicles and vehicles sold through
the automotive auction process. The Company has been aggressively pursuing
business from the used car superstores, which represents one of the fastest
growing sectors of the automotive industry, as well as off-lease companies
and auto auctions. For example, in August 1997 the Company entered into a
contract with Aucnet to provide transportation logistics services for the
movement of vehicles sold through live interactive auctions and bulletin
board sales on the Internet. The Company also has agreements with
AutoNation and DriversMart to provide logistics services for the movement
of vehicles to their reconditioning centers and stores.
Expand Share of New Vehicle Transportation Market. The Company
believes it can capture a larger percentage of its major customers' North
American production volume by building upon existing relationships and
leveraging its reputation for providing high-quality service, value-added
services and competitive pricing, while expanding the breadth of services
offered to its customers. The Company also believes it can increase its
business with existing customers by utilizing its expansive terminal
locations and its sophisticated information systems to deliver vehicles
more efficiently and cost effectively.
Realize Operating Efficiencies. The Company continually focuses on
increasing operating efficiencies without compromising the quality or range
of its services. The Company has identified the following areas which, as a
result of the Ryder Acquisition, provide significant savings potential:
- Optimize Terminal Network. The Company plans to consolidate
approximately 19 terminals, or approximately 14% of its terminal
locations, which, as a result of the Ryder Acquisition, are located in
close proximity to one another. The consolidation of these terminals
will reduce operating and terminal overhead costs. In addition, the
Company believes that additional cost savings can be achieved by
combining terminal administrative functions.
- Improve Productivity. Over the past decade, the Company has
implemented performance improvement programs at its terminal locations
which have resulted in reduced operating costs. The Company intends to
implement these programs at the Ryder locations. In addition, the
Company believes it will be able to increase Rig utilization through
the consolidation of terminal locations and through the increased
backhaul potential that the Company believes will result from the Ryder
Acquisition. These actions are expected to reduce the number of Rigs
the Company is required to operate and result in reduced operating
costs.
- Integration of Proprietary Information Systems. The Company intends
to integrate Ryder's information systems with its own proprietary
information systems. This is expected to result in increased operating
efficiencies and reduced administrative costs.
- Centralize Administrative Functions. The Company's administrative
functions are centralized and performed at its corporate headquarters
in Decatur, Georgia. The Company is in the process of combining most of
Ryder's central office functions with the Company's in order to
eliminate redundant functions and reduce costs.
Continue to Introduce Complementary Services. Over the past several
years, the Company has made a significant commitment to providing logistics
solutions and other services to its existing customers and other segments
of the automotive industry utilizing its proprietary information systems
and extensive terminal networks. These services include identifying new and
innovative distribution methods, providing solutions relating to improving
the management of inventory of new and used vehicles, and providing
distribution services relating to the used
5
<PAGE> 7
and remarketed vehicle market. For example, the Company is party to an
agreement with Volkswagen to provide port processing and vehicle
distribution services. The Company also believes that significant
opportunities exist for it to provide automotive distribution services to
its existing customers' foreign manufacturing plants through the formation
of joint ventures with established local transportation carriers.
Pursue Selective Acquisitions. The Company plans to pursue selective
acquisitions within the automotive distribution services industry.
Specifically, the Company believes that significant opportunities exist to
acquire entities which would enable the Company to provide additional
logistics services to the domestic and international operations of its
existing customer base and other global automotive manufacturers. As the
largest motor carrier of automobiles and light trucks in North America, the
Company believes that acquisitions will enable it to leverage its existing
infrastructure and thereby increase profit opportunities. The Company
completed the Ryder Acquisition on September 30, 1997 for $114.5 million,
subject to post-closing adjustments. In October 1994, the Company acquired
Auto Haulaway, Inc. ("Auto Haulaway"), the largest transporter of
automobiles and light trucks in Canada, for $65.0 million. Allied has
successfully integrated Auto Haulaway's information systems and
administrative functions into those of the Company resulting in significant
cost savings. In addition, the Company acquired Kar-Tainer International,
Ltd. ("Kar-Tainer") in April 1997 for $13.1 million to provide the
capability to transport finished and partially completed vehicles and parts
in intermodal containers domestically and internationally and is currently
integrating Kar-Tainer's systems and operations with those of the Company.
THE RYDER ACQUISITION
On September 30, 1997, the Company acquired Ryder from Ryder System for
$114.5 million in cash, subject to post-closing adjustments. Ryder provided a
full range of automotive delivery services including transporting new, used and
off-lease vehicles to dealers from plants, rail ramps, ports and auctions, and
providing vehicle rail-car loading and unloading services. Ryder also provided
logistics solutions and other services to the new and used vehicle distribution
market and other segments of the automotive industry, including the growing used
car superstore market.
For the year ended December 31, 1996, Ryder generated revenues and
operating income of $568.1 million and $0.6 million, respectively (in each case,
adjusted to reflect only the businesses of Ryder acquired by the Company, before
any pro forma adjustments). Ryder's operating income for 1996 includes an $11.3
million charge relating to a restructuring that was intended to improve Ryder's
future operating performance. See "Unaudited Pro Forma Financial Information"
and "Business -- Ryder."
Ryder operated throughout the Continental United States and Canada through
approximately 90 terminals and a fleet of approximately 3,400 Rigs, including
approximately 600 owner-operated Rigs, and had approximately 4,800 employees.
Similar to the Company, Ryder provided vehicle hauling services to all of the
major domestic and foreign automotive manufacturers. General Motors represented
Ryder's largest customer, accounting for approximately 49.9% of 1996 revenues.
The Company believes that the Ryder Acquisition was consistent with the
Company's growth strategy to increase its market share within the North American
automotive carrier industry. The Ryder Acquisition also provided an opportunity
for the Company to significantly accelerate its penetration with existing
customers and gain entry to new customers. The Company believes that the Ryder
Acquisition is attractive because: (i) the combination of Allied and Ryder has
created the largest motor carrier in the automotive transportation industry,
transporting approximately 65% of the new vehicles sold in the United States and
Canada in 1996; (ii) significant cost savings and margin enhancement
opportunities are expected to be realized through consolidation of terminal
operations and administrative functions, the integration of proprietary
information systems, and the implementation of performance improvement programs;
(iii) the Company will be able to provide
6
<PAGE> 8
additional services to its customers through increased capabilities, such as
port processing and rail yard management; (iv) the Company's customer base will
become more diversified; and (v) the Company will expand the geographic
territories in which it does business from the southern and eastern United
States and Canada to the entire Continental United States and Canada.
In connection with the Ryder Acquisition, the Company completed an offering
(the "Senior Note Offering") of $150.0 million of its 8 5/8% Senior Notes due
2007 (the "Senior Notes"). The net proceeds to the Company from the sale of the
Senior Notes were used to fund the Ryder Acquisition, to pay related fees and
expenses, and to reduce outstanding borrowings.
THE OFFERING
Common Stock offered by the
Company....................... 2,000,000 shares
Common Stock offered by Selling
Stockholders.................. 1,000,000 shares
----------------------------------------------
Total Common Stock offered...... 3,000,000 shares
----------------------------------------------
----------------------------------------------
Common Stock to be outstanding
after the Offering.............. 9,810,000 shares(1)
Use of proceeds by the
Company......................... To repay certain indebtedness. See "Use of
Proceeds."
Nasdaq National Market.......... HAUL
- ---------------
(1) Does not include 171, 050 shares of Common Stock issuable upon the exercise
of outstanding stock options.
RISK FACTORS
Prospective purchasers of the Common Stock offered hereby should carefully
consider all information set forth in this Prospectus, including the information
set forth in "Risk Factors" beginning on page 9, prior to making an investment
decision.
RECENT DEVELOPMENTS
Based upon preliminary unaudited financial information, the Company had
revenues of $91.4 million and operating income of $1.8 million (excluding a
one-time charge related to the Ryder Acquisition) for the quarter ended
September 30, 1997, compared to revenues of $87.6 million and operating income
of $1.0 million for the quarter ended September 30, 1996, and Ryder had revenues
of $141.9 million and pre-tax earnings of $5.2 million for the quarter ended
September 30, 1997, compared to revenues of $136.6 million and a pre-tax loss of
$4.5 million for the quarter ended September 30, 1996. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Recent Developments."
7
<PAGE> 9
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING DATA
The following table sets forth certain summary historical and pro forma
consolidated financial and operating data of the Company for each of the three
years in the period ended December 31, 1996 and for the six-month periods ended
June 30, 1996 and 1997. The financial data is derived from the Company's audited
and unaudited consolidated financial statements included elsewhere herein. The
pro forma data gives effect to the Offering (assuming a public offering price of
$20.25 per share, the last reported sale price of the Common Stock on the Nasdaq
National Market on October 22, 1997), the Ryder Acquisition and the Senior Note
Offering as if they had occurred on (i) January 1, 1996 with respect to the
statement of operations data, other financial data and operating data, and (ii)
June 30, 1997 with respect to the balance sheet data. This table should be read
in conjunction with "Selected Financial Data," "Unaudited Pro Forma Financial
Information," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the Consolidated Financial Statements, including the
notes thereto, of the Company and Ryder included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------------------------ ------------------------------
HISTORICAL PRO HISTORICAL PRO
------------------------------- FORMA ------------------- FORMA
1994(1) 1995 1996 1996 1996 1997 1997
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................... $ 297,236 $ 381,464 $ 392,547 $ 960,661 $ 200,565 $ 208,969 $ 524,665
Operating expenses................. 268,505 360,543 373,952 928,913 189,510 197,519 496,936
--------- --------- --------- --------- --------- --------- ---------
Operating income................... 28,731 20,921 18,595 31,748(2) 11,055 11,450 27,729
Interest expense................... 5,462 11,260 10,720 18,889 5,396 5,408 9,370
Interest income.................... 312 707 603 1,216 303 357 1,448
Other income, net.................. -- -- -- 2,472 -- -- 752
Income tax provision............... 9,393 4,222 3,557 8,189 2,504 2,688 9,120
--------- --------- --------- --------- --------- --------- ---------
Income before extraordinary
item............................. $ 14,188 $ 6,146 $ 4,921 $ 8,358 $ 3,458 $ 3,711 $ 11,439
========= ========= ========= ========= ========= ========= =========
Income per share before
extraordinary item............... $ 1.84 $ 0.80 $ 0.64 $ 0.86 $ 0.45 $ 0.48 $ 1.18
========= ========= ========= ========= ========= ========= =========
Weighted average common shares
outstanding...................... 7,725,000 7,725,000 7,725,000 9,725,000 7,725,000 7,725,000 9,725,000
========= ========= ========= ========= ========= ========= =========
OTHER FINANCIAL DATA:
EBITDA(3).......................... $ 45,045 $ 46,352 $ 45,020 $ 98,880(2) $ 23,986 $ 25,236 $ 62,011
Capital expenditures:
New Rigs and modifications....... 23,337 11,716 17,092 58,470 12,053 5,811 15,206
Maintenance and other............ 7,208 6,494 8,880 12,724 2,323 1,099 1,739
--------- --------- --------- --------- --------- --------- ---------
Total.......................... $ 30,545 $ 18,210 $ 25,972 $ 71,194 $ 14,376 $ 6,910 $ 16,945
========= ========= ========= ========= ========= ========= =========
OPERATING DATA:
Rigs operated (at end of period)... 2,151 2,063 1,947 5,323 1,999 1,893 5,250
Vehicles delivered (in thousands).. 3,254 4,515 4,738 10,767 2,450 2,503 5,749
Loads delivered (in thousands)..... 385 540 572 1,348 295 307 713
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
----------------------------------------
PRO FORMA
ACTUAL PRO FORMA(4) AS ADJUSTED(5)
-------- ------------ --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Total assets................................................ $228,694 $540,000 $533,731(6)
Total debt.................................................. 105,234 231,789 198,763
Stockholders' equity........................................ 60,157 60,157 92,402(6)
</TABLE>
- ---------------
(1) Includes the results of Auto Haulaway commencing with its acquisition by the
Company on October 31, 1994.
(2) Pro forma operating income for 1996 includes an $11.3 million restructuring
charge at Ryder related to efforts to improve its profitability and focus on
its core business of transporting vehicles and related services. See
"Business -- Ryder."
(3) Represents income before interest expense, interest income, income tax
provision, depreciation and amortization and extraordinary item. EBITDA is
presented because it provides useful information regarding a company's
ability to service and/or incur debt. EBITDA should not be considered in
isolation from or as a substitute for net income, cash flows from operating
activities and other consolidated income or cash flow statement data
prepared in accordance with generally accepted accounting principles or as a
measure of profitability or liquidity.
(4) Gives pro forma effect to the Ryder Acquisition and the Senior Note
Offering.
(5) As adjusted to give effect to the Offering.
(6) Excludes an after-tax charge of approximately $5.2 million that the Company
will record to write down Company Rigs and terminal facilities that will be
idled or closed as a result of the Ryder Acquisition.
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<PAGE> 10
RISK FACTORS
Prospective purchasers of the Common Stock offered hereby should carefully
review the information set forth below, in addition to the other information
contained and incorporated by reference in this Prospectus, in evaluating an
investment in the Common Stock offered hereby.
ABILITY TO INTEGRATE ACQUISITION OF RYDER
The full benefits of the business combination of the Company and Ryder
requires the integration of each company's operational, administrative, finance
and marketing organizations, the coordination of each company's operations and
the implementation of appropriate operational, financial and management systems
and controls in order to capture the efficiencies and the cost reductions that
are expected to result from the Ryder Acquisition. This will require substantial
attention from the Company's management team. The diversion of management
attention, as well as any other difficulties which may be encountered in the
transition and integration process, could have an adverse impact on the revenue
and operating results of the Company. In addition, there can be no assurance
that the Company will be successful in integrating the operations of Ryder, or
that the anticipated benefits will be realized.
DEPENDENCE ON AUTOMOTIVE INDUSTRY
The automotive transportation industry is dependent upon the volume of
automobiles and light trucks manufactured, imported and sold. The automotive
industry is highly cyclical and demand for new automobiles and light trucks is
directly affected by such factors as general economic conditions, consumer
confidence, and the availability of affordable new car financing. As a result,
the Company's results of operations will be adversely affected by cyclical
downturns in the general economy or in the automotive industry and by consumer
preferences in purchasing new automobiles and light trucks.
DEPENDENCE ON MAJOR CUSTOMERS
The Company's business is highly dependent upon General Motors, Ford and
Chrysler, its largest customers. The Company derived approximately 35%, 26% and
14% of its 1996 pro forma revenues from General Motors, Ford and Chrysler,
respectively. A significant reduction in General Motors', Ford's or Chrysler's
production, the loss of General Motors, Ford or Chrysler as a customer, or a
significant reduction in the services provided for any of these customers by the
Company would have a materially adverse effect upon the Company. See "Business."
CONTRACTS WITH CUSTOMERS
The Company operates under contracts with most of its customers with terms
varying from 30 days to five years. The Company's contract with Ford expires in
May 1999, its contract with Chrysler expires in June 2000, and it has an
agreement in principle with General Motors to enter into a three-year contract.
See "-- Dependence on Major Customers." The contracts between the Company and
its customers generally establish rates for the transportation of vehicles based
upon a fixed rate per vehicle transported and a variable rate for each mile a
vehicle is transported. The contracts generally do not permit the Company to
recover for increases in fuel prices, fuel taxes or labor costs, and any such
increases are likely to have an adverse effect on the Company's results of
operations, although some contracts provide for renegotiation to address certain
material adverse changes. In addition, certain of the Company's contracts
provide for annual rate reductions. While the Company may be able to derive
savings through increased efficiencies with respect to vehicles transported for
these customers, the savings may not offset the reductions, which would
adversely affect the Company's results of operations.
9
<PAGE> 11
LIABILITY EXPOSURE
The Company currently retains up to $650,000 of liability for each claim
for workers' compensation and up to $500,000 of liability for automobile and
general liability, including personal injury and property damage claims. In
addition to the $500,000 per occurrence deductible for automobile liability,
there is a $500,000 aggregate deductible for those claims which exceed the
$500,000 per occurrence deductible. The Company also retains up to $250,000 of
liability for each cargo damage claim in the United States. In Canada, the
Company retains up to C$100,000 (approximately U.S. $72,000 at October 16, 1997)
of liability for each claim for personal injury, property damage or cargo
damage. If the Company were to experience a material increase in the frequency
or severity of accidents or workers' compensation claims or unfavorable
developments in existing claims, the Company's operating results could be
adversely affected. The Company formed Haul Insurance Limited in December 1995
as a captive insurance subsidiary to provide insurance coverage to the Company
with respect to its deductibles for workers' compensation and commercial general
liability in the United States and for automobile liability insurance in the
United States and Canada. See "Business -- Risk Management and Insurance."
ENVIRONMENTAL REGULATION
The Company is subject to environmental laws and regulations that impose
liability for the costs of cleaning up, and certain damages resulting from,
sites of past spills, disposals or other releases of hazardous materials or
petroleum products. Such liability could relate to spills, disposals or other
releases of hazardous materials or petroleum products at property that the
Company (i) currently owns or operates, (ii) formerly owned or operated, or
(iii) used for the disposal of wastes. These environmental laws and regulations
typically impose cleanup responsibility and liability without regard to whether
the owner or operator knew or caused the presence of the contaminants, and the
liability under the laws has been interpreted to be joint and several unless the
harm is divisible and there is a reasonable basis for allocation of liabilities.
Many of the Company's terminals contain, or have contained, underground storage
tanks ("USTs") for storing fuel and other materials. While the Company believes
that it is in material compliance with all environmental requirements, including
requirements relating to the USTs, there can be no assurance that any failure to
comply, or compliance in the future, with such environmental laws (including the
potential imposition of liabilities associated with releases of hazardous
substances or petroleum products from the properties currently or formerly owned
or operated by the Company) will not have a material adverse effect on the
Company's business, financial condition or results of operations. See
"Business -- Regulation."
LABOR MATTERS
Certain subsidiaries of the Company, along with four other motor carriers
who, together with the Company, provide approximately 95% of the total new
vehicle motor transportation services in the United States, are signatories to
the Automobile National Master Agreement (the "Master Agreement") with the
International Brotherhood of Teamsters (the "Teamsters"). As a result of being a
party to the Master Agreement, the Company does not have exclusive control over
labor concessions in bargaining with the Teamsters. In Canada, certain
subsidiaries of the Company are signatories to four labor agreements, each
covering certain of the Canadian provinces and territories. The contracts expire
from May 31, 1998 to March 31, 2000. In addition, the Company is a party to
agreements with other labor unions. There can be no assurance that renegotiation
of labor contracts as they expire will not result in increased labor costs to
the Company, which increases could be material, or that such contracts can be
renegotiated without work stoppages.
COMPETITION
The automotive transportation industry is highly competitive. The Company
currently competes with other motor carriers of varying sizes, as well as with
railroads. The Company also competes with
10
<PAGE> 12
non-union motor carriers that may be able to provide comparable services at
lower costs. The development of new methods for hauling vehicles could also lead
to increased competition. See "Business -- Competition."
SEASONALITY
The Company's revenues are seasonal, with the second and fourth quarters
generally experiencing higher revenues than the first and third quarters. The
volume of vehicles shipped during the second and fourth quarters is generally
higher due to the introduction of new models which are shipped to dealers during
those periods and the higher spring and early summer sales of automobiles and
light trucks. During the first and third quarters, vehicle shipments typically
decline due to lower sales volume during those periods and scheduled plant shut
downs which primarily occur during the third quarter. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operation -- Seasonality and Inflation."
DEPENDENCE ON KEY PERSONNEL
The success of the Company is dependent upon its senior management team, as
well as its ability to attract and retain qualified personnel. There is
competition for qualified personnel in the automotive transportation industry.
There is no assurance that the Company will be able to retain its existing
senior management or to attract additional qualified personnel. See
"Management."
EFFECTIVE CONTROL BY PRINCIPAL STOCKHOLDERS
Following the Offering, the Company's management will continue to
beneficially own an aggregate of 2,861,191 shares of Common Stock, or 29.2% of
the outstanding Common Stock. As a result, if management and members of their
families choose to vote all of their shares in a similar manner, management
likely would have sufficient voting power to elect the entire Board of Directors
of the Company and to significantly influence the outcome of matters submitted
to shareholders. Such concentration of ownership may have the effect of
preventing a change in control of the Company. See "Principal and Selling
Stockholders."
SHARES ELIGIBLE FOR FUTURE SALE
Future sales of substantial amounts of the Common Stock, or the perception
that such sales may occur, could adversely affect the value of the Common Stock.
Upon completion of this Offering, there will be 20.0 million shares of Common
Stock authorized and approximately 9.8 million shares of Common Stock
outstanding. See "Description of Capital Stock."
VOLATILITY OF PRICE OF COMMON STOCK
The market price for shares of Common Stock is subject to wide fluctuations
in response to quarterly variations in the Company's results of operations,
changes in earnings estimates by analysts, conditions in the Company's markets
or general market or economic conditions. In addition, in recent years the stock
market has experienced extreme price and volume fluctuations. These fluctuations
have had a substantial effect on the market prices of many companies, often
unrelated to the operating performance of the specific companies. Such market
fluctuations could adversely affect the price of the Common Stock.
NO DIVIDENDS
The Company has not paid and does not anticipate paying any dividends on
its Common Stock in the foreseeable future. The Company intends to retain its
earnings, if any, for use in the Company's growth and ongoing operations. In
addition, the terms of the Company's revolving credit facility (the "Revolving
Credit Facility") and the Senior Notes restrict the ability of the Company to
pay dividends on the Common Stock. See "Price Range of Common Stock and Dividend
Policy."
11
<PAGE> 13
BLANK CHECK PREFERRED STOCK
The Company's Articles of Incorporation allow the Board of Directors to
issue up to 5.0 million shares of Preferred Stock and to fix the rights,
privileges and preferences of such shares without any further vote or action by
the stockholders. The rights of the holders of Common Stock will be subject to,
and may be adversely affected by, the rights of the holders of any Preferred
Stock that may be issued in the future. While the Company has no present
intention to issue shares of Preferred Stock, any such issuance could be used to
discourage, delay or make more difficult a change in control of the Company. See
"Description of Capital Stock -- Preferred Stock."
FORWARD-LOOKING STATEMENTS
Certain of the matters discussed under the captions "Prospectus Summary,"
"Risk Factors," "Unaudited Pro Forma Financial Information," "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Business" and elsewhere in this Prospectus may constitute "forward-looking"
statements for purposes of the Securities Act and the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and as such may involve known and unknown
risks, uncertainties and other factors that may cause the actual results,
performance or achievements of the Company to be materially different from the
future results, performance or achievements expressed or implied by such
forward-looking statements. Important factors that could cause the actual
results, performance or achievements of the Company to differ materially from
the Company's expectations are disclosed in this Prospectus ("Cautionary
Statements"), including, without limitation, those statements included under
"Risk Factors" and otherwise herein. All written and oral forward-looking
statements attributable to the Company are expressly qualified in their entirety
by the Cautionary Statements.
12
<PAGE> 14
USE OF PROCEEDS
The net proceeds from the sale of the 2,000,000 shares of Common Stock
offered hereby by the Company are estimated to be approximately $37.7 million
(assuming a public offering price of $20.25 per share, the last reported sale
price of the Common Stock on the Nasdaq National Market on October 22, 1997),
after deducting underwriting discounts and commissions and estimated expenses of
the Offering. All of the net proceeds to the Company, together with available
cash and borrowings under the Revolving Credit Facility, will be used to retire
the Company's 12% Senior Subordinated Notes due February 1, 2003 (the
"Subordinated Notes"). The Company will not receive any proceeds from the sale
of Common Stock offered hereby by the Selling Stockholders.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Company's Common Stock is traded on the Nasdaq National Market under
the symbol "HAUL." The following table sets forth for the periods indicated the
high and low sales prices of the Common Stock on the Nasdaq National Market.
<TABLE>
<CAPTION>
PRICE RANGE
---------------
HIGH LOW
------ ------
<S> <C> <C>
1995
First Quarter............................................... $12.50 $ 9.75
Second Quarter.............................................. 11.00 8.50
Third Quarter............................................... 11.75 7.25
Fourth Quarter.............................................. 10.00 7.37
1996
First Quarter............................................... $ 9.87 $ 7.75
Second Quarter.............................................. 10.50 7.75
Third Quarter............................................... 10.62 8.37
Fourth Quarter.............................................. 10.50 7.00
1997
First Quarter............................................... $ 8.25 $ 6.25
Second Quarter.............................................. 11.12 5.50
Third Quarter............................................... 23.25 11.25
Fourth Quarter (through October 21)......................... 23.00 18.37
</TABLE>
On October 22, 1997, the last reported sale price of the Common Stock on
the Nasdaq National Market was $20.25. As of October 22, 1997, there were 70
holders of record of the Common Stock.
The Company has not paid dividends on the Common Stock prior to the date of
this Prospectus. The determination of the amount of future cash dividends, if
any, to be declared and paid will depend upon, among other things, the Company's
financial condition, funds from operations, the level of its capital
expenditures and its future business prospects. The Revolving Credit Facility
and the Senior Notes contain certain limitations on the payment of dividends.
13
<PAGE> 15
CAPITALIZATION
The following table sets forth the capitalization of the Company at June
30, 1997 on an actual basis, on a pro forma basis to give effect to the Ryder
Acquisition and the Senior Note Offering, and as further adjusted to give effect
to the Offering (assuming a public offering price of $20.25 per share, the last
reported sale price of the Common Stock on the Nasdaq National Market on October
22, 1997). This table should be read in conjunction with "Selected Financial
Data," "Unaudited Pro Forma Financial Information," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Consolidated
Financial Statements, including the notes thereto, of the Company included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1997
--------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt (including current maturities):
Revolving credit facility(1)........................ $ 59,737 $ 35,487 $ 42,461
8 5/8% Senior Notes due 2007........................ -- 150,000 150,000
12% Senior Subordinated Notes due 2003.............. 40,000 40,000 --
Other debt and capital lease obligations............ 5,497 6,302 6,302
-------- -------- --------
Total long-term debt........................ 105,234 231,789 198,763
-------- -------- --------
Stockholders' equity:.................................
Preferred stock, no par value; 5,000,000 shares
authorized, no shares issued and outstanding..... -- -- --
Common stock, no par value per share; 20,000,000
shares authorized, 7,810,000 shares issued and
outstanding actual and pro forma, 9,810,000
shares issued and outstanding pro forma as
adjusted......................................... -- -- --
Additional paid-in capital.......................... 43,657 43,657 81,357
Retained earnings................................... 18,186 18,186(2) 12,731(2)
Foreign currency translation adjustment, net of
tax.............................................. (1,074) (1,074) (1,074)
Unearned compensation............................... (612) (612) (612)
-------- -------- --------
Total stockholders' equity.................. 60,157 60,157 92,402
-------- -------- --------
Total capitalization........................ $165,391 $291,946 $291,165
======== ======== ========
</TABLE>
- ---------------
(1) The Company entered into the Revolving Credit Facility on September 30,
1997, which provides for $230.0 million of total availability. As of
June 30, 1997, after giving pro forma effect to the Offering, the Ryder
Acquisition and the Senior Note Offering, the Company would have had
approximately $68.3 million of letters of credit outstanding and
approximately $126.3 million of undrawn availability under the Revolving
Credit Facility.
(2) Excludes an after-tax charge of approximately $5.2 million that the Company
will record to write down Company Rigs and terminal facilities that will be
idled or closed as a result of the Ryder Acquisition.
14
<PAGE> 16
SELECTED FINANCIAL DATA
The selected financial data presented below as of and for each of the five
years in the period ended December 31, 1996 are derived from the Company's
Consolidated Financial Statements which have been audited by Arthur Andersen
LLP, independent public accountants. The selected financial data presented below
as of and for the six months ended June 30, 1996 and 1997 are derived from the
Company's unaudited Consolidated Financial Statements, which in the opinion of
management include all adjustments (consisting only of normal recurring
accruals) necessary to fairly present the information set forth therein. The
results for the six months ended June 30, 1997 are not necessarily indicative of
the results that may be expected for the entire year ending December 31, 1997.
The selected financial data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements, including the notes thereto, included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------------- --------------------
1992 1993 1994(1) 1995 1996 1996 1997
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................... $ 212,655 $ 241,981 $ 297,236 $ 381,464 $ 392,547 $ 200,565 $ 208,969
--------- --------- --------- --------- --------- --------- ---------
Operating expenses:
Salaries, wages and fringe
benefits....................... 116,901 134,054 157,979 195,952 204,838 105,315 109,634
Operating supplies and expenses.. 40,154 44,090 51,532 62,179 62,880 31,526 32,563
Purchased transportation......... 2,002 3,223 9,486 32,084 34,533 17,666 19,170
Insurance and claims............. 9,553 9,745 12,043 16,022 16,849 8,039 8,098
Operating taxes and licenses..... 10,084 12,223 14,301 16,564 16,122 8,381 8,190
Depreciation and amortization.... 8,878 11,683 16,314 25,431 26,425 12,931 13,786
Rent expense..................... 6,051 3,485 3,214 5,354 4,975 2,481 2,470
Communications and utilities..... 1,405 1,456 1,855 3,435 3,111 1,740 1,534
Other operating expenses......... 1,467 1,662 1,781 3,522 4,219 1,431 2,074
--------- --------- --------- --------- --------- --------- ---------
Total operating expenses... 196,495 221,621 268,505 360,543 373,952 189,510 197,519
--------- --------- --------- --------- --------- --------- ---------
Operating income................... 16,160 20,360 28,731 20,921 18,595 11,055 11,450
Minority interest in earnings of
consolidated subsidiary.......... (1,034) (858) -- -- -- -- --
Interest expense................... 6,963 6,042 5,462 11,260 10,720 5,396 5,408
Interest income.................... 61 313 312 707 603 303 357
Other expense, net................. 169 49 -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Income before income taxes,
extraordinary item and cumulative
effect of accounting change...... 8,055 13,724 23,581 10,368 8,478 5,962 6,399
Income tax provision(2)............ 3,249 4,183 9,393 4,222 3,557 2,504 2,688
--------- --------- --------- --------- --------- --------- ---------
Income before extraordinary item
and cumulative effect of
accounting change................ $ 4,806 $ 9,541 $ 14,188 $ 6,146 $ 4,921 $ 3,458 $ 3,711
========= ========= ========= ========= ========= ========= =========
Income per share before
extraordinary item and cumulative
effect of accounting change...... $ 1.07 $ 1.78 $ 1.84 $ 0.80 $ 0.64 $ 0.45 $ 0.48
========= ========= ========= ========= ========= ========= =========
Weighted average common shares
outstanding...................... 4,500,000 5,347,000 7,725,000 7,725,000 7,725,000 7,725,000 7,725,000
========= ========= ========= ========= ========= ========= =========
OTHER DATA:
EBITDA(3).......................... $ 25,038 $ 32,043 $ 45,045 $ 46,352 $ 45,020 $ 23,986 $ 25,236
Capital expenditures:
New Rigs and modifications....... 11,680 33,848 23,337 11,716 17,092 12,053 5,811
Maintenance and other............ 1,811 2,149 7,208 6,494 8,880 2,323 1,099
--------- --------- --------- --------- --------- --------- ---------
Total...................... $ 13,491 $ 35,997 $ 30,545 $ 18,210 $ 25,972 $ 14,376 $ 6,910
========= ========= ========= ========= ========= ========= =========
BALANCE SHEET DATA (AT END OF
PERIOD):
Total assets....................... $ 89,722 $ 119,897 $ 218,806 $ 214,686 $ 211,083 $ 216,903 $ 228,694
Total debt......................... 48,023 44,120 122,894 111,002 95,983 103,259 105,234
Stockholders' equity (deficit)..... (5,944) 35,759 45,835 53,022 56,709 55,563 60,157
</TABLE>
- ---------------
(1) Includes the results of Auto Haulaway commencing with its acquisition by the
Company on October 31, 1994.
(2) Prior to the Company's initial public offering in 1993, its predecessors
were not subject to federal or most state income taxes. Accordingly, the
Company's consolidated financial statements for the periods prior to the
initial public offering include a pro forma provision for income taxes.
(3) Represents income before interest expense, interest income, income tax
provision, depreciation and amortization and extraordinary item. EBITDA is
presented because it provides useful information regarding a company's
ability to service and/or incur debt. EBITDA should not be considered in
isolation from or as a substitute for net income, cash flows from operating
activities and other consolidated income or cash flow statement data
prepared in accordance with generally accepted accounting principles or as a
measure of profitability or liquidity.
15
<PAGE> 17
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information has been derived
from the historical financial statements of the Company and Ryder, and gives pro
forma effect to the Offering (assuming a public offering price of $20.25 per
share, the last reported sale price of the Common Stock on the Nasdaq National
Market on October 22, 1997), the Ryder Acquisition and the Senior Note Offering
as if they had occurred as of January 1, 1996 with respect to the unaudited
condensed pro forma statements of operations and as of June 30, 1997 with
respect to the unaudited condensed pro forma balance sheet.
The unaudited pro forma financial information does not purport to represent
what the Company's results of operations actually would have been if each of
such transactions had occurred as of the dates indicated or will be for any
future periods. The unaudited pro forma financial information is based upon
assumptions believed appropriate by management of the Company and does not
reflect all potential cost savings or improvements in revenues that the Company
believes could be realized as a result of the Ryder Acquisition. However, there
can be no assurance that any of these anticipated savings can be achieved or
that the effects of any such savings will not be offset by unexpected,
unforeseen increases in other costs. The unaudited pro forma financial
information should be read in conjunction with "Selected Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements, including the notes
thereto, of the Company and Ryder included elsewhere in this Prospectus.
The Ryder Acquisition was accounted for under the purchase method of
accounting. The total purchase price for the Ryder Acquisition has been
allocated to the assets and liabilities acquired based upon their relative fair
values at the closing of the Ryder Acquisition, based upon valuation and other
studies which are not yet complete. The allocation of the purchase price
reflected herein is subject to revision when additional information from the
valuations and studies become available. However, the Company does not expect
that the effects of the final allocation will differ materially from those set
forth herein.
16
<PAGE> 18
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
<TABLE>
<CAPTION>
ACQUISITION
AGREEMENT ADJUSTED TRANSACTIONS PRO FORMA
RYDER(1) ADJUSTMENTS RYDER ALLIED ADJUSTMENTS COMBINED
-------- ----------- -------- -------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
REVENUES....................... $315,156 $(2,663)(2) $315,696 $208,969 $ -- $524,665
3,203 (3)
-------- ------- -------- -------- ------- --------
OPERATING EXPENSES
Depreciation and
amortization............... 19,818 (190)(2) 19,636 13,786 108 (5) 33,530
8 (3)
Other operating expenses..... 285,497 (2,637)(2) 286,013 183,733 (6,340)(6) 463,406
3,153 (3)
-------- ------- -------- -------- ------- --------
Total operating
expenses............ 305,315 334 305,649 197,519 (6,232) 496,936
-------- ------- -------- -------- ------- --------
OPERATING INCOME............... 9,841 206 10,047 11,450 6,232 27,729
-------- ------- -------- -------- ------- --------
OTHER INCOME (EXPENSE)
Interest expense............. (334) (1)(3) (335) (5,408) (5,827)(7) (9,370)
2,200 (8)
Interest income.............. 1,228 (137)(2) 1,091 357 -- 1,448
Other income (expense), net.. 738 14 (2) 752 -- -- 752
-------- ------- -------- -------- ------- --------
1,632 (124) 1,508 (5,051) (3,627) (7,170)
-------- ------- -------- -------- ------- --------
INCOME BEFORE INCOME TAXES..... 11,473 82 11,555 6,399 2,605 20,559
INCOME TAX PROVISION........... 3,818 724 (4) 4,542 2,688 1,890 (4) 9,120
-------- ------- -------- -------- ------- --------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM........... $ 7,655 $ (642) $ 7,013 $ 3,711 $ 715 $ 11,439 (9)
======== ======= ======== ======== ======= ========
INCOME PER SHARE BEFORE
EXTRAORDINARY ITEM........... $ 0.48 $ 1.18
======== ========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING.................. 7,725 2,000 (10) 9,725
======== ======= ========
</TABLE>
See accompanying notes to unaudited pro forma financial information.
17
<PAGE> 19
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
<TABLE>
<CAPTION>
ACQUISITION
AGREEMENT ADJUSTED TRANSACTIONS PRO FORMA
RYDER(1) ADJUSTMENTS RYDER ALLIED ADJUSTMENTS COMBINED
-------- ----------- -------- -------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
REVENUES................. $583,292 $(15,178)(2) $568,114 $392,547 $ -- $960,661
OPERATING EXPENSES
Depreciation and
amortization......... 38,838 (718)(2) 38,120 26,425 115(5) 64,660
Restructuring charge... 18,328 (7,023)(2) 11,305 -- -- 11,305
Other operating
expenses............. 543,315 (25,216)(2) 518,099 347,527 (12,678)(6) 852,948
-------- -------- -------- -------- -------- --------
Total operating
expenses...... 600,481 (32,957) 567,524 373,952 (12,563) 928,913
-------- -------- -------- -------- -------- --------
OPERATING (LOSS)
INCOME................. (17,189) 17,779 590 18,595 12,563 31,748
-------- -------- -------- -------- -------- --------
OTHER INCOME (EXPENSE)
Interest expense....... (866) -- (866) (10,720) (11,702)(7) (18,889)
4,399(8)
Interest income........ 895 (282)(2) 613 603 -- 1,216
Other income (expense),
net.................. 2,470 2(2) 2,472 -- -- 2,472
-------- -------- -------- -------- -------- --------
2,499 (280) 2,219 (10,117) (7,303) (15,201)
-------- -------- -------- -------- -------- --------
(LOSS) INCOME BEFORE
INCOME TAXES AND
EXTRAORDINARY ITEM..... (14,690) 17,499 2,809 8,478 5,260 16,547
INCOME TAX (BENEFIT)
PROVISION.............. (1,256) 3,837(4) 2,581 3,557 2,051(4) 8,189
-------- -------- -------- -------- -------- --------
(LOSS) INCOME BEFORE
EXTRAORDINARY ITEM..... $(13,434) $ 13,662 $ 228 $ 4,921 $ 3,209 $ 8,358(9)
======== ======== ======== ======== ======== ========
INCOME PER SHARE BEFORE
EXTRAORDINARY ITEM..... $ 0.64 $ 0.86
======== ========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING..... 7,725 2,000(10) 9,725
======== ======== ========
</TABLE>
See accompanying notes to unaudited pro forma financial information.
18
<PAGE> 20
PRO FORMA CONSOLIDATED BALANCE SHEET
(UNAUDITED)
AS OF JUNE 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
ACQUISITION
AGREEMENT ADJUSTED TRANSACTIONS PRO FORMA
RYDER(11) ADJUSTMENTS RYDER ALLIED ADJUSTMENTS COMBINED
--------- ----------- -------- -------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents........ $ 6,047 $ 170(12) $ 1,217 $ 4,409 $ 37,700(19) $ --
(5,000)(13) 6,974(20)
(50,300)(21)
Short-term investments........... -- -- -- 8,821 -- 8,821
Receivables, net of allowance for
doubtful accounts.............. 46,396 650(12) 47,046 28,325 -- 75,371
Deferred income taxes............ 6,509 (293)(13) 11,608 -- -- 11,608
4,433(14)
959(15)
Other current assets............. 17,552 (7,861)(13) 9,691 18,469 -- 28,160
-------- -------- -------- -------- --------- --------
Total current assets........... 76,504 (6,942) 69,562 60,024 (5,626) 123,960
-------- -------- -------- -------- --------- --------
PROPERTY AND EQUIPMENT, net........ 161,299 46(12) 159,122 126,364 14,500(22) 299,986
(2,223)(13)
-------- -------- -------- -------- --------- --------
OTHER ASSETS
Goodwill, net.................... 42,550 -- 42,550 33,800 14,055(23) 90,405
Other............................ 10,862 (4,695)(13) 6,167 8,506 5,350(24) 19,380
(643)(25)
-------- -------- -------- -------- --------- --------
Total other assets......... 53,412 (4,695) 48,717 42,306 18,762 109,785
-------- -------- -------- -------- --------- --------
Total assets............... $291,215 $(13,814) $277,401 $228,694 $ 27,636 $533,731
======== ======== ======== ======== ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term
debt........................... $ -- $ -- $ -- $ 8,248 $ -- $ 8,248
Trade accounts payable........... 21,246 710(12) 21,956 12,910 -- 34,866
Accrued liabilities.............. 57,657 50(12) 69,845 37,433 (2,000)(21) 114,872
(3,329)(13) (3,488)(26)
12,909(16) 13,082(27)
2,558(17)
-------- -------- -------- -------- --------- --------
Total current
liabilities.............. 78,903 12,898 91,801 58,591 7,594 157,986
-------- -------- -------- -------- --------- --------
LONG-TERM DEBT AND CAPITAL LEASE
OBLIGATIONS, less current
maturities....................... 805 -- 805 96,986 6,974(20) 190,515
(40,000)(21)
150,000(28)
(24,250)(29)
DEFERRED INCOME TAXES.............. 26,300 765(13) 9,274 8,700 5,655(30) 23,629
(17,791)(14)
OTHER LONG-TERM LIABILITIES........ 20,615 79(12) 65,665 4,260 (726)(31) 69,199
(1,419)(13)
46,390(16)
STOCKHOLDERS' EQUITY............... 164,592 (54,736)(18) 109,856 60,157 37,700(19) 92,402(33)
(109,856)(31)
(5,455)(32)
-------- -------- -------- -------- --------- --------
Total liabilities and
stockholders' equity..... $291,215 $(13,814) $277,401 $228,694 $ 27,636 $533,731
======== ======== ======== ======== ========= ========
</TABLE>
See accompanying notes to unaudited pro forma financial information.
19
<PAGE> 21
ALLIED HOLDINGS, INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
(1) Represents the historical results of operations of Ryder Automotive
Carrier Services, Inc. ("RACS") for the period indicated.
(2) Elimination of the operations of RACS not included in the Ryder
Acquisition.
(3) Addition of the operations of RC Management Corp. ("RCMC"), which was
acquired as part of the Ryder Acquisition. RCMC began operations in January
1997.
(4) Reflects the income tax effect of the adjustments.
(5) Reflects the net effect of the change in goodwill amortization expense
related to the Ryder Acquisition, as follows:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED
1996 JUNE 30, 1997
------------ -------------
<S> <C> <C>
(a) Increased goodwill amortization expense
based upon the preliminary purchase price
allocation of the Ryder Acquisition, using
the straight-line method over a 40-year
life....................................... $ 1,415 $ 708
(b) Elimination of goodwill amortization
expense from Ryder's operations............ (1,300) (600)
------- -----
$ 115 $ 108
======= =====
</TABLE>
(6) Represents elimination of the following costs resulting from the Ryder
Acquisition:
(a) Salaries and wages, rent expenses and other operating expenses to
be eliminated as a result of closing duplicate terminals and
offices; and
(b) Management and other fees allocated to Ryder by Ryder System which
will not be incurred by Ryder under the Company's ownership.
(7) Reflects interest expense relating to the Senior Notes, elimination of
interest expense on amounts under the revolving credit facility that were repaid
with a portion of the proceeds of the Senior Note Offering, and amortization of
deferred debt costs incurred in connection with the issuance of the Senior
Notes.
(8) Reflects the net reduction in interest expense resulting from the
retirement of the Subordinated Notes, as follows:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED
1996 JUNE 30, 1997
------------ -------------
<S> <C> <C>
(a) Interest expense and amortization of debt
issuance costs related to the Subordinated
Notes...................................... $4,915 $2,458
(b) Interest expense on additional borrowings
under Revolving Credit Facility............ (516) (258)
------ ------
$4,399 $2,200
====== ======
</TABLE>
(9) Excludes a $5.5 million after-tax extraordinary charge that the Company
will record as a result of the retirement of the Subordinated Notes.
(10) Reflects additional shares to be issued by the Company in the
Offering.
20
<PAGE> 22
ALLIED HOLDINGS, INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION -- (CONTINUED)
(11) Represents the historical assets and liabilities of RACS as of June
30, 1997.
(12) Addition of the assets and liabilities of RCMC, which was acquired as
part of the Ryder Acquisition.
(13) Elimination of the assets and liabilities of RACS not included in the
Ryder Acquisition.
(14) Deferred income tax assets and liabilities related to the assumption
by Ryder of certain insurance liabilities from Ryder System as part of the Ryder
Acquisition (see note 16).
(15) Effect on deferred income taxes related to severance liability (see
note 17).
(16) Reflects the transfer to Ryder of certain insurance liabilities,
including workers' compensation, post employment benefits other than pensions,
and general liability, previously maintained on the books of Ryder System.
(17) Severance liability related to termination of certain Ryder personnel
in connection with the Ryder Acquisition.
(18) Effect on stockholders' equity of pro forma adjustments to assets and
liabilities as follows:
<TABLE>
<S> <C>
(a) Insurance liabilities assumed from Ryder System, net of
deferred taxes.......................................... $(37,075)
(b) Severance liability assumed from Ryder System, net of
deferred taxes.......................................... (1,599)
(c) Assets and liabilities of RACS not acquired............. (16,089)
(d) Assets and liabilities of RCMC acquired................. 27
--------
Total effect on stockholders' equity.............. $(54,736)
========
</TABLE>
(19) Reflects the net proceeds to the Company from the Offering.
(20) Reflects additional borrowings under the Revolving Credit Facility.
(21) Reflects the retirement of the Subordinated Notes as follows:
<TABLE>
<S> <C> <C>
(a) Principal of Subordinated Notes............................ $(40,000)
(b) Accrued interest........................................... (2,000)
(c) Prepayment premium......................................... (8,300)
--------
$(50,300)
========
</TABLE>
(22) Write-up of Ryder property and equipment to fair market value.
(23) Adjustment to goodwill reflects:
<TABLE>
<S> <C> <C>
(a) Addition of goodwill related to the Ryder Acquisition...... $ 56,605
(b) Elimination of goodwill recorded by Ryder.................. (42,550)
--------
Total effect on goodwill................................... $ 14,055
========
</TABLE>
(24) Estimated Senior Note Offering expenses to be deferred and amortized
over the life of the Senior Notes.
(25) Elimination of deferred financing costs relating to the Subordinated
Notes.
(26) Effect on accrued income taxes of the prepayment premium and
elimination of the deferred financing costs relating to the Subordinated Notes.
21
<PAGE> 23
ALLIED HOLDINGS, INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION -- (CONTINUED)
(27) Estimated additional liabilities incurred in connection with the Ryder
Acquisition, including severance and acquisition costs.
(28) Reflects the issuance of the Senior Notes.
(29) Repayment of amounts outstanding under the revolving credit facility
with a portion of the proceeds of the Senior Note Offering.
(30) Deferred income taxes, recorded at 39%, related to the write-up of
Ryder property and equipment to fair market value.
(31) Elimination of Ryder advances to affiliates and stockholders' equity.
(32) Effect on equity of the elimination of deferred financing costs and
prepayment premium on the Subordinated Notes, net of deferred income tax
benefits.
(33) Excludes an after-tax charge of approximately $5.2 million the Company
will record to write down Company Rigs and terminal facilities that will be
idled or closed as a result of the Ryder Acquisition.
22
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
The Company provides automobile and light truck transportation and
logistics services to automotive manufacturers and retailers. The Company's
primary business is the transportation of new automobiles and light trucks
principally from manufacturing plants and rail heads to dealerships in trip
lengths generally under 200 miles.
The Company receives revenues from the transportation of vehicles on a per
unit basis. Revenue is comprised of a fixed rate per unit and a variable rate on
a per mile transported basis to account for differences in the length of the
haul. Accordingly, both the number of units transported, as well as the distance
vehicles are transported, are the primary components of revenue. The Company's
cost structure is highly variable with salaries, wages and fringe benefits
comprising greater than 50% of total revenue.
In October 1994, the Company acquired Auto Haulaway, the largest motor
carrier of new automobiles and light trucks in Canada. Accordingly, since the
acquisition of Auto Haulaway, the Company has derived approximately 30% of its
revenues in Canada with the balance in the United States. The following table
summarizes historic new vehicle production and sales in the United States and
Canada, the primary drivers of the Company's revenues.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------- ---------------
1994 1995 1996 1996 1997
----- ----- ----- ----- -----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
NEW VEHICLE PRODUCTION
United States..................................... 11.9 11.6 11.5 6.1 6.1
Percent increase (decrease) over prior year....... 12.6% (2.3)% (0.9)% -- 0.3%
Canada............................................ 2.3 2.4 2.4 1.3 1.4
Percent increase over prior year.................. 2.8% 3.6% 0.0% -- 8.7%
NEW VEHICLE SALES
United States..................................... 15.0 14.7 15.1 7.8 7.6
Percent increase (decrease) over prior year....... 8.3% (2.2)% 2.5% -- (2.0)%
Canada............................................ 1.2 1.1 1.2 0.6 0.7
Percent increase (decrease) over prior year....... 5.3% (7.6)% 3.5% -- 16.2%
</TABLE>
- ---------------
Source: DRI/McGraw-Hill.
Since 1996, the Company has made a significant commitment to developing its
logistics business in response to its customers' needs for integrated automotive
distribution services beyond the traditional movement of vehicles. Over the past
two years, the Company has incurred significant start-up costs to develop its
logistic business which is operated through a subsidiary, Axis Group, Inc.
("Axis"). Management believes these start-up costs are largely complete.
During 1995, the Company's operations were impacted by the lower sales of
automobiles and light trucks, particularly in Canada, and lower new vehicle
production in the United States. While new vehicle sales improved in the United
States and Canada in 1996, the Company's operations were negatively impacted by
decreased new vehicle production in the United States and by an increase in fuel
costs which impacted operating earnings by approximately $2.5 million, as well
as by the start-up costs of Axis which totaled approximately $3.0 million in
1996. In the first half of 1997, the strength of the Canadian market offset both
slight weakness in United States vehicle sales and approximately $2.4 million of
continued start-up losses of Axis.
Capital expenditures primarily consist of expenditures for the acquisition
and maintenance of Rigs, as well as proprietary information systems. Capital
expenditures for Rigs are utilized to
23
<PAGE> 25
maintain the Company's fleet and to minimize operating costs. Since 1994, the
Company has spent approximately $52.2 million to purchase new 75- foot Rigs and
to modify existing Rigs primarily to lengthen them to 75 feet, the maximum
length allowed by most governmental regulations, in order to increase fleet
efficiency. The Company's proprietary information systems are designed to
support the Company's operations by providing timely management information and
sophisticated data exchange with the Company's customers. Since 1994, the
Company has spent $5.4 million to enhance the capability of its proprietary
information systems. The Company's information systems also facilitate the
efficient integration of new operations into the Company's infrastructure,
including those of Auto Haulaway and Ryder.
The Company believes that the Ryder Acquisition will provide the Company
with significant opportunities for cost reduction. The Company expects to
achieve cost savings by: (i) eliminating duplicative administrative functions;
(ii) integrating Ryder's operations into its proprietary information systems;
and (iii) consolidating certain terminal locations.
RECENT DEVELOPMENTS
Based upon preliminary unaudited financial information, revenues for the
third quarter of 1997 were $91.4 million, compared to revenues of $87.6 million
for the third quarter of 1996, an increase of 4%. Operating income for the third
quarter of 1997 was $1.8 million (excluding a one-time charge related to the
Ryder Acquisition) compared to $1.0 million for the third quarter of 1996, an
increase of 80%. The Company believes that the improved operating results were
primarily due to increases in new vehicle production and sales, especially in
Canada, which led to an increase of approximately 3% in the number of vehicles
delivered by the Company. Excluding the one-time charge relating to the Ryder
Acquisition, the Company experienced a loss of $0.5 million during the third
quarter of 1997, versus a loss of $0.9 million during the third quarter of 1996,
or $0.06 per share in 1997, versus $0.12 per share in 1996.
Based upon preliminary unaudited financial information, during the third
quarter of 1997, Ryder had revenues of $141.9 million, compared to revenues of
$136.6 million in the third quarter of 1996, an increase of 4%, and had pre-tax
earnings of $5.2 million in the third quarter of 1997, compared to a pre-tax
loss of $4.5 million during the third quarter of 1996. The 1997 results include
$2.8 million of unusual or non-recurring gains. The Company believes that the
improvement in earnings is primarily due to a 6% increase in vehicle deliveries
together with operating efficiency gains resulting from a restructuring that
began in 1996 in order to improve operating performance.
24
<PAGE> 26
RESULTS OF OPERATIONS
The following table sets forth the Company's results of operations as a
percentage of revenues for the periods indicated:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
----------------------- --------------
1994 1995 1996 1996 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Revenues.............................. 100.0% 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Salaries, wages and fringe
benefits......................... 53.1 51.4 52.2 52.5 52.5
Operating supplies and expenses..... 17.3 16.3 16.0 15.7 15.6
Purchased transportation............ 3.2 8.4 8.8 8.8 9.2
Insurance and claims................ 4.1 4.2 4.3 4.0 3.9
Operating taxes and licenses........ 4.8 4.3 4.1 4.2 3.9
Depreciation and amortization....... 5.5 6.7 6.7 6.5 6.6
Rent expense........................ 1.1 1.4 1.3 1.2 1.2
Communications and utilities........ 0.6 0.9 0.8 0.9 0.8
Other operating expenses............ 0.6 0.9 1.1 0.7 0.8
----- ----- ----- ----- -----
Total operating expenses.... 90.3 94.5 95.3 94.5 94.5
----- ----- ----- ----- -----
Operating income...................... 9.7 5.5 4.7 5.5 5.5
----- ----- ----- ----- -----
Other income(expense):
Interest expense.................... (1.8) (3.0) (2.8) (2.7) (2.6)
Interest income..................... 0.1 0.2 0.2 0.2 0.2
----- ----- ----- ----- -----
Total other income
(expense)................. (1.7) (2.8) (2.6) (2.5) (2.4)
----- ----- ----- ----- -----
Income before income taxes and
extraordinary item.................. 8.0 2.7 2.1 3.0 3.1
Income tax provision.................. (3.2) (1.1) (0.9) (1.3) (1.3)
----- ----- ----- ----- -----
Income before extraordinary item...... 4.8% 1.6% 1.2% 1.7% 1.8%
===== ===== ===== ===== =====
</TABLE>
Six months ended June 30, 1997 compared to six months ended June 30, 1996
Revenues were $209.0 million for the first six months of 1997 compared to
$200.6 million for the first six months of 1996, an increase of $8.4 million, or
4.2%. The increase in revenues was primarily due to an increase in the number of
vehicles the Company delivered together with an increase in the revenue
generated per vehicle delivered. The Company delivered approximately 2% more
vehicles during the first six months of 1997 than during the first six months of
1996. A 13% increase in vehicle deliveries in Canada due to increased Canadian
new vehicle production and sales more than offset a 4% decline in vehicle
deliveries in the United States. In addition, the revenue generated per vehicle
delivered for the first six months of 1997 increased approximately 2% from the
first six months of 1996 due to an increase in longer haul dealer deliveries.
The operating ratio (operating expenses as a percentage of revenues) for
the first six months of 1997 was 94.5%, the same as in the first six months of
1996. Additional operating income resulting from the increase in revenues was
offset by continued start-up losses of Axis.
Salaries, wages and fringe benefits were 52.5% of revenues in both the
first six months of 1997 and 1996. However, purchased transportation increased
from 8.8% of revenues for the first six months of 1996 to 9.2% of revenues
during the first six months of 1997 due to the increased use of owner-operators,
together with an increase in the vehicles which were delivered by other carriers
for the Company.
Operating taxes and licenses decreased from 4.2% of revenues during the
first six months of 1996 to 3.9% of revenues during the first six months of
1997. The decrease was primarily due to a decline in the operating taxes and
licenses the Company paid for its fleet of Rigs due to a decrease in the number
of active Rigs the Company operated.
25
<PAGE> 27
1996 Compared to 1995
Revenues were $392.6 million in 1996 compared to $381.5 million in 1995, an
increase of $11.1 million, or 2.9%. The increase in revenues was primarily due
to a 5% increase in the number of vehicles delivered, offset in part by a
decrease in the revenue generated per vehicle delivered due to an increase in
the percentage of shorter haul deliveries.
The operating ratio for 1996 was 95.3%, compared to 94.5% in 1995. The
increase was primarily due to planned startup costs for Axis, together with
increased fuel costs and an increase in the percentage of light trucks
transported by the Company, which led to lower load averages and increased
costs.
Salaries, wages and fringe benefits increased from 51.4% of revenues in
1995 to 52.2% of revenues in 1996. This change as a percent of revenues was
primarily due to the addition of payroll costs for Axis, increased costs
resulting from strikes at General Motors during March and October 1996 and the
severe winter weather during the first quarter of 1996.
Operating supplies and expenses as a percentage of revenues decreased from
16.3% in 1995 to 16.0% in 1996, despite a rise in diesel fuel prices. This
decrease is primarily due to an increase in the units delivered by
owner-operators combined with the use of newer, more efficient equipment which
has reduced the costs to operate the Company's Rigs and has increased fuel
efficiency. Owner-operators are responsible for all costs to operate their Rigs
and such costs are included in purchased transportation. In addition, the
Company implemented productivity and efficiency programs that reduced operating
expenses.
Purchased transportation increased from 8.4% of revenues in 1995 to 8.8% in
1996. This is mainly due to an increase in the number of units hauled by
owner-operators and by other carriers for the Company as part of an exchange
program to improve the backhaul ratio.
Interest expense for 1996 decreased to $10.7 million compared to $11.3
million in 1995. This decrease is primarily the result of reductions in
long-term debt during the year due to debt repayments.
The effective tax rate increased from approximately 41% of pre-tax income
in 1995 to approximately 42% of pre-tax income in 1996. This increase was due to
higher state taxes.
1995 Compared to 1994
Revenues were $381.5 million in 1995 compared to $297.2 million in 1994, an
increase of $84.3 million, or 28.4%. The increase in revenues was primarily
attributable to the acquisition of Auto Haulaway which was completed October 31,
1994. Auto Haulaway contributed $123.4 million of revenues in 1995. The
additional revenues gained from the acquisition of Auto Haulaway were offset in
part by decreased revenues from the Company's U.S. operations due to a decrease
in vehicles delivered arising from a weaker U.S. auto market compared to 1994.
The operating ratio for 1995 was 94.5%, compared to 90.3% in 1994. The
increase was primarily due to decreases in vehicles delivered because of
decreases in new vehicle production and sales. U.S. car and light truck sales
for 1995 decreased approximately 2% from 1994 and Canada's car and light truck
sales were approximately 8% below that of 1994. In addition, 1995 new vehicle
production in Canada for Auto Haulaway's largest customer decreased
approximately 22% from 1994, mainly due to model changeovers. New vehicle
production in the U.S. and Canada during 1995 was impacted by numerous model
changeovers as well as slower than expected ramp-up of production after the
model changeovers at two of the Company's primary customers. As a result of the
decline in new vehicle production and sales, the number of vehicles delivered by
Auto Haulaway during 1995 decreased 13% compared to 1994.
Salaries, wages and fringe benefits decreased from 53.1% of revenues in
1994 to 51.4% of revenues in 1995. This decrease as a percentage of revenue was
primarily because Auto Haulaway
26
<PAGE> 28
utilizes approximately 200 owner-operators. Owner-operators are either paid a
percentage of the revenues they generate or receive normal driver pay plus a
truck allowance, and amounts earned by the owner-operators are included as
purchased transportation expense. Prior to the acquisition of Auto Haulaway, all
of the Company's drivers were employees of the Company.
Operating supplies and expenses as a percentage of revenues decreased from
17.3% in 1994 to 16.3% in 1995. This decrease is primarily attributable to the
inclusion of a full year of Auto Haulaway's operating results as Auto Haulaway's
owner-operators are responsible for all costs to operate their Rigs, so the
operating supplies and expenses related to the vehicles delivered by the
owner-operator are greatly reduced.
Purchased transportation increased from 3.2% of revenues in 1994 to 8.4% in
1995. As discussed above, this increase is the result of Auto Haulaway utilizing
owner-operators to deliver vehicles.
Depreciation and amortization expense increased from 5.5% of revenues in
1994 to 6.7% of revenues in 1995 mainly due to the acquisition of additional
Rigs together with the additional goodwill amortization resulting from the
acquisition of Auto Haulaway.
Interest expense for 1995 increased to $11.3 million compared to $5.5
million in 1994. This increase was due to the increase in long-term debt
resulting from the acquisition of Auto Haulaway and due to a rise in interest
rates.
The effective tax rate increased from approximately 40% of pre-tax income
in 1994 to approximately 41% of pre-tax income in 1995. This increase was due to
higher effective tax rates in Canada.
LIQUIDITY AND CAPITAL RESOURCES
The Company's sources of liquidity are funds provided by operations and
borrowings under the Revolving Credit Facility. The Company's liquidity needs
are for the acquisition and maintenance of Rigs and terminals, the payment of
operating expenses and the payment of interest on and repayment of long-term
debt.
Net cash provided by operating activities totaled $30.1 million for 1995,
$31.1 million for 1996, and $14.2 million for the six months ended June 30,
1997. The increase in cash flows from operations during 1996 was mainly due to
changes in working capital. Net cash used in investing activities totaled $18.0
million for 1995, $24.5 million for 1996, and $21.0 million for the six months
ended June 30, 1997. The increase during 1996 was primarily due to an increase
in the number of new Rigs that were acquired, modifications of existing
equipment, and renovations and additions to terminal and maintenance facilities.
The increase in cash used in investing activities during the first six months of
1997 is due to the acquisition of Kar-Tainer for approximately $13.1 million.
Net cash used in financing activities was $12.8 million for 1995 and $15.7
million during 1996, and $9.3 million was provided by financing activities for
the six months ended June 30, 1997. These amounts include repayments of
long-term debt of $12.0 million in 1995 and $57.7 million in 1996. The
acquisition of Kar-Tainer for approximately $13.1 million in April 1997 was
financed through borrowings of long-term debt. In February 1996, the Company
issued $40.0 million principal amount of Subordinated Notes, the proceeds of
which were used to repay long-term debt. The Subordinated Notes were issued to
ease restrictions and provide increased flexibility under the Company's prior
revolving credit facility.
The Company entered into the Revolving Credit Facility concurrent with the
closing of the Senior Note Offering. The Revolving Credit Facility allows the
Company to borrow up to $230.0 million under a revolving line of credit and a
five-year maturity. As of June 30, 1997, after giving pro forma effect to the
Offering, the Ryder Acquisition and the Senior Note Offering, the Company would
have had approximately $68.3 million of letters of credit outstanding and
approximately $126.3 million of undrawn availability under the Revolving Credit
Facility.
27
<PAGE> 29
The Company had $59.7 million of borrowings outstanding under its prior
revolving credit facility at June 30, 1997 bearing interest at a weighted
average interest rate of 7.5%. The Company entered into interest rate cap
agreements to cap a portion of the borrowings outstanding at June 30, 1997. Such
interest rate cap agreements are required under the terms of the Company's prior
credit facility and the Revolving Credit Facility.
SEASONALITY AND INFLATION
The Company generally experiences its highest revenues during the second
and fourth quarters of each calendar year due to the shipment of new models and
because the first and third quarters are impacted by manufacturing plant
downtime. During the past three years, inflation has not significantly affected
the Company's results of operations. The following table sets forth certain
operating data of the Company by quarter for each of 1996 and 1995 (in
millions):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
----------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Revenues.................................. $ 93.4 $107.2 $87.6 $104.4 $392.6
Operating income.......................... 3.1 8.0 1.0 6.5 18.6
Income (loss) before extraordinary item... 0.4 3.1 (0.9) 2.3 4.9
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
----------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Revenues.................................. $101.1 $102.3 $82.2 $ 95.9 $381.5
Operating income.......................... 6.3 7.6 0.6 6.4 20.9
Income (loss)............................. 2.1 2.9 (1.2) 2.4 6.2
</TABLE>
28
<PAGE> 30
BUSINESS
INDUSTRY OVERVIEW
The new vehicle transportation business involves the transportation of new
vehicles from manufacturing plants to new vehicle dealers. Vehicles are usually
shipped by rail from the manufacturing plant to rail ramps throughout the United
States where motor carriers, such as the Company, handle final delivery to
dealers. Vehicles destined for dealers within a radius of approximately 250
miles from the plant are usually shipped by truck directly to the dealer. In
each case, the rail or motor carrier generally is responsible for loading the
vehicles on railcars or trailers and for any damages incurred while the vehicles
are in the carrier's custody. Automobiles manufactured in Mexico and Canada are
usually shipped into the United States by rail and delivered from rail ramps to
dealers by truck. Automobiles manufactured in Europe and Asia for sale in the
United States are transported into the United States by ship and are delivered
directly to dealers from seaports by truck or shipped by rail to rail ramps and
delivered by trucks to dealers.
The core carrier consolidation trend of automotive manufacturers is to
reduce the number of suppliers with which they do business in an effort to
minimize their manufacturing and inventory costs, as well as to improve the
quality of their products. Manufacturers are increasingly demanding quality,
service and cost efficiencies from the companies that transport their vehicles.
For example, manufacturers require that their automotive carriers utilize
sophisticated information systems to reduce the costs of the manufacturer
through measures such as tracking the location of vehicles being transported,
thereby improving inventory management.
The remarketed vehicle transportation business involves the transportation
of used and previously leased vehicles and vehicles sold through the automotive
auction process. Vehicles are usually shipped from dealers or auctions to
reconditioning centers or other used car dealers. There has recently been
consolidation in the remarketed vehicle sector due to the rapid growth of the
used car superstores, such as AutoNation and DriversMart, which has increased
the volume of vehicles being delivered to the used car superstores and their
reconditioning centers.
THE COMPANY
The Company, founded in 1934, is the largest motor carrier of automobiles
and light trucks in North America. The Company offers a full range of automotive
delivery services including transporting new, used and off-lease vehicles to
dealers from plants, rail ramps, ports and auctions, and providing vehicle
rail-car loading and unloading services. The Company also provides logistics
solutions and other services to the new and used vehicle distribution market and
other segments of the automotive industry, including the rapidly growing used
car superstore market. The Company transported approximately 65% of the new
vehicles sold in the United States and Canada in 1996 and had 1996 revenues
nearly five times greater than the Company's closest competitor, after giving
pro forma effect to the Ryder Acquisition. For the year ended December 31, 1996,
after giving pro forma effect to the Ryder Acquisition, revenues and operating
income of the Company would have been approximately $960.7 million and $31.7
million, respectively.
The Company operates primarily in the short-haul segment of the automotive
transportation industry with an average length of haul of less than 200 miles.
The Company delivers new and used vehicles throughout the United States and
Canada for all of the major domestic and foreign manufacturers of automobiles
and light trucks and certain of the used car superstores. General Motors, Ford
and Chrysler represent the Company's largest customers, accounting for
approximately 35%, 26% and 14%, respectively, of 1996 pro forma revenues. The
Company also provides services to all of the major foreign manufacturers,
including Honda, Mazda, Nissan, Toyota, Isuzu, Volkswagen and Mitsubishi.
The Company also provides logistics solutions that complement its new and
used vehicle distribution services operations and is pursuing additional
opportunities in the growing remarketed
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<PAGE> 31
vehicle sector, which includes the delivery of used and previously leased
vehicles and vehicles sold through the automotive auction process. For example,
the Company has entered into agreements with AutoNation and DriversMart to
provide transportation logistics services for the movement of vehicles to their
reconditioning centers and stores. The Company has also entered into a contract
with Aucnet to provide transportation logistics services relating to the
movement of vehicles sold through live interactive auctions and bulletin board
sales on the Internet.
RYDER
Prior to the Ryder Acquisition, Ryder was North America's largest motor
carrier of new and used automobiles and light trucks offering a full range of
automotive delivery services including transporting new, used and off-lease
vehicles to dealers from plants, railramps, ports and auctions, and providing
vehicle rail-car loading and unloading services. Ryder also provided logistics
solutions and other services to the new and used vehicle distribution market and
other segments of the automotive industry, including the growing used car
superstore market.
As of June 30, 1997, Ryder operated approximately 90 terminal locations
throughout the United States and Canada with a fleet of approximately 3,400
Rigs, including approximately 600 owner-operated Rigs. Ryder provided automotive
distribution services to all of the major domestic and foreign manufacturers.
General Motors represented Ryder's largest customer, accounting for
approximately 49.9% of Ryder's 1996 revenues. Ryder also provided logistics
solutions and other services to the new and used vehicle distribution market and
other segments of the automotive industry, including the growing used car
superstore market. For example, Ryder recently entered into agreements with
AutoNation to provide transportation logistics services for the movement of
vehicles to their reconditioning centers and stores and with Volkswagen to
provide port processing services.
During 1996, Ryder undertook a restructuring of its operations in an effort
to improve its profitability and to focus on its core business of transporting
cars and light trucks and related services. The primary components of the
restructuring were (i) to reduce employee headcount through an early retirement
program, (ii) to consolidate administrative functions and (iii) to divest
non-core operations. For example, in February 1997 Ryder sold Blazer Truck
Lines, Inc., a provider of inbound logistics services to the automotive
industry. Additionally, during 1995 and 1996, a number of factors, including
certain special charges and credits, a Teamsters strike at Ryder during 1995,
strikes at certain General Motors' manufacturing plants during 1996, and
increased diesel fuel costs during 1996, limit the comparability of Ryder's
operating performance during this period.
Specifically, 1996 operating results were adversely impacted by a
restructuring charge of approximately $18.3 million ($11.3 million of which is
attributable to the businesses being acquired by the Company), the impact of
strikes at certain General Motors manufacturing plants, which management
estimates to be approximately $5.5 million, and the impact of higher diesel fuel
costs, estimated to be approximately $3.2 million. These charges were offset in
part by asset sale gains which totaled $4.1 million.
In 1995, Ryder's financial results were positively impacted by reduced
insurance costs totaling $2.5 million, an operating tax settlement of $9.9
million and asset sale gains of $10.7 million, offset by the impact of a 32-day
Teamsters strike.
Ryder's results of operations for the six months ended June 30, 1997
improved significantly, with revenues increasing 6% and operating income
increasing from $0.6 million to $9.8 million compared to the six months ended
June 30, 1996. The increase in revenues resulted primarily from a 5% increase in
vehicles delivered. In addition, the Company believes that Ryder's 1997 results
benefited from the restructuring initiatives implemented during 1996.
The following table sets forth certain historical financial information of
Ryder for the periods indicated. These results include entities not being
acquired by Allied, as well as the charges and
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<PAGE> 32
credits discussed above. Accordingly, such amounts are not necessarily
representative of future operating results. See "Unaudited Pro Forma Financial
Information" and Consolidated Financial Statements of Ryder included elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------- --------------------
1994 1995 1996 1996 1997
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues........................ $645,402 $594,446 $583,292 $297,945 $315,156
Operating Income (Loss)......... 49,850 36,238 (17,189) 622 9,841
Capital Expenditures
New Rigs and modifications.... 39,793 60,628 41,378 18,511 9,395
Maintenance and other......... 3,996 3,935 3,844 1,909 640
-------- -------- -------- -------- --------
Total................. $ 43,789 $ 64,563 $ 45,222 $ 20,420 $ 10,035
======== ======== ======== ======== ========
</TABLE>
For the year ended December 31, 1996, the businesses acquired by the
Company generated revenues and operating income of $568.1 million and $0.6
million, respectively. Operating income includes an $11.3 million charge
relating to a restructuring that was intended to improve Ryder's future
operating performance. Such businesses generated revenues and operating income
of $315.7 million and $10.0 million, respectively, for the six months ended June
30, 1997. See "Unaudited Pro Forma Financial Information."
SERVICES
As a result of the Ryder Acquisition, the Company is the largest motor
carrier in North America specializing in the transportation of new and used
automobiles and light trucks for all the major domestic and foreign automotive
manufacturers. Allied and Ryder together participated in the transportation of
approximately 65% of the new vehicles sold in the United States and Canada in
1996, including more than 50% of the North American production of General
Motors, Ford and Chrysler. The Company believes it can capture a larger
percentage of its major customers' North American production by building upon
its relationships with manufacturers and leveraging its reputation for high
quality services, competitive pricing and value-added services. The Company also
believes that it can expand the types of services provided to its existing
customers by utilizing its sophisticated technology in order to deliver vehicles
and provide other services more efficiently and cost effectively than its
competitors.
The Company also provides automotive transportation services in the growing
remarketed vehicle sector, which includes the delivery of used and previously
leased vehicles and vehicles sold through the automotive auction process. The
Company has been aggressively pursuing business from the used car superstores.
Ryder recently entered into an agreement with AutoNation to provide logistics
services for the movement of vehicles to its reconditioning centers and stores
and Allied recently entered into a contract with Aucnet to provide
transportation logistics services relating to the movement of vehicles sold
through live interactive auctions and bulletin board sales on the Internet.
Additionally, Ryder entered into an agreement with Volkswagen to provide port
processing and vehicle distribution services.
The Company has made a significant commitment to providing complementary
services to its existing customers and to new customers. The Company is
aggressively pursuing opportunities to provide logistics solutions to customers
in the automotive industry and seeks to leverage its proprietary information
systems and extensive terminal network in order to efficiently provide such
services. These services include identifying new and innovative distribution
methods for customers, providing solutions relating to improving the management
of inventory of new and used vehicles, and providing reconditioning services
relating to the used and remarketed vehicle market. The Company further believes
that significant opportunities exist for it to provide automotive hauling and
other related services to its existing customers' foreign manufacturing plants
through the formation of joint ventures with established local transportation
carriers. For example, through its Kar-Tainer subsidiary, the Company transports
finished and partially completed vehicles and parts in intermodal containers
both domestically and internationally.
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<PAGE> 33
CUSTOMER RELATIONSHIPS
The following table sets forth the percentage of 1996 revenues derived from
each major customer:
<TABLE>
<CAPTION>
MANUFACTURER ALLIED RYDER PRO FORMA
- ------------ ------ ----- ---------
<S> <C> <C> <C>
General Motors............................................. 11.1% 49.9% 34.8%
Ford....................................................... 53.3 6.9 26.0
Chrysler................................................... 17.9 10.5 13.7
Mazda...................................................... 2.5 1.9 2.2
Nissan..................................................... 1.8 5.6 4.1
Honda...................................................... 2.6 6.3 4.9
Toyota..................................................... 2.3 6.4 4.8
Others..................................................... 8.5 12.5 9.5
----- ----- -----
Total............................................ 100.0% 100.0% 100.0%
===== ===== =====
</TABLE>
The Company has contracts with most of its customers. The Company's
contracts with its customers establish rates for the transportation of vehicles
based upon a fixed rate per vehicle transported and a variable rate for each
mile a vehicle is transported. While the contracts generally do not permit the
Company to recover for increases in fuel prices, fuel taxes or labor cost,
certain of the Company's contracts provide for renegotiation in the event
material adverse changes occur. Allied has an agreement with Ford expiring in
May 1999 which provides that Allied is the primary carrier for 24 locations in
the United States and all Canadian locations and a contract with Chrysler
expiring in June 2000, which provides that Allied is the primary carrier for 26
locations throughout the United States and Canada. The Company operates at the
former Ryder locations under a month-to-month contract with Ford in the United
States and Canada and under various contracts with Chrysler in the United States
with terms varying from month-to-month to those which expire in February 2001.
The Company has an agreement in principal with General Motors to enter into a
three-year contract.
PROPRIETARY MANAGEMENT INFORMATION SYSTEMS
The Company has made a long-term commitment to utilizing technology to
serve its customers. Since 1994, the Company has invested $5.4 million to
enhance the capability of its proprietary information systems. The Company's
advanced management information system is a centralized, fully integrated
information system utilizing a mainframe computer together with client servers.
The system is based on a company-wide information database, which allows the
Company to quickly respond to customer information requests without having to
combine data files from several sources. Updates with respect to vehicle load,
dispatch and delivery are immediately available from all Company locations for
reporting to customers and for better control and tracking of customer vehicle
inventories. Through EDI, the Company communicates directly with manufacturers
in the process of delivering vehicles and electronically bills and collects from
manufacturers. The Company also utilizes EDI to communicate with inspection
companies, railroads, port processors and other carriers.
The Company also utilizes its system to allow it to operate more
efficiently. For example, the Company's information systems automatically design
an optimal load for each Rig, taking into account factors such as the capacity
of the Rig, the size of the vehicles, the route, the drop points, fuel taxes,
applicable weight and height restrictions and the formula for paying drivers.
The system also determines the most economical and efficient load sequence and
drop sequence for the vehicles to be transported.
MANAGEMENT STRATEGY
The Company has adopted a performance management strategy which it believes
contributes to quality, enhanced efficiency, safety and profitability in its
operations. The Company's management strategy and culture is designed to enhance
employee performance through careful selection and
32
<PAGE> 34
continuous training of new employees, with individual performance goals
established for each employee and performance measured regularly through the
Company's management information system. The Company believes that its
performance management strategy is unique with respect to the role that
employees play in the form of participation in this process.
The Company has developed and implemented various programs to incentivize
and reward increased employee productivity. The various programs developed by
the Company reward damage-free delivery by drivers, driver efficiency and driver
safety. The Company believes that these programs have improved customer and
employee satisfaction and driver related productivity in areas such as
damage-free deliveries, as evidenced by the fact that the Company maintained a
damage-free delivery rate of 99.6% for the first six months of 1997.
During 1997, the Company adopted an economic value added ("EVA") based
performance measurement and incentive compensation system. EVA is the measure
used by the Company to determine incentive compensation for senior management.
EVA also provides management with a measure to gauge financial performance,
allocate capital to appropriate projects, assist in providing valuations in
regard to proposed acquisitions, and evaluate daily operating decisions. The
Company believes that the EVA based performance measurement and incentive
compensation system promotes the creation of economic value and increase
shareholder value by aligning the interests of senior management with that of
the Company's shareholders.
SAFETY
The Company's safety department is responsible for training and supervising
personnel to keep safety awareness at its highest level and to minimize injuries
and related lost time. The department rewards drivers who have satisfied safety
performance goals established by the Company. The Company utilizes various forms
of safety equipment, such as cap liners to protect against head injuries, which
have reduced the number and severity of accident-related injuries to its
drivers. Management believes that the Company's safety programs have resulted in
significant cost savings since they have been implemented. For example, lost
time injuries decreased from 526 in 1990 to 453 in 1996, notwithstanding a 65%
increase in the number of employees during this period.
RISK MANAGEMENT AND INSURANCE
The Company's risk management department is responsible for defining risks
and securing appropriate insurance programs and coverages at cost effective
rates. The Company internally administers all claims for auto and general
liability and for workers compensation claims in Alabama, Florida, Georgia,
Missouri, North Carolina, South Carolina, Tennessee and Virginia. Liability
claims are subject to periodic audits by the Company's commercial insurance
carriers. The Company currently retains up to $650,000 of liability for each
claim for workers' compensation and up to $500,000 of liability for automobile
and general liability, including personal injury and property damage claims. In
addition to the $500,000 per occurrence deductible for automobile liability,
there is a $500,000 aggregate deductible for those claims which exceed the
$500,000 per occurrence deductible. The Company also retains up to $250,000 of
liability for each cargo damage claim in the United States. In Canada, the
Company retains up to C$100,000 (approximately U.S. $72,000 at October 16, 1997)
of liability for each claim for personal injury, property damage or cargo
damage. If the Company were to experience a material increase in the frequency
or severity of accidents or workers' compensation claims or unfavorable
developments in existing claims, the Company's operating results could be
adversely affected. The Company formed Haul Insurance Limited in December 1995
as a captive insurance subsidiary to provide insurance coverage to the Company
with respect to its deductibles for workers' compensation and commercial general
liability in the United States and for automobile liability insurance in the
United States and Canada.
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<PAGE> 35
EQUIPMENT, MAINTENANCE AND FUEL
As a result of the Ryder Acquisition, the Company operates approximately
5,300 Rigs with an average age of 6.9 years. The Company has historically
invested heavily in both new equipment and equipment upgrades, which have served
to increase efficiency and extend the useful life of Rigs. Currently, new
75-foot Rigs cost between $120,000 and $140,000.
Over the past 10 years, changes in governmental regulations have gradually
permitted the lengthening of Rigs from 55 to 75 feet. This has increased load
factors and improved operating efficiency by permitting the Company to haul more
vehicles with fewer Rigs and employees. The Company has worked closely with
manufacturers to develop specialized equipment to meet the specific needs of
manufacturers.
The Company's Rigs are maintained at 65 shops by approximately 300
maintenance personnel, including supervisors. Rigs are scheduled for regular
preventive maintenance inspections. Each shop is equipped to handle repairs
resulting from inspection or driver write up, including repairs to electrical
systems, air conditioners, suspension, hydraulic systems, cooling systems, and
minor engine repairs. Major engine overhaul and engine replacement can be
handled at larger terminal facilities, while smaller terminals rely on outside
vendors. The trend has been to use engine suppliers' outlets for engine repairs
due to the long-term warranties obtained by the Company.
All of Allied's terminals in the United States have access to a central
parts warehouse through the management information system. The system calculates
maximum and minimum parts inventory quantities based upon usage and
automatically reorders parts. The Company intends to implement its management
information system at Ryder terminals during 1998. Minor modifications of
equipment are performed at all terminal locations. Major modifications involving
change in length, configuration or load capacity are performed by the trailer
manufacturers.
In order to reduce fuel costs, the Company purchases approximately 56% of
its fuel in bulk. Fuel is purchased by drivers on the road from a few major
suppliers that offer discounts and central billing.
COMPETITION
The transportation of vehicles in the long-haul segment of the automotive
industry is primarily controlled by rail carriers. In the 1970s and 1980s,
following deregulation of the trucking industry by the Interstate Commerce
Commission and as importers obtained a more significant share of United States
automobile sales, new motor carriers, some without union contracts, began to
compete for automobile traffic. In some instances, these new carriers were
created, or their creation facilitated, by importer interests.
Since the mid-1980s, nearly all transportation has been pursuant to
contracts entered into by negotiation or competitive bid. The competition for
these contracts has been from both rail carriers and union and non-union motor
carriers. As a result, many negotiations and bids have resulted in contracts
that do not allow for recovery of increased costs of labor or fuel over the
contract term and that provide for rate reductions of varying magnitudes.
Two other recent developments are now beginning to have an impact on
competition. The first is the rise in the use of third-party logistics companies
by automotive manufacturers. This is expected to convert further traffic to
competitive bidding and ease entry for less well capitalized, less sophisticated
haulers as the logistics companies provide the information systems and
integrate, more comprehensively, the full distribution function. The second is
the fundamental changes automotive manufacturers are making to their vehicle
distribution systems in order to expedite the delivery of finished vehicles to
dealers. Certain manufacturers are creating vehicle mixing centers where rail
traffic from numerous manufacturing plants is re-mixed for delivery to the
dealer. These mixing centers offer the opportunity for longer haul business to
be obtained through competitive bidding. In addition, manufacturers are creating
new rail ramps in order to place vehicles in more
34
<PAGE> 36
central locations closer to the market but off the dealer lots. These new rail
ramps may reduce the average length of haul for motor carriers of automobiles.
In metropolitan areas, competition for traffic from the new rail ramps to the
dealers may increase as local delivery carriers and equipment and driver leasing
companies may become new competitors for the traffic. In addition, some parties
may attempt to utilize drive-away operators or dealer pick-ups to deliver
vehicles.
Major motor carriers specializing in the delivery of new vehicles that are
competitors of the Company include Leaseway, Jack Cooper, Cassens, Hadley and E
& L, all of which are privately held companies.
EMPLOYEES AND OWNER OPERATORS
The Company has approximately 8,300 employees, including approximately
5,400 drivers. All drivers and shop and yard personnel are represented by
various labor unions. The majority of the Company's employees are covered by the
Master Agreement with the Teamsters which expires on May 31, 1999. The
compensation and benefits paid by the Company to union employees are established
by union contracts. The Company also utilizes approximately 800 owner-operators,
with approximately 200 driving exclusively for Auto Haulaway in Canada and
approximately 600 driving exclusively from former Ryder terminals in the United
States. The owner-operators are either paid a percentage of the revenues they
generate or receive normal driver pay plus a truck allowance.
TERMINALS AND OTHER PROPERTIES
The Company's executive offices are located in Decatur, Georgia, a suburb
of Atlanta. The Company leases approximately 96,000 square feet of space for its
executive offices, which is sufficient to permit the Company to conduct its
operations. The Company operates 140 terminals, 19 of which are expected to be
closed as a result of the Ryder Acquisition. The Company's terminals are located
at or near manufacturing plants, ports and railway terminals. Of the 121
terminals that the Company will operate after the closing of 19 terminals, 26
are owned and 95 are leased.
REGULATION
The Company is regulated in the United States by the United States
Department of Transportation ("DOT") and various state agencies, and in Canada
by the National Transportation Agency of Canada and various provincial transport
boards. Truck and trailer length, height, width, maximum weight capacity and
other specifications are regulated federally in the United States, as well as by
individual states and provinces. Interstate motor carrier operations are subject
to safety requirements prescribed by the DOT. The DOT also regulates certain
safety features incorporated in the design of Rigs. The motor carrier
transportation industry is also subject to regulatory and legislative changes
which can affect the economics of the industry by requiring changes in operating
policies or influencing the demand for, and the costs of providing, services to
shippers.
In addition, the Company's terminal operations are subject to environmental
laws and regulations enforced by federal, state, provincial and local agencies,
including those related to the treatment, storage and disposal of wastes, and
those related to the storage and handling of fuel and lubricants. The Company
maintains regular ongoing testing programs for their USTs located at most of
their terminals for compliance with environmental laws and regulations.
Management believes that the Company's USTs are in compliance with current
environmental standards and that the Company will not be required to incur
substantial costs to bring the USTs into compliance with higher standards which
take effect in 1998.
LEGAL PROCEEDINGS
The Company is routinely a party to litigation incidental to its business,
primarily involving claims for personal injury and property damage incurred in
the transportation of vehicles. The
35
<PAGE> 37
Company does not believe that any of such pending litigation, if adversely
determined, would have a material adverse effect on the Company.
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information about beneficial
ownership of the Common Stock as of October 1, 1997 and as adjusted to reflect
the sale of the Common Stock in the Offering by (i) each director of the
Company, (ii) all directors and executive officers of the Company as a group,
and (iii) the Selling Stockholders. Unless otherwise indicated, the beneficial
owners of the Common Stock listed below have sole voting and investment power
with respect to all shares shown as beneficially owned by them.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY NUMBER OF SHARES BENEFICIALLY
OWNED PRIOR SHARES BEING OWNED AFTER
TO OFFERING OFFERED(1) OFFERING
------------------- ------------ -------------------
BENEFICIAL OWNERS NUMBER PERCENT NUMBER PERCENT
- ----------------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C>
Robert J. Rutland(2)..................... 1,256,469 16.1 482,692 773,777 7.9
Guy W. Rutland, III(3)................... 842,551 10.8 -- 842,551 8.6
Guy W. Rutland, IV(4).................... 687,311 8.8 192,309 495,002 5.0
Bernard O. De Wulf(5).................... 572,750 7.3 200,000 372,750 3.8
A. Mitchell Poole, Jr.(6)................ 226,200 2.9 38,461 187,739 1.9
Berner F. Wilson, Jr..................... 225,710 2.9 86,538 139,172 1.4
Joseph W. Collier (7).................... 11,000 * -- 11,000 *
David G. Bannister....................... 3,000 * -- 3,000 *
Robert R. Woodson........................ 4,000 * -- 4,000 *
All executive officers and directors..... 3,861,191 49.4 1,000,000 2,861,191 29.2
as a group(8) (12 persons).............
</TABLE>
- ---------------
* Less than 1% not applicable
(1) Excludes 144,808, 150,000, 57,691, 60,000, 11,539, 25,962 and 450,000 shares
that the Underwriters have the option to purchase from Robert J. Rutland,
Guy W. Rutland, III, Guy W. Rutland, IV, Mr. De Wulf, Mr. Poole, Mr. Wilson
and all executive officers and directors as a group to cover
over-allotments, if any.
(2) Includes 18,099 shares owned by his wife to which he disclaims beneficial
ownership and 25,000 shares owned by him under the Restricted Stock Plan
which are subject to transfer restrictions.
(3) Includes 18,099 shares owned by his wife and 67,800 shares owned by a
private foundation of which Mr. Rutland is a trustee to which he disclaims
beneficial ownership.
(4) All shares held in a general partnership of which he is a partner.
(5) Includes 165,000 shares held in trust for the benefit of his wife and family
members and 2,750 shares held in a limited partnership to which he disclaims
beneficial ownership.
(6) Includes 20,000 shares owned by him under the Restricted Stock Plan which
are subject to transfer restrictions.
(7) Includes 10,000 shares owned by him under the Restricted Stock Plan which
are subject to transfer restrictions. Does not include options to acquire
61,000 shares.
(8) Includes 30,000 shares issued under the Restricted Stock Plan which are
subject to transfer restrictions. Does not include options to acquire 28,800
shares.
DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
The Company's authorized capital stock consists of 20,000,000 shares of
Common Stock, no par value per share. Upon completion of the Offering, the
Company will have outstanding 9,810,000 shares of Common Stock, excluding
171,050 shares issuable upon the exercise of outstanding stock
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<PAGE> 38
options. The Company has reserved 650,000 shares of Common Stock for issuance
under its long-term incentive plan and has 393,950 shares remaining which are
eligible for issuance under such plan. The currently outstanding shares of
Common Stock are, and the shares of Common Stock offered hereby will be upon
issuance, validly issued, fully paid and nonassessable.
Holders of shares of Common Stock are entitled to receive such dividends as
may be declared by the Company's Board of Directors out of funds legally
available for such purpose. Upon liquidation, dissolution or winding up of the
company, the holders of Common Stock are entitled to shares ratably in all
assets available for distribution after payment in full of creditors and the
holders of any Preferred Stock.
Holders of shares of Common Stock are entitled to one vote per share on all
matters submitted to a vote of shareholders. The holders of a majority of the
shares of Common Stock represented at a meeting can elect all of the directors
of the Company because holders of Common Stock do not have cumulative voting
rights in the election of directors.
The Company's Articles of Incorporation require the affirmative vote of the
holders of not less than two-thirds of the outstanding shares of Common Stock in
order to approve most corporate transactions such as mergers, consolidations,
sales of substantially all of the property or assets of the Company, and the
liquidation or dissolution of the Company. The holders of Common Stock are not
entitled to preemptive or subscriptive rights.
PREFERRED STOCK
The Company's Articles of Incorporation authorize the issuance of up to
5,000,000 shares of Preferred Stock, no par value. No shares of Preferred Stock
are outstanding, but the Board of Directors is authorized to issue Preferred
Stock at any time without approval of the holders of the Common Stock. The Board
of Directors believes that the availability of Preferred Stock gives the Board
greater flexibility in planning the Company's growth and enables the Board to
act promptly to take advantage of acquisition and other corporate opportunities
that may arise in the future. However, the Board of Directors, without approval
of the holders of the Common Stock, can issue Preferred Stock with voting rights
which could adversely affect the voting power of holders of the Common Stock.
The issuance of Preferred Stock could inhibit a potential takeover of the
Company. The Company has no present intention to issue any shares of Preferred
Stock.
Under the Company's Articles of Incorporation, the Board of Directors is
authorized to divide the Preferred Stock into one or more series and to fix the
designation and relative rights and preferences of shares of any series so
established, including, but not limited to: (i) the designation of and number of
shares constituting the series; (ii) the dividend rate, whether dividends will
be cumulative, and, if so, the conditions and the date or dates from which
dividends are cumulative; (iii) whether the shares will be redeemable and, if
so, the terms and conditions of redemption, including the time during which the
shares may be redeemed and the redemption price; (iv) the amount payable on the
shares in the event of dissolution or liquidation; (v) whether a purchase,
retirement, or sinking fund will be provided for the shares and, if so, the
terms and conditions thereof; (vi) whether the shares will be convertible into
shares of stock of any series or class of the Company (including Common Stock)
and, if so, the terms and conditions of conversion or exchange; (vii) whether
the shares have voting rights and, if so, the extent of the voting rights;
(viii) whether the holders of the shares have any preemptive rights; (ix)
liability to future calls or assessment; (x) restrictions on alienability; and
(xi) any discrimination against a holder of the shares as a result of such
holder owning a substantial amount of securities.
LIMITATIONS ON DIRECTORS' AND OFFICERS' LIABILITY
The Company has included in its Articles of Incorporation a provision to
eliminate the personal liability of its directors for monetary damages resulting
from breaches of their fiduciary duty, except that such provision does not
eliminate liability for breaches of the duty of loyalty, acts which involve
37
<PAGE> 39
intentional misconduct or a knowing violation of law, the improper payment of
dividends or distributions, or for any transaction from which the director
derived an improper personal benefit. The Company has included in its bylaws
provisions to indemnify its directors and officers to the fullest extent
permitted by Sections 14-2-850 through 14-2-859 of the Georgia Business
Corporation Code, including circumstances in which indemnification is otherwise
discretionary. The Company believes that these provisions are necessary to
attract and retain qualified persons as directors and officers.
CERTAIN PROVISIONS WITH ANTI-TAKEOVER EFFECTS
The Company's Articles of Incorporation and bylaws contain several
provisions that may be deemed to have an "anti-takeover" effect in that they
could prevent an acquisition of the Company unless the potential acquirer has
obtained the prior approval of the Board of Directors of the Company. The
anti-takeover provisions also may make it more difficult for a potential
acquirer to obtain control of the Company by means of replacing the existing
members of the Board of Directors and management of the Company, which may tend
to perpetuate the incumbent Board and management. The following is a description
of such provisions and certain provisions of Georgia law that may be deemed to
have an anti-takeover effect:
Classified Board. The Company's bylaws provide that the Board of Directors
is divided into three classes, with each class to be as nearly equal in number
as possible with the Directors in each class to hold office for a three-year
term.
Removal of Directors. The Company's bylaws provide that a director may be
removed only for cause and only upon the affirmative vote of at least two-thirds
of the outstanding shares of Common Stock. The purpose of the super-majority
vote needed to remove directors is to prevent a majority shareholder from
removing directors and replacing them with new individuals selected only by that
shareholder in an effect to circumvent the classified board structure adopted by
the Company.
Amendment of Articles of Incorporation and Bylaws. The Georgia Business
Corporation Code generally provides that the approval of the Board of Directors
and the affirmative vote of a majority of shares entitled to vote thereon as
well as a majority of the shares of each class of stock entitled to vote as a
class, is required to amend the Articles of Incorporation of a corporation,
unless the Articles of Incorporation provide for a greater voting requirement.
The Articles of Incorporation of the Company provide that the provisions of the
Articles relating to anti-takeover provisions may only be amended, altered,
changed or repealed by the affirmative vote of two-thirds of the outstanding
shares of Common Stock, subject to the rights, if any, of the holders of
Preferred Stock then outstanding.
The Georgia Business Corporation Code generally provides that the authority
to amend, alter, change or repeal the bylaws of a corporation may be granted to
the Board of Directors, subject to the power of the shareholders to amend,
alter, change or repeal bylaws by the affirmative vote of a majority of the
outstanding common stock of such corporation. The bylaws of the Company provide
that any action taken by the shareholders with respect to amending, altering,
changing or repealing the bylaws may be taken only upon the affirmative vote of
the holders of at least two-thirds of the outstanding Common Stock, subject to
the rights, if any, of the holders of Preferred Stock then outstanding.
Director Exculpation. The Articles of Incorporation of the Company provide
that a director of the Company will have no personal liability to the Company or
its stockholders for monetary damages for breach of fiduciary duty as a director
to the extent allowed by the Georgia Business Corporation Code. This provision
would absolve directors of personal liability for negligence in the performance
of their duties, including gross negligence, but would not permit a director to
be exculpated for liability for actions involving conflicts of interest or
breaches of the "duty of loyalty" to the company or its stockholders. This
provision does not eliminate or alter the duty of the members of the Board of
Directors of the Company, it only limits personal liability for monetary
38
<PAGE> 40
damages. This provision does not affect the availability of equitable relief as
a remedy for breach of duty by directors.
Constituencies. The Company's Articles of Incorporation permit the Board
of Directors to consider the social and economic effects of a matter considered
by the Board of Directors upon the Company and its subsidiaries and its
employees, customers, suppliers, and creditors as well as the communities which
they serve in connection with determining the best interests of the Company and
its stockholders. The Articles of Incorporation also allow the Board of
Directors, when evaluating a proposed Business Combination or tender offer, to
consider matters such as offering price, reputation and business practices of
the offeror and its management as they would affect the employees, customers,
suppliers and creditors of the Company and its subsidiaries and any other
matters deemed pertinent by the Board of Directors when considering whether to
oppose such an offer.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Company's Common Stock is
BankBoston, N.A. (Boston EquiServe).
39
<PAGE> 41
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters"), through their Representatives, BT
Alex. Brown Incorporated and Bear, Stearns & Co. Inc. (the "Representatives"),
have severally agreed to purchase from the Company the following respective
number of shares of Common Stock at the initial public offering price less the
underwriting discounts and commission set forth on the cover page of this
Prospectus.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
- ------------ ---------
<S> <C>
BT Alex. Brown Incorporated.................................
Bear, Stearns & Co. Inc.....................................
---------
Total............................................. 3,000,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will purchase the total number of shares of Common Stock offered
hereby if any of such shares are purchased.
The Company and the Selling Stockholders have been advised by the
Representatives of the Underwriters that the Underwriters propose to offer the
shares of Common Stock to the public at the public offering price set forth on
the cover page of this Prospectus and to certain dealers at such price less a
concession not in excess of $ per share. The Underwriters may allow, and
such dealers may reallow, a concession not to exceed $ per share to certain
other dealers. After commencement of the public offering, the offering price and
other selling terms may be changed by Representatives of the Underwriters.
The Selling Stockholders have granted to the Underwriters an option,
exercisable not later than 30 days after the date of this Prospectus, to
purchase up to 450,000 shares of Common Stock at the public offering price set
forth on the cover page of this Prospectus. To the extent that the Underwriters
exercise such option, each of the Underwriters will have a firm commitment to
purchase approximately the same percentage thereof that the number of shares of
Common Stock purchased by each of them as shown in the above table bears to
3,000,000 and the Selling Stockholders will be obligated, pursuant to the
option, to sell such shares to the Underwriters. The Underwriters may exercise
such option only to cover over-allotments made in connection with the sale of
the Common Stock offered hereby. If purchased, the Underwriters will offer such
additional shares on the same terms as those on which the 3,000,000 shares are
being offered.
In connection with this offering, certain Underwriters may engage in
passive market making transactions in the Common Stock on the Nasdaq National
Market immediately prior to the commencement of sales in this Offering in
accordance with Rule 103 of Regulation M. Passive market making consists of
displaying bids on the Nasdaq National Market limited by the bid prices of
independent market makers and making purchases limited by such prices and
effected in response to order flow. Net purchases by a passive market maker on
each day are limited to a specified
40
<PAGE> 42
percentage of the passive market maker's average daily trading volume in the
Common Stock during a specified period and must be discontinued when such limit
is reached. Passive market making may stabilize the market price of the Common
Stock at a level above that which might otherwise prevail and, if commenced, may
be discontinued at any time.
Subject to applicable limitations, the Underwriters, in connection with
this Offering, may place bids for or make purchases of the Common Stock in the
open market or otherwise, for long or short account, or cover short positions
incurred, to stabilize, maintain or otherwise affect the price of the Common
Stock, which may be higher than the price that might otherwise prevail in the
open market. There can be no assurance that the price of the Common Stock will
be stabilized, or that stabilizing, if commenced, will not be discontinued at
any time. Subject to applicable limitations, the Underwriters may also place
bids or make purchases on behalf of the underwriting syndicate to reduce a short
position created in connection with this Offering. The Underwriters are not
required to engage in these activities and may end these activities at any time.
The Underwriting Agreement contains covenants of indemnity and contribution
between the Underwriters and the Company and the Selling Stockholders with
respect to certain civil liabilities, including liabilities under the Securities
Act.
Certain of the Company's principal stockholders and the directors and
officers, who following the Offering will beneficially own an aggregate of
2,861,191 shares of Common Stock, and the Company have agreed not to offer, sell
or otherwise dispose of any of such Common Stock or any shares of Common Stock
issuable upon exercise of any options for Common Stock for a period of 180 days
after the date of this Prospectus without the prior written consent of BT Alex.
Brown Incorporated.
David G. Bannister, a director of the Company, is a Managing Director of BT
Alex. Brown Incorporated. BT Alex. Brown Incorporated provided investment
banking services to the Company in connection with the Senior Note Offering for
which it received customary fees. Bear, Stearns & Co. Inc. provided investment
banking services to the Company in connection with the Senior Note Offering and
financial advisory services to the Company in connection with the Ryder
Acquisition for which it received customary fees.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company and the Selling Stockholders by Troutman Sanders LLP,
Atlanta, Georgia. Certain legal matters relating to the Offering will be passed
upon for the Underwriters by Latham & Watkins, New York, New York.
EXPERTS
The historical Consolidated Financial Statements of Allied Holdings, Inc.
and Subsidiaries as of December 31, 1995 and 1996, and for each of the three
years in the period ended December 31, 1996, included in this Prospectus, have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said report.
The historical Consolidated Financial Statements of Ryder Automotive
Carriers Services, Inc. and subsidiaries as of December 31, 1995 and 1996, and
for each of the three years in the period ended December 31, 1997, included in
this Prospectus, have been audited by KPMG Peat Marwick LLP, independent public
accountants, as indicated in their report with respect thereto, and are included
herein in reliance upon the authority of said firm as experts in giving said
report.
41
<PAGE> 43
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Exchange Act,
and the rules and regulations thereunder, and in accordance therewith files
periodic reports, proxy and information statements, and other information with
the Commission. Such reports, proxy and information statements, and other
information filed by the Company with the Commission may be inspected at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the regional offices of the Commission
located at 7 World Trade Center, 13th Floor, New York, New York 10048 and 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
materials may be obtained from the Public Reference Section of the Commission,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Commission also maintains a web site (http://www.sec.gov) that contains reports,
proxy and information statements regarding registrants, such as the Company,
that file electronically with the Commission.
The Company has filed with the Commission a Registration Statement on Form
S-2 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act with respect to the securities offered
hereby. This Prospectus does not include all the information set forth in the
Registration Statement and the exhibits thereto, to which reference is made for
further information with respect to the Company. Copies of the Registration
Statement and the exhibits thereto are on file at the office of the Commission
and may be obtained from the Commission upon payment of prescribed rates or may
be examined without charge at the public reference facilities of the Commission
as prescribed above. Any statements contained herein concerning the provisions
of any document are not necessarily complete, and in each instance reference is
made to the copy of such document filed as an exhibit to the Registration
Statement or otherwise filed with the Commission. Each such statement is
qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents or portions thereof filed with the Commission are
incorporated into this Prospectus by reference.
1. The Company's Annual Report on Form 10-K for the year ended
December 31, 1996, as amended on Form 10K/A on August 28, 1997;
2. The Company's quarterly Reports on Form 10-Q for the quarter ended
March 31, 1997, as amended on Form 10-Q/A on August 28, 1997, and for the
quarter ended June 30, 1997; and
3. The Company's Current Reports on Form 8-K filed May 1, 1997, June
3, 1997, July 22, 1997, August 13, 1997, August 29, 1997, September 2,
1997, October 10, 1997 and October 21, 1997.
Additionally, all documents filed by the Company with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the date of this Prospectus and prior to the termination of the Offering shall
be deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or supersedes for purposes of this Prospectus to the
extent that a statement contained herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus has been delivered upon the written or oral request of such
person, a copy of any and all of the documents which have been or may be
incorporated by reference in this Prospectus, except that exhibits to such
documents will not be provided unless they are specifically incorporated by
42
<PAGE> 44
reference into such documents. Requests for copies of any such documents should
be directed to Allied Holdings, Inc., 160 Clairemont Avenue, Suite 510, Decatur,
Georgia 30030, Attention: Daniel H. Popky, telephone: 404/370-1100.
43
<PAGE> 45
ALLIED HOLDINGS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Report of Independent Public Accountants.................... F-2
Consolidated Balance Sheets at December 31, 1995 and 1996
and June 30, 1997 (Unaudited)............................. F-3
Consolidated Statements of Operations for the Years Ended
December 31, 1994, 1995, and 1996 and the Six Months Ended
June 30, 1996 and 1997 (Unaudited)........................ F-4
Consolidated Statements of Changes in Stockholders' Equity
for the Years Ended December 31, 1994, 1995, and 1996 and
the Six Months Ended June 30, 1997 (Unaudited)............ F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1994, 1995 and 1996 and the Six Months Ended
June 30, 1996 and 1997 (Unaudited)........................ F-6
Notes to Consolidated Financial Statements.................. F-7
RYDER AUTOMOTIVE CARRIER SERVICES, INC. AND SUBSIDIARIES
Independent Auditors' Report................................ F-24
Consolidated Balance Sheets at December 31, 1995 and 1996
and June 30, 1997 (Unaudited)............................. F-25
Consolidated Statements of Operations for the Years Ended
December 31, 1994, 1995, and 1996 and the Six Months Ended
June 30, 1996 and 1997 (Unaudited)........................ F-26
Consolidated Statements of Shareholder's Equity for the
Years Ended December 31, 1994, 1995, and 1996 and the Six
Months Ended June 30, 1997 (Unaudited).................... F-27
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1994, 1995, and 1996 and the Six Months Ended
June 30, 1996 and 1997 (Unaudited)........................ F-28
Notes to Consolidated Financial Statements.................. F-29
</TABLE>
F-1
<PAGE> 46
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
Allied Holdings, Inc.:
We have audited the accompanying consolidated balance sheets of ALLIED
HOLDINGS, INC. (a Georgia corporation) AND SUBSIDIARIES as of December 31, 1995
and 1996 and the related consolidated statements of operations, changes in
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Allied Holdings, Inc. and
subsidiaries as of December 31, 1995 and 1996 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 4, 1997
(except with respect to
the matters discussed in
Note 13, as to which the
date is October 23, 1997)
F-2
<PAGE> 47
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
AND JUNE 30, 1997 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- JUNE 30,
1995 1996 1997
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 11,147 $ 1,973 $ 4,409
Short-term investments.................................... 0 8,520 8,821
Receivables, net of allowance for doubtful accounts of
$689, $564, and $564 at December 31, 1995 and 1996 and
June 30, 1997, respectively............................. 22,690 22,673 28,325
Inventories............................................... 4,184 4,096 4,215
Prepayments and other current assets...................... 12,400 11,940 14,254
-------- -------- --------
Total current assets............................... 50,421 49,202 60,024
-------- -------- --------
PROPERTY AND EQUIPMENT, net................................. 134,873 132,552 126,364
-------- -------- --------
OTHER ASSETS:
Goodwill, net............................................. 23,568 22,081 33,800
Notes receivable due from related parties................. 573 573 573
Other..................................................... 5,251 6,675 7,933
-------- -------- --------
Total other assets................................. 29,392 29,329 42,306
-------- -------- --------
Total assets....................................... $214,686 $211,083 $228,694
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt...................... $ 4,368 $ 2,275 $ 8,248
Trade accounts payable.................................... 11,320 15,872 12,910
Accrued liabilities....................................... 27,569 30,347 37,433
-------- -------- --------
Total current liabilities............................... 43,257 48,494 58,591
-------- -------- --------
LONG-TERM DEBT, less current maturities..................... 106,634 93,708 96,986
-------- -------- --------
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS................. 3,698 3,621 3,557
-------- -------- --------
DEFERRED INCOME TAXES....................................... 5,561 7,487 8,700
-------- -------- --------
OTHER LONG-TERM LIABILITIES................................. 2,514 1,064 703
-------- -------- --------
COMMITMENTS AND CONTINGENCIES (Notes 5, 7, 8 and 13)
STOCKHOLDERS' EQUITY:
Common stock, no par value; 20,000 shares authorized,
7,725, 7,810 and 7,810 shares outstanding at December
31, 1995 and 1996 and June 30, 1997, respectively....... 0 0 0
Additional paid-in capital................................ 42,977 43,657 43,657
Retained earnings......................................... 10,489 14,475 18,186
Foreign currency translation adjustment, net of tax....... (444) (743) (1,074)
Unearned compensation..................................... 0 (680) (612)
-------- -------- --------
Total stockholders' equity......................... 53,022 56,709 60,157
-------- -------- --------
Total liabilities and stockholders' equity......... $214,686 $211,083 $228,694
======== ======== ========
</TABLE>
The accompanying notes are an integral part
of these consolidated balance sheets.
F-3
<PAGE> 48
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995, AND 1996
AND THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997 (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE SIX
FOR THE YEARS ENDED MONTHS ENDED
DECEMBER 31, JUNE 30,
------------------------------ -------------------
1994 1995 1996 1996 1997
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES................................ $297,236 $381,464 $392,547 $200,565 $208,969
-------- -------- -------- -------- --------
OPERATING EXPENSES:
Salaries, wages, and fringe
benefits........................... 157,979 195,952 204,838 105,315 109,634
Operating supplies and expenses....... 51,532 62,179 62,880 31,526 32,563
Purchased transportation.............. 9,486 32,084 34,533 17,666 19,170
Insurance and claims.................. 12,043 16,022 16,849 8,039 8,098
Operating taxes and licenses.......... 14,301 16,564 16,122 8,381 8,190
Depreciation and amortization......... 16,314 25,431 26,425 12,931 13,786
Rent expenses......................... 3,214 5,354 4,975 2,481 2,470
Communications and utilities.......... 1,855 3,435 3,111 1,740 1,534
Other operating expenses.............. 1,781 3,522 4,219 1,431 2,074
-------- -------- -------- -------- --------
Total operating expenses...... 268,505 360,543 373,952 189,510 197,519
-------- -------- -------- -------- --------
Operating income.............. 28,731 20,921 18,595 11,055 11,450
-------- -------- -------- -------- --------
OTHER INCOME (EXPENSE):
Interest expense...................... (5,462) (11,260) (10,720) (5,396) (5,408)
Interest income....................... 312 707 603 303 357
-------- -------- -------- -------- --------
(5,150) (10,553) (10,117) (5,093) (5,051)
-------- -------- -------- -------- --------
INCOME BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM.................... 23,581 10,368 8,478 5,962 6,399
INCOME TAX PROVISION.................... (9,393) (4,222) (3,557) (2,504) (2,688)
-------- -------- -------- -------- --------
INCOME BEFORE EXTRAORDINARY ITEM........ 14,188 6,146 4,921 3,458 3,711
EXTRAORDINARY LOSS ON EARLY
EXTINGUISHMENT OF DEBT, net of income
tax benefit of $2,072, $573, and $573
for the years ended December 31, 1994
and 1996 and for the six months ended
June 30, 1996, respectively........... (2,627) 0 (935) (935) 0
-------- -------- -------- -------- --------
NET INCOME.............................. $ 11,561 $ 6,146 $ 3,986 $ 2,523 $ 3,711
======== ======== ======== ======== ========
PER COMMON SHARE:
Income before extraordinary item...... $ 1.84 $ 0.80 $ 0.64 $ 0.45 $ 0.48
Extraordinary loss on early
extinguishment of debt............. (0.34) 0.00 (0.12) (0.12) 0.00
-------- -------- -------- -------- --------
NET INCOME PER COMMON SHARE............. $ 1.50 $ 0.80 $ 0.52 $ 0.33 $ 0.48
======== ======== ======== ======== ========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING........................... 7,725 7,725 7,725 7,725 7,725
======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-4
<PAGE> 49
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995, AND 1996
AND THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOREIGN
COMMON STOCK ADDITIONAL RETAINED CURRENCY
--------------- PAID-IN EARNINGS TRANSLATION UNEARNED
SHARES AMOUNT CAPITAL (DEFICIT) ADJUSTMENT COMPENSATION TOTAL
------ ------ ---------- --------- ----------- ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1993....... 7,725 $0 $42,977 $(7,218) $ 0 $ 0 $35,759
Net income..................... 0 0 0 11,561 0 0 11,561
Foreign currency translation
adjustment, net of income
taxes of $978................ 0 0 0 0 (1,485) 0 (1,485)
----- -- ------- ------- ------- ----- -------
BALANCE, December 31, 1994....... 7,725 0 42,977 4,343 (1,485) 0 45,835
Net income..................... 0 0 0 6,146 0 0 6,146
Foreign currency translation
adjustment, net of income
taxes of $701................ 0 0 0 0 1,041 0 1,041
----- -- ------- ------- ------- ----- -------
BALANCE, December 31, 1995....... 7,725 0 42,977 10,489 (444) 0 53,022
Net income..................... 0 0 0 3,986 0 0 3,986
Foreign currency translation
adjustment, net of income
taxes of $181................ 0 0 0 0 (299) 0 (299)
Restricted stock awards........ 85 0 680 0 0 (680) 0
----- -- ------- ------- ------- ----- -------
BALANCE, December 31, 1996....... 7,810 0 43,657 14,475 (743) (680) 56,709
Net income (unaudited)......... 0 0 0 3,711 0 0 3,711
Foreign currency translation
adjustment, net of income
taxes of $181 (unaudited).... 0 0 0 0 (331) 0 (331)
Restricted stock awards
(unaudited).................. 0 0 0 0 0 68 68
----- -- ------- ------- ------- ----- -------
BALANCE, June 30, 1997
(Unaudited).................... 7,810 $0 $43,657 $18,186 $(1,074) $(612) $60,157
===== == ======= ======= ======= ===== =======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE> 50
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995, AND 1996
AND THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE SIX
FOR THE YEAR ENDED MONTH ENDED
DECEMBER 31, JUNE 30,
----------------------------- -------------------
1994 1995 1996 1996 1997
------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................................... $11,561 $ 6,146 $ 3,986 $ 2,523 $ 3,711
------- -------- -------- -------- --------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................. 16,314 25,431 26,425 12,931 13,786
Gain on sale of property and equipment......... (401) (57) (13) (359) 27
Extraordinary loss on early extinguishment of
debt, net.................................... 2,627 0 935 935 0
Deferred income taxes.......................... 4,189 1,806 1,921 84 1,405
Change in operating assets and liabilities,
excluding effect of business acquired:
Increase in short-term investments........... 0 0 (8,520) 0 (301)
Receivables, net............................. (3,155) 1,299 (9) (6,149) (5,699)
Inventories.................................. 457 163 82 148 (128)
Prepayments and other current assets......... (95) (444) 452 (2,150) (2,333)
Trade accounts payable....................... (1,907) 645 4,565 1,247 (2,934)
Accrued liabilities.......................... (1,482) (4,927) 1,277 6,069 6,685
------- -------- -------- -------- --------
Total adjustments......................... 16,547 23,916 27,115 12,756 10,508
------- -------- -------- -------- --------
Net cash provided by operating
activities.............................. 28,108 30,062 31,101 15,279 14,219
------- -------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment.............. (30,545) (18,210) (25,972) (14,376) (6,910)
Proceeds from sale of property and equipment..... 1,032 768 3,447 1,734 114
Purchase of business, net of cash acquired....... (32,332) 0 0 0 (12,898)
Increase in the cash surrender value of life
insurance...................................... (356) (589) (1,981) (991) (1,283)
------- -------- -------- -------- --------
Net cash used in investing activities..... (62,201) (18,031) (24,506) (13,633) (20,977)
------- -------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt..................... (73,839) (11,952) (57,691) (47,692) (11,404)
Proceeds from issuance of long-term debt......... 113,113 0 42,657 40,000 20,655
Other, net....................................... (1,243) (827) (655) (513) 0
------- -------- -------- -------- --------
Net cash provided by (used in) financing
activities.............................. 38,031 (12,779) (15,689) (8,205) 9,251
------- -------- -------- -------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS...................................... (137) 183 (80) 69 (57)
------- -------- -------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS...................................... 3,801 (565) (9,174) (6,490) 2,436
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD... 7,911 11,712 11,147 11,147 1,973
------- -------- -------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD......... $11,712 $ 11,147 $ 1,973 $ 4,657 $ 4,409
------- -------- -------- -------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE> 51
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1995, AND 1996
(INFORMATION AS OF JUNE 30, 1997 AND
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
1. ORGANIZATION AND OPERATIONS
Allied Holdings, Inc. (the "Company"), a Georgia corporation, is a holding
company which operates through its wholly owned subsidiaries. The principal
subsidiary of the Company is Allied Automotive Group, Inc. ("AAG"), a Georgia
corporation. AAG is comprised of Allied Systems, Ltd. ("Allied Systems"), a
Georgia limited partnership, Auto Haulaway, Inc. ("Auto Haulaway"), an Ontario,
Canada corporation, Inter Mobile, Inc. ("Inter Mobile"), Legion Transportation,
Inc. ("Legion"), and Auto Haulaway Releasing Services (1981) Limited
("Releasing"). Allied Systems and Auto Haulaway are engaged in the business of
transporting automobiles and light trucks from manufacturing plants, ports,
auctions, and railway distribution points to automobile dealerships. The Company
acquired all of the outstanding capital stock of Auto Haulaway on October 31,
1994 (Note 2). Currently, Inter Mobile, Legion, and Releasing are not
significant to the consolidated financial position or results of operations of
the Company.
During 1996, the Company incorporated Axis Group, Inc. ("Axis Group"). Axis
Group provides logistics solutions to the finished vehicle, service, and
aftermarket parts segments of the automotive market. Axis Group identifies new
and innovative methods of distribution as well as better use of traditional and
emerging technologies to help customers solve the most complex transportation,
inventory management, and logistics problems.
The Company has three other operating subsidiaries, Allied Industries, Inc.
("Allied Industries"), Haul Insurance Limited ("Haul"), and Link Information
Systems, Inc. ("Link"). These subsidiaries provide services to AAG, Axis Group,
and the other subsidiaries of the Company. Allied Industries provides
administrative, financial, risk management, and other related services. During
December 1995, the Company incorporated Haul as a captive insurance company.
Haul was formed for the purpose of insuring general liability, automobile
liability, and workers' compensation for the Company. Link, which was
incorporated in 1996, provides information systems hardware, software, and
support.
2. ACQUISITION OF AUTO HAULAWAY
On October 31, 1994, the Company acquired all of the outstanding capital
stock of Auto Haulaway for approximately $30 million. The acquisition has been
accounted for under the purchase method, and accordingly, the operating results
of Auto Haulaway have been included in the accompanying financial statements
since the date of the acquisition.
In connection with the acquisition, the Company refinanced approximately
$35 million of Auto Haulaway's long-term debt, which resulted in an
extraordinary loss on the extinguishment of the debt of approximately $2.6
million, net of income taxes of approximately $2.1 million. The source of funds
utilized for the payment of the purchase price and the debt refinancing was
borrowings under the Company's revolving credit agreement and available cash on
hand.
The following unaudited pro forma results of operations for the year ended
December 31, 1994 assume that the acquisition of Auto Haulaway had occurred on
January 1, 1994. The pro forma results are not necessarily indicative of what
actually would have occurred if the acquisition of Auto Haulaway had been
consummated on January 1, 1994. In addition, they are not intended to be a
F-7
<PAGE> 52
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
projection of future results and do not reflect any synergies that might be
achieved from combined operations (in thousands, except per share data).
<TABLE>
<CAPTION>
DECEMBER 31,
1994
------------
<S> <C>
Revenues.................................................... $410,631
Operating income............................................ 35,245
Income before extraordinary item............................ 14,871
Net income.................................................. 12,244
Income per share before extraordinary item.................. $ 1.93
Net income per share........................................ $ 1.58
Average shares outstanding.................................. 7,725
</TABLE>
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany transactions and accounts
have been eliminated.
FOREIGN CURRENCY TRANSLATION
The assets and liabilities of the Company's Canadian subsidiaries are
translated into U.S. dollars using current exchange rates in effect at the
balance sheet date, and revenues and expenses are translated at average monthly
exchange rates. The resulting translation adjustments are recorded as a separate
component of stockholders' equity, net of related income taxes.
REVENUE RECOGNITION
Substantially all revenue is derived from transporting automobiles and
light trucks from manufacturing plants, ports, auctions, and railway
distribution points to automobile dealerships. Revenue is recorded by the
Company when the vehicles are delivered to the dealerships.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
INVENTORIES
Inventories consist primarily of tires, parts, materials, and supplies for
servicing the Company's tractors and trailers. Inventories are recorded at the
lower of cost (on a first-in, first-out basis) or market.
F-8
<PAGE> 53
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PREPAYMENTS AND OTHER CURRENT ASSETS
Prepayments and other current assets consist of the following at December
31, 1995 and 1996 and June 30, 1997 (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- JUNE 30,
1995 1996 1997
------- ------- --------
<S> <C> <C> <C>
Tires on tractors and trailers.......................... $ 5,944 $ 6,785 $ 6,611
Prepaid insurance....................................... 3,192 2,572 3,307
Other................................................... 3,264 2,583 4,336
------- ------- -------
$12,400 $11,940 $14,254
======= ======= =======
</TABLE>
TIRES ON TRACTORS AND TRAILERS
Tires on tractors and trailers are capitalized and amortized to operating
supplies and expenses on a cents per mile basis.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Major property additions,
replacements, and betterments are capitalized, while maintenance and repairs
which do not extend the useful lives of these assets are expensed currently.
Depreciation is provided using the straight-line method for financial reporting
and accelerated methods for income tax purposes. The detail of property and
equipment at December 31, 1995 and 1996 and June 30, 1997 is as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- JUNE 30,
1995 1996 1997 USEFUL LIVES
-------- -------- -------- -------------
<S> <C> <C> <C> <C>
Tractors and trailers.................. $164,422 $181,841 $186,288 4 to 10 years
Buildings and facilities (including
leasehold improvements).............. 22,951 23,679 23,786 4 to 25 years
Land................................... 9,999 9,953 9,953
Furniture, fixtures, and equipment..... 9,745 10,520 10,560 3 to 10 years
Service cars and equipment............. 1,330 1,175 2,190 3 to 10 years
-------- -------- --------
208,447 227,168 232,777
Less accumulated depreciation and
amortization......................... 73,574 94,616 106,413
-------- -------- --------
$134,873 $132,552 $126,364
======== ======== ========
</TABLE>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
FOR THE SIX
FOR THE YEARS ENDED MONTHS ENDED
DECEMBER 31, JUNE 30,
-------------------------- ---------------
1994 1995 1996 1996 1997
------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
Cash paid during the period for interest......... $ 3,738 $11,470 $8,514 $3,623 $6,124
Cash paid during the period for income taxes, net
of refunds..................................... 6,205 1,364 (280) 730 228
Liabilities assumed in connection with business
acquired....................................... 48,261 0 0 0 0
Capital lease obligations terminated............. 4,093 0 0 0 0
</TABLE>
F-9
<PAGE> 54
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
GOODWILL
The acquisition of Auto Haulaway resulted in goodwill of approximately
$23,425,000. Goodwill related to the acquisition is being amortized on a
straight-line basis over 20 years. Other goodwill is being amortized on a
straight-line basis over ten years. Amortization (included in depreciation and
amortization expense) for the years ended December 31, 1994, 1995, and 1996
amounted to approximately $607,000, $1,407,000, and $1,541,000, respectively.
Amortization for the six months ended June 30, 1996 and 1997 amounted to
approximately $772,000 and $846,000, respectively. Accumulated amortization was
approximately $4,082,000, $5,623,000, and $6,454,000 at December 31, 1995 and
1996 and June 30, 1997, respectively. The Company periodically evaluates the
realizability of goodwill based upon expectations of nondiscounted cash flows
and operating income for each subsidiary having a material goodwill balance. The
Company believes no impairment of goodwill exists at June 30, 1997.
CASH SURRENDER VALUE OF LIFE INSURANCE
The Company maintains life insurance policies for certain employees of the
Company. Under the terms of the policies, the Company will receive, upon the
death of the insured, the lesser of aggregate premiums paid or the face amount
of the policy. Any excess proceeds over premiums paid are remitted to the
employee's beneficiary. The Company records the increase in cash surrender value
each year as a reduction of premium expense. The Company has recorded
approximately $2,146,000 and $4,127,000 of cash surrender value as of December
31, 1995 and 1996, respectively, included in other assets on the accompanying
balance sheets.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements. Estimates also affect the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107 ("SFAS No. 107"),
"Disclosures About Fair Value of Financial Instruments," requires disclosure of
the following information about the fair value of certain financial instruments
for which it is practicable to estimate that value. For purposes of the
following disclosure, the fair value of a financial instrument is the amount at
which the instrument could be exchanged in a current transaction between willing
parties other than in a forced sale or liquidation.
The amounts disclosed represent management's best estimates of fair value.
In accordance with SFAS No. 107, the Company has excluded certain financial
instruments and all other assets and liabilities from its disclosure.
Accordingly, the aggregate fair value amounts presented are not intended to, and
do not, represent the underlying fair value of the Company.
The methods and assumptions used to estimate fair value are as follows:
Cash and Cash Equivalents
The carrying amount approximates fair value due to the relatively short
period to maturity of these instruments.
F-10
<PAGE> 55
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Short-Term Investments
The Company's short-term investments are comprised of debt securities, all
classified as trading securities, which are carried at their fair value based
upon the quoted market prices of those investments. Accordingly, net realized
and unrealized gains and losses on trading securities are included in net
earnings.
Long-Term Debt
The carrying amount approximates fair value based on the borrowing rates
currently available to the Company for bank loans with similar terms and average
maturities.
Interest Rate Cap Agreements
The Company has entered into several interest rate protection agreements
which expire at various dates through February 1999. The agreements protect
outstanding floating rate debt at varying amounts ranging from $47,000,000 in
1996 to $33,000,000 in 1999. Under the agreements, the Company is reimbursed
when actual interest rates exceed a limit, as defined. The limit, based
primarily upon the 90-day LIBOR, ranges from 6.5% to 8% over the protection
period and certain of the agreements limit the reimbursement if actual LIBOR
exceeds a specified rate. The fair value of the interest rate cap agreements is
the amount at which they could be settled, based on estimates obtained from
brokers.
The asset and (liability) amounts recorded in the balance sheet and the
estimated fair values of financial instruments at December 31, 1995 and 1996 and
June 30, 1997 consisted of the following:
<TABLE>
<CAPTION>
CARRYING FAIR
AMOUNT VALUE
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
December 31, 1995:
Cash and cash equivalents................................. $ 11,147 $ 11,147
Long-term debt............................................ (111,002) (111,002)
Interest rate cap agreements.............................. 228 0
December 31, 1996:
Cash and cash equivalents................................. $ 1,973 $ 1,973
Short-term investments.................................... 8,520 8,520
Long-term debt............................................ (95,983) (95,983)
Interest rate cap agreements.............................. 309 0
June 30, 1997:
Cash and cash equivalents................................. $ 4,409 $ 4,409
Short-term investments.................................... 8,821 8,821
Long-term debt............................................ (105,234) (105,234)
Interest rate cap agreements.............................. 209 0
</TABLE>
F-11
<PAGE> 56
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ACCRUED LIABILITIES
Accrued liabilities consist of the following at December 31, 1995 and 1996
and June 30, 1997:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- JUNE 30,
1995 1996 1997
------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Wages and benefits...................................... $14,540 $12,566 $15,274
Claims and insurance reserves........................... 9,649 13,145 14,844
Other................................................... 3,380 4,636 7,315
------- ------- -------
$27,569 $30,347 $37,433
======= ======= =======
</TABLE>
CLAIMS AND INSURANCE RESERVES
In the United States, the Company retains liability up to $500,000 for each
claim for automobile, workers' compensation, and general liability, including
personal injury and property damage claims. In addition to the $500,000 per
occurrence deductible for automobile liability, there is a $250,000 aggregate
deductible for those claims which exceed the $500,000 per occurrence deductible.
In addition, the Company retains liability up to $250,000 for each cargo damage
claim. In Canada, the Company retains liability up to CDN $100,000 for each
claim for personal injury, property damage, and cargo damage. The estimated
costs of all known and potential losses are accrued by the Company. In the
opinion of management, adequate provision has been made for all incurred claims.
Subsequent to December 31, 1996, the Company increased its liability up to
$650,000 for each claim for workers' compensation. The Company also increased
its aggregate deductible for automobile liability to $500,000 for those claims
which exceed the per occurrence deductible. These changes are in effect for the
fiscal year beginning January 1, 1997.
INCOME TAXES
The Company follows the practice of providing for income taxes based on
SFAS No. 109, "Accounting for Income Taxes." SFAS No. 109 requires recognition
of deferred tax liabilities and assets for the expected future tax consequences
of events that have been included in the financial statements or tax returns
(Note 4).
EARNINGS PER SHARE
Earnings per share are calculated by dividing net income by the weighted
average number of common shares outstanding for the years presented. The
dilutive effect of equivalent shares derived from stock options and restricted
stock was less than 3% for the years ended December 31, 1995 and 1996 and for
the six months ended June 30, 1996 and 1997 (there were no stock options or
restricted stock outstanding during 1994), and therefore, the equivalent shares
were not included in the computation of earnings per share.
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings per Share." This new statement will not result in changes to the
Company's earnings per share for the first six months of 1997 or prior years.
RECLASSIFICATION
Certain amounts in the December 31, 1994, 1995, and 1996 financial
statements have been reclassified to conform to the current period presentation.
F-12
<PAGE> 57
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INTERIM UNAUDITED DATA FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997
In the opinion of management, the unaudited condensed consolidated
financial statements contain all of the normal and recurring adjustments
necessary to present fairly the consolidated financial position of the Company
and its subsidiaries at June 30, 1997 and the consolidated results of operations
and cash flows of the Company and its subsidiaries for the six months ended June
30, 1996 and 1997.
4. INCOME TAXES
For all periods presented, the accompanying financial statements reflect
provisions for income taxes computed in accordance with the requirements of SFAS
No. 109.
The following summarizes the components of the income tax provision for the
years ended December 31, 1994, 1995, and 1996:
<TABLE>
<CAPTION>
1994 1995 1996
------ ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal................................................ $3,991 $ 571 $ 369
State.................................................. 607 177 269
Foreign................................................ 325 1,989 932
Deferred:
Federal................................................ 3,599 3,371 4,365
State.................................................. 630 422 646
Foreign................................................ 241 (2,308) (3,024)
------ ------- -------
Total income tax provision..................... $9,393 $ 4,222 $ 3,557
====== ======= =======
</TABLE>
For the six months ended June 30, 1996 and 1997, the Company recorded an
income tax provision of $2,504 and $2,688, respectively.
The provision for income taxes differs from the amounts computed by
applying federal statutory rates due to the following for the years ended
December 31, 1994, 1995, and 1996:
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Provision computed at the federal statutory rate........... $8,018 $3,525 $2,883
State income taxes, net of federal income tax benefit...... 943 415 604
Insurance premiums, net of recovery........................ 42 54 (115)
Earnings in jurisdictions taxed at rates different from the
statutory U.S. federal rate.............................. 0 (252) (494)
Other, net................................................. 390 480 679
------ ------ ------
Income tax provision....................................... $9,393 $4,222 $3,557
====== ====== ======
</TABLE>
F-13
<PAGE> 58
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax effect of significant temporary differences representing deferred
tax assets and liabilities at December 31, 1995 and 1996 is as follows:
<TABLE>
<CAPTION>
1995 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Noncurrent deferred tax assets (liabilities):
Tax carryforwards......................................... $ 1,775 $ 3,623
Postretirement benefits................................... 1,535 1,501
Depreciation and amortization............................. (10,085) (13,823)
Other, net................................................ 1,214 1,212
-------- --------
Net noncurrent deferred tax liabilities........... (5,561) (7,487)
-------- --------
Current deferred tax assets (liabilities):
Tires on tractors and trailers............................ (2,244) (2,615)
Liabilities not currently deductible...................... 3,881 2,470
Other, net................................................ (511) 498
-------- --------
Net current deferred tax assets................... 1,126 353
-------- --------
Net deferred tax liabilities...................... $ (4,435) $ (7,134)
======== ========
</TABLE>
The Company has certain tax carryforwards available to offset future income
taxes consisting of net operating losses that expire from 2002 to 2012, foreign
tax credits that expire from 2001 to 2002, and alternative minimum tax credits
that have no expiration dates.
Management believes that a valuation allowance is not considered necessary
based upon the Company's earnings history, the projections for future taxable
income, and other relevant considerations over the periods during which the
deferred tax assets are deductible.
5. LEASE COMMITMENTS
RELATED PARTIES
Prior to December 1995, the Company leased automobiles and service trucks
from a related party under leases generally having one-year to three-year lease
terms at fixed monthly rental rates. In addition, the Company leases office
space from a related party under a lease which expires in 2003. Rental expenses
under these noncancellable leases amounted to approximately $1,398,000 in 1994,
$1,652,000 in 1995, and $1,030,000 in 1996. In the opinion of management, the
terms of these leases are as favorable as those which could be obtained from
unrelated lessors.
UNRELATED PARTIES
The Company leases equipment and certain terminal facilities from unrelated
parties under noncancellable operating lease agreements which expire in various
years through 2003. Rental expenses under these leases amounted to approximately
$454,000, $1,796,000, and $3,245,000 in 1994, 1995, and 1996, respectively.
The Company also leases certain terminal facilities and revenue equipment
from unrelated parties under cancelable leases (i.e., month-to-month terms). The
total rental expenses under these leases were approximately $1,973,000,
$1,965,000, and $2,142,000 for the years ended December 31, 1994, 1995, and
1996, respectively.
F-14
<PAGE> 59
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Future minimum rental commitments under all noncancellable operating lease
agreements, excluding lease agreements that expire within one year, are as
follows as of December 31, 1996:
<TABLE>
<CAPTION>
RELATED
PARTY OTHER TOTAL
------- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C>
1997...................................................... $1,061 $2,840 $ 3,901
1998...................................................... 1,093 2,563 3,656
1999...................................................... 1,126 1,750 2,876
2000...................................................... 1,159 812 1,971
2001...................................................... 1,194 618 1,812
Thereafter................................................ 1,540 1,052 2,592
------ ------ -------
Total........................................... $7,173 $9,635 $16,808
====== ====== =======
</TABLE>
6. LONG-TERM DEBT
Long-term debt consisted of the following at December 31, 1995 and 1996 and
June 30, 1997:
<TABLE>
<CAPTION>
DECEMBER 31
------------------ JUNE 30,
1995 1996 1997
-------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Revolving credit and term loan agreement.............. $100,000 $49,348 $ 59,737
Senior subordinated notes............................. 0 40,000 40,000
Floating rate installment note payable with interest
at LIBOR plus 2.25% (8.48% at December 31, 1996).... 8,909 6,635 5,497
Fixed rate installment note payable bearing interest
at 10%.............................................. 2,093 0 0
-------- ------- --------
111,002 95,983 105,234
Less current maturities of long-term debt............. (4,368) (2,275) (8,248)
-------- ------- --------
$106,634 $93,708 $ 96,986
======== ======= ========
</TABLE>
In February 1996, the Company issued $40,000,000 of Senior Subordinated
Notes ("Subordinated Notes") through a private placement. The Subordinated Notes
mature February 1, 2003 and bear interest at 12% annually. Proceeds from the
Subordinated Notes were used to reduce borrowings under the Company's revolving
credit and term loan agreement (the "Agreement"). In connection with the
issuance of the Subordinated Notes, the Company refinanced the Agreement (the
"Refinancing") to provide for the Subordinated Notes. In addition, the floating
rate installment note payable was amended and refinanced to allow for the Senior
Subordinated Notes, and the interest rate was changed from prime plus 2% to the
LIBOR plus 2.25%.
The Agreement enables the Company to borrow up to the lesser of
$130,000,000 or the borrowing base amount, as defined in the Agreement. After
the Refinancing, annual commitment fees are .375% of the undrawn portion of the
commitment. Amounts outstanding under the revolving portion of the Agreement,
after giving consideration to the Refinancing, mature February 1998, subject to
one-year extensions, at which time the balance outstanding converts into a term
loan which matures four years after the maturity date of the revolving portion
of the Agreement. The interest rate for the Agreement is, at the Company's
option, either (1) the bank's base rate, as defined, or (2) the bank's
Eurodollar rate, as defined, as determined at the date of each borrowing, plus
an applicable margin.
F-15
<PAGE> 60
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Agreement is unsecured and contains restrictive covenants which, among
other things, limit indebtedness and distributions, require certain cash flow
and leverage ratios to be maintained, and require a minimum consolidated
tangible net worth, as defined. After the Refinancing, and assuming that the
extension of the revolving portion of the Agreement is not exercised, future
maturities of long-term debt are as follows at December 31, 1996:
<TABLE>
<CAPTION>
IN THOUSANDS
------------
<S> <C>
1997...................................................... $ 2,275
1998...................................................... 12,144
1999...................................................... 11,956
2000...................................................... 9,870
2001...................................................... 7,403
Thereafter................................................ 52,335
-------
$95,983
=======
</TABLE>
At December 31, 1996, the weighted average interest rate on borrowings
under the revolving credit agreement was 7.3%, and approximately $8,520,000 was
committed under letters of credit. At December 31, 1996, the Company had
available borrowings under the Agreement of approximately $48,000,000.
Property and equipment with a net book value of approximately $10,348,000
at December 31, 1996 are secured as collateral under an installment note
payable.
7. EMPLOYEE BENEFITS
PENSION PLANS
The Company maintains the Allied Defined Benefit Pension Plan, a trusteed
noncontributory defined benefit pension plan for management and office personnel
in the United States, and the Pension Plan for Employees of Auto Haulaway, Inc.
and Associated Companies for management and office personnel in Canada (the
"Plans"). Under the Plans, benefits are paid to eligible employees upon
retirement based primarily on years of service and compensation levels at
retirement. Contributions to the Plans reflect benefits attributed to employees'
services to date and services expected to be rendered in the future. The
Company's funding policy is to contribute annually at a rate that is intended to
fund future service benefits as a level percentage of pay and past service
benefits over a 30-year period.
The following table sets forth the Plans' status and amounts recognized in
the Company's balance sheets as of December 31, 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested benefits
of $15,046 and $16,444 in 1995 and 1996,
respectively........................................... $15,349 $16,810
======= =======
Projected benefit obligation................................ $19,609 $21,438
Plan assets at fair value................................... 17,106 19,052
------- -------
Projected benefit obligation in excess of plan assets....... (2,503) (2,386)
Unrecognized net loss....................................... 3,180 2,787
Unrecognized prior service cost............................. (508) (472)
Unrecognized net transition asset being recognized over
approximately 15 years.................................... (312) (270)
------- -------
Accrued pension cost recognized in the consolidated
balance sheets......................................... $ (143) $ (341)
======= =======
</TABLE>
F-16
<PAGE> 61
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The net periodic pension cost consisted of the following components for the
years ended December 31, 1994, 1995, and 1996:
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost for benefits earned during the period...... $ 826 $ 732 $ 993
Interest cost on projected benefit obligation........... 972 1,336 1,523
Actual (gain) loss on plan assets....................... 69 (2,522) (2,226)
Net amortization and deferral of actuarial gains and
losses................................................ (1,149) 1,169 713
------- ------- -------
Net periodic pension cost............................... $ 718 $ 715 $ 1,003
======= ======= =======
</TABLE>
The following assumptions were used:
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Weighted average discount rate............................. 8.5% 7.5% 7.75%
Increase in future compensation levels..................... 3.5-6.0 3.5-6.0 3.5-6.0
Expected long-term rate of return on assets -- United
States................................................... 10.0 10.0 10.0
Expected long-term rate of return on assets -- Canada...... 7.5 7.5 7.5
</TABLE>
At December 31, 1996, plan assets consisted primarily of U.S. and
international corporate bonds and stocks, convertible equity securities, and
U.S. and Canadian government securities.
A substantial number of the Company's employees are covered by
union-sponsored, collectively bargained, multi-employer pension plans. The
Company contributed and charged to expense approximately $8,350,000,
$10,916,000, and $11,444,000 for the years ended December 31, 1994, 1995, and
1996, respectively, for such plans. These contributions are determined in
accordance with the provisions of negotiated labor contracts and are generally
based on the number of man-hours worked.
401(K) PLAN
The Company has a 401(k) plan covering all of its employees in the United
States. Prior to July 1, 1993, the Company did not contribute to this plan;
however, the Company did incur the cost of administering this plan. The
Company's administrative expense for the 401(k) plan was approximately $221,000,
$160,000, and $165,000 in fiscal years 1994, 1995, and 1996, respectively.
Beginning July 1, 1993, the Company contributes the lesser of 3% of participant
wages or $1,000 per year for each nonbargaining unit participant of the plan.
The Company contributed approximately $183,000, $225,000, and $225,000 to
the plan during the years ended December 31, 1994, 1995, and 1996, respectively.
POSTRETIREMENT BENEFIT PLANS
The Company provides certain health care and life insurance benefits for
eligible employees who retired prior to July 1, 1993 and their dependents.
Generally, the medical plan pays a stated percentage of most medical expenses
reduced for any deductibles and payments by government programs or other group
coverage. The life insurance plan pays a lump-sum death benefit based on the
employee's salary at retirement. The plans are unfunded. Employees retiring
after July 1, 1993 are not entitled to any postretirement medical or life
insurance benefits.
F-17
<PAGE> 62
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table sets forth the status of the plan reconciled to the
accrued postretirement benefit cost recognized in the Company's balance sheets
at December 31, 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
------ ------
(IN THOUSANDS)
<S> <C> <C>
Accumulated postretirement benefit obligation, retirees..... $4,111 $3,586
Unrecognized net gain (loss)................................ (155) 338
------ ------
Accrued postretirement benefit cost......................... 3,956 3,924
Less current portion........................................ (258) (303)
------ ------
$3,698 $3,621
====== ======
</TABLE>
Net periodic benefit cost for 1994, 1995, and 1996 included the following
components:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost of benefits earned............................. $ 0 $ 0 $ 0
Interest cost on accumulated postretirement benefit
obligation................................................ 325 308 260
---- ---- ----
Net periodic postretirement benefit cost.................... $325 $308 $260
==== ==== ====
</TABLE>
Assumptions used in the computation of the accumulated postretirement
benefit obligation and net periodic benefit cost are as follows:
<TABLE>
<CAPTION>
1994 1995 1 996
----- ----- -----
<S> <C> <C> <C>
Discount rate............................................... 8.5% 7.5% 7.75%
Initial health care cost trend rate......................... 12.5 11.0 10.25
Ultimate health care cost trend rate........................ 5.5 5.5 5.5
Year ultimate health care cost trend rate reached........... 2003 2003 2003
</TABLE>
If the health care cost trend rate were increased 1%, the accumulated
postretirement benefit obligation as of December 31, 1996 would have increased
by approximately $177,000. The effect of this change on the periodic
postretirement benefit cost for 1996 would be approximately $13,000.
A substantial number of the Company's employees are covered by
union-sponsored, collectively bargained, multi-employer health and welfare
benefit plans. The Company contributed and charged to expense approximately
$11,700,000, $13,723,000, and $14,811,000 in 1994, 1995, and 1996, respectively,
in connection with these plans. These required contributions are determined in
accordance with the provisions of negotiated labor contracts and are for both
active and retired employees.
8. COMMITMENTS AND CONTINGENCIES
The Company is involved in various litigation and environmental matters
relating to employment practices, damages, and other matters arising from
operations in the ordinary course of business. In the opinion of management, the
ultimate disposition of these matters will not have a material adverse effect on
the Company's financial position or results of operations.
The Company has entered into employment agreements with certain executive
officers of the Company. The agreements, which are substantially similar,
provide for compensation to the officers in the form of annual base salaries and
bonuses based on earnings. The employment agreements also provide for severance
benefits upon the occurrence of certain events, including a change in control,
as defined.
F-18
<PAGE> 63
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. REVENUES FROM MAJOR CUSTOMERS
Substantially all of the Company's trade receivables and revenues are
realized through the automotive industry.
In 1994, 1995, and 1996, approximately 77%, 80%, and 82%, respectively, of
the Company's revenues were derived from three customers, one of which, Ford
Motor Company ("Ford"), accounted for approximately 58%, 52%, and 53% of
revenues, respectively.
The Company had accounts receivable from Ford of approximately $8,081,000
and $8,964,000 at December 31, 1995 and 1996, respectively.
10. INDUSTRY SEGMENT AND GEOGRAPHIC INFORMATION
The Company operates in one industry segment: transporting automobiles and
light trucks from manufacturing plants, ports, auctions, and railway
distribution points to automotive dealerships. Prior to the acquisition of Auto
Haulaway on October 31, 1994, the Company only operated in the United States.
Auto Haulaway operates in Canada. Geographic financial information as of
December 31, 1995 and 1996 and June 30, 1997 and for the years ended December
31, 1994, 1995, and 1996 and the six months ended June 30, 1996 and 1997 is as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------------ -------------------
1994 1995 1996 1996 1997
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues:
United States................. $274,293 $258,038 $264,909 $133,841 $133,165
Canada........................ 22,943 123,426 127,638 66,724 75,804
-------- -------- -------- -------- --------
$297,236 $381,464 $392,547 $200,565 $208,969
======== ======== ======== ======== ========
Operating income (loss):
United States................. $ 27,141 $ 19,821 $ 19,129 $ 9,143 $ 7,678
Canada........................ 1,590 1,100 (534) 1,912 3,772
-------- -------- -------- -------- --------
$ 28,731 $ 20,921 $ 18,595 $ 11,055 $ 11,450
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- JUNE 30,
1995 1996 1997
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Identifiable assets:
United States..................................... $136,948 $133,618 $152,734
Canada............................................ 77,738 77,465 75,960
-------- -------- --------
$214,686 $211,083 $228,694
======== ======== ========
</TABLE>
11. STOCKHOLDERS' EQUITY
The Company has authorized 5,000,000 shares of preferred stock with no par
value. No shares have been issued, and therefore, there were no shares
outstanding at December 31, 1995 and 1996. The board of directors has the
authority to issue these shares and to fix dividends, voting and conversion
rights, redemption provisions, liquidation preferences, and other rights and
restrictions.
In addition, the Company adopted a long-term incentive plan which allows
the issuance of grants or awards of incentive stock options, restricted stock,
stock appreciation rights, performance units, and performance shares to
employees and directors of the Company to acquire up to 400,000 shares of the
Company's common stock.
F-19
<PAGE> 64
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
During December 1996, the Company granted 85,000 shares of restricted stock
to certain employees of the Company. In connection with the award of the
restricted stock, the Company recorded $680,000 of unearned compensation in the
accompanying balance sheets which will be amortized over five years, the vesting
period of the restricted stock.
In addition, the Company has granted nonqualified stock options under the
long-term incentive plan. Options granted become exercisable after one year in
20% or 33 1/3% increments per year and expire ten years from the date of the
grant.
No restricted stock or stock options were issued during the six months
ended June 30, 1997.
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
OPTION PRICE EXERCISE
SHARES (PER SHARE) PRICE
-------- ------------ ---------
<S> <C> <C> <C>
Outstanding as of January 1, 1995........................ 8,550 $ 11.75 $11.75
Granted................................................ 128,500 9.50 9.50
Exercised.............................................. 0 N/A N/A
Lapsed................................................. 0 N/A N/A
-------- ------------ ------
Outstanding as of December 31, 1995...................... 137,050 $9.50-$11.75 $ 9.64
Granted................................................ 34,000 9.00 9.00
Exercised.............................................. 0 N/A N/A
Lapsed................................................. 0 N/A N/A
-------- ------------ ------
Outstanding as of December 31, 1996...................... 171,050 $9.00-$11.75 $ 9.51
======== ============ ======
</TABLE>
<TABLE>
<CAPTION>
1995 1996
---------- --------
<S> <C> <C>
Options exercisable at year-end............................. 2,850 41,867
Weighted average exercise price of options exercisable at
year-end.................................................. $ 11.75 $ 9.81
Weighted average grant-date fair value of options granted
during the year........................................... $1,220,750 $306,000
</TABLE>
The weighted average remaining contractual life of options outstanding at
December 31, 1996 was 9.2 years.
The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation," but applies Accounting Principles
Board Opinion No. 25 and related interpretations in accounting for the long-term
incentive plan. If the Company had elected to recognize compensation cost for
the long-term incentive plan based on the fair value at the grant dates for
awards under the plan, consistent with the method prescribed by SFAS No. 123,
net income and earnings per share would have been changed to the pro forma
amounts indicated below at December 31, 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
------ ------
(IN THOUSANDS,
EXCEPT PER SHARE
DATA)
<S> <C> <C>
Net income:
As reported............................................... $6,146 $3,986
Pro forma................................................. 6,136 3,844
Earnings per share:
As reported............................................... $ 0.80 $ 0.52
Pro forma................................................. 0.79 0.50
</TABLE>
The fair value of the Company's stock options used to compute pro forma net
income and earnings per share disclosures is the estimated present value at
grant date using the Black-Scholes
F-20
<PAGE> 65
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
option pricing model with the following weighted average assumptions for 1995
and 1996: dividend yield of 0%, expected volatility of 34%, a risk-free interest
rate of 5.7%, and an expected holding period of five years.
12. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
1995
---------------------------------------
FIRST SECOND THIRD FOURTH
-------- -------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C> <C>
Revenues............................................ $101,062 $102,252 $82,192 $95,958
Operating income.................................... 6,265 7,617 632 6,407
Net income (loss)................................... 2,063 2,848 (1,182) 2,417
Net income (loss) per share......................... $ 0.27 $ 0.37 $ (0.15) $ 0.31
Average shares outstanding.......................... 7,725 7,725 7,725 7,725
Stock prices:
High.............................................. $ 12.500 $ 11.000 $11.750 $10.000
Low............................................... 9.750 8.500 7.250 7.375
</TABLE>
<TABLE>
<CAPTION>
1996
----------------------------------------
FIRST(1) SECOND THIRD FOURTH
-------- -------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues............................................ $93,396 $107,169 $87,609 $104,373
Operating income.................................... 3,090 7,965 987 6,553
Income (loss) before extraordinary item(1).......... 360 3,098 (936) 2,399
Income (loss) per share before extraordinary
item(1)........................................... 0.05 0.40 (0.12) 0.31
Net income (loss)................................... (575) 3,098 (936) 2,399
Net income (loss) per share......................... $ (0.07) $ 0.40 $ (0.12) $ 0.31
Average shares outstanding.......................... 7,725 7,725 7,725 7,725
Stock prices:
High.............................................. $ 9.875 $ 10.500 $10.625 $ 10.500
Low............................................... 7.750 7.750 8.375 7.000
</TABLE>
<TABLE>
<CAPTION>
1997
------------------
FIRST SECOND
------- --------
(IN THOUSANDS,
EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
Revenues.................................................... $96,393 $112,576
Operating income............................................ 2,806 8,644
Net income.................................................. 198 3,513
Net income per share........................................ $ 0.03 $ 0.45
Average shares outstanding.................................. 7,725 7,725
Stock prices:
High...................................................... $ 8.250 $ 11.125
Low....................................................... 6.250 5.500
</TABLE>
- ---------------
(1) During the first quarter of 1996, the Company recorded an extraordinary loss
on extinguishment of debt of approximately $935,000, net of taxes.
F-21
<PAGE> 66
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. SUBSEQUENT EVENTS
KAR-TAINER INTERNATIONAL LIMITED ("KAR-TAINER")
In April 1997, the Company completed the acquisition of the stock of
Kar-Tainer for approximately $13,100,000 and Kar-Tainer became a wholly-owned
subsidiary of Axis Group. Kar-Tainer, with offices in Bermuda, United States,
London and South Africa, is a leader in the containerized shipping of vehicles.
As a result of the acquisition of Kar-Tainer, the Company recorded goodwill of
approximately $12,677,000 which will be amortized over 30 years.
RYDER AUTOMOTIVE CARRIER SERVICES, INC. AND RC MANAGEMENT CORP. (COLLECTIVELY,
"RYDER")
On September 30, 1997, the Company completed the acquisition of Ryder from
Ryder System, Inc. ("Ryder System") for approximately $114,500,000 in cash (the
"Acquisition"). The Company believes that the Acquisition is consistent with the
Company's growth strategy to increase its market share of the North American
automotive carrier industry while expanding its range of services and
capabilities.
The Acquisition has been accounted for under the purchase method, and,
accordingly, the results of operations for Ryder will be included with those of
the Company for periods subsequent to the date of the Acquisition.
SENIOR NOTE OFFERING
On September 30, 1997, the Company issued and sold $150,000,000 of 8 5/8%
senior notes (the "Notes") through a private placement. The Company raised
approximately $144,650,000, net of discounts and expenses, through the issuance
of the Notes. The net proceeds from the Notes were used to fund the Acquisition,
pay related fees and expenses, and reduce amounts owed on outstanding Company
debt. The Company's obligations under the Notes are guaranteed by substantially
all of the subsidiaries of the Company (the "Guarantors"). Separate financial
statements of the Guarantors are not provided herein as (i) the Guarantors are
jointly and severally liable for the Company's obligations under the Notes, (ii)
the subsidiaries which are not Guarantors are inconsequential to the
consolidated operations of the Company and its subsidiaries and (iii) the net
assets and earnings of the Guarantors are substantially equivalent to the net
assets and earnings of the consolidated entity as reflected in these
consolidated financial statements.
PRO FORMA INFORMATION
The unaudited pro forma combined information below presents the combined
results of operations as if the Acquisition and the Note offering had occurred
on January 1, 1996 and balance sheet information as if the Acquisition and the
Note offering had occurred as of June 30, 1997. The unaudited pro forma combined
information, based upon the historical consolidated financial statements of the
Company and Ryder, assumes an acquisition cost of approximately $114,500,000 and
further assumes that an estimated $56,605,000 excess of acquisition cost over
the net value of Ryder's tangible assets is allocated to goodwill with a useful
life of 40 years.
The unaudited pro forma combined information is not necessarily indicative
of the results of operations of the combined company had the acquisition
occurred on January 1, 1996 or financial position had the acquisition occurred
on June 30, 1997, nor is it necessarily indicative of future results or
financial position.
F-22
<PAGE> 67
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following proforma data is unaudited and is in thousands except per
share data.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
1996 1997
------------ --------------
<S> <C> <C>
Statement of Income Data:
Revenues.................................................. $960,661 $524,665
Net income before extraordinary item...................... 5,674 10,097
Earnings per share........................................ 0.73 1.31
</TABLE>
<TABLE>
<CAPTION>
JUNE 30,
1997
--------
<S> <C>
Balance Sheet Data:
Total Assets.............................................. $540,000
Borrowings................................................ 231,789
Stockholders' equity...................................... 60,157
</TABLE>
NEW CREDIT FACILITY
Concurrent with the closing of the Note offering, the Company closed on a
new credit facility (the "New Credit Facility") which allows the Company to
borrow under a revolving line of credit, and issue letters of credit, up to the
lesser of $230,000,000 or a borrowing base amount (as defined in the New Credit
Facility) that is determined based on a defined percentage of the Company's
accounts receivable and equipment. The New Credit Facility matures in 2002, and
the annual commitment fees are due on the undrawn portion of the commitment over
the agreement period. The interest rate for the New Credit Facility is, at the
Company's option, either (i) the bank's Base Rate, as defined, or (ii) the
bank's Eurodollar rate, as defined, as determined at the date of the borrowing,
plus an applicable margin. The Company has the right to repay the outstanding
debt under the New Credit Facility, in whole or in part, without penalty or
premium subject to a limitation that prepayment of Eurodollar rate loans are
subject to a breakage penalty if prepaid other than on the last day of the
applicable interest period. The Company is subject to mandatory prepayment with
a defined percentage of net proceeds from certain asset sales, new debt
offerings, and new equity offerings. The revolving line of credit allows the
Company to repay and reborrow so long as there is no event of default.
Borrowings under the New Credit Facility are secured by a first priority
security interest on assets of the Company and certain of its subsidiaries other
than real estate but including a pledge of stock of certain subsidiaries. In
addition, the Guarantors of the Notes are also Guarantors of the New Credit
Facility.
The New Credit Facility sets forth a number of affirmative, negative, and
financial covenants binding on the Company. The negative covenants limit the
ability of the Company to, among other things, incur debt, incur liens, make
investments, make dividend or other distributions, or enter into any merger or
other consolidation transaction. The financial covenants include the maintenance
of a minimum consolidated tangible net worth, compliance with a leverage ratio
and a coverage ratio, and limitations on capital expenditures.
THE OFFERING
The Company plans to proceed with the Offering as described elsewhere in
this Prospectus with the anticipation of raising approximately $37.7 million in
capital, net of underwriting discounts and estimated expenses. The Company
anticipates using the net proceeds to pay off the Subordinated Notes (Note 6).
There can be no assurance that the Offering can be completed at the anticipated
price, or at all. There are significant potential risks associated with the
purchase of shares in the Offering. See "Risk Factors" elsewhere in this
Prospectus related to the proposed Offering for a discussion of these risks.
F-23
<PAGE> 68
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholder of
Ryder Automotive Carrier Services, Inc.:
We have audited the accompanying consolidated balance sheets of Ryder
Automotive Carrier Services, Inc. and subsidiaries as of December 31, 1995 and
1996, and the related consolidated statements of operations, cash flows and
shareholder's equity for each of the years in the three-year period ended
December 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Ryder
Automotive Carrier Services, Inc. and subsidiaries as of December 31, 1995 and
1996, and the results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 1996, in conformity with
generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Miami, Florida
February 28, 1997
F-24
<PAGE> 69
RYDER AUTOMOTIVE CARRIER SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- JUNE 30,
1995 1996 1997
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash..................................................... $ 4,558 $ 1,441 $ 6,047
Receivables, net......................................... 43,945 39,404 46,396
Inventories.............................................. 11,012 4,594 3,624
Deferred income taxes.................................... 5,653 7,620 6,509
Prepaid expenses and other current assets................ 13,768 12,813 13,928
-------- -------- --------
Total current assets............................. 78,936 65,872 76,504
Revenue earning equipment, net............................. 137,967 142,535 134,493
Operating property and equipment, net...................... 37,326 28,641 26,806
Goodwill................................................... 40,113 43,266 42,550
Other assets............................................... 11,955 13,200 10,862
-------- -------- --------
Total Assets..................................... $306,297 $293,514 $291,215
======== ======== ========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable......................................... $ 25,531 $ 22,700 $ 21,246
Accrued expenses and other current liabilities........... 53,116 59,452 57,657
-------- -------- --------
Total current liabilities........................ 78,647 82,152 78,903
-------- -------- --------
Deferred income taxes...................................... 28,685 26,992 26,300
Other non-current liabilities.............................. 15,924 19,574 20,773
Advances (to) from Ryder................................... 2,692 (2,154) 647
Shareholder's equity:
Common stock and additional paid-in capital, $1 par
value, 7,500 shares authorized, 1,000 shares issued
and outstanding....................................... 157,335 157,384 157,384
Retained earnings........................................ 25,074 11,640 9,314
Translation adjustment................................... (2,060) (2,074) (2,106)
-------- -------- --------
Total shareholder's equity....................... 180,349 166,950 164,592
-------- -------- --------
Total Liabilities and Shareholder's Equity....... $306,297 $293,514 $291,215
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-25
<PAGE> 70
RYDER AUTOMOTIVE CARRIER SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------ -------------------
1994 1995 1996 1996 1997
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue................................. $645,402 $594,446 $583,292 $297,945 $315,156
-------- -------- -------- -------- --------
Operating Expense:
Salaries, wages and benefits.......... 321,363 293,145 301,276 153,981 166,290
Operating supplies and expenses....... 99,569 90,331 95,178 49,437 46,146
Purchased transportation.............. 61,988 63,596 62,670 30,853 38,080
Insurance and claims.................. 28,384 28,143 37,569 15,754 14,388
Depreciation and amortization......... 37,262 40,700 38,838 20,608 19,818
Rent expense.......................... 2,525 2,914 3,291 1,633 1,470
Communications and utilities.......... 4,651 4,934 5,727 2,823 3,344
Operating taxes and licenses.......... 27,247 24,715 23,976 12,444 11,136
Restructuring charges................. -- -- 18,328 4,174 --
Other operating expense............... 12,563 9,730 13,628 5,616 4,643
-------- -------- -------- -------- --------
Total operating expense....... 595,552 558,208 600,481 297,323 305,315
-------- -------- -------- -------- --------
Operating income (loss)....... 49,850 36,238 (17,189) 622 9,841
-------- -------- -------- -------- --------
Other Income:
Miscellaneous income, net............. 310 4,504 2,470 1,269 738
Interest income (expense)............. (82) 2,402 29 697 894
-------- -------- -------- -------- --------
228 6,906 2,499 1,966 1,632
-------- -------- -------- -------- --------
Earnings (Loss) Before Income Taxes..... 50,078 43,144 (14,690) 2,588 11,473
Provision (Benefit) For Income Taxes.... 20,428 17,777 (1,256) 1,163 3,818
-------- -------- -------- -------- --------
Net Earnings (Loss)..................... $ 29,650 $ 25,367 $(13,434) $ 1,425 $ 7,655
======== ======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-26
<PAGE> 71
RYDER AUTOMOTIVE CARRIER SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON
STOCK
AND
ADDITIONAL RETAINED TRANSLATION
PAID-IN CAPITAL EARNINGS ADJUSTMENT TOTAL
--------------- -------- ----------- --------
<S> <C> <C> <C> <C>
At December 31, 1993.......................... $139,640 $ 24,794 $ (1,744) $162,690
Net earnings................................ -- 29,650 -- 29,650
Dividend.................................... (13,229) (53,057) -- (66,286)
Currency adjustment......................... -- -- (558) (558)
-------- -------- -------- --------
At December 31, 1994.......................... 126,411 1,387 (2,302) 125,496
Net earnings................................ -- 25,367 -- 25,367
Dividend.................................... -- (1,680) -- (1,680)
Capital contribution........................ 30,924 -- -- 30,924
Currency adjustment......................... -- -- 242 242
-------- -------- -------- --------
At December 31, 1995.......................... 157,335 25,074 (2,060) 180,349
Net loss.................................... -- (13,434) -- (13,434)
Capital contribution........................ 49 -- -- 49
Currency adjustment......................... -- -- (14) (14)
-------- -------- -------- --------
At December 31, 1996.......................... 157,384 11,640 (2,074) 166,950
Net earnings................................ -- 7,655 -- 7,655
Dividend.................................... -- (9,981) -- (9,981)
Currency adjustment......................... -- -- (32) (32)
-------- -------- -------- --------
At June 30, 1997 (unaudited).................. $157,384 $ 9,314 $ (2,106) $164,592
======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-27
<PAGE> 72
RYDER AUTOMOTIVE CARRIER SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------ -------------------
1994 1995 1996 1996 1997
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss)................... $ 29,650 $ 25,367 $(13,434) $ 1,425 $ 7,655
Depreciation and amortization......... 37,262 40,700 38,838 20,608 19,818
Deferred income tax expense
(benefit).......................... (89) 2,861 362 257 324
Decrease (increase) in receivables.... 6,158 (2,334) 4,541 (12,876) (6,992)
Decrease (increase) in inventories.... (2,912) (2,722) 6,418 4,190 970
Decrease (increase) in prepaid and
other current assets............... (4,267) (600) 955 (1,083) (1,115)
Increase (decrease) in accounts
payable............................ 13,185 (18,610) (2,831) (1,162) (1,454)
Increase (decrease) in accrued
expenses and other liabilities..... (5,651) (9,250) 6,336 (10,556) (1,795)
Increase in other non-current
liabilities........................ 3,157 8,912 3,650 (12,135) 1,199
Other, net............................ (1,826) (6,173) 2,005 2,636 1,910
-------- -------- -------- -------- --------
74,667 38,151 46,840 (8,696) 20,520
Cash flows from investing activities:
Purchases of property and revenue
earning equipment.................. (43,789) (64,563) (45,222) (20,420) (10,035)
Sales of property and revenue earning
equipment.......................... 3,103 11,910 10,011 5,112 1,996
Other, net............................ 2,609 (5,606) 1,926 (637) (663)
-------- -------- -------- -------- --------
(38,077) (58,259) (33,285) (15,945) (8,702)
Cash flows from financing activities:
Net increase (decrease) in advances
from Ryder......................... 29,163 (8,951) (16,721) 23,814 2,769
Dividends............................. (66,286) (1,680) -- -- (9,981)
Capital contributions................. -- 30,924 49 -- --
-------- -------- -------- -------- --------
(37,123) 20,293 (16,672) 23,814 (7,212)
-------- -------- -------- -------- --------
Increase (decrease) in cash............. (533) 185 (3,117) (827) 4,606
Cash at beginning of period........... 4,906 4,373 4,558 4,558 1,441
-------- -------- -------- -------- --------
Cash at end of period................... $ 4,373 $ 4,558 $ 1,441 $ 3,731 $ 6,047
======== ======== ======== ======== ========
Summary of Noncash Activities:
Contribution of goodwill from Ryder... $ -- $ -- $ 7,853 $ 7,853 $ --
Increase in advances from Ryder....... -- -- 7,853 7,853 --
</TABLE>
See accompanying notes to consolidated financial statements.
F-28
<PAGE> 73
RYDER AUTOMOTIVE CARRIER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(INFORMATION AS OF JUNE 30, 1997 AND FOR THE SIX MONTHS ENDED
JUNE 30, 1996 AND 1997 IS UNAUDITED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization. Ryder Automotive Carrier Services, Inc. ("RACS"), a Florida
corporation and a wholly-owned subsidiary of Ryder System, Inc. ("Ryder"), is a
holding company which operates through its wholly-owned subsidiaries. The
principal subsidiaries of RACS are Ryder Automotive Operations, Inc. ("RAOI"),
MCL Ryder Transport, Inc. ("MCL"), a Canadian corporation, QAT, Inc. ("QAT") and
Blazer Truck Lines, Inc. (Blazer). RAOI is principally comprised of Commercial
Carriers, Inc. ("CCI"), Ryder Freight Broker, Inc. and F. J. Boutell Driveaway
Co., Inc. ("Boutell"). CCI, Boutell, QAT and MCL are engaged in the business of
transporting automobiles and light and medium-duty trucks from manufacturing
plants, ports and railway distribution points to other distribution points and
automobile dealers. CCI also manufacturers equipment for RACS's use in the
transportation and delivery of automobiles and trucks. Blazer provided inbound
logistics to the automobile industry and was sold on February 28, 1997 (see Note
19).
Basis of Presentation. The accompanying consolidated financial statements
include the operations, assets and liabilities of Ryder Automotive Carrier
Services, Inc. and subsidiaries (the "Company"). The financial statements do not
include assets and liabilities of Ryder not specifically identifiable to the
Company. Reserves for workers' compensation claims, postretirement benefits
other than pensions, auto and general liability claims which are from $500,000
to $1,000,000 per occurrence and medical and dental claims are maintained by
Ryder. The financial information included herein is not necessarily indicative
of the financial position and results of operations or cash flows that would
have occurred had the Company been an independent stand-alone entity during the
periods presented, nor is it necessarily indicative of future results of the
Company. All significant intercompany accounts and transactions have been
eliminated.
Revenue Recognition. Revenue is recorded by the Company when the vehicles
are dispatched to the dealerships and other distribution points. Estimated
direct costs to complete delivery of freight in-transit are accrued. All other
expenses are recognized as incurred.
Receivables. Receivables consist primarily of trade receivables resulting
from vehicle shipments. Receivables are reduced by amounts considered by
management to be uncollectible based on historical loss experience and review of
the current status of existing receivables.
Inventories. Inventories consist primarily of parts, materials and fuel as
well as inventory related to the manufacturing of trailers and headramps.
Inventories are stated at the lower of cost or market.
Tires in Service. The Company allocates a portion of the acquisition costs
of tractors and trailers to tires in service and amortizes this amount on a
straight-line basis over seven years. The cost of replacement tires and tire
repairs are expensed when incurred.
Revenue Earning Equipment, Operating Property and Equipment and
Depreciation. Revenue earning equipment, principally tractors and trailers, and
operating property and equipment are stated at cost. Provision for depreciation
is computed using the straight-line method on all depreciable assets. Annual
straight-line depreciation rates are 14% for revenue earning equipment, 3% to
10% for buildings and improvements and 14% to 20% for furniture, fixtures and
equipment. Effective January 1, 1995, the estimated residual values used to
calculate the provision for depreciation on certain types of revenue earning
equipment were changed to reflect recent experience. As a result of this change,
depreciation expense was decreased by $2.2 million and $1.2 million for the
years ended December 31, 1995 and 1996, respectively.
F-29
<PAGE> 74
RYDER AUTOMOTIVE CARRIER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Gains on sales of revenue earning equipment, net of vehicle disposition
costs, are reported as reductions of other operating expense and totaled $0.8
million, $2.6 million and $0.1 million for the years ended December 31, 1994,
1995 and 1996, respectively, and $0.1 million for each of the six month periods
ended June 30, 1996 and 1997. Gains on sales of operating property and equipment
are also reflected in other operating expense.
Goodwill. Goodwill is amortized on a straight-line basis over 40 years.
Amortization (included in depreciation and amortization expense) amounted to
approximately $1.3 million for each of the years in the three-year period ended
December 31, 1996. Accumulated amortization was approximately $11.5 million at
December 31, 1995 and 1996, respectively. During 1996, Ryder contributed $7.9
million in goodwill to the Company for acquisitions made in prior years.
Impairment of Long-Lived Assets. Long-lived assets, including goodwill,
used in the Company's operations are reviewed for impairment when circumstances
indicate that the carrying amount of an asset may not be recoverable. The
primary indicators of recoverability are the associated current and forecasted
undiscounted operating cash flows. If management has made a decision to dispose
of an asset or a group of assets, those assets are reported at the lower of
carrying amount or the estimated fair value less costs to sell.
Accrued Insurance and Loss Reserves. The Company participates in Ryder's
overall risk management programs for vehicle and general liability, workers'
compensation, property (including cargo) and other. The major programs are
summarized as follows:
Vehicle and general liability -- The Company has recorded reserves
which reflect the Company's portion of the undiscounted estimated
liabilities up to $500,000 per occurrence (plus allocated loss adjustment
expense) and an estimate of claims incurred but not reported. For exposures
from $500,000 to $1 million per occurrence, the Company is charged a
premium by Ryder based on the Company's loss experience and the related
liability is retained by Ryder. Costs associated with insurance premiums to
third party insurance companies for coverage in excess of $1 million are
charged by Ryder to the Company based on the Company's pro rata share of
Ryder's revenue.
Workers' compensation -- Ryder has recorded reserves which reflect the
Company's portion of the undiscounted estimated workers' compensation
liabilities up to $1 million per injury (plus allocated loss adjustment
expense) and an estimate of claims incurred but not reported. The Company
is billed by Ryder based on actuarial projections of expected losses. For
losses in excess of $1 million per injury, Ryder has third party insurance
coverage, the cost of which is charged by Ryder to the Company based on the
Company's proportionate share of losses up to $1 million. At December 31,
1995 and 1996 and June 30, 1997 the workers' compensation reserves
maintained by Ryder on the Company's behalf were $58.3 million, $47.1
million, and $46.2 million, respectively.
Property, including cargo -- The Company has recorded reserves for
estimated damages to transported vehicles. The accruals for these claims
include both reported claims and an estimate of claims incurred but not
reported for amounts up to $50,000 per occurrence. Damages in excess of
$50,000 per occurrence are insured by a third party insurance company.
Such liabilities, whether recorded as a liability by Ryder or the Company,
are necessarily based on estimates and, while management believes that the
amounts are adequate, there can be no assurance that changes to management's
estimates may not occur due to limitations inherent in the estimation process.
Changes in the estimates of these reserves are charged or credited to income in
the period determined. For reserves recorded by the Company, amounts estimated
to be paid within
F-30
<PAGE> 75
RYDER AUTOMOTIVE CARRIER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
one year have been classified as accrued expenses with the remainder included in
other non-current liabilities.
Income Taxes. The Company has been included in consolidated income tax
filings of Ryder for Federal and state income tax purposes. However, the income
tax provisions included in the accompanying Consolidated Financial Statements
have been determined as if the Company was an independent stand-alone entity
filing separate income tax returns.
Deferred taxes are provided using the asset and liability method for
temporary differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
balances are adjusted for any tax law changes in the periods that include the
enactment date of such changes. See Note 12.
Foreign Currency Translation. The Company's Canadian operations use the
local currency as their functional currency. Assets and liabilities of these
operations are translated at the exchange rates in effect on the balance sheet
date. Items included in the Statements of Operations are translated at the
average exchange rates for the year. The impact of currency fluctuation is
included in shareholder's equity as a translation adjustment.
Use of Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Interim Unaudited Data for the Six Months Ended June 30, 1996 and 1997. In
the opinion of management, the unaudited consolidated financial statements
contain all of the normal and recurring adjustments necessary to present fairly
the consolidated financial position of the Company at June 30, 1997 and the
consolidated results of operations and cash flows of the Company for the six
months ended June 30, 1996 and 1997.
NOTE 2. TRANSACTIONS WITH RYDER
Certain Ryder branch locations provide fuel, vehicle repairs and
maintenance services to the Company. Rates charged to the Company for these
items approximate rates charged to significant Ryder customers for similar items
and reflect the cost plus a mark-up.
The Company participates in Ryder's combined risk management programs for
vehicle and general liability, workers' compensation liability and property
losses and Ryder processes claims related to vehicle and general liability and
workers' compensation. The Company also participates in Ryder's medical and
dental, postretirement and savings plans. See Notes 14 and 15.
Ryder provides various general and administrative services to the Company
including treasury, legal, human resources, accounting and others. Costs for
these services are charged to the Company through a management fee, which is
based on the Company's equity and revenue levels.
The Company's cash and financing needs are managed by Ryder. The
accompanying Consolidated Balance Sheets do not include Ryder's general
corporate debt, which is used to finance the operations of all of Ryder's
business units. However, Ryder allocates its corporate interest expense to each
business unit based upon a target debt to equity ratio. The Company's
shareholder's equity in the Consolidated Balance Sheets has been periodically
adjusted to effect this target debt to equity ratio. Interest expense charged
(or credited) to the Company by Ryder is principally based upon the interest
cost incurred by Ryder for certain of its indebtedness.
F-31
<PAGE> 76
RYDER AUTOMOTIVE CARRIER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Management believes the methods used to determine intercompany charges and
cost allocations are reasonable, however, such costs may not be representative
of those which would be incurred if the Company operated as an independent
stand-alone entity.
Amounts charged and allocated by Ryder and its subsidiaries to the Company
for the above expense items are summarized in the following table:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1994 1995 1996
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Operating expense:
Salaries, wages and benefits:
Medical and dental................................. $ 3,653 $ 2,589 $ 2,615
Postretirement..................................... 1,305 1,139 2,536
Savings plan....................................... 277 368 402
Other.............................................. 1,306 117 118
Operating supplies and expense:
Fuel, repairs and maintenance...................... 23,700 19,094 21,459
Insurance and claims.................................. 24,674 18,754 22,823
Other operating expense:
General and administrative expense................. 721 432 1,542
Management fees.................................... 3,370 3,258 3,098
Interest income (expense)............................... 858 (511) (252)
</TABLE>
NOTE 3. RESTRUCTURING AND OTHER CHARGES
During 1996, the Company implemented several restructuring initiatives in
an effort to reduce costs, improve profitability and align the organizational
structure with the strategic direction of the Company. As a result of the
initiatives, the Company recorded pretax charges in 1996 of $18.3 million which
included restructuring costs of $5.5 million, early retirement costs of $4.2
million, asset write-downs of $6.0 million and other charges of $2.6 million.
The charges reduced net income by $14.4 million. The pre tax charge of $4.2
million related to early retirement costs is included in the results of
operations for the six month period ended June 30, 1996.
The Company's pretax charges included $8.0 million in employee-related
costs, which were primarily related to the planned elimination of approximately
140 positions. This amount included $4.2 million for approximately 60 employees
who retired pursuant to a voluntary early retirement program. The headcount
reductions resulted from consolidating and reorganizing corporate and field
operations and affected employee groups across all levels of the Company. Nearly
50% and 65% of the separations occurred by December 31, 1996 and June 30, 1997,
respectively, with the remaining separations expected to be completed by the end
of 1997.
The Company recorded $7.7 million in estimated closure costs, including
asset write-downs of $6.0 million relating to both anticipated property sales
and the anticipated sale of Blazer Truck Lines, Inc. (See Note 19). The Company
also incurred $2.6 million of other costs, including employee relocation
relating to the implementation of the restructuring.
Management believes that the remaining restructuring liabilities of
approximately $6.0 million and $2.0 million at December 31, 1996 and June 30,
1997, respectively, are adequate to complete its plans and that the liabilities
will be substantially paid by the end of 1997. The additional pension and
postretirement liabilities will be paid in accordance with the provisions of the
existing plans. As
F-32
<PAGE> 77
RYDER AUTOMOTIVE CARRIER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
a result of these actions, and prior to considering the effect of the sale of
the Company discussed in Note 20, earnings are ultimately expected to be
benefited by approximately $9.0 million annually.
NOTE 4. RECEIVABLES
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- JUNE 30,
1995 1996 1997
------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Trade accounts receivable................................... $36,152 $35,706 $39,496
Current portion of owner-operator notes receivable.......... 1,813 2,932 3,097
Other receivables........................................... 6,158 1,507 4,538
------- ------- -------
44,123 40,145 47,131
Allowance for doubtful accounts............................. (178) (741) (735)
------- ------- -------
$43,945 $39,404 $46,396
======= ======= =======
</TABLE>
No bad debt expense was recorded for the year ended December 31, 1994. Bad
debt expense totaled $0.1 million and $0.6 million for the years ended December
31, 1995 and 1996, respectively.
NOTE 5. INVENTORIES
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Trailer manufacturing inventory............................. $ 9,499 $ 3,149
Parts, materials and fuel................................... 1,513 1,445
------- -------
$11,012 $ 4,594
======= =======
</TABLE>
NOTE 6. PREPAID EXPENSES AND OTHER CURRENT ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Prepaid pension............................................. $ 5,876 $ 5,457
Tires in service............................................ 4,037 3,944
Licenses and permits........................................ 1,706 1,410
Operating taxes............................................. 1,002 882
Other....................................................... 1,147 1,120
------- -------
$13,768 $12,813
======= =======
</TABLE>
F-33
<PAGE> 78
RYDER AUTOMOTIVE CARRIER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7. REVENUE EARNING EQUIPMENT, NET
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- JUNE 30,
1995 1996 1997
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Tractors.................................................... $226,505 $226,941 $225,944
Trailers.................................................... 142,858 150,453 147,998
Other....................................................... 966 279 1,349
-------- -------- --------
370,329 377,673 375,291
Accumulated depreciation.................................... (232,362) (235,138) (240,798)
-------- -------- --------
$137,967 $142,535 $134,493
======== ======== ========
</TABLE>
NOTE 8. OPERATING PROPERTY AND EQUIPMENT, NET
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Buildings and improvements.................................. $43,316 $37,227
Furniture, fixtures and equipment........................... 20,265 20,455
Land........................................................ 12,265 8,866
Service vehicles and other.................................. 6,653 3,513
------- -------
82,499 70,061
Accumulated depreciation.................................... (45,173) (41,420)
------- -------
$37,326 $28,641
======= =======
</TABLE>
NOTE 9. OTHER ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Long-term portion of owner-operator notes receivable........ $ 4,035 $ 6,322
Long-term portion of property notes receivable.............. 2,871 2,173
Properties held for sale.................................... 4,845 4,518
Other....................................................... 204 187
------- -------
$11,955 $13,200
======= =======
</TABLE>
F-34
<PAGE> 79
RYDER AUTOMOTIVE CARRIER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 10. ACCRUED EXPENSES AND OTHER LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Vehicle and general liability reserves...................... $20,207 $26,552
Salaries and wages.......................................... 22,760 21,805
Employee benefits........................................... 9,448 6,708
Cargo liability reserves.................................... 5,910 5,782
Operating taxes............................................. 4,255 4,140
Environmental liabilities................................... 543 1,198
Other, including restructuring.............................. 5,917 12,841
------- -------
69,040 79,026
Non-current portion......................................... (15,924) (19,574)
------- -------
Accrued expenses and other liabilities...................... $53,116 $59,452
======= =======
</TABLE>
During 1995 and 1996, the Company released employee benefit reserves of
$9.9 million and $0.8 million, respectively, related to prior year FICA taxes.
NOTE 11. LEASES
The Company leases offices and office equipment under operating lease
agreements. During 1994, 1995 and 1996, rent expense was $3.3 million, $3.2
million and $2.8 million, respectively. Future minimum payments for operating
leases in effect at December 31, 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1997........................................................ $ 891
1998........................................................ 893
1999........................................................ 847
2000........................................................ 766
2001........................................................ 732
Thereafter.................................................. 3,063
------
$7,192
======
</TABLE>
F-35
<PAGE> 80
RYDER AUTOMOTIVE CARRIER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 12. INCOME TAXES
The provision (benefit) for income taxes included the following components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1994 1995 1996
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current tax expense (benefit):
Federal............................................... $18,188 $13,469 $(1,214)
State................................................. 2,472 1,288 (404)
Foreign............................................... (143) 159 --
------- ------- -------
20,517 14,916 (1,618)
------- ------- -------
Deferred tax expense (benefit):
Federal............................................... (621) 1,517 68
State................................................. 355 1,321 334
Foreign............................................... 177 23 (40)
------- ------- -------
(89) 2,861 362
------- ------- -------
Provision (benefit) for income taxes.................... $20,428 $17,777 $(1,256)
======= ======= =======
</TABLE>
A reconciliation of the Federal statutory tax rate with the effective tax
rate follows:
<TABLE>
<CAPTION>
% OF PRETAX INCOME
---------------------
YEAR ENDED
DECEMBER 31,
---------------------
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
Statutory tax rate.......................................... 35.0 35.0 (35.0)
Impact on deferred taxes for changes in tax rates........... 0.6 -- --
State income taxes, net of Federal income tax benefit....... 3.1 4.0 (0.3)
Amortization of goodwill.................................... 0.9 1.0 3.1
Restructuring and other charges............................. -- -- 19.1
Miscellaneous items, net.................................... 1.2 1.2 4.5
----- ----- -----
Effective tax rate.......................................... 40.8 41.2 (8.6)
===== ===== =====
</TABLE>
The lower 1996 effective tax rate is primarily due to the permanent
differences associated with the charge for restructuring and other items.
Additionally, lower income before taxes increased the rate impact of normal,
recurring permanent differences.
As described in Note 1, the Company was wholly-owned by Ryder for all of
the periods presented in the accompanying Consolidated Financial Statements. The
deferred tax assets and liabilities shown below have been determined as though
the Company was a separate company and
F-36
<PAGE> 81
RYDER AUTOMOTIVE CARRIER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
not part of Ryder's consolidated Federal income tax returns. The components of
the net deferred income tax liability were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1995 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Deferred income tax assets:
Accrued insurance and loss reserves....................... $ 9,761 $ 11,091
Accrued compensation and benefits......................... 4,027 3,733
Restructuring and other charges........................... -- 1,622
Miscellaneous accruals and other.......................... 3,656 6,256
-------- --------
17,444 22,702
Valuation allowance......................................... (1,812) (3,490)
-------- --------
Deferred income tax assets........................ 15,632 19,212
-------- --------
Deferred income tax liabilities:
Property and equipment bases differences.................. (32,984) (32,510)
Other items............................................... (5,680) (6,074)
-------- --------
Deferred income tax liabilities................... (38,664) (38,584)
-------- --------
Net deferred income tax liability........................... $(23,032) $(19,372)
======== ========
</TABLE>
A valuation allowance has been established to reduce the income tax
benefits of tax loss carryforwards to amounts expected to be realized.
Income taxes paid totaled $19 million in 1994 and $15 million in 1995.
There were no income tax payments in 1996.
NOTE 13. FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying amounts of the Company's notes receivable, which originate
from the sale of equipment to owner-operators, were $5.8 million and $9.3
million as of December 31, 1995 and 1996, respectively. As of the same dates,
the fair values of the notes receivable were $6.0 million and $9.5 million,
respectively. The fair values were determined from discounted future cash flows
through maturity or expiration using current rates. The fair values of all other
financial instruments approximate their carrying amounts.
NOTE 14. PENSION AND SAVINGS PLANS
The Company sponsors three defined benefit pension plans, covering
substantially all employees not covered by union-administered plans. These plans
generally provide participants with benefits based on years of service and
recent average compensation levels. Funding policy for these plans is to make
contributions based on normal costs plus amortization of unfunded past service
liability but not greater than the maximum allowable contribution deductible for
Federal income tax
F-37
<PAGE> 82
RYDER AUTOMOTIVE CARRIER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
purposes. The majority of the plans' assets are invested in a master trust
which, in turn, is primarily invested in listed stocks and bonds. Total pension
expense was as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1994 1995 1996
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Company-administered plans:
Present value of benefits earned during the year...... $ 1,604 $ 1,203 $ 1,443
Interest cost on projected benefit obligation......... 3,214 3,320 3,755
Return on plan assets:
Actual............................................. (710) (14,145) (8,397)
Deferred........................................... (3,583) 9,669 2,863
Additional expense from early retirement program...... -- -- 2,650
Other, net............................................ (575) (583) (691)
------- ------- -------
(50) (536) 1,623
Union-administered plans................................ 19,625 18,948 20,921
------- ------- -------
Net pension expense..................................... $19,575 $18,412 $22,544
======= ======= =======
</TABLE>
As a part of the Company's restructuring and other profit improvement
initiatives, certain employees accepted early retirement benefits, which
increased 1996 pension expense by $2.7 million.
The following table sets forth the plans' funded status and the Company's
prepaid pension expense:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Plan assets at fair value................................... $66,734 $71,334
Actuarial present value of service rendered to date:
Accumulated benefit obligation, including vested benefits
of $43,819 and $47,770 in 1995 and 1996,
respectively........................................... 44,429 50,107
Additional benefit based on estimated future salary
levels................................................. 2,972 4,225
------- -------
Projected benefit obligation................................ 47,401 54,332
------- -------
Plan assets in excess of projected benefit obligation....... 19,333 17,002
Unrecognized transition amount.............................. (4,311) (3,685)
Other, primarily unrecognized prior service cost and net
gains..................................................... (9,146) (7,860)
------- -------
Prepaid pension expense..................................... $ 5,876 $ 5,457
======= =======
</TABLE>
The following table sets forth the actuarial assumptions used for the
Company's dominant plan:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Discount rate............................................... 8.5% 7.5% 7.5%
Rate of increase in compensation levels..................... 5.0% 5.0% 5.0%
Expected long-term rate of return on plan assets............ 8.5% 8.5% 8.5%
Transition amortization in years............................ 17 17 17
Gain and loss amortization in years......................... 9 9 9
</TABLE>
The Company also contributed to various defined benefit,
union-administered, multi-employer plans for employees under collective
bargaining agreements. The Company contributed and
F-38
<PAGE> 83
RYDER AUTOMOTIVE CARRIER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
charged to expense approximately $19.6 million, $18.9 million, and $20.9 million
for the years ended December 31, 1994, 1995, and 1996, respectively, for such
plans. These contributions are determined in accordance with the provisions of
negotiated labor contracts and are generally based on the number of hours or
days worked.
In addition, the Company participates in certain defined contribution
savings plans sponsored by Ryder that cover substantially all eligible
employees. Contributions to the plans include employee contributions and
contributions made by Ryder under a matching program. Defined contribution
expense totaled $0.3 million, $0.4 million and $0.4 million for the years ended
December 31, 1994, 1995 and 1996, respectively.
NOTE 15. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company participates in Ryder plans which provide retired employees
with certain health care and life insurance benefits. Substantially all
employees not covered by union-administered health and welfare plans are
eligible for these benefits. Health care benefits are generally provided to
qualified retirees and eligible dependents. Generally, these plans require
employee contributions which vary based on years of service and include
provisions which cap Company contributions. Reserves related to these plans are
carried by Ryder.
Total periodic postretirement benefit expense was as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1994 1995 1996
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Current year service cost.................................. $ 230 $ 216 $ 185
Interest accrued on postretirement benefit obligation...... 867 923 828
Additional expense from early retirement program........... -- -- 1,523
Other, net................................................. 208 -- --
------ ------ ------
Periodic postretirement benefit expense.................... $1,305 $1,139 $2,536
------ ------ ------
</TABLE>
As part of the Company's restructuring and other profit improvement
initiatives, certain employees accepted early retirement benefits which
increased 1996 postretirement benefit expense by $1.5 million.
The Company's postretirement benefit plans are not funded. The following
summarizes the reserves carried by Ryder:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees.................................................. $ 9,509 $10,006
Fully eligible active plan participants................... 863 800
Other active plan participants............................ 2,908 2,314
------- -------
13,280 13,120
Unrecognized net gains (losses)............................. (1,872) 300
------- -------
Accrued unfunded postretirement benefit obligation.......... $11,408 $13,420
------- -------
Discount rate............................................... 7.5% 7.5%
======= =======
</TABLE>
The actuarial assumptions include health care cost trend rates projected
ratably from 11% in 1997 to 6% in the year 2003 and thereafter. Increasing the
assumed health care cost trend rates by
F-39
<PAGE> 84
RYDER AUTOMOTIVE CARRIER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1% in each year would have increased the accumulated postretirement benefit
obligation as of December 31, 1996 by $1.0 million and would not have had a
material effect on periodic postretirement benefit expense for 1996.
NOTE 16. ENVIRONMENTAL MATTERS
The Company's operations involve storing and dispensing petroleum products,
primarily diesel fuel. In 1988, the Environmental Protection Agency issued
regulations that established requirements for testing and replacing underground
storage tanks. The Company is involved in various stages of investigation,
cleanup and tank replacement to comply with the regulations. In addition, the
Company received notices from the Environmental Protection Agency and others
that it has been identified as a potentially responsible party (PRP) under the
Comprehensive Environmental Response, Compensation and Liability Act, the
Superfund Amendments and Reauthorization Act and similar state statutes and may
be required to share in the cost of cleanup of four identified disposal sites.
The Company records a liability for environmental assessments and/or
cleanup when it is probable a loss has been incurred. Generally, the timing of
these accruals coincides with the identification of an environmental problem
through the Company's internal procedures or upon notification from regulatory
agencies. The estimate of loss is based on information obtained from independent
environmental engineers and/or from Company experts regarding the nature and
extent of environmental contamination, remedial alternatives available and the
cleanup criteria required by relevant governmental agencies. The estimated costs
include amounts for anticipated site testing, consulting, remediation, disposal,
post-remediation monitoring and legal fees, as appropriate. These amounts
represent the estimated undiscounted costs to fully resolve the environmental
matters in accordance with prevailing Federal, state and local requirements
based on information presently available. The liability includes estimates of
cost sharing with other PRPs at Superfund sites. The Company's environmental
expenses were $0.6 million, $2.0 million and $1.2 million for the years ended
December 31, 1994, 1995 and 1996, respectively.
The ultimate costs of the Company's environmental liabilities cannot be
projected with certainty due to the presence of several unknown factors,
primarily the level of contamination, the effectiveness of selected remediation
methods, the stage of investigation at individual sites, the determination of
the Company's liability in proportion to other responsible parties and the
recoverability of such costs from third parties. Based on information presently
available, management believes that the ultimate disposition of these matters,
although potentially material to the results of operations in any one year, will
not have a material adverse effect on the Company's financial condition or
liquidity.
NOTE 17. INDUSTRY SEGMENT, MAJOR CUSTOMERS AND GEOGRAPHIC INFORMATION
The Company operates solely in the automotive industry, primarily
transporting automobiles and light and medium-duty trucks from manufacturing
plants, ports and railway distribution points to automobile dealerships and
other distribution points. In 1994, 1995 and 1996, approximately 83.8%, 84.9%
and 85.6%, respectively, of the Company's revenue was derived from six
customers, one of which, General Motors, accounted for approximately 51.1%,
51.6% and 49.9% of revenue, respectively. The Company operates in the United
States and Canada. Operating income (loss) shown below includes gains on the
sale of operating property and equipment in the amounts of $0.2
F-40
<PAGE> 85
RYDER AUTOMOTIVE CARRIER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
million, $3.5 million and $1.6 million for 1994, 1995 and 1996, respectively.
Geographic financial information is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1994 1995 1996
--------------- --------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenue:
United States..................................... $610,088 $556,663 $547,158
Canada............................................ 35,314 37,783 36,134
-------- -------- --------
$645,402 $594,446 $583,292
======== ======== ========
Operating income (loss):
United States..................................... $ 50,800 $ 37,107 $(13,186)
Canada............................................ (950) (869) (4,003)
-------- -------- --------
$ 49,850 $ 36,238 $(17,189)
======== ======== ========
Identifiable assets:
United States..................................... $233,645 $265,200 $257,095
Canada............................................ 40,942 41,097 36,419
-------- -------- --------
$274,587 $306,297 $293,514
======== ======== ========
</TABLE>
NOTE 18. COMMITMENTS AND CONTINGENCIES
The Company is a party to various claims, legal actions and complaints
arising in the ordinary course of business which relate to the Company's
operations, including the manufacture of trailers and headramps. While any
proceeding or litigation has an element of uncertainty, management believes that
the disposition of these matters will not have a material impact on the
financial condition, liquidity or results of operations of the Company.
The Company has entered into employment agreements with certain executive
officers of the Company. The agreements, which are substantially similar,
provide for compensation to the officers in the form of annual base salaries and
bonuses based on earnings. The employment agreements also provide for severance
benefits upon the occurrence of certain events, including a change in control,
as defined.
NOTE 19. SALE OF BLAZER
In the fourth quarter of 1996, management made a decision to dispose of
Blazer, an in-bound logistics provider to the automotive industry. Consistent
with this decision and included within the full year restructuring charge
discussed in Note 3, management recorded restructuring and other charges of $2.8
million and asset write-downs of $4.2 million to reduce the carrying values of
Blazer assets to an estimate of fair value less costs to sell. The Company sold
Blazer on February 28, 1997.
F-41
<PAGE> 86
RYDER AUTOMOTIVE CARRIER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The condensed financial statements of Blazer are as follows:
STATEMENTS OF OPERATIONS AND CHANGES IN COMPANY INVESTMENT
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------- ----------------
1994 1995 1996 1996 1997
------- ------- ------- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenue....................................... $25,529 $19,366 $14,520 $7,565 $ 2,204
Operating expense............................. 25,897 19,816 22,203 8,357 2,277
------- ------- ------- ------ -------
Operating loss................................ (368) (450) (7,683) (792) (73)
Other expense................................. (378) (110) (9) 10 14
------- ------- ------- ------ -------
Loss before income taxes...................... (746) (560) (7,692) (802) (87)
Income tax benefit............................ (19) (472) (320) 275 739
------- ------- ------- ------ -------
Net income (loss)............................. (727) (88) (7,372) (527) 652
Company investment at beginning of period..... 721 5 (151) (151) (7,648)
Net change in Company investment.............. 11 (68) (125) 453 6,996
------- ------- ------- ------ -------
Company investment at end of period........... $ 5 $ (151) $(7,648) $ (225) $ --
======= ======= ======= ====== =======
</TABLE>
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------- JUNE 30,
1995 1996 1997
------ ------ --------
(IN THOUSANDS)
<S> <C> <C> <C>
Current assets.............................................. $2,049 $1,526 $ --
Property and equipment, net................................. 1,687 428 --
Other assets, principally goodwill.......................... 3,428 -- --
------ ------ ------
Total assets................................................ $7,164 $1,954 $ --
====== ====== ======
Current liabilities......................................... $2,768 $5,976 --
Other liabilities........................................... 4,547 3,626 --
Company investment.......................................... (151) (7,648) --
------ ------ ------
Total liabilities and Company investment.................... $7,164 $1,954 $ --
====== ====== ======
</TABLE>
NOTE 20. SUBSEQUENT EVENT
On September 30, 1997, Ryder sold the Company, along with another business
unit, to Allied Holdings, Inc. ("Allied") for approximately $114.5 million in
cash and assumption of certain liabilities of the business, subject to
post-closing adjustments.
F-42
<PAGE> 87
======================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN, OR INCORPORATED BY
REFERENCE IN, THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, THE NEW NOTES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO
WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH
IN THIS PROSPECTUS OR INCORPORATED BY REFERENCE HEREIN OR IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 9
Use of Proceeds....................... 13
Price Range of Common Stock and
Dividend Policy..................... 13
Capitalization........................ 14
Selected Financial Data............... 15
Unaudited Pro Forma Financial
Information......................... 16
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 23
Business.............................. 29
Principal and Selling Shareholders.... 36
Description of Capital Stock.......... 36
Underwriting.......................... 40
Legal Matters......................... 41
Experts............................... 41
Available Information................. 42
Incorporation of Certain Documents by
Reference........................... 42
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
======================================================
======================================================
3,000,000 SHARES
[ALLIED HOLDINGS LOGO]
COMMON STOCK
-------------------
PROSPECTUS
-------------------
BT ALEX. BROWN
BEAR, STEARNS & CO. INC.
, 1997
======================================================
<PAGE> 88
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses to be borne by the
Company in connection with the issuance and distribution of the securities being
registered hereby other than underwriting discounts and commissions.
<TABLE>
<S> <C>
SEC Registration Fee........................................ $19,205
Nasdaq National Market Listing Fee*......................... $
Transfer Agents Fees and Expenses*.......................... $
Accounting Fees and Expenses*............................... $
Legal Fees and Expenses*.................................... $
Blue Sky Fees and Expenses (including legal fees)*.......... $
Printing and engraving*..................................... $
NASD Filing Fees*........................................... $ 6,838
Miscellaneous*.............................................. $
-------
TOTAL............................................. $26,043
=======
</TABLE>
- ---------------
* To be furnished by amendment to the Registration Statement
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The provisions of the Georgia Business Corporation Code and the
Registrant's Bylaws set forth the extent to which the Registrant's directors and
officers may be indemnified against liabilities they may incur while serving in
such capacities. Under these indemnification provisions, the Registrant is
required to indemnify any of its directors or officers against any reasonable
expenses (including attorneys' fees) incurred by such director or officer in
defense of any action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, and whether formal or informal, to which such
director or officer was made a party, or in defense of any claim, issue or
matter therein, by reason of the fact that such director or officer is or was a
director or officer of the Registrant or who, while a director of the
Registrant, is or was serving at the Registrant's request as a director,
officer, partner, trustee, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan, or other enterprise,
to the extent that such director or officer has been successful, on the merits
or otherwise, in such defense. The Registrant also must indemnify any of its
directors, and may indemnify any of its officers, against any liability incurred
in connection with any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, or investigative, and
whether formal or informal, by reason of the fact that such director or officer
is or was a director or officer of the Registrant or who, while a director or
officer of the Registrant, is or was serving at the Registrant's request as a
director, officer, partner, trustee, employee, or agent of another corporation,
partnership, joint venture, trust, employee benefit plan, or other enterprise,
if such director or officer acted in a manner such director or officer believed
in good faith to be in, or not opposed to, the best interests of the Registrant,
or, with respect to any criminal proceeding, had no reasonable cause to believe
such director's or officer's conduct was unlawful, if a determination has been
made that the director or officer has met these standards of conduct. Such
indemnification in connection with a proceeding by or in the right of the
Registrant, however, is limited to reasonable expenses, including attorneys'
fees, incurred in connection with the proceeding. The Registrant may also
provide advancement of expenses incurred by a director or officer in defending
any such action, suit, or proceeding upon receipt of a written affirmation of
such officer or director that such director or officer has met certain standards
of conduct and an undertaking by or on behalf of such director or officer to
repay such advances unless it is ultimately determined that such director or
officer is entitled to indemnification by the Registrant.
II-1
<PAGE> 89
The Registrant may not indemnify a director or officer in connection with a
proceeding by or in the right of the Registrant in which the director or officer
was adjudged liable to the Registrant, or in connection with a proceeding in
which he was adjudged liable on the basis that he improperly received a personal
benefit.
The Registrant's Articles of Incorporation contain a provision which
provides that, to the fullest extent permitted by the Business Corporation Code
of Georgia, directors of the Registrant shall not be personally liable to the
Registrant or its shareholders for monetary damages for breach of his duty of
care or any other duty as a director.
The Registrant maintains insurance policies insuring the Registrant and
directors and officers of the Registrant against certain liabilities, including
liabilities under the Securities Act of 1933.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits (See exhibit index immediately preceding the exhibits for the
page number where each exhibit can be found)
<TABLE>
<CAPTION>
DESCRIPTION
EXHIBIT OF
NUMBER EXHIBITS
- ------- -----------
<C> <C> <S>
*1.1 -- Form of Underwriting Agreement.
2.1 -- Acquisition Agreement among Allied Holdings, Inc., AH
Acquisition Corp. Canadian Acquisition Corp., and Axis
International Incorporated and Ryder System Inc. dated
August 20, 1997 (incorporated by reference from Form 8-K
filed with the Commission on August 29, 1997).
3.1 -- Articles of Incorporation (incorporated by reference from
the Company's Annual Report on Form 10-K as filed with the
Securities and Exchange Commission on March 27, 1997).
3.2 -- Bylaws (incorporated by reference from the Company's Annual
Report on Form 10-K as filed with the Securities and
Exchange Commission on March 27, 1997).
*5.1 -- Opinion of Troutman Sanders LLP.
10.1 -- Revolving Credit Agreement dated September 30, 1997
(incorporated by reference from Registration Statement on
Form S-4, Commission file no. 333-37113, as filed on October
3, 1997).
10.2 -- Indenture dated September 30, 1997 (incorporated by
reference from Registration Statement on Form S-4,
Commission file no. 333-37113, as filed on October 3, 1997).
*23.1 -- Consent of Troutman Sanders LLP (Included in Exhibit 5.1).
23.2 -- Consent of Arthur Andersen LLP.
23.3 -- Consent of KPMG Peat Marwick LLP
24.1 -- Power of Attorney. (Included on the signature pages in Part
II of this Registration Statement).
</TABLE>
- ---------------
* To be filed by amendment.
ITEM 17. UNDERTAKINGS
The Registrant hereby undertakes the following:
(a)(1) to file, during any period in which offers or sales are being
made, a post effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which,
II-2
<PAGE> 90
individually or in the aggregate, represent a fundamental change in the
information set forth in the registration statement;
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement; provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii)
do not apply if the registration statement is on Form S-3 or Form S-8,
and the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed
with or furnished to the Commission by the registrant pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the Offering.
(b) For purposes of determining any liability under the Securities Act
of 1933, each filing of the Registrant's annual report pursuant to Section
13(a) or 15(d) of the Exchange Act that is incorporated by reference in
this Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant ofo expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE> 91
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Decatur, State of Georgia, on the 21st day of October
1997.
ALLIED HOLDINGS, INC.
By /s/ ROBERT J. RUTLAND
------------------------------------
Robert J. Rutland
Chairman and Chief Executive Officer
By /s/ A. MITCHELL POOLE, JR.
------------------------------------
A. Mitchell Poole, Jr.
President, Chief Operating Officer,
Chief Financial Officer, and
Assistant Secretary
Each person whose signature to this Registration Statement appears below
appoints Robert J. Rutland and A. Mitchell Poole, Jr., and each of them, any one
of whom may act without the joinder of the other, as his agent and
attorney-in-fact to sign on his behalf individually and in the capacity stated
below and to file all pre- and post-effective amendments to this Registration
Statement (and, in addition, any registration statement filed pursuant to Rule
462(b) under the Securities Act of 1933, as amended, for the offering to which
this Registration Statement relates), which amendments may make such changes in
and additions to this Registration Statement as such agent and attorney-in-fact
may deem necessary or appropriate.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ ROBERT J. RUTLAND Chairman of the Board of October 21, 1997
- ----------------------------------------------------- Directors and Chief
Robert J. Rutland Executive Officer, and
Director
/s/ GUY W. RUTLAND, III Chairman Emeritus and October 21, 1997
- ----------------------------------------------------- Director
Guy W. Rutland, III
/s/ A. MITCHELL POOLE, JR. President, Chief Operating October 21, 1997
- ----------------------------------------------------- Officer, Chief Financial
A. Mitchell Poole, Jr. Officer, Assistant Secretary
and Director
/s/ BERNARD O. DE WULF Vice Chairman, Executive October 21, 1997
- ----------------------------------------------------- Vice President, and Director
Bernard O. De Wulf
/s/ BERNER F. WILSON, JR. Vice Chairman, Secretary and October 21, 1997
- ----------------------------------------------------- Director
Berner F. Wilson, Jr.
/s/ GUY W. RUTLAND, IV Vice President and Director October 21, 1997
- -----------------------------------------------------
Guy W. Rutland, IV
</TABLE>
II-4
<PAGE> 92
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
- ----------------------------------------------------- Director
Joseph W. Collier
/s/ DAVID G. BANNISTER Director October 21, 1997
- -----------------------------------------------------
David G. Bannister
/s/ ROBERT R. WOODSON Director October 21, 1997
- -----------------------------------------------------
Robert R. Woodson
</TABLE>
II-5
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports and to all references to our firm included in or made a part of this
registration statement.
/s/ Arthur Andersen LLP
Atlanta, Georgia
October 23, 1997
<PAGE> 1
EXHIBIT 23.3
The Board of Directors
Allied Holdings, Inc.:
We consent to the use of our reports included herein and to the reference to our
firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
Miami, Florida
October 23, 1997
