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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 - FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 - For the transition period from_________________
to _____________________
Commission File Number: 0-22276
ALLIED HOLDINGS, INC.
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(Exact name of registrant as specified in its charter)
GEORGIA 58-0360550
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
SUITE 200, 160 CLAIREMONT AVENUE, DECATUR, GEORGIA 30030
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(Address of principal executive offices)
(404) 373-4285
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [ ] No
Outstanding common stock, No par value at May 3, 1999..................7,964,097
TOTAL NUMBER OF PAGES INCLUDED IN THIS REPORT: 16
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INDEX
PART I
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ITEM 1: FINANCIAL STATEMENTS
Consolidated Balance Sheets as of March 31, 1999 and
December 31, 1998.................................................................... 3
Consolidated Statements of Operations for the Three
Month Periods Ended March 31, 1999 and 1998.......................................... 4
Consolidated Statements of Cash Flows for the Three
Month Periods Ended March 31, 1999 and 1998.......................................... 5
Notes to Consolidated Financial Statements............................................. 6
ITEM 2
Management's Discussion and Analysis of Financial
Condition and Results of Operations.................................................. 8
PART II
OTHER INFORMATION
ITEM 6
Exhibits and Reports on Form 8-K....................................................... 15
Signature Pages........................................................................ 16
</TABLE>
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PART 1 FINANCIAL INFORMATION
ITEM I FINANCIAL STATEMENTS
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
March 31 December 31
1999 1998
--------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 20,720 $ 21,977
Short-term investments 25,357 23,323
Receivables, net of allowance for doubtful accounts 120,094 103,968
Inventories 7,882 6,788
Deferred tax assets 20,775 20,773
Prepayments and other current assets 23,091 18,930
--------- ---------
Total current assets 217,919 195,759
--------- ---------
PROPERTY AND EQUIPMENT, NET 296,506 297,530
--------- ---------
OTHER ASSETS:
Goodwill, net 94,108 94,677
Other 33,079 33,761
--------- ---------
Total other assets 127,187 128,338
--------- ---------
Total assets $ 641,612 $ 621,627
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 2,168 $ 2,746
Trade accounts payable 34,491 42,196
Accrued liabilities 102,813 100,788
--------- ---------
Total current liabilities 139,472 145,730
--------- ---------
LONG-TERM DEBT, less current maturities 321,664 291,096
--------- ---------
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS 11,085 11,165
--------- ---------
DEFERRED INCOME TAXES 38,046 39,953
--------- ---------
OTHER LONG-TERM LIABILITIES 71,638 70,830
--------- ---------
STOCKHOLDERS' EQUITY:
Common stock, no par value; 20,000 shares authorized, 7,964
and 7,878 shares outstanding at March 31,
1999 and December 31, 1998, respectively 0 0
Additional paid-in capital 46,085 44,854
Retained earnings 21,349 25,354
Cumulative other comprehensive income, net of tax (5,429) (6,115)
Unearned compensation (2,298) (1,240)
--------- ---------
Total stockholders' equity 59,707 62,853
--------- ---------
Total liabilities and stockholders' equity $ 641,612 $ 621,627
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
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ALLIED HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in Thousands, Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31
---------------------------
1999 1998
---- ----
<S> <C> <C>
REVENUES $ 261,249 $ 253,390
--------- ---------
OPERATING EXPENSES:
Salaries, wages and fringe benefits 144,645 137,619
Operating supplies and expenses 44,781 42,740
Purchased transportation 25,282 27,535
Insurance and claims 13,617 9,442
Operating taxes and licenses 10,716 9,998
Depreciation and amortization 14,015 12,925
Rents 2,622 2,351
Communications and utilities 2,230 2,315
Other operating expenses 3,311 1,678
--------- ---------
Total operating expenses 261,219 246,603
--------- ---------
Operating income 30 6,787
--------- ---------
OTHER INCOME (EXPENSE):
Interest expense (7,409) (6,022)
Interest income 291 456
--------- ---------
(7,118) (5,566)
--------- ---------
(LOSS) INCOME BEFORE INCOME TAXES (7,088) 1,221
INCOME TAX BENEFIT (PROVISION) 3,083 (531)
--------- ---------
NET (LOSS) INCOME $ (4,005) $ 690
========= =========
PER COMMON SHARE - BASIC AND DILUTED $ (0.51) $ 0.09
========= =========
COMMON SHARES OUTSTANDING - BASIC AND DILUTED 7,790 7,746
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
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ALLIED HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31
---------------------------
1999 1998
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Not (loss) income ($ 4,005) $ 690
--------- ---------
Adjustments to reconcile net (loss) income to
net cash used in operating activities:
Depreciation and amortization 14,015 12,925
(Gain) loss on sale of property and equipment (51) 37
Deferred income taxes (2,424) 76
Compensation expense related to stock options and grants 146 46
Equity in loss of joint venture 1,466 122
Change in operating assets and liabilities:
Receivables, net of allowance for doubtful accounts (15,885) (11,973)
Inventories (1,076) (574)
Prepayments and other current assets (4,123) (1,949)
Trade accounts payable (7,799) (2,431)
Accrued liabilities 2,724 360
--------- ---------
Total adjustments (13,007) (3,361)
--------- ---------
Net cash used in operating activities (17,012) (2,671)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (11,531) (6,396)
Proceeds from sale of property and equipment 146 115
Investment in joint venture 0 (11,920)
Increase in short-term investments (2,034) (2,715)
Decrease (increase) in the cash surrender value of life insurance 193 (620)
--------- ---------
Net cash used in investing activities (13,226) (21,536)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt, net 29,990 18,269
Proceeds from exercise of stock options 27 24
Other, net (1,062) (98)
--------- ---------
Net cash provided by financing activities 28,955 18,195
--------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS 26 (66)
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,257) (6,078)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 21,977 10,530
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 20,720 $ 4,452
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
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ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
Note 1. Basis of Presentation
The unaudited consolidated financial statements included herein have
been prepared pursuant to the rules and regulations of the Securities
and Exchange Commission. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. The statements contained
herein reflect all adjustments, all of which are of a normal, recurring
nature, which are, in the opinion of management, necessary to present
fairly the financial condition, results of operations and cash flows
for the periods presented. Operating results for the three month period
ended March 31, 1999 are not necessarily indicative of the results that
may be expected for the year ended December 31, 1999. The interim
financial statements should be read in conjunction with the financial
statements and notes thereto of Allied Holdings, Inc. and Subsidiaries,
(the "Company") included in the Company's 1998 Annual Report on Form
10-K.
Note 2. Long-Term Debt
On September 30, 1997, the Company issued $150 million of 8 5/8 %
senior notes (the "Notes") through a private placement. Subsequently,
the senior notes were registered with the Securities and Exchange
Commission. The net proceeds from the Notes were used to fund the
acquisition of Ryder Automotive Carrier Services, Inc. and RC
Management Corp., pay related fees and expenses, and reduce outstanding
indebtedness. 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. There are no restrictions on the
ability of the Guarantors to make distributions to the Company.
Note 3. Comprehensive Income
The Company had a comprehensive loss of $3.3 million for the first
quarter 1999 versus comprehensive income of $1.1 million for the first
quarter of 1998. The difference between comprehensive income and net
income is the foreign currency translation adjustment, net of income
taxes.
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Note 4. Accounting for Derivative Instruments and Hedging Activities
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities."
The Statement establishes accounting and reporting standards requiring
that every derivative instrument (including certain derivative
instruments embedded in other contracts) be recorded in the balance
sheet as either an asset or liability measured at its fair value. The
Statement requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges allows a
derivative's gains and losses to offset related results on the hedged
item in the income statement, and requires that a company must formally
document, designate, and assess the effectiveness of transactions that
receive hedge accounting.
This statement is effective for fiscal quarters beginning after June
15, 1999 on a prospective basis. The Company will adopt this
statement in the third quarter of 1999. The Company does not believe
the adoption will have a material impact on its financial position or
results of operations.
Note 5. Segment Reporting
The Company operates in one reportable industry segment: transporting
automobiles and light trucks from manufacturing plants, ports,
auctions, and railway distribution points to automotive dealerships.
Geographic financial information for the first quarter of 1999 and 1998
follows (in thousands):
<TABLE>
<CAPTION>
1999 1998
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<S> <C> <C>
Revenues:
United States $217,914 $207,578
Canada 43,335 45,812
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$261,249 $253,390
======== ========
Long-lived assets:
United States $349,958 $339,191
Canada 73,735 76,473
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$423,693 $415,664
======== ========
</TABLE>
Revenues are attributed to the respective countries based on the
location of the origination terminal.
Note 6. Reclassifications
Certain amounts in the prior year financial statements have been
reclassified to conform with the current year presentation.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Revenues were $261.3 million for the first quarter of 1999 versus
revenues of $253.4 million for the first quarter of 1998, an increase
of 3 %. The increase in revenues during the quarter is attributable to
increased vehicle deliveries because of higher new vehicle production
and sales.
The Company experienced a net loss of $4.0 million in the first quarter
of 1999 versus net income of $0.7 million in the first quarter of
1998. Basic and diluted loss per share for the first quarter of 1999
were $0.51 versus basic and diluted earnings per share of $0.09 in the
first quarter of 1998. Results for the first quarter of 1999 were
impacted by a decline in load averages, severe winter weather, and a
deterioration in the Brazilian economy.
The Company experienced a significant increase in the percentage of
vehicles delivered that were light trucks as well as an overall
increase in the size and weight of most vehicles delivered. During
the first quarter of 1999, light truck production in the US and
Canada increased approximately 200,000 units while car production
increased approximately 30,000 units. Due to regulations on tractor
and trailer length, height, width, and maximum weight capacity, this
change in mix resulted in the number of vehicles delivered per load
in the first quarter of 1999 being approximately 5 percent lower than
the first quarter of 1998. The change in mix negatively impacts
operating results as revenue is realized on a per vehicle basis, thus
the Company's revenue per load decreased. The Company estimates that
operating income for the first quarter was reduced by approximately
$5 million as a result of this load average decline. The Company
recorded a loss of approximately $1.5 million from its Brazilian
joint venture in the first quarter of 1999. The loss resulted from a
significant reduction in new vehicle sales as the Brazilian economy
deteriorated because of the currency devaluation. In addition,
operating results in the United States and Canada during the first
quarter of 1999 were impacted by the severe winter weather, causing
significant operating inefficiencies as well as substantial snow
removal costs. The Company estimates the weather reduced operating
income in the first quarter of 1999 by approximately $2 million.
The following is a discussion of the changes in the Company's major
expense categories:
Salaries, wages and fringe benefits increased from 54.3 % of revenues
in the first quarter of 1998 to 55.4 % of revenues for the first
quarter of 1999. The increase was primarily due to annual salary and
benefit increases together with the inefficiencies resulting from the
decline in load averages offset by continued productivity and
efficiency improvements.
Operating supplies and expenses increased from 16.9 % of revenues in
the first quarter of 1998 to 17.1 % of revenues for the first quarter
of 1999. The increase was primarily due to the inefficiencies from
decreased load averages offset by lower fuel prices.
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Purchased transportation expense decreased from 10.9 % of revenues in
the first quarter of 1998 to 9.7 % of revenues for the first quarter of
1999. The decrease during the first quarter was primarily due to the
decrease in the mix of loads hauled by owner-operators versus company
drivers. The number of owner-operators year-to-year was similar, thus
the additional loads hauled were delivered by company drivers.
Insurance and claims expense increased from 3.7 % of revenues in the
first quarter of 1998 to 5.2 % of revenues for the first quarter of
1999. The increase during the first quarter was primarily due to an
increase in the frequency of damage claims primarily as a result of the
Company hauling larger size vehicles.
Depreciation and amortization expense increased from 5.1 % of revenues
in the first quarter of 1998 to 5.4 % for the first quarter of 1999.
The increase was primarily due to additional depreciation expense from
the Company's capital expenditures during 1998.
Other Operating expenses increased from 0.7 % of revenues in the first
quarter of 1998 to 1.3 % for the first quarter of 1999. The increase
was primarily due to the Company recording a loss of approximately $1.5
million from its Brazilian joint venture.
Interest expense as a percentage of revenues increased from 2.4 %
during the first quarter of 1998 to 2.8 % in the first quarter of 1999.
The increase was primarily because of higher long-term debt levels in
1999 versus 1998.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Net cash used by operating activities totaled $17.0 million for the
three months ended March 31, 1999 versus $2.7 million for the three
months ended March 31, 1998. The increase in cash used by operating
activities was primarily due to the reduction in earnings during the
first quarter of 1999 together with a larger than normal seasonal
increase in accounts receivable. A greater percentage of the quarterly
revenues were generated in March which caused an increase in the
quarter-end accounts receivable balance.
Net cash used in investing activities totaled $13.2 million for the
three months ended March 31, 1999 versus $21.5 million for the same
period in 1998. The decrease was primarily due to the investment in
Axis Do Brazil in February 1998. Capital expenditures totaled $11.5
million for the first quarter of 1999, versus $6.4 million for the same
period in 1998. The increase was primarily due to planned levelized
capital expenditures throughout 1999 versus capital expenditures in
1998 that were weighted to the second half of the year.
Net cash provided by financing activities totaled $29.0 million for the
three months ended March 31, 1999 versus $18.2 million for the three
months ended March 31, 1998. The
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increase was primarily due to seasonal borrowings required to finance
operating activities to be offset by additional seasonally stronger
operating cash flows during the balance of the year.
DISCLOSURES ABOUT MARKET RISKS
The market risk inherent in the Company's market risk sensitive
instruments and positions is the potential loss arising from adverse
changes in short-term investment prices, interest rates, fuel prices,
and foreign currency exchange rates.
SHORT-TERM INVESTMENTS - The Company does not use derivative financial
instruments in its investment portfolio. The Company places its
investments in instruments that meet high credit quality standards, as
specified in the Company's investment policy guidelines. The policy
also limits the amount of credit exposure to any one issue, issuer, and
type of instrument. Short-term investments at March 31, 1999, which are
recorded at fair value of $25.4 million, have exposure to price risk.
This risk is estimated as the potential loss in fair value resulting
from a hypothetical 10% adverse change in quoted prices and amounts to
$2.5 million.
INTEREST RATES - The Company primarily issues long-term debt
obligations to support general corporate purposes including capital
expenditures and working capital needs. The majority of the Company's
long-term debt obligations bear a fixed rate of interest. A one
percentage point increase in interest rates affecting the Company's
floating rate long-term debt would reduce pre-tax income by $1.0
million over the next fiscal year. A one percentage point change in
interest rates would not have a material effect on the fair value of
the Company's fixed rate long-term debt.
FUEL PRICES - The Company is dependent on diesel fuel to operate its
fleet of rigs. Diesel fuel prices are subject to fluctuations due to
unpredictable factors such as weather, government policies, changes in
global demand, and global production. To reduce price risk caused by
market fluctuations, the Company generally follows a policy of hedging
a portion of its anticipated diesel fuel consumption. The instruments
used are principally readily marketable exchange traded futures
contracts which are designated as hedges. The changes in market value
of such contracts have a high correlation to the price changes of
diesel fuel. Gains and losses resulting from fuel hedging transactions
are recognized when the underlying fuel being hedged is used. A 10%
increase in diesel fuel prices would reduce pre-tax income by $3.9
million over the next fiscal year.
FOREIGN CURRENCY EXCHANGE RATES - Although the majority of the
Company's operations are in the United States, the Company does have
foreign subsidiaries (primarily Canada). The net investments in foreign
subsidiaries translated into dollars using exchange rates at March 31,
1999, are $79.5 million. The potential loss in fair value impacting
other comprehensive income resulting from a hypothetical 10% change in
quoted foreign currency exchange rates amounts to $8.0 million. The
Company does not use derivative financial instruments to hedge its
exposure to changes in foreign currency exchange rates.
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YEAR 2000
Year 2000 ("Y2K" or "Year 2000") issues are being addressed by the
Company. The Company, like most other major companies, is currently
addressing a universal problem commonly referred to as "Year 2000
Compliance," which relates to the ability of computer programs and
systems to properly recognize and process date sensitive information
before and after January 1, 2000. The following discussion is based on
information currently available to the Company.
The Company has analyzed and continues to analyze its internal
information technology ("IT") systems ("IT systems") to identify any
computer programs that are not Year 2000 compliant and implement any
changes required to make such systems Year 2000 compliant. The Company
believes that its critical IT systems currently are capable of
functioning without substantial Year 2000 Compliance problems. Of the
non-critical, but important, IT systems that are not currently Year
2000 compliant, the Company believes such IT systems will be Year 2000
capable in a time frame that will avoid any material adverse effect on
the Company. Also, the Company does not believe that the expenditures
related to replacing or upgrading any of its IT systems to make them
Year 2000 compliant will have a material adverse effect on the
financial condition or results of operations of the Company. The
Company has evaluated its critical equipment and critical systems that
contain embedded software, ("Non-IT systems"), and the Company believes
that all of its critical Non-IT systems are capable of functioning
without substantial Year 2000 Compliance problems.
The Company has engaged a leading computer consulting services firm to
lead the Year 2000 remediation and testing process. The Company is also
investigating each of its significant vendors, suppliers, financial
service organizations, service providers and customers to confirm that
the Company's operations will not be materially adversely affected by
the failure of any such third party to have Year 2000 compliant
computer programs. Regardless of the responses that the Company
receives from such third parties, the Company is establishing
contingency plans to reduce the Company's exposure resulting from the
non-compliance of third parties.
The Company has approached the Year 2000 project in phases. Phase I of
the project involved identification of all software used by the
Company, identification of all significant vendors, and establishment
of a senior management committee to oversee the project. Phase I was
completed in the third calendar quarter of 1998. Phase II of the
project involves (a) evaluation of each significant vendor and
evaluation of major customers through letters and questionnaires (b)
communication with customers concerning any products currently or
recently sold by the Company that have Year 2000 issues, and (c)
evaluating the Company's most reasonably likely worst case Year 2000
scenarios and contingency planning related thereto. Phase II was
completed in the first calendar quarter of 1999. Phase III involves
testing of the Company's IT systems and Non-IT systems to confirm Year
2000 compliance and/or discover any overlooked Year 2000 problems.
Phase III has commenced and should be completed in the third calendar
quarter of 1999. Last, Phase IV involves implementation of the
Company's contingency plans. Such plans are expected to be implemented
in the third calendar quarter of 1999.
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The Company has material relationships with third parties whose failure
to be Year 2000 compliant could have materially adverse impacts on the
Company's business, operations or financial condition in the future.
Third parties that are considered to be in this category for Y2K
purposes include critically important customers, suppliers, vendors and
public entities such as government regulatory agencies, utilities,
financial entities and others.
The Company derives most of its net operating revenues from the
transportation of new and used automobiles and light trucks for all
major domestic and foreign automotive manufacturers. The Company has
made Y2K awareness information available to all customers and has asked
each customer to advise the Company of their plans for reaching Y2K
readiness. The Company has also contacted the customers to inquire
about actions being taken with respect to third parties. Further action
may be taken by the Company as it deems appropriate in particular
cases.
The Company classifies as critical those suppliers of products or
services that, if interrupted, would materially disrupt the Company's
ability to conduct operations. The Company expect reviews of these
products and service providers to be completed by the third quarter of
1999.
In the first calendar quarter of 1999, the Company began the planning
and implementation of a Y2K program involving interaction with and
assessment of public entities such as government regulatory agencies,
utilities, financial entities and others.
The Company is preparing contingency plans relating specifically to
identified Y2K risks, and cost estimates relating to these plans are
being developed. The Company began training designated employees in Y2K
contingency planning matters during the first calendar quarter of 1999,
and anticipates completion of the Y2K contingency plans during the
third calendar quarter of 1999. Contingency plans may include
establishing alternative means of communicating with employees at
terminal locations and with customers, and other appropriate measures.
Once developed, Y2K contingency plans and related cost estimates will
be continually refined as additional information becomes available.
While the Company currently believes that it will be able to modify or
replace its affected systems in time to minimize any significant
detrimental effects on its operations, failure to do so, or the failure
of customers or other third parties to modify or replace their affected
systems, could have materially adverse impacts on the Company's
business, operations or financial condition in the future. There can be
no guarantee that such impacts will not occur. In particular, because
of the interdependent nature of business systems, the Company could be
materially adversely affected if private businesses, utilities and
governmental entities with which it does business or that provide
essential products or services are not Year 2000 compliant. Reasonably
likely consequences of failure by the Company or third parties to
resolve the Y2K problem include, among other things, temporary
slowdowns or cessation's of delivery operations at one or more
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Company terminals, or delays in the delivery of vehicles. However, the
Company believes that its Y2K readiness program, including related
contingency planning, should significantly reduce the possibility of
significant interruptions of normal operations.
As of March 31, 1999, the Company's total incremental costs (historical
plus estimated future costs) of addressing Y2K issues are estimated to
be in the range of $3.5 million, of which approximately $2.5 million
has been incurred. The Company believes that approximately 30% of the
costs expected to be incurred in 1999 will be internal costs, including
compensation and benefits of employees assigned primarily to Y2K
procedures. Internal costs addressing Y2K issues during 1998 were not
material. These costs are being funded through operating cash flow.
These amounts do not include: (i) any costs associated with the
implementation of contingency plans, which are in the process of being
developed, or (ii) costs associated with replacements of computerized
systems or equipment in cases where replacement was not accelerated due
to Y2K issues.
Implementation of the Company's Y2K plan is an ongoing process.
Consequently, the above described estimates of costs and completion
dates for the various components of the plan are subject to change.
The preceding discussion on Y2K contains various forward-looking
statements which represent the Company's beliefs or expectations
regarding future events. When used in the Y2K discussion, the words
"believes," "expects," "estimates" and similar expressions are intended
to identify forward-looking statements. Forward-looking statements
include, without limitation, the Company's expectations as to when it
will complete the remediation and testing phases of its Y2K procedures
as well as its Y2K contingency plans; its estimated cost of achieving
Y2K readiness; and the Company's belief that its internal systems and
equipment will be Year 2000 ready in a timely manner. All
forward-looking statements involve a number of risks and uncertainties
that could cause the actual results to differ materially from the
projected results. Factors that may cause these differences include,
but are not limited to, the availability of qualified personnel and
other information technology resources; the ability to identify and
remediate all date sensitive lines of computer code or to replace
embedded computer chips in affected systems or equipment; and the
actions of governmental agencies or other third parties with respect to
Y2K problems.
The Company does not currently believe that any of the foregoing will
have a material adverse effect on its financial condition or its
results of operations. However, the process of evaluating the Company's
third party vendors and their systems is ongoing. Although not
expected, failures of critical suppliers, critical customers, critical
IT systems or critical Non-IT systems could have a material adverse
effect on the Company's financial condition or results of operations.
As widely publicized, Year 2000 Compliance has many issues and aspects,
not all of which the Company is able to accurately forecast or predict.
There is no way to assure that Year 2000 Compliance will not have
adverse effects on the Company, some of which could be material.
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SEASONALITY AND INFLATION
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. Inflation has not significantly affected the Company's results
of operations.
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
Statements in this quarterly report on Form 10-Q contains
forward-looking statements, including statements regarding, among other
items, (i) the Company's plans, intentions or expectations, (ii)
general industry trends, competitive conditions and customer
preferences, (iii) the Company's management information systems, and
its ability to resolve any Year 2000 issues related thereto (iv) the
Company's efforts to reduce costs, (v) the adequacy of the Company's
sources of cash to finance its current and future operations and (vi)
resolution of litigation without material adverse effect on the
Company. This notice is intended to take advantage of the "safe harbor"
provided by the Private Securities Litigation Reform Act of 1995 with
respect to such forward-looking statements. These forward-looking
statements involve a number of risks and uncertainties. Among others,
factors that could cause actual results to differ materially are the
following: economic recessions or downturns in new vehicle production
or sales; the highly competitive nature of the automotive distribution
industry; dependence on the automotive industry; loss or reduction of
revenues generated by the Company's major customers; the variability of
quarterly results and seasonality of the automotive distribution
industry; labor disputes involving the Company or its significant
customers; the dependence on key personnel who have been hired or
retained by the Company; the availability of strategic acquisitions or
joint venture partners; changes in regulatory requirements which are
applicable to the Company's business; changes in vehicle sizes and
weights which may adversely impact vehicle deliveries per load; risks
associated with doing business in foreign countries; problems related
to information technology systems and computations that must be made by
the Company or its customers and vendors in 1999, 2000 or beyond; and
the risk factors listed herein from time to time in the Company's
Securities and Exchange Commission reports, including but not limited
to, its Annual Reports on Form 10-K or 10 Q.
14
<PAGE> 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits: Exhibit 27.
(b) Reports on Form 8-K: There were no reports filed on Form 8-K
for the quarter ended March 31, 1999.
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Allied Holdings, Inc.
May 12, 1999 /s/A. Mitchell Poole, Jr.
- ------------ ------------------------------------
(Date) A. Mitchell Poole, Jr.
on behalf of Registrant as
President, Chief Operating Officer,
and Assistant Secretary
May 12, 1999 /s/Daniel H. Popky
- ------------ ------------------------------------
(Date) Daniel H. Popky
on behalf of Registrant as
Senior Vice President, Finance
and Chief Financial Officer
Chief Financial Officer and
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF ALLIED HOLDINGS INC. FOR THE THREE MONTH PERIOD ENDED
MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 20,720
<SECURITIES> 25,357
<RECEIVABLES> 120,094
<ALLOWANCES> 0
<INVENTORY> 7,882
<CURRENT-ASSETS> 217,919
<PP&E> 296,506
<DEPRECIATION> 0
<TOTAL-ASSETS> 641,612
<CURRENT-LIABILITIES> 139,472
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 59,707
<TOTAL-LIABILITY-AND-EQUITY> 641,612
<SALES> 261,249
<TOTAL-REVENUES> 261,249
<CGS> 261,219
<TOTAL-COSTS> 261,219
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,409
<INCOME-PRETAX> (7,088)
<INCOME-TAX> 3,083
<INCOME-CONTINUING> (4,005)
<DISCONTINUED> 0
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<NET-INCOME> (4,005)
<EPS-PRIMARY> (.51)
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