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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 JUNE 30, 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)
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<CAPTION>
GEORGIA 58-0360550
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(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
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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 August 3, 1999.............7,990,669
TOTAL NUMBER OF PAGES INCLUDED IN THIS REPORT:17
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INDEX
PART I
FINANCIAL INFORMATION
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PAGE
ITEM 1: FINANCIAL STATEMENTS
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Consolidated Balance Sheets as of June 30, 1999 and
December 31, 1998.............................................................................. 3
Consolidated Statements of Operations for the Three and Six
Month Periods Ended June 30, 1999 and 1998................................................... 4
Consolidated Statements of Cash Flows for the Six
Month Periods Ended June 30, 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
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PART II
OTHER INFORMATION
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ITEM 4
Submission of Matters to a Vote of Security Holders................................................ 15
ITEM 6
Exhibits and Reports on Form 8-K................................................................... 16
Signature Page..................................................................................... 17
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PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
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June 30 December 31
1999 1998
----------- -----------
(Unaudited)
ASSETS
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CURRENT ASSETS:
Cash and cash equivalents $ 24,824 $ 21,977
Short-term investments 22,935 23,323
Receivables, net of allowance for doubtful accounts 114,679 103,968
Inventories 8,241 6,788
Deferred tax assets 19,150 20,773
Prepayments and other current assets 22,611 18,930
-------- --------
Total current assets 212,440 195,759
-------- --------
PROPERTY AND EQUIPMENT, NET 298,782 297,530
-------- --------
OTHER ASSETS:
Goodwill, net 94,079 94,577
Other 34,141 33,761
-------- --------
Total other assets 128,220 128,338
-------- --------
Total assets $639,442 $621,627
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 1,380 $ 2,746
Trade accounts payable 32,467 42,196
Accrued liabilities 94,047 100,788
-------- --------
Total current liabilities 127,894 145,730
-------- --------
LONG-TERM DEBT, less current maturities 326,845 291,096
-------- --------
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS 10,988 11,165
-------- --------
DEFERRED INCOME TAXES 39,064 39,953
-------- --------
OTHER LONG-TERM LIABILITIES 69,464 70,830
-------- --------
STOCKHOLDERS' EQUITY:
Common stock, no par value; 20,000 shares authorized, 7,964
and 7,878 shares outstanding at June 30,
1999 and December 31, 1998, respectively 0 0
Additional paid-in capital 46,085 44,854
Retained earnings 25,481 25,354
Cumulative other comprehensive income, net of tax (4,227) (6,115)
Unearned compensation (2,152) (1,240)
-------- --------
Total stockholders' equity 65,187 62,853
-------- --------
Total liabilities and stockholders' equity $639,442 $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)
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FOR THE THREE MONTHS FOR THE SIX MONTHS ENDED
ENDED JUNE 30 JUNE 30
-----------------------------------------------------
1999 1998 1999 1998
<S> <C> <C> <C> <C>
REVENUES $286,984 $280,641 $548,233 $534,031
-------- -------- -------- --------
OPERATING EXPENSES:
Salaries, wages and fringe benefits 150,128 143,150 294,773 280,769
Operating supplies and expenses 49,701 45,257 94,482 87,997
Purchased transportation 28,692 32,450 54,529 59,985
Insurance and claims 12,260 10,778 25,877 20,220
Operating taxes and licenses 11,096 10,419 21,812 20,417
Depreciation and amortization 14,362 13,015 28,377 25,940
Rents 2,301 2,456 4,368 4,807
Communications and utilities 2,197 2,287 4,427 4,602
Other operating expenses 1,506 1,505 4,817 3,183
-------- -------- -------- --------
Total operating expenses 272,243 261,317 533,462 507,920
-------- -------- -------- --------
Operating income 14,741 19,324 14,771 26,111
-------- -------- -------- --------
OTHER INCOME (EXPENSE):
Interest expense (7,758) (6,260) (15,167) (12,282)
Interest income 329 565 620 1,021
-------- -------- -------- --------
(7,429) (5,695) (14,547) (11,261)
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 7,312 13,629 224 14,850
INCOME TAX PROVISION (3,180) (5,932) (97) (6,463)
-------- -------- -------- --------
NET INCOME $ 4,132 $ 7,697 $ 127 $ 8,387
======== ======== ======== ========
PER COMMON SHARE:
BASIC $ 0.53 $ 0.99 $ 0.02 $ 1.08
======== ======== ======== ========
DILUTED $ 0.53 $ 0.98 $ 0.02 $ 1.07
======== ======== ======== ========
COMMON SHARES OUTSTANDING:
BASIC 7,792 7,748 7,791 7,747
======== ======== ======== ========
DILUTED 7,800 7,861 7,807 7,860
======== ======== ======== ========
</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)
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FOR THE SIX MONTHS ENDED
JUNE 30
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1999 1998
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 127 $ 8,387
------- -------
Adjustments to reconcile net income to net
cash (used in) provided by operating activities:
Depreciation and amortization 28,377 25,940
(Gain) loss on sale of property and equipment (24) 212
Deferred income taxes (685) 3,497
Compensation expense related to stock options and grants 292 128
Equity in loss (earnings) of joint ventures 738 (130)
Change in operating assets and liabilities:
Receivables, net of allowance for doubtful accounts (10,067) (5,150)
Inventories (1,406) (1,739)
Prepayments and other current assets (3,581) 128
Trade accounts payable (9,980) (4,297)
Accrued liabilities (8,484) (10,946)
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Total adjustments (4,820) 7,643
------- -------
Net cash (used in) provided by operating activities (4,693) 16,030
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (26,482) (25,149)
Proceeds from sale of property and equipment 827 501
Purchase of business, net of cash acquired (1,879) (400)
Investment in joint venture (80) (11,920)
Decrease in short-term investments 388 1,853
Decrease (increase) in the cash surrender value of life insurance 73 (1,190)
------- -------
Net cash used in investing activities (27,153) (36,305)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt, net 34,383 20,906
Proceeds from exercise of stock options 27 24
Other, net 106 30
------- -------
Net cash provided by financing activities 34,516 20,960
------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS 177 103
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,847 788
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 21,977 10,530
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $24,824 $11,318
======= =======
</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
and six month periods ended June 30, 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 comprehensive income of $5.3 million for the second
quarter of 1999 versus $6.0 million for the second quarter of 1998.
For the first six months of 1999, comprehensive income was $2.0
million, versus $7.1 million for the first six months 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.
During the second quarter of 1999, the Financial Accounting Standards
Board issued SFAS No. 137, which deferred the effective date of SFAS
No. 133. The Statement defers the effective date for all quarters of
all fiscal years beginning after June 15, 2000. The Company will adopt
this statement in the first quarter of 2001. 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 is as follows (in thousands):
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For the three months ended For the six months ended
June 30 June 30
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1999 1998 1999 1998
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Revenues:
United States $ 237,431 $ 229,486 $ 455,345 $ 437,064
Canada 49,553 51,155 92,888 96,967
--------- --------- --------- ---------
$ 286,984 $ 280,641 $ 548,233 $ 534,031
========= ========= ========= =========
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Revenues are attributed to the respective countries based on the location of
the origination terminal.
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Note 6. Reclassifications
Certain amounts in the prior year financial statements have been
reclassified to conform with the current year presentation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Revenues were $287.0 million for the second quarter of 1999 versus
revenues of $280.6 million for the second quarter of 1998, an increase
of 2.3%. For the six-month period ended June 30, 1999, revenues were
$548.2 million, versus revenues of $534.0 million reported for the
same period last year, an increase of 2.7%. The increase in revenues
is attributed to increased vehicle deliveries resulting from higher
new vehicle production and sales.
Net income was $4.1 million during the second quarter of 1999 versus
$7.7 million during the second quarter of 1998. Basic and diluted
earnings per share for the second quarter of 1999 were $0.53, versus
basic earnings per share of $0.99 and diluted earnings per share of
$0.98 in the second quarter of 1998. For the six-month period ended
June 30, 1999, net income was $127.0 thousand, versus $8.4 million for
the comparable six-month period a year ago. During the first six months
of 1999, net income was impacted by costs associated with severe winter
weather, year 2000 testing and remediation costs, lower earnings from
the Company's Brazilian venture because of the deterioration of the
Brazilian economy, as well as a decline in load averages.
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. 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 six months of 1999 being approximately
4% lower than the first six months 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 and second
quarter of 1999 was reduced by approximately $5 million per quarter as
a result of the load average decline. Throughout the second quarter,
the Company has been discussing the load average decline with the
manufacturers. The Company has been successful at resolving the issue
with certain customers and is continuing discussions with others. The
result will be an increase in the revenue generated per vehicle
delivered.
During the second quarter of 1999, the Company negotiated a new
agreement with the International Brotherhood of Teamsters Union in the
United States. The previous contract expired June 1, 1999. The
Teamsters ratified the new contract in July, 1999. During the second
quarter of 1999, the Company incurred $1-$2 million of costs for
contingency planning related to the negotiations.
The following is a discussion of the changes in the Company's major
expense categories:
Salaries, wages and fringe benefits increased from 51.0 % of revenues
in the second quarter of 1998 to 52.3 % of revenues for the second
quarter of 1999, and from 52.6% of revenues for the first six months
of 1998 to 53.8% of revenues for the first six months of 1999. This
increase was due primarily to annual salary and benefit increases,
together with the inefficiencies resulting from the decline in load
averages offset by continued productivity
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and efficiency improvements. Also, salaries, wages and fringe benefits
increased because of an increase in the mix of loads hauled by company
drivers versus owner-operators and other carriers. The number of
owner-operators year-to-year was comparable; thus company drivers
delivered the additional loads hauled by the Company.
Operating supplies and expenses increased from 16.1% of revenues in
the second quarter of 1998 to 17.3% of revenues for the second quarter
of 1999, and increased from 16.5% of revenues for the first six months
of 1998 to 17.2% for the first six months of 1999. The increase was
due primarily to the inefficiencies resulting from the decrease in
load averages. The Company experienced lower fuel prices in the first
quarter of 1999, which were offset by higher fuel prices in the
second quarter of 1999. In addition, the Company also incurred certain
one-time costs related to contingency planning for its US labor
negotiations that contributed to the increase.
Purchased transportation expense decreased from 11.6% of revenues in
the second quarter of 1998 to 10.0% of revenues for the second quarter
of 1999, and decreased from 11.2% of revenues for the first six months
of 1998 to 10.0% of revenues for the first six months of 1999. The
decrease was due primarily to the decrease in the mix of loads hauled
by owner-operators and other carriers versus company drivers. The
number of owner-operators year-to-year was comparable; thus company
drivers delivered the additional loads hauled by the Company.
Insurance and claims expense increased from 3.8% of revenues in the
second quarter of 1998 to 4.3% of revenues for the second quarter of
1999, and increased from 3.8% of revenue for the first six months of
1998 to 4.7% of revenues for the first six months of 1999. The
increase is due primarily to an increase in the frequency of damage
claims, mainly resulting from hauling larger size vehicles by the
Company.
Depreciation and amortization expense increased from 4.6% of revenues
in the second quarter of 1998 to 5.0% for the second quarter of 1999,
and increased from 4.9% of revenues for the first six months of 1998
to 5.2% of revenues for the first six months of 1999. The increase was
related to the increase in the Company's capital expenditures during
1998 and 1999.
Interest expense as a percentage of revenues increased from 2.2 %
during the second quarter of 1998 to 2.7% in the second quarter of
1999, and increased from 2.3% of revenue for the first six months of
1998 to 2.8% for the first six months of 1999. The increase was due
primarily to higher long-term debt levels in 1999 versus 1998.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Net cash used by operating activities totaled $4.7 million for the
six-month period ended June 30, 1999, versus $16.0 million provided by
operating activities for the six-month period ended June 30, 1998. The
increase in cash used by operating activities was primarily due to a
$14.6 million reduction in pre-tax earnings during the first six
months of 1999 versus 1998.
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Net cash used in investing activities totaled $27.1 million for the
six-month period ended June 30, 1999, versus $36.3 million for the
six-month period ended June 30, 1998. The decrease was due primarily
to an $11.9 million investment in Axis Do Brazil in February of 1998.
Net cash provided by financing activities totaled $34.5 million for
the six-month period ended June 30, 1999, versus $21.0 million for the
six-month period ended June 30, 1998. The increase was due primarily
to seasonal borrowings required to finance operating activities due to
the reduction in pre-tax earnings.
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 June 30, 1999, which
are recorded at fair value of $22.9 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 $2.3 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
$1.4 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 that 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
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(primarily Canada). The net investments in foreign subsidiaries
translated into dollars using exchange rates at June 30, 1999, are
$81.4 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 $8.1 million. The
Company does not use derivative financial instruments to hedge its
exposure to changes in foreign currency exchange rates.
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
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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.
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 expects 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
identify 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
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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 of
delivery operations at one or more 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 June 30, 1999, the Company's total incremental costs (historical
plus estimated future costs) of addressing Y2K issues are estimated to
be in the range of $5.0 million, of which approximately $3.5 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 that 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
13
<PAGE> 14
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.
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; the ability to increase
the rates charged to customers; 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
PART II
OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 12, 1999 the Annual Meeting of Shareholders was held. The
following Directors were elected for terms that will expire on the date of the
annual meeting in the year indicated below. The number of shares voted for,
against and abstentions are also indicated.
PROPOSAL I (ELECTION OF DIRECTORS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
FOR AGAINST TERM
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bernard O. De Wulf 7,055,697 92,688 2002
- ----------------------------------------------------------------------------------------------------
Guy W. Rutland, III 7,055,697 92,688 2002
- ----------------------------------------------------------------------------------------------------
Robert R. Woodson 7,055,875 92,510 2002
- ----------------------------------------------------------------------------------------------------
</TABLE>
The following Directors' terms will continue as indicated.
<TABLE>
<S> <C>
Joseph W. Collier 2001
Guy W. Rutland, IV 2001
Randall E. West 2001
Berner F. Wilson 2001
William P. Benton 2000
David G. Bannister 2000
A. Mitchell Poole, Jr. 2000
Robert J. Rutland 2000
</TABLE>
PROPOSAL II (APPROVAL OF THE 1999 EMPLOYEE STOCK PURCHASE PLAN)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
6,463,321 669,859 15,205
- ---------------------------------------------------------------------------------------------------
</TABLE>
PROPOSAL III (APPOINTMENT OF INDEPENDENT AUDITORS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
7,141,155 160 7,070
- ----------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE> 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits: 27.1 Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K: There were no reports filed on Form 8-K
for the quarter ended June 30, 1999.
16
<PAGE> 17
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.
August 12, 1999 /s/A. Mitchell Poole, Jr.
- --------------- -------------------------------
(Date) A. Mitchell Poole, Jr.
on behalf of Registrant as
President, Chief Operating Officer,
and Assistant Secretary
August 12, 1999 /s/Daniel H. Popky
- --------------- -------------------------------
(Date) Daniel H. Popky
on behalf of Registrant as
Senior Vice President, Finance
and Chief Financial Officer
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF ALLIED HOLDINGS, INC. FOR THE SIX MONTHS ENDED JUNE 30,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 24,824
<SECURITIES> 22,935
<RECEIVABLES> 114,679
<ALLOWANCES> 0
<INVENTORY> 8,241
<CURRENT-ASSETS> 212,440
<PP&E> 298,782
<DEPRECIATION> 0
<TOTAL-ASSETS> 639,442
<CURRENT-LIABILITIES> 127,894
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 65,187
<TOTAL-LIABILITY-AND-EQUITY> 639,442
<SALES> 548,233
<TOTAL-REVENUES> 548,233
<CGS> 533,462
<TOTAL-COSTS> 533,462
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,167
<INCOME-PRETAX> 224
<INCOME-TAX> 97
<INCOME-CONTINUING> 127
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 127
<EPS-BASIC> .02
<EPS-DILUTED> .02
</TABLE>
