<PAGE> 1
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 SEPTEMBER 30,
2000
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.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
GEORGIA 58-0360550
--------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
SUITE 200, 160 CLAIREMONT AVENUE, DECATUR, GEORGIA 30030
--------------------------------------------------------------------------------
(Address of principal executive offices)
(404) 373-4285
--------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
--------------------------------------------------------------------------------
(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 October 28, 2000.........8,271,359
TOTAL NUMBER OF PAGES INCLUDED IN THIS REPORT: 22
1
<PAGE> 2
INDEX
PART I
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
ITEM 1: FINANCIAL STATEMENTS
<S> <C> <C>
Consolidated Balance Sheets as of September 30, 2000 and
December 31, 1999 ............................................. 3
Consolidated Statements of Operations for the Three and Nine
Month Periods Ended September 30, 2000 and 1999 ............... 4
Consolidated Statements of Cash Flows for the Nine
Month Periods Ended September 30, 2000 and 1999 ............... 5
Notes to Consolidated Financial Statements ...................... 6
ITEM 2
Management's Discussion and Analysis of Financial
Condition and Results of Operations ........................... 16
PART II
OTHER INFORMATION
ITEM 1
Legal Proceedings ............................................... 21
ITEM 6
Exhibits and Reports on Form 8-K ................................ 21
Signature Page .................................................. 22
</TABLE>
2
<PAGE> 3
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
2000 1999
------------ -----------
(UNAUDITED)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 4,604 $ 13,984
Short-term investments 58,369 44,325
Receivables, net of allowance for doubtful accounts 124,764 121,058
Inventories 7,916 7,949
Deferred tax assets 16,369 16,119
Prepayments and other current assets 23,779 22,182
--------- ---------
Total current assets 235,801 225,617
--------- ---------
PROPERTY AND EQUIPMENT, NET 258,684 287,838
--------- ---------
OTHER ASSETS:
Goodwill, net 95,986 93,104
Other 42,770 43,361
--------- ---------
Total other assets 138,756 136,465
--------- ---------
Total assets $ 633,241 $ 649,920
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 150 $ 185
Trade accounts payable 37,321 42,931
Accrued liabilities 85,280 85,655
--------- ---------
Total current liabilities 122,751 128,771
--------- ---------
LONG-TERM DEBT, LESS CURRENT MATURITIES 330,907 330,101
--------- ---------
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS 10,336 11,973
--------- ---------
DEFERRED INCOME TAXES 35,560 37,409
--------- ---------
OTHER LONG-TERM LIABILITIES 67,648 74,752
--------- ---------
STOCKHOLDERS' EQUITY:
Common stock, no par value; 20,000 shares authorized, 8,246 and
7,997 shares outstanding at September 30,
2000 and December 31, 1999, respectively 0 0
Additional paid-in capital 45,515 44,437
Retained earnings 28,147 26,903
Cumulative other comprehensive income, net of tax (7,155) (4,240)
Common stock in treasury, at cost, 62 and 29 shares at September 30,
2000 and December 31, 1999, respectively (468) (186)
--------- ---------
Total stockholders' equity 66,039 66,914
--------- ---------
Total liabilities and stockholders' equity $ 633,241 $ 649,920
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
3
<PAGE> 4
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDEDD
SEPTEMBER 30 SEPTEMBER 30
-------------------------- ---------------------------
2000 1999 2000 1999
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES $ 236,347 $ 240,058 $ 815,128 $ 788,291
--------- --------- --------- ---------
OPERATING EXPENSES:
Salaries, wages and fringe benefits 132,704 134,198 441,817 428,971
Operating supplies and expenses 40,953 41,345 140,837 135,827
Purchased transportation 23,513 22,866 79,967 77,395
Insurance and claims 11,226 11,695 36,369 37,572
Operating taxes and licenses 9,650 8,743 31,491 30,555
Depreciation and amortization 15,051 14,865 45,686 43,242
Rents 2,114 2,254 6,613 6,622
Communications and utilities 1,335 2,062 5,550 6,489
Other operating expenses 2,785 3,563 8,534 8,489
--------- --------- --------- ---------
Total operating expenses 239,331 241,591 796,864 775,162
--------- --------- --------- ---------
Operating (loss) income (2,984) (1,533) 18,264 13,129
--------- --------- --------- ---------
OTHER INCOME (EXPENSE):
Equity in earnings of joint ventures, net of tax 1,502 1,519 4,201 1,616
Interest expense (8,321) (8,129) (25,070) (23,296)
Interest income 1,644 716 3,653 1,336
--------- --------- --------- ---------
(5,175) (5,894) (17,216) (20,344)
--------- --------- --------- ---------
(LOSS) INCOME BEFORE INCOME TAXES (8,159) (7,427) 1,048 (7,215)
INCOME TAX BENEFIT 3,549 3,604 196 3,519
--------- --------- --------- ---------
NET (LOSS) INCOME $ (4,610) $ (3,823) $ 1,244 $ (3,696)
========= ========= ========= =========
PER COMMON SHARE - BASIC AND DILUTED $ (0.58) $ (0.49) $ 0.16 $ (0.47)
========= ========= ========= =========
COMMON SHARES OUTSTANDING - BASIC AND DILUTED 7,961 7,818 7,924 7,818
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
4
<PAGE> 5
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30
-------------------------
2000 1999
--------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 1,244 $ (3,696)
-------- --------
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 45,686 43,242
Loss on sale of property and equipment 97 781
Deferred income taxes 104 2,415
Compensation expense related to stock options and grants 452 441
Equity in earnings of joint ventures (4,201) (1,616)
Amortization (payment) of Teamsters Union signing bonus 1,850 (9,654)
Change in operating assets and liabilities:
Receivables, net of allowance for doubtful accounts (2,366) (17,034)
Inventories (7) (933)
Prepayments and other current assets (1,717) (2,655)
Trade accounts payable (6,587) (8,089)
Accrued liabilities (8,633) (15,239)
-------- --------
Total adjustments 24,678 (8,341)
-------- --------
Net cash provided by (used in) operating activities 25,922 (12,037)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (15,972) (38,290)
Proceeds from sale of property and equipment 799 1,108
Purchase of business, net of cash acquired (8,185) (1,879)
Investment in joint venture 0 (80)
(Increase) decrease in short-term investments (14,044) 7,425
Increase in the cash surrender value of life insurance (128) (47)
-------- --------
Net cash used in investing activities (37,530) (31,763)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt, net 771 55,930
Proceeds from issuance of common stock 626 211
Repurchase of common stock (282) 0
Other, net 1,894 841
-------- --------
Net cash provided by financing activities 3,009 56,982
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (781) 107
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (9,380) 13,289
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 13,984 21,977
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,604 $ 35,266
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
5
<PAGE> 6
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 accounting principles generally
accepted in the United States 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 nine month periods ended September 30, 2000 are not
necessarily indicative of the results that may be expected for the year
ended December 31, 2000. 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 1999 Annual Report on Form 10-K.
Note 2. Long-Term Debt and Supplemental Guarantor Information
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 "Guarantor
Subsidiaries"). Haul Insurance Ltd., Arrendadora de Equipo Para el
Transporte de Automoviles, S. de R.L. de C.V., Axis Logistica, S. de
R.L. de C.V. and Axis Netherlands C.V. do not guarantee the Company's
obligations under the Notes (the "Non-guarantor Subsidiaries"). The
following condensed consolidating balance sheets, statements of
operations and statements of cash flows present the financial
statements of the parent company, and the combined financial statements
of the Guarantor Subsidiaries and Non-guarantor subsidiaries. The
Guarantors are jointly and severally liable for the Company's
obligations under the Notes and there are no restrictions on the
ability of the Guarantors to make distributions to the Company.
6
<PAGE> 7
SUPPLEMENTAL GUARANTOR INFORMATION
ALLIED HOLDINGS, INC.
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 2000
IN THOUSANDS
<TABLE>
<CAPTION>
ALLIED GUARANTOR NON-GUARANTOR
HOLDINGS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 380 $ 3,199 $ 1,025 $ -- $ 4,604
Short-term investments -- -- 58,369 -- 58,369
Receivables, net of allowance for doubtful accounts 94 123,462 1,208 -- 124,764
Inventories -- 7,916 -- -- 7,916
Deferred tax asset-current -- 17,542 582 (1,755) 16,369
Prepayments and other current assets 1,738 21,760 281 -- 23,779
--------- --------- -------- --------- ---------
Total current assets 2,212 173,879 61,465 (1,755) 235,801
--------- --------- -------- --------- ---------
PROPERTY AND EQUIPMENT, NET 8,625 247,132 2,927 -- 258,684
OTHER ASSETS:
Goodwill, net 1,662 94,324 -- -- 95,986
Other 6,878 25,244 10,648 -- 42,770
Deferred tax asset-noncurrent 21,580 -- -- (21,580) --
Intercompany receivables 274,410 -- -- (274,410) --
Investment in subsidiaries 93,834 13,591 -- (107,425) --
--------- --------- -------- --------- ---------
Total other assets 398,364 133,159 10,648 (403,415) 138,756
--------- --------- -------- --------- ---------
Total assets $ 409,201 $ 554,170 $ 75,040 $(405,170) $ 633,241
========= ========= ======== ========= =========
CURRENT LIABILITIES:
Current maturities of long-term debt $ -- $ 150 $ -- $ -- $ 150
Trade accounts payable 469 36,650 202 -- 37,321
Deferred tax liability 1,755 -- -- (1,755) --
Intercompany payables -- 273,672 738 (274,410) --
Accrued liabilities 10,248 63,676 11,356 -- 85,280
--------- --------- -------- --------- ---------
Total current liabilities 12,472 374,148 12,296 (276,165) 122,751
--------- --------- -------- --------- ---------
LONG-TERM DEBT, less current maturities 330,690 217 -- -- 330,907
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS -- 10,336 -- -- 10,336
DEFERRED INCOME TAXES -- 57,140 -- (21,580) 35,560
OTHER LONG-TERM LIABILITIES -- 33,832 33,816 -- 67,648
STOCKHOLDERS' EQUITY:
Common stock, no par value -- -- -- -- --
Additional paid-in capital 45,515 81,523 13,470 (94,993) 45,515
Retained Earnings 28,147 5,861 18,045 (23,906) 28,147
Cumulative other comprehensive income, net of tax (7,155) (6,887) (2,587) 11,474 (7,155)
Less treasury stock (468) -- -- -- (468)
--------- --------- -------- --------- ---------
Total stockholders' equity 66,039 78,497 28,928 (107,425) 66,039
--------- --------- -------- --------- ---------
Total liabilities and stockholders' equity $ 409,201 $ 554,170 $ 75,040 $(405,170) $ 633,241
========= ========= ======== ========= =========
</TABLE>
7
<PAGE> 8
SUPPLEMENTAL GUARANTOR INFORMATION
ALLIED HOLDINGS, INC.
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1999
IN THOUSANDS
<TABLE>
<CAPTION>
ALLIED GUARANTOR NON-GUARANTOR
HOLDINGS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,852 $ 3,179 $ 8,953 $ -- $ 13,984
Short-term investments -- -- 44,325 -- 44,325
Receivables, net of allowance for doubtful accounts 14 119,978 1,066 -- 121,058
Inventories -- 7,949 -- -- 7,949
Deferred tax asset-current 1,558 14,561 -- -- 16,119
Prepayments and other current assets 1,611 20,257 314 -- 22,1821
--------- --------- --------- --------- ---------
Total current assets 5,035 165,924 54,658 -- 225,617
--------- --------- --------- --------- ---------
PROPERTY AND EQUIPMENT, NET -- 285,665 2,173 -- 287,838
OTHER ASSETS:
Goodwill, net 1,751 91,353 -- -- 93,104
Other 7,665 24,509 11,187 -- 43,361
Deferred tax asset-noncurrent 17,004 -- -- (17,004) --
Intercompany receivables 262,361 -- (262,361) --
Investment in subsidiaries 112,848 13,571 -- (126,419) --
--------- --------- --------- --------- ---------
Total other assets 401,629 129,433 11,187 (405,784) 136,465
--------- --------- --------- --------- ---------
Total assets $ 406,664 $ 581,022 $ 68,018 $(405,784) $ 649,920
========= ========= ========= ========= =========
CURRENT LIABILITIES:
Current maturities of long-term debt $ -- $ 185 $ -- $ -- $ 185
Trade accounts payable 345 42,089 497 42,931
Intercompany payables -- 260,977 1,384 (262,361) --
Accrued liabilities 9,405 66,350 9,900 -- 85,655
--------- --------- --------- --------- ---------
Total current liabilities 9,750 369,601 11,781 (262,361) 128,771
--------- --------- --------- --------- ---------
LONG-TERM DEBT, less current maturities 330,000 101 -- -- 330,101
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS -- 11,973 -- -- 11,973
DEFERRED INCOME TAXES -- 54,413 -- (17,004) 37,409
OTHER LONG-TERM LIABILITIES -- 45,237 29,515 -- 74,752
STOCKHOLDERS' EQUITY:
Common stock, no par value -- -- -- -- --
Additional paid-in capital 44,437 81,449 13,229 (94,678) 44,437
Retained Earnings 26,903 23,485 14,984 (38,469) 26,903
Cumulative other comprehensive income, net of tax (4,240) (5,237) (1,491) 6,728o
(4,240)
Less treasury stock at cost (186) -- -- -- (186)
--------- --------- --------- --------- ---------
Total stockholders' equity 66,914 99,697 26,722 (126,419) 66,914
--------- --------- --------- --------- ---------
Total liabilities and stockholders' equity $ 406,664 $ 581,022 $ 68,018 $(405,784) $ 649,920
========= ========= ========= ========= =========
</TABLE>
8
<PAGE> 9
SUPPLEMENTAL GUARANTOR INFORMATION
ALLIED HOLDINGS, INC
SUPPLEMENTAL CONDENSED CONSOLIDATED INCOME STATEMENT
NINE MONTHS ENDED SEPTEMBER 30, 2000
IN THOUSANDS
<TABLE>
<CAPTION>
ALLIED GUARANTOR NON-GUARANTOR
HOLDINGS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES $ 3,728 $ 813,804 $ 25,574 $(27,978) $ 815,128
-------- --------- -------- -------- ---------
OPERATING EXPENSES:
Salaries, wages and fringe benefits 3,609 438,208 -- -- 441,817
Operating supplies and expenses 856 139,953 28 -- 140,837
Purchased transportation -- 79,967 -- -- 79,967
Rents 57 6,556 -- -- 6,613
Insurance and claims -- 36,042 24,577 (24,250) 36,369
Operating taxes and licenses 8 31,483 -- -- 31,491
Depreciation and amortization 321 45,085 280 -- 45,686
Communications and utilities 12 5,538 -- -- 5,550
Other operating expenses 1,549 10,562 151 (3,728) 8,534
-------- --------- -------- -------- ---------
Total operating expenses 6,412 793,394 25,036 (27,978) 796,864
-------- --------- -------- -------- ---------
Operating (loss) income (2,684) 20,410 538 -- 18,264
-------- --------- -------- -------- ---------
OTHER INCOME (EXPENSE):
Equity in earnings (loss) of joint ventures, net of tax -- 4,359 (158) -- 4,201
Interest expense (22,111) (25,591) (372) 23,004 (25,070)
Interest income 22,977 294 3,386 (23,004) 3,653
Equity in net income of subsidiaries 2,079 -- -- (2,079) --
-------- --------- -------- -------- ---------
2,945 (20,938) 2,856 (2,079) (17,216)
-------- --------- -------- -------- ---------
INCOME (LOSS) BEFORE INCOME TAXES 261 (528) 3,394 (2,079) 1,048
INCOME TAX BENEFIT (PROVISION) 983 (124) (663) -- 196
-------- --------- -------- -------- ---------
NET INCOME (LOSS) $ 1,244 $ (652) $ 2,731 $ (2,079) $ 1,244
======== ========= ======== ======== =========
</TABLE>
SUPPLEMENTAL CONDENSED CONSOLIDATED INCOME STATEMENT
NINE MONTHS ENDED SEPTEMBER 30, 1999
IN THOUSANDS
<TABLE>
<CAPTION>
ALLIED GUARANTOR NON-GUARANTOR
HOLDINGS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES $ 3,741 $ 787,736 $ 24,133 $(27,319) $ 788,291
-------- --------- -------- -------- ---------
OPERATING EXPENSES:
Salaries, wages and fringe benefits 3,126 425,845 -- -- 428,971
Operating supplies and expenses 1,089 134,727 11 -- 135,827
Purchased transportation -- 77,395 -- -- 77,395
Rents 31 6,591 -- -- 6,622
Insurance and claims 131 38,669 22,350 (23,578) 37,572
Operating taxes and licenses 26 30,529 -- -- 30,555
Depreciation and amortization 192 42,808 242 -- 43,242
Communications and utilities 25 6,464 -- -- 6,489
Other operating expenses 1,412 10,094 724 (3,741) 8,489
-------- --------- -------- -------- ---------
Total operating expenses 6,032 773,122 23,327 (27,319) 775,162
-------- --------- -------- -------- ---------
Operating (loss) income (2,291) 14,614 806 -- 13,129
-------- --------- -------- -------- ---------
OTHER INCOME (EXPENSE):
Equity in earnings of joint ventures, net of tax -- 1,307 309 -- 1,616
Interest expense (22,763) (24,243) (315) 24,025 (23,296)
Interest income 24,016 370 975 (24,025) 1,336
Equity in net loss of subsidiaries (7,313) -- -- 7,313 --
-------- --------- -------- -------- ---------
(6,060) (22,566) 969 7,313 (20,344)
-------- --------- -------- -------- ---------
(LOSS) INCOME BEFORE INCOME TAXES (8,351) (7,952) 1,775 7,313 (7,215)
INCOME TAX BENEFIT (PROVISION) 4,655 (463) (673) -- 3,519
-------- --------- -------- -------- ---------
NET (LOSS) INCOME $ (3,696) $ (8,415) $ 1,102 $ 7,313 $ (3,696)
======== ========= ======== ======== =========
</TABLE>
9
<PAGE> 10
SUPPLEMENTAL GUARANTOR INFORMATION
ALLIED HOLDINGS, INC
SUPPLEMENTAL CONDENSED CONSOLIDATED INCOME STATEMENT
THREE MONTHS ENDED SEPTEMBER 30, 2000
IN THOUSANDS
<TABLE>
<CAPTION>
ALLIED GUARANTOR NON-GUARANTOR
HOLDINGS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES $ 1,243 $ 235,973 $ 8,392 $(9,261) $ 236,347
------- --------- ------- ------- ---------
OPERATING EXPENSES:
Salaries, wages and fringe benefits 1,833 130,871 -- -- 132,704
Operating supplies and expenses 56 40,885 12 -- 40,953
Purchased transportation -- 23,513 -- -- 23,513
Rents 19 2,095 -- -- 2,114
Insurance and claims -- 10,813 8,431 (8,018) 11,226
Operating taxes and licenses 2 9,648 -- -- 9,650
Depreciation and amortization 262 14,693 96 -- 15,051
Communications and utilities 4 1,331 -- -- 1,335
Other operating expenses 273 3,755 -- (1,243) 2,785
------- --------- ------- ------- ---------
Total operating expenses 2,449 237,604 8,539 (9,261) 239,331
------- --------- ------- ------- ---------
Operating loss (1,206) (1,631) (147) -- (2,984)
------- --------- ------- ------- ---------
OTHER INCOME (EXPENSE):
Equity in earnings (loss) of joint ventures, net of tax -- 1,557 (55) -- 1,502
Interest expense (7,216) (8,569) (133) 7,597 (8,321)
Interest income 7,595 94 1,552 (7,597) 1,644
Equity in net loss of subsidiaries (7,400) -- -- 7,400 --
------- --------- ------- ------- ---------
(7,021) (6,918) 1,364 7,400 (5,175)
------- --------- ------- ------- ---------
(LOSS) INCOME BEFORE INCOME TAXES (8,227) (8,549) 1,217 7,400 (8,159)
INCOME TAX BENEFIT (PROVISION) 3,617 (40) (28) -- 3,549
------- --------- ------- ------- ---------
NET (LOSS) INCOME $(4,610) $ (8,589) $ 1,189 $ 7,400 $ (4,610)
======= ========= ======= ======= =========
</TABLE>
SUPPLEMENTAL CONDENSED CONSOLIDATED INCOME STATEMENT
THREE MONTHS ENDED SEPTEMBER 30, 1999
IN THOUSANDS
<TABLE>
<CAPTION>
ALLIED GUARANTOR NON-GUARANTOR
HOLDINGS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES $ 1,247 $ 239,815 $ 8,103 $(9,107) $ 240,058
------- --------- ------- ------- ---------
OPERATING EXPENSES:
Salaries, wages and fringe benefits 815 133,383 -- -- 134,198
Operating supplies and expenses 347 40,987 11 -- 41,345
Purchased transportation -- 22,866 -- -- 22,866
Rents 18 2,236 -- -- 2,254
Insurance and claims 44 12,063 7,448 (7,860) 11,695
Operating taxes and licenses 5 8,738 -- -- 8,743
Depreciation and amortization 64 14,711 90 -- 14,865
Communications and utilities 6 2,056 -- -- 2,062
Other operating expenses 515 4,451 (156) (1,247) 3,563
------- --------- ------- ------- ---------
Total operating expenses 1,814 241,491 7,393 (9,107) 241,591
------- --------- ------- ------- ---------
Operating (loss) income (567) (1,676) 710 -- (1,533)
------- --------- ------- ------- ---------
OTHER INCOME (EXPENSE):
Equity in earnings of joint ventures, net of tax -- 1,365 154 -- 1,519
Interest expense (7,900) (8,592) (177) 8,540 (8,129)
Interest income 8,533 58 665 (8,540) 716
Equity in net loss of subsidiaries (7,022) -- -- 7,022 --
------- --------- ------- ------- ---------
(6,389) (7,169) 642 7,022 (5,894)
------- --------- ------- ------- ---------
(LOSS) INCOME BEFORE INCOME TAXES (6,956) (8,845) 1,352 7,022 (7,427)
INCOME TAX BENEFIT (PROVISION) 3,133 801 (330) -- 3,604
------- --------- ------- ------- ---------
NET (LOSS) INCOME $(3,823) $ (8,044) $ 1,022 $ 7,022 $ (3,823)
======= ========= ======= ======= =========
</TABLE>
10
<PAGE> 11
SUPPLEMENTAL GUARANTOR INFORMATION
ALLIED HOLDINGS, INC
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2000
IN THOUSANDS
<TABLE>
<CAPTION>
ALLIED GUARANTOR NON-GUARANTOR
HOLDINGS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 1,244 $ (652) $ 2,731 $(2,079) $ 1,244
------- --------- ------- ------- ---------
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 321 45,085 280 -- 45,686
Loss on sale of property and equipment -- 97 -- -- 97
Deferred income taxes 567 119 (582) -- 104
Compensation expense related to stock options and grants 452 -- -- -- 452
Equity in earnings (loss) of joint ventures -- (4,359) 158 -- (4,201)
Equity in net income of subsidiaries (2,079) -- -- 2,079 --
Amortization of Teamsters Union signing bonus -- 1,850 -- -- 1,850
Change in operating assets and liabilities:
Receivables, net of allowance for doubtful accounts (80) (2,144) (142) -- (2,366)
Inventories -- (7) -- -- (7)
Prepayments and other current assets (127) (1,623) 33 -- (1,717)
Intercompany receivables and payables (12,049) 12,695 (646) -- --
Trade accounts payable 124 (6,416) (295) -- (6,587)
Accrued liabilities 843 (15,233) 5,757 -- (8,633)
------- --------- ------- ------- ---------
Total adjustments (12,028) 30,064 4,563 2,079 24,678
------- --------- ------- ------- ---------
Net cash (used in) provided by operating activities (10,784) 29,412 7,294 -- 25,922
------- --------- ------- ------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (141) (14,955) (876) -- (15,972)
Intercompany sale of property and equipment (8,716) 8,716 -- -- --
Proceeds from sale of property and equipment -- 799 -- -- 799
Purchase of business, net of cash acquired -- (8,185) -- -- (8,185)
Return of capital 11,999 (11,999) -- -- --
Intercompany dividend received (paid) 4,349 (4,349) -- -- --
Increase in short-term investments -- -- (14,044) -- (14,044)
Increase in cash surrender value of life insurance -- (128) -- -- (128)
------- --------- ------- ------- ---------
Net cash provided by (used) in investing activities 7,491 (30,101) (14,920) -- (37,530)
------- --------- ------- ------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt, net 690 81 -- -- 771
Proceeds from issuance of common stock 626 -- -- -- 626
Repurchase of common stock (282) -- -- -- (282)
Other, net 787 313 794 -- 1,894
------- --------- ------- ------- ---------
Net cash provided by financing activities 1,821 394 794 -- 3,009
------- --------- ------- ------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS -- 315 (1,096) -- (781)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (1,472) 20 (7,928) -- (9,380)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,852 3,179 8,953 -- 13,984
------- --------- ------- ------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 380 $ 3,199 $ 1,025 $ -- $ 4,604
======= ========= ======= ======= =========
</TABLE>
11
<PAGE> 12
SUPPLEMENTAL GUARANTOR INFORMATION
ALLIED HOLDINGS, INC
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1999
IN THOUSANDS
<TABLE>
<CAPTION>
ALLIED GUARANTOR NON-GUARANTOR
HOLDINGS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income $(3,696) $ (8,415) $ 1,102 $ 7,313 $ (3,696)
------- --------- ------- ------- ---------
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 192 42,808 242 -- 43,242
Loss on sale of property and equipment -- 781 -- -- 781
Deferred income taxes 1,787 628 -- -- 2,415
Compensation expense related to stock options and grants 441 -- -- -- 441
Equity in loss of joint ventures -- (1,307) (309) -- (1,616)
Equity in net loss of subsidiaries 7,313 -- -- (7,313) --
Payment of Teamsters Union signing bonus -- (9,654) -- -- (9,654)
Change in operating assets and liabilities:
Receivables, net of allowance for doubtful accounts 2 (16,541) (495) -- (17,034)
Inventories -- (933) -- -- (933)
Prepayments and other current assets (127) (2,980) 452 -- (2,655)
Trade accounts payable (288) (7,342) (459) -- (8,089)
Intercompany payables (65,424) 65,471 (47) -- --
Accrued liabilities (4,454) (18,963) 8,178 -- (15,239)
------- --------- ------- ------- ---------
Total adjustments (60,558) 51,968 7,562 (7,313) (8,341)
------- --------- ------- ------- ---------
Net cash (used in) provided by operating activities (64,254) 43,553 8,664 -- (12,037)
------- --------- ------- ------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment -- (37,062) (1,228) -- (38,290)
Proceeds from sale of property and equipment -- 1,108 -- -- 1,108
Purchase of business, net of cash acquired -- (1,879) -- -- (1,879)
Return of capital -- (80) -- -- (80)
Intercompany dividend (received) paid 4,638 (4,638) -- -- --
Decrease in short-term investments -- -- 7,425 -- 7,425
Increase in cash surrender value of life insurance -- (47) -- -- (47)
------- --------- ------- ------- ---------
Net cash provided by (used in) investing activities 4,638 (42,598) 6,197 -- (31,763)
------- --------- ------- ------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt, net 57,077 (1,147) -- -- 55,930
Proceeds from issuance of common stock 211 -- -- -- 211
Other, net 1,042 (1,754) 1,553 -- 841
------- --------- ------- ------- ---------
Net cash provided by (used in) financing activities 58,330 (2,901) 1,553 -- 56,982
------- --------- ------- ------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS -- 159 (52) -- 107
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (1,286) (1,787) 16,362 -- 13,289
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 895 1,849 19,233 -- 21,977
------- --------- ------- ------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ (391) $ 62 $35,595 $ -- $ 35,266
======= ========= ======= ======= =========
</TABLE>
12
<PAGE> 13
Note 3. Comprehensive Income
Comprehensive income was a loss of $5.6 million for the third quarter
2000 versus a loss of $3.6 million for the third quarter 1999, and a
loss of $1.7 million for the first nine months of 2000 versus a loss of
$1.6 million for the first nine months of 1999. The difference between
comprehensive income and net income is the change in the foreign
currency translation adjustment, net of income taxes.
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 is currently
in the process of analyzing certain transactions in order to meet the
requirements of this statement by January 1, 2001.
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):
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
September 30 September 30
-------------------------- -------------------------
2000 1999 2000 1999
--------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Revenues:
United States $195,219 $202,684 $672,397 $658,029
Canada 41,128 37,374 142,731 130,262
-------- -------- -------- --------
$236,347 $240,058 $815,128 $788,291
======== ======== ======== ========
</TABLE>
Revenues are attributed to the respective countries based on the location of the
origination terminal.
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<PAGE> 14
Note 6. Equity in Earnings of Joint Ventures
The Company has joint ventures in the United Kingdom and Brazil. Equity
in earnings for these joint ventures is recorded net of income taxes in
the consolidated statements of operations by the Company. Income taxes
related to the joint ventures were $2,000 and $1.2 million for the
three and nine months ended September 30, 2000 and $661,000 and
$673,000 for the three and nine months ended September 30, 1999.
Included in the second quarter of 2000 results are $1.5 million in fees
related to management services declared by the joint venture. A
corresponding receivable is included in the balance sheet of the
Company.
Note 7. Stock Repurchase Plan
The Company's Board of Directors has authorized management to take the
necessary steps to repurchase up to 500,000 shares of the Company's
outstanding common stock through fiscal year 2000 in open market
transactions. The timing of these purchases and the number of shares
purchased will be dictated by market conditions and other relevant
factors. Through September 30, 2000, the Company has repurchased 61,652
shares.
Note 8. Litigation
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 Company does not
believe that any of such pending litigation if adversely determined
would have a material adverse effect on the Company.
The Company is defending two pieces of related litigation in the
Supreme Court of Erie County, New York: Gateway Development &
Manufacturing, Inc. v. Commercial Carriers, Inc., et al., Index No.
1997/8920 (the "Gateway Case"), and Commercial Carriers, Inc., v.
Gateway Development & Manufacturing, Inc., et al. (the "CCI Case"),
Index No. I2000/8184. The claims at issue in both the Gateway Case and
the CCI Case center around the contention that the Company breached
legal duties with respect to a failed business transaction involving
Gateway Development & Manufacturing, Inc., Ryder Truck Rental, Inc.,
and Ryder System, Inc. In the Gateway Case, the Company has sought and
received summary judgment in its favor on the sole claim (for tortious
interference with contract) asserted against it by Gateway Development
& Manufacturing, Inc., but anticipates the filing and service of
cross-claims that the court has permitted to be asserted against the
Company by the other defendants in that action. In the CCI Case, the
Company has accepted or expects to accept service of a separate
complaint asserting claims against the Company that are virtually
identical to the cross-claims that the Company expects to be asserted
against it by the other defendants in the Gateway Case. It is
anticipated that the claims asserted in both the Gateway Case and the
CCI Case will be resolved in a unified proceeding. With respect to the
entirety of this litigation, the Company intends to continue its
vigorous defense against the claims asserted it, as management believes
all of those claims are without merit. While the
14
<PAGE> 15
ultimate results of this litigation cannot be predicted, management
does not expect that the resolution of these proceedings will have a
material adverse effect on the Company's consolidated financial
position or results of operations.
In June 2000, Commercial Carriers, Inc. (CCI), which is a subsidiary of
Allied Automotive Group, Inc., a subsidiary of Allied Holdings, Inc.,
filed suit against National Union Fire Insurance Company of Pittsburgh,
PA (National Union). National Union is to provide insurance coverage of
approximately $20 million regarding a $35 million judgment against CCI
and had fully reserved its rights of insurance coverage. CCI filed a
lawsuit seeking a declaratory judgment that National Union had no basis
for reserving its rights.
In July 2000, National Union unconditionally withdrew its previously
issued reservation of its rights and acknowledged coverage, and CCI
dismissed, without prejudice, the lawsuit it previously filed against
National Union. As a result, CCI has insurance coverage for the entire
amount of the judgment.
Note 9. Reclassifications
Certain amounts in the prior year financial statements have been
reclassified to conform to the current year presentation.
15
<PAGE> 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Revenues were $236.3 million for the third quarter of 2000 versus
revenues of $240.1 million for the third quarter of 1999, a decrease of
1.6%. For the nine-month period ended September 30, 2000, revenues were
$815.1 million, versus revenues of $788.3 million for the nine-month
period ended September 30, 1999, an increase of 3.4%. During 2000, the
Company generated higher revenue per vehicle delivered, which is due to
revenue enhancements and other factors, including the elimination of
some non-profitable business. During the third quarter, the additional
revenue generated per vehicle delivered was offset by a decrease in the
number of vehicles delivered. The decrease in volume was primarily a
result of decreased new vehicle production partly due to the Firestone
tire recall, which lowered production at three Ford Plants served by
the Company.
The Company experienced a net loss of $4.6 million for the third
quarter of 2000 versus a net loss of $3.8 million for the third quarter
of 1999. Basic and diluted loss per share for the third quarter of 2000
was $0.58 versus basic and diluted loss per share of $0.49 for the
third quarter of 1999. For the nine-month period ended September 30,
2000, net income was $1.2 million, versus a net loss of $3.7 million
for the nine-month period ended September 30, 1999. Basic and diluted
earnings per share for the nine-month period ended September 30, 2000
were $0.16 versus basic and diluted loss per share of $0.47 for the
nine-month period ended September 30, 1999.
Earnings improved for the first nine months of 2000 versus the first
nine months of 1999 due to continued cost control measures implemented
in the fourth quarter of 1999, combined with an increase in the revenue
generated per vehicle delivered. The rate structure was modified in the
second half of 1999 in response to the increase in light truck
deliveries, which adversely impacted load averages and operating
results. The result was an increase in the revenue generated per
vehicle delivered. During 2000, the Company has experienced higher fuel
costs. The Company began implementing fuel surcharges in the first
quarter of 2000; in addition, the Company hedges a portion of its
expected fuel consumption. The Company estimates that higher fuel
costs, net of surcharges and hedging gains, reduced earnings in the
first quarter of 2000 by approximately $1.6 million, or $0.20 per
share. The fuel surcharges were fully implemented by the second
quarter, and accordingly, the higher fuel costs were offset by
surcharges and hedging gains in the second quarter and for most of the
third quarter. However, fuel costs again increased significantly late
in the third quarter of 2000, and the Company estimates that higher
fuel costs, net of surcharges and hedging gains, reduced earnings in
the third quarter by approximately $0.6 million, or $0.07 per share.
During the third quarter, Ford suspended production at three
manufacturing plants due to the Firestone tire recall. The Company
handled vehicle deliveries at all three plants. The Company estimates
that the loss of business due to the Firestone tire recall, and to a
lesser
16
<PAGE> 17
extent, extended plant shutdowns by other manufacturers, reduced net
earnings by approximately $2.4 million, or $0.30 per share.
The following is a discussion of the changes in the Company's major
expense categories:
Salaries, wages and fringe benefits increased slightly from 55.9% of
revenues for the third quarter of 1999 to 56.2% of revenues for the
third quarter of 2000, and decreased from 54.4% of revenues for the
first nine months of 1999 to 54.2% of revenues for the first nine
months of 2000. The change was due primarily to annual salary and
benefit increases, offset by continued productivity and efficiency
improvements. During the third quarter of 2000, the slight increase was
also due to the impact of the Firestone tire recall.
Operating supplies and expenses increased from 17.2% of revenues for
the third quarter of 1999 to 17.3% of revenues for the third quarter of
2000, and also increased from 17.2% of revenues for the first nine
months of 1999 to 17.3% of revenues for the first nine months of 2000.
The increase is due primarily to higher fuel prices that more than
offset the decrease in Year 2000 compliance expenses and efficiency
improvements gained in 2000.
Insurance and claims expense decreased from 4.9% of revenues for the
third quarter of 1999 to 4.8% of revenues for the third quarter of
2000, and decreased from 4.8% of revenues for the first nine months of
1999 to 4.5% of revenues for the first nine months of 2000. The
decrease is due to quality initiatives the Company put in place to
reduce the frequency and dollar amount of damage claims.
Equity in earnings of joint ventures was 0.6% of revenues for both the
third quarter of 1999 and 2000 and increased from 0.2% of revenues for
the first nine months of 1999 to 0.5% of revenues for the first nine
months of 2000. The increase was due to increased earnings from the
Company's joint ventures in the United Kingdom, which began operations
in May 1999, and a reduction in the loss from the Company's Brazilian
venture.
Interest expense as a percentage of revenues increased from 3.4% of
revenues for the third quarter of 1999 to 3.5% of revenues for the
third quarter of 2000, and increased from 3.0% of revenues for the
first nine months of 1999 to 3.1% for the first nine months of 2000.
The increase was due primarily to higher interest rates in 2000 versus
1999.
Interest income, as a percentage of revenues, increased from 0.3% in
the third quarter of 1999 to 0.7% in the third quarter of 2000, and
increased from 0.2% for the first nine months of 1999 to 0.5% for the
first nine months of 2000. The increase was due to higher earnings on
marketable securities held by the Company's captive insurance company.
17
<PAGE> 18
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities totaled $25.9 million for the
nine-month period ended September 30, 2000 versus net cash used by
operating activities of $12.0 million for the nine-month period ended
September 30, 1999. The significant increase in cash provided by
operations was due primarily to an increase in earnings during the
first nine months of 2000 versus 1999, combined with a favorable change
in operating assets and liabilities as the Company implemented measures
to improve asset utilization.
Net cash used in investing activities totaled $37.5 million for the
nine-month period ended September 30, 2000 versus $31.8 million for the
nine-month period ended September 30, 1999. The increase was due
primarily to the purchase of CT Group, a logistics service group, in
March 2000 for $8.2 million. A decrease in capital expenditures was
offset by an increase in short-term investments. The investment
portfolio mix of the Company's captive insurance company changed during
the first nine months of 2000 as short-term investments increased by
$14.0 million. The change was the result of the captive insurance
company's investment managers investing cash on hand. Capital
expenditures were $16.0 million in the first nine months of 2000 versus
$38.3 million in the first nine months of 1999. The reduced level of
capital spending was the result of efforts by the Company to limit
capital expenditures in 2000 as fleet utilization improved and due to
the timing of capital expenditures. The Company expects capital
spending to be higher in the last half of 2000 versus the first half
while spending in 1999 was higher in the first half of the year.
Net cash provided by financing activities totaled $3.0 million for the
nine-month period ended September 30, 2000 versus $57.0 million for the
nine-month period ended September 30, 1999. The decrease was due
primarily to the increase in cash flows from operations.
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 September 30, 2000, which
are recorded at a fair value of $58.4 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 $5.8 million.
18
<PAGE> 19
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 $5.5
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 September
30, 2000, are $81.5 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 $8.2 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 were addressed by the Company.
The Company, like most other major companies, addressed 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 Company has analyzed internal information technology ("IT") systems
("IT systems") to identify any computer programs that are not Year 2000
compliant and implement changes required to make such systems Year 2000
compliant. The Company critical IT systems functioned without
substantial Year 2000 Compliance problems.
As of December 31, 1999, the Company's total incremental costs
(historical plus estimated future costs) of addressing Y2K issues were
estimated to be $5.0 million, of which approximately $4.1 million was
incurred in 1999 and $900,000 was incurred in 1998. The Company
estimates that approximately 30% of the costs incurred in 1999 were
internal costs, including compensation and benefits of employees
assigned primarily to Y2K procedures. Internal costs addressing Y2K
issues during 1998 were not material.
19
<PAGE> 20
These costs were funded through operating cash flow. The Company did
not incur material Y2K related costs in the first nine months of 2000.
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.
20
<PAGE> 21
PART II.
ITEM 1. LEGAL PROCEEDINGS.
Refer to Note 7 on Page 8 of this Report on Form 10-Q for information
on legal proceedings.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits: 27 - Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K: None.
21
<PAGE> 22
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.
November 14, 2000 /s/A. Mitchell Poole, Jr.
----------------- ----------------------------------------
(Date) A. Mitchell Poole, Jr.
on behalf of Registrant as
Vice Chairman and
Chief Executive Officer
November 14, 2000 /s/Daniel H. Popky
----------------- ----------------------------------------
(Date) Daniel H. Popky
on behalf of Registrant as
Senior Vice President, Finance
and Chief Financial Officer
22
