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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 - FOR THE QUARTERLY PERIOD ENDED MARCH 31, 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.
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(Exact name of registrant as specified in its charter)
GEORGIA 58-0360550
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
SUITE 200, 160 CLAIREMONT AVENUE, DECATUR, GEORGIA 30030
- -------------------------------------------------------------------------------
(Address of principal executive offices)
(404) 373-4285
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(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 April 21, 2000............. 8,041,957
TOTAL NUMBER OF PAGES INCLUDED IN THIS REPORT: 12
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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 March 31, 2000 and
December 31, 1999........................................... 3
Consolidated Statements of Operations for the Three
Month Periods Ended March 31, 2000 and 1999............. 4
Consolidated Statements of Cash Flows for the Three
Month Periods Ended March 31, 2000 and 1999................. 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 6
Exhibits and Reports on Form 8-K................................ 11
Signature Pages................................................. 12
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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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<CAPTION>
MARCH 31 DECEMBER 31
2000 1999
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(UNAUDITED)
ASSETS
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CURRENT ASSETS:
Cash and cash equivalents $ 4,335 $ 13,984
Short-term investments 53,592 44,325
Receivables, net of allowance for doubtful accounts 128,986 121,058
Inventories 7,940 7,949
Deferred tax assets 14,605 16,119
Prepayments and other current assets 26,230 22,182
---------- ----------
Total current assets 235,688 225,617
---------- ----------
PROPERTY AND EQUIPMENT, NET 276,360 287,838
---------- ----------
OTHER ASSETS:
Goodwill, net 98,867 93,104
Other 43,603 43,361
---------- ----------
Total other assets 142,470 136,465
---------- ----------
Total assets $ 654,518 $ 649,920
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 149 $ 185
Trade accounts payable 42,704 42,931
Accrued liabilities 96,863 85,655
---------- ----------
Total current liabilities 139,716 128,771
---------- ----------
LONG-TERM DEBT, LESS CURRENT MATURITIES 330,058 330,101
---------- ----------
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS 11,949 11,973
---------- ----------
DEFERRED INCOME TAXES 35,151 37,409
---------- ----------
OTHER LONG-TERM LIABILITIES 72,078 74,752
---------- ----------
STOCKHOLDERS' EQUITY:
Common stock, no par value; 20,000 shares authorized, 8,001
and 7,997 shares outstanding at March 31,
2000 and December 31,1999, respectively 0 0
Additional paid-in capital 44,892 44,437
Retained earnings 25,868 26,903
Cumulative other comprehensive income, net of tax (4,726) (4,240)
Common stock in treasury, at cost, 62 shares at March 31, 2000 (468) (186)
---------- ----------
Total stockholders' equity 65,566 66,914
---------- ----------
Total liabilities and stockholders' equity $ 654,518 $ 649,920
========== ==========
</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 ENDED
MARCH 31
--------------------------
2000 1999
---- ----
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REVENUES $ 282,884 $ 261,249
---------- ----------
OPERATING EXPENSES:
Salaries, wages and fringe benefits 154,838 144,645
Operating supplies and expenses 51,582 44,781
Purchased transportation 27,153 25,282
Insurance and claims 12,056 13,617
Operating taxes and licenses 10,859 10,716
Depreciation and amortization 15,242 14,015
Rents 2,326 2,622
Communications and utilities 2,209 2,230
Other operating expenses 2,658 2,156
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Total operating expenses 278,923 260,064
---------- ----------
Operating income 3,961 1,185
---------- ----------
OTHER INCOME (EXPENSE):
Equity in earnings (loss) of joint ventures, net of tax 901 (774)
Interest expense (8,401) (7,409)
Interest income 1,320 291
---------- ----------
(6,180) (7,892)
---------- ----------
LOSS BEFORE INCOME TAXES (2,219) (6,707)
INCOME TAX BENEFIT 1,184 2,702
---------- ----------
NET LOSS $ (1,035) $ (4,005)
========== ==========
PER COMMON SHARE - BASIC AND DILUTED $ (0.13) $ (0.51)
========== ==========
COMMON SHARES OUTSTANDING - BASIC AND DILUTED 7,898 7,790
========== ==========
</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 THREE MONTHS ENDED
MARCH 31
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2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,035) $ (4,005)
---------- ----------
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Depreciation and amortization 15,242 14,015
Loss (gain) on sale of property and equipment 103 (51)
Deferred income taxes (374) (2,424)
Compensation expense related to stock options and grants 237 146
Equity in (earnings) loss of joint ventures (901) 774
Amortization of Teamsters Union signing bonus 606 0
Change in operating assets and liabilities:
Receivables, net of allowance for doubtful accounts (8,007) (15,885)
Inventories 5 (1,076)
Prepayments and other current assets (4,059) (4,123)
Trade accounts payable (215) (7,799)
Accrued liabilities 8,553 2,724
---------- ----------
Total adjustments 11,190 (13,699)
---------- ----------
Net cash provided by (used in) operating activities 10,155 (17,704)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (3,241) (11,531)
Proceeds from sale of property and equipment 44 146
Purchase of business, net of cash acquired (8,185) 0
Increase in short-term investments (9,267) (2,034)
(Increase) decrease in the cash surrender value of life insurance (120) 193
---------- ----------
Net cash used in investing activities (20,769) (13,226)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
(Repayments) proceeds from issuance of long-term debt, net (79) 29,990
Proceeds from issuance of common stock 218 0
Repurchase of common stock (282) 0
Proceeds from exercise of stock options 0 27
Other, net 1,653 (370)
---------- ----------
Net cash provided by financing activities 1,510 29,647
---------- ----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS (545) 26
NET DECREASE IN CASH AND CASH EQUIVALENTS (9,649) (1,257)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 13,984 21,977
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,335 $ 20,720
========== ==========
</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 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-month period
ended March 31, 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
On September 30, 1997, the Company issued $150 million of 8 5/8%
senior notes (the "Notes") through a private placement.
Subsequently, the senior notes were registered with the Securities
and Exchange Commission. The net proceeds from the Notes were used
to fund the acquisition of Ryder Automotive Carrier Services, Inc.
and RC Management Corp., pay related fees and expenses, and reduce
outstanding indebtedness. The Company's obligations under the Notes
are guaranteed by substantially all of the subsidiaries of the
Company (the "Guarantors"). Separate financial statements of the
Guarantors are not provided herein as (i) the Guarantors are
jointly and severally liable for the Company's obligations under
the Notes, (ii) the subsidiaries which are not Guarantors are
inconsequential to the consolidated operations of the Company and
its subsidiaries and (iii) the net assets and earnings of the
Guarantors are substantially equivalent to the net assets and
earnings of the consolidated entity as reflected in these
consolidated financial statements. There are no restrictions on the
ability of the Guarantors to make distributions to the Company.
Note 3. Comprehensive Income
The Company had a comprehensive loss of $1.5 million in the first
quarter of 2000 versus a comprehensive loss of $3.3 million in the
first quarter of 1999. 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. SFAS No. 133 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 1999, SFAS No. 137 was issued which defers the effective
date of SFAS No. 133 until fiscal quarters of all fiscal years
beginning after June 15, 2000. The Company will adopt this
statement in the first quarter of 2001. The Company has not yet
quantified the impact of adopting SFAS No. 133 on the consolidated
financial statements. This statement could increase volatility in
earnings and other comprehensive income.
Note 5. Segment Reporting
The Company operates in one reportable industry segment:
transporting automobiles and light trucks from manufacturing
plants, ports, auctions, and railway distribution points to
automotive dealerships. Geographic financial information for the
first quarter of 2000 and 1999 follows (in thousands):
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2000 1999
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Revenues:
United States $ 234,938 $ 217,914
Canada 47,946 43,335
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$ 282,884 $ 261,249
========== ==========
</TABLE>
Revenues are attributed to the respective countries based on the
location of the origination terminal.
Note 6. 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 March 31, 2000, the Company has
repurchased 61,652 shares.
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Note 7. 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 a defendant in a lawsuit (Gateway Development &
Manufacturing, Inc. v. Commercial Carriers, Inc., et al, Index No.
1997/8920), pending in Supreme Court of Erie County, New York
claiming that Company tortiously interfered with a business
transaction involving the plaintiff and a defendant in the action
other than the Company. The Company has filed an answer denying the
material allegations of the complaint and denying any liability
relating to the allegations made against the Company. The Company
intends to vigorously defend this case, as it believes the claims
against the Company are without merit. While the ultimate results
of this litigation cannot be determined, management does not expect
that the resolution of this proceeding will have a material adverse
effect on the Company's consolidated financial position or results
of operations.
Note 8. Reclassifications
Certain amounts in the prior year financial statements have been
reclassified to conform to the current year presentation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Revenues were $282.9 million in the first quarter of 2000 versus
revenues of $261.3 million in the first quarter of 1999, an
increase of 8.3%. The increase in revenues was due to higher
vehicle delivery volumes resulting from increased new vehicle
production and sales, together with the effect of rate increases
negotiated during the second half of 1999.
The Company experienced a net loss of $1.0 million in the first
quarter of 2000 versus a net loss of $4.0 million in the first
quarter of 1999. Basic and diluted loss per share in the first
quarter of 2000 were $0.13 versus basic and diluted loss per share
of $0.51 in the first quarter of 1999.
Earnings improved for the first quarter of 2000 versus the first
quarter of 1999 due to continued cost control measures implemented
in the fourth quarter of 1999 and a reduction in cargo claims and
on-the-job injuries, combined with higher vehicle deliveries and
rate increases. Rate increases were obtained in the second half of
1999 in response to the increase in light truck deliveries, which
adversely impacted load averages and operating results. These
factors more than offset the effect of higher fuel costs. However,
increased fuel costs, net of surcharges secured from customers, is
estimated to have reduced earnings
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in the first quarter of 2000 by approximately $1.6 million, or
$0.20 per share.
The following is a discussion of the changes in the Company's major
expense categories:
Salaries, wages and fringe benefits decreased from 55.4% of
revenues in the first quarter of 1999 to 54.7% of revenues in the
first quarter of 2000. The decrease was due primarily to the
benefit of rate increases together with productivity and efficiency
improvements, offset by annual wage increases.
Operating supplies and expenses increased from 17.1% of revenues in
the first quarter of 1999 to 18.2% of revenues in the first
quarter of 2000. The increase was due primarily to increases in
fuel prices.
Insurance and claims expense decreased from 5.2% of revenues in
the first quarter of 1999 to 4.3% of revenues in the first quarter
of 2000. The decrease was a result of safety programs initiated in
the fourth quarter of 1999, which resulted in a reduction in cargo
claims.
Equity in earnings of joint ventures increased from a loss of
$774,000 in the first quarter of 1999 to earnings of $901,000 in
the first quarter of 2000. The increase was due to earnings from
the Company's joint ventures in the United Kingdom, which began
operations in May 1999, combined with a reduction in the loss from
the Company's Brazilian venture.
Interest expense increased from $7.4 million, or 2.8% of revenues,
in the first quarter of 1999, to $8.4 million, or 3.0% of revenues,
in the first quarter of 2000. The increase was due to higher
interest rates in 2000 versus 1999 combined with higher long-term
debt levels.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities totaled $10.2 million for
the three months ended March 31, 2000, versus net cash used for
operating activities in the amount of $17.7 million for the three
months ended March 31, 1999. The significant improvement in cash
provided from operations was due to the reduction in the net loss
for the first quarter of 2000, combined with a decrease in the
change in the accounts receivable balance. In the first quarter of
2000, the accounts receivable balance increased less than in the
first quarter of 1999 due to improved electronic billing
efficiencies and collection efforts in 2000 versus 1999.
Net cash used in investing activities totaled $20.8 million for the
three months ended March 31, 2000 versus $13.2 million for the
three months ended March 31, 1999. The increase was due primarily
to the purchase of CT Group, a logistics services 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
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captive insurance company changed during the first quarter of 2000
as short-term investments increased and cash decreased by $9.2
million. The change was the result of the captive insurance
company's investment managers investing cash on hand. Capital
expenditures were $3.2 million in the first quarter 2000 versus
$11.5 million in the first quarter of 1999. The reduced level of
capital spending was the result of efforts by the Company to limit
capital expenditures in 2000.
Net cash provided by financing activities totaled $1.5 million for
the three months ended March 31, 2000 versus $29.6 million for the
three months ended March 31, 1999. The decrease was due primarily
to the improved cash generated from operations combined with
reduced spending on capital expenditures as discussed above.
DISCLOSURES ABOUT MARKET RISKS
The market risk inherent in the Company's market risk sensitive
instruments and positions is the potential loss arising from
adverse changes in short-term investment prices, interest rates,
fuel prices, and foreign currency exchange rates.
SHORT-TERM INVESTMENTS - The Company does not use derivative
financial instruments in its investment portfolio. The Company
places its investments in instruments that meet high credit quality
standards, as specified in the Company's investment policy
guidelines. The policy also limits the amount of credit exposure to
any one issue, issuer, and type of instrument. Short-term
investments at March 31, 2000, which are recorded at a fair value
of $53.6 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
$5.4 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, which are designated
as hedges. The changes in market value of such contracts have a
high correlation to the price changes of diesel fuel. Gains and
losses resulting from fuel hedging transactions are recognized when
the underlying fuel being hedged is used. A 10% increase in diesel
fuel prices would reduce pre-tax income by $1.5 million over the
next fiscal year.
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FOREIGN CURRENCY EXCHANGE RATES - Although the majority of the
Company's operations are in the United States, the Company does
have foreign subsidiaries (primarily Canada). The net investments
in foreign subsidiaries translated into dollars using exchange
rates at March 31, 2000, are $82.6 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 $8.3 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") 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
related to the ability of computer programs and systems to properly
recognize and process date sensitive information before and after
January 1, 2000.
The Company analyzed its internal information technology ("IT")
systems ("IT systems") to identify any computer programs that were
not Year 2000 Compliant and implemented changes required to make
such systems Year 2000 Compliant. The Company's 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. These costs
were funded through operating cash flow. The Company did not incur
material Y2K related costs in the first quarter of 2000.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits: None
(b) Reports on Form 8-K: (i) The Company filed a report on Form
8-K with the Securities and Exchange Commission on March 3,
2000 regarding the acquisition by Axis Group, Inc. of CT
Group, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Allied Holdings, Inc.
May 11, 2000 /s/ A. Mitchell Poole
(Date) ----------------------------------
A. Mitchell Poole
on behalf of Registrant as
Vice Chairman and Chief Executive
Officer
May 11, 2000 /s/ Daniel H. Popky
(Date) ----------------------------------
Daniel H. Popky
on behalf of Registrant as
Senior Vice President, Finance
and Chief Financial Officer
12
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF ALLIED HOLDINGS, INC. AND SUBSIDIARIES FOR THE THREE
MONTHS ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 4,335
<SECURITIES> 53,592
<RECEIVABLES> 128,986
<ALLOWANCES> 0
<INVENTORY> 7,940
<CURRENT-ASSETS> 235,688
<PP&E> 276,360
<DEPRECIATION> 0
<TOTAL-ASSETS> 654,518
<CURRENT-LIABILITIES> 139,716
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 65,566
<TOTAL-LIABILITY-AND-EQUITY> 659,513
<SALES> 282,884
<TOTAL-REVENUES> 282,884
<CGS> 278,923
<TOTAL-COSTS> 278,923
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,401
<INCOME-PRETAX> (2,219)
<INCOME-TAX> 1,184
<INCOME-CONTINUING> (1,035)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,035)
<EPS-BASIC> (.13)
<EPS-DILUTED> (.13)
</TABLE>