-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AGxuRNju8Phd0wFOPPB6nquU5LNGk3b/gmHOzOpv37Uw3/0umKH+fDgnk7ZSJJV9 BmLMFAp6LV/icooIQXsUfA== /in/edgar/work/0000950144-00-013858/0000950144-00-013858.txt : 20001115 0000950144-00-013858.hdr.sgml : 20001115 ACCESSION NUMBER: 0000950144-00-013858 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLIED HOLDINGS INC CENTRAL INDEX KEY: 0000909950 STANDARD INDUSTRIAL CLASSIFICATION: [4213 ] IRS NUMBER: 580360550 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13867 FILM NUMBER: 766670 BUSINESS ADDRESS: STREET 1: 160 CLAIRMONT AVE STREET 2: STE 200 CITY: DECATUR STATE: GA ZIP: 30030 BUSINESS PHONE: 4043701100 MAIL ADDRESS: STREET 1: 160 CLAIREMONT AVENUE SUITE 200 CITY: DECATUR STATE: GA ZIP: 30030 10-Q 1 g65313e10-q.txt ALLIED HOLDINGS, INC. 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 2 INDEX PART I FINANCIAL INFORMATION
PAGE ITEM 1: FINANCIAL STATEMENTS 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
2 3 PART 1 - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS ALLIED HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
SEPTEMBER 30 DECEMBER 31 2000 1999 ------------ ----------- (UNAUDITED) ASSETS 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 ========= =========
The accompanying notes are an integral part of these consolidated balance sheets. 3 4 ALLIED HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDEDD SEPTEMBER 30 SEPTEMBER 30 -------------------------- --------------------------- 2000 1999 2000 1999 ---------- --------- ---------- ---------- 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 ========= ========= ========= =========
The accompanying notes are an integral part of these consolidated statements. 4 5 ALLIED HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30 ------------------------- 2000 1999 --------- ---------- 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 ======== ========
The accompanying notes are an integral part of these consolidated statements. 5 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 7 SUPPLEMENTAL GUARANTOR INFORMATION ALLIED HOLDINGS, INC. SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET SEPTEMBER 30, 2000 IN THOUSANDS
ALLIED GUARANTOR NON-GUARANTOR HOLDINGS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED --------- ------------ ------------- ------------ ------------ 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 ========= ========= ======== ========= =========
7 8 SUPPLEMENTAL GUARANTOR INFORMATION ALLIED HOLDINGS, INC. SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET DECEMBER 31, 1999 IN THOUSANDS
ALLIED GUARANTOR NON-GUARANTOR HOLDINGS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED --------- ------------ ------------- ------------ ------------ 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 ========= ========= ========= ========= =========
8 9 SUPPLEMENTAL GUARANTOR INFORMATION ALLIED HOLDINGS, INC SUPPLEMENTAL CONDENSED CONSOLIDATED INCOME STATEMENT NINE MONTHS ENDED SEPTEMBER 30, 2000 IN THOUSANDS
ALLIED GUARANTOR NON-GUARANTOR HOLDINGS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED ---------- ------------ ------------- ------------ ------------ 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 ======== ========= ======== ======== =========
SUPPLEMENTAL CONDENSED CONSOLIDATED INCOME STATEMENT NINE MONTHS ENDED SEPTEMBER 30, 1999 IN THOUSANDS
ALLIED GUARANTOR NON-GUARANTOR HOLDINGS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED -------- ------------ ------------- ------------ ------------ 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) ======== ========= ======== ======== =========
9 10 SUPPLEMENTAL GUARANTOR INFORMATION ALLIED HOLDINGS, INC SUPPLEMENTAL CONDENSED CONSOLIDATED INCOME STATEMENT THREE MONTHS ENDED SEPTEMBER 30, 2000 IN THOUSANDS
ALLIED GUARANTOR NON-GUARANTOR HOLDINGS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED -------- ------------ ------------- ------------ ------------ 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) ======= ========= ======= ======= =========
SUPPLEMENTAL CONDENSED CONSOLIDATED INCOME STATEMENT THREE MONTHS ENDED SEPTEMBER 30, 1999 IN THOUSANDS
ALLIED GUARANTOR NON-GUARANTOR HOLDINGS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED -------- ------------ ------------- ------------ ------------ 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) ======= ========= ======= ======= =========
10 11 SUPPLEMENTAL GUARANTOR INFORMATION ALLIED HOLDINGS, INC SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 2000 IN THOUSANDS
ALLIED GUARANTOR NON-GUARANTOR HOLDINGS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED -------- ------------ ------------- ------------ ------------ 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 ======= ========= ======= ======= =========
11 12 SUPPLEMENTAL GUARANTOR INFORMATION ALLIED HOLDINGS, INC SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 1999 IN THOUSANDS
ALLIED GUARANTOR NON-GUARANTOR HOLDINGS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED -------- ------------ ------------- ------------ ------------ 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 ======= ========= ======= ======= =========
12 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):
For the three months ended For the nine months ended September 30 September 30 -------------------------- ------------------------- 2000 1999 2000 1999 --------- ------------- ---------- ------------ 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 ======== ======== ======== ========
Revenues are attributed to the respective countries based on the location of the origination terminal. 13 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 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 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 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 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 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 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 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 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 EX-27 2 g65313ex27.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF ALLIED HOLDINGS, INC. FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 4,604 58,369 124,764 0 7,916 235,801 258,684 0 633,241 122,751 0 0 0 0 66,039 633,241 815,128 815,128 796,864 796,864 0 0 25,070 1,048 (196) 1,244 0 0 0 1,244 .16 .16
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