10-Q

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, 2001
	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 incorporation or organization)	(I.R.S. Employer Identification Number)

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 29, 2001                      8,285,015

TOTAL NUMBER OF PAGES INCLUDED IN THIS REPORT: 26

1

TABLE OF CONTENTS

PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
	CONSOLIDATED BALANCE SHEETS
	CONSOLIDATED STATEMENTS OF OPERATIONS
	CONSOLIDATED STATEMENTS OF CASH FLOWS
	Notes to Consolidated Financial Statements (Unaudited)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
PART II.
OTHER INFORMATION
Item 1. Legal Proceedings.
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-K.
SIGNATURES
Agreement between Allied Automotive Group
Agreement between Allied Automotive Group, Inc.

INDEX

PART I

FINANCIAL INFORMATION

		PAGE
ITEM 1:	FINANCIAL STATEMENTS
	Consolidated Balance Sheets as of September 30, 2001 and December 31, 2000	3
	Consolidated Statements of Operations for the Three and Nine Month Periods Ended September 30, 2001 and 2000	4
	Consolidated Statements of Cash Flows for the Nine Month Periods Ended September 30, 2001 and 2000	5
	Notes to Consolidated Financial Statements	6
ITEM 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
PART II
OTHER INFORMATION
ITEM 1
	Legal Proceedings	25
ITEM 5
	Other Information	25
ITEM 6
	Exhibits and Reports on Form 8-K	25
	Signature Page	26

2

PART 1 – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

ALLIED HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands)

				September 30			December 31
				2001			2000
				(Unaudited)
ASSETS
CURRENT ASSETS:
	Cash and cash equivalents			$	12,249		$	2,373
	Short-term investments				64,756			59,892
	Receivables, net of allowance for doubtful accounts				94,789			114,266
	Inventories				6,610			7,415
	Deferred tax assets				11,968			10,191
	Prepayments and other current assets				20,036			19,355
			Total current assets		210,408			213,492
PROPERTY AND EQUIPMENT, NET					231,073			259,362
OTHER ASSETS:
	Goodwill, net				91,303			95,159
	Other				43,387			42,526
			Total other assets		134,690			137,685
			Total assets	$	576,171		$	610,539
		LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
	Current maturities of long-term debt			$	158,462		$	109
	Trade accounts payable				38,658			45,975
	Accrued liabilities				81,969			79,487
			Total current liabilities		279,089			125,571
LONG-TERM DEBT, less current maturities					190,003			324,876
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS					9,565			9,943
DEFERRED INCOME TAXES					3,125			21,414
OTHER LONG-TERM LIABILITIES					73,215			69,594
STOCKHOLDERS’ EQUITY:
	Common stock, no par value; 20,000 shares authorized, 8,240 and 8,187 shares outstanding at September 30, 2001 and December 31, 2000, respectively				—			—
	Additional paid-in capital				46,500			45,990
	Retained (deficit) earnings				(16,622	)		20,602
	Cumulative other comprehensive loss, net of tax				(7,997	)		(6,744	)
	Common stock in treasury, at cost, 139 shares at September 30, 2001 and December 31, 2000				(707	)		(707	)
			Total stockholders’ equity		21,174			59,141
			Total liabilities and stockholders’ equity	$	576,171		$	610,539

The accompanying notes are an integral part of these consolidated balance sheets.

3

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 Ended
			September 30						September 30
			2001			2000			2001			2000
REVENUES			$	204,010		$	236,347		$	672,384		$	815,128
OPERATING EXPENSES:
	Salaries, wages and fringe benefits			118,700			132,704			391,006			441,817
	Operating supplies and expenses			33,810			40,953			115,147			140,837
	Purchased transportation			23,228			23,513			75,190			79,967
	Insurance and claims			10,531			11,226			37,588			36,369
	Operating taxes and licenses			7,857			9,650			24,990			31,491
	Depreciation and amortization			15,145			15,051			45,450			45,686
	Rents			1,691			2,114			5,353			6,613
	Communications and utilities			1,300			1,335			5,252			5,550
	Other operating expenses			3,295			2,701			10,908			8,437
		Total operating expenses		215,557			239,247			710,884			796,767
		Operating (loss) income		(11,547	)		(2,900	)		(38,500	)		18,361
OTHER INCOME (EXPENSE):
	Equity in earnings of joint ventures, net of tax			1,054			1,502			3,593			4,201
	(Loss) gain on sale of assets			(24	)		(84	)		2,719			(97	)
	Interest expense			(9,141	)		(8,321	)		(26,994	)		(25,070	)
	Interest income			424			1,644			2,014			3,653
				(7,687	)		(5,259	)		(18,668	)		(17,313	)
(LOSS) INCOME BEFORE INCOME TAXES				(19,234	)		(8,159	)		(57,168	)		1,048
INCOME TAX BENEFIT				6,588			3,549			19,944			196
NET (LOSS) INCOME			$	(12,646	)	$	(4,610	)	$	(37,224	)	$	1,244
PER COMMON SHARE – BASIC AND DILUTED			$	(1.56	)	$	(0.58	)	$	(4.60	)	$	0.16
COMMON SHARES OUTSTANDING – BASIC AND DILUTED				8,114			7,961			8,096			7,924

4

ALLIED HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

					For the Nine Months Ended
					September 30
					2001			2000
					(Unaudited)			(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net (loss) income					($37,224	)	$	1,244
	Adjustments to reconcile net loss to net cash provided by operating activities:
		Depreciation and amortization				45,450			45,686
		(Gain) loss on sale of property and equipment				(2,719	)		97
		Deferred income taxes				(19,377	)		104
		Compensation expense related to stock options and grants				207			452
		Equity in earnings of joint ventures				(3,593	)		(4,201	)
		Amortization of Teamsters Union signing bonus				1,802			1,850
		Change in operating assets and liabilities excluding effect of businesses acquired:
			Receivables, net of allowance for doubtful accounts			18,190			(2,366	)
			Inventories			720			(7	)
			Prepayments and other current assets			(822	)		(1,717	)
			Trade accounts payable			(7,021	)		(6,587	)
			Accrued liabilities			6,028			(8,633	)
				Total adjustments		38,865			24,678
				Net cash provided by operating activities		1,641			25,922
CASH FLOWS FROM INVESTING ACTIVITIES:
	Purchases of property and equipment					(18,274	)		(15,972	)
	Proceeds from sale of property and equipment					4,832			799
	Purchase of business, net of cash acquired					—			(8,185	)
	Investment in joint ventures					(464	)		—
	Cash received from joint ventures					3,578			—
	Increase in short-term investments					(4,864	)		(14,044	)
	Increase in the cash surrender value of life insurance					(360	)		(128	)
				Net cash used in investing activities		(15,552	)		(37,530	)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Proceeds from issuance of long-term debt, net					23,480			771
	Proceeds from issuance of common stock					303			626
	Repurchase of common stock					—			(282	)
	Other, net					(64	)		1,894
				Net cash provided by financing activities		23,719			3,009
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS						68			(781	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS						9,876			(9,380	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR						2,373			13,984
CASH AND CASH EQUIVALENTS AT END OF PERIOD					$	12,249		$	4,604

The accompanying notes are an integral part of these consolidated statements.

5

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, 2001 are not necessarily indicative of the results that may be expected for the year ended December 31, 2001. 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 2000 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 “Nonguarantor 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 Nonguarantor 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

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 2001
(In Thousands)
(Unaudited)

					ALLIED			GUARANTOR			NONGUARANTOR
					HOLDINGS			SUBSIDIARIES			SUBSIDIARIES			ELIMINATIONS			CONSOLIDATED
CURRENT ASSETS:
	Cash and cash equivalents				$	(142	)	$	2,399		$	9,992			—		$	12,249
	Short-term investments					—			—			64,756			—			64,756
	Receivables, net of allowance for doubtful accounts					23			91,487			3,279			—			94,789
	Inventories					—			6,600			10			—			6,610
	Deferred tax assets					10,109			1,608			251			—			11,968
	Prepayments and other current assets					1,762			18,081			193			—			20,036
				Total current assets		11,752			120,175			78,481			—			210,408
PROPERTY AND EQUIPMENT, NET						12,521			214,952			3,600			—			231,073
OTHER ASSETS:
	Goodwill, net					1,544			89,759			—			—			91,303
	Other					16,216			16,574			10,597			—			43,387
	Deferred tax asset – noncurrent					35,943			—			—			(35,943	)		—
	Intercompany receivables					274,460			—			—			(274,460	)		—
	Investment in subsidiaries					33,662			15,019			—			(48,681	)		—
				Total other assets		361,825			121,352			10,597			(359,084	)		134,690
				Total assets	$	386,098		$	456,479		$	92,678		$	(359,084	)	$	576,171
CURRENT LIABILITIES:
	Current maturities of long-term debt				$	156,167		$	2,295		$	—		$	—		$	158,462
	Trade accounts payable					2,881			35,229			548			—			38,658
	Intercompany payables					—			272,146			2,314			(274,460	)		—
	Accrued liabilities					15,876			52,126			13,967			—			81,969
			Total current liabilities			174,924			361,796			16,829			(274,460	)		279,089
LONG-TERM DEBT, less current maturities						190,000			3			—			—			190,003
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS						—			9,565			—			—			9,565
DEFERRED INCOME TAXES						—			39,068			—			(35,943	)		3,125
OTHER LONG-TERM LIABILITIES						—			31,701			41,514			—			73,215
STOCKHOLDERS’ EQUITY:
	Common stock, no par value					—			—			—			—			—
	Additional paid-in capital					46,500			90,733			13,279			(104,012	)		46,500
	Retained deficit (earnings)					(16,622	)		(65,771	)		23,294			42,477			(16,622	)
	Cumulative other comprehensive income, net of tax					(7,997	)		(10,616	)		(2,238	)		12,854			(7,997	)
	Treasury stock					(707	)		—			—			—			(707	)
		Total stockholders’ equity				21,174			14,346			34,335			(48,681	)		21,174
Total liabilities and stockholders’ equity					$	386,098		$	456,479		$	92,678		$	(359,084	)	$	576,171

7

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2000
(In Thousands)

					ALLIED			GUARANTOR			NONGUARANTOR
					HOLDINGS			SUBSIDIARIES			SUBSIDIARIES			ELIMINATIONS			CONSOLIDATED
					(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
CURRENT ASSETS:
	Cash and cash equivalents				$	(1,213	)	$	2,063		$	1,523		$	—		$	2,373
	Short-term investments					—			—			59,892			—			59,892
	Receivables, net of allowance for doubtful accounts					805			112,876			585			—			114,266
	Inventories					—			7,415			—			—			7,415
	Deferred tax asset – current					8,009			1,600			582			—			10,191
	Prepayments and other current assets					1,974			15,007			2,374			—			19,355
				Total current assets		9,575			138,961			64,956			—			213,492
PROPERTY AND EQUIPMENT, NET						16,319			239,866			3,177			—			259,362
OTHER ASSETS:
	Goodwill, net					1,633			93,526			—			—			95,159
	Other					15,732			16,372			10,422			—			42,526
	Deferred tax asset – noncurrent					17,585			—			—			(17,585	)		—
	Intercompany receivables					260,850			—			—			(260,850	)		—
	Investment in subsidiaries					80,057			14,072			—			(94,129	)		—
				Total other assets		375,857			123,970			10,422			(372,564	)		137,685
				Total assets	$	401,751		$	502,797		$	78,555		$	(372,564	)	$	610,539
CURRENT LIABILITIES:
	Current maturities of long-term debt				$	—		$	109		$	—		$	—		$	109
	Trade accounts payable					1,590			43,475			910			—			45,975
	Intercompany payables					—			259,268			1,582			(260,850	)		—
	Accrued liabilities					16,592			51,684			11,211			—			79,487
				Total current liabilities		18,182			354,536			13,703			(260,850	)		125,571
LONG-TERM DEBT, less current maturities						324,428			448			—			—			324,876
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS						—			9,943			—			—			9,943
DEFERRED INCOME TAXES						—			38,999			—			(17,585	)		21,414
OTHER LONG-TERM LIABILITIES						—			36,660			32,934			—			69,594
STOCKHOLDERS’ EQUITY:
	Common stock, no par value					—			—			—			—			—
	Additional paid-in capital					45,990			81,180			13,612			(94,792	)		45,990
	Retained earnings (deficit)					20,602			(10,171	)		20,309			(10,138	)		20,602
	Cumulative other comprehensive income, net of tax					(6,744	)		(8,798	)		(2,003	)		10,801			(6,744	)
	Treasury stock					(707	)		—			—			—			(707	)
		Total stockholders’ equity				59,141			62,211			31,918			(94,129	)		59,141
			Total liabilities and stockholders’ equity		$	401,751		$	502,797		$	78,555		$	(372,564	)	$	610,539

8

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2001
(In Thousands)
(Unaudited)

			ALLIED			GUARANTOR			NONGUARANTOR
			HOLDINGS			SUBSIDIARIES			SUBSIDIARIES			ELIMINATIONS			CONSOLIDATED
REVENUES			$	7,425		$	671,111		$	28,550		$	(34,702	)	$	672,384
OPERATING EXPENSES:
	Salaries, wages and fringe benefits			7,791			383,215			—			—			391,006
	Operating supplies and expenses			1,316			113,746			85			—			115,147
	Purchased transportation			—			75,190			—			—			75,190
	Insurance and claims			—			38,382			26,483			(27,277	)		37,588
	Operating taxes and licenses			94			24,896			—			—			24,990
	Depreciation and amortization			2,550			42,361			539			—			45,450
	Rents			1,585			3,764			4			—			5,353
	Communications and utilities			218			5,026			8			—			5,252
	Other operating expenses			5,218			12,943			172			(7,425	)		10,908
		Total operating expenses		18,772			699,523			27,291			(34,702	)		710,884
		Operating (loss) income		(11,347	)		(28,412	)		1,259			—			(38,500	)
OTHER INCOME (EXPENSE):
	Equity in earnings of joint ventures, net of tax			—			3,299			294			—			3,593
	Gain on sale of assets						2,719			—			—			2,719
	Interest expense			(25,511	)		(24,336	)		(157	)		23,010			(26,994	)
	Interest income			23,031			155			1,838			(23,010	)		2,014
	Intercompany dividends			1,980			(1,980	)		—			—			—
	Equity in losses of subsidiaries			(45,483	)		—			—			45,483			—
				(45,983	)		(20,143	)		1,975			45,483			(18,668	)
(LOSS) INCOME BEFORE INCOME TAXES				(57,330	)		(48,555	)		3,234			45,483			(57,168	)
INCOME TAX BENEFIT (PROVISION)				20,106			827			(989	)		—			19,944
NET (LOSS) INCOME			$	(37,224	)	$	(47,728	)	$	2,245		$	45,483		$	(37,224	)

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2000
(In Thousands)
(Unaudited)

			ALLIED			GUARANTOR			NONGUARANTOR
			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
	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
	Rents			57			6,556			—			—			6,613
	Communications and utilities			12			5,538			—			—			5,550
	Other operating expenses			1,549			10,465			151			(3,728	)		8,437
		Total operating expenses		6,412			793,297			25,036			(27,978	)		796,767
		Operating (loss) income		(2,684	)		20,507			538			—			18,361
OTHER INCOME (EXPENSE):
	Equity in earnings (loss) of joint ventures, net of tax			—			4,359			(158	)		—			4,201
	Loss on sale of assets			—			(97	)		—			—			(97	)
	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			(21,035	)		2,856			(2,079	)		(17,313	)
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

9

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2001
(In Thousands)
(Unaudited)

			ALLIED			GUARANTOR			NONGUARANTOR
			HOLDINGS			SUBSIDIARIES			SUBSIDIARIES			ELIMINATIONS			CONSOLIDATED
REVENUES			$	2,475		$	203,586		$	9,517		$	(11,568	)	$	204,010
OPERATING EXPENSES:
	Salaries, wages and fringe benefits			345			118,355			—			—			118,700
	Operating supplies and expenses			341			33,437			32			—			33,810
	Purchased transportation			—			23,228			—			—			23,228
	Insurance and claims			—			10,680			8,944			(9,093	)		10,531
	Operating taxes and licenses			1			7,856			—			—			7,857
	Depreciation and amortization			825			14,137			183			—			15,145
	Rents			544			1,146			1			—			1,691
	Communications and utilities			106			1,192			2			—			1,300
	Other operating expenses			1,612			4,120			38			(2,475	)		3,295
		Total operating expenses		3,774			214,151			9,200			(11,568	)		215,557
		Operating (loss) income		(1,299	)		(10,565	)		317			—			(11,547	)
OTHER INCOME (EXPENSE):
	Equity in earnings of joint ventures, net of tax			—			862			192			—			1,054
	Loss on sale of assets			—			(24	)		—			—			(24	)
	Interest expense			(8,442	)		(8,204	)		(61	)		7,566			(9,141	)
	Interest income			7,536			43			411			(7,566	)		424
	Equity in losses of subsidiaries			(17,366	)		—			—			17,366			—
				(18,272	)		(7,323	)		542			17,366			(7,687	)
(LOSS) INCOME BEFORE INCOME TAXES				(19,571	)		(17,888	)		859			17,366			(19,234	)
INCOME TAX BENEFIT (PROVISION)				6,925			(85	)		(252	)		—			6,588
NET (LOSS) INCOME			$	(12,646	)	$	(17,973	)	$	607		$	17,366		$	(12,646	)

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2000
(In Thousands)
(Unaudited)

			ALLIED			GUARANTOR			NONGUARANTOR
			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
	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
	Rents			19			2,095			—			—			2,114
	Communications and utilities			4			1,331			—			—			1,335
	Other operating expenses			273			3,671						(1,243	)		2,701
		Total operating expenses		2,449			237,520			8,539			(9,261	)		239,247
		Operating loss		(1,206	)		(1,547	)		(147	)		—			(2,900	)
OTHER INCOME (EXPENSE):
	Equity in earnings (loss) of joint ventures, net of tax			—			1,557			(55	)		—			1,502
	Loss on sale of assets			—			(84	)		—			—			(84	)
	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 losses of subsidiaries			(7,400	)		—			—			7,400			—
				(7,021	)		(7,002	)		1,364			7,400			(5,259	)
(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	)

10

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2001
(In Thousands)
(Unaudited)

					ALLIED			GUARANTOR			NONGUARANTOR
					HOLDINGS			SUBSIDIARIES			SUBSIDIARIES			ELIMINATIONS			CONSOLIDATED
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net (loss) income				$	(37,224	)	$	(47,728	)	$	2,245		$	45,483		$	(37,224	)
	Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
		Depreciation and amortization				2,550			42,361			539			—			45,450
		Gain on sale of property and equipment				—			(2,719	)		—			—			(2,719	)
		Deferred income taxes				(19,657	)		(51	)		331			—			(19,377	)
		Compensation expense related to stock options and grants				207			—			—			—			207
		Equity in earnings of joint ventures				—			(3,299	)		(294	)		—			(3,593	)
		Equity in losses of subsidiaries				45,483			—			—			(45,483	)		—
		Amortization of Teamsters Union signing bonus				—			1,802			—			—			1,802
		Change in operating assets and liabilities:
			Receivables, net of allowance for doubtful accounts			782			20,102			(2,694	)		—			18,190
			Inventories			—			730			(10	)		—			720
			Prepayments and other current assets			212			(3,215	)		2,181			—			(822	)
			Trade accounts payable			1,291			(7,950	)		(362	)		—			(7,021	)
				Intercompany payables		(13,610	)		12,878			732			—			—
			Accrued liabilities			(716	)		(4,592	)		11,336			—			6,028
				Total adjustments		16,542			56,047			11,759			(45,483	)		38,865
				Net cash (used in) provided by operating activities		(20,682	)		8,319			14,004			—			1,641
CASH FLOWS FROM INVESTING ACTIVITIES:
	Purchases of property and equipment					(67	)		(17,552	)		(655	)		—			(18,274	)
	Intercompany sale of property and equipment					1,403			(1,403	)		—			—			—
	Proceeds from sale of property and equipment					—			4,832			—			—			4,832
	Investment in joint venture					—			—			(464	)		—			(464	)
	Cash received from joint ventures					—			3,578			—			—			3,578
	Intercompany dividend received (paid)					1,980			(1,980	)		—			—			—
	Increase in short-term investments					—			—			(4,864	)		—			(4,864	)
	Increase in cash surrender value of life insurance					(360	)		—			—			—			(360	)
				Net cash provided by (used in) investing activities		2,956			(12,525	)		(5,983	)		—			(15,552	)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Proceeds from issuance of long-term debt, net					21,739			1,741			—			—			23,480
	Proceeds from issuance of common stock					303			—			—			—			303
	Other, net					(3,245	)		2,498			683			—			(64	)
				Net cash provided by financing activities		18,797			4,239			683			—			23,719
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS						—			303			(235	)		—			68
NET INCREASE IN CASH AND CASH EQUIVALENTS						1,071			336			8,469			—			9,876
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR						(1,213	)		2,063			1,523			—			2,373
CASH AND CASH EQUIVALENTS AT END OF PERIOD					$	(142	)	$	2,399		$	9,992		$	—		$	12,249

11

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2000
(In Thousands)
(Unaudited)

					ALLIED			GUARANTOR			NONGUARANTOR
					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

12

Note 3. Comprehensive Loss

Comprehensive income was a loss of $11.9 million for the third quarter of 2001 versus a loss of $5.6 million for the third quarter of 2000, and a loss of $38.5 million for the first nine months of 2001 versus a loss of $1.7 million for the first nine months of 2000. 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

The Financial Accounting Standards Board issued Statement of Financial Accounting Standards “SFAS” No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended. 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.

From time to time, the Company enters into futures contracts to manage the risk associated with changes in fuel prices. Gains and losses from fuel hedging contracts are recognized as part of fuel expense when the Company uses the underlying fuel being hedged. The Company does not enter into fuel hedging contracts for speculative purposes. At September 30, 2001, the Company did not have any outstanding fuel hedging contracts or other derivative instruments that fall under the provisions of SFAS No. 133.

Note 5. Recent Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board approved Statement of SFAS No. 141, “Business Combinations,” and SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 141 prospectively prohibits the pooling of interest method of accounting for business combinations initiated after June 30, 2001. SFAS No. 142 requires companies to cease amortizing goodwill that existed at June 30, 2001. The amortization of existing goodwill will cease on December 31, 2001. Any goodwill resulting from acquisitions completed after June 30, 2001 will not be amortized. SFAS No. 142 also establishes a new method of testing goodwill for impairment on an annual basis or on an interim basis if an event occurs or circumstances change that would reduce the fair value of a reporting unit below its carrying value. The adoption of SFAS No. 142 will result in the Company’s discontinuation of amortization of its goodwill; however, the Company will be required to test its goodwill for impairment under the new standard beginning in the first quarter of 2002, which could have an adverse effect on the Company’s future results of operations if an impairment occurs.

13

In June 2001, the Financial Accounting Standards Board issued Statement No. 143, “Accounting for Asset Retirement Obligations"' which addresses accounting and reporting for asset retirement costs of long lived assets resulting from legal obligations associated with acquisition, construction or development transactions. The Company plans to adopt Statement No. 143 in the first quarter of fiscal 2003. Management has determined the adoption of this statement will not have a material effect on the Consolidated Financial Statements of the Company.

In August 2001, The Financial Accounting Standards Board issued Statement No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” which clarifies accounting and reporting for assets held for sale, scheduled for abandonment or other disposal, and recognition of impairment loss related to the carrying value of long-lived assets. The Company plans to adopt Statement No. 144 in the first quarter of fiscal 2003. Management is currently evaluating the effect of this statement on the Consolidated Financial Statements of the Company.

Note 6. Workforce Reduction Accrual

The Company has implemented a program to achieve a significant reduction in corporate overhead expenses. Targeted in the plan are workforce reductions and additional efforts to decrease discretionary spending and eliminate fixed costs. The components of the workforce reduction accrual are as follows (Dollars in millions):

	Year Ended			Quarter Ended
	December 31,			March 31,			June 30,			September 30,
	2000			2001			2001			2001
Beginning Balance	$	0.0		$	1.6		$	4.7		$	4.0
Expense		2.5			5.0			0.6			1.6
Payments		(0.9	)		(1.9	)		(1.3	)		(2.6	)
Ending Balance		1.6			4.7			4.0			3.0
Number of terminated employees during quarter		100			65			20			63

Note 7. Segment Reporting

In accordance with the requirements of SFAS No. 131, “Disclosure About Segments of an Enterprise and Related Information,” the Company has identified two reportable industry segments through which it conducts its operating activities: Allied Automotive Group and Axis Group. These two segments reflect the organization used by management for internal reporting. Allied Automotive Group is engaged in the business of transporting automobiles and light trucks from manufacturing plants, ports, auctions, and railway distribution points to automobile dealerships. Axis Group provides distribution, automobile inspection, auction, and logistics services for the automotive industry. The following is a summary of certain financial information relating to the two segments (In thousands):

14

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2001			2000			2001			2000
Revenues – unaffiliated customers:
Allied Automotive Group	$	197,168		$	230,192		$	651,982		$	793,560
Axis Group		6,842			6,146			20,402			21,497
Corporate/other		—			9			—			71
	$	204,010		$	236,347		$	672,384		$	815,128
Depreciation and amortization:
Allied Automotive Group	$	13,343		$	12,880		$	40,132		$	39,200
Axis Group		977			806			2,768			2,247
Corporate/other		825			1,365			2,550			4,239
	$	15,145		$	15,051		$	45,450		$	45,686
Operating (loss) profit:
Allied Automotive Group	$	(10,483	)	$	(1,475	)	$	(27,701	)	$	24,138
Axis Group		502			84			900			222
Corporate/other		(1,566	)		(1,509	)		(11,699	)		(5,999	)
		(11,547	)		(2,900	)		(38,500	)		18,361
Reconciling items:
Equity income in joint ventures		1,054			1,502			3,593			4,201
Gain (loss) on sale of assets		(24	)		(84	)		2,719			(97	)
Interest expense		(9,141	)		(8,321	)		(26,994	)		(25,070	)
Interest income		424			1,644			2,014			3,653
(Loss) income before income taxes	$	(19,234	)	$	(8,159	)	$	(57,168	)	$	1,048
Capital expenditures:
Allied Automotive Group	$	1,321		$	4,763		$	16,381		$	9,780
Axis Group		11			856			1,826			1,780
Corporate/other		—			1,275			67			4,412
	$	1,332		$	6,894		$	18,274		$	15,972

	September 30,		December 31,
	2001		2000
Total assets:
Allied Automotive Group	$	387,017	$	437,945
Axis Group		67,641		64,869
Corporate/other		121,513		107,725
	$	576,171	$	610,539

15

Geographic financial information for 2001 and 2000 is as follows (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2001		2000		2001		2000
Revenues:
United States	$	170,222	$	195,219	$	555,489	$	672,397
Canada		33,788		41,128		116,895		142,731
	$	204,010	$	236,347	$	672,384	$	815,128

Note 8. Equity Investments

Axis Group has entered into three joint ventures for the purpose of managing the distribution of vehicles in the United Kingdom and Brazil. The Company is accounting for the investments under the equity method of accounting with its share of the ventures’ earnings or loss reflected as equity in earnings (loss) of joint ventures in the consolidated statements of operations. The related equity investments are included in other assets in the accompanying consolidated balance sheets.

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 $.6 million and $1.7 million for the three and nine months ended September 30, 2001 and $2,000 and $1.2 million for the three and nine months ended September 30, 2000. Included in the 2001 results are $1.7 million in fees related to management services provided to the joint venture and $1.5 million for similar fees is included in the 2000 results.

The majority of the Company’s equity in earnings of joint ventures in 2001 was derived from its joint venture in the United Kingdom, Ansa Logistics Limited. Summarized unaudited financial information of Ansa Logistics Limited for the periods ended September 30, 2001 and 2000, is as follows (in thousands):

		September 30,		December 31,
		2001		2000
Current assets		$	30,738	$	34,799
Other assets			4,015		5,019
	Total assets	$	34,753	$	39,818
Current liabilities		$	18,413	$	32,194

16

	Three Months Ended				Nine Months Ended
	September 30,				September 30
	2001		2000		2001		2000
Revenues	$	28,965	$	24,125	$	85,066	$	79,890
Operating income	$	2,963	$	2,505	$	7,840	$	7,789
Income from continuing operations	$	3,178	$	2,620	$	8,218	$	7,903
Net income	$	1,971	$	1,624	$	5,095	$	4,900

Note 9. 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 the court has permitted the filing and service of cross-claims against the Company by the other defendants in that action. In the CCI Case, the Company has accepted service of a separate complaint asserting claims against the Company that are virtually identical to the cross-claims asserted against the Company 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 ultimate results of this litigation cannot be predicted, if this litigation is resolved in a manner that is adverse to the Company, it could have a material adverse effect on the Company’s consolidated financial position or results of operations.

The Company is defending a third piece of related litigation in the United States District Court for the Southern District of Florida, Ryder Systems, Inc. v. Allied Holdings, Inc., AH Acquisition Corp. and Allied Automotive Group, Inc., Case No. 01-3553-CIV-HUCK. The claims at issue in this case center around the Allied parties’ September 1997 stock acquisition of certain corporations wholly-owned by Ryder. Through that acquisition, Allied parties agreed to assume financial responsibility for certain third-

17

party injury claims arising on or before the September 1997 closing date. Ryder’s four-count complaint alleges in count one that the Allied parties have breached their agreement with Ryder by failing to undertake certain logistical actions to actually substitute Allied parties for Ryder under an insurance policy covering these third-party claims and with various states’ agencies who regulate matters such as self-insured workers’ compensation. In counts two through four, the complaint alleges that, if the contract does not create these obligations, the legal doctrines of promissory estoppel, good faith and fair dealing, and negligent misrepresentation, create them. The Allied parties have moved to dismiss all counts of the complaint or, alternatively, to transfer the case to the Northern District of Georgia. With respect to the entirety of this litigation, the Company intends to continue its vigorous defense against the claims asserted, as management believes all of those claims are without merit. While the 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.

Note 10. Reclassifications

Certain amounts in the prior year financial statements have been reclassified to conform to the current year presentation.

18

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

Revenues were $204.0 million for the third quarter of 2001 versus revenues of $236.3 million for the third quarter of 2000, a decrease of 13.7%. For the nine-month period ended September 30, 2001 revenues were $672.4 million, versus revenues of $815.1 million for the nine-month period ended September 30, 2000, a decrease of 17.5%.

Allied has initiated an aggressive plan to revitalize the Company. The key elements of the turnaround plan include:

• Focus on Execution

• De-leverage the Company

• Eliminate Non-contributory Expense

• Eliminate Non-performing Assets

• Better Management of Cash

• Price Adjustments

• Optimize Invested Assets

• Implement Strategic Growth Plan

Unanticipated adjustments in new vehicle production by the auto manufacturers led to lower vehicle delivery volumes and a decline in revenues and earnings during the third quarter. The events of September 11, 2001 caused a significant drop in new vehicle productions during the balance of the month. The Company estimates its vehicle deliveries were reduced by approximately 85,000 units during September 2001 following the terrorist acts, which reduced net earnings by approximately $2 million for the month.

As part of the initiative to adjust pricing, effective on or about September 6, 2001, the Company implemented an administrative processing fee for vehicles transported on behalf of its clients in the United States and Canada. Allied has implemented the new processing fee with clients representing approximately 85% of its annual revenues. The remaining portion of Allied’s business is under a contract which prohibits the implementation of the fee at the present time. The administrative processing fee is approximately an 8.5% price increase over the Company’s previous rates.

The Company experienced a net loss of $12.6 million for the third quarter of 2001 versus a net loss of $4.6 million for the third quarter of 2000. Basic and diluted loss per share for the third quarter of 2001 was $1.56 versus basic and diluted loss per share of $0.58 for the third quarter of 2000. For the nine-month period ended September 30, 2001, the net loss was $37.2 million, versus net income of $1.2 million for the nine-month period ended September 30, 2000. Basic and diluted loss per share for the nine-month period ended September 30, 2001 were $4.60 versus basic and diluted earnings per share of $0.16 for the nine-month period ended September 30, 2000.

As part of the initiative to eliminate non-performing assets, Allied announced that it will close certain non-performing and non-core terminal locations within the U.S. and Canada. Allied closed its Doremus, NJ facility on July 1, 2001. In the first nine months of 2001, the operations of Allied at Doremus, NJ generated approximately $4.8 million in revenues and posted an operating loss of approximately $1.4 million. Allied intends to close its Houston, TX, Selkirk, NY and Edison, NJ terminal facilities during the fourth quarter of 2001. In the first nine months of 2001, the operations of the automotive group at Houston, Selkirk and Edison generated approximately $23 million in revenues and posted operating losses of approximately $4 million.

The following is a discussion of the changes in the Company’s major expense categories:

19

Salaries, wages and fringe benefits increased from 56.2% of revenues for the third quarter of 2000 to 58.2% of revenues for the third quarter of 2001, and increased from 54.2% of revenues for the first nine months of 2000 to 58.2% of revenues for the first nine months of 2001. The increase was due in part to severance charged to expense of $4.9 million in the first six months of 2001 and $1.6 million in the third quarter of 2001 included in the Company’s workforce and overhead reduction program, as well as annual wage increases for remaining employees. In addition, the significant drop in vehicle deliveries caused operating inefficiencies that increased salaries, wages, and fringe benefits as a percentage of revenues.

Operating supplies and expenses decreased from 17.3% of revenues for the third quarter of 2000 to 16.6% of revenues for the third quarter of 2001, and also decreased from 17.3% of revenues for the first nine months of 2000 to 17.1% of revenues for the first nine months of 2001. The decrease was due primarily to an increase in the percentage of units hauled by owner operators versus company drivers. Owner operators are responsible for related operating expenses. In addition, operating supplies and expenses declined due to a decrease in parts and maintenance expense related to vigorous expense reduction programs and decreasing volumes, combined with lower fuel costs.

Purchased transportation increased from 10.0% of revenues in the third quarter of 2000 to 11.4% of revenues in the third quarter of 2001, and increased from 9.8% of revenues for the first nine months of 2000 to 11.2% of revenues for the first nine months of 2001. As volumes decline, units are hauled by drivers with the highest seniority and owner operators generally have more seniority than company drivers in the current workforce. The number of owner operators stayed relatively constant from year to year while the number of company drivers decreased, resulting in higher purchased transportation for 2001 compared to 2000.

Insurance and claims expense increased from 4.8% of revenues for the third quarter of 2000 to 5.2% of revenues for the third quarter of 2001, and increased from 4.5% of revenues for the first nine months of 2000 to 5.6% of revenues for the first nine months of 2001. The increase was a result of an increase in cargo claims expense and costs related to higher auto, general liability and property insurance premiums that were unaffected by the decline in vehicles delivered.

Depreciation and amortization expense increased from 6.4% of revenues in the third quarter of 2000 to 7.4% of revenues in the third quarter of 2001, and increased from 5.6% of revenues for the first nine months of 2000 to 6.8% of revenues for the first nine months of 2001. The increase as a percentage of revenues was due primarily to a sharp decline in vehicles delivered which reduced revenues. Depreciation and amortization expense stayed relatively constant in 2001 versus 2000; depreciation and amortization expense was $15.1 million in the third quarter of 2001 versus $15.0 million in the third quarter of 2000, and $45.4 million for the first nine months of 2001 versus $45.7 million for the first nine months of 2000.

Loss/gain on sale of assets increased from a loss of $97,000 for the first nine months of 2000 to a gain of $2,719,000 for the first nine months of 2001. The Company disposed of excess real estate and other assets in Canada during the second quarter of 2001.

20

Interest expense as a percentage of revenues increased from 3.5% of revenues for the third quarter of 2000 to 4.5% of revenues for the third quarter of 2001, and increased from 3.1% of revenues for the first nine months of 2000 to 4.1% for the first nine months of 2001. The increase was due to higher interest rates charged under the Company’s revolving credit facility and senior subordinated notes as a result of the amendments in the second quarter of 2001, as well as higher long-term debt levels and additional costs related to the amendments.

Financial Condition, Liquidity and Capital Resources

Net cash provided by operating activities totaled $1.6 million for the nine-month period ended September 30, 2001 versus net cash provided by operating activities of $25.9 million for the nine-month period ended September 30, 2000. The decline in cash provided by operating activities was due primarily to reduced earnings during the first nine months of 2001 versus 2000, offset with a favorable change in operating assets and liabilities as the Company has implemented measures to improve asset utilization.

Net cash used in investing activities totaled $15.6 million for the nine-month period ended September 30, 2001 versus $37.5 million for the nine-month period ended September 30, 2000. The decrease was due primarily to the purchase of CT Group, a logistics service group, in 2000 for $8.2 million, combined with a change in the investment portfolio mix of the Company’s captive insurance company which increased short-term investments by $14.0 million and reduced cash and cash equivalents by a like amount in 2000.

Net cash provided by financing activities totaled $23.7 million for the nine-month period ended September 30, 2001 versus $3.0 million for the nine-month period ended September 30, 2000. The increase was due to an increase in borrowings during 2001 as a result of lower operating cash flow.

In April 2001 the Company amended its revolving credit facility and its senior subordinated notes to avoid defaults relating to its financial covenants. The maturity date of the amended revolving credit facility has been accelerated from September 30, 2002 to January 31, 2002.

The Company’s future cash flow would be insufficient to meet its debt payment obligations if it is required to repay the outstanding balance of the Credit Facility at its currently scheduled maturity in January 2002. The Company’s ability to meet its principal payment obligations at the January 2002 maturity will depend on whether it can arrange a refinancing, restructuring or extension of such facility on satisfactory terms within that time frame. The Company is engaged in discussions with a number of lenders to replace its revolving credit facility, and completion of the financing is anticipated by January 2002.

If the Company is unable to refinance, restructure or extend its Credit Facility, the Company may be required to sell additional assets, reduce or delay capital investments or seek to raise additional capital, among other things. The Company cannot give any

21

assurance that any refinancing, restructuring or extension of the current Credit Facility would be possible, that any assets could be sold, or, if sold, of the timing of the sales and the amount of proceeds realized from those sales, or that additional capital could be obtained on acceptable terms, if at all. The Company’s inability to refinance, restructure or extend its indebtedness on commercially reasonable terms would have a material adverse effect on its business, financial condition, and results of operations. Additionally, the Company has been advised by its independent public accountants that if the Company is unable to refinance, restructure or extend its indebtedness, the auditor’s report on the consolidated financial statements for the year ended December 31, 2001 may contain a paragraph regarding uncertainties as to the Company’s ability to continue as a going concern. The debt under the Company’s Credit Facility is secured by liens on all of its assets, and the Company’s failure to pay these obligations when due would permit the lenders to pursue their remedies under the Credit Facility.

The Company’s ability to obtain sufficient cash to make scheduled payments on its debt obligations as they become due until the January 2002 maturity will depend on future cash flow from operations, sales of assets and the Company’s financial performance, which will be affected by a range of economic, competitive and business factors. The Company cannot control many of these factors, such as general economic and financial conditions in the automotive industry and the economy at large.

Allied is continuing its efforts in regard to the potential sale of its Axis Group, Inc. subsidiary. Allied is currently engaged in discussions with prospective buyers of Axis and expects to complete a transaction regarding Axis by January 2002.

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, 2001, which are recorded at a fair value of $64.8 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 $6.5 million.

Interest Rates – The Company primarily issues long-term debt obligations to support general corporate purposes including capital expenditures and working capital needs. The majority of the Company’s long-term debt obligations bear a fixed rate of interest. A one-percentage point increase in interest rates affecting the Company’s floating rate long-term debt would reduce pre-tax income by $1.6 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.

22

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 periodically 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. In addition, the Company has contractual agreements with certain customers that provide for fuel surcharges that mitigate the exposure to risk associated with fuel price increases. A 10% increase in diesel fuel prices would reduce pre-tax income by $4.7 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, 2001, are $97.3 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 $9.7 million. The Company does not use derivative financial instruments to hedge its exposure to changes in foreign currency exchange rates.

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 efforts to reduce costs, (iv) the adequacy of the Company’s sources of cash to finance its current and future operations and (v) 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

23

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 maintain 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 2001 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.

24

PART II.

OTHER INFORMATION

Item 1. Legal Proceedings.

Refer to Note 9 on Page 16 of this Report on Form 10-Q for information on legal proceedings.

Item 5. Other Information.

On July 13, 2001, the Company announced that it had been advised by the New York Stock Exchange (“NYSE”) that the Company had fallen below the continued listing standard requiring stockholders’ equity of not less than $50 million and total market capitalization of not less than $50 million. Allied submitted a detailed plan to the Listing and Compliance Committee of the NYSE demonstrating how the Company plans to be in compliance with the continued listing standard on or before November 29, 2002, the deadline set by the NYSE. The Committee has accepted the plan and the Company is currently subject to quarterly monitoring for compliance with the plan.

In connection with the implementation of the administrative processing fee, effective September 7, 2001 Allied Automotive Group, Inc. entered into an amendment to its contract with UPS Autogistics, Inc. regarding the distribution of vehicles for Ford Motor Company extending the term of the agreement for 12 months as to ramp locations and 15 months as to plant locations. The amended agreement provides that the contract may be terminated on 75 days notice by either party. Allied Automotive Group also entered into an amendment to its contract with General Motors effective September 6, 2001, in order to provide for the payment of the administrative processing fee. The amended agreement is for a term of 30 months expiring March 6, 2004.

Item 6. Exhibits and Reports on Form 8-K.

(a)	Exhibits	Description
	(10.1)*	Agreement between Allied Automotive Group, Inc. and UPS Autogistics, Inc. dated September 30, 2001.
	(10.2)*	Agreement between Allied Automotive Group, Inc., and General Motors Corporation dated September 6, 2001.

* Portions of the agreement are omitted pursuant to a request for confidential treatment filed with the SEC on November 13, 2001.

(b) Reports on Form 8-K: None

25

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 13, 2001	/s/Hugh E. Sawyer
(Date)	Hugh E. Sawyer
	on behalf of Registrant as
	President and
	Chief Executive Officer
November 13, 2001	/s/Daniel H. Popky
(Date)	Daniel H. Popky
	on behalf of Registrant as
	Senior Vice President, Finance
	and Chief Financial Officer

26 EX-10.1 3 g72550ex10-1.txt AGREEMENT BETWEEN ALLIED AUTOMOTIVE GROUP EXHIBIT 10.1 AMENDMENT TO AGREEMENT THIS AMENDMENT TO AGREEMENT (the "Amendment") is entered into effective as of the 6th day of September 2001, by and among Allied Automotive Group, Inc. ("Carrier") and UPS Autogistics, Inc. ("Customer"). WHEREAS, Carrier and Ford Motor Company entered into that certain agreement later assigned to Customer, dated April 3, 1992, as amended from time to time, including the amendment dated August 1, 1999 (the "Prior Agreement"); and WHEREAS, Carrier and Customer entered into that certain Letter Agreement dated September 6, 2001, (the "Letter Agreement"); and WHEREAS, the parties now desire to revoke the terms and conditions of the Letter Agreement and to provide that the Prior Agreement is and has remained in full force and effect notwithstanding the terms and conditions of Letter Agreement; and WHEREAS, the parties desire to enter into this Amendment and to amend certain terms of the Prior Agreement as set forth herein; NOW, THEREFORE, in consideration of the foregoing, and the mutual promises and covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows: 1. Carrier and Customer agree that the terms and conditions of the Letter Agreement are revoked and are of no force or effect and further agree that notwithstanding the terms of the conditions of the Letter Agreement, the Prior Agreement is deemed reinstated and is in full force and effect as amended hereby. 2. Commencing effective September 7, 2001, Carrier shall bill and Customer shall pay an administrative processing fee in an amount equal to $[XXX] per vehicle transported from all locations originating in the United States, and $[XXX] Canadian for all locations originating in Canada, provided that Carrier and Customer agree that the administrative processing fee shall be increased to $[XXX] per vehicle transported from all locations originating in the United States and $[XXX] Canadian for all locations originating in Canada immediately upon the removal of business transported by Carrier for Customer at (i) Edison, NJ and (ii) any of (a) [XXX], (b) [XXX], (c) [XXX], or (d) [XXX]. Customer agrees to process Carrier billings electronically and pay the administrative processing fee in accordance with the terms of the Prior Agreement. Carrier and Customer agree that the administrative processing fee shall not apply to (i) new locations not currently served by Carrier on behalf of Customer as of September 7, 2001, (ii) rail diversions occurring after September 7, 2001, or (iii) new business rerouted to existing locations. Page 1 3. Notwithstanding the provisions of Section 2, Carrier will not charge any administrative processing fee for any vehicle transported in the following moves: [XXX] 4. Carrier agrees that Customer has the sole discretion for managing and designing the network, and Carrier does not have the right to increase the administrative processing fee or the underlying rates charged to Customer as a result of such management and design, other than the increase in the administrative processing fee as set forth in Section 2 of this Amendment. 5. The Prior Agreement, as amended hereby, shall terminate on (i) September 30, 2002 as to ramp locations and (ii) December 31, 2002 as to plant locations 6. Except as provided in Section 2 of this Amendment and this Section 6, the administrative processing fee and underlying rates charged to Customer shall not be subject to upward or downward adjustment prior to the termination dates specified in Section 5 hereof, except that Customer agrees to adjust rates based on fuel price fluctuations using the current fuel surcharge process. 7. Subject to the provisions of Section 7.8, Carrier agrees to comply by location with the following transit times and compliance percentages: 7.1(a) Shuttle: completed within twenty-four (24) hours, [XXX] compliance; (b) Ramp to dealer: completed within forty-eight (48) hours; and (c) Plant to dealer: completed within seventy-two (72) hours. 7.2 Commencing September 6, 2001, [XXX] percent of Carrier's ramp and plant deliveries under this Amendment ("Deliveries") will be in compliance with the transit times set forth in Section 7.1(b) and (c). The remaining [XXX] percent will be made within an additional forty-eight (48) hours. 7.3 Commencing January 1, 2002, [XXX] percent of Carrier's Deliveries will be in compliance with the transit times set forth in 7.1(b) and (c). The remaining [XXX] percent will be made within an additional forty-eight (48) hours. 7.4 Commencing July 1, 2002, [XXX] percent of Carrier's Deliveries will be in compliance with the transit times set forth in 7.1 (b) and (c). The remaining [XXX] percent will be made within an additional forty-eight (48) hours. 7.5 Commencing January 1, 2003, [XXX] percent of Carrier's Deliveries will be in compliance with the transit times set forth in 7.1 (b) and (c). The remaining [XXX] percent will be made within an additional forty-eight (48) hours. Page 2 7.6 Customer will notify Carrier if a corrective action plan is required due to Carrier's failure to comply with the standards specified in Sections 7.1, 7.2, 7.3, 7.4, or 7.5. Carrier must submit a corrective action plan within forty-eight (48) hours of such notification by Customer. Carrier shall have thirty (30) days from such notification ("Cure Period") in which to bring its performance into compliance with said standards. Customer may terminate the obligation of Carrier and Customer as to any location not in compliance at the end of the Cure Period. If Customer elects to so terminate, Customer will give Carrier seventy-five (75) days' prior written notice thereof. Carrier and Customer agree that, during any such seventy-five (75) day notice period, Customer and Carrier will continue fully to perform all of their respective obligations under this Amendment and Carrier will perform as to transit standards at levels no worse than those achieved prior to such corrective action plan during the Cure Period. 7.7 Carrier may not increase the administrative processing fee or the underlying rates charged to Customer pursuant to the terms of this Amendment in the event Customer terminates the obligations of Customer and Carrier as to any location as a result of the breach by Carrier of Sections 7.1, 7.2, 7.3, 7.4, 7.5, or 7.6 of this Agreement. 7.8 Customer agrees to continue to use commercially reasonable efforts to assist Carrier in achieving the performance standards set forth in Sections 7.1, 7.2, 7.3, 7.4, and 7.5, and to define reporting of performance acceptable to both parties, provided, however, Carrier bears the sole responsibility for achieving such performance standards, anything to the contrary in this Amendment notwithstanding. Customer agrees that Carrier shall not be in breach of this Section 7 to the extent acts or events or circumstances beyond the reasonable control of Carrier occur which prohibit compliance with this Section 7. 8. Quarterly financial reporting is required by Carrier to Customer to include at a minimum the following: - Borrowing Base Report. - Unit volume by terminal in total for Ford broken out between shuttle and non-shuttle activity. - Ford Revenue by terminal by month. - Quarterly status of turnaround plan, including initiatives and actual results of operations compared to plan - Copy of amended or new loan agreements, including forbearance agreements and waivers. Carrier will provide to Customer such monthly financial reports listed above to the extent available. 9. Either Carrier or Customer may terminate the obligation of Carrier to provide services on a location by location basis, without terminating the Prior Agreement, on seventy-five (75) days prior written notice, with or without cause. In the event all Page 3 locations covered by the Prior Agreement are terminated, then the Prior Agreement, as amended hereby, shall automatically be terminated and immediately be of no further force or effect. During such seventy-five (75) day period, Carrier may not increase or decrease the administrative processing fee or underlying rates charged and Customer and Carrier and will continue fully to perform their obligations under this Amendment. Any termination of the Prior Agreement, as amended hereby, shall not release either party from any obligation based on events that may have occurred before such termination. 10. The terms and conditions of the Prior Agreement, including the underlying rates and charges and locations served by Carrier, are in full force and effect, provided that the terms and conditions of this Amendment shall govern and control in the event of a conflict with the Prior Agreement. 11. Section 1 and Section 17 of the Prior Agreement are terminated and are of no further force or effect. 12. Section 10 of the Prior Agreement shall be amended to provide that (i) the vehicle quality performance standard shall be [XXX] during the term of the Prior Agreement, as amended hereby, (ii) the quality performance standards shall be applied on a location by location basis, and (iii) the cure period of Carrier shall be six (6) months following written notice of breach given by Customer to Carrier per location. Customer agrees to continue to use commercially reasonable efforts to assist Carrier in achieving the performance standards set forth in this Section 12, provided, however, Carrier bears the sole responsibility for achieving such performance standards, anything to the contrary in this Amendment notwithstanding. 13. Customer represents to Carrier that it has the right and authority to enter into this Amendment and to contract for the distribution of Ford Motor Company vehicles in accordance with the terms of this Amendment. 14. Customer and Carrier agree that Section 5 of the Prior Agreement shall be amended by deleting the third sentence of Section 5 and inserting the following in its place: "If, at any time during the term of this Agreement, forty percent (40%) or more of the capital stock or substantially all of the assets of Carrier shall be transferred, assigned, subcontracted, or sold to an unaffiliated entity ("Acquirer"), other than transfers or assignments to lenders in the ordinary course of business, Customer shall have the right (but not the obligation) for a period of thirty (30) days from the date of its receipt of written notice from Carrier that consummation of such transfer or sale has been effected, to terminate this Agreement in its entirety or with respect to any location affected by such Agreement. In the event Customer elects to terminate this Agreement pursuant to this Section 5, Customer and Carrier agree that such termination will be effective seventy-five (75) days following notice from Customer of its election to terminate this Agreement, and during such seventy-five (75) day period, Carrier may not increase or decrease the Page 4 administrative processing fee or underlying rates charged, and Customer and Carrier will continue to fully perform their obligations under this Agreement." The remaining provisions of Section 5 shall remain in full force and effect. IN WITNESS WHEREOF, the parties have executed this document this day of October, 2001, but effective as of the date first written above. ALLIED AUTOMOTIVE GROUP, INC. By: -------------------------------------- Title: ----------------------------------- UPS AUTOGISTICS, INC. By: -------------------------------------- Title: ----------------------------------- - --------------- [XXX] Represents material deleted per the Company's request for Confidential Treatment and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934. EX-10.2 4 g72550ex10-2.txt AGREEMENT BETWEEN ALLIED AUTOMOTIVE GROUP, INC. EXHIBIT 10.2 AMENDMENT TO BRIDGE AGREEMENT BETWEEN ALLIED AUTOMOTIVE GROUP, INC. AND GENERAL MOTORS CORPORATION DATED SEPTEMBER 6, 2001 This Amendment to Bridge Agreement (the "Amendment") is dated effective as of September 6, 2001. WHEREAS, Allied Automotive Group, Inc. ("Allied" or "AAG") and General Motors Corporation ("GM") are parties to that certain Bridge Agreement dated September 29, 2000 and Master Transportation Agreement dated as of October 1, 1997 (collectively, the "Agreement"); and WHEREAS, the parties desire to amend the Agreement effective September 6, 2001; NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: 1. The Agreement is amended to provide that the Agreement will continue in full force and effect for a period of thirty (30) months from September 6, 2001 as to both the Core Region and the balance in the United States and Canada. Should the parties thereafter continue to operate under the Agreement, it will continue from month to month until terminated by either party upon not less than thirty (30) days prior written notice to the other. 2. The Agreement is amended to provide that Allied will charge GM, and GM will pay Allied, for the services contemplated by the Agreement, the rates, charges and surcharges currently contemplated by the Agreement and in accordance with current practices, and the Administrative Processing Fee as set forth in this Amendment. 3. The Agreement is amended to provide that GM agrees not to resource any business currently conducted by AAG during the thirty (30) month period of this Agreement, subject to performance by AAG under the Agreement. 4. The Agreement is amended to provide that GM agrees to return the [XXX] to [XXX] lane of traffic to AAG [XXX]. 5. The Agreement is amended to provide that Allied agrees to consider GM proposals for Allied's car fleet up to 70% of the fleet. 6. The Agreement is amended to provide that GM agrees to pay Administrative Processing Fee to Allied on the following rates and terms: [XXX] [XXX] [XXX] [XXX] [XXX] [XXX] [XXX] 7. The parties agree that the terms of both the Agreement and this Amendment are confidential. 8. Except as amended hereby, the Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the undersigned have affixed their hands and seals as of the 6th day of September, 2001. GENERAL MOTORS CORPORATION ALLIED AUTOMOTIVE GROUP, INC. By: By: ------------------------------- --------------------------------- Title: Title: ---------------------------- ------------------------------ - --------------- [XXX] Represents material deleted per the Company's request for Confidential Treatment and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934. -----END PRIVACY-ENHANCED MESSAGE-----

EX-10.1

                                                                    EXHIBIT 10.1

                             AMENDMENT TO AGREEMENT

         THIS AMENDMENT TO AGREEMENT (the "Amendment") is entered into effective
as of the 6th day of September 2001, by and among Allied Automotive Group, Inc.
("Carrier") and UPS Autogistics, Inc. ("Customer").

         WHEREAS, Carrier and Ford Motor Company entered into that certain
agreement later assigned to Customer, dated April 3, 1992, as amended from time
to time, including the amendment dated August 1, 1999 (the "Prior Agreement");
and

         WHEREAS, Carrier and Customer entered into that certain Letter
Agreement dated September 6, 2001, (the "Letter Agreement"); and

         WHEREAS, the parties now desire to revoke the terms and conditions of
the Letter Agreement and to provide that the Prior Agreement is and has remained
in full force and effect notwithstanding the terms and conditions of Letter
Agreement; and

         WHEREAS, the parties desire to enter into this Amendment and to amend
certain terms of the Prior Agreement as set forth herein;

         NOW, THEREFORE, in consideration of the foregoing, and the mutual
promises and covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, agree as follows:


1.       Carrier and Customer agree that the terms and conditions of the Letter
Agreement are revoked and are of no force or effect and further agree that
notwithstanding the terms of the conditions of the Letter Agreement, the Prior
Agreement is deemed reinstated and is in full force and effect as amended
hereby.

2.       Commencing effective September 7, 2001, Carrier shall bill and Customer
shall pay an administrative processing fee in an amount equal to $[XXX] per
vehicle transported from all locations originating in the United States, and
$[XXX] Canadian for all locations originating in Canada, provided that Carrier
and Customer agree that the administrative processing fee shall be increased to
$[XXX] per vehicle transported from all locations originating in the United
States and $[XXX] Canadian for all locations originating in Canada immediately
upon the removal of business transported by Carrier for Customer at (i) Edison,
NJ and (ii) any of (a) [XXX], (b) [XXX], (c) [XXX], or (d) [XXX]. Customer
agrees to process Carrier billings electronically and pay the administrative
processing fee in accordance with the terms of the Prior Agreement. Carrier and
Customer agree that the administrative processing fee shall not apply to (i) new
locations not currently served by Carrier on behalf of Customer as of
September 7, 2001, (ii) rail diversions occurring after September 7, 2001, or
(iii) new business rerouted to existing locations.


                                     Page 1



3.       Notwithstanding the provisions of Section 2, Carrier will not charge
any administrative processing fee for any vehicle transported in the following
moves:

                                    [XXX]

4.       Carrier agrees that Customer has the sole discretion for managing and
designing the network, and Carrier does not have the right to increase the
administrative processing fee or the underlying rates charged to Customer as a
result of such management and design, other than the increase in the
administrative processing fee as set forth in Section 2 of this Amendment.

5.       The Prior Agreement, as amended hereby, shall terminate on (i)
September 30, 2002 as to ramp locations and (ii) December 31, 2002 as to plant
locations

6.       Except as provided in Section 2 of this Amendment and this Section 6,
the administrative processing fee and underlying rates charged to Customer shall
not be subject to upward or downward adjustment prior to the termination dates
specified in Section 5 hereof, except that Customer agrees to adjust rates based
on fuel price fluctuations using the current fuel surcharge process.

7.       Subject to the provisions of Section 7.8, Carrier agrees to comply by
location with the following transit times and compliance percentages:

         7.1(a)   Shuttle: completed within twenty-four (24) hours, [XXX]
compliance; (b) Ramp to dealer: completed within forty-eight (48) hours; and
(c) Plant to dealer: completed within seventy-two (72) hours.

         7.2      Commencing September 6, 2001, [XXX] percent of Carrier's ramp
and plant deliveries under this Amendment ("Deliveries") will be in compliance
with the transit times set forth in Section 7.1(b) and (c). The remaining [XXX]
percent will be made within an additional forty-eight (48) hours.

         7.3      Commencing January 1, 2002, [XXX] percent of Carrier's
Deliveries will be in compliance with the transit times set forth in 7.1(b) and
(c). The remaining [XXX] percent will be made within an additional forty-eight
(48) hours.

         7.4      Commencing July 1, 2002, [XXX] percent of Carrier's Deliveries
will be in compliance with the transit times set forth in 7.1 (b) and (c). The
remaining [XXX] percent will be made within an additional forty-eight (48)
hours.

         7.5      Commencing January 1, 2003, [XXX] percent of Carrier's
Deliveries will be in compliance with the transit times set forth in 7.1 (b) and
(c). The remaining [XXX] percent will be made within an additional forty-eight
(48) hours.


                                     Page 2



         7.6      Customer will notify Carrier if a corrective action plan is
required due to Carrier's failure to comply with the standards specified in
Sections 7.1, 7.2, 7.3, 7.4, or 7.5. Carrier must submit a corrective action
plan within forty-eight (48) hours of such notification by Customer. Carrier
shall have thirty (30) days from such notification ("Cure Period") in which to
bring its performance into compliance with said standards. Customer may
terminate the obligation of Carrier and Customer as to any location not in
compliance at the end of the Cure Period. If Customer elects to so terminate,
Customer will give Carrier seventy-five (75) days' prior written notice thereof.
Carrier and Customer agree that, during any such seventy-five (75) day notice
period, Customer and Carrier will continue fully to perform all of their
respective obligations under this Amendment and Carrier will perform as to
transit standards at levels no worse than those achieved prior to such
corrective action plan during the Cure Period.

         7.7      Carrier may not increase the administrative processing fee or
the underlying rates charged to Customer pursuant to the terms of this Amendment
in the event Customer terminates the obligations of Customer and Carrier as to
any location as a result of the breach by Carrier of Sections 7.1, 7.2, 7.3,
7.4, 7.5, or 7.6 of this Agreement.

         7.8      Customer agrees to continue to use commercially reasonable
efforts to assist Carrier in achieving the performance standards set forth in
Sections 7.1, 7.2, 7.3, 7.4, and 7.5, and to define reporting of performance
acceptable to both parties, provided, however, Carrier bears the sole
responsibility for achieving such performance standards, anything to the
contrary in this Amendment notwithstanding. Customer agrees that Carrier shall
not be in breach of this Section 7 to the extent acts or events or circumstances
beyond the reasonable control of Carrier occur which prohibit compliance with
this Section 7.

8.       Quarterly financial reporting is required by Carrier to Customer to
include at a minimum the following:

                  -        Borrowing Base Report.
                  -        Unit volume by terminal in total for Ford broken out
                           between shuttle and non-shuttle activity.
                  -        Ford Revenue by terminal by month.
                  -        Quarterly status of turnaround plan, including
                           initiatives and actual results of operations compared
                           to plan
                  -        Copy of amended or new loan agreements, including
                           forbearance agreements and waivers.

Carrier will provide to Customer such monthly financial reports listed above to
the extent available.

9.       Either Carrier or Customer may terminate the obligation of Carrier to
provide services on a location by location basis, without terminating the Prior
Agreement, on seventy-five (75) days prior written notice, with or without
cause. In the event all


                                     Page 3



locations covered by the Prior Agreement are terminated, then the Prior
Agreement, as amended hereby, shall automatically be terminated and immediately
be of no further force or effect. During such seventy-five (75) day period,
Carrier may not increase or decrease the administrative processing fee or
underlying rates charged and Customer and Carrier and will continue fully to
perform their obligations under this Amendment. Any termination of the Prior
Agreement, as amended hereby, shall not release either party from any obligation
based on events that may have occurred before such termination.

10.      The terms and conditions of the Prior Agreement, including the
underlying rates and charges and locations served by Carrier, are in full force
and effect, provided that the terms and conditions of this Amendment shall
govern and control in the event of a conflict with the Prior Agreement.

11.      Section 1 and Section 17 of the Prior Agreement are terminated and are
of no further force or effect.

12.      Section 10 of the Prior Agreement shall be amended to provide that (i)
the vehicle quality performance standard shall be [XXX] during the term of the
Prior Agreement, as amended hereby, (ii) the quality performance standards shall
be applied on a location by location basis, and (iii) the cure period of Carrier
shall be six (6) months following written notice of breach given by Customer to
Carrier per location. Customer agrees to continue to use commercially reasonable
efforts to assist Carrier in achieving the performance standards set forth in
this Section 12, provided, however, Carrier bears the sole responsibility for
achieving such performance standards, anything to the contrary in this Amendment
notwithstanding.

13.      Customer represents to Carrier that it has the right and authority to
enter into this Amendment and to contract for the distribution of Ford Motor
Company vehicles in accordance with the terms of this Amendment.

14.      Customer and Carrier agree that Section 5 of the Prior Agreement shall
be amended by deleting the third sentence of Section 5 and inserting the
following in its place:

         "If, at any time during the term of this Agreement, forty percent (40%)
         or more of the capital stock or substantially all of the assets of
         Carrier shall be transferred, assigned, subcontracted, or sold to an
         unaffiliated entity ("Acquirer"), other than transfers or assignments
         to lenders in the ordinary course of business, Customer shall have the
         right (but not the obligation) for a period of thirty (30) days from
         the date of its receipt of written notice from Carrier that
         consummation of such transfer or sale has been effected, to terminate
         this Agreement in its entirety or with respect to any location affected
         by such Agreement. In the event Customer elects to terminate this
         Agreement pursuant to this Section 5, Customer and Carrier agree that
         such termination will be effective seventy-five (75) days following
         notice from Customer of its election to terminate this Agreement, and
         during such seventy-five (75) day period, Carrier may not increase or
         decrease the


                                     Page 4



         administrative processing fee or underlying rates charged, and Customer
         and Carrier will continue to fully perform their obligations under this
         Agreement."

The remaining provisions of Section 5 shall remain in full force and effect.

         IN WITNESS WHEREOF, the parties have executed this document this
day of October, 2001, but effective as of the date first written above.


                                       ALLIED AUTOMOTIVE GROUP, INC.



                                       By:
                                          --------------------------------------
                                       Title:
                                             -----------------------------------



                                       UPS AUTOGISTICS, INC.



                                       By:
                                          --------------------------------------
                                       Title:
                                             -----------------------------------


- ---------------

[XXX]    Represents material deleted per the Company's request for Confidential
         Treatment and filed separately with the Securities and Exchange
         Commission pursuant to Rule 24b-2 under the Securities Exchange Act of
         1934.

EX-10.2

                                                                    EXHIBIT 10.2

                  AMENDMENT TO BRIDGE AGREEMENT BETWEEN ALLIED
              AUTOMOTIVE GROUP, INC. AND GENERAL MOTORS CORPORATION
                             DATED SEPTEMBER 6, 2001

         This Amendment to Bridge Agreement (the "Amendment") is dated effective
as of September 6, 2001.

         WHEREAS, Allied Automotive Group, Inc. ("Allied" or "AAG") and General
Motors Corporation ("GM") are parties to that certain Bridge Agreement dated
September 29, 2000 and Master Transportation Agreement dated as of October 1,
1997 (collectively, the "Agreement"); and

         WHEREAS, the parties desire to amend the Agreement effective
September 6, 2001;

         NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:

1.       The Agreement is amended to provide that the Agreement will continue
         in full force and effect for a period of thirty (30) months from
         September 6, 2001 as to both the Core Region and the balance in the
         United States and Canada. Should the parties thereafter continue to
         operate under the Agreement, it will continue from month to month until
         terminated by either party upon not less than thirty (30) days prior
         written notice to the other.

2.       The Agreement is amended to provide that Allied will charge GM, and GM
         will pay Allied, for the services contemplated by the Agreement, the
         rates, charges and surcharges currently contemplated by the Agreement
         and in accordance with current practices, and the Administrative
         Processing Fee as set forth in this Amendment.

3.       The Agreement is amended to provide that GM agrees not to resource any
         business currently conducted by AAG during the thirty (30) month period
         of this Agreement, subject to performance by AAG under the Agreement.

4.       The Agreement is amended to provide that GM agrees to return the [XXX]
         to [XXX] lane of traffic to AAG [XXX].

5.       The Agreement is amended to provide that Allied agrees to consider GM
         proposals for Allied's car fleet up to 70% of the fleet.

6.       The Agreement is amended to provide that GM agrees to pay
         Administrative Processing Fee to Allied on the following rates and
         terms:

         [XXX]             [XXX]                              [XXX]
                           [XXX]                              [XXX]
                           [XXX]                              [XXX]

7.       The parties agree that the terms of both the Agreement and this
         Amendment are confidential.

8.       Except as amended hereby, the Agreement shall remain in full force and
         effect.




         IN WITNESS WHEREOF, the undersigned have affixed their hands and seals
as of the 6th day of September, 2001.



GENERAL MOTORS CORPORATION                  ALLIED AUTOMOTIVE GROUP, INC.



By:                                         By:
   -------------------------------             ---------------------------------
Title:                                      Title:
      ----------------------------                ------------------------------


- ---------------

[XXX]    Represents material deleted per the Company's request for Confidential
         Treatment and filed separately with the Securities and Exchange
         Commission pursuant to Rule 24b-2 under the Securities Exchange Act of
         1934.