-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MNm3O5oMSr131T+SQtWmdtK5j2AWWz05xKGcVpwNO8GrIP81ukt4oznwdmGQlgDi 1lrvyO0aLMgwArgJwr03EA== 0000950144-99-005661.txt : 19990513 0000950144-99-005661.hdr.sgml : 19990513 ACCESSION NUMBER: 0000950144-99-005661 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLIED HOLDINGS INC CENTRAL INDEX KEY: 0000909950 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 580360550 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13867 FILM NUMBER: 99617980 BUSINESS ADDRESS: STREET 1: 160 CLAIRMONT AVE STREET 2: STE 510 CITY: DECATUR STATE: GA ZIP: 30030 BUSINESS PHONE: 4043701100 MAIL ADDRESS: STREET 1: 160 CLAIREMONT AVENUE SUITE 510 CITY: DECATUR STATE: GA ZIP: 30030 10-Q 1 ALLIED HOLDINGS, INC. 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 - FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 - For the transition period from_________________ to _____________________ Commission File Number: 0-22276 ALLIED HOLDINGS, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) GEORGIA 58-0360550 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification incorporation or organization) 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 May 3, 1999..................7,964,097 TOTAL NUMBER OF PAGES INCLUDED IN THIS REPORT: 16 1 2 INDEX PART I FINANCIAL INFORMATION
PAGE ITEM 1: FINANCIAL STATEMENTS Consolidated Balance Sheets as of March 31, 1999 and December 31, 1998.................................................................... 3 Consolidated Statements of Operations for the Three Month Periods Ended March 31, 1999 and 1998.......................................... 4 Consolidated Statements of Cash Flows for the Three Month Periods Ended March 31, 1999 and 1998.......................................... 5 Notes to Consolidated Financial Statements............................................. 6 ITEM 2 Management's Discussion and Analysis of Financial Condition and Results of Operations.................................................. 8 PART II OTHER INFORMATION ITEM 6 Exhibits and Reports on Form 8-K....................................................... 15 Signature Pages........................................................................ 16
2 3 PART 1 FINANCIAL INFORMATION ITEM I FINANCIAL STATEMENTS ALLIED HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In Thousands)
March 31 December 31 1999 1998 --------- ------------ (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 20,720 $ 21,977 Short-term investments 25,357 23,323 Receivables, net of allowance for doubtful accounts 120,094 103,968 Inventories 7,882 6,788 Deferred tax assets 20,775 20,773 Prepayments and other current assets 23,091 18,930 --------- --------- Total current assets 217,919 195,759 --------- --------- PROPERTY AND EQUIPMENT, NET 296,506 297,530 --------- --------- OTHER ASSETS: Goodwill, net 94,108 94,677 Other 33,079 33,761 --------- --------- Total other assets 127,187 128,338 --------- --------- Total assets $ 641,612 $ 621,627 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt $ 2,168 $ 2,746 Trade accounts payable 34,491 42,196 Accrued liabilities 102,813 100,788 --------- --------- Total current liabilities 139,472 145,730 --------- --------- LONG-TERM DEBT, less current maturities 321,664 291,096 --------- --------- POSTRETIREMENT BENEFITS OTHER THAN PENSIONS 11,085 11,165 --------- --------- DEFERRED INCOME TAXES 38,046 39,953 --------- --------- OTHER LONG-TERM LIABILITIES 71,638 70,830 --------- --------- STOCKHOLDERS' EQUITY: Common stock, no par value; 20,000 shares authorized, 7,964 and 7,878 shares outstanding at March 31, 1999 and December 31, 1998, respectively 0 0 Additional paid-in capital 46,085 44,854 Retained earnings 21,349 25,354 Cumulative other comprehensive income, net of tax (5,429) (6,115) Unearned compensation (2,298) (1,240) --------- --------- Total stockholders' equity 59,707 62,853 --------- --------- Total liabilities and stockholders' equity $ 641,612 $ 621,627 ========= =========
The accompanying notes are an integral part of these consolidated balance sheets. 3 4 ALLIED HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in Thousands, Except Per Share Data) (Unaudited)
For the Three Months Ended March 31 --------------------------- 1999 1998 ---- ---- REVENUES $ 261,249 $ 253,390 --------- --------- OPERATING EXPENSES: Salaries, wages and fringe benefits 144,645 137,619 Operating supplies and expenses 44,781 42,740 Purchased transportation 25,282 27,535 Insurance and claims 13,617 9,442 Operating taxes and licenses 10,716 9,998 Depreciation and amortization 14,015 12,925 Rents 2,622 2,351 Communications and utilities 2,230 2,315 Other operating expenses 3,311 1,678 --------- --------- Total operating expenses 261,219 246,603 --------- --------- Operating income 30 6,787 --------- --------- OTHER INCOME (EXPENSE): Interest expense (7,409) (6,022) Interest income 291 456 --------- --------- (7,118) (5,566) --------- --------- (LOSS) INCOME BEFORE INCOME TAXES (7,088) 1,221 INCOME TAX BENEFIT (PROVISION) 3,083 (531) --------- --------- NET (LOSS) INCOME $ (4,005) $ 690 ========= ========= PER COMMON SHARE - BASIC AND DILUTED $ (0.51) $ 0.09 ========= ========= COMMON SHARES OUTSTANDING - BASIC AND DILUTED 7,790 7,746 ========= =========
The accompanying notes are an integral part of these consolidated statements. 4 5 ALLIED HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in Thousands) (Unaudited)
For the Three Months Ended March 31 --------------------------- 1999 1998 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Not (loss) income ($ 4,005) $ 690 --------- --------- Adjustments to reconcile net (loss) income to net cash used in operating activities: Depreciation and amortization 14,015 12,925 (Gain) loss on sale of property and equipment (51) 37 Deferred income taxes (2,424) 76 Compensation expense related to stock options and grants 146 46 Equity in loss of joint venture 1,466 122 Change in operating assets and liabilities: Receivables, net of allowance for doubtful accounts (15,885) (11,973) Inventories (1,076) (574) Prepayments and other current assets (4,123) (1,949) Trade accounts payable (7,799) (2,431) Accrued liabilities 2,724 360 --------- --------- Total adjustments (13,007) (3,361) --------- --------- Net cash used in operating activities (17,012) (2,671) --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (11,531) (6,396) Proceeds from sale of property and equipment 146 115 Investment in joint venture 0 (11,920) Increase in short-term investments (2,034) (2,715) Decrease (increase) in the cash surrender value of life insurance 193 (620) --------- --------- Net cash used in investing activities (13,226) (21,536) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of long-term debt, net 29,990 18,269 Proceeds from exercise of stock options 27 24 Other, net (1,062) (98) --------- --------- Net cash provided by financing activities 28,955 18,195 --------- --------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 26 (66) NET DECREASE IN CASH AND CASH EQUIVALENTS (1,257) (6,078) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 21,977 10,530 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 20,720 $ 4,452 ========= =========
The accompanying notes are an integral part of these consolidated statements. 5 6 ALLIED HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) Note 1. Basis of Presentation The unaudited consolidated financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The statements contained herein reflect all adjustments, all of which are of a normal, recurring nature, which are, in the opinion of management, necessary to present fairly the financial condition, results of operations and cash flows for the periods presented. Operating results for the three month period ended March 31, 1999 are not necessarily indicative of the results that may be expected for the year ended December 31, 1999. The interim financial statements should be read in conjunction with the financial statements and notes thereto of Allied Holdings, Inc. and Subsidiaries, (the "Company") included in the Company's 1998 Annual Report on Form 10-K. Note 2. Long-Term Debt On September 30, 1997, the Company issued $150 million of 8 5/8 % senior notes (the "Notes") through a private placement. Subsequently, the senior notes were registered with the Securities and Exchange Commission. The net proceeds from the Notes were used to fund the acquisition of Ryder Automotive Carrier Services, Inc. and RC Management Corp., pay related fees and expenses, and reduce outstanding indebtedness. The Company's obligations under the Notes are guaranteed by substantially all of the subsidiaries of the Company (the "Guarantors"). Separate financial statements of the Guarantors are not provided herein as (i) the Guarantors are jointly and severally liable for the Company's obligations under the Notes, (ii) the subsidiaries which are not Guarantors are inconsequential to the consolidated operations of the Company and its subsidiaries and (iii) the net assets and earnings of the Guarantors are substantially equivalent to the net assets and earnings of the consolidated entity as reflected in these consolidated financial statements. There are no restrictions on the ability of the Guarantors to make distributions to the Company. Note 3. Comprehensive Income The Company had a comprehensive loss of $3.3 million for the first quarter 1999 versus comprehensive income of $1.1 million for the first quarter of 1998. The difference between comprehensive income and net income is the foreign currency translation adjustment, net of income taxes. 6 7 Note 4. Accounting for Derivative Instruments and Hedging Activities In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." The Statement establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. The Statement requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement, and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. This statement is effective for fiscal quarters beginning after June 15, 1999 on a prospective basis. The Company will adopt this statement in the third quarter of 1999. The Company does not believe the adoption will have a material impact on its financial position or results of operations. Note 5. Segment Reporting The Company operates in one reportable industry segment: transporting automobiles and light trucks from manufacturing plants, ports, auctions, and railway distribution points to automotive dealerships. Geographic financial information for the first quarter of 1999 and 1998 follows (in thousands):
1999 1998 -------- -------- Revenues: United States $217,914 $207,578 Canada 43,335 45,812 -------- -------- $261,249 $253,390 ======== ======== Long-lived assets: United States $349,958 $339,191 Canada 73,735 76,473 -------- -------- $423,693 $415,664 ======== ========
Revenues are attributed to the respective countries based on the location of the origination terminal. Note 6. Reclassifications Certain amounts in the prior year financial statements have been reclassified to conform with the current year presentation. 7 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Revenues were $261.3 million for the first quarter of 1999 versus revenues of $253.4 million for the first quarter of 1998, an increase of 3 %. The increase in revenues during the quarter is attributable to increased vehicle deliveries because of higher new vehicle production and sales. The Company experienced a net loss of $4.0 million in the first quarter of 1999 versus net income of $0.7 million in the first quarter of 1998. Basic and diluted loss per share for the first quarter of 1999 were $0.51 versus basic and diluted earnings per share of $0.09 in the first quarter of 1998. Results for the first quarter of 1999 were impacted by a decline in load averages, severe winter weather, and a deterioration in the Brazilian economy. The Company experienced a significant increase in the percentage of vehicles delivered that were light trucks as well as an overall increase in the size and weight of most vehicles delivered. During the first quarter of 1999, light truck production in the US and Canada increased approximately 200,000 units while car production increased approximately 30,000 units. Due to regulations on tractor and trailer length, height, width, and maximum weight capacity, this change in mix resulted in the number of vehicles delivered per load in the first quarter of 1999 being approximately 5 percent lower than the first quarter of 1998. The change in mix negatively impacts operating results as revenue is realized on a per vehicle basis, thus the Company's revenue per load decreased. The Company estimates that operating income for the first quarter was reduced by approximately $5 million as a result of this load average decline. The Company recorded a loss of approximately $1.5 million from its Brazilian joint venture in the first quarter of 1999. The loss resulted from a significant reduction in new vehicle sales as the Brazilian economy deteriorated because of the currency devaluation. In addition, operating results in the United States and Canada during the first quarter of 1999 were impacted by the severe winter weather, causing significant operating inefficiencies as well as substantial snow removal costs. The Company estimates the weather reduced operating income in the first quarter of 1999 by approximately $2 million. The following is a discussion of the changes in the Company's major expense categories: Salaries, wages and fringe benefits increased from 54.3 % of revenues in the first quarter of 1998 to 55.4 % of revenues for the first quarter of 1999. The increase was primarily due to annual salary and benefit increases together with the inefficiencies resulting from the decline in load averages offset by continued productivity and efficiency improvements. Operating supplies and expenses increased from 16.9 % of revenues in the first quarter of 1998 to 17.1 % of revenues for the first quarter of 1999. The increase was primarily due to the inefficiencies from decreased load averages offset by lower fuel prices. 8 9 Purchased transportation expense decreased from 10.9 % of revenues in the first quarter of 1998 to 9.7 % of revenues for the first quarter of 1999. The decrease during the first quarter was primarily due to the decrease in the mix of loads hauled by owner-operators versus company drivers. The number of owner-operators year-to-year was similar, thus the additional loads hauled were delivered by company drivers. Insurance and claims expense increased from 3.7 % of revenues in the first quarter of 1998 to 5.2 % of revenues for the first quarter of 1999. The increase during the first quarter was primarily due to an increase in the frequency of damage claims primarily as a result of the Company hauling larger size vehicles. Depreciation and amortization expense increased from 5.1 % of revenues in the first quarter of 1998 to 5.4 % for the first quarter of 1999. The increase was primarily due to additional depreciation expense from the Company's capital expenditures during 1998. Other Operating expenses increased from 0.7 % of revenues in the first quarter of 1998 to 1.3 % for the first quarter of 1999. The increase was primarily due to the Company recording a loss of approximately $1.5 million from its Brazilian joint venture. Interest expense as a percentage of revenues increased from 2.4 % during the first quarter of 1998 to 2.8 % in the first quarter of 1999. The increase was primarily because of higher long-term debt levels in 1999 versus 1998. FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES Net cash used by operating activities totaled $17.0 million for the three months ended March 31, 1999 versus $2.7 million for the three months ended March 31, 1998. The increase in cash used by operating activities was primarily due to the reduction in earnings during the first quarter of 1999 together with a larger than normal seasonal increase in accounts receivable. A greater percentage of the quarterly revenues were generated in March which caused an increase in the quarter-end accounts receivable balance. Net cash used in investing activities totaled $13.2 million for the three months ended March 31, 1999 versus $21.5 million for the same period in 1998. The decrease was primarily due to the investment in Axis Do Brazil in February 1998. Capital expenditures totaled $11.5 million for the first quarter of 1999, versus $6.4 million for the same period in 1998. The increase was primarily due to planned levelized capital expenditures throughout 1999 versus capital expenditures in 1998 that were weighted to the second half of the year. Net cash provided by financing activities totaled $29.0 million for the three months ended March 31, 1999 versus $18.2 million for the three months ended March 31, 1998. The 9 10 increase was primarily due to seasonal borrowings required to finance operating activities to be offset by additional seasonally stronger operating cash flows during the balance of the year. DISCLOSURES ABOUT MARKET RISKS The market risk inherent in the Company's market risk sensitive instruments and positions is the potential loss arising from adverse changes in short-term investment prices, interest rates, fuel prices, and foreign currency exchange rates. SHORT-TERM INVESTMENTS - The Company does not use derivative financial instruments in its investment portfolio. The Company places its investments in instruments that meet high credit quality standards, as specified in the Company's investment policy guidelines. The policy also limits the amount of credit exposure to any one issue, issuer, and type of instrument. Short-term investments at March 31, 1999, which are recorded at fair value of $25.4 million, have exposure to price risk. This risk is estimated as the potential loss in fair value resulting from a hypothetical 10% adverse change in quoted prices and amounts to $2.5 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 $1.0 million over the next fiscal year. A one percentage point change in interest rates would not have a material effect on the fair value of the Company's fixed rate long-term debt. FUEL PRICES - The Company is dependent on diesel fuel to operate its fleet of rigs. Diesel fuel prices are subject to fluctuations due to unpredictable factors such as weather, government policies, changes in global demand, and global production. To reduce price risk caused by market fluctuations, the Company generally follows a policy of hedging a portion of its anticipated diesel fuel consumption. The instruments used are principally readily marketable exchange traded futures contracts which are designated as hedges. The changes in market value of such contracts have a high correlation to the price changes of diesel fuel. Gains and losses resulting from fuel hedging transactions are recognized when the underlying fuel being hedged is used. A 10% increase in diesel fuel prices would reduce pre-tax income by $3.9 million over the next fiscal year. FOREIGN CURRENCY EXCHANGE RATES - Although the majority of the Company's operations are in the United States, the Company does have foreign subsidiaries (primarily Canada). The net investments in foreign subsidiaries translated into dollars using exchange rates at March 31, 1999, are $79.5 million. The potential loss in fair value impacting other comprehensive income resulting from a hypothetical 10% change in quoted foreign currency exchange rates amounts to $8.0 million. The Company does not use derivative financial instruments to hedge its exposure to changes in foreign currency exchange rates. 10 11 YEAR 2000 Year 2000 ("Y2K" or "Year 2000") issues are being addressed by the Company. The Company, like most other major companies, is currently addressing a universal problem commonly referred to as "Year 2000 Compliance," which relates to the ability of computer programs and systems to properly recognize and process date sensitive information before and after January 1, 2000. The following discussion is based on information currently available to the Company. The Company has analyzed and continues to analyze its internal information technology ("IT") systems ("IT systems") to identify any computer programs that are not Year 2000 compliant and implement any changes required to make such systems Year 2000 compliant. The Company believes that its critical IT systems currently are capable of functioning without substantial Year 2000 Compliance problems. Of the non-critical, but important, IT systems that are not currently Year 2000 compliant, the Company believes such IT systems will be Year 2000 capable in a time frame that will avoid any material adverse effect on the Company. Also, the Company does not believe that the expenditures related to replacing or upgrading any of its IT systems to make them Year 2000 compliant will have a material adverse effect on the financial condition or results of operations of the Company. The Company has evaluated its critical equipment and critical systems that contain embedded software, ("Non-IT systems"), and the Company believes that all of its critical Non-IT systems are capable of functioning without substantial Year 2000 Compliance problems. The Company has engaged a leading computer consulting services firm to lead the Year 2000 remediation and testing process. The Company is also investigating each of its significant vendors, suppliers, financial service organizations, service providers and customers to confirm that the Company's operations will not be materially adversely affected by the failure of any such third party to have Year 2000 compliant computer programs. Regardless of the responses that the Company receives from such third parties, the Company is establishing contingency plans to reduce the Company's exposure resulting from the non-compliance of third parties. The Company has approached the Year 2000 project in phases. Phase I of the project involved identification of all software used by the Company, identification of all significant vendors, and establishment of a senior management committee to oversee the project. Phase I was completed in the third calendar quarter of 1998. Phase II of the project involves (a) evaluation of each significant vendor and evaluation of major customers through letters and questionnaires (b) communication with customers concerning any products currently or recently sold by the Company that have Year 2000 issues, and (c) evaluating the Company's most reasonably likely worst case Year 2000 scenarios and contingency planning related thereto. Phase II was completed in the first calendar quarter of 1999. Phase III involves testing of the Company's IT systems and Non-IT systems to confirm Year 2000 compliance and/or discover any overlooked Year 2000 problems. Phase III has commenced and should be completed in the third calendar quarter of 1999. Last, Phase IV involves implementation of the Company's contingency plans. Such plans are expected to be implemented in the third calendar quarter of 1999. 11 12 The Company has material relationships with third parties whose failure to be Year 2000 compliant could have materially adverse impacts on the Company's business, operations or financial condition in the future. Third parties that are considered to be in this category for Y2K purposes include critically important customers, suppliers, vendors and public entities such as government regulatory agencies, utilities, financial entities and others. The Company derives most of its net operating revenues from the transportation of new and used automobiles and light trucks for all major domestic and foreign automotive manufacturers. The Company has made Y2K awareness information available to all customers and has asked each customer to advise the Company of their plans for reaching Y2K readiness. The Company has also contacted the customers to inquire about actions being taken with respect to third parties. Further action may be taken by the Company as it deems appropriate in particular cases. The Company classifies as critical those suppliers of products or services that, if interrupted, would materially disrupt the Company's ability to conduct operations. The Company expect reviews of these products and service providers to be completed by the third quarter of 1999. In the first calendar quarter of 1999, the Company began the planning and implementation of a Y2K program involving interaction with and assessment of public entities such as government regulatory agencies, utilities, financial entities and others. The Company is preparing contingency plans relating specifically to identified Y2K risks, and cost estimates relating to these plans are being developed. The Company began training designated employees in Y2K contingency planning matters during the first calendar quarter of 1999, and anticipates completion of the Y2K contingency plans during the third calendar quarter of 1999. Contingency plans may include establishing alternative means of communicating with employees at terminal locations and with customers, and other appropriate measures. Once developed, Y2K contingency plans and related cost estimates will be continually refined as additional information becomes available. While the Company currently believes that it will be able to modify or replace its affected systems in time to minimize any significant detrimental effects on its operations, failure to do so, or the failure of customers or other third parties to modify or replace their affected systems, could have materially adverse impacts on the Company's business, operations or financial condition in the future. There can be no guarantee that such impacts will not occur. In particular, because of the interdependent nature of business systems, the Company could be materially adversely affected if private businesses, utilities and governmental entities with which it does business or that provide essential products or services are not Year 2000 compliant. Reasonably likely consequences of failure by the Company or third parties to resolve the Y2K problem include, among other things, temporary slowdowns or cessation's of delivery operations at one or more 12 13 Company terminals, or delays in the delivery of vehicles. However, the Company believes that its Y2K readiness program, including related contingency planning, should significantly reduce the possibility of significant interruptions of normal operations. As of March 31, 1999, the Company's total incremental costs (historical plus estimated future costs) of addressing Y2K issues are estimated to be in the range of $3.5 million, of which approximately $2.5 million has been incurred. The Company believes that approximately 30% of the costs expected to be incurred in 1999 will be internal costs, including compensation and benefits of employees assigned primarily to Y2K procedures. Internal costs addressing Y2K issues during 1998 were not material. These costs are being funded through operating cash flow. These amounts do not include: (i) any costs associated with the implementation of contingency plans, which are in the process of being developed, or (ii) costs associated with replacements of computerized systems or equipment in cases where replacement was not accelerated due to Y2K issues. Implementation of the Company's Y2K plan is an ongoing process. Consequently, the above described estimates of costs and completion dates for the various components of the plan are subject to change. The preceding discussion on Y2K contains various forward-looking statements which represent the Company's beliefs or expectations regarding future events. When used in the Y2K discussion, the words "believes," "expects," "estimates" and similar expressions are intended to identify forward-looking statements. Forward-looking statements include, without limitation, the Company's expectations as to when it will complete the remediation and testing phases of its Y2K procedures as well as its Y2K contingency plans; its estimated cost of achieving Y2K readiness; and the Company's belief that its internal systems and equipment will be Year 2000 ready in a timely manner. All forward-looking statements involve a number of risks and uncertainties that could cause the actual results to differ materially from the projected results. Factors that may cause these differences include, but are not limited to, the availability of qualified personnel and other information technology resources; the ability to identify and remediate all date sensitive lines of computer code or to replace embedded computer chips in affected systems or equipment; and the actions of governmental agencies or other third parties with respect to Y2K problems. The Company does not currently believe that any of the foregoing will have a material adverse effect on its financial condition or its results of operations. However, the process of evaluating the Company's third party vendors and their systems is ongoing. Although not expected, failures of critical suppliers, critical customers, critical IT systems or critical Non-IT systems could have a material adverse effect on the Company's financial condition or results of operations. As widely publicized, Year 2000 Compliance has many issues and aspects, not all of which the Company is able to accurately forecast or predict. There is no way to assure that Year 2000 Compliance will not have adverse effects on the Company, some of which could be material. 13 14 SEASONALITY AND INFLATION The Company's revenues are seasonal, with the second and fourth quarters generally experiencing higher revenues than the first and third quarters. The volume of vehicles shipped during the second and fourth quarters is generally higher due to the introduction of new models which are shipped to dealers during those periods and the higher spring and early summer sales of automobiles and light trucks. During the first and third quarters, vehicle shipments typically decline due to lower sales volume during those periods and scheduled plant shut downs. Inflation has not significantly affected the Company's results of operations. CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS Statements in this quarterly report on Form 10-Q contains forward-looking statements, including statements regarding, among other items, (i) the Company's plans, intentions or expectations, (ii) general industry trends, competitive conditions and customer preferences, (iii) the Company's management information systems, and its ability to resolve any Year 2000 issues related thereto (iv) the Company's efforts to reduce costs, (v) the adequacy of the Company's sources of cash to finance its current and future operations and (vi) resolution of litigation without material adverse effect on the Company. This notice is intended to take advantage of the "safe harbor" provided by the Private Securities Litigation Reform Act of 1995 with respect to such forward-looking statements. These forward-looking statements involve a number of risks and uncertainties. Among others, factors that could cause actual results to differ materially are the following: economic recessions or downturns in new vehicle production or sales; the highly competitive nature of the automotive distribution industry; dependence on the automotive industry; loss or reduction of revenues generated by the Company's major customers; the variability of quarterly results and seasonality of the automotive distribution industry; labor disputes involving the Company or its significant customers; the dependence on key personnel who have been hired or retained by the Company; the availability of strategic acquisitions or joint venture partners; changes in regulatory requirements which are applicable to the Company's business; changes in vehicle sizes and weights which may adversely impact vehicle deliveries per load; risks associated with doing business in foreign countries; problems related to information technology systems and computations that must be made by the Company or its customers and vendors in 1999, 2000 or beyond; and the risk factors listed herein from time to time in the Company's Securities and Exchange Commission reports, including but not limited to, its Annual Reports on Form 10-K or 10 Q. 14 15 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits: Exhibit 27. (b) Reports on Form 8-K: There were no reports filed on Form 8-K for the quarter ended March 31, 1999. 15 16 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Allied Holdings, Inc. May 12, 1999 /s/A. Mitchell Poole, Jr. - ------------ ------------------------------------ (Date) A. Mitchell Poole, Jr. on behalf of Registrant as President, Chief Operating Officer, and Assistant Secretary May 12, 1999 /s/Daniel H. Popky - ------------ ------------------------------------ (Date) Daniel H. Popky on behalf of Registrant as Senior Vice President, Finance and Chief Financial Officer Chief Financial Officer and 16 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF ALLIED HOLDINGS INC. FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 US DOLLARS 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 1 20,720 25,357 120,094 0 7,882 217,919 296,506 0 641,612 139,472 0 0 0 0 59,707 641,612 261,249 261,249 261,219 261,219 0 0 7,409 (7,088) 3,083 (4,005) 0 0 0 (4,005) (.51) (.51)
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