<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
         EXCHANGE ACT OF 1934 FOR THE YEAR ENDED DECEMBER 31, 1998

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
         EXCHANGE ACT OF 1934

Commission File Number 0-22276

                              ALLIED HOLDINGS, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                                                                 <C>
                        Georgia                                                                  58-0360550
--------------------------------------------------------------                      --------------------------------------
(State or other jurisdiction of incorporation or organization)                            (I.R.S. Employer ID Number)

          160 Clairemont Avenue, Suite 200,  Decatur, Georgia 30030 (Address of principal executive office)
-------------------------------------------------------------------------------------------------------------------
</TABLE>
                      
                          

        Registrant's telephone number, including area code (404) 373-4285
                                                           ---------------
          Securities registered pursuant to Section 12(b) of the Act:

<TABLE>
<S>                                                                                 <C>
                  No par value Common Stock                                                New York Stock Exchange
--------------------------------------------------------------                      --------------------------------------
                      (Title of Class)                                              (Name of Exchange on which Registered)
</TABLE>

          Securities registered pursuant to Section 12(g) of the Act:

                                      None
                             ----------------------
                                (Title of Class)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or Section 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.

                                       YES  [X]   NO  [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by referenced in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]

As of March 3, 1999 Registrant had outstanding 7,964,097 shares of common stock.
The aggregate market value of the common stock held by nonaffiliates of the
Registrant, based upon the closing sales price of the common stock on March 3,
1999 as reported on the New York Stock Exchange, was approximately $52,426,000.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the proxy statement for Registrant's 1999 Annual Meeting of
Shareholders to be held May 12, 1999 are incorporated by reference in Part III.


<PAGE>   2


                              ALLIED HOLDINGS, INC.

                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                                                            Page
                    Caption                                                                                Number
                    -------                                                                                ------
<S>               <C>                                                                                      <C>
PART I.

ITEM 1.           BUSINESS...................................................................................2

ITEM 2.           PROPERTIES.................................................................................7

ITEM 3.           LEGAL PROCEEDINGS........................................ .................................7

ITEM 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........................................8

PART II.

ITEM 5.           MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
                  STOCKHOLDER MATTERS.......................................................................10

ITEM 6.           SELECTED CONSOLIDATED FINANCIAL DATA......................................................11

ITEM 7.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                  CONDITION AND RESULTS OF OPERATIONS.......................................................12

ITEM 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...............................................18

ITEM 9.           DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE......................................18

PART III.

ITEM 10.          DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT........................................19

ITEM 11.          EXECUTIVE COMPENSATION....................................................................19

ITEM 12.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT................................................................................19

ITEM 13.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................................19

PART IV.

ITEM 14.          EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
                  REPORTS ON FORM 8-K.......................................................................20
</TABLE>





<PAGE>   3




                                     PART I

ITEM 1.  BUSINESS.

         1.       GENERAL

         Allied Holdings, Inc. (the "Company" or "Allied"), founded in 1934, is
a holding company which operates through its wholly-owned subsidiaries. The
Company's principal operating divisions are Allied Automotive Group, Inc.
("Allied Automotive Group" or "Automotive Group") and Axis Group, Inc. ("Axis"
or the "Axis Group"). Allied Automotive Group is the largest motor carrier in
North America specializing in the transportation of new and used automobiles and
light trucks utilizing specialized tractor trailers ("Rigs" or "Rig") and serves
all of the major domestic and foreign automotive manufacturers. The Axis Group
provides logistics solutions and other services to the new and used vehicle
distribution market and other segments of the automotive industry. Axis is the
global logistics services arm of the Allied Holdings family of companies. On
September 30, 1997, the Company acquired Ryder Automotive Carrier Services, Inc.
and RC Management Corp. (collectively, "Ryder Automotive Group") from Ryder
System, Inc. (the "Ryder Automotive Group Acquisition").

         Allied Automotive Group offers a full range of automotive delivery
services including transporting new, used and off-lease vehicles to dealers from
plants, rail ramps, ports and auctions, and providing vehicle rail-car loading
and unloading services. The Allied Automotive Group represented approximately
98% of the Company's consolidated 1998 revenues. The Allied Automotive Group
operates primarily in the short-haul segment of the automotive transportation
industry with an average length of haul of less than 200 miles. The Allied
Automotive Group delivers new and used vehicles throughout the United States and
Canada for all of the major domestic and foreign manufacturers of automobiles
and light trucks. General Motors, Ford and DaimlerChrysler represent the
Company's largest customers, accounting for in total approximately 73% of 1998
revenues. The Automotive Group also provides services to all of the major
foreign manufacturers, including Honda, Mazda, Nissan, Toyota, Isuzu, Volkswagen
and Mitsubishi. Allied Automotive Group participated in the transportation of
approximately 65% of the new vehicles sold in the United States and Canada in
1998, and had 1998 revenues nearly five times greater than its closest
competitor.

         The Company provides logistics solutions to the automotive market
through the Axis Group that complement Allied's new vehicle distribution
services operations. Axis provides carrier management services for various
automotive clients, leases equipment for containerized international shipment of
vehicles, and provides vehicles processing services at ports and inland
distribution centers. In addition, Axis has established a joint venture in
Brazil to provide automotive logistics services in the Mercosur region, and it
recently created subsidiaries in Mexico to provide services to the auto industry
in Mexico.

         2.       INTEGRATION OF RYDER AUTOMOTIVE GROUP

         Ryder Automotive Group, prior to its acquisition by the Company, was
North America's largest motor carrier of new and used automobiles and light
trucks offering a full range of automotive delivery services including
transporting new, used and off-lease vehicles to dealers from plants, railramps,
ports and auctions, and providing vehicle rail-car loading and unloading
services. The Ryder Automotive Group also provided logistics solutions and other
services to the new and used vehicle distribution market and other segments of
the automotive industry, including the growing used car superstore market.
During 1998, the Company completed the integration of Ryder Automotive Group by
consolidating 19 duplicate terminal facilities and converting all former Ryder
Automotive Group locations to Allied's computer system.


                                       2
<PAGE>   4


         3.       SERVICES

         As a result of the Ryder Automotive Group Acquisition, the Allied
Automotive Group is the largest motor carrier in North America specializing in
the transportation of new and used automobiles and light trucks for all the
major domestic and foreign automotive manufacturers. Allied participated in the
transportation of approximately 65% of the new vehicles sold in the United
States and Canada in 1998, including more than 50% of the North American
production of General Motors, Ford and DaimlerChrysler. Allied Automotive Group
believes it can capture a larger percentage of its major customers' North
American production by building upon its relationships with manufacturers and
leveraging its reputation for high quality services, competitive pricing and
value-added services. Allied Automotive Group also believes that it can expand
the types of services provided to its existing customers by utilizing its
sophisticated technology in order to deliver vehicles and provide other services
more efficiently and cost effectively than its competitors.

         The Company has made a significant commitment to providing
complementary services to its existing customers and to new customers through
its Axis Group subsidiary. Axis Group is aggressively pursuing opportunities to
provide logistics solutions to customers in the automotive industry and seeks to
leverage its proprietary information systems in order to efficiently provide
such services. These services include identifying new and innovative
distribution methods for customers, providing solutions relating to improving
the management of inventory of new and used vehicles, and providing
reconditioning services relating to the used and remarketed vehicle market. The
Axis Group further believes that significant opportunities exist for it to
provide additional automotive distribution services to its existing customers'
internationally through the formation of joint ventures with established local
transportation carriers. For example, Axis owns a minority interest in Axis
Sinimbu Logistica ("ASL"). ASL provides automotive distribution services to the
automotive industry in Brazil.

         4.       CUSTOMER RELATIONSHIPS

         The Company has contracts with most of its customers. The Allied
Automotive Group's contracts with its customers establish rates for the
transportation of vehicles based upon a fixed rate per vehicle transported and a
variable rate for each mile a vehicle is transported. While the contracts
generally do not permit Allied Automotive Group to recover for increases in fuel
prices, fuel taxes or labor cost, certain of the Allied Automotive Group
contracts provide for renegotiation in the event material adverse changes occur.
The Allied Automotive Group has two contracts with Ford. The first expires in
May 1999 and provides that the Allied Automotive Group is the primary carrier
for 24 locations in the United States and all Canadian locations. The second
contract with Ford expires in June 2000 and provides that the Allied Automotive
Group is the primary carrier for 6 locations in the United States. The Company
has begun negotiations with Ford regarding an extension of the existing contract
or a new contract. The Allied Automotive Group has two contracts with
DaimlerChrysler. The first contract expires in June 2000 and provides that the
Allied Automotive Group is the primary carrier for 26 locations throughout the
United States and Canada. The second contract with DaimlerChrysler expires in
May 2001 and provides that the Allied Automotive Group is the primary carrier
for 13 locations in the United States and 1 in Canada. The Allied Automotive
Group has a contract with General Motors which expires in October 2000 and
provides that the Allied Automotive Group is the primary carrier for 32
locations in the United States.

         5.       PROPRIETARY MANAGEMENT INFORMATION SYSTEMS

         The Company has made a long-term commitment to utilizing technology to
serve its customers. The Company's information systems subsidiary, Link
Information Systems, Inc. ("Link") provides information systems services to the
Allied Automotive Group, Axis Group and other subsidiaries of the Company.
Link's advanced management information system is a centralized, fully integrated
information system utilizing a mainframe computer together with client servers.
The system is based on a company-wide information database, which allows Link to
quickly respond to customer information requests without having to combine data
files from several sources. Updates with respect to vehicle load, dispatch and
delivery are immediately available for reporting to customers and for better
control and tracking of customer vehicle inventories. Through electronic data
interchange ("EDI"), Link communicates directly with manufacturers in the
process of delivering vehicles and electronically bills and collects from
manufacturers. Link also utilizes EDI to communicate with inspection companies,
railroads, port processors and other carriers.


                                       3
<PAGE>   5


         Subsidiaries of the Company utilize Link's information system to allow
them to operate more efficiently. For example, the information systems
automatically design an optimal load for each Rig, taking into account factors
such as the capacity of the Rig, the size of the vehicles, the route, the drop
points, applicable weight and height restrictions and the formula for paying
drivers. The system also determines the most economical and efficient load
sequence and drop sequence for the vehicles to be transported.

         6.       MANAGEMENT STRATEGY

         The Company has adopted a performance management strategy which it
believes contributes to quality, enhanced efficiency, safety and profitability
in its operations. The Company's management strategy and culture is designed to
enhance employee performance through careful selection and continuous training
of new employees, with individual performance goals established for each
employee and performance measured regularly through the Company's management
information system. The Company believes that its performance management
strategy is unique with respect to the role that employees play in the form of
participation in this process.

         The Company has developed and implemented various programs to
incentivize and reward increased employee productivity. The various programs
developed by the Company reward damage-free delivery by drivers, driver
efficiency and driver safety. The Company believes that these programs have
improved customer and employee satisfaction and driver related productivity in
areas such as damage-free deliveries.

         During 1997, the Company adopted an economic value added ("EVA") based
performance measurement and incentive compensation system. EVA is the measure
used by the Company to determine incentive compensation for senior management.
EVA also provides management with a measure to gauge financial performance,
allocate capital to appropriate projects, assist in providing valuations in
regard to proposed acquisitions, and evaluate daily operating decisions. The
Company believes that the EVA based performance measurement and incentive
compensation system promotes the creation of economic value and shareholder
value by aligning the interests of senior management with that of the Company's
shareholders. The Board of Directors of the Company has adopted an Employee
Stock Purchase Plan to provide all employees the opportunity to purchase shares
of the Company's common stock. The plan is subject to approval by the
shareholders of the Company.

         7.       RISK MANAGEMENT AND INSURANCE

         The Company's risk management subsidiary, Haul Risk Management
Services, Inc. ("HRMS"), is responsible for defining risks and securing
appropriate insurance programs and coverages at cost effective rates for the
Company. HRMS internally administers all claims for auto and general liability
and for workers compensation claims in Alabama, Florida, Georgia, Missouri,
North Carolina, Ohio, South Carolina, Tennessee and Virginia. Liability and
workers compensation claims are subject to periodic audits by the Company's
commercial insurance carriers. The Company currently retains up to $650,000 of
liability for each claim for workers' compensation and up to $500,000 of
liability for automobile and general liability, including personal injury and
property damage claims. In addition to the $500,000 per occurrence deductible
for automobile liability, there is a $1,500,000 aggregate deductible for those
claims which exceed the $500,000 per occurrence deductible, subject to a
$1,000,000 per claim limit. The Company also retains up to $250,000 of liability
for each cargo damage claim in the United States. In Canada, the Company retains
up to C$100,000 (approximately U.S. $70,000 at February 27, 1999) of liability
for each claim for personal injury, property damage or cargo damage. If the
Company were to experience a material increase in the frequency or severity of
accidents or workers' compensation claims or unfavorable developments in
existing claims, the Company's operating results could be adversely affected.
The Company formed Haul Insurance Limited in December 1995 as a captive
insurance subsidiary to provide insurance coverage to the Company.



                                       4
<PAGE>   6


         8.       EQUIPMENT, MAINTENANCE AND FUEL

         The Allied Automotive Group operates approximately 5,240 Rigs with an
average age of 7.2 years. The Allied Automotive Group has historically invested
heavily in both new equipment and equipment upgrades, which have served to
increase efficiency and extend the useful life of Rigs. Currently, new 75-foot
Rigs cost between $120,000 and $140,000 and have a useful life of between 10 to
15 years when properly maintained and upgraded.

         All of the Automotive Group's terminals have access to a central parts
warehouse through the management information system. The system calculates
maximum and minimum parts inventory quantities based upon usage and
automatically reorders parts. Minor modifications of equipment are performed at
terminal locations. Major modifications involving change in length,
configuration or load capacity are performed by the trailer manufacturers.

         In order to reduce fuel costs, the Automotive Group purchases
approximately 31% of its fuel in bulk. Also, fuel is purchased by drivers on the
road from a few major suppliers that offer discounts and central billing. The
Automotive Group has entered into futures contracts to manage a portion of its
exposure to fuel price fluctuations.

         9.       COMPETITION

         The transportation of vehicles in the long-haul segment of the
automotive industry has been primarily controlled by rail carriers. In the 1970s
and 1980s, following deregulation of the trucking industry by the Interstate
Commerce Commission and as importers obtained a more significant share of United
States automobile sales, new motor carriers, some without union contracts, began
to compete for automobile traffic.

         Since the mid-1980s, nearly all transportation has been pursuant to
contracts entered into by negotiation or competitive bid. The competition for
these contracts has been from both rail carriers and union and non-union motor
carriers. As a result, many negotiations and bids have resulted in contracts
that do not allow for recovery of increased costs of labor or fuel over the
contract term and that provide for rate reductions of varying magnitudes.

         Two other recent developments are now beginning to have an impact on
competition. The first is the rise in the use of third-party logistics companies
by automotive manufacturers. This is expected to convert further traffic to
competitive bidding and ease entry for less well capitalized, less sophisticated
haulers as the logistics companies provide the information systems and
integrate, more comprehensively, the full distribution function. The second is
the fundamental changes automotive manufacturers are making to their vehicle
distribution systems in order to expedite the delivery of finished vehicles to
dealers. Certain manufacturers are creating vehicle consolidation centers where
rail traffic from numerous manufacturing plants is re-mixed for delivery to the
dealer. In addition, manufacturers are creating new rail ramps in order to place
vehicles in more central locations closer to the market but off the dealer lots.
These new rail ramps may reduce the average length of haul for motor carriers of
automobiles. In metropolitan areas, competition for traffic from the new rail
ramps to the dealers may increase as local delivery carriers and equipment and
driver leasing companies may become new competitors for the traffic. In
addition, some parties may attempt to utilize drive-away operators or dealer
pick-ups to deliver vehicles.

         Major motor carriers specializing in the delivery of new vehicles that
are competitors of the Allied Automotive Group include Leaseway, Jack Cooper,
Cassens, Hadley and E & L, all of which are privately held companies.

         10.      EMPLOYEES AND OWNER OPERATORS

         The Company has approximately 8,500 employees, including approximately
5,800 drivers. All drivers and shop and yard personnel are represented by
various labor unions. The majority of the Automotive Group's employees are
covered by the Master Agreement with the International Brotherhood of Teamsters
("IBT") which expires on May 31, 1999. Representatives of the IBT and the
carriers covered by the master agreement, including the Allied Automotive Group,
began negotiations regarding a new contract in February 1999. The compensation
and benefits paid by the Automotive Group to union employees are established by
union contracts. The Automotive Group also utilizes approximately 800
owner-operators, with approximately 200 driving exclusively for Allied Systems
(Canada) Company, a subsidiary of the Automotive Group, in Canada and
approximately 600 driving exclusively



                                       5
<PAGE>   7


from terminals in the United States. The owner-operators are either paid a
percentage of the revenues they generate or receive normal driver pay plus a
truck allowance.

         11.      REGULATION

         The Company is regulated in the United States by the United States
Department of Transportation ("DOT") and various state agencies, and in Canada
by the National Transportation Agency of Canada and various provincial transport
boards. Truck and trailer length, height, width, maximum weight capacity and
other specifications are regulated federally in the United States, as well as by
individual states and provinces. In recent years, the automotive manufacturers
have increased the percentage of vehicles produced that are light trucks as well
as increased the size and weight of many vehicles. Due to the regulations on
truck and trailer length, height, width and maximum weight capacity, the number
of vehicles the Company delivers per load has decreased. Interstate motor
carrier operations are subject to safety requirements prescribed by the DOT. The
DOT also regulates certain safety features incorporated in the design of Rigs.
The motor carrier transportation industry is also subject to regulatory and
legislative changes which can affect the economics of the industry by requiring
changes in operating policies or influencing the demand for, and the costs of
providing, services to shippers.

         In addition, the Company's terminal operations are subject to
environmental laws and regulations enforced by federal, state, provincial and
local agencies, including those related to the treatment, storage and disposal
of wastes, and those related to the storage and handling of fuel and lubricants.
The Company maintains regular ongoing testing programs for those underground
storage tanks ("USTs") located at their terminals for compliance with
environmental laws and regulations. Management believes that the Company's USTs
are in compliance with current environmental standards.

        12.    INDUSTRY OVERVIEW

        The following table summarizes historic new vehicle production and sales
in the United States and Canada, the primary sources of the Company's revenues:

<TABLE>
<CAPTION>
                                                                       YEAR ENDED DECEMBER 31,
                                                                       -----------------------
                                                       1995             1996            1997             1998
                                                       ----             ----            ----             ----
<S>                                                    <C>              <C>             <C>              <C>
NEW VEHICLE PRODUCTION (IN MILLIONS)
United States...........................               11.6             11.5            11.8             11.6
Percent increase (decrease) over prior year            (2.3)%           (0.9)%           2.6%            (1.7)%
Canada..................................                2.4              2.4             2.5              2.5
Percent increase (decrease) over prior year             3.6%             0.0%            4.2%             0.0%
NEW VEHICLE SALES (IN MILLIONS)
United States...........................               14.7             15.1            15.1             15.6
Percent increase (decrease) over prior year            (2.2)%            2.5%            0.0%             3.3%
Canada..................................                1.1              1.2             1.4              1.4
Percent increase (decrease) over prior year            (7.6)%            3.5%           16.7%             0.0%
</TABLE>


         Domestic automotive manufacturing plants are typically dedicated to
manufacturing a particular model or models. Vehicles destined for dealers within
a radius of approximately 250 miles from the plant are usually shipped by truck.
The remaining vehicles are shipped by rail to rail ramps throughout the United
States and Canada where trucking companies handle final delivery to dealers. The
rail or truck carrier is responsible for loading the vehicles on railcars or
trailers and for any damages incurred while the vehicles are in the carrier's
custody. Automobiles manufactured in Europe and Asia are transported into the
United States and Canada by ship and usually delivered directly to dealers from
seaports by truck or shipped by rail to rail ramps and delivered by trucks to
dealers. Vehicles transported by ship are normally prepared for delivery in port
processing centers, which involves cleaning and may involve installing
accessories. The port processor releases the vehicles to the carrier which loads
the vehicles and delivers them to a rail ramp or directly to dealers.

             CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

         This Annual Report on Form 10-K contains forward-looking statements,
including statements regarding, among other items, (i) the Company's plans,
intentions or expectations, (ii) general industry trends, competitive



                                       6
<PAGE>   8


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.


ITEM 2.         PROPERTIES.

         The Company's executive offices are located in Decatur, Georgia, a
suburb of Atlanta. The Company leases approximately 96,000 square feet of space
for its executive offices, which is sufficient to permit the Company to conduct
its operations. The Company operates from 113 terminals which are located at or
near manufacturing plants, ports, and railway terminals. The Company currently
owns 29 of its terminals. The Company leases the remainder of its facilities.
Most of the leased facilities are leased on a year to year basis from railroads
at rents that are not material to the Company.

         Over the past 10 years, changes in governmental regulations have
gradually permitted the lengthening of Rigs from 55 to 75 feet. The Company has
worked closely with manufacturers to develop specialized equipment to meet the
specific needs of manufacturers.

         The Automotive Group's Rigs are maintained at 57 shops by approximately
550 maintenance personnel, including supervisors. Rigs are scheduled for regular
preventive maintenance inspections. Each shop is equipped to handle repairs
resulting from inspection or driver write up, including repairs to electrical
systems, air conditioners, suspension, hydraulic systems, cooling systems, and
minor engine repairs. Major engine overhaul and engine replacement can be
handled at larger terminal facilities, while smaller terminals rely on outside
vendors. The trend has been to use engine suppliers' outlets for engine repairs
due to the long-term warranties obtained by the Company.

ITEM 3.         LEGAL PROCEEDINGS.

         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.



                                       7
<PAGE>   9


ITEM 4.         SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

                  NONE

Executive Officers of the Registrant

         The following table sets forth certain information regarding the
Company's executive officers:


<TABLE>
<CAPTION>
         Name                                Age                           Title
         ----                                ---                           -----
<S>                                          <C>        <C>
Robert J. Rutland                             57        Chairman of the Board of Directors and Chief
                                                        Executive Officer

Guy W.  Rutland, III                          62        Chairman Emeritus and Director

A. Mitchell Poole, Jr.                        51        President, Chief Operating Officer,  Assistant
                                                        Secretary and Director

Bernard O. De Wulf                            50        Vice Chairman, Executive Vice President and Director

Berner F. Wilson, Jr.                         60        Vice Chairman and Director

Guy W.  Rutland, IV                           35        Vice President and Director

Joseph W.  Collier                            56        President of Allied Automotive Group and Director

Randall E. West                               50        President of Axis Group and Director

Douglas A. Lauer                              35        President of Link Information Systems

Daniel H. Popky                               34        Senior Vice President, Chief Financial Officer, and
                                                        President of Allied Industries

Herbert A. Terwilliger                        49        President of Haul Risk Management Services and
                                                        Haul Insurance Limited

Thomas M. Duffy                               38        Vice President, Corporate Affairs, General Counsel
                                                        and Secretary
</TABLE>

         Mr. Rutland has been Chairman and Chief Executive Officer of the
Company since December 1995. Mr. Rutland served as President and Chief Executive
Officer of the Company from 1986 to December 1995. Prior to October 1993, Mr.
Rutland was Chief Executive Officer of each of the Company's subsidiaries.

         Guy Rutland, III was elected Chairman Emeritus in December 1995. Mr.
Rutland served as Chairman of the Board of the Company from 1986 to December
1995. Prior to October 1993, Mr. Rutland was Chairman or Vice Chairman of each
of the Company's subsidiaries.

         Mr. Poole has been President, Chief Operating Officer, and Assistant
Secretary of the Company since December 1995. Prior to December 1995, Mr. Poole
served as Executive Vice President and Chief Financial Officer of the Company.
Mr. Poole continued to serve as Chief Financial Officer until November 1998. Mr.
Poole joined Allied Systems, Ltd. in 1988 as Senior Vice President and Chief
Financial Officer. He was appointed President of Allied Industries, Inc. in
December 1990 and served in that capacity until December 1997. Prior to joining
the Company in 1988, Mr. Poole was an audit partner with Arthur Andersen LLP,
independent public accountants.

         Mr. De Wulf has been Vice Chairman and an Executive Vice President of
the Company since October 1993. Prior to such time, Mr. De Wulf was Vice
Chairman of each of the Company's subsidiaries. Mr. De Wulf was Vice Chairman of
Auto Convoy from 1983 until 1988 when the Company and Auto Convoy became
affiliated.



                                       8
<PAGE>   10


         Mr. Wilson has been Vice President of the Company since October 1993
and Vice Chairman of the Board of Directors since December 1995. Mr. Wilson was
Secretary of the Company from December 1995 to June 1998. Prior to October 1993,
Mr. Wilson was an officer or Vice Chairman of several of the Company's
subsidiaries. Mr. Wilson joined the Company in 1974 and has held various
finance, administration, and operations positions.

         Mr. Rutland, IV has been Vice President of the Company since October
1993 and Senior Vice President - Operations of Allied Automotive Group since
November 1997. Mr. Rutland was Vice President - Reengineering Core Team of
Allied Automotive Group from November 1996 to November 1997. From January 1996
to November 1996 Mr. Rutland was Assistant Vice President of the Central and
Southeast Region of Operations for Allied Systems, Ltd. From March 1995 to
January 1996 Mr. Rutland was Assistant Vice President of the Central Division of
Operations for Allied Systems, Ltd. From June 1994 to March 1995, Mr. Rutland
was Assistant Vice President of the Eastern Division of Operations for Allied
Systems, Ltd. From 1993 to June 1994 Mr. Rutland was assigned to special
projects with an assignment in Industrial Relations/Labor Department and from
1988 to 1993, Mr. Rutland was Director of Performance Management.

         Mr. Collier was appointed as a director of the Company in December
1995. Mr. Collier has been the President of Allied Automotive Group since
December 1995. Mr. Collier had been Executive Vice President of Marketing and
Sales and Senior Vice President of Allied Systems, Ltd. since 1991. Prior to
joining the Company in 1979, Mr. Collier served in management positions with
Bowman Transportation and also with the Federal Bureau of Investigation.

         Mr. West was appointed as a director of the Company in December 1997.
Mr. West has been the President of Axis Group since October 1997. Mr. West was
President of Ryder Automotive Carrier Services, Inc. from January 1996 to
October 1997 and Senior Vice President and General Manager of Ryder
International from 1993 to 1995.

         Mr. Lauer has been President of Link Information Systems since July
1996. From January 1996 to July 1996 Mr. Lauer was Vice President and Chief
Information Officer of Allied Industries, Inc. Mr. Lauer has 11 years of
information technology experience. Prior to joining the Company, he was
Director, Information Systems at Exel Logistics.

         Mr. Popky has been Senior Vice President and Chief Financial Officer of
the Company since November 1998. He was appointed President of Allied
Industries, Inc. in December 1997 and continues to serve in such capacity. Mr.
Popky was Senior Vice President, Finance of the Company from December 1997 to
November 1998. From December 1995 to December 1997, Mr. Popky was Vice
President, Finance of the Company. From January 1995 to December 1995 Mr. Popky
was Vice President and Controller and from October 1994 to January 1995 he was
Assistant Vice President and Controller for the Company. Prior to joining the
Company, Mr. Popky held various positions with Arthur Andersen LLP for 9 years.

         Mr. Terwilliger has been President of Haul Insurance Limited since its
inception in December 1995 and President of Haul Risk Management Services since
its inception in April 1997. From August 1994 to April 1997, Mr. Terwilliger was
Vice President Risk Management of Allied Industries. From July 1992 to August
1994, Mr. Terwilliger was Director Risk Management of Allied Industries. Prior
to joining the Company in 1992, Mr. Terwilliger spent 18 years with various
companies in the insurance and risk management industry.

         Mr. Duffy joined the Company in June 1998 as Vice President, Corporate
Affairs, General Counsel and Secretary. From May 1997 to June 1998, Mr. Duffy
was a partner with the law firm of Troutman Sanders LLP. Prior to May 1997, Mr.
Duffy was a partner with the law firm of Peterson Dillard Young Asselin & Powell
LLP.



                                       9
<PAGE>   11


                                     PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
         MATTERS.

        The Company's common stock is traded on the New York Stock Exchange
under the symbol AHI. The common stock began trading on September 29, 1993 on
The Nasdaq Stock Market and has been trading on the New York Stock Exchange
since March 3, 1998. Prior to September 29, 1993, there had been no established
public trading market for the common stock. Market information regarding the
common stock is set forth in Financial Statements and Supplementary Data
included elsewhere herein.

        As of March 3, 1999 there were approximately 2,500 holders of the
Company's common stock. The Company has paid no cash dividends in the last two
years.



                                       10
<PAGE>   12



ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA

        The selected consolidated financial data presented below for each of the
five years in the period ended December 31, 1998 are derived from the Company's
Consolidated Financial Statements which have been audited by Arthur Andersen
LLP, independent public accountants. The selected consolidated financial data
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Consolidated Financial
Statements and notes thereto.

<TABLE>
<CAPTION>
                                                                                         Year ended December 31,
                                                                                (in thousands except per share amounts)
                                                                   1998           1997           1996           1995           1994
                                                                   ----           ----           ----           ----           ----
<S>                                                          <C>              <C>            <C>            <C>            <C>
STATEMENT OF OPERATION DATA:
   Revenues                                                  $1,026,799       $581,530       $392,547       $381,464       $297,236
                                                             ----------       --------       --------       --------       --------
   Operating expenses:
      Salaries, wages and fringe benefits                       547,780        302,539        204,838        195,952        157,979
      Operating supplies and expenses                           169,498         96,206         62,880         62,179         51,532
      Purchased transportation                                  109,884         59,925         34,533         32,084          9,486
      Insurance and claims                                       40,339         22,737         16,849         16,022         12,043
      Operating taxes and licenses                               40,779         23,028         16,122         16,564         14,301
      Depreciation and amortization                              53,327         33,340         26,425         25,431         16,314
      Rent expense                                               10,072          5,720          4,975          5,354          3,214
      Communications and utilities                                9,341          4,530          3,111          3,434          1,855
      Other operating expenses                                    7,899          6,812          4,219          3,522          1,781
      Acquisition related realignment(1)                             --          8,914             --             --             --
                                                             ----------       --------       --------       --------       --------
      Total operating expenses                                  988,919        563,751        373,952        360,543        268,505
                                                             ----------       --------       --------       --------       --------
   Operating Income                                              37,880         17,779         18,595         20,291         28,731
   Interest expense                                             (26,146)       (14,095)       (10,720)       (11,260)        (5,462)
   Interest income                                                3,270            868            603            707            312
                                                             ----------       --------       --------       --------       --------
   Income before income taxes and Extraordinary item             15,004          4,552          8,478         10,368         23,581
   Income tax provision                                          (6,527)        (2,150)        (3,557)        (4,222)        (9,393)
                                                             ----------       --------       --------       --------       --------
   Income before extraordinary item                               8,477          2,402          4,921          6,146         14,188
   Extraordinary loss on early Extinguishment of debt                --             --           (935)           --          (2,627)
                                                             ----------       --------       --------       --------       --------
   Net income                                                $    8,477       $  2,402       $  3,986       $  6,146       $ 11,561
                                                             ==========       ========       ========       ========       ========
   Income before extraordinary item per share - basic        $     1.09       $   0.31       $   0.64       $   0.80       $   1.84
   Income before extraordinary item per share - diluted            1.08           0.31           0.64           0.80           1.84
   Net income per share - basic                                    1.09           0.31           0.52           0.80           1.50
   Net income per share - diluted                                  1.08           0.31           0.52           0.80           1.50
   Weighted average common shares outstanding - basic             7,747          7,728          7,725          7,725          7,725 
   Weighted average common shares outstanding - diluted           7,846          7,810          7,725          7,725          7,725

BALANCE SHEET DATA:
   Current assets                                            $  195,759       $149,673       $ 49,202       $ 50,421         50,861
   Current liabilities                                          145,730        157,679         48,494         43,257         44,608
   Total assets                                                 621,627        558,939        211,083        214,696        218,806
   Long-term debt & capital lease obligations, less                
        current portion                                         291,096        228,003         93,708        106,634        120,136 
   Stockholders' equity                                          62,853         57,328         56,709         53,022         45,835

</TABLE>


(1) Represents a non-cash charge the Company recorded during 1997 to write down
Company Rigs and terminal facilities that were idled or closed as a result of
the Ryder Automotive Group Acquisition.



                                       11
<PAGE>   13



ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

         The following table sets forth the percentage relationship of expense
items to revenues for the periods indicated:


<TABLE>
<CAPTION>
                                                            Year ended December 31,
                                                            -----------------------
                                                         1998        1997          1996
                                                         ----        ----          ----
<S>                                                     <C>          <C>           <C>
Revenues                                                100.0%       100.0%        100.0%
                                                        -----        -----         -----
Operating Expenses:
   Salaries, wages and fringe benefits                   53.3         52.0          52.2
   Operating supplies and expenses                       16.5         16.5          16.0
   Purchased transportation                              10.7         10.3           8.8
   Rent expense                                           1.0          1.0           1.3
   Insurance and claims                                   3.9          3.9           4.3
   Operating taxes and licenses                           4.0          4.0           4.1
   Depreciation and amortization                          5.2          5.7           6.7
   Communications and utilities                           0.9          0.8           0.8
   Other operating expenses                               0.8          1.2           1.1
   Acquisition related realignment                        0.0          1.5           0.0
                                                          ---          ---           ---
Total operating expenses                                 96.3         96.9          95.3
                                                         ----         ----          ----
Operating income                                          3.7          3.1           4.7
                                                          ---          ---           ---
Other income (expense):
   Interest expense                                      (2.5)        (2.4)         (2.8)
   Interest income                                        0.3          0.1           0.2
                                                         ----         ----           ---
Total other income (expense)                             (2.2)        (2.3)         (2.6)
                                                          ----         ----          ----
Income before income taxes and extraordinary item         1.5          0.8           2.1
Income tax provision                                     (0.7)        (0.4)         (0.9)
                                                          ---          ---           ---
Income before extraordinary item                          0.8          0.4           1.2
Extraordinary loss on early extinguishment of debt        0.0          0.0          (0.2)
                                                          ---          ---           ---
Net Income                                                0.8%         0.4%          1.0%
                                                          ===          ===           ===
</TABLE>

1998 Compared to 1997

         Revenues were $1.03 billion in 1998 compared to $581.5 million in 1997,
an increase of $448.5 million, or 77%. The increase in revenues was primarily
due to a 75% increase in the number of vehicles delivered by the Allied
Automotive Group. The number of vehicles delivered by the Automotive Group
increased 71% because of the Ryder Automotive Group Acquisition and the
inclusion of the Ryder Automotive Group's results since September 30, 1997, the
date of the acquisition. The remaining increase in vehicle deliveries was
primarily due to increased new vehicle sales in the United States together with
rail-car shortages which led to increased deliveries by the Automotive Group's
U.S. operations. Net income in 1998 was $8.5 million compared with net income of
$2.4 million in 1997. Basic earnings per share for 1998 were $1.09 while diluted
earnings per share were $1.08, versus basic and diluted earnings per share of
$0.31 in 1997. The 1998 results were impacted by an eight-week work stoppage at
most General Motors manufacturing plants. The Company estimates that the work
stoppages reduced earnings in 1998 by approximately $0.75 per share. In
addition, the 1998 results include a $0.15 per share charge relating to a
voluntary early retirement program instituted in the fourth quarter. The 1997
results include a charge of $0.67 per share to write down Rigs and terminal
facilities idled or closed as a result of the Ryder Automotive Group
Acquisition. Excluding these unusual items, the significant increase in earnings
in 1998 was primarily due to contributions from the Ryder Automotive Group
Acquisition.

         The operating ratio (operating expenses as a percentage of revenues)
for 1998 was 96.3%, compared to 96.9% in 1997. However, excluding the effect of
the General Motors work stoppages and voluntary early retirement program costs
in 1998 and the acquisition related charge in 1997, the operating ratio improved
from 95.4% in 1997



                                       12
<PAGE>   14


to 95.1% in 1998. The improvement in the operating ratio is due to the operating
income contribution from the Ryder Automotive Group.

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

         Salaries, wages and fringe benefits increased from 52.0% of revenues in
1997 to 53.3% in 1998. The increase was primarily due to annual salary and
benefit increases together with additional labor costs due to inefficiencies
caused by the lower volumes from the loss of General Motors business as a result
of the work stoppages offset by continued productivity and efficiency
improvements. Also, the Company expensed approximately $2 million during 1998
for a voluntary early retirement program and such costs are included in
salaries, wages and fringe benefits.

         Operating supplies and expenses as a percentage of revenues remained
unchanged in 1998 from 1997. Lower fuel prices were offset by inefficiencies
caused by the lower volumes from the loss of General Motors business as a result
of the work stoppages.

         Purchased transportation increased from 10.3% of revenues in 1997 to
10.7% in 1998 primarily due to an increase in the number of vehicles hauled by
other carriers for the Allied Automotive Group as part of an exchange program to
improve loaded miles.

         Depreciation and amortization as a percentage of revenues decreased
from 5.7% in 1997 to 5.2% in 1998. The decrease was primarily the result of
depreciation expense on the Rigs acquired as part of the Ryder Automotive Group
Acquisition representing a lower percentage of revenues than the Company's due
to the age and useful lives of the Rigs.

         Interest expense increased from $14.1 million, or 2.4% of revenues, in
1997, to $26.2 million, or 2.5% of revenues in 1998. The increase is primarily
due to interest on additional borrowings used to finance the Ryder Automotive
Group Acquisition.

         Interest income increased from $0.9 million, or 0.1% of revenues in
1997, to $3.3 million, or 0.3% of revenues in 1998. The increase is due to an
increase in earnings from the Company's captive insurance subsidiary, Haul
Insurance Limited, due to increases in the amount of investments held by the
captive insurance company.

         The income tax provision as a percentage of revenues increased form
0.4% in 1997 to 0.7% in 1998, however, the effective tax rate decreased from
47.2% of pre-tax income in 1997 to 43.5% of pre-tax income in 1998. The decrease
in the effective tax rate was due to lower pre-tax income in 1997 because of the
acquisition related charge which made non-deductible expenses a greater
percentage of pre-tax income.

1997 Compared to 1996

         Revenues were $581.5 million in 1997 compared to $392.6 million in
1996, an increase of $188.9 million, or 48%. The increase in revenues was due to
a 41% increase in the number of vehicles delivered by the Allied Automotive
Group together with an increase in the revenue generated per vehicle delivered
due to an increase in the percentage of longer-haul dealer deliveries. The
number of vehicles delivered by the Automotive Group increased 38% because of
the acquisition of the Ryder Automotive Group and the inclusion of their results
since September 30, 1997, the date of the acquisition. The remaining increase in
vehicle deliveries was primarily due to increased new vehicle production and
sales in Canada which led to increased deliveries by the Automotive Group's
Canadian operations. Net income in 1997 was $2.4 million, or $0.31 per share,
compared with net income of $4.0 million, or $0.52 per share in 1996. The 1997
results include a one time charge of $0.67 per share related to the acquisition
of the Ryder Automotive Group. The 1996 results include an extraordinary loss on
the early extinguishment of debt of $0.12 per share. Excluding the acquisition
related charge in 1997 and the extraordinary loss in 1996, the significant
increase in earnings was primarily due to contributions from the acquisition of
the Ryder Automotive Group together with increased earnings from the Allied
Automotive Group's Canadian operations due to increased vehicle deliveries. In
addition, net income in 1996 was impacted by strikes at a number of General
Motors manufacturing plants.



                                       13
<PAGE>   15


         The operating ratio (operating expenses as a percentage of revenues)
for 1997 was 96.9%, compared to 95.3% in 1996. The operating ratio increased 1.6
percentage points, but 1.5 of the percentage point increase was due to a
non-cash charge the company recorded during the third quarter of 1997 to
write-down Company Rigs and terminal facilities that will be idled or closed as
a result of the acquisition of the Ryder Automotive Group. Excluding this one
time charge, the operating ratio for 1997 was virtually unchanged from the prior
year.

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

         Salaries, wages and fringe benefits decreased from 52.2% of revenues in
1996 to 52.0% in 1997. This change is primarily due to annual salary and benefit
increases of approximately 3%, which were more than offset by productivity and
efficiency improvements implemented during 1997 by the Allied Automotive Group
together with increases in purchased transportation.

         Operating supplies and expenses as a percentage of revenues increased
from 16.0% in 1996 to 16.5% in 1997. The increase is mainly the result of the
acquisition of the Ryder Automotive Group as its operating costs as a percentage
of revenues were higher than the Company's.

         Purchased transportation increased from 8.8% of revenues in 1996 to
10.3% of revenues in 1997 primarily due to an increase in the number of vehicles
hauled by other carriers for the Allied Automotive Group as part of an exchange
program to improve loaded miles.

         Insurance and claims expense as a percentage of revenues decreased from
4.3% in 1996 to 3.9% in 1997 mainly due to lower cargo claims costs resulting
from quality programs instituted during 1997.

         Operating taxes and licenses decreased from 4.1% of revenues in 1996 to
4.0% in 1997. This decrease is due to efforts made by the Company to reduce its
licensing costs per Rig together with an overall decrease in the number of Rigs
operated by the Allied Automotive Group after the acquisition of the Ryder
Automotive Group.

         Depreciation and amortization as a percentage of revenues decreased
from 6.7% in 1996 to 5.7% in 1997. The decrease is mainly the result of
depreciation expense on the Rigs acquired as part of the Ryder Automotive Group
representing a lower percentage of revenues than the Company's due to the age
and useful lives of the Rigs. In addition, depreciation and amortization expense
has been reduced due to a reduction in the number of Rigs operated by the Allied
Automotive Group after the acquisition of Ryder Automotive Group.

         Interest expense as a percentage of revenues decreased from 2.8% in
1996 to 2.4% in 1997, however interest expense increased from $10.7 million in
1996 to $14.1 million in 1997. The increase was primarily the result of interest
on additional borrowings used to finance the acquisitions in 1997 of Kar-Tainer
and the Ryder Automotive Group.

         The effective tax rate increased from 42.0% of pre-tax income in 1996
to 47.2% in 1997. The increase was due to higher non-deductible expenses
resulting from the acquisition of the Ryder Automotive Group together with lower
pre-tax income which made the non-deductible expenses a greater percentage of
pre-tax income.

Liquidity and Capital Resources

         The Company's sources of liquidity are funds provided by operations and
borrowings under its revolving credit facility with a syndicate of banks. The
Company's liquidity needs are for the acquisition and maintenance of Rigs and
terminal facilities, the payment of operating expenses and the payment of
interest on and repayment of long-term debt.

         Net cash provided by operating activities totaled $47.9 million in 1997
versus $25.6 million for 1998. The decrease in cash provided by operating
activities was primarily due to the change in payment terms for one of the
Company's customers which caused an increase in accounts receivable together
with a reduction in accrued liabilities because of the payment of certain
liabilities resulting from the Ryder Automotive Group Acquisition. 



                                       14
<PAGE>   16
         These decreases in operating cash flows were offset by an increase in
depreciation and amortization expense resulting from the inclusion of the Ryder
Automotive Group's operating results since the consummation of the Ryder
Automotive Group Acquisition.

         Net cash used in investing activities totaled $163.3 million for 1997
versus $79.3 million for 1998. The decrease was primarily due to the purchase of
the Ryder Automotive Group in September 1997 for $114.5 million offset by an
increase in capital expenditures, from $27.2 million in 1997 to $61.9 million in
1998. This increase was due to an increase in the number of new tractors and
trailers purchased by the Company together with an increase in modifications to
existing tractors and trailers because of the increase in the fleet size as a
result of the Ryder Automotive Group Acquisition. In addition, the Company
invested $11.9 million to form Axis do Brasil in February 1998.

         Net cash provided by financing activities totaled $123.9 million in
1997 versus $65.5 million in 1998. The decrease was primarily due to the
financing of the Ryder Automotive Group Acquisition in 1997 which was offset
with additional borrowings from the Company's revolving credit facility in 1998
due to the losses associated with the General Motors work stoppages, the change
in payment terms for a customer and the investment in Brazil.

         In connection with the acquisition of the Ryder Automotive Group, the
Company refinanced its revolving credit facility with a syndicate of banks. The
new revolving credit facility allows the Company to borrow, under a revolving
line of credit, and issue letters of credit, up to the lesser of $230 million or
a borrowing base amount that is determined based on a defined percentage of the
Company's accounts receivable and equipment. The credit facility matures in
September 2002 and the interest rate is, at the Company's option, either (i) the
bank's base rate, as defined, or (ii) the bank's Eurodollar rate, as defined, as
determined at the date of each borrowing, plus an applicable margin. The Company
has the right to repay the outstanding debt under the credit facility, in whole
or in part, without penalty or premium, subject to a limitation that prepayment
of Eurodollar rate loans will be subject to a breakage penalty if prepaid other
than on the last day of the applicable interest period. The Company will be
subject to mandatory prepayment with a defined percentage of net proceeds from
certain asset sales, new debt offerings and new equity offerings. The credit
facility gives the Company the ability to reduce the commitment amount and the
Company periodically reviews its borrowing needs. The Company had $100.8 million
outstanding under the revolving credit facility at December 31, 1998 bearing
interest at a weighted average interest rate of 7.4%. In addition, the Company
had approximately $4.5 million of letters of credit outstanding under its
revolving credit facility at December 31, 1998.

         The credit facility, the $150 million of 8 5/8% Senior Notes due in
2007 and the $40 million of 12% Senior Subordinated Notes due in 2003, set forth
a number of affirmative, negative, and financial covenants binding on the
Company. The negative covenants limit the ability of the Company to, among other
things, incur debt, incur liens, make investments, make dividend or other
distributions, or enter into any merger or other consolidation transaction. The
financial covenants include the maintenance of a minimum consolidated tangible
net worth, compliance with a leverage ratio and a coverage ratio and limitations
on capital expenditures.

         The Company's obligations under the Senior Notes due in 2007 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 the Company's consolidated financial statements. There
are no restrictions on the ability of the Guarantors to make distributions to
the Company.

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.



                                       15
<PAGE>   17


         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 December 31, 1998, which are recorded at fair value of $23.3
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 $2.3 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 year-end exchange rates at December 31, 1998, is
$77.1 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 $7.7 million. The Company does not use derivative
financial instruments to hedge its exposure to changes in foreign currency
exchange rates.

Year 2000

         Year 2000 ("Y2K") issues 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.



                                       16
<PAGE>   18


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 is in process and many of the
tasks described in subparagraphs (b) and (c) above have been completed; Phase II
is expected to be 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.

         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 second 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 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.




                                       17
<PAGE>   19


         As of February 20, 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 $1.5 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.

Seasonality and Inflation

         The Company generally experiences its highest revenues and earnings
during the second and fourth quarters of each calendar year due to the shipment
of new vehicle models and because the first and third quarters are impacted by
manufacturing plant downtime. During the past three years, inflation has not
significantly affected the Company's results of operations.

ITEM 8.        FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

          Financial statements and supplementary data are set forth beginning on
page F-1 of this Report.

ITEM 9.        DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

          NONE.



                                       18
<PAGE>   20


                                    PART III

          Certain information required by Part III is omitted from this report
in that the Registrant will file a definitive Proxy Statement pursuant to
Regulation 14A (the "Proxy Statement") not later than 120 days after the end of
the fiscal year covered by this report, and certain information included therein
is incorporated herein by reference. Only those sections of the Proxy Statement
which specifically address the items set forth herein are incorporated by
reference. Such information does not include the Compensation Committee Report
or the Performance Graph included in the Proxy Statement.

ITEM 10.        DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

         The information concerning the Company's directors required by this
Item is incorporated by reference to the Company's Proxy Statement. The
information concerning the Company's executive officers required by this Item is
incorporated by reference to the section in Part I, Item 4, entitled "Executive
Officers of the Registrant."

         The information regarding compliance with Section 16 of the Securities
Exchange Act of 1934, as amended, is to be set forth in the Proxy Statement and
is hereby incorporated by reference.

ITEM 11.        EXECUTIVE COMPENSATION.

         The information required by this Item is incorporated by reference to
the Company's Proxy Statement.

ITEM 12.        SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         The information required by this Item is incorporated by reference to
the Company's Proxy Statement.

ITEM 13.        CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         The information required by this Item is incorporated by reference to
the Company's Proxy Statement.




                                       19
<PAGE>   21


                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

         (a)      The following documents are filed as part of this report:

                  (1)      Financial Statements:


                          INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                                       Page
                                                                                                       ----
         <S>                                                                                           <C>
         Report of Independent Public Accountants......................................................F-1
         Consolidated Balance Sheets at December 31, 1998 and 1997.....................................F-2
         Consolidated Statements of Operations for the Years Ended December 31, 1998, 1997 and 1996....F-3
         Consolidated Statements of Changes in Stockholders' Equity for the Years Ended
            December 31, 1998, 1997 and 1996...........................................................F-4
         Consolidated Statements of Cash Flows for the Years Ended December 31, 1998, 1997 and 1996....F-5
         Notes to Consolidated Financial Statements....................................................F-6
</TABLE>

                  (2)      Financial Statement Schedules:


                     INDEX TO FINANCIAL STATEMENT SCHEDULES

<TABLE>
<CAPTION>
                                                                                                       Page
         <S>                                                                                           <C>
         Report of Independent Public Accountants......................................................S-1

         Schedule II - Valuation and Qualifying Accounts for the Years Ended
           December 31, 1998, 1997 and 1996  ..........................................................S-2
</TABLE>

All other schedules are omitted as the required information is inapplicable or
the information is presented in the financial statements or related notes.

         (b)      Reports on Form 8-K;

         (c)      Exhibits;

         Exhibit Index filed as part of this report


                                       20
<PAGE>   22


EXHIBIT DESCRIPTION

<TABLE>
<S>        <C>      <C>
(1)        3.1      Amended and Restated Articles of Incorporation of the Company.

(1)        3.2      Amended and Restated Bylaws of the Company.

(1)        4.1      Specimen Common Stock Certificate.

(5)        4.2      Indenture dated September 30, 1997 by and among the Company,
                    the Guarantors and The First National Bank of Chicago, as
                    Trustee.

(5)        4.3      $230 million Revolving Credit Agreement among Allied Holdings,
                    Inc. and BankBoston, N.A., individually and as Administrative
                    Agent, et al., dated September 30, 1997.

(3)       10.1      Form of the Company's Employment Agreement with executive
                    officers.

(1)       10.2      The Company's Long Term Incentive Plan dated July 1993.

(2)       10.3      The Company's 401(k) Retirement Plan and Defined Benefit
                    Pension Plan and Trust.

(3)       10.4      Form of 12% Senior Subordinated Notes due February 1, 2003.

(4)       10.5      Agreement between the Company and Ford Motor Company, as
                    amended.

(4)       10.6      Agreement between the Company and Chrysler Corporation, as
                    amended.

(7)       10.7      Agreement between the Company and General Motors
                    Corporation.

(6)       10.8      Acquisition  Agreement among Allied Holdings,  Inc., AH
                    Acquisition Corp., Canadian Acquisition Corp., and Axis
                    International Incorporated and Ryder System, Inc. dated
                    August 20, 1997.

(8)       10.9      The Company's 1999 Employee Stock Purchase Plan.

          21.1      List of subsidiary corporations.

          23.1      Consent of Arthur Andersen LLP.

          24.1      Powers of Attorney (included within the signature pages of
                    this Report).

          27.1      Financial Data Schedule (for SEC use only).
</TABLE>
-------------

(1)      Incorporated by reference from Registration Statement (File Number
         33-66620) as filed with the Securities and Exchange Commission on July
         28, 1993 and amended on September 2, 1993 and September 17, 1993 and
         deemed effective on September 29, 1993.

(2)      Incorporated by reference from Registration Statement (File Number
         33-76108) as filed with the SEC on March 4, 1994 and deemed effective
         on such date, and Annual Report on Form 10-K for the year ended
         December 31, 1993.

(3)      Incorporated by reference from the Company's Annual Report on Form 10-K
         for the year ended December 31,1996.

(4)      Incorporated by reference from Amendment No. 1 to the Company's Annual
         Report on Form 10-K for the year ended December 31,1996. Portions of
         the agreements are omitted pursuant to a request for confidential
         treatment granted by the Commission.

(5)      Incorporated by reference from Registration Statement (File Number
         33-37113) as filed with the SEC on October 3, 1997.

(6)      Incorporated by reference from Form 8-K filed with the Commission on
         August 29, 1997. Portions of the agreement are omitted pursuant to a
         request for confidential treatment granted by the Commission.

(7)      Portions of the agreement are omitted pursuant to a confidential
         treatment request made to the commission on March 29, 1999.

(8)      Incorporated by reference from Registration Statement (File Number
         333-72053) as filed with the SEC on February 9, 1999.



                                       21
<PAGE>   23



                                   SIGNATURES



         Pursuant to the requirements of Section 13 or 15(d) 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.

Date: March 26, 1999                  By: /s/ Robert J. Rutland
      ------------------                  -------------------------------------
                                      Robert J. Rutland, Chairman and Chief
                                      Executive Officer



Date: March 26, 1999                  By: /s/ A. Mitchell Poole, Jr.
      ------------------                  -------------------------------------
                                      A. Mitchell Poole, Jr., President, Chief
                                      Operating Officer and Assistant 
                                      Secretary



Date: March 26, 1999                  By: /s/ Daniel H. Popky
      ------------------                  -------------------------------------
                                      Daniel H. Popky, Senior Vice President
                                      and Chief Financial Officer (Principal
                                      Financial and Accounting Officer)




                                       22
<PAGE>   24


                                POWER OF ATTORNEY

        KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Robert J. Rutland and A. Mitchell Poole,
Jr., jointly and severally, his attorneys-in-fact, each with the power of
substitution, for him in any and all capacities to sign any amendments to this
Report on Form 10-K, and to file the same, with exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.


<TABLE>
<CAPTION>
        Signature                                              Title                                      Date
        ---------                                              -----                                      ----
<S>                                                  <C>                                             <C>
/s/ Robert J. Rutland                                Chairman of the Board of Directors and          March 26, 1999
---------------------------------------------        Chief Executive Officer                         --------------
Robert J. Rutland

/s/ Guy W. Rutland, III                              Chairman Emeritus and Director                  March 26, 1999
---------------------------------------------                                                        --------------
Guy W. Rutland, III

/s/ A. Mitchell Poole, Jr.                           President, Chief Operating Officer and          March 26, 1999
---------------------------------------------        Director                                        --------------
A. Mitchell Poole, Jr.

/s/ Bernard O. De Wulf                               Vice Chairman, Executive Vice                   March 26, 1999
---------------------------------------------        President, and Director                         --------------
Bernard O. De Wulf

/s/ Berner F. Wilson, Jr.                            Vice Chairman and Director                      March 26, 1999
---------------------------------------------                                                        --------------
Berner F. Wilson, Jr.

/s/ Guy W. Rutland, IV                               Vice President and Director                     March 26, 1999
---------------------------------------------                                                        --------------
Guy W. Rutland, IV

/s/ Joseph W. Collier                                Director, President - Allied Automotive         March 26, 1999
---------------------------------------------        Group                                           --------------
Joseph W. Collier

/s/ Randall E. West                                  Director, President - Axis Group                March 26, 1999
---------------------------------------------                                                        --------------
Randall E. West

/s/ David G. Bannister                               Director                                        March 26, 1999
---------------------------------------------                                                        --------------
David G. Bannister

/s/ Robert R. Woodson                                Director                                        March 26, 1999
---------------------------------------------                                                        --------------
Robert R. Woodson

/s/ William P. Benton                                Director                                        March 26, 1999
---------------------------------------------                                                        --------------
William P. Benton
</TABLE>



                                       23
<PAGE>   25


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS




To the Stockholders of
Allied Holdings, Inc.:


We have audited the accompanying consolidated balance sheets of ALLIED HOLDINGS,
INC. (a Georgia corporation) AND SUBSIDIARIES as of December 31, 1998 and 1997
and the related consolidated statements of operations, changes in stockholders'
equity, and cash flows for each of the three years in the period ended December
31, 1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Allied Holdings, Inc. and
subsidiaries as of December 31, 1998 and 1997 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998 in conformity with generally accepted accounting principles.


ARTHUR ANDERSEN LLP

/s/ ARTHUR ANDERSEN LLP



Atlanta, Georgia
February 8, 1999



                                      F-1
<PAGE>   26


                     ALLIED HOLDINGS, INC. AND SUBSIDIARIES


                           CONSOLIDATED BALANCE SHEETS

                           DECEMBER 31, 1998 AND 1997

                                 (IN THOUSANDS)




                                     ASSETS

<TABLE>
<CAPTION>
                                                                                 1998            1997
                                                                              ---------       ---------
<S>                                                                           <C>             <C>
CURRENT ASSETS:
   Cash and cash equivalents                                                  $  21,977       $  10,530
   Short-term investments                                                        23,323          19,540
   Receivables, net of allowance for doubtful accounts of
      $1,545 and $2,078 in 1998 and 1997, respectively                          103,968          74,881
   Inventories                                                                    6,788           5,391
   Deferred tax assets                                                           20,773          17,812
   Prepayments and other current assets                                          18,930          21,519
                                                                              ---------       ---------
            Total current assets                                                195,759         149,673
                                                                              ---------       ---------
PROPERTY AND EQUIPMENT, NET                                                     297,530         286,214
                                                                              ---------       ---------
OTHER ASSETS:
   Goodwill, net                                                                 94,577          99,310
   Notes receivable due from related parties                                          0             573
   Other                                                                         33,761          23,169
                                                                              ---------       ---------
            Total other assets                                                  128,338         123,052
                                                                              ---------       ---------
            Total assets                                                      $ 621,627       $ 558,939
                                                                              =========       =========


                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
   Current maturities of long-term debt                                       $   2,746       $   2,980
   Trade accounts payable                                                        42,196          36,263
   Accrued liabilities                                                          100,788         118,436
                                                                              ---------       ---------
            Total current liabilities                                           145,730         157,679
                                                                              ---------       ---------
LONG-TERM DEBT, LESS CURRENT MATURITIES                                         291,096         228,003
                                                                              ---------       ---------
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS                                      11,165          11,355
                                                                              ---------       ---------
DEFERRED INCOME TAXES                                                            39,953          35,062
                                                                              ---------       ---------
OTHER LONG-TERM LIABILITIES                                                      70,830          69,512
                                                                              ---------       ---------
COMMITMENTS AND CONTINGENCIES (NOTES 5, 7, AND 8)

STOCKHOLDERS' EQUITY:
   Common stock, no par value; 20,000 shares authorized, 7,878 and 7,819
      shares outstanding at December 31, 1998 and 1997, respectively                  0               0
   Additional paid-in capital                                                    44,854          43,758
   Retained earnings                                                             25,354          16,877
   Accumulated other comprehensive income, net of tax                            (6,115)         (2,826)
   Unearned compensation                                                         (1,240)           (481)
                                                                              ---------       ---------
            Total stockholders' equity                                           62,853          57,328
                                                                              ---------       ---------
            Total liabilities and stockholders' equity                        $ 621,627       $ 558,939
                                                                              =========       =========
</TABLE>



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



                                      F-2
<PAGE>   27


                     ALLIED HOLDINGS, INC. AND SUBSIDIARIES


                      CONSOLIDATED STATEMENTS OF OPERATIONS

              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996

                      (IN THOUSANDS, EXCEPT PER SHARE DATA)



<TABLE>
<CAPTION>
                                                                   1998            1997            1996
                                                                ----------        --------        --------
<S>                                                             <C>               <C>             <C>
REVENUES                                                        $1,026,799        $581,530        $392,547
                                                                ----------        --------        --------
OPERATING EXPENSES:
   Salaries, wages, and fringe benefits                            547,780         302,539         204,838
   Operating supplies and expenses                                 169,498          96,206          62,880
   Purchased transportation                                        109,884          59,925          34,533
   Insurance and claims                                             40,339          22,737          16,849
   Operating taxes and licenses                                     40,779          23,028          16,122
   Depreciation and amortization                                    53,327          33,340          26,425
   Rent expense                                                     10,072           5,720           4,975
   Communications and utilities                                      9,341           4,530           3,111
   Other operating expenses                                          7,899           6,812           4,219
   Acquisition related realignment                                       0           8,914               0
                                                                ----------        --------        --------
            Total operating expenses                               988,919         563,751         373,952
                                                                ----------        --------        --------
            Operating income                                        37,880          17,779          18,595
                                                                ----------        --------        --------
OTHER INCOME (EXPENSE):
   Interest expense                                                (26,146)        (14,095)        (10,720)
   Interest income                                                   3,270             868             603
                                                                ----------        --------        --------
                                                                   (22,876)        (13,227)        (10,117)
                                                                ----------        --------        --------
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM                   15,004           4,552           8,478


INCOME TAX PROVISION                                                (6,527)         (2,150)         (3,557)
                                                                ----------        --------        --------
INCOME BEFORE EXTRAORDINARY ITEM                                     8,477           2,402           4,921

EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT OF DEBT, NET OF
   INCOME TAX BENEFIT OF $573                                            0               0            (935)
                                                                ----------        --------        --------

NET INCOME                                                      $    8,477        $  2,402        $  3,986
                                                                ==========        ========        ========

PER COMMON SHARE:
   Basic:
      Income before extraordinary item                          $     1.09        $   0.31        $   0.64
      Extraordinary loss on early extinguishment of debt              0.00            0.00           (0.12)
                                                                ----------        --------        --------

            Net income per common share--basic                  $     1.09        $   0.31        $   0.52
                                                                ==========        ========        ========

   Diluted:
      Income before extraordinary item                          $     1.08        $   0.31        $   0.64
      Extraordinary loss on early extinguishment of debt              0.00            0.00           (0.12)
                                                                ----------        --------        --------

            Net income per common share--diluted                $     1.08        $   0.31        $   0.52
                                                                ==========        ========        ========


WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
   Basic                                                             7,747           7,728           7,725
                                                                ==========        ========        ========

   Diluted                                                           7,846           7,810           7,725
                                                                ==========        ========        ========
</TABLE>


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


                                      F-3
<PAGE>   28


                     ALLIED HOLDINGS, INC. AND SUBSIDIARIES


           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996

                                 (IN THOUSANDS)



<TABLE>
<CAPTION>
                                                                                                 ACCUMULATED
                                                             COMMON STOCK   ADDITIONAL               OTHER
                                               COMPREHENSIVE -------------   PAID-IN   RETAINED  COMPREHENSIVE    UNEARNED
                                                   INCOME    SHARES AMOUNT   CAPITAL   EARNINGS      INCOME     COMPENSATION  TOTAL
                                                -----------  ------ ------   -------   --------  -------------  ------------  -----
<S>                                            <C>           <C>    <C>    <C>         <C>      <C>            <C>          <C>
BALANCE, DECEMBER 31, 1995                                   7,725    $0   $ 42,977    $10,489    $  (444)      $     0     $53,022

   Net income                                      $ 3,986       0     0          0      3,986          0             0       3,986
   Other comprehensive income--foreign
      currency translation adjustment, net of
      income taxes of $181                            (299)      0     0          0          0       (299)            0        (299)
                                                ----------

   Comprehensive income                            $ 3,687
                                                ==========
   Restricted stock                                             85     0        680          0          0          (680)          0
                                                             -----  ----   --------    -------   --------       -------     -------
BALANCE, DECEMBER 31, 1996                                   7,810     0     43,657     14,475       (743)         (680)     56,709

   Net income                                      $ 2,402       0     0          0      2,402          0             0       2,402
   Other comprehensive income--foreign
      currency translation adjustment, net of
      income taxes of $1,331                        (2,083)      0     0          0          0     (2,083)            0      (2,083)
                                                ---------- 
   Comprehensive income                            $   319
                                                ========== 
   Nonqualified options exercised                               17     0        163          0          0             0         163
   Restricted stock, net                                        (8)    0        (62)         0          0           199         137
                                                             -----  ----   --------    -------   --------       -------     -------
BALANCE, DECEMBER 31, 1997                                   7,819     0     43,758     16,877     (2,826)         (481)     57,328

   Net income                                      $ 8,477       0     0          0      8,477          0             0       8,477
   Other comprehensive income--foreign
      currency translation adjustment, net of
      income taxes of $2,089                        (3,289)      0     0          0          0     (3,289)            0      (3,289)
                                                ---------- 
   Comprehensive income                            $ 5,188
                                                ========== 
   Issuance of stock                                             1     0         22          0          0             0          22
   Nonqualified options exercised                                3     0         24          0          0             0          24
   Restricted stock, net                                        55     0      1,050          0          0          (759)        291
BALANCE, DECEMBER 31, 1998                                   7,878    $0   $ 44,854    $25,354    $(6,115)      $(1,240)    $62,853
                                                             =====  ====   ========    =======   ========       =======     =======
</TABLE>


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


                                      F-4
<PAGE>   29


                     ALLIED HOLDINGS, INC. AND SUBSIDIARIES


                      CONSOLIDATED STATEMENTS OF CASH FLOWS

              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                        1998            1997            1996
                                                                      --------        --------        --------
<S>                                                                   <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                                         $  8,477        $  2,402        $  3,986
                                                                      --------        --------        --------
   Adjustments to reconcile net income to net cash provided by
      operating activities:
         Depreciation and amortization                                  53,327          33,340          26,425
         (Gain) loss on sale of property and equipment                     (32)            141             (13)
         Acquisition related realignment                                     0           8,914               0
         Extraordinary loss on early extinguishment of debt, net             0               0             935
         Equity in loss of joint venture                                   470               0               0
         Compensation expense related to restricted stock grants           291              75               0
         Deferred income taxes                                           1,852           2,990           1,921
         Change in operating assets and liabilities, excluding
            effect of businesses acquired:
               Receivables, net                                        (30,321)         (4,314)             (9)
               Inventories                                              (1,505)            382              82
               Prepayments and other current assets                      2,384           1,216             452
               Trade accounts payable                                    6,366           2,296           4,565
               Accrued liabilities                                     (15,751)            474           1,277
                                                                      --------        --------        --------
                 Total adjustments                                      17,081          45,514          35,635
                                                                      --------        --------        --------
                 Net cash provided by operating activities              25,558          47,916          39,621
                                                                      --------        --------        --------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of property and equipment                                 (61,868)        (27,243)        (25,972)
   Proceeds from sale of property and equipment                            606             953           3,447
   Purchase of businesses, net of cash acquired                           (942)       (123,492)              0
   Investment in joint venture                                         (11,920)              0               0
   Increase in short-term investments                                   (3,783)        (11,020)         (8,520)
   Increase in the cash surrender value of life insurance               (1,373)         (2,451)         (1,981)
                                                                      --------        --------        --------
                 Net cash used in investing activities                 (79,280)       (163,253)        (33,026)
                                                                      --------        --------        --------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds (repayments) of long-term debt, net                         62,859         133,052         (15,034)
   Proceeds from exercise of stock options                                  24             163               0
   Other, net                                                            2,613          (9,277)           (655)
                                                                      --------        --------        --------
                 Net cash provided by (used in) financing
                    activities                                          65,496         123,938         (15,689)
                                                                      --------        --------        --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS              (327)            (44)            (80)
                                                                      --------        --------        --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                    11,447           8,557          (9,174)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                          10,530           1,973          11,147
                                                                      --------        --------        --------
CASH AND CASH EQUIVALENTS AT END OF YEAR                              $ 21,977        $ 10,530        $  1,973
                                                                      ========        ========        ========
</TABLE>


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



                                      F-5
<PAGE>   30


                     ALLIED HOLDINGS, INC. AND SUBSIDIARIES


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        DECEMBER 31, 1998, 1997, AND 1996



1.       ORGANIZATION AND OPERATIONS

         Allied Holdings, Inc. (the "Company"), a Georgia corporation, is a
         holding company which operates through its wholly owned subsidiaries.
         The principal operating divisions of the Company are Allied Automotive
         Group, Inc. ("Allied Automotive Group") and Axis Group, Inc. ("Axis
         Group"). Allied Automotive Group, through its subsidiaries, 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, through its subsidiaries,
         provides distribution and logistics services for the automotive
         industry.

         The Company acquired Ryder Automotive Carrier Services, Inc. and RC
         Management Corp. (collectively "Ryder Automotive Carrier Group") on
         September 30, 1997 (Note 2), resulting in the Company becoming the
         largest motor carrier of automobiles and light trucks in North America.

         The Company has four additional operating divisions: Allied Industries,
         Inc. ("Allied Industries"), Haul Insurance Limited ("Haul"), Link
         Information Systems, Inc. ("Link"), and Haul Risk Management, Inc.
         ("Risk Management"), which provide services to Allied Automotive Group,
         Axis Group, and the other subsidiaries of the Company. Allied
         Industries provides administrative, financial, and other related
         services. During December 1995, the Company incorporated Haul as a
         captive insurance company. Haul was formed for the purpose of insuring
         general liability, automobile liability, and workers' compensation for
         the Company. Link, which was incorporated in 1996, provides information
         systems hardware, software, and support. Risk Management was
         incorporated in 1997 and offers a range of risk management and claims
         administration services.


2.       ACQUISITION OF RYDER AUTOMOTIVE CARRIER GROUP

         On September 30, 1997, the Company completed the acquisition of Ryder
         Automotive Carrier Group from Ryder System, Inc. for approximately
         $114.5 million in cash, subject to post-closing adjustments. The
         acquisition has been accounted for under the purchase method, and
         accordingly, the operating results of Ryder Automotive Carrier Group
         have been included in the accompanying financial statements since the
         date of the acquisition.

         In conjunction with the acquisition, the Company issued $150,000,000 of
         8 5/8% senior notes (the "Senior Notes") in order to finance the
         acquisition, pay related fees and expenses, and reduce borrowings (Note
         6). Upon completion of the acquisition, the Company recorded a pretax
         charge of approximately $8.9 million (the "Acquisition Charge") to
         write down Company rigs and terminal facilities that will be idled or
         closed as a result of the acquisition. During 1998 and 1997, the
         Company paid approximately $562,000 and $282,000 against the
         Acquisition Charge, respectively, related to employee severance and in
         1997 charged



                                      F-6
<PAGE>   31


         approximately $7,412,000 to the Acquisition Charge to write-down rigs
         and terminal facilities that were idled or closed as a result of the
         acquisition.

         The following unaudited pro forma results of operations for the years
         ended December 31, 1997 and 1996 assume that the acquisition of Ryder
         Automotive Carrier Group and the Senior Notes offering had occurred on
         January 1, 1996. The pro forma results are not necessarily indicative
         of what actually would have occurred if the acquisition had been
         consummated on January 1, 1996, nor are they intended to be a
         projection of future results from combined operations (in thousands,
         except per share data).


<TABLE>
<CAPTION>
                                                             1997           1996
                                                          ----------      --------
         <S>                                              <C>             <C>
         Revenues                                         $1,044,875      $960,661
         Operating income                                     43,904        31,748
         Income before extraordinary item                     15,515         5,674
         Net income                                           15,515         4,739
         Income per share before extraordinary item:
             Basic                                        $     2.01      $   0.73
             Diluted                                      $     1.99      $   0.73
         Net income per share:
             Basic                                        $     2.01      $   0.61
             Diluted                                      $     1.99      $   0.61
         Weighted average common shares outstanding            7,728         7,725
</TABLE>


3.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         PRINCIPLES OF CONSOLIDATION

         The consolidated financial statements include the accounts of the
         Company and its subsidiaries. All significant intercompany transactions
         and accounts have been eliminated.

         FOREIGN CURRENCY TRANSLATION

         The assets and liabilities of the Company's foreign subsidiaries are
         translated into U.S. dollars using current exchange rates in effect at
         the balance sheet date, and revenues and expenses are translated at
         average monthly exchange rates. The resulting translation adjustments
         are recorded as accumulated other comprehensive income in the
         accompanying consolidated statements of changes in stockholders'
         equity, net of related income taxes.

         REVENUE RECOGNITION

         Substantially all revenue is derived from transporting automobiles and
         light trucks from manufacturing plants, ports, auctions, and railway
         distribution points to automobile dealerships. Revenue is recorded by
         the Company when the vehicles are delivered to the dealerships.

         CASH AND CASH EQUIVALENTS

         The Company considers all highly liquid investments with an original
         maturity of three months or less to be cash equivalents.



                                      F-7
<PAGE>   32


         INVENTORIES

         Inventories consist primarily of tires, parts, materials, and supplies
         for servicing the Company's tractors and trailers. Inventories are
         recorded at the lower of cost (on a first-in, first-out basis) or
         market.

         PREPAYMENTS AND OTHER CURRENT ASSETS

         Prepayments and other current assets consist of the following at
         December 31, 1998 and 1997 (in thousands):

<TABLE>
<CAPTION>
                                               1998         1997
                                             -------      -------
         <S>                                 <C>          <C>
         Tires on tractors and trailers      $13,378      $13,582
         Prepaid insurance                     1,355        3,228
         Other                                 4,197        4,709
                                             $18,930      $21,519
</TABLE>

         TIRES ON TRACTORS AND TRAILERS

         Tires on tractors and trailers are capitalized and amortized to
         operating supplies and expenses on a cents per mile basis.

         PROPERTY AND EQUIPMENT

         Property and equipment are stated at cost. Major property additions,
         replacements, and betterments are capitalized, while maintenance and
         repairs which do not extend the useful lives of these assets are
         expensed currently. Depreciation is provided using the straight-line
         method for financial reporting and accelerated methods for income tax
         purposes. The detail of property and equipment at December 31, 1998 and
         1997 is as follows (in thousands):

<TABLE>
<CAPTION>
                                                               1998          1997        USEFUL LIVES
                                                             --------      --------      -------------
         <S>                                                 <C>           <C>           <C>
         Tractors and trailers                               $367,380      $320,282      4 to 10 years
         Buildings and facilities (including leasehold
             improvements)
                                                               46,322        41,250      4 to 25 years
         Land                                                  17,772        17,888
         Furniture, fixtures, and equipment
                                                               23,677        15,418      3 to 10 years
         Service cars and equipment                             2,309         1,670      3 to 10 years
                                                             --------      --------
                                                              457,460       396,508
         Less accumulated depreciation and amortization       159,930       110,294
                                                             --------      --------
                                                             $297,530      $286,214
                                                             ========      ========
</TABLE>



                                      F-8
<PAGE>   33


         SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

<TABLE>
<CAPTION>
                                                                           1998            1997          1996
                                                                          -------       ---------       ------
         <S>                                                              <C>           <C>             <C>
         Cash paid during the year for interest                           $24,540       $   9,189       $8,514

         Cash paid during the year for income taxes, net of refunds           378             278         (280)

         Liabilities assumed in connection with businesses acquired*            0        (170,745)           0
</TABLE>

        *Includes trade accounts payable, accrued liabilities, postretirement
         benefits other than pensions, deferred income taxes, and other
         long-term liabilities.

         GOODWILL

         The acquisition of Ryder Automotive Carrier Group resulted in goodwill
         of approximately $68,079,000. Goodwill related to the acquisition is
         being amortized on a straight-line basis over 40 years. Other goodwill
         is being amortized on a straight-line basis over 20 to 30 years.
         Amortization (included in depreciation and amortization expense) for
         the years ended December 31, 1998, 1997, and 1996 amounted to
         approximately $3,235,000, $2,086,000, and $1,541,000, respectively.
         Accumulated amortization was approximately $7,164,000 and $7,709,000 at
         December 31, 1998 and 1997, respectively. The Company periodically
         evaluates the realizability of goodwill based on expectations of
         nondiscounted cash flows and operating income for each subsidiary
         having a material goodwill balance. In the opinion of management, no
         impairment of goodwill exists at December 31, 1998.

         CASH SURRENDER VALUE OF LIFE INSURANCE

         The Company maintains life insurance policies for certain employees of
         the Company. Under the terms of the policies, the Company will receive,
         upon the death of the insured, the lesser of aggregate premiums paid or
         the face amount of the policy. Any excess proceeds over premiums paid
         are remitted to the employee's beneficiary. The Company records the
         increase in cash surrender value each year as a reduction of premium
         expense. The Company has recorded approximately $7,950,000 and
         $6,577,000 of cash surrender value as of December 31, 1998 and 1997,
         respectively, included in other assets on the accompanying balance
         sheets.

         USE OF ESTIMATES

         The preparation of financial statements in conformity with generally
         accepted accounting principles requires management to make estimates
         and assumptions that affect the reported amounts of assets and
         liabilities and disclosure of contingent assets and liabilities at the
         date of the financial statements. Estimates also affect the reported
         amounts of revenues and expenses during the reporting period. Actual
         results could differ from those estimates.

         FAIR VALUE OF FINANCIAL INSTRUMENTS

         Statement of Financial Accounting Standards ("SFAS") No. 107,
         "Disclosures About Fair Value of Financial Instruments," requires
         disclosure of the following information about the fair value of certain
         financial instruments for which it is practicable to estimate that
         value. For purposes of the following disclosure, the fair value of a
         financial instrument is the amount at which the instrument could be
         exchanged in a



                                      F-9
<PAGE>   34


         current transaction between willing parties, other than in a forced
         sale or liquidation.

         The amounts disclosed represent management's best estimates of fair
         value. In accordance with SFAS No. 107, the Company has excluded
         certain financial instruments and all other assets and liabilities from
         its disclosure. Accordingly, the aggregate fair value amounts presented
         are not intended to, and do not, represent the underlying fair value of
         the Company.

         The methods and assumptions used to estimate fair value are as follows:

                  CASH AND CASH EQUIVALENTS

                  The carrying amount approximates fair value due to the
                  relatively short period to maturity of these instruments.

                  SHORT-TERM INVESTMENTS

                  The Company's short-term investments are comprised of debt
                  securities, all classified as trading securities, which are
                  carried at their fair value based on the quoted market prices
                  of those investments. Accordingly, net realized and unrealized
                  gains and losses on trading securities are included in net
                  earnings.

                  LONG-TERM DEBT

                  The carrying amount approximates fair value based on the
                  borrowing rates currently available to the Company for
                  borrowings with similar terms and average maturities.

                  FUEL HEDGING CONTRACTS

                  The Company has entered into futures contracts to manage a
                  portion of the Company's exposure to fuel price fluctuations.
                  Gains and losses resulting from fuel hedging transactions are
                  recognized when the underlying fuel being hedged is used. The
                  fair value of fuel hedging contracts is estimated based on
                  quoted market prices.

         The financial instruments are generally executed with major financial
         institutions which expose the Company to acceptable levels of market
         and credit risks and may at times be concentrated with certain
         counterparties or groups of counterparties. The creditworthiness of
         counterparties is subject to continuing review and full performance is
         anticipated.

         The asset and (liability) amounts recorded in the balance sheet and the
         estimated fair values of financial instruments at December 31, 1998
         consisted of the following (in thousands):

<TABLE>
<CAPTION>
                                                                         CARRYING           FAIR
                                                                          AMOUNT            VALUE
                                                                         ---------        ---------
         <S>                                                             <C>              <C>
         Cash and cash equivalents                                       $  21,977        $  21,977
         Short-term investments                                             23,323           23,323
         Long-term debt                                                   (291,096)        (291,096)
         Fuel hedging contracts                                                  0           (1,572)
</TABLE>



                                      F-10
<PAGE>   35


      ACCRUED LIABILITIES

      Accrued liabilities consist of the following at December 31, 1998 and 1997
(in thousands):

<TABLE>
<CAPTION>
                                              1998          1997
                                            --------      --------
         <S>                                <C>           <C>
         Wages and benefits                 $ 46,615      $ 44,676
         Claims and insurance reserves        23,158        28,476
         Other                                31,015        45,284
                                            --------      --------
                                            $100,788      $118,436
                                            ========      ========
</TABLE>

         The long-term portion of claims and insurance reserves is included in
         the balance sheet as other long-term liabilities and amounts to
         approximately $69,475,000 and $66,795,000 at December 31, 1998 and
         1997, respectively.

         CLAIMS AND INSURANCE RESERVES

         In the United States, the Company retains liability up to $650,000 for
         each workers' compensation claim and $500,000 for each claim for
         automobile and general liability, including personal injury and
         property damage claims. In addition to the $500,000 per occurrence
         deductible for automobile liability, there is a $1,500,000 aggregate
         deductible for those claims which exceed the $500,000 per occurrence
         deductible, subject to a $1,000,000 per claim limit. In addition, the
         Company retains liability up to $250,000 for each cargo damage claim.
         In Canada, the Company retains liability up to CDN $100,000 for each
         claim for personal injury, property damage, and cargo damage.

         The reserves for self-insured workers' compensation, automobile, and
         general liability losses are based on actuarial estimates that are
         discounted at 6% to their present value based on the Company's
         historical claims experience adjusted for current industry trends. The
         undiscounted amount of the reserves for claims and insurance at
         December 31, 1998 and 1997 was approximately $97,114,000 and
         $97,697,000, respectively. The claims and insurance reserves are
         adjusted periodically as such claims mature, to reflect changes in
         actuarial estimates based on actual experience.

         The estimated costs of all known and potential losses are accrued by
         the Company. In the opinion of management, adequate provision has been
         made for all incurred claims.

         COMPREHENSIVE INCOME

         In 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive
         Income", which requires companies to report all changes in equity
         during a period, except those resulting from investment by owners and
         distribution to owners, in a financial statement for the period in
         which they are recognized. The Company has chosen to disclose
         comprehensive income, which encompasses net income and foreign currency
         translation adjustment, net of income taxes, in the accompanying
         consolidated statements of changes in stockholders' equity. Prior years
         have been restated to conform to the statement requirements.

         INCOME TAXES

         The Company follows the practice of providing for income taxes based on
         SFAS No. 109, "Accounting for Income Taxes." SFAS No. 109 requires




                                      F-11
<PAGE>   36


         recognition of deferred tax liabilities and assets for the expected
         future tax consequences of events that have been included in the
         financial statements or tax returns (Note 4).

         EQUITY INVESTMENT

         In February 1998, Axis Group completed the formation of a joint venture
         in Brazil. Axis Group initially invested $10,089,000 in the venture.
         The Company is accounting for the investment under the equity method of
         accounting with its share of the venture's earnings or loss included in
         other operating expenses in the consolidated statements of operations.
         The related equity investment is included in other assets in the
         accompanying consolidated balance sheet. The Company's equity in the
         joint venture's earnings/loss was not material in 1998.

         EARNINGS PER SHARE

         In February 1997, the Financial Accounting Standards Board issued SFAS
         No. 128, "Earnings Per Share." This statement requires presentation of
         basic and diluted earnings per share. Basic earnings per share are
         calculated by dividing net income available to common stockholders by
         the weighted average number of common shares outstanding for the years
         presented. Diluted earnings per share reflect the potential dilution
         that could occur if securities and other contracts to issue common
         stock were exercised or converted into common stock or resulted in the
         issuance of common stock that then shared in the earnings of the
         entity. Basic and diluted earnings per share are not materially
         different for the years presented. A reconciliation of the number of
         weighted average shares used in calculating basic and diluted earnings
         per share is as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                      1998       1997       1996
                                                                                      -----      -----      -----
         <S>                                                                          <C>        <C>        <C>
         Weighted average number of common shares outstanding-basic earnings per
             share                                                                    7,747      7,728      7,725
         Effect of potentially dilutive shares outstanding                               99         82          0
                                                                                      -----      -----      -----
         Weighted average number of common shares outstanding-diluted earnings
             per share                                                                7,846      7,810      7,725
                                                                                      =====      =====      =====
</TABLE>

         NEW ACCOUNTING STANDARDS

         In June 1998, the Financial Accounting Standards Board issued SFAS No.
         133, "Accounting for Derivative Instruments and Hedging Activities".
         The Statement establishes accounting and reporting standards requiring
         that every derivative instrument (including certain derivative
         instruments embedded in other contracts) be recorded in the balance
         sheet as either an asset or liability measured at its fair value. SFAS
         No. 133 requires that changes in the derivative's fair value be
         recognized currently in earnings unless specific hedge accounting
         criteria are met. Special accounting for qualifying hedges allows a
         derivative's gains and losses to offset related results on the hedged
         item in the income statement, and requires that a company must formally
         document, designate, and assess the effectiveness of transactions that
         receive hedge accounting.

         SFAS No. 133 is effective for fiscal quarters beginning after June 15,
         1999. The Company has not yet quantified the impact of adopting SFAS
         No. 133 on the consolidated financial statements and has not determined
         the timing of or method of adoption of SFAS No. 133. However, this




                                      F-12
<PAGE>   37


         Statement could increase volatility in earnings and other comprehensive
         income.

         RECLASSIFICATION

         Certain amounts in the December 31, 1997 and 1996 financial statements
         have been reclassified to conform to the current year presentation.


4.       INCOME TAXES

         For all periods presented, the accompanying financial statements
         reflect provisions for income taxes computed in accordance with the
         requirements of SFAS No. 109.

         The following summarizes the components of the income tax provision (in
         thousands):

<TABLE>
<CAPTION>
                                                  1998          1997          1996
                                                -------       -------       -------
         <S>                                    <C>           <C>           <C>
         Current:
             Federal                            $   (38)      $  (874)      $   369
             State                                  795           110           269
             Foreign                              1,316           340           932

         Deferred:
             Federal                              3,319         3,148         4,365
             State                                  215           415           646
             Foreign                                920          (989)       (3,024)
                                                -------       -------       -------

                Total income tax provision      $ 6,527       $ 2,150       $ 3,557
                                                =======       =======       =======
</TABLE>

         The provision for income taxes differs from the amounts computed by
         applying federal statutory rates due to the following (in thousands):

<TABLE>
<CAPTION>
                                                                           1998          1997          1996
                                                                          -------       -------       -------
         <S>                                                              <C>           <C>           <C>
         Provision computed at the federal statutory rate                 $ 5,101       $ 1,548       $ 2,883
         State income taxes, net of federal income tax benefit                667           346           604
         Insurance premiums, net of recovery                                    0           258          (115)
         Amortization of goodwill                                             405           274           146
         Earnings in jurisdictions taxed at rates different from the
             statutory U.S. federal rate                                     (121)         (166)         (494)
         Other, net                                                           475          (110)          533
                                                                          -------       -------       -------
                       Total income tax provision                         $ 6,527       $ 2,150       $ 3,557
                                                                          =======       =======       =======
</TABLE>

         The tax effect of significant temporary differences representing
         deferred tax assets and liabilities at December 31, 1998 and 1997 is as
         follows (in thousands):



                                      F-13
<PAGE>   38


<TABLE>
<CAPTION>
                                                               1998           1997
                                                             --------       --------
         <S>                                                 <C>            <C>
         Deferred tax assets:
             Claims and insurance expense                    $ 23,316       $ 28,510
             Accrued compensation expense                       6,290          6,016
             Postretirement benefits                            4,567          4,581
             Other liabilities not currently deductible         3,934         11,687
             Tax carryforwards                                  9,625         10,736
             Other, net                                         7,136          5,379
                                                             --------       --------
                       Total deferred tax assets               54,868         66,909
                                                             --------       --------
         Deferred tax liabilities:
            Prepaids currently deductible                      (2,469)        (5,707)
            Depreciation and amortization                     (67,143)       (68,328)
            Postemployment benefits                              (299)        (5,665)
            Other, net                                         (4,137)        (4,459)
                                                             --------       --------
                       Total deferred tax liabilities         (74,048)       (84,159)
                                                             --------       --------
         Net deferred tax liabilities                        $(19,180)      $(17,250)
                                                             ========       ========
</TABLE>

         The Company has certain tax carryforwards available to offset future
         income taxes consisting of net operating losses that expire from 2004
         to 2019, foreign tax credits that expire from 2001 to 2004, charitable
         contributions that expire from 2002 to 2003, and alternative minimum
         tax credits that have no expiration dates.

         Management believes that a valuation allowance is not considered
         necessary based on the Company's earnings history, the projections for
         future taxable income, and other relevant considerations over the
         periods during which the deferred tax assets are deductible.

         The 1996 consolidated federal income tax return of the Company is
         presently under examination by the Internal Revenue Service. The
         ultimate result of the examination cannot be predicted at this time. In
         the opinion of management, any additional tax liability resulting from
         the examination would not have a material adverse impact on the
         consolidated financial position or operating results of the Company.


5.       LEASE COMMITMENTS

         RELATED PARTIES

         The Company leased office space through December 1997 from a related
         party under a lease which was to expire in 2003. On December 31, 1997,
         this space was sold to an unrelated party, and a new and revised
         agreement was signed effective January 1, 1998 which extends the lease
         term through 2007. Rental expenses under these noncancelable leases
         amounted to approximately $1,456,000 in 1997 and $1,030,000 in 1996. In
         the opinion of management, the terms of these leases were as favorable
         as those which could be obtained from unrelated lessors.

         UNRELATED PARTIES

         The Company leases equipment, office space, and certain terminal
         facilities from unrelated parties under noncancelable operating lease
         agreements which expire in various years through 2007. Rental expenses




                                      F-14
<PAGE>   39

      under these leases amounted to approximately $6,540,000, $4,277,000, and
      $3,245,000 in 1998, 1997, and 1996, respectively.

      The Company also leases certain terminal facilities from unrelated parties
      under cancelable leases (i.e., month-to-month terms). The total rental
      expenses under these leases were approximately $5,187,000, $2,198,000, and
      $2,142,000 for the years ended December 31, 1998, 1997, and 1996,
      respectively.

      Subsequent to December 31, 1998, the Company entered into a sublease
      agreement with a third party for a leased building obtained in connection
      with the Ryder Automotive Carrier acquisition. The Company's commitment
      under the lease expires in 2006. The lease agreement with the third party
      expires in 2004.

      Future minimum rental commitments and related sublease income under all
      noncancelable operating lease agreements, excluding lease agreements that
      expire within one year, are as follows as of December 31, 1998 (in
      thousands):

<TABLE>
<CAPTION>
                                                                                          SUBLEASE
                                                                     COMMITMENTS           INCOME
                                                                     -----------           ------
                       <S>                                           <C>                  <C>
                       1999                                            $ 6,496            $  575
                       2000                                              5,489               858
                       2001                                              4,791               881
                       2002                                              4,987               904
                       2003                                              4,601               927
                       Thereafter                                       11,625               341
                                                                       -------            ------
                                     Total                             $37,989            $4,486
                                                                       =======            ======
</TABLE>


6.       LONG-TERM DEBT

         Long-term debt consisted of the following at December 31, 1998 and 1997
         (in thousands):

<TABLE>
<CAPTION>
                                                           1998            1997
                                                        ---------       ---------
         <S>                                            <C>             <C>
         Revolving credit facility                      $ 100,837       $  35,000
         Senior notes                                     150,000         150,000
         Senior subordinated notes                         40,000          40,000
         Other                                              3,005           5,983
                                                        ---------       ---------
                                                          293,842         230,983
         Less current maturities of long-term debt         (2,746)         (2,980)
                                                        ---------       ---------
                                                        $ 291,096       $ 228,003
                                                        =========       =========
</TABLE>

         In September 1997, the Company issued $150,000,000 of Senior Notes
         through a private placement. Subsequently, the Senior Notes were
         registered with the Securities and Exchange Commission. The Senior
         Notes mature October 1, 2007 and bear interest at 8 5/8% annually.
         Interest on the Senior Notes is payable semi-annually in arrears on
         April 1 and October 1 of each year.

         Borrowings under the Senior Notes are general unsecured obligations of
         the Company. The Company's obligations under the Senior Notes are
         guaranteed by substantially all of the subsidiaries of the Company (the
         "Guarantors"). Separate financial statements of the Guarantors are not




                                      F-15
<PAGE>   40


         provided herein as (i) the Guarantors are jointly and severally liable
         for the Company's obligations under the Senior 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 Guarantors to make distributions to the
         Company.

         The Senior Notes set forth a number of negative covenants binding on
         the Company. The covenants limit the Company's ability to, among other
         things, purchase or redeem stock, make dividend or other distributions,
         make investments, and incur or repay debt (with the exception of
         payment of interest or principal at stated maturity).

         Concurrent with the issuance of the Senior Notes, the Company closed on
         a revolving credit facility (the "Revolving Credit Facility"). The
         Revolving Credit Facility allows the Company to borrow under a
         revolving line of credit and to issue letters of credit up to the
         lesser of $230,000,000 or a borrowing base amount, as defined in the
         Revolving Credit Facility. Annual commitment fees are due on the
         undrawn portion of the commitment. Amounts outstanding under the
         Revolving Credit Facility mature in 2002. The interest rate for the
         Revolving Credit Facility is, at the Company's option, either (i) the
         bank's base rate, as defined, or (ii) the bank's Eurodollar rate, as
         defined, as determined at the date of each borrowing, plus an
         applicable margin.

         Borrowings under the Revolving Credit Facility are secured by a first
         priority security interest on assets (other than real estate) of the
         Company and certain of its subsidiaries, including a pledge of stock of
         certain subsidiaries. In addition, certain subsidiaries of the Company
         jointly and severally guarantee the obligations of the Company under
         the Revolving Credit Facility.

         The Revolving Credit Facility sets forth a number of affirmative,
         negative, and financial covenants binding on the Company. The negative
         covenants limit the ability of the Company to, among other things,
         incur debt, incur liens, make investments, make dividend or other
         distributions, or enter into any merger or other consolidation
         transaction. The financial covenants include the maintenance of a
         minimum consolidated net worth, compliance with a leverage ratio and a
         coverage ratio, and limitations on capital expenditures.

         In February 1996, the Company issued $40,000,000 of senior subordinated
         notes ("Senior Subordinated Notes") through a private placement. The
         Senior Subordinated Notes mature February 1, 2003 and bear interest at
         12% annually. Proceeds from the Senior Subordinated Notes were used to
         reduce outstanding company borrowings.

         Future maturities of long-term debt are as follows at December 31, 1998
         (in thousands):

<TABLE>
                       <S>                                                             <C>
                       1999                                                            $  2,746
                       2000                                                                 159
                       2001                                                                 100
                       2002                                                             100,837
                       2003                                                              40,000
                       Thereafter                                                       150,000
                                                                                       --------
                                                                                       $293,842
                                                                                       ========
</TABLE>



                                      F-16
<PAGE>   41


         At December 31, 1998, the weighted average interest rate on borrowings
         under the Revolving Credit Facility was 7.4%, and approximately
         $4,500,000 was committed under letters of credit. At December 31, 1998,
         the Company had available borrowings under the Revolving Credit
         Facility of approximately $119,000,000.


7.       EMPLOYEE BENEFITS

         PENSION AND POSTRETIREMENT BENEFIT PLANS

         The Company maintains the Allied Defined Benefit Pension Plan, a
         trusteed noncontributory defined benefit pension plan for management
         and office personnel in the United States, and the Pension Plan for
         Employees of Allied Systems (Canada) Company and Associated Companies
         for management and office personnel in Canada (the "Canada Plan,"
         collectively, the "Plans"). Under the Plans, benefits are paid to
         eligible employees upon retirement based primarily on years of service
         and compensation levels at retirement. Contributions to the Plans
         reflect benefits attributed to employees' services to date and services
         expected to be rendered in the future. The Company's funding policy is
         to contribute annually at a rate that is intended to fund future
         service benefits as a level percentage of pay and past service benefits
         over a 30-year period. At December 31, 1998, participation in the
         Canada Plan was frozen.

         The Company also provides certain health care and life insurance
         benefits for eligible employees who retired prior to July 1, 1993 and
         their dependents, except for certain employees participating in the
         1998 Voluntary Early Retirement Plan ("VERP"). Generally, the health
         care plan pays a stated percentage of most medical expenses reduced for
         any deductibles and payments by government programs or other group
         coverage. The life insurance plan pays a lump-sum death benefit based
         on the employee's salary at retirement. These plans are unfunded.
         Employees retiring after July 1, 1993 are not entitled to any
         postretirement medical or life insurance benefits.

         In conjunction with the Ryder Automotive Carrier Group acquisition, the
         Company took over a postretirement benefit plan to provide retired
         employees with certain health care and life insurance benefits.
         Substantially all employees not covered by union-administered medical
         plans and who had retired as of September 30, 1997 are eligible for
         these benefits. Benefits are generally provided to qualified retirees
         under age 65 and eligible dependents. Furthermore, the Company took
         over two defined pension plans for a certain terminal. One of the plans
         benefit provides a monthly benefit based on years of service upon
         retirement. The other plan provides benefits to eligible employees upon
         retirement based primarily on years of service and compensation levels
         at retirement.

         During 1998, the Company adopted SFAS No. 132, "Employers' Disclosures
         about Pension and Other Postretirement Benefits." This statement
         requires additional disclosure information on changes in plan assets
         and benefit obligations. All disclosures related to the Company's
         pension and postretirement benefit plans have been prepared in
         accordance with SFAS No. 132.

         The change in the projected benefit obligation of the defined benefit
         pension plans and the postretirement benefit plans consisted of the
         following during fiscal 1998 and 1997 (in thousands):



                                      F-17
<PAGE>   42


<TABLE>
<CAPTION>
                                                            DEFINED BENEFIT                POSTRETIREMENT
                                                             PENSION PLANS                  BENEFIT PLANS
                                                       -----------------------       -----------------------
                                                         1998           1997           1998           1997
                                                       --------       --------       --------       --------
         <S>                                           <C>            <C>            <C>            <C>
         Change in benefit obligation:
                Benefit obligation at beginning
                   of fiscal year                      $ 31,886       $ 21,439       $ 10,642       $  3,586
                Impact of acquisition                         0          5,189              0          7,894
                Service cost                              2,981          1,219              0              0
                Interest cost                             2,119          1,522            925            330
                Foreign currency translation               (426)          (224)             0              0
                Plan amendments and other                 2,219            668             98             50
                Curtailment loss                          1,092              0            790              0
                Actuarial (gain) loss                    (2,787)         2,761           (433)          (669)
                Benefits paid                            (1,197)          (688)        (1,063)          (549)
                                                       --------       --------       --------       --------
         Benefit obligation at end of fiscal year      $ 35,887       $ 31,886       $ 10,959       $ 10,642
                                                       ========       ========       ========       ========
</TABLE>

         The change in plan assets and funded status of the defined benefit
         pension plans and the postretirement benefit plans consisted of the
         following during fiscal 1998 and 1997 (in thousands):

<TABLE>
<CAPTION>
                                                       DEFINED BENEFIT               POSTRETIREMENT
                                                        PENSION PLANS                 BENEFIT PLANS
                                                  -----------------------       -----------------------
                                                    1998           1997           1998           1997
                                                  --------       --------       --------       --------
<S>                                               <C>            <C>            <C>            <C>
         Change in plan assets:
            Fair value of plan assets at
                beginning of year                 $ 26,673       $ 19,052       $      0       $      0

            Acquisition                                  0          4,130              0              0
            Actual return on plan assets             1,539          3,250              0              0
            Participants' contributions                162            165              0              0
            Foreign currency translation              (382)          (188)             0              0
            Employer contribution                    1,608            952          1,063            549
            Benefits paid                           (1,197)          (688)        (1,063)          (549)
                                                  --------       --------       --------       --------
         Fair value of plan assets at end of
             year                                 $ 28,403       $ 26,673       $      0       $      0
                                                  ========       ========       ========       ========

         Funded status                            $ (7,484)      $ (5,213)      $(10,959)      $(10,642)
         Unrecognized actuarial loss (gain)          4,469          3,385           (390)          (897)
         Unrecognized prior service cost             1,105          2,190              0              0
         Unrecognized transition asset                (218)          (529)             0              0
                                                  --------       --------       --------       --------
         Accrued benefit cost                     $ (2,128)      $   (167)      $(11,349)      $(11,539)
                                                  ========       ========       ========       ========
</TABLE>



                                      F-18
<PAGE>   43



<TABLE>
<CAPTION>
                                                     DEFINED BENEFIT            POSTRETIREMENT
                                                      PENSION PLANS              BENEFIT PLANS
                                                  --------------------        --------------------
                                                   1998          1997          1998          1997
                                                  ------        ------        ------        ------
         <S>                                      <C>           <C>         <C>            <C>
         Amounts recognized in the
             consolidated balance sheets
             consist of:
                Accrued liabilities               $(2,128)      $(167)      $   (184)      $   (184)
                Postretirement benefit other
                    than pension                        0           0        (11,165)       (11,355)
                                                  -------       -----        -------       --------
                                                  $(2,128)      $(167)      $(11,349)      $(11,539)
                                                  =======       =====       ========       ========
</TABLE>

         The following assumptions were used in determining the actuarial
         present value of the projected pension benefit obligation and
         postretirement benefit obligation at December 31, 1998 and 1997:

<TABLE>
<CAPTION>
                                                                        DEFINED BENEFIT           POSTRETIREMENT
                                                                         PENSION PLANS            BENEFIT PLANS
                                                                       ------------------       -----------------
                                                                       1998          1997       1998         1997
                                                                       ----          ----       ----         ----
         <S>                                                           <C>           <C>        <C>          <C>
         Weighted average discount rate                                6.84%         7.30%      7.00%        7.50%
         Weighted average expected long-term rate of return on
             assets                                                    9.29          9.29        N/A          N/A

         Weighted average rate of compensation increase                4.06          4.98        N/A          N/A
</TABLE>


         The net periodic benefit cost recognized for the defined benefit
         pension plans and the postretirement benefit plans includes the
         following components at December 31, 1998 and 1997 (in thousands):

<TABLE>
<CAPTION>
                                                                          DEFINED BENEFIT             POSTRETIREMENT
                                                                           PENSION PLANS               BENEFIT PLANS
                                                                        --------------------       -------------------
                                                                         1998          1997          1998        1997
                                                                        ------        ------       -------      ------
         <S>                                                            <C>           <C>           <C>           <C>
         Components of net periodic benefit cost:
                Service cost:                                           $ 2,981       $ 1,219       $     0       $   0
                Interest cost                                             2,119         1,522           925         330
                Expected return on plan assets                           (2,490)       (1,457)            0           0
                Amortization of prior service cost                          247            25             0           0
                Amortization of transition asset                            (52)          (47)            0           0
                Curtailment loss                                          1,092             0           790           0
                Recognized actuarial loss (gain)                             25            33           (53)        (60)
                                                                        -------       -------       -------       -----
         Net periodic benefit cost                                      $ 3,922       $ 1,295       $ 1,662       $ 270
                                                                        =======       =======       =======       =====
</TABLE>

         As reflected in the net periodic benefit cost table above, for fiscal
         1998, the Company recognized an aggregate net curtailment loss of
         $1,882,000 related to the VERP offered to qualified nonunion employees
         in December 1998. The effect of the VERP was to increase the benefit
         obligation based on the acceleration of years of credited service. This



                                      F-19
<PAGE>   44


         transaction is recognized as a curtailment loss in accordance with SFAS
         No. 88, "Employer Accounting for Settlements and Curtailments of
         Defined Benefit Pension Plans."

         The weighted average annual assumed rate of increase in the per capital
         cost of covered benefits (i.e., health care trend rate) for the health
         plans is 7.67% for 1997 and 7.35% for 1998, grading to 5.5% over five
         years. The effect of a 1% increase in the assumed trend rate would have
         increased the accumulated postretirement benefit obligation as of
         December 31, 1998 by approximately $796,000. The effect of this change
         on the periodic postretirement benefit cost for 1998 would be
         approximately $56,000.

         At December 31, 1998, plan assets consisted primarily of U.S. and
         international corporate bonds and stocks, convertible equity
         securities, and U.S. and Canadian government securities.

         A substantial number of the Company's employees are covered by
         union-sponsored, collectively bargained multiemployer pension plans.
         The Company contributed and charged to expense approximately
         $38,068,000, $17,926,000, and $11,444,000 for the years ended December
         31, 1998, 1997, and 1996, respectively, for such plans. These
         contributions are determined in accordance with the provisions of
         negotiated labor contracts and are generally based on the number of
         man-hours worked.

         Also, a substantial number of the Company's employees are covered by
         union-sponsored, collectively bargained multiemployer health and
         welfare benefit plans. The Company contributed and charged to expense
         approximately $44,796,000, $22,402,000, and $14,811,000 in 1998, 1997,
         and 1996, respectively, in connection with these plans. These required
         contributions are determined in accordance with the provisions of
         negotiated labor contracts and are for both active and retired
         employees.

         401(K) PLAN

         The Company has a 401(k) plan covering all of its employees in the
         United States. Prior to July 1, 1993, the Company did not contribute to
         this plan; however, the Company did incur the cost of administering
         this plan. The Company's administrative expense for the 401(k) plan was
         approximately $69,000, $102,000, and $165,000 in fiscal years 1998,
         1997, and 1996, respectively. Beginning July 1, 1993, the Company
         contributes the lesser of 3% of participant wages or $1,000 per year
         for each nonbargaining unit participant of the plan. The Company
         contributed approximately $625,000, $319,000, and $225,000 to the plan
         during the years ended December 31, 1998, 1997, and 1996, respectively.

         EMPLOYEE STOCK PURCHASE PLAN

         During December 1998, the Company approved an Employee Stock Purchase
         Plan (the "ESPP"). The ESPP allows eligible employees, as defined, the
         right to purchase common stock of the Company on a quarterly basis at
         85% of the fair market value on the first business day of the calendar
         quarter or on the last business day of the calendar quarter. There are
         350,000 shares of the Company's common stock reserved under the ESPP,
         of which no shares were issued to employees during 1998.


                                      F-20
<PAGE>   45


8.       COMMITMENTS AND CONTINGENCIES

         The Company is involved in various litigation and environmental matters
         relating to employment practices, damages, and other matters arising
         from operations in the ordinary course of business. In the opinion of
         management, the ultimate disposition of these matters will not have a
         material adverse effect on the Company's financial position or results
         of operations.

         The Company has entered into employment agreements with certain
         executive officers of the Company. The agreements, which are
         substantially similar, provide for compensation to the officers in the
         form of annual base salaries and bonuses based on earnings. The
         employment agreements also provide for severance benefits upon the
         occurrence of certain events, including a change in control, as
         defined.

         Approximately 86% of the Company's total labor force is covered by
         collective bargaining agreements. Collective bargaining agreements
         representing 84% of the total force will expire within one year.


9.       REVENUES FROM MAJOR CUSTOMERS

         Substantially all of the Company's revenues are realized through the
         automotive industry.

         In 1998, 1997, and 1996, approximately 73%, 77%, and 81%, respectively,
         of the Company's revenues were derived from the three largest
         automobile manufacturers. In 1998, 1997, and 1996, Ford Motor Company
         accounted for approximately 26%, 41%, and 53%, respectively, of
         revenues, General Motors Corporation accounted for approximately 32%,
         22%, and 10%, respectively, of revenues, and Chrysler Corporation
         accounted for 15%, 14%, and 18% of revenues, respectively.


10.      INDUSTRY SEGMENT AND GEOGRAPHIC INFORMATION

         During 1998, the Company adopted SFAS No. 131, "Disclosures about
         Segments of an Enterprise and Related Information." SFAS No. 131
         establishes standards for reporting information about operating
         segments in annual financial statements and requires reporting selected
         information about operating segments in interim financial reports
         issued to stockholders.

         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 1998, 1997, and 1996 is as follows
         (in thousands):

<TABLE>
<CAPTION>
                                                                1998              1997             1996
                                                             ----------        --------         --------
              <S>                                            <C>               <C>              <C>
              Revenues:
                  United States                              $  858,772        $425,090         $264,909
                  Canada                                        168,027         156,440          127,638
                                                             ----------        --------         --------
                                                             $1,026,799        $581,530         $392,547
                                                             ==========        ========         ========
</TABLE>



                                      F-21
<PAGE>   46


<TABLE>
<CAPTION>
                                                                1998              1997             1996
                                                             ----------        --------         --------
              <S>                                            <C>               <C>              <C>
              Long-lived assets:
                  United States                              $  350,897        $333,061         $280,301
                  Canada                                         74,971          76,205           63,334
                                                             ----------        --------         --------
                                                             $  425,868        $409,266         $343,635
                                                             ==========        ========         ========
</TABLE>


         Revenues are attributed to the respective countries based on the
         location of the origination terminal.

11.      STOCKHOLDERS' EQUITY

         The Company has authorized 5,000,000 shares of preferred stock with no
         par value. No shares have been issued, and therefore, there were no
         shares outstanding at December 31, 1998 and 1997. The board of
         directors has the authority to issue these shares and to fix dividends,
         voting and conversion rights, redemption provisions, liquidation
         preferences, and other rights and restrictions.

         In addition, the Company adopted a long-term incentive plan which
         allows the issuance of grants or awards of incentive stock options,
         restricted stock, stock appreciation rights, performance units, and
         performance shares to employees and directors of the Company to acquire
         up to 650,000 shares of the Company's common stock.

         During 1998 and 1996, the Company granted 54,523 and 85,000 shares,
         respectively, of restricted stock to certain employees of the Company.
         In connection with the award of the restricted stock, the Company
         recorded $1,730,000 of unearned compensation in the accompanying
         balance sheet which is amortized to compensation expense over five
         years, the vesting period of the restricted stock. During 1997, 8,000
         shares of restricted stock were canceled.

         In addition, the Company has granted nonqualified stock options under
         the long-term incentive plan. Options granted become exercisable after
         one year in 20% or 33 1/3% increments per year and expire ten years
         from the date of the grant.



                                      F-22
<PAGE>   47



<TABLE>
<CAPTION>
                                                                                     WEIGHTED
                                                                                     AVERAGE
                                                                 OPTION PRICE        EXERCISE
                                                    SHARES        (PER SHARE)         PRICE
                                                   -------       -------------     ----------
         <S>                                       <C>           <C>               <C>
         Outstanding as of December 31, 1995       137,050       $9.50-$11.75      $   9.64
                Granted                             34,000              $9.00          9.00
                Exercised                                0                N/A           N/A
                Canceled                                 0                N/A           N/A
                                                   -------
         Outstanding as of December 31, 1996       171,050       $9.00-$11.75          9.51
                Granted                             10,000             $17.13         17.13
                Exercised                          (17,495)      $9.00-$11.75          9.42
                Canceled                           (18,500)      $9.00-$11.75          9.07
                                                   -------
         Outstanding as of December 31, 1997       145,055       $9.00-$17.13         10.11
                Granted                             15,000             $10.38         10.38
                Exercised                           (2,500)             $9.50          9.50
                Canceled                                 0                N/A           N/A
                                                   -------
         Outstanding as of December 31, 1998       157,555       $9.00-$17.13         10.14
                                                   =======
</TABLE>



<TABLE>
<CAPTION>
                                                                                   1998            1997            1996
                                                                                 --------         -------         -------
         <S>                                                                     <C>              <C>             <C>
         Options exercisable at year-end                                          115,855          75,048          41,867
         Weighted average exercise price of options exercisable at
             year-end                                                               $9.85           $9.70           $9.81
         Per share weighted average fair value of options granted during
             the year                                                               $5.09           $8.27           $3.74
</TABLE>

         The weighted average remaining contractual life of options outstanding
         at December 31, 1998 was seven years.

         The Company has adopted the disclosure-only provisions of SFAS No. 123,
         "Accounting for Stock-Based Compensation," but applies Accounting
         Principles Board Opinion No. 25 and related interpretations in
         accounting for the long-term incentive plan. If the Company had elected
         to recognize compensation cost for the long-term incentive plan based
         on the fair value at the grant dates for awards under the plan,
         consistent with the method prescribed by SFAS No. 123, net income and
         earnings per share would have been changed to the pro forma amounts
         indicated below at December 31, 1998, 1997, and 1996 (in thousands,
         except per share data):

<TABLE>
<CAPTION>
                                   1998        1997        1996
                                  ------      ------      ------
         <S>                      <C>         <C>         <C>
         Net income:
             As reported          $8,477      $2,402      $3,986
             Pro forma             8,367       2,305       3,900
         Earnings per share:
             As reported:
                Basic             $ 1.09      $ 0.31      $ 0.52
                Diluted             1.08        0.31        0.52
             Pro forma:
                Basic               1.08        0.30        0.50
                Diluted             1.07        0.30        0.50
</TABLE>


                                      F-23
<PAGE>   48



         The fair value of the Company's stock options used to compute pro forma
         net income and earnings per share disclosures is the estimated present
         value at grant date using the Black-Scholes option pricing model with
         the following weighted average assumptions for 1998 and 1997: dividend
         yield of 0%, expected volatility of 49% and 34%, respectively, a
         risk-free interest rate of 5.09% and 5.7%, respectively, and an
         expected holding period of five years.

         The Black-Scholes option pricing model was developed for use in
         estimating the fair value of traded options which have no vesting
         restrictions and are fully transferable. In addition, option valuation
         models require the input of highly subjective assumptions, including
         expected stock price volatility. Because the Company's employee stock
         options have characteristics significantly different from those of
         traded options and because changes in the subjective input assumptions
         can materially affect the fair value estimate, in management's opinion,
         the existing models do not necessarily provide a reliable single
         measure of the fair value of its employee stock options.


12.      QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                                                    1998
                                            ----------------------------------------------------
                                              FIRST        SECOND         THIRD          FOURTH
                                            --------      --------      ---------       --------
                                                               (IN THOUSANDS,
                                                          EXCEPT PER SHARE AMOUNTS)
         <S>                                <C>           <C>           <C>             <C>
         Revenues                           $253,390      $280,641      $ 217,468       $275,300
         Operating income (loss)*              6,787        19,324         (3,418)        15,187
         Net income (loss)*                      690         7,697         (4,960)         5,050
         Net income (loss) per share:*
                Basic                       $   0.09      $   0.99      $   (0.64)      $   0.65
                Diluted                         0.09          0.98          (0.64)          0.65
         Average shares outstanding:
                Basic                          7,746         7,748          7,748          7,748
                Diluted                        7,746         7,861          7,748          7,829
         Stock prices:
             High                           $ 22.500      $ 22.313      $  21.938       $ 16.750
             Low                              18.000        17.750         10.250         11.375
</TABLE>

         *The Company's second and third quarter earnings were impacted by an
          eight-week work stoppage at most General Motors manufacturing plants.
          Also, during the fourth quarter, the Company expensed approximately
          $2.0 million for the VERP.



                                      F-24
<PAGE>   49


<TABLE>
<CAPTION>
                                                                             1997
                                                      --------------------------------------------------
                                                       First        Second         Third         Fourth
                                                      -------      --------      --------       --------
                                                                        (In Thousands,
                                                                   Except Per Share Amounts)
         <S>                                          <C>          <C>           <C>            <C>
         Revenues                                     $96,393      $112,576      $ 91,384       $281,177
         Operating income (loss)**                      2,806         8,644        (7,156)        13,485
         Net income (loss)**                              198         3,513        (5,674)         4,365
         Basic and diluted net income (loss) per
             share**                                  $  0.03      $   0.45      $  (0.73)      $   0.56
         Average shares outstanding:
             Basic                                      7,725         7,725         7,725          7,725
             Diluted                                    7,725         7,725         7,725          7,810
         Stock prices:
             High                                     $ 8.250      $ 11.125      $ 23.375       $ 24.000
             Low                                        6.250         5.500        11.000         13.750
</TABLE>

              **During the third quarter of 1997, the Company recorded a pretax
                charge of approximately $8.9 million upon completion of the
                Ryder Carrier Group acquisition to write down Company rigs and
                terminal facilities that will be idled or closed as a result of
                the acquisition.




                                      F-25
<PAGE>   50



                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS




To the Stockholders of
Allied Holdings, Inc.:



We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in ALLIED HOLDINGS, INC.'S 1998
annual report to stockholders and this Form 10-K, and have issued our report
thereon dated February 8, 1999. Our audit was made for the purpose of forming an
opinion on those financial statements taken as a whole. The schedule listed in
Item 14 of this Form 10-K is the responsibility of the Company's management, is
presented for purposes of complying with the Securities and Exchange
Commission's rules, and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audits of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.



/s/ ARTHUR ANDERSEN LLP


Atlanta, Georgia
February 8, 1999


<PAGE>   51




                     ALLIED HOLDINGS, INC. AND SUBSIDIARIES


                        VALUATION AND QUALIFYING ACCOUNTS
              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                               ADDITIONS
                                                 BALANCE AT    CHARGED TO                                  BALANCE
                                                 BEGINNING     COSTS AND                                    AT END
          CLASSIFICATION                         OF PERIOD     EXPENSES      DEDUCTIONS     ADJUSTMENTS    OF YEAR
---------------------------------------        ------------   -----------   ------------   ------------    -------
<S>                                            <C>            <C>           <C>            <C>             <C>   
YEAR ENDED DECEMBER 31, 1998:
  Allowance for doubtful accounts                 $2,078         $201         (734)(a)      $    0         $1,545

YEAR ENDED DECEMBER 31, 1997:
   Allowance for doubtful accounts                   564          159          (19)(a)       1,374(b)       2,078

YEAR ENDED DECEMBER 31, 1996:
   Allowance for doubtful accounts                   689            0         (125)(a)           0            564
</TABLE>




                    (a) Write-off of uncollectable accounts.

                    (b) Balance assumed from the acquisition of
                        Ryder Automotive Carrier Group.





                                      S - 2