##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q

|   |  |                                                                                                                                         |  | 
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------- |  | 
|x  |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934  For the quarterly period ended March 31, 2003 |  | 
|   |  |                                                                                                                                         |  | 
|or
|   |  |                                                                                                                                         |  | 
|o  |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934  For the transition period from  to           |  | 
|   |  |                                                                                                                                         |  | 
|   |  | Commission File Number: 0-22276                                                                                                         |  | 

ALLIED HOLDINGS, INC.




(Exact name of registrant as specified in its charter)


|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|GEORGIA                                                        |  | 58-0360550                             
|                                                               |  |                                        
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification Number)

Suite 200, 160 Clairemont Avenue, Decatur, Georgia 30030




(Address of principal executive offices)


(404) 373-4285




(Registrants telephone number, including area code)




---

(Former name, former address and former fiscal year, if changed since last report)


Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.   Yes   x   No   o

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act of 1934)  o  Yes    x  No

|                                                         |  |  |           | 
|-------------------------------------------------------- |  |  | --------- | 
|Outstanding common stock, no par value at April 22, 2003 |  |  | 8,499,405 | 





---

TABLE OF CONTENTS



|                                                                                              |                                            |  |  |  |  |  |  | 
|--------------------------------------------------------------------------------------------- | ------------------------------------------ |  |  |  |  |  |  | 
|Item 1  FINANCIAL STATEMENTS                                                                
|                                                                                              | CONSOLIDATED BALANCE SHEETS               
|                                                                                              | CONSOLIDATED STATEMENTS OF OPERATIONS     
|                                                                                              | CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                                                                                              | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                           
|Item 4. Controls and Procedures                                                              
|Item 6. Exhibits and Reports on Form 8-K.                                                    
|                                                                                              | SIGNATURES                                
|                                                                                              | CERTIFICATIONS                            
|EX-10.1 FORM OF BONUS AND RETENTION AGREEMENT                                                



---



##### Table of Contents



ALLIED HOLDINGS, INC. & SUBSIDIARIES

INDEX

PART I

FINANCIAL INFORMATION

|                                                                                             |                                                                                                 |  |    |      |  |  |  |  |  | 
|-------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------- |  | -- | ---- |  |  |  |  |  | 
|                                                                                             |                                                                                                 |  |    | PAGE |  |  | 
|ITEM 1
Financial Statements                                                                  |                                                                                                 |  |    |      |  |  |  | 
|                                                                                             | Consolidated Balance Sheets as of March 31, 2003 and
December 31, 2002                          |  |    | 3    |  |  |  |  | 
|                                                                                             | Consolidated Statements of Operations for the Three Month Periods
Ended March 31, 2003 and 2002 |  |    | 4    |  |  |  |  | 
|                                                                                             | Consolidated Statements of Cash Flows for the Three Month Periods
Ended March 31, 2003 and 2002 |  |    | 5    |  |  |  |  | 
|                                                                                             | Notes to Consolidated Financial Statements                                                      |  |    | 6    |  |  |  |  | 
|ITEM 2 Managements Discussion and Analysis of Financial Condition
and Results of Operations |                                                                                                 |  | 22 |      |  |  |  | 
|ITEM 3 Quantitative and Qualitative Disclosures About Market Risk                            |                                                                                                 |  | 35 |      |  |  |  | 
|ITEM 4 Controls and Procedures                                                               |                                                                                                 |  | 35 |      |  |  |  | 
|PART II                                                                                     
|OTHER INFORMATION                                                                           
|ITEM 1 Legal Proceedings                                                                     |                                                                                                 |  | 35 |      |  |  |  | 
|ITEM 6 Exhibits and Reports on Form 8-K                                                      |                                                                                                 |  | 37 |      |  |  |  | 
|                                                                                             | Signature Pages                                                                                 |  |    | 38   |  |  |  |  | 
|                                                                                             | Certifications                                                                                  |  |    | 39   |  |  |  |  | 

2



---



##### Table of Contents









PART 1  FINANCIAL INFORMATIONItem 1  FINANCIAL STATEMENTS

ALLIED HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(In Thousands)

|                                            |                                                                                                                                                |                                            |         |             |         |              |         |         |         | 
|------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | ----------- | ------- | ------------ | ------- | ------- | ------- | 
|                                            |                                                                                                                                                |                                            |         | March 31,   |         | December 31,
|                                            |                                                                                                                                                |                                            |         | 2003        |         | 2002        
|                                            |                                                                                                                                                |                                            |         |             |         |             
|                                            |                                                                                                                                                |                                            |         | (Unaudited) |         |              |         |        
|ASSETS                                      |                                                                                                                                                |                                            |         |             |         |              |         |        
|CURRENT ASSETS:                             |                                                                                                                                                |                                            |         |             |         |              |         |        
|                                            | Cash and cash equivalents                                                                                                                      |                                            | $       | 5,748       |         |              | $       | 10,253  |        
|                                            | Short-term investments                                                                                                                         |                                            |         | 63,174      |         |              |         | 60,732  |        
|                                            | Receivables, net of allowance for doubtful accounts of
$5,798 and $5,587 respectively                                                          |                                            |         | 55,094      |         |              |         | 58,512  |        
|                                            | Inventories                                                                                                                                    |                                            |         | 5,237       |         |              |         | 5,071   |        
|                                            | Deferred tax assets                                                                                                                            |                                            |         | 34,701      |         |              |         | 39,826  |        
|                                            | Prepayments and other current assets                                                                                                           |                                            |         | 30,574      |         |              |         | 28,685  |        
|                                            |                                                                                                                                                |                                            |         |             |         |              |         |        
|                                            |                                                                                                                                                | Total current assets                       |         |             | 194,528 |              |         |         | 203,079 | 
|                                            |                                                                                                                                                |                                            |         |             |         |              |         |        
|PROPERTY AND EQUIPMENT, NET                 |                                                                                                                                                |                                            | 172,808 |             |         |              | 176,663 |        
|                                            |                                                                                                                                                |                                            |         |             |         |              |         |        
|GOODWILL, NET                               |                                                                                                                                                |                                            | 86,867  |             |         |              | 85,241  |        
|                                            |                                                                                                                                                |                                            |         |             |         |              |         |        
|OTHER                                       |                                                                                                                                                |                                            | 19,325  |             |         |              | 20,525  |        
|                                            |                                                                                                                                                |                                            |         |             |         |              |         |        
|                                            |                                                                                                                                                | Total assets                               |         | $           | 473,528 |              |         | $       | 485,508 | 
|                                            |                                                                                                                                                |                                            |         |             |         |              |         |        
|LIABILITIES AND STOCKHOLDERS EQUITY        |                                                                                                                                                |                                            |         |             |         |              |         |        
|CURRENT LIABILITIES:                        |                                                                                                                                                |                                            |         |             |         |              |         |        
|                                            | Current maturities of long-term debt                                                                                                           |                                            | $       | 13,418      |         |              | $       | 10,785  |        
|                                            | Trade accounts payable                                                                                                                         |                                            |         | 32,382      |         |              |         | 36,585  |        
|                                            | Accrued liabilities                                                                                                                            |                                            |         | 91,968      |         |              |         | 92,881  |        
|                                            |                                                                                                                                                |                                            |         |             |         |              |         |        
|                                            |                                                                                                                                                | Total current liabilities                  |         |             | 137,768 |              |         |         | 140,251 | 
|                                            |                                                                                                                                                |                                            |         |             |         |              |         |        
|LONG-TERM DEBT, less current maturities     |                                                                                                                                                |                                            | 241,671 |             |         |              | 237,690 |        
|                                            |                                                                                                                                                |                                            |         |             |         |              |         |        
|POSTRETIREMENT BENEFITS OTHER THAN PENSIONS |                                                                                                                                                |                                            | 7,370   |             |         |              | 7,467   |        
|                                            |                                                                                                                                                |                                            |         |             |         |              |         |        
|DEFERRED INCOME TAXES                       |                                                                                                                                                |                                            | 19,418  |             |         |              | 27,746  |        
|                                            |                                                                                                                                                |                                            |         |             |         |              |         |        
|OTHER LONG-TERM LIABILITIES                 |                                                                                                                                                |                                            | 60,525  |             |         |              | 62,040  |        
|                                            |                                                                                                                                                |                                            |         |             |         |              |         |        
|STOCKHOLDERS EQUITY:                       |                                                                                                                                                |                                            |         |             |         |              |         |        
|                                            | Preferred stock, no par value; 5,000 shares authorized, none
outstanding                                                                       |                                            |         |            |         |              |         |        |        
|                                            | Common stock, no par value; 20,000 shares authorized, 8,444
and 8,421 shares outstanding at March 31, 2003
and December 31, 2002, respectively |                                            |         |            |         |              |         |        |        
|                                            | Additional paid-in capital                                                                                                                     |                                            |         | 46,918      |         |              |         | 46,801  |        
|                                            | Treasury stock at cost, 139 shares at March 31, 2003
and December 31, 2002                                                                     |                                            |         | (707        | )       |              |         | (707    | )      
|                                            | Accumulated deficit                                                                                                                            |                                            |         | (32,084     | )       |              |         | (26,420 | )      
|                                            | Accumulated other comprehensive loss, net of tax                                                                                               |                                            |         | (7,351      | )       |              |         | (9,360  | )      
|                                            |                                                                                                                                                |                                            |         |             |         |              |         |        
|                                            |                                                                                                                                                | Total stockholders equity                 |         |             | 6,776   |              |         |         | 10,314  | 
|                                            |                                                                                                                                                |                                            |         |             |         |              |         |        
|                                            |                                                                                                                                                | Total liabilities and stockholders equity |         | $           | 473,528 |              |         | $       | 485,508 | 
|                                            |                                                                                                                                                |                                            |         |             |         |              |         |        

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

3



---



##### Table of Contents






ALLIED HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)

|                                                                                 |                                                  |                          |         |                            |         |             |         |         |         |  
|-------------------------------------------------------------------------------- | ------------------------------------------------ | ------------------------ | ------- | -------------------------- | ------- | ----------- | ------- | ------- | ------- | -
|                                                                                 |                                                  |                          |         | For the Three Months Ended
|                                                                                 |                                                  |                          |         | March 31,                 
|                                                                                 |                                                  |                          |         |                           
|                                                                                 |                                                  |                          |         | 2003                       |         | 2002       
|                                                                                 |                                                  |                          |         |                            |         |            
|                                                                                 |                                                  |                          |         | (Unaudited)                |         | (Unaudited)
|REVENUES                                                                         |                                                  | $                        | 213,592 |                            |         | $           | 213,259 |        
|                                                                                 |                                                  |                          |         |                            |         |             |         |        
|OPERATING EXPENSES:                                                              |                                                  |                          |         |                            |         |             |         |        
|                                                                                 | Salaries, wages and fringe benefits              |                          |         | 117,575                    |         |             |         | 118,536 |        
|                                                                                 | Operating supplies and expenses                  |                          |         | 37,180                     |         |             |         | 30,905  |        
|                                                                                 | Purchased transportation                         |                          |         | 24,713                     |         |             |         | 21,580  |        
|                                                                                 | Insurance and claims                             |                          |         | 9,357                      |         |             |         | 10,571  |        
|                                                                                 | Operating taxes and licenses                     |                          |         | 7,838                      |         |             |         | 8,463   |        
|                                                                                 | Depreciation and amortization                    |                          |         | 12,024                     |         |             |         | 13,663  |        
|                                                                                 | Rents                                            |                          |         | 1,620                      |         |             |         | 1,553   |        
|                                                                                 | Communications and utilities                     |                          |         | 1,888                      |         |             |         | 1,992   |        
|                                                                                 | Other operating expenses                         |                          |         | 2,849                      |         |             |         | 3,297   |        
|                                                                                 | Loss (gain) on disposal of operating assets, net |                          |         | 264                        |         |             |         | (1,029  | )      
|                                                                                 |                                                  |                          |         |                            |         |             |         |        
|                                                                                 |                                                  | Total operating expenses |         |                            | 215,308 |             |         |         | 209,531 |  
|                                                                                 |                                                  |                          |         |                            |         |             |         |        
|                                                                                 |                                                  | Operating (loss) income  |         |                            | (1,716  | )           |         |         | 3,728   |  
|                                                                                 |                                                  |                          |         |                            |         |             |         |        
|OTHER INCOME (EXPENSE):                                                          |                                                  |                          |         |                            |         |             |         |        
|                                                                                 | Interest expense                                 |                          |         | (7,381                     | )       |             |         | (8,122  | )      
|                                                                                 | Interest income                                  |                          |         | 326                        |         |             |         | 272     |        
|                                                                                 | Gain on early extinguishment of debt             |                          |         |                           |         |             |         | 2,750   |        
|                                                                                 | Foreign exchange gains, net                      |                          |         | 1,018                      |         |             |         | 37      |        
|                                                                                 | Other, net                                       |                          |         |                           |         |             |         | (207    | )      
|                                                                                 |                                                  |                          |         |                            |         |             |         |        
|                                                                                 |                                                  |                          | (6,037  | )                          |         |             | (5,270  | )      
|                                                                                 |                                                  |                          |         |                            |         |             |         |        
|LOSS BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE |                                                  |                          | (7,753  | )                          |         |             | (1,542  | )      
|INCOME TAX BENEFIT                                                               |                                                  |                          | 2,089   |                            |         |             | 386     |        
|                                                                                 |                                                  |                          |         |                            |         |             |         |        
|LOSS BEFORE CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE                  |                                                  |                          | (5,664  | )                          |         |             | (1,156  | )      
|CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE,
NET OF TAX                  |                                                  |                          |        |                            |         |             | (4,092  | )      
|                                                                                 |                                                  |                          |         |                            |         |             |         |        
|NET LOSS                                                                         |                                                  | $                        | (5,664  | )                          |         | $           | (5,248  | )      
|                                                                                 |                                                  |                          |         |                            |         |             |         |        
|BASIC & DILUTED LOSS PER COMMON SHARE:                                           |                                                  |                          |         |                            |         |             |         |        
|LOSS BEFORE CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE:                 |                                                  |                          |         |                            |         |             |         |        
|BASIC AND DILUTED                                                                |                                                  | $                        | (0.67   | )                          |         | $           | (0.14   | )      
|CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE, NET OF TAX:                 |                                                  |                          |         |                            |         |             |         |        
|                                                                                 |                                                  | BASIC AND DILUTED        |         |                            |        |             |         |         | (0.50   | )
|                                                                                 |                                                  |                          |         |                            |         |             |         |        
|NET LOSS: BASIC AND DILUTED                                                      |                                                  | $                        | (0.67   | )                          |         | $           | (0.64   | )      
|                                                                                 |                                                  |                          |         |                            |         |             |         |        
|WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:                                      |                                                  |                          |         |                            |         |             |         |        
|                                                                                 |                                                  | BASIC AND DILUTED        |         |                            | 8,409   |             |         |         | 8,252   |  
|                                                                                 |                                                  |                          |         |                            |         |             |         |        

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

4



---



##### Table of Contents






ALLIED HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)

|                                                             |                                                                                           |                                                          |                                                     |                                                     |        |                            |        |             |        |        |         |  
|------------------------------------------------------------ | ----------------------------------------------------------------------------------------- | -------------------------------------------------------- | --------------------------------------------------- | --------------------------------------------------- | ------ | -------------------------- | ------ | ----------- | ------ | ------ | ------- | -
|                                                             |                                                                                           |                                                          |                                                     |                                                     |        | For the Three Months Ended
|                                                             |                                                                                           |                                                          |                                                     |                                                     |        | March 31,                 
|                                                             |                                                                                           |                                                          |                                                     |                                                     |        | 2003                       |        | 2002       
|                                                             |                                                                                           |                                                          |                                                     |                                                     |        |                            |        |            
|                                                             |                                                                                           |                                                          |                                                     |                                                     |        | (Unaudited)                |        | (Unaudited)
|CASH FLOWS FROM OPERATING ACTIVITIES:                        |                                                                                           |                                                          |                                                     |                                                     |        |                            |        |            
|                                                             | Net loss                                                                                  |                                                          | $                                                   | (5,664                                              | )      |                            | $      | (5,248      | )     
|                                                             | Adjustments to reconcile net loss to net
cash (used in) provided by operating activities: |                                                          |                                                     |                                                     |        |                            |        |             |       
|                                                             |                                                                                           | Gain on early extinguishment of debt                     |                                                     |                                                     |       |                            |        |             | (2,750 | )     
|                                                             |                                                                                           | Interest expense paid in kind                            |                                                     |                                                     | 369    |                            |        |             | 12     |       
|                                                             |                                                                                           | Amortization of deferred financing costs                 |                                                     |                                                     | 1,012  |                            |        |             | 1,045  |       
|                                                             |                                                                                           | Depreciation and amortization                            |                                                     |                                                     | 12,024 |                            |        |             | 13,663 |       
|                                                             |                                                                                           | Loss (gain) on disposal of assets and other, net         |                                                     |                                                     | 264    |                            |        |             | (822   | )     
|                                                             |                                                                                           | Foreign exchange gains, net                              |                                                     |                                                     | (1,018 | )                          |        |             | (37    | )     
|                                                             |                                                                                           | Cumulative effect of change in accounting principle      |                                                     |                                                     |       |                            |        |             | 4,092  |       
|                                                             |                                                                                           | Deferred income taxes                                    |                                                     |                                                     | (4,401 | )                          |        |             | (1,767 | )     
|                                                             |                                                                                           | Compensation expense related to stock options and grants |                                                     |                                                     | 60     |                            |        |             | 59     |       
|                                                             |                                                                                           | Amortization of Teamsters Union contract costs           |                                                     |                                                     | 600    |                            |        |             | 600    |       
|                                                             |                                                                                           | Change in operating assets and liabilities:              |                                                     |                                                     |        |                            |        |             |        |       
|                                                             |                                                                                           |                                                          | Receivables, net of allowance for doubtful accounts |                                                     |        | 2,810                      |        |             |        | 9,473  |        
|                                                             |                                                                                           |                                                          | Inventories                                         |                                                     |        | (226                       | )      |             |        | 99     |        
|                                                             |                                                                                           |                                                          | Prepayments and other current assets                |                                                     |        | (2,039                     | )      |             |        | 1,405  |        
|                                                             |                                                                                           |                                                          | Short-term investments                              |                                                     |        | (2,442                     | )      |             |        | 136    |        
|                                                             |                                                                                           |                                                          | Trade accounts payable                              |                                                     |        | (3,810                     | )      |             |        | (2,467 | )      
|                                                             |                                                                                           |                                                          | Accrued liabilities                                 |                                                     |        | (2,146                     | )      |             |        | 6,878  |        
|                                                             |                                                                                           |                                                          |                                                     |                                                     |        |                            |        |            
|                                                             |                                                                                           | Net change in operating assets and liabilities           |                                                     |                                                     | (7,853 | )                          |        |             | 15,524 |       
|                                                             |                                                                                           |                                                          |                                                     |                                                     |        |                            |        |            
|                                                             |                                                                                           |                                                          |                                                     | Net cash (used in) provided by operating activities |        |                            | (4,607 | )           |        |        | 24,371  |  
|                                                             |                                                                                           |                                                          |                                                     |                                                     |        |                            |        |            
|CASH FLOWS FROM INVESTING ACTIVITIES:                        |                                                                                           |                                                          |                                                     |                                                     |        |                            |        |            
|                                                             | Purchases of property and equipment                                                       |                                                          |                                                     | (5,878                                              | )      |                            |        | (2,626      | )     
|                                                             | Proceeds from sale of property and equipment                                              |                                                          |                                                     | 11                                                  |        |                            |        | 2,185       |       
|                                                             | Decrease in the cash surrender value of life insurance                                    |                                                          |                                                     | 1                                                   |        |                            |        | 183         |       
|                                                             |                                                                                           |                                                          |                                                     |                                                     |        |                            |        |            
|                                                             |                                                                                           |                                                          |                                                     | Net cash used in investing activities               |        |                            | (5,866 | )           |        |        | (258    | )
|                                                             |                                                                                           |                                                          |                                                     |                                                     |        |                            |        |            
|CASH FLOWS FROM FINANCING ACTIVITIES:                        |                                                                                           |                                                          |                                                     |                                                     |        |                            |        |            
|                                                             | Additions to (repayments of) revolving credit facilities, net                             |                                                          |                                                     | 8,471                                               |        |                            |        | (49,458     | )     
|                                                             | Additions to long-term debt                                                               |                                                          |                                                     |                                                    |        |                            |        | 82,750      |       
|                                                             | Repayment of long-term debt                                                               |                                                          |                                                     | (2,226                                              | )      |                            |        | (39,671     | )     
|                                                             | Payment of deferred financing costs                                                       |                                                          |                                                     | (407                                                | )      |                            |        | (8,803      | )     
|                                                             | Proceeds from issuance of common stock                                                    |                                                          |                                                     | 57                                                  |        |                            |        | 24          |       
|                                                             | Other, net                                                                                |                                                          |                                                     | (12                                                 | )      |                            |        | 125         |       
|                                                             |                                                                                           |                                                          |                                                     |                                                     |        |                            |        |            
|                                                             |                                                                                           |                                                          |                                                     | Net cash provided by (used in) financing activities |        |                            | 5,883  |             |        |        | (15,033 | )
|                                                             |                                                                                           |                                                          |                                                     |                                                     |        |                            |        |            
|EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS |                                                                                           |                                                          | 85                                                  |                                                     |        |                            | (8     | )          
|NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS         |                                                                                           |                                                          | (4,505                                              | )                                                   |        |                            | 9,072  |            
|CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD             |                                                                                           |                                                          | 10,253                                              |                                                     |        |                            | 10,543 |            
|                                                             |                                                                                           |                                                          |                                                     |                                                     |        |                            |        |            
|CASH AND CASH EQUIVALENTS AT END OF PERIOD                   |                                                                                           | $                                                        | 5,748                                               |                                                     |        | $                          | 19,615 |            
|                                                             |                                                                                           |                                                          |                                                     |                                                     |        |                            |        |            

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

5



---



##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

March 31, 2003 and 2002

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|(1) | Basis of Presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 
|    | The unaudited consolidated financial statements included herein have been
prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Accordingly, they do not include all of the information
and footnotes required by accounting principles generally accepted in the
United States of America for complete financial statements. The statements
contained herein reflect all adjustments, all of which are of a normal,
recurring nature, which are, in the opinion of management, necessary to
present fairly the financial condition, results of operations and cash flows
for the periods presented. Operating results for the three-month period
ended March 31, 2003 are not necessarily indicative of the results that may
be expected for the year ended December 31, 2003. The interim financial
statements should be read in conjunction with the financial statements and
notes thereto of Allied Holdings, Inc. and Subsidiaries, (the Company)
included in the Companys 2002 Annual Report on Form 10-K.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 
|    | Certain amounts in the prior year financial statements have been
reclassified to conform to the current year presentation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 
|(2) | Use of Estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 
|    | The preparation of the consolidated financial statements requires management
of the Company to make a number of estimates and assumptions relating to the
reported amount of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the consolidated financial statements
and the reported amounts of revenues and expenses during the period.
Significant items subject to such estimates and assumptions include the
carrying amount of property, plant and equipment; valuation allowances for
receivables, inventories and deferred income tax assets; self-insurance
reserves; and assets and obligations related to employee benefits. Actual
results could differ from those estimates.                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 
|(3) | Recent Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 
|    | In June 2001, FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations. SFAS No. 143 requires the Company to record the fair value of
an asset retirement obligation as a liability in the period in which it
incurs a legal obligation associated with the retirement of tangible
long-lived assets that result from the acquisition, construction,
development, and/or normal use of the assets. The Company also records a
corresponding asset that is depreciated over the life of the asset.
Subsequent to the initial measurement of the asset retirement obligation,
the obligation will be adjusted at the end of each period to reflect the
passage of time and changes in the estimated future cash flows underlying
the obligation. The Company adopted the provisions of the standard effective
January 1, 2003. The Statement did not have a material impact on the
financial position or results of operations of the Company as of the date of
adoption.                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 
|    | In July 2002, the FASB issued SFAS No. 146, Accounting for Cost Associated
with Exit or Disposal Activities. The Statement addresses financial
accounting and reporting for costs associated with exit or disposal
activities and nullifies EITF Issue No. 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring). This Statement
requires recognition of a liability for a                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

6



---



##### Table of Contents



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
| | cost associated with an exit or disposal activity when the liability is
incurred, as opposed to when the entity commits to an exit plan under EITF
No. 94-3. The Company adopted the provisions of the standard effective
January 1, 2003. The Statement did not have a material impact on the
financial position or results of operations of the Company as of the date of
adoption.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 
| | In November 2002, the FASB issued Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness to Others, an interpretation of FASB Statements
No. 5, 57 and 107 and a rescission of FASB Interpretation No. 34.This
Interpretation elaborates on the disclosures to be made by a guarantor in
its interim and annual financial statements about its obligations under
guarantees issued. The Interpretation also clarifies that a guarantor is
required to recognize, at inception of a guarantee, a liability for the fair
value of the obligation undertaken. The initial recognition and measurement
provisions of the Interpretation are applicable to guarantees issued or
modified after December 31, 2002. The Company adopted the provisions of the
Interpretation effective January 1, 2003 for guarantees issued or modified
after December 31, 2002. The adoption of this Interpretation did not have a
material impact on the financial position or results of operations of the
Company as of the date of adoption. See note 11, Guarantees and
Indemnifications.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 
| | In April 2002, the FASB issued SFAS No. 145, Rescission of
FASB Statements No. 44, and 64 Amendment of FASB Statement No.
13, and Technical Corrections. The Statement updates clarifies
and simplifies existing accounting pronouncements. The Statement
requires that in certain circumstances previous items classified as
extraordinary that do not meet the criteria in Opinion 30 must be
reclassified. The Statement is effective for fiscal years beginning
after May 15, 2002. The Company elected early adoption of the
standard. Accordingly, the after-tax gain on early extinguishment of
debt that was reported as an extraordinary item in the first quarter
of 2002 has been reclassified and is currently reported as other
income.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 
| | In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure, an amendment of FASB Statement No.
123. This Statement amends FASB Statement No. 123, Accounting for
Stock-Based Compensation, to provide alternative methods of transition for a
voluntary change to the fair value method of accounting for stock-based
employee compensation. In addition, this Statement amends the disclosure
requirements of Statement No. 123 to require prominent disclosures in both
annual and interim financial statements. Certain of the disclosure
modifications are required for fiscal years and interim periods ending after
December 15, 2002 and are included in the notes to these consolidated
financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 
| | In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation
of Variable Interest Entities, an Interpretation of ARB No. 51. This
Interpretation addresses the consolidation of business enterprises
(variable interest entities) to which the usual condition of consolidation
does not apply. This interpretation focuses on financial interests that
indicate control. It concludes that in the absence of clear control through
voting interests, a companys exposure (variable interest) to the economic
risks and potential rewards from the variable interest entitys assets and
activities are the best evidence of control. Variable interests are rights
and obligations that convey economic gains or losses from changes in the
values of the variable interest entitys assets and liabilities. Variable
interests may arise from financial instruments, service contracts,
nonvoting ownership interests and other arrangements. If an enterprise
holds a majority of the variable interests of an entity, it would be
considered the primary beneficiary. The primary beneficiary would be
required to include assets, liabilities and the results of operations of
the variable interest entity in its financial statements. This
interpretation applies immediately to variable interest entities that are
created after or for which control is obtained after January 31, 2003. For
variable interest entities created prior to February 1, 2003, the
provisions would be applied effective July 1, 2003. The Company did not
have any variable interest entities prior to February 1, 2003 and has not
created any for which control has been maintained since January 31, 2003.
Therefore, this Interpretation is not expected to have a material impact on
the financial position or results of operations of the Company.

7



---



##### Table of Contents



|    |                                                                                                                       | 
|--- | --------------------------------------------------------------------------------------------------------------------- | 
|(4) | Prepayments and Other Current Assets                                                                                 
|    |                                                                                                                       | 
|    | Prepayments and other current assets consist of the following at March 31,
2003 and December 31, 2002 (in thousands):

|                               |  |           |        |              |  |   |        | 
|------------------------------ |  | --------- | ------ | ------------ |  | - | ------ | 
|                               |  | March 31, |        | December 31,
|                               |  | 2003      |        | 2002        
|                               |  |           |        |             
|Tires on tractors and trailers |  | $         | 7,581  |              |  | $ | 7,082  | 
|Prepaid insurance              |  |           | 1,269  |              |  |   | 1,773  | 
|Prepaid pension cost           |  |           | 14,885 |              |  |   | 14,968 | 
|Other                          |  |           | 6,839  |              |  |   | 4,862  | 
|                               |  |           |        |              |  |   |        | 
|                               |  | $         | 30,574 |              |  | $ | 28,685 | 
|                               |  |           |        |              |  |   |        | 

|    |                                                                                                          | 
|--- | -------------------------------------------------------------------------------------------------------- | 
|(5) | Property and Equipment                                                                                  
|    |                                                                                                          | 
|    | Property and equipment consists of the following at March 31, 2003 and
December 31, 2002 (in thousands):

|                                                            |  |           |          |              |  |              |         |  |  |              
|----------------------------------------------------------- |  | --------- | -------- | ------------ |  | ------------ | ------- |  |  | -------------
|                                                            |  | March 31, |          | December 31, |  |             
|                                                            |  | 2003      |          | 2003         |  | Useful Lives
|                                                            |  |           |          |              |  |             
|Tractors and trailers                                       |  | $         | 431,862  |              |  | $            | 421,615 |  |  | 4 to 10 years
|Buildings and facilities (including leasehold
improvements) |  |           | 45,476   |              |  |              | 44,925  |  |  | 5 to 30 years
|Land                                                        |  |           | 12,100   |              |  |              | 11,958  |  |  |              
|Furniture, fixtures, and equipment                          |  |           | 42,096   |              |  |              | 41,819  |  |  | 3 to 10 years
|Service cars and equipment                                  |  |           | 3,127    |              |  |              | 3,111   |  |  | 3 to 10 years
|                                                            |  |           |          |              |  |              |         |  |  |              
|                                                            |  |           | 534,661  |              |  |              | 523,428 |  |  |              
|Less accumulated depreciation and amortization              |  |           | 361,853  |              |  |              | 346,765 |  |  |              
|                                                            |  |           |          |              |  |              |         |  |  |              
|                                                            |  |           | $172,808 |              |  | $            | 176,663 |  |  |              
|                                                            |  |           |          |              |  |              |         |  |  |              

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|    | Depreciation expense amounted to $11,977,000 and $13,618,000 for the three
months ended March 31, 2003 and 2002, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | 
|(6) | Goodwill                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | 
|    | In accordance with SFAS No. 142, Goodwill and Other Intangible Assets,
effective January 1, 2002, the Company no longer amortizes goodwill but
reviews it annually for impairment, or on an interim basis if an event
occurs or circumstances change that would reduce the fair value of goodwill
below its carrying value. The adoption of SFAS No. 142 is a required
change in accounting principle, and the cumulative effect of adopting
this standard as of January 1, 2002 resulted in a non-cash, after-tax
decrease to net income of $4.1 in the first quarter of 2002. The Companys reporting units are the Allied
Automotive Group and the Axis Group.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | 
|    | The following table sets forth the carrying value of goodwill by reporting
unit as of March 31, 2003 and December 31, 2002 (in thousands):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

|                                                              |  |            |        |       |  |       |        |  |  |   |        | 
|------------------------------------------------------------- |  | ---------- | ------ | ----- |  | ----- | ------ |  |  | - | ------ | 
|                                                              |  | Allied     |        |       |  |       |        |  |  |  
|                                                              |  | Automotive |        | Axis  |  |       |        | 
|                                                              |  | Group      |        | Group |  | Total
|                                                              |  |            |        |       |  |      
|Balance as of December 31,
2002                               |  | $          | 73,043 |       |  | $     | 12,198 |  |  | $ | 85,241 | 
|Increase in carrying amount
due to a change in currency
rates |  |            | 1,619  |       |  |       | 7      |  |  |   | 1,626  | 
|                                                              |  |            |        |       |  |       |        |  |  |   |        | 
|Balance as of March 31, 2003                                  |  | $          | 74,662 |       |  | $     | 12,205 |  |  | $ | 86,867 | 
|                                                              |  |            |        |       |  |       |        |  |  |   |        | 

8



---



##### Table of Contents



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|(7) | Impairment of Long-Lived Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 
|    | In accordance with SFAS No. 144, Accounting for the Impairment or Disposal
of Long-Lived Assets, long-lived assets, such as property, plant, and
equipment, and purchased intangibles subject to amortization, are reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets
to be held and used is measured by a comparison of the carrying amount of an
asset to estimated undiscounted future cash flows expected to be generated
by the asset. If the carrying amount of an asset exceeds its estimated
future cash flows, an impairment charge is recognized by the amount by which
the carrying amount of the asset exceeds the fair value of the asset. Assets
to be disposed of would be separately presented in the balance sheet and
reported at the lower of the carrying amount or fair value less costs to
sell, and are no longer depreciated. The assets and liabilities of a
disposed group classified as held for sale would be presented separately in
the appropriate asset and liability sections of the balance sheet.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 
|    | During 2002, the Company performed an analysis of certain fleet equipment
that was recently idled. The assets were evaluated in order to determine if
they were candidates for the fleet remanufacturing and engine replacement
program. Approximately 1,000 tractors or trailers were not considered viable
candidates for the program and a decision was made that they would not be
placed back into operations. As a result, depreciation was accelerated to
the reduced useful life resulting in an additional charge of $2.1 million to
depreciation expense in the fourth quarter of 2002. Management is
developing a disposal plan regarding these assets and anticipates disposing
of them during 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 
|(8) | Accrued Liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 
|    | Accrued liabilities consists of the following at March 31, 2003 and December
31, 2002 (in thousands):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

|                              |  |               |        |                  |  |   |        | 
|----------------------------- |  | ------------- | ------ | ---------------- |  | - | ------ | 
|                              |  | March 31,2003 |        | December 31,2002
|                              |  |               |        |                 
|Wages and benefits            |  | $             | 40,719 |                  |  | $ | 41,903 | 
|Claims and insurance reserves |  |               | 29,363 |                  |  |   | 35,487 | 
|Other                         |  |               | 21,886 |                  |  |   | 15,491 | 
|                              |  |               |        |                  |  |   |        | 
|                              |  | $             | 91,968 |                  |  | $ | 92,881 | 
|                              |  |               |        |                  |  |   |        | 

|    |                                                                                                   | 
|--- | ------------------------------------------------------------------------------------------------- | 
|(9) | Long-Term Debt                                                                                   
|    |                                                                                                   | 
|    | Long-term debt consisted of the following at March 31, 2003 and December 31,
2002 (in thousands):

|                          |                                           |   |           |         |              |   |         |         |  
|------------------------- | ----------------------------------------- | - | --------- | ------- | ------------ | - | ------- | ------- | -
|                          |                                           |   | March 31, |         | December 31,
|                          |                                           |   | 2003      |         | 2002        
|                          |                                           |   |           |         |             
|Revolving credit facility |                                           | $ | 33,107    |         |              | $ | 24,635  |        
|Term Loan A               |                                           |   | 5,247     |         |              |   | 7,474   |        
|Term Loan B               |                                           |   | 25,909    |         |              |   | 25,684  |        
|Term Loan C               |                                           |   | 11,576    |         |              |   | 11,432  |        
|Term Loan D               |                                           |   | 29,250    |         |              |   | 29,250  |        
|Senior notes              |                                           |   | 150,000   |         |              |   | 150,000 |        
|                          |                                           |   |           |         |              |   |         |        
|                          |                                           |   | 255,089   |         |              |   | 248,475 |        
|                          | Less current maturities of long-term debt |   |           | (13,418 | )            |   |         | (10,785 | )
|                          |                                           |   |           |         |              |   |         |        
|                          |                                           | $ | 241,671   |         |              | $ | 237,690 |        
|                          |                                           |   |           |         |              |   |         |        

9



---



##### Table of Contents



| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | On September 30, 1997, the Company issued $150 million of 8 5/8% senior
notes (the Notes) through a private placement. Subsequently, the Notes
were registered with the Securities and Exchange Commission. The net
proceeds from the Notes were used to fund the acquisition of Ryder
Automotive Carrier Services, Inc. and RC Management Corp., pay related fees
and expenses, and reduce outstanding indebtedness. The Notes mature on
October 1, 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  | Borrowings under the Notes are general unsecured obligations of the Company.
The Companys obligations under the Notes are guaranteed by substantially
all of the subsidiaries of the Company (the Guarantor Subsidiaries). Haul
Insurance Ltd., Arrendadora de Equipo Para el Transporte de Automoviles, S.
de R.L. de C.V. and Axis Logistica, S. de R.L. de C.V. do not guarantee the
Companys obligations under the Notes (the Nonguarantor Subsidiaries).
There are no restrictions on the ability of Guarantors to make distributions
to the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  | The Notes set forth a number of negative covenants, which are 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 Notes, the Company closed on a revolving
credit facility (the Revolving Credit Facility). The Company also
previously issued $40.0 million of senior subordinated notes (the Senior
Subordinated Notes) through a private placement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  | On February 25, 2002, the Company refinanced the Revolving Credit Facility
and Senior Subordinated Notes with a new credit facility including certain
term loans (the Term Loans) (the new credit facility and the term loans,
collectively, the Credit Facility). Proceeds from the Term Loans were used
to repurchase the $40.0 million of Senior Subordinated Notes for $37.25
million. In conjunction with the extinguishment of this debt, the Company
recognized a pre-tax gain of $2.75 million, during the first quarter of
2002. The Credit Facility includes a revolving credit facility (the
Revolver) that allows the Company to borrow under a revolving line of
credit up to the lesser of $120.0 million or a borrowing base amount as
defined in the Credit Facility. The interest rate for the Revolver is based
upon the prime rate plus 1.5% or LIBOR plus 4.5% at managements discretion
with a minimum interest rate of 6.5%. Annual commitment fees are due on the
undrawn portion of the commitment. At March 31, 2003, $33.1 million was
outstanding under the Revolver, and approximately $19.6 million was
committed under letters of credit. As of March 31, 2003 the Company had
approximately $39.3 million available under the Revolver. The Revolver
matures on February 25, 2005.
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  | Borrowings under the Companys credit facility are collateralized with the
assets of the Company and certain of its subsidiaries. If the Company were
unable to repay any borrowing under its credit facility when due, the
lenders thereunder would have the right to proceed against the collateral
granted to them to secure the debt. Any default under the Companys debt
instruments, particularly any default that resulted in acceleration of
indebtedness or foreclosure on collateral, could have a material adverse
effect on the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  | The Credit Facility includes four Term Loans. Term Loan A is repayable in
installments over three years, with interest payable monthly. Term Loan B is
repayable in installments over three years, with interest payable monthly.
The interest rate on Term Loan B includes PIK interest of 3.5% that will be
payable upon maturity. Term Loan C is payable in full at maturity with
interest payable monthly. The interest rate on Term Loan C also includes PIK
interest of 5.0% that will be payable upon maturity. Term Loan D is payable
in full at maturity with interest payable quarterly.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

10



---



##### Table of Contents



| |  |                                                                              
| |  | -----------------------------------------------------------------------------
| |  | The following table summarizes the terms of the loans in the Credit
Facility:

|                                                         |  |                                                                               |  |                                                                              |  |                                                                          |  |                                                             
|-------------------------------------------------------- |  | ----------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------- |  | ------------------------------------------------------------------------ |  | ------------------------------------------------------------
|                                                         |  | Term Loan A                                                                   |  | Term Loan B                                                                  |  | Term Loan C                                                              |  | Term Loan D                                                 
|                                                         |  |                                                                               |  |                                                                              |  |                                                                          |  |                                                             
|Date of note
Maturity date
Original amount
Interest rate |  | February 25, 2002
February 25, 2005
$17,500,000
Prime + 2.75% or
Min of 7.75% |  | February 25, 2002
February 25, 2005
$25,000,000
Prime + 6.5% or
Min of 11.5% |  | February 25, 2002
February 25, 2005
$11,000,000
Prime + 9% or
Min of 14% |  | February 25, 2002
February 28, 2005
$29,250,000
Prime + 3.5%

|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |  | The Credit Facility agreement 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, sell assets, or declare or pay any dividends on its
capital stock. The financial covenants require the Company to maintain a
minimum consolidated earnings before interest, taxes, depreciation and
amortization, and gains and losses on disposal of operating assets amount
and include maximum leverage and minimum fixed charges coverage ratios. The
Company was in compliance at March 31, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|     |  | There can be no assurance that the Company will be able to comply with these
covenants or its other debt covenants or that if it fails to do so, it will
be able to obtain amendments to or waivers of such covenants. Failure of the
Company to comply with covenants contained in its debt instruments, if not
waived, or to adequately service debt obligations, could result in a default
under the Credit Facility. Any default under the Companys debt instruments,
particularly any default that results in an acceleration of indebtedness or
foreclosure on collateral could have a material adverse effect on the
Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(10) |  | 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, other than those discussed below,
will not have a material adverse effect on the Companys financial position
or results of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|     |  | Gateway Development & Manufacturing, Inc. v. Commercial Carriers, Inc., et
al.,Index No. 1997/8920 (the Gateway Case) and Commercial Carriers, Inc.
v. Gateway Development & Manufacturing, Inc., et al. (the CCI Case), Index
No. 12000/8184. The claims at issue in both the Gateway Case and the CCI
case center around the contention that the Company breached legal duties
with respect to a failed business transaction involving Gateway Development
& Manufacturing, Inc., Ryder Truck Rental, Inc. and Ryder System, Inc. In
the Gateway Case, the Company sought and received summary judgment in its
favor on the sole claim (for tortious interference with contract) asserted
against it by Gateway Development & Manufacturing, Inc., but that ruling was
reversed on appeal. While the appellate court held that summary judgment in
favor of the Company was premature, the Company will be permitted to raise
at trial and/or further dispositive motions the substantive arguments upon
which its initial summary judgment motion was based. Subsequent to its
summary judgment ruling, the trial court permitted the filing and service of
cross-claims against the Company by the other defendants in that action. In
the CCI Case, the Company has accepted service of a separate complaint
asserting claims against the Company by the other defendants in the Gateway
Case. It is anticipated that the claims asserted in both the Gateway Case
and the CCI Case will be resolved in a unified proceeding. With respect to
the entirety of this litigation, the Company intends to continue its
vigorous defense against the claims asserted against it, as management
believes all of those claims are without merit. While the ultimate results
of this litigation cannot be predicted, if this

11



---



##### Table of Contents



|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |  | litigation is resolved in a manner that is adverse to the Company, it could
have a material adverse effect on the Companys consolidated financial
position or results of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|     |  | Ryder System, Inc. v. Allied Holdings, Inc., AH Acquisition Corp. and Allied
Automotive Group, Inc.,Case No. 01-3553-CIV-HUCK in the United States
District Court for the Southern District of Florida, relates to the
Companys August 1997 stock acquisition of certain corporations wholly owned
by Ryder. Through that acquisition, the Company agreed to assume financial
responsibility for certain third-party injury claims arising on or before
the August 1997 closing date. Ryders original complaint was filed on
August 16, 2001. In response, the Company moved to dismiss, and the court
granted that motion with leave for Ryder to amend its complaint. On
December 26, 2001, Ryder timely filed its amended complaint. Following the
dismissal with prejudice of one of the counts asserted by Ryder, Ryder
filed, on or about August 1, 2002, a Second Amended Complaint. Ryders
five-count Second Amended Complaint alleges, in Count one, that the Company
breached its agreement with Ryder by failing to undertake certain actions
(including posting letters of credit and bonds) to substitute the Company
for Ryder under an insurance policy covering third-party claims and with
various states agencies that regulate matters such as self-insured workers
compensation. In Counts two and three, the Second Amended Complaint alleges
that if these obligations are not required by contract, the legal doctrines
of promissory estoppel and negligent misrepresentation created them. In
Count four, the Second Amended Complaint seeks a declaration that the
Company is required to undertake these actions. In Count five, Ryder seeks
a declaration that the Company is obligated to take certain steps to
transfer from Ryder to the Company the ownership and administrative
responsibility for two pension plans. The Company intends to continue its
vigorous defense against the claims asserted against it, as management
believes all of those claims are without merit. The Company has also raised
several counterclaims. The ultimate results of this litigation cannot be
predicted. However, if Ryder prevails on its claims and the court orders
the Company to substitute itself for Ryder by, among other things, posting
substantial letters of credit, it could have a material adverse effect on
the Companys consolidated financial position or results of operations.
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(11) |  | Guarantees and Indemnifications                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|     |  | Guarantees                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    
|     |  | The Company leases office space and certain terminal facilities under
noncancelable and cancelable (i.e. month-to-month terms) operating lease
agreements. Certain of the leases provide for guarantees to restore leased
premises to original conditions at the lessors discretion upon termination
of the leases. With respect to the guarantees that the Company issued in
the three months ended March 31, 2003, the Company assessed the fair value
of its obligation to stand ready to perform under these guarantees by
considering the likelihood of the occurrence of the specified triggering
events or conditions requiring performance as well as other assumptions and
factors. Through internal analysis the Company determined that the fair
value of the guarantees issued in the three months ended March 31, 2003 was
not material to the Companys financial position or results of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|     |  | Indemnifications                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|     |  | The Company enters into indemnification provisions under its
agreements with certain of its customers, suppliers, service
providers, and business partners in
the ordinary course of business. Under these provisions, subject to various
limitations and qualifications, the Company generally indemnifies and holds
harmless the indemnified party for losses suffered or incurred by the
indemnified party as a result of the Companys activities. The
potential losses primarily relate to obligations that are insured
under the Companys insurance programs. These
indemnifications provisions generally survive termination of the underlying
agreement. The maximum potential amount of future payments the Company
could be required to make under these indemnification provisions is
unlimited. The Company has not incurred material costs to defend lawsuits
or settle claims related to these indemnification agreements. As a result,
the estimated fair value of these agreements is minimal. Accordingly, the
Company has no liabilities recorded for these agreements as of March 31,
2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|     |  | In addition, the Company is obligated to indemnify its directors and officers
who are, or were, serving at the Companys request in such capacities,
subject to the Companys By-laws. The maximum potential amount of future
payments that the Company could be required to make under the By-laws is
unlimited; however the Company has Director and Officer insurance policies
that, in most cases, would limit its exposure and enable it to recover a
portion of any future amounts paid. Historically, costs incurred to settle
claims related to these indemnifications have not been material to the
Companys financial position or results of operations, and accordingly, no
liabilities have been recorded for these provisions as of March 31, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(12) |  | Net Income (Loss)
Per Common Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|     |  | SFAS No. 128,
Earnings Per Share, 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 periods 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|     |  | A reconciliation of
net income (loss) and the weighted average number of common shares
outstanding used to calculate basic and diluted net income (loss) per
common share for the three months ended March 31, 2003 and 2002
is as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

|                                                                    |                                                                     |   |                            |       |      |   |        |       |  
|------------------------------------------------------------------- | ------------------------------------------------------------------- | - | -------------------------- | ----- | ---- | - | ------ | ----- | -
|                                                                    |                                                                     |   | For the Three Months Ended
|                                                                    |                                                                     |   | March 31,                 
|                                                                    |                                                                     |   |                           
|                                                                    |                                                                     |   | 2003                       |       | 2002
|                                                                    |                                                                     |   |                            |       |     
|Basic
Earnings Per Share:                                           |                                                                     |   |                            |       |      |   |        |      
|Weighted
average number of common shares outstanding                |                                                                     |   | 8,409                      |       |      |   | 8,252  |      
|                                                                    |                                                                     |   |                            |       |      |   |        |      
|Loss
before cumulative effect of a change in accounting principle   |                                                                     | $ | (5,664                     | )     |      | $ | (1,156 | )    
|Cumulative
effect of a change in accounting principle, net of taxes |                                                                     |   |                           |       |      |   | (4,092 | )    
|                                                                    |                                                                     |   |                            |       |      |   |        |      
|Net
loss                                                            |                                                                     | $ | (5,664                     | )     |      | $ | (5,248 | )    
|                                                                    |                                                                     |   |                            |       |      |   |        |      
|Net
loss per share:                                                 |                                                                     |   |                            |       |      |   |        |      
|                                                                    | Loss
before cumulative effect of a change in accounting principle   |   | $                          | (0.67 | )    |   | $      | (0.14 | )
|                                                                    | Cumulative
effect of a change in accounting principle, net of taxes |   |                            |      |      |   |        | (0.50 | )
|                                                                    |                                                                     |   |                            |       |      |   |        |      
|Net
loss per common share                                           |                                                                     | $ | (0.67                      | )     |      | $ | (0.64  | )    
|                                                                    |                                                                     |   |                            |       |      |   |        |      

|                                                                    |                                                                     |   |                            |       |      |   |        |       |  
|------------------------------------------------------------------- | ------------------------------------------------------------------- | - | -------------------------- | ----- | ---- | - | ------ | ----- | -
|                                                                    |                                                                     |   | For the Three Months Ended
|                                                                    |                                                                     |   | March 31,                 
|                                                                    |                                                                     |   |                           
|                                                                    |                                                                     |   | 2003                       |       | 2002
|                                                                    |                                                                     |   |                            |       |     
|Diluted
Earnings Per Share:                                         |                                                                     |   |                            |       |      |   |        |      
|Weighted
average number of common shares outstanding                |                                                                     |   | 8,409                      |       |      |   | 8,252  |      
|Shares
issued upon assumed exercise of outstanding stock options    |                                                                     |   |                           |       |      |   |       |      
|                                                                    |                                                                     |   |                            |       |      |   |        |      
|Weighted
average number of common and common equivalent shares      |                                                                     |   | 8,409                      |       |      |   | 8,252  |      
|                                                                    |                                                                     |   |                            |       |      |   |        |      
|Loss
before cumulative effect of a change in accounting principle   |                                                                     | $ | (5,664                     | )     |      | $ | (1,156 | )    
|Cumulative
effect of a change in accounting principle, net of taxes |                                                                     |   |                           |       |      |   | (4,092 | )    
|                                                                    |                                                                     |   |                            |       |      |   |        |      
|Net
loss                                                            |                                                                     | $ | (5,664                     | )     |      | $ | (5,248 | )    
|                                                                    |                                                                     |   |                            |       |      |   |        |      
|Net
loss per share:                                                 |                                                                     |   |                            |       |      |   |        |      
|                                                                    | Loss
before cumulative effect of a change in accounting principle   |   | $                          | (0.67 | )    |   | $      | (0.14 | )
|                                                                    | Cumulative
effect of a change in accounting principle, net of taxes |   |                            |      |      |   |        | (0.50 | )
|                                                                    |                                                                     |   |                            |       |      |   |        |      
|Net
loss per common share                                           |                                                                     | $ | (0.67                      | )     |      | $ | (0.64  | )    
|                                                                    |                                                                     |   |                            |       |      |   |        |      

| |  |                                                                                                                                                                                                                                         
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Common stock
equivalents for approximately 326,000 and 293,000 shares outstanding
at March 31, 2003 and 2002, respectively, were excluded from the
calculation of diluted earnings per share as the impact would have
been antidilutive.

12



---



##### Table of Contents



|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(13) |  | Stock Option Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|     |  | The Company applies the intrinsic-value-based method of accounting
prescribed by Accounting Principles Board (APB) Opinion No. 25, Accounting
for Stock Issued to Employees,and related interpretations including FASB
Interpretation No. 44, Accounting for Certain Transactions involving Stock
Compensation, an interpretation of APB Opinion No. 25,issued in March 2000,
to account for its fixed-plan stock options. Under this method, compensation
expense is recorded on the date of grant only if the current market price of
the underlying stock exceeded the exercise price. SFAS No. 123, Accounting
for Stock-Based Compensation,established accounting and disclosure
requirements using a fair-value-based method of accounting for stock-based
employee compensation plans. As allowed by SFAS No. 123, the Company has
elected to continue to apply the intrinsic value based method of accounting
described above, and has adopted only the disclosure requirements SFAS No.
123. The Company did not grant any significant stock options during the
first quarter of 2003. 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, using the Black-Scholes
option pricing valuation model, would have been changed to the pro forma
amounts indicated below at March 31, 2003 and 2002 (in thousands, except per
share data):

|                                                                                                     |                   |   |                            |       |      |   |        |       |  
|---------------------------------------------------------------------------------------------------- | ----------------- | - | -------------------------- | ----- | ---- | - | ------ | ----- | -
|                                                                                                     |                   |   | For the Three Months Ended
|                                                                                                     |                   |   | March 31,                 
|                                                                                                     |                   |   |                           
|                                                                                                     |                   |   | 2003                       |       | 2002
|                                                                                                     |                   |   |                            |       |     
|Reported net loss                                                                                    |                   | $ | (5,664                     | )     |      | $ | (5,248 | )    
|Less: stock-based employee
compensation included in
reported net loss, net of
related taxes          |                   |   | 0                          |       |      |   | 0      |      
|Plus: stock-based employee
compensation determined
under the fair value method,
net of related taxes |                   |   | (124                       | )     |      |   | (133   | )    
|                                                                                                     |                   |   |                            |       |      |   |        |      
|Pro forma net loss                                                                                   |                   | $ | (5,788                     | )     |      | $ | (5,381 | )    
|                                                                                                     |                   |   |                            |       |      |   |        |      
|Loss per share:                                                                                      |                   |   |                            |       |      |   |        |      
|As reported:                                                                                         |                   |   |                            |       |      |   |        |      
|                                                                                                     | Basic and diluted |   | $                          | (0.67 | )    |   | $      | (0.64 | )
|Pro forma:                                                                                           |                   |   |                            |       |      |   |        |      
|                                                                                                     | Basic and diluted |   | $                          | (0.69 | )    |   | $      | (0.65 | )

13



---



##### Table of Contents



|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(14) |  | Comprehensive Income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|     |  | Statement of Financial Accounting Standards (SFAS) No. 130, Reporting
Comprehensive Income, requires companies to report all changes in equity
during a period, except those resulting from investment by owners and
distribution to owners. The Company had a comprehensive loss of $3.6
million in the first quarter of 2003 versus a comprehensive loss of $5.4
million in the first quarter of 2002. The difference between comprehensive
loss and net loss is the foreign currency translation adjustment and minimum
pension liability, net of income taxes.                                                                                                                                                                                                                                                                                                                                       
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(15) |  | Industry Segment and Geographic Information                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|     |  | In accordance with the requirements of SFAS No. 131, Disclosure About
Segments of an Enterprise and Related Information, the Company has
identified two reportable industry segments through which it conducts its
operating activities: Allied Automotive Group and Axis Group. These two
segments reflect the organization used by management for internal reporting.
Allied Automotive Group is engaged in the business of transporting
automobiles, light trucks and SUVs from manufacturing plants, ports,
auctions, and railway distribution points to automobile dealerships. Axis
Group, through its subsidiaries, is engaged in the business of securing and
managing vehicle distribution services, automobile inspections, auction and
yard management services, intra-modal transport, vehicle tracking, vehicle
accessorization, and dealer preparatory services for the automotive
industry.

14



---



##### Table of Contents



|                                   |                                                                                  |  |                            |         |      |  |   |         |  
|---------------------------------- | -------------------------------------------------------------------------------- |  | -------------------------- | ------- | ---- |  | - | ------- | -
|                                   |                                                                                  |  | For the Three Months Ended
|                                   |                                                                                  |  | March 31,                 
|                                   |                                                                                  |  |                           
|                                   |                                                                                  |  | 2003                       |         | 2002
|                                   |                                                                                  |  |                            |         |     
|Revenues  unaffiliated customers: |                                                                                  |  |                            |         |      |  |   |        
|                                   | Allied Automotive Group                                                          |  | $                          | 206,202 |      |  | $ | 206,610 |  
|                                   | Axis Group                                                                       |  |                            | 7,390   |      |  |   | 6,649   |  
|                                   | Corporate/other                                                                  |  |                            | 0       |      |  |   | 0       |  
|                                   |                                                                                  |  |                            |         |      |  |   |        
|                                   | Total                                                                            |  | $                          | 213,592 |      |  | $ | 213,259 |  
|                                   |                                                                                  |  |                            |         |      |  |   |        
|Depreciation and amortization:     |                                                                                  |  |                            |         |      |  |   |        
|                                   | Allied Automotive Group                                                          |  | $                          | 10,411  |      |  | $ | 12,190  |  
|                                   | Axis Group                                                                       |  |                            | 736     |      |  |   | 707     |  
|                                   | Corporate/other                                                                  |  |                            | 877     |      |  |   | 766     |  
|                                   |                                                                                  |  |                            |         |      |  |   |        
|                                   | Total                                                                            |  | $                          | 12,024  |      |  | $ | 13,663  |  
|                                   |                                                                                  |  |                            |         |      |  |   |        
|Operating (loss) profit:           |                                                                                  |  |                            |         |      |  |   |        
|                                   | Allied Automotive Group                                                          |  | $                          | (1,077  | )    |  | $ | 5,569   |  
|                                   | Axis Group                                                                       |  |                            | 671     |      |  |   | 112     |  
|                                   | Corporate/other                                                                  |  |                            | (1,310  | )    |  |   | (1,953  | )
|                                   |                                                                                  |  |                            |         |      |  |   |        
|                                   | Total                                                                            |  | $                          | (1,716  | )    |  | $ | 3,728   |  
|Reconciling items:                 |                                                                                  |  |                            |         |      |  |   |        
|                                   | Interest expense                                                                 |  | $                          | (7,381  | )    |  | $ | (8,122  | )
|                                   | Interest income                                                                  |  |                            | 326     |      |  |   | 272     |  
|                                   | Gain on early extinguishment of debt                                             |  |                            | 0       |      |  |   | 2,750   |  
|                                   | Foreign exchange gains, net                                                      |  |                            | 1,018   |      |  |   | 37      |  
|                                   | Other, net                                                                       |  |                            | 0       |      |  |   | (207    | )
|                                   |                                                                                  |  |                            |         |      |  |   |        
|                                   | Loss before income taxes and
cumulative effect of change
in accounting principle |  | $                          | (7,753  | )    |  | $ | (1,542  | )
|                                   |                                                                                  |  |                            |         |      |  |   |        

|              |                         |  |           |         |              |  |   |         | 
|------------- | ----------------------- |  | --------- | ------- | ------------ |  | - | ------- | 
|              |                         |  | March 31, |         | December 31,
|              |                         |  | 2003      |         | 2002        
|              |                         |  |           |         |             
|Total Assets: |                         |  |           |         |              |  |   |        
|              | Allied Automotive Group |  | $         | 297,877 |              |  | $ | 296,935 | 
|              | Axis Group              |  |           | 32,498  |              |  |   | 35,663  | 
|              | Corporate/other         |  |           | 143,153 |              |  |   | 152,910 | 
|              |                         |  |           |         |              |  |   |        
|              | Total                   |  | $         | 473,528 |              |  | $ | 485,508 | 
|              |                         |  |           |         |              |  |   |        

|                      |                         |  |                            |       |      |  |   |       | 
|--------------------- | ----------------------- |  | -------------------------- | ----- | ---- |  | - | ----- | 
|                      |                         |  | For the Three Months Ended
|                      |                         |  | March 31,                 
|                      |                         |  |                           
|                      |                         |  | 2003                       |       | 2002
|                      |                         |  |                            |       |     
|Capital expenditures: |                         |  |                            |       |      |  |   |      
|                      | Allied Automotive Group |  | $                          | 5,693 |      |  | $ | 2,608 | 
|                      | Axis Group              |  |                            | 158   |      |  |   | 18    | 
|                      | Corporate/other         |  |                            | 27    |      |  |   | 0     | 
|                      |                         |  |                            |       |      |  |   |      
|                      | Total                   |  | $                          | 5,878 |      |  | $ | 2,626 | 
|                      |                         |  |                            |       |      |  |   |      

15



---



##### Table of Contents



| |  |                                                                                                          
| |  | ---------------------------------------------------------------------------------------------------------
| |  | Geographical information for the three months ended March 31, 2003 and 2002
is as follows (in thousands):

|              |  |                        |         |      |  |   |         | 
|------------- |  | ---------------------- | ------- | ---- |  | - | ------- | 
|              |  | For Three Months Ended
|              |  | March 31,             
|              |  |                       
|              |  | 2003                   |         | 2002
|              |  |                        |         |     
|Revenues:     |  |                        |         |      |  |   |         | 
|United States |  | $                      | 176,205 |      |  | $ | 178,228 | 
|Canada        |  |                        | 37,387  |      |  |   | 35,031  | 
|              |  |                        |         |      |  |   |         | 
|Total         |  | $                      | 213,592 |      |  | $ | 213,259 | 
|              |  |                        |         |      |  |   |         | 

|                   |  |           |         |              |  |   |         | 
|------------------ |  | --------- | ------- | ------------ |  | - | ------- | 
|                   |  | March 31, |         | December 31,
|                   |  | 2003      |         | 2002        
|                   |  |           |         |             
|Long-lived assets: |  |           |         |              |  |   |         | 
|United States      |  | $         | 217,818 |              |  | $ | 224,119 | 
|Canada             |  |           | 61,182  |              |  |   | 58,310  | 
|                   |  |           |         |              |  |   |         | 
|Total              |  | $         | 279,000 |              |  | $ | 282,429 | 
|                   |  |           |         |              |  |   |         | 

|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |  | Revenues are attributed to the respective countries based on the location of
the origination terminal.                                                                                                                                                                                                                                                                                                                                                                                                                   
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|     |  | Substantially all of the Companys revenues and receivables are realized
through the automotive industry in the Allied Automotive Group.                                                                                                                                                                                                                                                                                                                                                                                 
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(16) |  | Supplemental Guarantor Information                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|     |  | The following consolidating balance sheet information, statements of
operations information, and statements of cash flows information present the
financial statement information of the parent company and the combined
financial statements information of the Guarantor subsidiaries and
Nonguarantor Subsidiaries. The Guarantors are jointly and severally liable
for the Companys obligations under the Notes and there are no restrictions
on the ability of the Guarantors to make distributions to the Company.

16



---



##### Table of Contents



SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION
MARCH 31, 2003
In Thousands

|                                            |                                                     |              |                                            |                            |         |          |         |              |         |              |         |              |        |              |         |          |          |          |          |         |         |         |         | 
|------------------------------------------- | --------------------------------------------------- | ------------ | ------------------------------------------ | -------------------------- | ------- | -------- | ------- | ------------ | ------- | ------------ | ------- | ------------ | ------ | ------------ | ------- | -------- | -------- | -------- | -------- | ------- | ------- | ------- | ------- | 
|                                            |                                                     |              |                                            |                            |         | ALLIED   |         | GUARANTOR    |         | NONGUARANTOR |         |              |        |              |         |          |          |         
|                                            |                                                     |              |                                            |                            |         | HOLDINGS |         | SUBSIDIARIES |         | SUBSIDIARIES |         | ELIMINATIONS |        | CONSOLIDATED
|                                            |                                                     |              |                                            |                            |         |          |         |              |         |              |         |              |        |             
|CURRENT ASSETS:                             |                                                     |              |                                            |                            |         |          |         |              |         |              |         |              |        |              |         |          |          |          |          |        
|                                            | Cash and cash equivalents                           |              | $                                          |                           |         |          | $       | 1,158        |         |              | $       | 4,590        |        |              | $       |         |          |          | $        | 5,748   |        
|                                            | Short-term investments                              |              |                                            |                           |         |          |         |             |         |              |         | 63,174       |        |              |         |         |          |          |          | 63,174  |        
|                                            | Receivables, net of allowance for doubtful accounts |              |                                            |                           |         |          |         | 53,064       |         |              |         | 2,030        |        |              |         |         |          |          |          | 55,094  |        
|                                            | Inventories                                         |              |                                            |                           |         |          |         | 5,237        |         |              |         |             |        |              |         |         |          |          |          | 5,237   |        
|                                            | Deferred tax asset  current                        |              |                                            | 32,478                     |         |          |         | 2,223        |         |              |         |             |        |              |         |         |          |          |          | 34,701  |        
|                                            | Prepayments and other current assets                |              |                                            | 16,173                     |         |          |         | 14,153       |         |              |         | 248          |        |              |         |         |          |          |          | 30,574  |        
|                                            |                                                     |              |                                            |                            |         |          |         |              |         |              |         |              |        |              |         |          |          |          |          |        
|                                            |                                                     |              |                                            | Total current assets       |         |          | 48,651  |              |         |              | 75,835  |              |        |              | 70,042  |          |          |          |         |         |         |         | 194,528 | 
|                                            |                                                     |              |                                            |                            |         |          |         |              |         |              |         |              |        |              |         |          |          |          |          |        
|PROPERTY AND EQUIPMENT, NET                 |                                                     |              | 8,291                                      |                            |         |          | 161,341 |              |         |              | 3,176   |              |        |              |        |          |          |          | 172,808  |        
|OTHER ASSETS:                               |                                                     |              |                                            |                            |         |          |         |              |         |              |         |              |        |              |         |          |          |          |          |        
|                                            | Goodwill, net                                       |              |                                            | 1,515                      |         |          |         | 85,352       |         |              |         |             |        |              |         |         |          |          |          | 86,867  |        
|                                            | Other                                               |              |                                            | 16,329                     |         |          |         | 2,112        |         |              |         | 884          |        |              |         |         |          |          |          | 19,325  |        
|                                            | Deferred tax asset  noncurrent                     |              |                                            | 15,699                     |         |          |         |             |         |              |         |             |        |              |         | (15,699  | )        |          |          |        |        
|                                            | Intercompany receivables                            |              |                                            | 56,658                     |         |          |         |             |         |              |         |             |        |              |         | (56,658  | )        |          |          |        |        
|                                            | Investment in subsidiaries                          |              |                                            | 24,984                     |         |          |         | 5,230        |         |              |         |             |        |              |         | (30,214  | )        |          |          |        |        
|                                            |                                                     |              |                                            |                            |         |          |         |              |         |              |         |              |        |              |         |          |          |          |          |        
|                                            |                                                     |              |                                            | Total other assets         |         |          | 115,185 |              |         |              | 92,694  |              |        |              | 884     |          |          |          | (102,571 | )       |         |         | 106,192 | 
|                                            |                                                     |              |                                            |                            |         |          |         |              |         |              |         |              |        |              |         |          |          |          |          |        
|                                            |                                                     | Total assets |                                            | $                          | 172,127 |          |         | $            | 329,870 |              |         | $            | 74,102 |              |         | $        | (102,571 | )        |          | $       | 473,528 |        
|                                            |                                                     |              |                                            |                            |         |          |         |              |         |              |         |              |        |              |         |          |          |          |          |        
|CURRENT LIABILITIES:                        |                                                     |              |                                            |                            |         |          |         |              |         |              |         |              |        |              |         |          |          |          |          |        
|                                            | Current maturities of long-term debt                |              | $                                          |                           |         |          | $       | 13,418       |         |              | $       |             |        |              | $       |         |          |          | $        | 13,418  |        
|                                            | Trade accounts payable                              |              |                                            | 2,802                      |         |          |         | 29,256       |         |              |         | 324          |        |              |         |         |          |          |          | 32,382  |        
|                                            | Intercompany payables                               |              |                                            |                           |         |          |         | 56,485       |         |              |         | 173          |        |              |         | (56,658  | )        |          |          |        |        
|                                            | Accrued liabilities                                 |              |                                            | 11,518                     |         |          |         | 66,759       |         |              |         | 13,691       |        |              |         |         |          |          |          | 91,968  |        
|                                            |                                                     |              |                                            |                            |         |          |         |              |         |              |         |              |        |              |         |          |          |          |          |        
|                                            |                                                     |              |                                            | Total current liabilities  |         |          | 14,320  |              |         |              | 165,918 |              |        |              | 14,188  |          |          |          | (56,658  | )       |         |         | 137,768 | 
|                                            |                                                     |              |                                            |                            |         |          |         |              |         |              |         |              |        |              |         |          |          |          |          |        
|LONG-TERM DEBT, less current maturities     |                                                     |              | 150,000                                    |                            |         |          | 91,671  |              |         |              |        |              |        |              |        |          |          |          | 241,671  |        
|POSTRETIREMENT BENEFITS OTHER THAN PENSIONS |                                                     |              |                                           |                            |         |          | 7,370   |              |         |              |        |              |        |              |        |          |          |          | 7,370    |        
|DEFERRED INCOME TAXES                       |                                                     |              |                                           |                            |         |          | 34,669  |              |         |              | 448     |              |        |              | (15,699 | )        |          |          | 19,418   |        
|OTHER LONG-TERM LIABILITIES                 |                                                     |              | 1,031                                      |                            |         |          | 26,765  |              |         |              | 32,729  |              |        |              |        |          |          |          | 60,525   |        
|STOCKHOLDERS EQUITY:                       |                                                     |              |                                            |                            |         |          |         |              |         |              |         |              |        |              |         |          |          |          |          |        
|                                            | Common stock, no par value                          |              |                                            |                           |         |          |         |             |         |              |         |             |        |              |         |         |          |          |          |        |        
|                                            | Additional paid-in capital                          |              |                                            | 46,918                     |         |          |         | 166,130      |         |              |         | 2,488        |        |              |         | (168,618 | )        |          |          | 46,918  |        
|                                            | Treasury stock                                      |              |                                            | (707                       | )       |          |         |             |         |              |         |             |        |              |         |         |          |          |          | (707    | )      
|                                            | Retained (deficit) earnings                         |              |                                            | (32,084                    | )       |          |         | (150,353     | )       |              |         | 24,249       |        |              |         | 126,106  |          |          |          | (32,084 | )      
|                                            | Accumulated other comprehensive loss, net of tax    |              |                                            | (7,351                     | )       |          |         | (12,300      | )       |              |         |             |        |              |         | 12,298   |          |          |          | (7,351  | )      
|                                            |                                                     |              |                                            |                            |         |          |         |              |         |              |         |              |        |              |         |          |          |          |          |        
|                                            |                                                     |              |                                            | Total stockholders equity |         |          | 6,776   |              |         |              | 3,477   |              |        |              | 26,737  |          |          |          | (30,214  | )       |         |         | 6,776   | 
|                                            |                                                     |              |                                            |                            |         |          |         |              |         |              |         |              |        |              |         |          |          |          |          |        
|                                            |                                                     |              | Total liabilities and stockholders equity |                            | $       | 172,127  |         |              | $       | 329,870      |         |              | $      | 74,102       |         |          | $        | (102,571 | )        |         | $       | 473,528 |        
|                                            |                                                     |              |                                            |                            |         |          |         |              |         |              |         |              |        |              |         |          |          |          |          |        

17



---



##### Table of Contents



SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION
DECEMBER 31, 2002
In Thousands

|                                            |                                                     |                                            |                            |                           |         |          |         |              |         |              |         |              |        |              |        |          |         |         |         |         |         |        |         | 
|------------------------------------------- | --------------------------------------------------- | ------------------------------------------ | -------------------------- | ------------------------- | ------- | -------- | ------- | ------------ | ------- | ------------ | ------- | ------------ | ------ | ------------ | ------ | -------- | ------- | ------- | ------- | ------- | ------- | ------ | ------- | 
|                                            |                                                     |                                            |                            |                           |         | ALLIED   |         | GUARANTOR    |         | NONGUARANTOR |         |              |        |              |        |          |         |        
|                                            |                                                     |                                            |                            |                           |         | HOLDINGS |         | SUBSIDIARIES |         | SUBSIDIARIES |         | ELIMINATIONS |        | CONSOLIDATED
|                                            |                                                     |                                            |                            |                           |         |          |         |              |         |              |         |              |        |             
|CURRENT ASSETS:                             |                                                     |                                            |                            |                           |         |          |         |              |         |              |         |              |        |              |        |          |         |         |         |        
|                                            | Cash and cash equivalents                           |                                            | $                          | 7                         |         |          | $       | 1,936        |         |              | $       | 8,310        |        |              | $      |         |         |         | $       | 10,253  |        
|                                            | Short-term investments                              |                                            |                            |                          |         |          |         |             |         |              |         | 60,732       |        |              |        |         |         |         |         | 60,732  |        
|                                            | Receivables, net of allowance for doubtful accounts |                                            |                            |                          |         |          |         | 56,003       |         |              |         | 2,509        |        |              |        |         |         |         |         | 58,512  |        
|                                            | Inventories                                         |                                            |                            |                          |         |          |         | 5,071        |         |              |         |             |        |              |        |         |         |         |         | 5,071   |        
|                                            | Deferred tax assets                                 |                                            |                            | 37,615                    |         |          |         | 2,211        |         |              |         |             |        |              |        |         |         |         |         | 39,826  |        
|                                            | Prepayments and other current assets                |                                            |                            | 17,645                    |         |          |         | 10,826       |         |              |         | 214          |        |              |        |         |         |         |         | 28,685  |        
|                                            |                                                     |                                            |                            |                           |         |          |         |              |         |              |         |              |        |              |        |          |         |         |         |         |        
|                                            |                                                     |                                            |                            | Total current assets      |         |          | 55,267  |              |         |              | 76,047  |              |        |              | 71,765 |          |         |         |        |         |         |        | 203,079 | 
|                                            |                                                     |                                            |                            |                           |         |          |         |              |         |              |         |              |        |              |        |          |         |         |         |         |        
|PROPERTY AND EQUIPMENT, NET                 |                                                     |                                            | 8,957                      |                           |         |          | 164,501 |              |         |              | 3,205   |              |        |              |       |          |         |         | 176,663 |        
|OTHER ASSETS:                               |                                                     |                                            |                            |                           |         |          |         |              |         |              |         |              |        |              |        |          |         |         |         |        
|                                            | Goodwill, net                                       |                                            |                            | 1,515                     |         |          |         | 83,726       |         |              |         |             |        |              |        |         |         |         |         | 85,241  |        
|                                            | Other                                               |                                            |                            | 16,860                    |         |          |         | 2,743        |         |              |         | 922          |        |              |        |         |         |         |         | 20,525  |        
|                                            | Deferred tax asset                                  |                                            |                            | 7,445                     |         |          |         |             |         |              |         |             |        |              |        | (7,445   | )       |         |         |        |        
|                                            | Intercompany receivables                            |                                            |                            | 55,952                    |         |          |         |             |         |              |         | 91           |        |              |        | (56,043  | )       |         |         |        |        
|                                            | Investment in subsidiaries                          |                                            |                            | 28,466                    |         |          |         | 5,111        |         |              |         |             |        |              |        | (33,577  | )       |         |         |        |        
|                                            |                                                     |                                            |                            |                           |         |          |         |              |         |              |         |              |        |              |        |          |         |         |         |         |        
|                                            |                                                     |                                            |                            | Total other assets        |         |          | 110,238 |              |         |              | 91,580  |              |        |              | 1,013  |          |         |         | (97,065 | )       |         |        | 105,766 | 
|                                            |                                                     |                                            |                            |                           |         |          |         |              |         |              |         |              |        |              |        |          |         |         |         |         |        
|                                            |                                                     |                                            |                            | Total assets              |         | $        | 174,462 |              |         | $            | 332,128 |              |        | $            | 75,983 |          |         | $       | (97,065 | )       |         | $      | 485,508 | 
|                                            |                                                     |                                            |                            |                           |         |          |         |              |         |              |         |              |        |              |        |          |         |         |         |         |        
|CURRENT LIABILITIES:                        |                                                     |                                            |                            |                           |         |          |         |              |         |              |         |              |        |              |        |          |         |         |         |        
|                                            | Current maturities of long-term debt                |                                            | $                          |                          |         |          | $       | 10,785       |         |              | $       |             |        |              | $      |         |         |         | $       | 10,785  |        
|                                            | Trade accounts payable                              |                                            |                            | 3,362                     |         |          |         | 32,930       |         |              |         | 293          |        |              |        |         |         |         |         | 36,585  |        
|                                            | Intercompany payables                               |                                            |                            |                          |         |          |         | 56,043       |         |              |         |             |        |              |        | (56,043  | )       |         |         |        |        
|                                            | Accrued liabilities                                 |                                            |                            | 9,755                     |         |          |         | 63,835       |         |              |         | 19,291       |        |              |        |         |         |         |         | 92,881  |        
|                                            |                                                     |                                            |                            |                           |         |          |         |              |         |              |         |              |        |              |        |          |         |         |         |         |        
|                                            |                                                     |                                            |                            | Total current liabilities |         |          | 13,117  |              |         |              | 163,593 |              |        |              | 19,584 |          |         |         | (56,043 | )       |         |        | 140,251 | 
|                                            |                                                     |                                            |                            |                           |         |          |         |              |         |              |         |              |        |              |        |          |         |         |         |         |        
|LONG-TERM DEBT, less current maturities     |                                                     |                                            | 150,000                    |                           |         |          | 87,690  |              |         |              |        |              |        |              |       |          |         |         | 237,690 |        
|POSTRETIREMENT BENEFITS OTHER THAN PENSIONS |                                                     |                                            |                           |                           |         |          | 7,467   |              |         |              |        |              |        |              |       |          |         |         | 7,467   |        
|DEFERRED INCOME TAXES                       |                                                     |                                            |                           |                           |         |          | 34,743  |              |         |              | 448     |              |        |              | (7,445 | )        |         |         | 27,746  |        
|OTHER LONG-TERM LIABILITIES                 |                                                     |                                            | 1,031                      |                           |         |          | 31,572  |              |         |              | 29,437  |              |        |              |       |          |         |         | 62,040  |        
|STOCKHOLDERS EQUITY:                       |                                                     |                                            |                            |                           |         |          |         |              |         |              |         |              |        |              |        |          |         |         |         |        
|                                            | Common stock, no par value                          |                                            |                            |                          |         |          |         |             |         |              |         |             |        |              |        |         |         |         |         |        |        
|                                            | Additional paid-in capital                          |                                            |                            | 46,801                    |         |          |         | 166,130      |         |              |         | 2,488        |        |              |        | (168,618 | )       |         |         | 46,801  |        
|                                            | Treasury stock                                      |                                            |                            | (707                      | )       |          |         |             |         |              |         |             |        |              |        |         |         |         |         | (707    | )      
|                                            | Retained (deficit) earnings                         |                                            |                            | (26,420                   | )       |          |         | (146,278     | )       |              |         | 24,026       |        |              |        | 122,252  |         |         |         | (26,420 | )      
|                                            | Accumulated other comprehensive loss, net of tax    |                                            |                            | (9,360                    | )       |          |         | (12,789      | )       |              |         |             |        |              |        | 12,789   |         |         |         | (9,360  | )      
|                                            |                                                     |                                            |                            |                           |         |          |         |              |         |              |         |              |        |              |        |          |         |         |         |         |        
|                                            |                                                     |                                            | Total stockholders equity |                           |         | 10,314   |         |              |         | 7,063        |         |              |        | 26,514       |        |          |         | (33,577 | )       |         |         | 10,314 |        
|                                            |                                                     |                                            |                            |                           |         |          |         |              |         |              |         |              |        |              |        |          |         |         |         |         |        
|                                            |                                                     | Total liabilities and stockholders equity |                            | $                         | 174,462 |          |         | $            | 332,128 |              |         | $            | 75,983 |              |        | $        | (97,065 | )       |         | $       | 485,508 |       
|                                            |                                                     |                                            |                            |                           |         |          |         |              |         |              |         |              |        |              |        |          |         |         |         |         |        

18



---



##### Table of Contents



SUPPLEMENTAL CONDENSED CONSOLIDATED INCOME STATEMENT INFORMATION
THREE MONTHS ENDED MARCH 31, 2003
In Thousands

|                                  |                                             |                          |        |          |        |              |         |              |         |              |       |              |       |   |         |        |         |   |         |         |         |  
|--------------------------------- | ------------------------------------------- | ------------------------ | ------ | -------- | ------ | ------------ | ------- | ------------ | ------- | ------------ | ----- | ------------ | ----- | - | ------- | ------ | ------- | - | ------- | ------- | ------- | -
|                                  |                                             |                          |        | ALLIED   |        | GUARANTOR    |         | NONGUARANTOR |         |              |       |              |       |   |         |       
|                                  |                                             |                          |        | HOLDINGS |        | SUBSIDIARIES |         | SUBSIDIARIES |         | ELIMINATIONS |       | CONSOLIDATED
|                                  |                                             |                          |        |          |        |              |         |              |         |              |       |             
|REVENUES                          |                                             | $                        | 6,806  |          |        | $            | 213,250 |              |         | $            | 9,022 |              |       | $ | (15,486 | )      |         | $ | 213,592 |        
|                                  |                                             |                          |        |          |        |              |         |              |         |              |       |              |       |   |         |        |         |   |         |        
|OPERATING EXPENSES:               |                                             |                          |        |          |        |              |         |              |         |              |       |              |       |   |         |        |         |   |         |        
|                                  | Salaries, wages and fringe benefits         |                          |        | 2,610    |        |              |         | 114,965      |         |              |       |             |       |   |         |       |         |   |         | 117,575 |        
|                                  | Operating supplies and expenses             |                          |        | 2,233    |        |              |         | 34,895       |         |              |       | 52           |       |   |         |       |         |   |         | 37,180  |        
|                                  | Purchased transportation                    |                          |        |         |        |              |         | 24,713       |         |              |       |             |       |   |         |       |         |   |         | 24,713  |        
|                                  | Insurance and claims                        |                          |        |         |        |              |         | 9,511        |         |              |       | 8,526        |       |   |         | (8,680 | )       |   |         | 9,357   |        
|                                  | Operating taxes and licenses                |                          |        | 65       |        |              |         | 7,773        |         |              |       |             |       |   |         |       |         |   |         | 7,838   |        
|                                  | Depreciation and amortization               |                          |        | 878      |        |              |         | 11,026       |         |              |       | 120          |       |   |         |       |         |   |         | 12,024  |        
|                                  | Rents                                       |                          |        | 478      |        |              |         | 1,140        |         |              |       | 2            |       |   |         |       |         |   |         | 1,620   |        
|                                  | Communications and utilities                |                          |        | 935      |        |              |         | 950          |         |              |       | 3            |       |   |         |       |         |   |         | 1,888   |        
|                                  | Other operating expenses                    |                          |        | 979      |        |              |         | 8,576        |         |              |       | 100          |       |   |         | (6,806 | )       |   |         | 2,849   |        
|                                  | Loss on disposal of operating assets, net   |                          |        |         |        |              |         | 264          |         |              |       |             |       |   |         |       |         |   |         | 264     |        
|                                  |                                             |                          |        |          |        |              |         |              |         |              |       |              |       |   |         |        |         |   |         |        
|                                  |                                             | Total operating expenses |        |          | 8,178  |              |         |              | 213,813 |              |       |              | 8,803 |   |         |        | (15,486 | ) |         |         | 215,308 |  
|                                  |                                             |                          |        |          |        |              |         |              |         |              |       |              |       |   |         |        |         |   |         |        
|                                  |                                             | Operating (loss) income  |        |          | (1,372 | )            |         |              | (563    | )            |       |              | 219   |   |         |        |        |   |         |         | (1,716  | )
|                                  |                                             |                          |        |          |        |              |         |              |         |              |       |              |       |   |         |        |         |   |         |        
|OTHER INCOME (EXPENSE):           |                                             |                          |        |          |        |              |         |              |         |              |       |              |       |   |         |        |         |   |         |        
|                                  | Interest expense                            |                          |        | (3,299   | )      |              |         | (5,107       | )       |              |       | (48          | )     |   |         | 1,073  |         |   |         | (7,381  | )      
|                                  | Interest income                             |                          |        | 1,073    |        |              |         | 21           |         |              |       | 305          |       |   |         | (1,073 | )       |   |         | 326     |        
|                                  | Intercompany dividends                      |                          |        |         |        |              |         |             |         |              |       |             |       |   |         |       |         |   |         |        |        
|                                  | Foreign exchange gains, net                 |                          |        |         |        |              |         | 1,089        |         |              |       | (71          | )     |   |         |       |         |   |         | 1,018   |        
|                                  | Equity in (losses) earnings of subsidiaries |                          |        | (3,972   | )      |              |         | 120          |         |              |       |             |       |   |         | 3,852  |         |   |         |        |        
|                                  |                                             |                          |        |          |        |              |         |              |         |              |       |              |       |   |         |        |         |   |         |        
|                                  |                                             |                          | (6,198 | )        |        |              | (3,877  | )            |         |              | 186   |              |       |   | 3,852   |        |         |   | (6,037  | )      
|                                  |                                             |                          |        |          |        |              |         |              |         |              |       |              |       |   |         |        |         |   |         |        
|(LOSS) INCOME BEFORE INCOME TAXES |                                             |                          | (7,570 | )        |        |              | (4,440  | )            |         |              | 405   |              |       |   | 3,852   |        |         |   | (7,753  | )      
|INCOME TAX BENEFIT (EXPENSE)      |                                             |                          | 1,906  |          |        |              | 365     |              |         |              | (182  | )            |       |   |        |        |         |   | 2,089   |        
|                                  |                                             |                          |        |          |        |              |         |              |         |              |       |              |       |   |         |        |         |   |         |        
|NET (LOSS) INCOME                 |                                             | $                        | (5,664 | )        |        | $            | (4,075  | )            |         | $            | 223   |              |       | $ | 3,852   |        |         | $ | (5,664  | )      
|                                  |                                             |                          |        |          |        |              |         |              |         |              |       |              |       |   |         |        |         |   |         |        

SUPPLEMENTAL CONDENSED CONSOLIDATED INCOME STATEMENT INFORMATION
THREE MONTHS ENDED MARCH 31, 2002
In Thousands

|                                                                                          |                                             |                          |        |          |        |              |         |              |         |              |       |              |       |   |         |        |         |   |         |         |         | 
|----------------------------------------------------------------------------------------- | ------------------------------------------- | ------------------------ | ------ | -------- | ------ | ------------ | ------- | ------------ | ------- | ------------ | ----- | ------------ | ----- | - | ------- | ------ | ------- | - | ------- | ------- | ------- | 
|                                                                                          |                                             |                          |        | ALLIED   |        | GUARANTOR    |         | NONGUARANTOR |         |              |       |              |       |   |         |       
|                                                                                          |                                             |                          |        | HOLDINGS |        | SUBSIDIARIES |         | SUBSIDIARIES |         | ELIMINATIONS |       | CONSOLIDATED
|                                                                                          |                                             |                          |        |          |        |              |         |              |         |              |       |             
|REVENUES                                                                                  |                                             | $                        | 2,535  |          |        | $            | 212,767 |              |         | $            | 9,622 |              |       | $ | (11,665 | )      |         | $ | 213,259 |        
|                                                                                          |                                             |                          |        |          |        |              |         |              |         |              |       |              |       |   |         |        |         |   |         |        
|OPERATING EXPENSES:                                                                       |                                             |                          |        |          |        |              |         |              |         |              |       |              |       |   |         |        |         |   |         |        
|                                                                                          | Salaries, wages and fringe benefits         |                          |        | 1,476    |        |              |         | 117,060      |         |              |       |             |       |   |         |       |         |   |         | 118,536 |        
|                                                                                          | Operating supplies and expenses             |                          |        | 326      |        |              |         | 30,540       |         |              |       | 39           |       |   |         |       |         |   |         | 30,905  |        
|                                                                                          | Purchased transportation                    |                          |        |         |        |              |         | 21,580       |         |              |       |             |       |   |         |       |         |   |         | 21,580  |        
|                                                                                          | Insurance and claims                        |                          |        |         |        |              |         | 10,571       |         |              |       | 9,130        |       |   |         | (9,130 | )       |   |         | 10,571  |        
|                                                                                          | Operating taxes and licenses                |                          |        | 54       |        |              |         | 8,409        |         |              |       |             |       |   |         |       |         |   |         | 8,463   |        
|                                                                                          | Depreciation and amortization               |                          |        | 766      |        |              |         | 12,778       |         |              |       | 119          |       |   |         |       |         |   |         | 13,663  |        
|                                                                                          | Rents                                       |                          |        | 423      |        |              |         | 1,128        |         |              |       | 2            |       |   |         |       |         |   |         | 1,553   |        
|                                                                                          | Communications and utilities                |                          |        | 185      |        |              |         | 1,804        |         |              |       | 3            |       |   |         |       |         |   |         | 1,992   |        
|                                                                                          | Other operating expenses                    |                          |        | 1,165    |        |              |         | 4,581        |         |              |       | 86           |       |   |         | (2,535 | )       |   |         | 3,297   |        
|                                                                                          | Gain on disposal of operating assets, net   |                          |        |          |        |              |         | (1,029       | )       |              |       |              |       |   |         |        |         |   |         | (1,029  | )      
|                                                                                          |                                             |                          |        |          |        |              |         |              |         |              |       |              |       |   |         |        |         |   |         |        
|                                                                                          |                                             | Total operating expenses |        |          | 4,395  |              |         |              | 207,422 |              |       |              | 9,379 |   |         |        | (11,665 | ) |         |         | 209,531 | 
|                                                                                          |                                             |                          |        |          |        |              |         |              |         |              |       |              |       |   |         |        |         |   |         |        
|                                                                                          |                                             | Operating (loss) income  |        |          | (1,860 | )            |         |              | 5,345   |              |       |              | 243   |   |         |        |        |   |         |         | 3,728   | 
|                                                                                          |                                             |                          |        |          |        |              |         |              |         |              |       |              |       |   |         |        |         |   |         |        
|OTHER INCOME (EXPENSE):                                                                   |                                             |                          |        |          |        |              |         |              |         |              |       |              |       |   |         |        |         |   |         |        
|                                                                                          | Interest expense                            |                          |        | (2,180   | )      |              |         | (5,853       | )       |              |       | (89          | )     |   |         |       |         |   |         | (8,122  | )      
|                                                                                          | Interest income                             |                          |        |         |        |              |         | (35          | )       |              |       | 307          |       |   |         |       |         |   |         | 272     |        
|                                                                                          | Gain on early extinguishment of debt        |                          |        | 2,750    |        |              |         |             |         |              |       |             |       |   |         |       |         |   |         | 2,750   |        
|                                                                                          | Intercompany dividends                      |                          |        | 160      |        |              |         | (160         | )       |              |       |             |       |   |         |       |         |   |         |        |        
|                                                                                          | Foreign exchange gains, net                 |                          |        |         |        |              |         | 37           |         |              |       |             |       |   |         |       |         |   |         | 37      |        
|                                                                                          | Other, net                                  |                          |        |         |        |              |         |             |         |              |       | (207         | )     |   |         |       |         |   |         | (207    | )      
|                                                                                          | Equity in (losses) earnings of subsidiaries |                          |        | (5,258   | )      |              |         | 97           |         |              |       |             |       |   |         | 5,161  |         |   |         |        |        
|                                                                                          |                                             |                          |        |          |        |              |         |              |         |              |       |              |       |   |         |        |         |   |         |        
|                                                                                          |                                             |                          | (4,528 | )        |        |              | (5,914  | )            |         |              | 11    |              |       |   | 5,161   |        |         |   | (5,270  | )      
|                                                                                          |                                             |                          |        |          |        |              |         |              |         |              |       |              |       |   |         |        |         |   |         |        
|(LOSS) INCOME BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE |                                             |                          | (6,388 | )        |        |              | (569    | )            |         |              | 254   |              |       |   | 5,161   |        |         |   | (1,542  | )      
|INCOME TAX BENEFIT (EXPENSE)                                                              |                                             |                          | 1,140  |          |        |              | (26     | )            |         |              | (728  | )            |       |   |        |        |         |   | 386     |        
|                                                                                          |                                             |                          |        |          |        |              |         |              |         |              |       |              |       |   |         |        |         |   |         |        
|(LOSS) INCOME BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE                  |                                             |                          | (5,248 | )        |        |              | (595    | )            |         |              | (474  | )            |       |   | 5,161   |        |         |   | (1,156  | )      
|CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE, NET OF TAX                           |                                             |                          |       |          |        |              | (4,092  | )            |         |              |      |              |       |   |        |        |         |   | (4,092  | )      
|                                                                                          |                                             |                          |        |          |        |              |         |              |         |              |       |              |       |   |         |        |         |   |         |        
|NET LOSS                                                                                  |                                             | $                        | (5,248 | )        |        | $            | (4,687  | )            |         | $            | (474  | )            |       | $ | 5,161   |        |         | $ | (5,248  | )      
|                                                                                          |                                             |                          |        |          |        |              |         |              |         |              |       |              |       |   |         |        |         |   |         |        

19



---



##### Table of Contents



SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
THREE MONTHS ENDED MARCH 31, 2003
In Thousands

|                                                             |                                                                                                    |                                                          |                                                     |                                                     |        |          |       |              |        |              |        |              |        |              |        |       |        |   |        |        |        |        |        |  
|------------------------------------------------------------ | -------------------------------------------------------------------------------------------------- | -------------------------------------------------------- | --------------------------------------------------- | --------------------------------------------------- | ------ | -------- | ----- | ------------ | ------ | ------------ | ------ | ------------ | ------ | ------------ | ------ | ----- | ------ | - | ------ | ------ | ------ | ------ | ------ | -
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |        | ALLIED   |       | GUARANTOR    |        | NONGUARANTOR |        |              |        |              |        |       |        |  
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |        | HOLDINGS |       | SUBSIDIARIES |        | SUBSIDIARIES |        | ELIMINATIONS |        | CONSOLIDATED
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |        |          |       |              |        |              |        |              |        |             
|CASH FLOWS FROM OPERATING ACTIVITIES:                        |                                                                                                    |                                                          |                                                     |                                                     |        |          |       |              |        |              |        |              |        |              |        |       |        |   |        |       
|                                                             | Net (loss) income                                                                                  |                                                          | $                                                   | (5,664                                              | )      |          | $     | (4,075       | )      |              | $      | 223          |        |              | $      | 3,852 |        |   | $      | (5,664 | )     
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |        |          |       |              |        |              |        |              |        |              |        |       |        |   |        |       
|                                                             | Adjustments to reconcile net (loss) income to net
cash provided by (used in) operating activities: |                                                          |                                                     |                                                     |        |          |       |              |        |              |        |              |        |              |        |       |        |   |        |        |       
|                                                             |                                                                                                    | Interest expense paid in kind                            |                                                     |                                                     |       |          |       |              | 369    |              |        |              |       |              |        |       |       |   |        |        | 369    |       
|                                                             |                                                                                                    | Amortization of deferred financing costs                 |                                                     |                                                     | 1,012  |          |       |              |       |              |        |              |       |              |        |       |       |   |        |        | 1,012  |       
|                                                             |                                                                                                    | Depreciation and amortization                            |                                                     |                                                     | 878    |          |       |              | 11,026 |              |        |              | 120    |              |        |       |       |   |        |        | 12,024 |       
|                                                             |                                                                                                    | Loss on disposal of assets and other, net                |                                                     |                                                     |       |          |       |              | 264    |              |        |              |       |              |        |       |       |   |        |        | 264    |       
|                                                             |                                                                                                    | Foreign exchange gains, net                              |                                                     |                                                     |       |          |       |              | (1,018 | )            |        |              |       |              |        |       |       |   |        |        | (1,018 | )     
|                                                             |                                                                                                    | Deferred income taxes                                    |                                                     |                                                     | (4,401 | )        |       |              |       |              |        |              |       |              |        |       |       |   |        |        | (4,401 | )     
|                                                             |                                                                                                    | Compensation expense related to stock options and grants |                                                     |                                                     | 60     |          |       |              |       |              |        |              |       |              |        |       |       |   |        |        | 60     |       
|                                                             |                                                                                                    | Equity in losses (earnings) of subsidiaries              |                                                     |                                                     | 3,972  |          |       |              | (120   | )            |        |              |       |              |        |       | (3,852 | ) |        |        |       |       
|                                                             |                                                                                                    | Amortization of Teamsters Union contract costs           |                                                     |                                                     |       |          |       |              | 600    |              |        |              |       |              |        |       |       |   |        |        | 600    |       
|                                                             |                                                                                                    | Change in operating assets and liabilities:              |                                                     |                                                     |        |          |       |              |        |              |        |              |        |              |        |       |        |   |        |        |        |       
|                                                             |                                                                                                    |                                                          | Receivables, net of allowance for doubtful accounts |                                                     |        |         |       |              |        | 2,331        |        |              |        | 479          |        |       |        |  |        |        |        | 2,810  |       
|                                                             |                                                                                                    |                                                          | Inventories                                         |                                                     |        |         |       |              |        | (226         | )      |              |        |             |        |       |        |  |        |        |        | (226   | )     
|                                                             |                                                                                                    |                                                          | Prepayments and other current assets                |                                                     |        | 1,472    |       |              |        | (3,477       | )      |              |        | (34          | )      |       |        |  |        |        |        | (2,039 | )     
|                                                             |                                                                                                    |                                                          | Short-term investments                              |                                                     |        |         |       |              |        |             |        |              |        | (2,442       | )      |       |        |  |        |        |        | (2,442 | )     
|                                                             |                                                                                                    |                                                          | Trade accounts payable                              |                                                     |        | (560     | )     |              |        | (3,281       | )      |              |        | 31           |        |       |        |  |        |        |        | (3,810 | )     
|                                                             |                                                                                                    |                                                          |                                                     | Intercompany payables                               |        |          | 2,098 |              |        |              | (2,362 | )            |        |              | 264    |       |        |   |       |        |        |        |       |  
|                                                             |                                                                                                    |                                                          | Accrued liabilities                                 |                                                     |        | 1,763    |       |              |        | (1,601       | )      |              |        | (2,308       | )      |       |        |  |        |        |        | (2,146 | )     
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |        |          |       |              |        |              |        |              |        |              |        |       |        |   |        |       
|                                                             |                                                                                                    | Net change in operating assets and liabilities           |                                                     |                                                     | 4,773  |          |       |              | (8,616 | )            |        |              | (4,010 | )            |        |       |       |   |        |        | (7,853 | )     
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |        |          |       |              |        |              |        |              |        |              |        |       |        |   |        |       
|                                                             |                                                                                                    |                                                          |                                                     | Net cash provided by (used in) operating activities |        |          | 630   |              |        |              | (1,570 | )            |        |              | (3,667 | )     |        |   |       |        |        |        | (4,607 | )
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |        |          |       |              |        |              |        |              |        |              |        |       |        |   |        |       
|CASH FLOWS FROM INVESTING ACTIVITIES:                        |                                                                                                    |                                                          |                                                     |                                                     |        |          |       |              |        |              |        |              |        |              |        |       |        |   |        |       
|                                                             | Purchases of property and equipment                                                                |                                                          |                                                     | (27                                                 | )      |          |       | (5,798       | )      |              |        | (53          | )      |              |        |      |        |   |        | (5,878 | )     
|                                                             | Proceeds from sale of property and equipment                                                       |                                                          |                                                     |                                                    |        |          |       | 11           |        |              |        |             |        |              |        |      |        |   |        | 11     |       
|                                                             | Decrease in cash surrender value of life insurance                                                 |                                                          |                                                     | 1                                                   |        |          |       |             |        |              |        |             |        |              |        |      |        |   |        | 1      |       
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |        |          |       |              |        |              |        |              |        |              |        |       |        |   |        |       
|                                                             |                                                                                                    |                                                          |                                                     | Net cash used in investing activities               |        |          | (26   | )            |        |              | (5,787 | )            |        |              | (53    | )     |        |   |       |        |        |        | (5,866 | )
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |        |          |       |              |        |              |        |              |        |              |        |       |        |   |        |       
|CASH FLOWS FROM FINANCING ACTIVITIES:                        |                                                                                                    |                                                          |                                                     |                                                     |        |          |       |              |        |              |        |              |        |              |        |       |        |   |        |       
|                                                             | Additions to revolving credit facilities, net                                                      |                                                          |                                                     |                                                    |        |          |       | 8,471        |        |              |        |             |        |              |        |      |        |   |        | 8,471  |       
|                                                             | Repayment of long-term debt                                                                        |                                                          |                                                     |                                                    |        |          |       | (2,226       | )      |              |        |             |        |              |        |      |        |   |        | (2,226 | )     
|                                                             | Payment of deferred financing costs                                                                |                                                          |                                                     | (407                                                | )      |          |       |             |        |              |        |             |        |              |        |      |        |   |        | (407   | )     
|                                                             | Proceeds from issuance of common stock                                                             |                                                          |                                                     | 57                                                  |        |          |       |             |        |              |        |             |        |              |        |      |        |   |        | 57     |       
|                                                             | Other, net                                                                                         |                                                          |                                                     | (261                                                | )      |          |       | 249          |        |              |        |             |        |              |        |      |        |   |        | (12    | )     
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |        |          |       |              |        |              |        |              |        |              |        |       |        |   |        |       
|                                                             |                                                                                                    |                                                          |                                                     | Net cash (used in) provided by financing activities |        |          | (611  | )            |        |              | 6,494  |              |        |              |       |       |        |   |       |        |        |        | 5,883  |  
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |        |          |       |              |        |              |        |              |        |              |        |       |        |   |        |       
|EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS |                                                                                                    |                                                          |                                                    |                                                     |        |          | 85    |              |        |              |       |              |        |              |       |       |        |   | 85     |       
|NET DECREASE IN CASH AND CASH EQUIVALENTS                    |                                                                                                    |                                                          | (7                                                  | )                                                   |        |          | (778  | )            |        |              | (3,720 | )            |        |              |       |       |        |   | (4,505 | )     
|CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD             |                                                                                                    |                                                          | 7                                                   |                                                     |        |          | 1,936 |              |        |              | 8,310  |              |        |              |       |       |        |   | 10,253 |       
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |        |          |       |              |        |              |        |              |        |              |        |       |        |   |        |       
|CASH AND CASH EQUIVALENTS AT END OF PERIOD                   |                                                                                                    | $                                                        |                                                    |                                                     |        | $        | 1,158 |              |        | $            | 4,590  |              |        | $            |       |       |        | $ | 5,748  |       
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |        |          |       |              |        |              |        |              |        |              |        |       |        |   |        |       

20



---



##### Table of Contents



SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2002
In Thousands

|                                                             |                                                                                           |                                                          |                                                     |                                                     |         |          |          |              |          |              |          |              |        |              |       |       |        |   |        |         |        |        |         |  
|------------------------------------------------------------ | ----------------------------------------------------------------------------------------- | -------------------------------------------------------- | --------------------------------------------------- | --------------------------------------------------- | ------- | -------- | -------- | ------------ | -------- | ------------ | -------- | ------------ | ------ | ------------ | ----- | ----- | ------ | - | ------ | ------- | ------ | ------ | ------- | -
|                                                             |                                                                                           |                                                          |                                                     |                                                     |         | ALLIED   |          | GUARANTOR    |          | NONGUARANTOR |          |              |        |              |       |       |        |  
|                                                             |                                                                                           |                                                          |                                                     |                                                     |         | HOLDINGS |          | SUBSIDIARIES |          | SUBSIDIARIES |          | ELIMINATIONS |        | CONSOLIDATED
|                                                             |                                                                                           |                                                          |                                                     |                                                     |         |          |          |              |          |              |          |              |        |             
|CASH FLOWS FROM OPERATING ACTIVITIES                         |                                                                                           |                                                          |                                                     |                                                     |         |          |          |              |          |              |          |              |        |              |       |       |        |   |        |        
|                                                             | Net loss                                                                                  |                                                          | $                                                   | (5,248                                              | )       |          | $        | (4,687       | )        |              | $        | (474         | )      |              | $     | 5,161 |        |   | $      | (5,248  | )     
|                                                             |                                                                                           |                                                          |                                                     |                                                     |         |          |          |              |          |              |          |              |        |              |       |       |        |   |        |        
|                                                             | Adjustments to reconcile net loss to net
cash provided by (used in) operating activities: |                                                          |                                                     |                                                     |         |          |          |              |          |              |          |              |        |              |       |       |        |   |        |         |       
|                                                             |                                                                                           | Gain on early extinguishment of debt                     |                                                     |                                                     | (2,750  | )        |          |              |         |              |          |              |       |              |       |       |       |   |        |         | (2,750 | )     
|                                                             |                                                                                           | Interest expense paid in kind                            |                                                     |                                                     |        |          |          |              | 12       |              |          |              |       |              |       |       |       |   |        |         | 12     |       
|                                                             |                                                                                           | Amortization of deferred financing costs                 |                                                     |                                                     | 1,045   |          |          |              |         |              |          |              |       |              |       |       |        |   |        |         | 1,045  |       
|                                                             |                                                                                           | Depreciation and amortization                            |                                                     |                                                     | 766     |          |          |              | 12,778   |              |          |              | 119    |              |       |       |       |   |        |         | 13,663 |       
|                                                             |                                                                                           | Loss (gain) on disposal of assets and other, net         |                                                     |                                                     |        |          |          |              | (822     | )            |          |              |       |              |       |       |       |   |        |         | (822   | )     
|                                                             |                                                                                           | Foreign exchange gains, net                              |                                                     |                                                     |        |          |          |              | (37      | )            |          |              |       |              |       |       |        |   |        |         | (37    | )     
|                                                             |                                                                                           | Cumulative effect of change in accounting principle      |                                                     |                                                     |        |          |          |              | 4,092    |              |          |              |       |              |       |       |       |   |        |         | 4,092  |       
|                                                             |                                                                                           | Deferred income taxes                                    |                                                     |                                                     | (1,671  | )        |          |              | (97      | )            |          |              | 1      |              |       |       |       |   |        |         | (1,767 | )     
|                                                             |                                                                                           | Compensation expense related to stock options and grants |                                                     |                                                     | 59      |          |          |              |         |              |          |              |       |              |       |       |       |   |        |         | 59     |       
|                                                             |                                                                                           | Amortization of Teamsters Union contract bonus           |                                                     |                                                     |        |          |          |              | 600      |              |          |              |       |              |       |       |       |   |        |         | 600    |       
|                                                             |                                                                                           | Equity in losses (earnings) of subsidiaries              |                                                     |                                                     | 5,258   |          |          |              | (97      | )            |          |              |       |              |       |       | (5,161 | ) |        |         |       |       
|                                                             |                                                                                           | Change in operating assets and liabilities:              |                                                     |                                                     |         |          |          |              |          |              |          |              |        |              |       |       |        |   |        |         |        |       
|                                                             |                                                                                           |                                                          | Receivables, net of allowance for doubtful accounts |                                                     |         | 13       |          |              |          | 9,660        |          |              |        | (200         | )     |       |        |  |        |         |        | 9,473  |        
|                                                             |                                                                                           |                                                          | Inventories                                         |                                                     |         |         |          |              |          | 100          |          |              |        | (1           | )     |       |        |  |        |         |        | 99     |        
|                                                             |                                                                                           |                                                          | Prepayments and other current assets                |                                                     |         | 282      |          |              |          | 1,125        |          |              |        | (2           | )     |       |        |  |        |         |        | 1,405  |        
|                                                             |                                                                                           |                                                          | Short-term investments                              |                                                     |         |         |          |              |          |             |          |              |        | 136          |       |       |        |  |        |         |        | 136    |        
|                                                             |                                                                                           |                                                          | Trade accounts payable                              |                                                     |         | (991     | )        |              |          | (1,559       | )        |              |        | 83           |       |       |        |  |        |         |        | (2,467 | )      
|                                                             |                                                                                           |                                                          |                                                     | Intercompany payables                               |         |          | 147,276  |              |          |              | (148,330 | )            |        |              | 1,054 |       |        |   |       |         |        |        |        |  
|                                                             |                                                                                           |                                                          | Accrued liabilities                                 |                                                     |         | 1,209    |          |              |          | (3,437       | )        |              |        | 9,106        |       |       |        |  |        |         |        | 6,878  |        
|                                                             |                                                                                           |                                                          |                                                     |                                                     |         |          |          |              |          |              |          |              |        |              |       |       |        |   |        |        
|                                                             |                                                                                           | Net change in operating assets and liabilities           |                                                     |                                                     | 147,789 |          |          |              | (142,441 | )            |          |              | 10,176 |              |       |       |       |   |        |         | 15,524 |       
|                                                             |                                                                                           |                                                          |                                                     |                                                     |         |          |          |              |          |              |          |              |        |              |       |       |        |   |        |        
|                                                             |                                                                                           |                                                          |                                                     | Net cash provided by (used in) operating activities |         |          | 145,248  |              |          |              | (130,699 | )            |        |              | 9,822 |       |        |   |       |         |        |        | 24,371  |  
|                                                             |                                                                                           |                                                          |                                                     |                                                     |         |          |          |              |          |              |          |              |        |              |       |       |        |   |        |        
|CASH FLOWS FROM INVESTING ACTIVITIES:                        |                                                                                           |                                                          |                                                     |                                                     |         |          |          |              |          |              |          |              |        |              |       |       |        |   |        |        
|                                                             | Purchases of property and equipment                                                       |                                                          |                                                     |                                                    |         |          |          | (2,587       | )        |              |          | (39          | )      |              |       |      |        |   |        | (2,626  | )     
|                                                             | Proceeds from sale of property and equipment                                              |                                                          |                                                     |                                                    |         |          |          | 2,185        |          |              |          |             |        |              |       |      |        |   |        | 2,185   |       
|                                                             | Decrease in cash surrender value of life insurance                                        |                                                          |                                                     | 183                                                 |         |          |          |             |          |              |          |             |        |              |       |      |        |   |        | 183     |       
|                                                             |                                                                                           |                                                          |                                                     |                                                     |         |          |          |              |          |              |          |              |        |              |       |       |        |   |        |        
|                                                             |                                                                                           |                                                          |                                                     | Net cash (used in) provided by investing activities |         |          | 183      |              |          |              | (402     | )            |        |              | (39   | )     |        |   |       |         |        |        | (258    | )
|                                                             |                                                                                           |                                                          |                                                     |                                                     |         |          |          |              |          |              |          |              |        |              |       |       |        |   |        |        
|CASH FLOWS FROM FINANCING ACTIVITIES:                        |                                                                                           |                                                          |                                                     |                                                     |         |          |          |              |          |              |          |              |        |              |       |       |        |   |        |        
|                                                             | Repayments of revolving credit facilities                                                 |                                                          |                                                     | (98,900                                             | )       |          |          | 49,442       |          |              |          |             |        |              |       |      |        |   |        | (49,458 | )     
|                                                             | Additions to long-term debt                                                               |                                                          |                                                     |                                                    |         |          |          | 82,750       |          |              |          |             |        |              |       |      |        |   |        | 82,750  |       
|                                                             | Repayments of long-term debt                                                              |                                                          |                                                     | (37,498                                             | )       |          |          | (2,173       | )        |              |          |             |        |              |       |      |        |   |        | (39,671 | )     
|                                                             | Payment of deferred financing costs                                                       |                                                          |                                                     | (8,803                                              | )       |          |          |             |          |              |          |             |        |              |       |      |        |   |        | (8,803  | )     
|                                                             | Proceeds from issuance of common stock                                                    |                                                          |                                                     | 24                                                  |         |          |          |             |          |              |          |             |        |              |       |      |        |   |        | 24      |       
|                                                             | Other, net                                                                                |                                                          |                                                     | 54                                                  |         |          |          | 720          |          |              |          | (649         | )      |              |       |      |        |   |        | 125     |       
|                                                             |                                                                                           |                                                          |                                                     |                                                     |         |          |          |              |          |              |          |              |        |              |       |       |        |   |        |        
|                                                             |                                                                                           |                                                          |                                                     | Net cash (used in) provided by financing activities |         |          | (145,123 | )            |          |              | 130,739  |              |        |              | (649  | )     |        |   |       |         |        |        | (15,033 | )
|                                                             |                                                                                           |                                                          |                                                     |                                                     |         |          |          |              |          |              |          |              |        |              |       |       |        |   |        |        
|EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS |                                                                                           |                                                          |                                                    |                                                     |         |          | (8       | )            |          |              |         |              |        |              |      |       |        |   | (8     | )      
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS         |                                                                                           |                                                          | 308                                                 |                                                     |         |          | (370     | )            |          |              | 9,134    |              |        |              |      |       |        |   | 9,072  |        
|CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD             |                                                                                           |                                                          | 209                                                 |                                                     |         |          | 1,063    |              |          |              | 9,271    |              |        |              |      |       |        |   | 10,543 |        
|                                                             |                                                                                           |                                                          |                                                     |                                                     |         |          |          |              |          |              |          |              |        |              |       |       |        |   |        |        
|CASH AND CASH EQUIVALENTS AT END OF PERIOD                   |                                                                                           | $                                                        | 517                                                 |                                                     |         | $        | 693      |              |          | $            | 18,405   |              |        | $            |      |       |        | $ | 19,615 |        
|                                                             |                                                                                           |                                                          |                                                     |                                                     |         |          |          |              |          |              |          |              |        |              |       |       |        |   |        |        

21



---



##### Table of Contents






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

Results of Operations

The Company, through its subsidiaries, generates revenues providing services to
the automotive industry. Allied Automotive Group, Inc. (AAG) is the largest
motor carrier in North America specializing in the transportation of new
automobiles, light trucks and SUVs, for all of the major domestic and foreign
automotive manufacturers.

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

|                                                                |                                                                                  |                                         |                                      |                          |      |                    |       |      |      |      |      | 
|--------------------------------------------------------------- | -------------------------------------------------------------------------------- | --------------------------------------- | ------------------------------------ | ------------------------ | ---- | ------------------ | ----- | ---- | ---- | ---- | ---- | 
|                                                                |                                                                                  |                                         |                                      |                          |      | Three Months Ended
|                                                                |                                                                                  |                                         |                                      |                          |      | March 31,         
|                                                                |                                                                                  |                                         |                                      |                          |      |                   
|                                                                |                                                                                  |                                         |                                      |                          |      | 2003               |       | 2002
|                                                                |                                                                                  |                                         |                                      |                          |      |                    |       |     
|Revenues                                                        |                                                                                  |                                         | 100.0                                | %                        |      |                    | 100.0 | %   
|                                                                |                                                                                  |                                         |                                      |                          |      |                    |       |     
|Operating expenses:                                             |                                                                                  |                                         |                                      |                          |      |                    |       |     
|                                                                |                                                                                  | Salaries, wages, and fringe benefits    |                                      |                          | 55.0 |                    |       |      | 55.6 |     
|                                                                |                                                                                  | Operating supplies and expenses         |                                      |                          | 17.4 |                    |       |      | 14.5 |     
|                                                                |                                                                                  | Purchased transportation                |                                      |                          | 11.6 |                    |       |      | 10.2 |     
|                                                                |                                                                                  | Insurance and claims                    |                                      |                          | 4.4  |                    |       |      | 5.0  |     
|                                                                |                                                                                  | Operating taxes and licenses            |                                      |                          | 3.7  |                    |       |      | 4.0  |     
|                                                                |                                                                                  | Depreciation and amortization           |                                      |                          | 5.6  |                    |       |      | 6.4  |     
|                                                                |                                                                                  | Rents                                   |                                      |                          | 0.8  |                    |       |      | 0.6  |     
|                                                                |                                                                                  | Communications and utilities            |                                      |                          | 0.9  |                    |       |      | 0.9  |     
|                                                                |                                                                                  | Other operating expenses                |                                      |                          | 1.3  |                    |       |      | 1.5  |     
|                                                                |                                                                                  | Loss (gain) on sale of operating assets |                                      |                          | 0.1  |                    |       |      | (0.5 | )   
|                                                                |                                                                                  |                                         |                                      |                          |      |                    |       |     
|                                                                |                                                                                  |                                         |                                      | Total operating expenses |      |                    | 100.8 |      |      |      | 98.2 | 
|                                                                |                                                                                  |                                         |                                      |                          |      |                    |       |     
|                                                                |                                                                                  | Operating (loss) income                 |                                      |                          | (0.8 | )                  |       |      | 1.8  |     
|                                                                |                                                                                  |                                         |                                      |                          |      |                    |       |     
|                                                                |                                                                                  | Other income (expense):                 |                                      |                          |      |                    |       |      |      |     
|                                                                |                                                                                  |                                         | Gain on early extinguishment of debt |                          |      | 0                  |       |      |      | 1.3  |     
|                                                                |                                                                                  |                                         | Interest expense                     |                          |      | (3.5               | )     |      |      | (3.8 | )   
|                                                                |                                                                                  |                                         | Interest income                      |                          |      | 0.2                |       |      |      | 0.1  |     
|                                                                |                                                                                  |                                         | Other, net                           |                          |      | 0.5                |       |      |      | (0.1 | )   
|                                                                |                                                                                  |                                         |                                      |                          |      |                    |       |     
|                                                                |                                                                                  |                                         | (2.8                                 | )                        |      |                    | (2.5  | )   
|                                                                |                                                                                  |                                         |                                      |                          |      |                    |       |     
|                                                                | Loss before income taxes and cumulative effect of
change in
accounting principle |                                         |                                      | (3.6                     | )    |                    |       | (0.7 | )   
|                                                                | Income tax benefit                                                               |                                         |                                      | 1.0                      |      |                    |       | 0.2  |     
|                                                                |                                                                                  |                                         |                                      |                          |      |                    |       |     
|Loss before cumulative effect of change in accounting principle |                                                                                  |                                         | (2.6                                 | )                        |      |                    | (0.5  | )   
|                                                                | Cumulative effect of change in accounting principle,
net of
tax                  |                                         |                                      | 0                        |      |                    |       | (1.9 | )   
|                                                                |                                                                                  |                                         |                                      |                          |      |                    |       |     
|Net (loss)
income                                               |                                                                                  |                                         | (2.6                                 | )%                       |      |                    | (2.4  | )%  
|                                                                |                                                                                  |                                         |                                      |                          |      |                    |       |     

Three Months Ended March 31, 2003 Compared to Three Months Ended March 31, 2002

Revenues were $213.6 million in the first quarter of 2003 compared to revenues
of $213.3 million in the first quarter of 2002. The increase in revenues
included an increase in revenues at Axis Group Inc. (Axis) of $740,000 in the
first quarter of 2003 offset somewhat by a decline in revenues at AAG of
$407,000 during the first quarter of 2003. The increase in revenues at Axis
was primarily due to increase in volume experienced in the used vehicle and
off-lease segments of the Axis business. The decline in revenues at AAG was
largely due to a different length of haul on deliveries in the first quarter of
2003 as compared to the first quarter of 2002. The Company experienced a
decrease in its average length of haul

22



---



##### Table of Contents



during its first quarter of 2003, which reduced revenue per unit as compared to
the prior year. Specifically, while vehicles delivered by AAG in the first
quarter of 2003 actually increased by 0.6% as compared to the first quarter in
2002, the revenue per unit decreased by 0.8% in the same period. The decrease
in the average length of haul is primarily the result of a portion of the new
business the Company obtained in 2002 having a shorter average length of haul
than the Companys remaining business. Automotive manufacturers have announced
production cutbacks during the second quarter of 2003. As a result, the Company
expects to experience a decline in vehicle deliveries during the second
quarter, which could have an adverse affect on revenues. In addition, vehicle
deliveries in the third quarter are typically lower due to manufacturing
production downtime due to vacations and model change-overs. The Companys
results of operations are adversely affected by cyclical downturns in the
general economy or in the automotive industry and by consumer preferences in
purchasing new automobiles, SUVs, and light trucks. Inventories of new
vehicles in the first quarter of 2003 are currently significantly higher than
the 2002 levels and sales of new vehicles in the first quarter of 2003 were
lower than the 2002 levels.

The Company experienced a net loss of $5.7 million in the first quarter of 2003
versus a net loss of $5.2 million in the first quarter of 2002. Basic and
diluted loss per share in the first quarter of 2003 were $0.67 versus basic and
diluted loss per share of $0.64 in the first quarter of 2002. Results for the
first quarter of 2003 include after-tax foreign exchange gains of $0.7 million
related primarily to the Companys operating subsidiary in Canada. The results
for the first quarter of 2002 include a $1.7 million after-tax gain on the
early extinguishment of the Companys subordinated notes and a $4.1 million
after-tax charge related to the impairment of goodwill at Axis.

Earnings before interest, taxes, depreciation and amortization, gains and
losses on disposal of assets, gain on early extinguishment of debt,
foreign exchange gains, net and other losses (Adjusted EBITDA) for the first quarter of 2003
were $10.6 million compared to $16.4 million of Adjusted EBITDA reported during
the first quarter last year. Approximately $4.0 million of the decline in
Adjusted EBITDA related to higher fuel prices experienced in the first quarter
of 2003 as compared to the first quarter of 2002. Diesel fuel costs in the
first quarter of 2003 were approximately 39% higher than in the prior year. In
addition, Adjusted EBITDA was negatively impacted by unusually severe weather
conditions, which adversely affected terminal productivity, and changes in our
customers product mix which eroded AAGs load factor and increased operating
costs. Diminished shipments of passenger vehicles combined with our customers
ongoing commitment to the production of SUVs and trucks reduced the number of
revenue producing vehicles AAG could physically place on each trailer due to
size and weight restrictions mandated by DOT guidelines. Reductions in load
factor also increased AAGs operating costs, as more trips were required to
deliver a roughly equivalent number of vehicles as had been shipped in the
first quarter of 2002.

Adjusted EBITDA is presented because management believes it provides useful
information to investors regarding the Companys ability to generate cash flows
that can be used to service debt and provide for capital expenditures.
Adjusted EBITDA is also a component of certain financial covenants in the
Companys debt agreements. A reconciliation of Adjusted EBITDA to Operating
Income and Operating Cash Flows is provided below, as they are the closest
measures in the Companys financial statements prepared in accordance with
Generally Accepted Accounting Principles (GAAP), in terms of comparability to
Adjusted EBITDA. Because Adjusted EBITDA is not a measure determined in
accordance with GAAP and is thus susceptible to varying calculation, Adjusted
EBITDA as presented may not be comparable to other similarly titled measures in
other companies.

The following table reconciles Adjusted EBITDA to operating income (loss) and
operating cash provided by (used in) operating cash flows for the three months
ended March 31, 2003 and 2002 (in thousands):

23



---



##### Table of Contents



|                                                           |                                                          |   |                            |        |      |   |        |         |  
|---------------------------------------------------------- | -------------------------------------------------------- | - | -------------------------- | ------ | ---- | - | ------ | ------- | -
|                                                           |                                                          |   | For the Three Months Ended
|                                                           |                                                          |   | March 31,                 
|                                                           |                                                          |   |                           
|                                                           |                                                          |   | 2003                       |        | 2002
|                                                           |                                                          |   |                            |        |     
|Reconciliation of operating income to Adjusted EBITDA:     |                                                          |   |                            |        |      |   |        |        
|Operating (loss) income                                    |                                                          | $ | (1,716                     | )      |      | $ | 3,728  |        
|Loss (gain) on disposal of operating assets                |                                                          |   | 264                        |        |      |   | (1,029 | )      
|Depreciation and Amortization                              |                                                          |   | 12,024                     |        |      |   | 13,663 |        
|                                                           |                                                          |   |                            |        |      |   |        |        
|Adjusted EBITDA                                            |                                                          | $ | 10,572                     |        |      | $ | 16,362 |        
|                                                           |                                                          |   |                            |        |      |   |        |        
|Reconciliation of operating cash flows to Adjusted EBITDA: |                                                          |   |                            |        |      |   |        |        
|Cash (used in) provided by operations                      |                                                          | $ | (4,607                     | )      |      | $ | 24,371 |        
|Adjustments:                                               |                                                          |   |                            |        |      |   |        |        
|                                                           | Interest expense                                         |   |                            | 7,381  |      |   |        | 8,122   |  
|                                                           | Interest paid in kind                                    |   |                            | (369   | )    |   |        | (12     | )
|                                                           | Interest income                                          |   |                            | (326   | )    |   |        | (272    | )
|                                                           | Amortization of deferred financing costs                 |   |                            | (1,012 | )    |   |        | (1,045  | )
|                                                           | Income tax benefit                                       |   |                            | (2,089 | )    |   |        | (386    | )
|                                                           | Deferred income taxes                                    |   |                            | 4,401  |      |   |        | 1,767   |  
|                                                           | Amortization of teamster union contract costs            |   |                            | (600   | )    |   |        | (600    | )
|                                                           | Compensation expense related to stock options and grants |   |                            | (60    | )    |   |        | (59     | )
|                                                           | Total change in operating assets and liabilities         |   |                            | 7,853  |      |   |        | (15,524 | )
|                                                           |                                                          |   |                            |        |      |   |        |        
|Adjusted EBITDA                                            |                                                          | $ | 10,572                     |        |      | $ | 16,362 |        
|                                                           |                                                          |   |                            |        |      |   |        |        

During the first quarter of 2003, the Company amended its Credit Facility
agreement to adjust two financial covenants: the minimum consolidated EBITDA
covenant as defined in the Credit Facility, (Covenant EBITDA), and the
maximum fixed charges coverage ratio. These financial covenants were amended by
the Company and its lenders due to the potential adverse financial impact on
the Company from external factors in 2003 including, but not limited to,
general economic conditions in the United States, higher fuel prices, consumer
confidence and the war with Iraq. See additional discussion of the terms and
conditions of the amendment to the Credit Facility under the caption Financial
Condition, Liquidity and Capital Resources of this section.

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

Salaries, wages and fringe benefits decreased from 55.6% of revenues in the
first quarter of 2002 to 55.0% of revenues in the first quarter of 2003. The
decrease was due primarily to continued productivity and efficiency
improvements implemented by the Company. These productivity and efficiency
improvements included a better day-to-day management of the Companys labor
needs for drivers, as the Master Agreement with the International Brotherhood
of Teamsters (IBT) allows for temporary layoffs of the driver workforce based
on driver requirements. The increase in productivity and efficiency was
partially offset by an increase to wages and benefits received by all Teamster
employees in the United States on June 1, 2002. This increase impacted wage
and benefit costs by approximately $3.0 million in the first quarter of 2003 as
compared to the first quarter of 2002. The Company was unable to fully offset
increases in wage and benefit costs through price increases.

Certain subsidiaries of the Company, along with certain competitors of the
Company, which utilize union labor and are engaged in the car-haul business,
are parties to the Master Agreement with the IBT. As a result of being a party
to the Master Agreement along with these other entities, the Company may not
have exclusive control over issues relating to bargaining with the IBT upon
expiration of the Master Agreement. The Master Agreement expires May 31, 2003.
Negotiation of a new contract with the IBT, in the United States, is currently
in process between the Company and the IBT, exclusive of any other car-haul
companies utilizing union labor. The Company believes that it

24



---



##### Table of Contents



must obtain wage and benefit stability and work rule flexibility with its union
employees in order to remain competitive. There can be no assurance that
negotiation of a new contract upon the May 31, 2003 expiration of the current
Master Agreement will not result in increased labor costs to the Company, or
that such contracts can be negotiated without work stoppages, either of which
could have a material adverse effect on the Company.

During March 2003, the Company renegotiated a contract that expired October 31,
2002 with the Teamsters Union in Eastern Canada. The employees governed by
this contract represent approximately 70% of the Companys total bargaining
unit employees in Canada. The employees in Eastern Canada agreed to a
three-year contract with a wage freeze in the first two years and increases in
the third year, provided that wages in each of the first two years will be
increased by an amount equivalent to any negotiated percentage increases in the
contract to be negotiated with the Teamsters Union in the United States later
this year. Health and welfare costs were frozen for the entire three-year
agreement and there were pension increases each year of the new contract. The
additional pension contributions will increase costs approximately $100,000 or
0.2% in year one of the agreement, and approximately $280,000 or 0.6% in year
two of the agreement. The wage and pension increases in year three of the
agreement will increase costs approximately $1.6 million or 3.2% of costs.

The Company had previously negotiated agreements with most of its other
employees in Canada that avoided wage and benefit increases over the 2002
levels and in some cases, required employee contributions for health and
welfare costs. Therefore, the Company did not experience any wage and benefit
inflation in Canada during the first quarter of 2003.

Operating supplies and expenses increased from 14.5% of revenues in the first
quarter of 2002 to 17.4 % of revenues in the first quarter of 2003. The
increase was due primarily to an increase in fuel costs experienced in the
first quarter of 2003 versus the first quarter of 2002. Fuel expense increased
approximately $5.0 million, before fuel tax surcharges which are included in
revenue, in the first quarter of 2003 versus the first quarter of 2002. The
Company attempts to minimize the effect of fuel price fluctuations by
periodically purchasing fuel in advance. Additionally, the Company has
negotiated fuel surcharges with customers representing approximately 64% of the
Companys customers, which enables it to pass on fuel costs to such customers.
However, the customer fuel surcharges typically reset at the beginning of each
quarter based on the fuel prices from the previous quarter. Therefore, there is
a one-quarter lag between the time fuel prices change and the adjustment to the
fuel surcharge.

Purchased transportation increased from 10.2% of revenues in the first quarter
of 2002 to 11.6% of revenues in the first quarter of 2003. The increase was
due primarily to a shift in the mix of owner-operators versus company drivers
and an increase in business at locations where owner-operators are utilized for
vehicle deliveries. Subsequent to the first quarter of 2002, the Company has
increased the number of owner-operators by approximately 80. All costs for
owner-operators are included in purchased transportation expense.

Insurance and claims expense decreased from 5.0% of revenues in the first
quarter of 2002 to 4.4% of revenues in the first quarter of 2003. The decrease
was a result of lower cargo claims experienced on shipped vehicles as well as a
reduction in auto liability claims, resulting from the Companys ongoing
initiatives to improve quality and safety measures, as well as claims
processing. The Company also experienced a decline of 16% in lost time days
associated with worker injuries that resulted in lower insurance costs during
the first quarter of 2003 as compared to the prior year.

Depreciation and amortization decreased from 6.4% of revenues in the first
quarter of 2002 to 5.6% of revenues in the first quarter of 2003. The decrease
is due primarily to the disposal of assets in 2002 with a cost basis of
approximately $18.8 million and a net book value of approximately $5.1 million,
as well as capital spending being lower than depreciation and amortization in
2002.

25



---



##### Table of Contents



During 2002, the Company performed an analysis of certain fleet equipment that
was recently idled. The assets were evaluated in order to determine if they
were candidates for the fleet remanufacturing and engine replacement program.
Approximately 1,000 tractors or trailers were not considered viable candidates
for the program and a decision was made that they would not be placed back into
operations. As a result, depreciation was accelerated to the reduced useful
life resulting in an additional charge of $2.1 million to depreciation expense
in the fourth quarter of 2002. Management is developing a disposal plan
regarding these assets and anticipates disposing of them during 2003.

The Company continues its tractor and trailer (Rig) remanufacturing program
to remanufacture existing owned Rigs rather than purchasing new Rigs.
Remanufacturing existing rigs requires less capital spending than purchasing
new Rigs. During the first quarter of 2003, the Company remanufactured
approximately 120 Rigs and replaced approximately 110 engines in its tractors.
The total remanufactured Rigs and replaced engines during the life of the
program are approximately 470 and 460, respectively. Due to the production
cutbacks announced by the automotive industry for the second quarter of 2003
and the cyclical decline in the industry typically experienced in the third
quarter, the Company plans to reduce the number of vehicles remanufactured
during the second and third quarters of 2003. The Company expects to
remanufacture 70 Rigs and replace 170 engines during the second and third
quarters of 2003.

Other operating expenses decreased from 1.5% of revenues in the first quarter
of 2002 to 1.3% of revenues in the first quarter of 2003. The decrease was
primarily due to lower professional fees for consultants. During 2001, the
Company engaged outside consultants, including Jay Alix & Associates, to aid in
the planning and analysis of its turnaround initiatives and the refinancing of
its revolving credit facility and subordinated debt, which was completed in the
second quarter of 2002.

Gain/loss on disposition of assets decreased from a gain of $1.0 million in the
first quarter of 2002 to a loss of $264,000 in 2003. As part of the Companys
initiatives to improve performance and better utilize its assets, the Company
disposed of significant assets in 2002, which generated cash of approximately
$2.2 million in the first quarter of 2002. There were no significant disposals
of operating assets during the first quarter of 2003.

Interest expense decreased from $8.1 million, or 3.8% of revenues, in the first
quarter of 2002 to $7.4 million, or 3.5% of revenues, in the first quarter of
2003. The decrease was due primarily to lower debt balances combined with
lower effective interest rates that resulted from the new credit facility,
which took effect during the end of the first quarter of 2002.

Foreign exchange gains, net increased from $37,000 in the first quarter of 2002
to $1.0 million in the first quarter of 2003. The increase was due primarily
to exchange rate increases related to the Companys operating subsidiary in
Canada that resulted from a strengthening of the Canadian dollar in relation to
the US dollar in the first quarter of 2003.

During the first quarter of 2002, the Company incurred other expenses of
$207,000 related to the disposition of the Companys Brazilian joint venture
that occurred in the second quarter of 2002.

The adoption of SFAS No. 142 is a required change in accounting principle, and
the cumulative effect of adopting this standard as of January 1, 2002 resulted
in a non-cash, after-tax decrease to net income of $4.1 in the first quarter of
2002. Pursuant to the adoption of SFAS No. 142, the Company has elected to
annually test goodwill during the fourth quarter of each year for impairment,
or earlier if an event occurs or circumstances change that would reduce the
fair value of goodwill below its carrying value. No impairment was indicated
during the review performed in the fourth quarter of 2002.

The adoption of SFAS No. 145 required that the after-tax gain of $1.7 million
on the early extinguishment of debt the Company recorded during the first
quarter of 2002 to be reclassified from an extraordinary item, net of tax, to
other income of $2.8 million, before tax.

26



---



##### Table of Contents



Financial Condition, 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 lenders. The
Companys primary liquidity needs are for the payment of operating expenses,
the refurbishment and maintenance of Rigs and terminal facilities, and the
payment of interest and principal associated with long-term debt.

Net cash used in operating activities totaled $4.6 million in the first quarter
of 2003 versus net cash provided by operations of $24.4 million in the first
quarter of 2002. The decrease in cash provided by operations was due primarily
to unfavorable changes in working capital of $7.9 million in the first quarter
of 2003 versus favorable changes in working capital of $15.5 million in the
first quarter of 2002. The fluctuation of the change in working capital was
partially due to the payment of $4.0 million related to fleet licensing. This
payment was made in the first quarter of 2003 resulting from a change in the
statutory state payment date. The fleet licensing payment in 2002 was paid in
the second quarter of 2002. In addition, the Company incurred an increase of
$5.0 million for fuel costs in the first quarter 2003 as compared to the prior
year. The change in working capital was also effected by a decrease in cash
generated from accounts receivable of $6.7 million, as well as a change in the
investment portfolio mix of the Companys captive insurance company from cash
to short-term investments during 2003. Short-term investments increased
approximately $2.4 million during the first quarter of 2003.

Net cash used in investing activities totaled $5.9 million for the first
quarter of 2003 versus $258,000 for the first quarter of 2002. Cash paid to
purchase capital items increased from $2.6 million to $5.9 million in the first
quarter of 2003. Capital expenditures for fiscal year 2003 are expected to be
comparable to total capital expenditures for 2002. However, the Companys
fleet remanufacturing program began in 2002 and capital expenditures were
weighted more towards the third and fourth quarters of 2002. Capital spending
during the first quarter of 2002 was offset by the receipt of $2.2 million of
proceeds from the sale of assets in the first quarter of 2002. The Company did
not sell any significant assets in the first quarter of 2003.

Net cash provided by financing activities totaled $5.9 million in the first
quarter of 2003 versus net cash used in financing activities of $15.0 million
in the first quarter of 2002. During the first quarter of 2003, the Company
borrowed long-term debt of $6.6 million versus repayments of long-term debt of
$9.1 in the first quarter of 2002. The borrowings of long-term debt in the
first quarter of 2003 were due primarily to higher working capital requirements
and the reduction of long-term debt in the first quarter of 2002 included the
gain on early extinguishment of the Senior Subordinated Notes of approximately
$2.8 million.

On February 25, 2002, the Company refinanced its revolving credit facility and
$40 million Senior Subordinated Notes with a new credit facility including
certain term loans (the Term Loans)(collectively the Credit Facility). Proceeds
from the Term Loans were used to repurchase the $40 million of Senior
Subordinated Notes for $37.25 million. The Credit Facility includes a revolving
credit facility (the Revolver) that allows the Company to borrow under a
revolving line of credit up to the lesser of $120 million or a borrowing base
amount as defined in the Credit Facility agreement. The interest rate for the
Revolver is based upon the prime rate plus 1.5% or LIBOR plus 4.5% with a
minimum interest rate of 6.5%. Annual commitment fees are due on the undrawn
portion of the commitment. At March 31, 2003, $33.1 million was outstanding
under the Revolver, and approximately $19.6 million was committed under letters
of credit. As of March 31, 2003, the Company had approximately $39.3 million
available under the Revolver. The Revolver matures on February 25, 2005.

Borrowings under the Credit Facility are secured by a first priority security
interest on assets of the Company and certain of its subsidiaries, including a
pledge of stock of certain subsidiaries. In

27



---



##### Table of Contents



addition, certain subsidiaries of the Company jointly and severally guarantee
the obligations of the Company under the Credit Facility.

The Credit Facility contains four loans with the following terms:

|                                                         |  |                                                                               |  |                                                                              |  |                                                                          |  |                                                             
|-------------------------------------------------------- |  | ----------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------- |  | ------------------------------------------------------------------------ |  | ------------------------------------------------------------
|                                                         |  | Term Loan A                                                                   |  | Term Loan B                                                                  |  | Term Loan C                                                              |  | Term Loan D                                                 
|                                                         |  |                                                                               |  |                                                                              |  |                                                                          |  |                                                             
|Date of note
Maturity date
Original amount
Interest rate |  | February 25, 2002
February 25, 2005
$17,500,000
Prime + 2.75% or
Min of 7.75% |  | February 25, 2002
February 25, 2005
$25,000,000
Prime + 6.5% or
Min of 11.5% |  | February 25, 2002
February 25, 2005
$11,000,000
Prime + 9% or
Min of 14% |  | February 25, 2002
February 28, 2005
$29,250,000
Prime + 3.5%

Term Loan A is repayable in installments over three years, with interest
payable monthly based upon the prime rate plus 2.75% with a minimum interest
rate of 7.75%. Term Loan B is repayable in installments over three years, with
interest payable monthly based upon the prime rate plus 6.50%. The interest
rate on Term Loan B includes interest paid in kind of 3.50% that will be
payable upon maturity. The minimum interest for Term Loan B is 11.50%. Term
Loan C is payable in full at maturity with interest payable monthly based upon
the prime rate plus 9.00%. The interest rate on Term Loan C also includes
interest paid in kind of 5.00% that will be payable upon maturity. The minimum
interest for Term Loan C is 14.00%. Term Loan D is payable in full at maturity
with interest payable quarterly based upon the prime rate plus 3.50%. In
addition, the Company currently has outstanding indebtedness of $150 million
under a series of 8 5/8% Senior Notes maturing in 2007.

Future maturities of long-term debt are as follows at March 31, 2003 (in
thousands):

|                                 |  |   |         | 
|-------------------------------- |  | - | ------- | 
|April 1, 2003 to March 31, 2004  |  | $ | 13,418  | 
|April 1, 2004 to March 31, 2005  |  |   | 91,671  | 
|April 1, 2005 to March 31, 2006  |  |   | 0       | 
|April 1, 2006 to March 31, 2007  |  |   | 0       | 
|April 1, 2007 to October 1, 2007 |  |   | 150,000 | 
|                                 |  |   |         | 
|                                 |  | $ | 255,089 | 
|                                 |  |   |         | 

The Credit Facility agreement 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, sell assets, or declare or pay any dividends on its capital stock.
The financial covenants require the Company to maintain minimum consolidated
earnings before interest, taxes, depreciation and amortization, and gains and
losses on disposal of operating assets, and also includes leverage and fixed
charges coverage ratios. During the first quarter of 2003, the Company amended
its Credit Facility agreement to adjust two financial covenants: the minimum
consolidated Covenant EBITDA and the maximum fixed charges coverage ratio. The
Company incurred a fee of $300,000 related to the completion of the amendment
to the Credit Facility. Prior to the amendment, the minimum consolidated
Covenant EBITDA increased from $60 million at December 31, 2002 to $70 million
at December 31, 2003. The minimum consolidated Covenant EBITDA is tested
monthly and the increases were at varying amounts each month. The amendment
reduced the increases and the minimum consolidated Covenant EBITDA from $70
million to $65 million. Therefore, the minimum consolidated Covenant EBITDA
will now increase from $60 million at December 31, 2002 to $65 million at
December 31, 2003. In addition, the fixed charges coverage ratio covenant was
amended based on the reduction in the Covenant EBITDA. The financial covenants
were amended by the Company and its lenders due to the potential adverse
financial impact from external factors in 2003 including, but not limited to,
the war with Iraq and a drop in new vehicle production, as well as higher fuel
prices.

28



---



##### Table of Contents



There can be no assurance that the Company will be able to comply with these or
its other debt covenants or that, if it fails to do so, it will be able to
obtain amendments to or waivers of such covenants. Failure of the Company to
comply with covenants contained in its debt instruments, if not waived, or to
adequately service debt obligations, could result in a default under the Credit
Facility. Any default under the Companys debt instruments, particularly any
default that results in an acceleration of indebtedness or foreclosure on
collateral, could have a material adverse effect on the Company.

As described previously, the Company is currently negotiating a new Master
Agreement with the IBT regarding its union employees in the United States. If
the Company is unable to negotiate a new contract with the IBT by May 31, 2003
(the expiration date of the current Master Agreement) and there is a work
stoppage, such work stoppage could result in an event of default under the
Companys Credit Facility. A work stoppage by the Companys employees may
significantly affect the Companys liquidity, including its ability to borrow
additional funds under its Credit Facility and its ability to pay normal
operating expenses and amounts owed to its creditors, which could potentially
require the Company to seek bankruptcy court or other protection from its
creditors.

In additional, the Company is involved in various litigation matters, including
the Gateway Development & Manufacturing case and the Commercial Carriers, Inc.
case. While it is not possible to predict the outcome of the litigation
against the Company and while the Company believes that these claims are
without merit, if the litigation is resolved in a manner that is financial
position and significantly increase the Companys need for additional
liquidity.

Quantitative and Qualitative Disclosures about Market Risk

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.

Investments

The Company does not use derivative financial instruments in its investment
portfolio. The Company places its investments in instruments that meet high
credit quality standards, as specified in the Companys investment policy
guidelines. The policy also limits the amount of credit exposure to any one
issue, issuer, and type of instrument. Short-term investments at March 31,
2003, which are recorded at fair value of $63.2 million, have exposure to price
risk. This risk is estimated as the potential loss in fair value resulting from
a hypothetical 10% adverse change in quoted prices and amounts to $6.3 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 $1.1
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.

29



---



##### Table of Contents



Substantial Leverage

The Company has consolidated indebtedness, which is substantial in
relation to its stockholders equity. As of March 31, 2003, the Company had
total long-term debt of approximately $255.1 million (excluding approximately
$124.4 million of trade payables and other accrued liabilities) and
stockholders equity of approximately $6.8 million. In addition, the Company
has additional borrowings available under its revolving credit facility, which
is discussed in the notes to the Companys consolidated financial statements
included in this Quarterly Report on Form 10-Q. The Companys leveraged
financial position exposes it to the risk of increased interest rates, may
impede its ability to obtain financing in the future for working capital,
capital expenditures and general corporate purposes, and may make the Company
more vulnerable to economic downturns and work stoppages, and limit its ability
to withstand competitive pressures.

The Companys debt instruments contain a number of affirmative, negative,
and financial covenants, which limit the ability of the Company to, among other
things, incur debt, incur liens, make investments, make capital expenditures,
make dividend or other distributions or enter into a merger or consolidation
transaction. As of March 31, 2003, the Company was in compliance with the terms
of its various long-term debt covenants. There can be no assurance, however,
that the Company will be able to comply with its debt covenants in the future
or that, if it fails to do so, it will be able to obtain amendments to or
waivers of such covenants on commercially reasonable terms, if at all.

The Company will need to use a large portion of its future earnings to pay
principal and interest on its substantial debt obligations, which will reduce
the amount of money available for use in its operations, capital reinvestment,
or for responding to potential business opportunities as they arise. The
ability of the Company to generate the cash necessary to service its debt is
subject to a number of external factors beyond its control, and there can be no
assurance that the Company will be able to generate sufficient cash through its
operations to enable it to meet its obligations. If the Company does not
generate enough cash to enable it to meet its debt obligations, it may be
required to take actions such as reducing or delaying capital expenditures,
selling assets, restructuring or financing its debt or seeking additional
equity capital. There can be no assurance that any of these actions could be
effected on commercially reasonable terms, if at all, and the terms of existing
or future indebtedness may restrict the Company from adopting any of these
alternatives.

Any failure of the Company to comply with the covenants contained in its
debt instruments, if not waived, or to adequately service its debt obligations,
could result in a default under its debt instruments. If a default occurs under
any of the Companys debt instruments, the lenders thereunder may elect to
declare all borrowings outstanding, together with interest and other fees, to
be immediately due and payable. Borrowings under the Companys credit facility
are collateralized with the assets of the Company and certain of its
subsidiaries. If the Company were unable to repay any borrowing under its
credit facility when due, the lenders thereunder would have the right to
proceed against the collateral granted to them to secure the debt. Any default
under the Companys debt instruments, particularly any default that resulted in
acceleration of indebtedness or foreclosure on collateral, would have a
material adverse effect on the Company.

Labor Matters

Certain subsidiaries of the Company, along with certain competitors of the
Company, which utilize union labor and are engaged in the car-haul business,
are parties to the Master Agreement with the IBT. As a result of being a party
to the Master Agreement along with these other entities, the Company may not
have exclusive control over issues relating to bargaining with the IBT upon
expiration of the Master Agreement. The Master Agreement expires May 31, 2003.
Negotiation of a new contract with the IBT has begun and the Company is
attempting to negotiate a contract with the IBT, exclusive of any other
car-haul companies utilizing union labor. The Company believes that it must
obtain wage and benefit stability and work rule flexibility with its union
employees in order to

30



---



##### Table of Contents



remain competitive. There can be no assurance that negotiation of a new
contract upon expiration of the current Master Agreement will not result in
increased labor costs to the Company, or that such contracts can be negotiated
without work stoppages, either of which could have a material adverse effect on
the Company. A work stoppage by the Companys employees may significantly
affect the Companys liquidity, including its ability to borrow additional
funds under its Credit Facility and its ability to pay normal operating
expenses and amounts owed to its creditors, which could potentially require the
Company to seek bankruptcy court or other protection from its creditors.

The United Auto Workers (UAW) contract with Ford Motor Company, General
Motors Corporation, and DaimlerChrysler Corporation expires in September 2003.
The failure of any of these automobile manufacturers to negotiate a new
agreement with the UAW without a work stoppage, which reduces production
levels, could have a material adverse effect on the Company.

Fuel Prices

Allied Automotive Group 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, and changes in global demand and
global production. To reduce price risk caused by market fluctuations, Allied
Automotive Group periodically purchases fuel in advance of consumption. A 10%
increase in diesel fuel prices would reduce pre-tax income by $5.4 million over
the next fiscal year assuming levels of fuel consumption and pricing in the
remainder of 2003 is consistent with the first quarter, without taking into
account any positive impact arising from fuel surcharges.

Competition

The automotive transportation industry is highly competitive, as Allied
Automotive Group currently competes with other motor carriers of varying sizes,
as well as with railroads. Allied Automotive Group also competes with non-union
motor carriers. The development of new methods of hauling vehicles could also
lead to competition.

The carhaul business is labor intensive for union carhaul companies. Wages
and benefits represented approximately 55% of the Companys consolidated
operating expenses for the quarter ended March 31, 2003. There has been an
increase in the number of carhaul companies that utilize non-union labor, and
the market share represented by such companies has increased. Carhaul companies
that utilize non-union labor operate at a significant cost advantage as
compared to Allied Automotive Group and other union carhaul companies due to
lower labor costs, primarily as a result of lower benefit and pension costs.
Non-union competitors also operate without work rules which apply to Allied
Automotive Group and other union companies, which provide non-union companies
with a competitive advantage.

Non-union companies, which operate at a significant cost advantage to
Allied Automotive Group, may be able to provide delivery services at a cost to
customers that is less than the cost of Allied Automotive Groups services. The
Company believes that Allied Automotive Group must obtain wage and benefit
stability and work rule flexibility with its union employees in order to remain
competitive.

Self Insurance Claims

An increase in the number or severity of accidents, stolen equipment, or
other loss events over those anticipated could have a materially adverse effect
on the Companys profitability as the Company is self-insured for a significant
portion of its risks. In addition, the insurance market is contracting and it
is becoming increasingly more difficult to obtain insurance coverage. While the
Company currently has insurance coverage, there can be no assurance that the
Company will be able to obtain insurance coverage in the future.

31



---



##### Table of Contents



Dependence on Major Customers

Allied Automotive Groups business is highly dependent upon General
Motors, Ford, DaimlerChrysler, Toyota and Honda, its largest customers. The
Company operates under written contracts with General Motors, UPS Autogistics,
Inc. on behalf of Ford, DaimlerChrysler, Toyota and Honda. The contracts with
UPS Autogistics, DaimlerChrysler and Toyota can be terminated by location for
any reason or no reason based on 60 to 150 days notice. Although Allied
Automotive Group believes that its relationships with these customers is
mutually satisfactory, there can be no assurance that these relationships will
not be terminated in whole or in part in the future. Furthermore, automotive
manufacturers are relying increasingly on fourth party logistics companies and
re-engineering vehicle delivery practices, which could result in a reduction of
services provided by the Company for some or all of its major customers. A
significant reduction in the production levels, plant closings or the
imposition of vendor price reductions by these manufacturers, or the loss of
General Motors, UPS Autogistics, DaimlerChrysler, Toyota or Honda as a
customer, or a significant reduction in the services provided for any of these
customers by Allied Automotive Group would have a material adverse effect upon
the Company.

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
investment in foreign subsidiaries translated into dollars using month-end
exchange rates at March 31, 2003 is $70.9 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 $7.1 million. At
March 31, 2003 a payable balance of $16.4 million related to intercompany
transactions was recorded on the Companys Canadian subsidiary. The potential
loss from a hypothetical 10% change in quoted foreign currency exchange rates
related to this balance amounts to $1.6 million as of March 31, 2003. The
Company does not use derivative financial instruments to hedge its exposure to
changes in foreign currency exchange rates.

Revenue Variability

The Companys revenues are variable and can be impacted by sudden
unexpected changes in OEM production levels. In addition, the Companys
revenues are seasonal, with the second and fourth quarters generally
experiencing higher revenues than the first and third quarters. The volume of
vehicles shipped during the second and fourth quarters is generally higher due
to the introduction of new models, which are shipped to dealers during those
periods and the higher spring, and early summer sales of automobiles and light
trucks. During the first and third quarters, vehicle shipments typically
decline due to lower sales volume during those periods and scheduled plant shut
downs. Except for the impact of rising fuel costs discussed herein, inflation
has not significantly affected the Companys results of operations. Automobile
manufacturers have announced production cutbacks during the second quarter of
2003. As a result, the Company expects to experience a potentially significant
decline in vehicle deliveries during the second quarter.

Dependence on Automotive Industry

The automotive transportation industry is dependent upon the volume of new
automobiles and light trucks manufactured, imported and sold. The automotive
industry is highly cyclical, and the demand for new automobiles and light
trucks is directly affected by such external factors as general economic
conditions in the United States, unemployment, consumer confidence, federal
policies, the possibility of war, terrorist activities, and the availability of
affordable new car financing. As a result, the Companys results of operations
are adversely affected by cyclical downturns in the general economy or in the
automotive industry and by consumer preferences in purchasing new automobiles,
SUVs, and light trucks. Inventories of new vehicles in the first quarter of
2003 are currently significantly higher than the 2002 levels and sales of new
vehicles in the first quarter of 2003 were

32



---



##### Table of Contents



lower than the 2002 levels. As a result, automotive manufacturers have
recently announced reductions in new vehicle production in the second quarter
of 2003 compared to the second quarter of 2002. A significant decline in the
volume of automobiles, SUVs, and light trucks manufactured as well as sold in
North America, or a material change in the overall mix of vehicles
manufactured, could similarly have a material adverse effect on the Company.

Contractual Obligations

Long-term contractual obligations, other than long-term debt obligations,
are not recorded in the Companys consolidated balance sheet. The Company has
no material changes to this disclosure as made in its Annual Report on Form
10-K for the year ended December 31, 2002.

Dependence on Key Personnel

The success of the Company is dependent upon its senior management team,
as well as its ability to attract and retain qualified personnel. The Companys
credit facility provides that the facility may be terminated in the event Hugh
E. Sawyer ceases to be involved in the day to day operation of the Company,
unless a successor reasonably acceptable to the lenders is appointed within 90
days of his cessation of involvement with the Company. There is no assurance
that the Company will be able to retain its existing senior management or to
attract additional qualified personnel.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make decisions based upon estimates, assumptions, and factors it
considers as relevant to the circumstances. Such decisions include the
selection of applicable accounting principles and the use of judgment in their
application, the results of which impact reported amounts and disclosures.
Changes in future economic conditions or other business circumstances may
affect the outcomes of managements estimates and assumptions. Accordingly,
actual results could differ from those anticipated.

The Companys critical accounting policies include the following:

CLAIMS AND INSURANCE RESERVES  Reserves for self-insured workers
compensation, automobile, and general liability losses are subject to actuarial
estimates based on historical claims experience adjusted for current industry
trends. The Company receives third-party actuarial valuations to assist in the
determination of its claims and insurance reserves. The actuarial estimates for
self-insured workers compensation and automobile liability are discounted using
managements estimate of weighted risk free interest rates for each claim year
to their present values. The claims and insurance reserves are adjusted
periodically as such claims mature to reflect changes in actuarial estimates
based on actual experience.

ACCOUNTS RECEIVABLE VALUATION RESERVES  Substantially all revenue is derived
from transporting new automobiles and light trucks from manufacturing plants,
ports, auctions, and railway distribution points to automobile dealerships.
Revenue is recorded when the vehicles are delivered to the dealerships. The
Company makes significant estimates to determine the collectibility of its
accounts receivable on the balance sheet. Estimates include assessments of the
potential for customer billing adjustments based on the timing of delivery, the
accuracy of pricing, as well as evaluation of the historical aging of customer
accounts. In addition, estimates include periodic evaluations of the credit
worthiness of customers including the impact of market and economic conditions
on their viability to satisfy amounts owed to the Company.

ACCOUNTING FOR INCOME TAXES  As part of the process of preparing the Companys
consolidated financial statements the Company is required to estimate income
taxes in each of the

33



---



##### Table of Contents



jurisdictions in which the Company operates. This process involves estimating
actual current tax exposure, together with assessing temporary differences
resulting from differing treatment of items, such as depreciation expense, for
tax and accounting purposes. These differences result in deferred tax assets
and liabilities, which are included within the Companys consolidated balance
sheet. The Company must then assess the likelihood that the deferred tax
assets will be recovered from future taxable income and to the extent the
Company believes that recovery is not likely, the Company must establish a
valuation allowance. To the extent the Company establishes a valuation
allowance or increases this allowance in a period, the Company must include an
expense within the tax provision in the statements of operations.

Significant management judgment is required in determining the Companys
provision for income taxes, deferred tax assets and liabilities and any
valuation allowance recorded against the net deferred tax assets. The Company
has recorded a valuation allowance of $7.1 as of March 31, 2003 due to
uncertainties related to the Companys ability to utilize some of the deferred
tax assets, primarily consisting of certain capital losses carried forward and
foreign tax credits, before they expire. The valuation allowance is based on
managements estimate of taxable income by jurisdiction in which the Company
operates and the period over which the deferred tax assets will be recoverable.
In the event that actual results differ from these estimates or the Company
adjusts these estimates in future periods, the Company may need to establish an
additional valuation allowance, which could materially impact the financial
position and results of operations.

The net deferred tax asset as of March 31, 2003 was $15.3 net of a valuation
allowance of $7.1 million.

PROPERTY AND EQUIPMENT   The Company operates approximately 3,800
company-owned Rigs, revenue equipment, in connection with its business.
Property and equipment, including revenue equipment, are stated at cost and
depreciated using the straight-line method over the estimated useful life down
to estimated salvage value. The actual life, if different than estimated, could
have an impact on depreciation expense in the Companys consolidated statements
of operations.

GOODWILL  The Company adopted SFAS 142 as of January 1, 2002. Pursuant to
adoption, goodwill is no longer amortized but is evaluated annually for
impairment, or on an interim basis if an event occurs or circumstances change
that would reduce the fair value of goodwill below its carrying value. The
fair value of goodwill is derived by using a discounted cash flow analysis.
This analysis involves estimates and assumptions by management regarding future
revenue streams and expenses. Changes to these assumptions and estimates could
have a material effect on the carrying value of goodwill and result in an
impairment charge in the Companys consolidated statements of operations.

CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS This Quarterly Report
on Form 10-Q contains, and from time to time the Company and its officers,
directors, or employees may make other forward-looking statements, including
statements regarding, among other items, (i) the Companys strategy, intentions
or expectations, (ii) general industry trends, competitive conditions and
customer preferences, (iii) the Companys management information systems, (iv)
the Companys remanufacturing program, (v) the Companys efforts to reduce
costs, (vi) the adequacy of the Companys sources of cash to finance its
current and future operations and (vii) 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. Without
limiting the generality of the foregoing, the words believe, anticipate,
seek, expect, estimate, intend, plan, and similar expressions are
intended to identify 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 from historical results or
results expressed or implied by such forward-looking statements are the
following: economic recessions or downturns in new vehicle production or sales;
war in the Middle East; increases in the cost and availability of fuel; the
highly competitive nature of the automotive distribution industry; price
competition with non-union carriers; dependence on the

34



---



##### Table of Contents



automotive industry; the impact of recent price increases implemented by the
Company on the Companys market share; loss or reduction of revenues generated
by the Companys major customers or the loss of any such customers; the
variability of OEM production and seasonality of the automotive distribution
industry; potential plant closings by the OEMs; the Companys highly leveraged
financial position; the ability of the Company to negotiate its IBT contract on
terms favorable to the Company without a work stoppage; the ability of Ford
Motor Corporation, General Motors Corporation, and DaimlerChrysler Corporation
to negotiate a contract with the UAW by September 2003 without work stoppages;
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; increased
frequency and severity of work related accidents and workers compensation
claims; availability of appropriate insurance coverages; increased expenses due
to layoffs of employees; 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; and other risk factors set forth from time
to time in the Companys Securities and Exchange Commission reports, including
but not limited to, this Quarterly Report on Form 10-Q. Many of these factors
are beyond the Companys ability to control or predict, and readers are
cautioned not to put undue reliance on such forward-looking statements. The
Company disclaims any obligation to update or review any forward-looking
statements contained in this Quarterly Report or in any statement referencing
the risk factors and other cautionary statements set forth in this Quarterly
Report.




Item 3. Quantitative and Qualitative Disclosures About Market Risk

The information required under this item is provided under the caption
Disclosures about Market Risks under Item 2. Managements Discussion and
Analysis of Financial Condition and Results of Operations.




Item 4. Controls and Procedures



| | (a) |  | Evaluation of Disclosure Controls and Procedures.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | The Company maintains a system of disclosure controls and procedures (as
defined in Rules 13a-14(c) and 15(d)-14(c) under the Securities Exchange
Act of 1934) designed to provide reasonable assurance as to the
reliability of the financial statements and other disclosures included in
this report, as well as to safeguard assets from unauthorized use or
disposition. The Companys Chief Executive Officer and Chief Financial
Officer evaluated the effectiveness of the Companys disclosure controls
within 90 days prior to the filing date of this report. Based upon that
evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that the Companys disclosure controls and procedures are
effective in alerting them in a timely manner of material information
required to be included in the Companys periodic Securities and Exchange
Commission filings.
|
| | (b) |  | Changes in Internal Controls.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |     |  | Since the evaluation date described above, no significant changes were
made to the Companys internal controls or other factors that could
significantly affect those controls.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

PART II  OTHER INFORMATION
Item 1.  LEGAL PROCEEDINGS

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

35



---



##### Table of Contents



opinion of management, the ultimate disposition of these matters, other than
those discussed below, will not have a material adverse effect on the Companys
financial position or results of operations.

Gateway Development & Manufacturing, Inc. v. Commercial Carriers, Inc., et al.,
Index No. 1997/8920 (the Gateway Case) and Commercial Carriers, Inc. v.
Gateway Development & Manufacturing, Inc., et al. (the CCI Case), Index No. I
2000/8184. The claims at issue in both the Gateway Case and the CCI Case
center around the contention that the Company breached legal duties with
respect to a failed business transaction involving Gateway Development &
Manufacturing, Inc., Ryder Truck Rental, Inc. and Ryder System, Inc. In the
Gateway Case, the Company sought and received summary judgment in its favor on
the sole claim (for tortious interference with contract) asserted against it by
Gateway Development & Manufacturing, Inc., but that ruling was reversed on
appeal. While the appellate court held that summary judgment in favor of the
Company was premature, the Company will be permitted to raise at trial and/or
further dispositive motions the substantive arguments upon which its initial
summary judgment motion was based. Subsequent to its summary judgment ruling,
the trial court permitted the filing and service of cross-claims against the
Company by the other defendants in that action. In the CCI Case, the Company
has accepted service of a separate complaint asserting claims against the
Company by the other defendants in the Gateway Case. It is anticipated that
the claims asserted in both the Gateway Case and the CCI Case will be resolved
in a unified proceeding. With respect to the entirety of this litigation, the
Company intends to continue its vigorous defense against the claims asserted
against it, as management believes all of those claims are without merit.
While the ultimate results of this litigation cannot be predicted, if this
litigation is resolved in a manner that is adverse to the Company, it could
have a material adverse effect on the Companys consolidated financial position
or results of operations.

Ryder Systems, Inc. v. Allied Holdings, Inc., AH Acquisition Corp. and Allied
Automotive Group, Inc.,Case No. 01-3553-CIV-MARRA in the United States
District Court for the Southern District of Florida, relates to the Companys
August 1997 stock acquisition of certain businesses formerly owned by Ryder,
and the respective responsibilities of Ryder and Allied for certain third-party
injury claims associated with the acquired businesses. Ryders original
complaint was filed on August 16, 2001. In response, the Company moved to
dismiss, and the court granted that motion with leave for Ryder to amend its
complaint. On December 26, 2001, Ryder timely filed its amended complaint.
Following the dismissal with prejudice of one of the counts asserted by Ryder
in its amended complaint, Ryder filed, on or about August 1, 2002, a Second
Amended Complaint. Ryders five-count Second Amended Complaint alleges, in
Count one, that the Company breached its agreement with Ryder by failing to
undertake certain actions (including posting letters of credit and bonds) to
substitute the Company for Ryder under an insurance policy covering third-party
claims and with various state agencies that regulate matters such as
self-insured workers compensation. In Counts two and three, the Second
Amended Complaint alleges that if these obligations are not required by
contract, the legal doctrines of promissory estoppel and negligent
misrepresentation created them. In Count four, the Second Amended Complaint
seeks a declaration that the Company is required to undertake these actions.
In Count five, Ryder seeks a declaration that the Company is obligated to take
certain steps to transfer from Ryder to the Company the ownership and
administrative responsibility for two pension plans. The Company has filed a
motion for summary judgment on all counts, which motion is currently pending.
The Company intends to continue its vigorous defense against the claims
asserted against it, and management believes all of those claims are without
merit. The Company has also raised several counterclaims. The ultimate
results of this litigation cannot be predicted. However, if Ryder prevails on
its claims and the court orders the Company to substitute itself for Ryder by,
among other things, posting substantial letters of credit, it could have a
material adverse effect on the Companys consolidated financial position or
results of operations.

36



---



##### Table of Contents






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

|            |  |                                                                                                                                                                                   | 
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|(a) Exhibit |  | Description                                                                                                                                                                      
|            |  |                                                                                                                                                                                  
|10.1       |  | Form of [Bonus and Retention Agreement], dated February 14,
2003 between the Company and each of Hugh E. Sawyer, Robert J.
Rutland, Daniel Popky, Thomas Duffy, and David Rawden.



---

| |  |  Management contract, compensatory plan or arrangement.
| |  | --------------------------------------------------------

(b)  Reports on Form 8-K: None.

37



---



##### Table of Contents






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: May 15, 2003 |  |     |  |                                                                                                               
| |  |                    |  |     |  |                                                                                                               
| |  |                    |  | By: |  | /s/ HUGH E. SAWYER                                                                                            
| |  |                    |  |     |  |                                                                                                               
| |  |                    |  |     |  | Hugh E. Sawyer,President and Chief Executive Officer                                                          
| |  |                    |  |     |  |                                                                                                               
| |  | Date: May 15, 2003 |  |     |  |                                                                                                               
| |  |                    |  |     |  |                                                                                                               
| |  |                    |  | By: |  | /s/ DANIEL H. POPKY                                                                                           
| |  |                    |  |     |  |                                                                                                               
| |  |                    |  |     |  | Daniel H. Popky,Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)

38



---



##### Table of Contents






CERTIFICATIONS

I, Daniel H. Popky, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Allied
Holdings, Inc;                                                                                                                                                                                                                                                   
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present
in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented
in this quarterly report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:                                                                                                     



| | a) |  | designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the
Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrants auditors and
the audit committee of registrants board of directors (or persons
performing the equivalent function):
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrants ability to record, process, summarize and report
financial data and have identified for the registrants auditors
any material weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|             |  |                                                                          
|------------ |  | -------------------------------------------------------------------------
|May 15, 2003 |  | /s/Daniel H. Popky                                                       
|             |  |                                                                          
|Date         |  | Daniel H. Popky
Senior Vice President
Finance and Chief Financial Officer

39



---



##### Table of Contents



CERTIFICATIONS

I, Hugh E. Sawyer, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Allied
Holdings, Inc;                                                                                                                                                                                                                                                   
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present
in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented
in this quarterly report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:                                                                                                     



| | a) |  | designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the
Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrants auditors and
the audit committee of registrants board of directors (or persons
performing the equivalent function):
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrants ability to record, process, summarize and report
financial data and have identified for the registrants auditors
any material weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|             |  |                                                     
|------------ |  | ----------------------------------------------------
|May 15, 2003 |  | /s/Hugh E. Sawyer                                   
|             |  |                                                     
|Date         |  | Hugh E. Sawyer
President and Chief Executive Officer

40