##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q



|X IN BALLOT BOX |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934  For the quarterly period ended June 30, 2002
|--------------- |  | --------------------------------------------------------------------------------------------------------------------------------------

or



|OPEN BALLOT BOX |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934  For the transition period from
 to
|--------------- |  | -----------------------------------------------------------------------------------------------------------------------------



| | Commission File
Number:    0-22276
| | ----------------------------------

ALLIED HOLDINGS, INC.

---

(Exact name of registrant as specified in its charter)


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

Suite 200, 160 Clairemont Avenue, Decatur, Georgia 30030

---

(Address of principal executive offices)


(404) 373-4285

---

(Registrants telephone number, including area code)




---

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


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

|                                                        |  |  |           |  | 
|------------------------------------------------------- |  |  | --------- |  | 
|Outstanding common stock, No par value at July 19, 2002 |  |  | 8,386,051 | 

1



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TABLE OF CONTENTS



|                             |                                                                                              |                                                                                                        |  |  |  |  |  | 
|---------------------------- | -------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------ |  |  |  |  |  | 
|PART I FINANCIAL INFORMATION
|                             | ITEM 1 FINANCIAL STATEMENTS                                                                 
|                             |                                                                                              | CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2002 AND DECEMBER 31, 2001                                 
|                             |                                                                                              | CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2002 AND 2001
|                             |                                                                                              | CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTH PERIODS ENDED JUNE 30, 2002 AND 2001          
|                             |                                                                                              | 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                           
|PART II OTHER INFORMATION   
|                             | ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|                             | ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K                                                     
|                             | SIGNATURE PAGE                                                                              



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##### Table of Contents



INDEX

PART I

FINANCIAL INFORMATION

|                             |                                                                                                        |  |  |    |      |  | 
|---------------------------- | ------------------------------------------------------------------------------------------------------ |  |  | -- | ---- |  | 
|                             |                                                                                                        |  |  |    | PAGE
|                             |                                                                                                        |  |  |    |     
|ITEM 1: FINANCIAL STATEMENTS |                                                                                                        |  |  |   
|                            
|                             | Consolidated Balance Sheets as of June 30, 2002 and
December 31, 2001                                  |  |  | 3  |     
|                            
|                             | Consolidated Statements of Operations for the Three and Six
Month Periods Ended June 30, 2002 and 2001 |  |  | 4  |     
|                            
|                             | Consolidated Statements of Cash Flows for the Six
Month Periods Ended June 30, 2002 and 2001           |  |  | 5  |     
|                            
|                             | Notes to Consolidated Financial Statements                                                             |  |  | 6  |     
|                            
|ITEM 2                       |                                                                                                        |  |  |   
|                             | Managements Discussion and Analysis of Financial
Condition and Results of Operations                  |  |  | 20 |     
|                            
|ITEM 3                       |                                                                                                        |  |  |   
|                             | Quantitative and Qualitative Disclosures about Market Risk                                             |  |  | 26 |     
|                            
|PART II                     
|                            
|OTHER INFORMATION           
|                            
|ITEM 4                       |                                                                                                        |  |  |   
|                             | Submission of Matters to a Vote of Security Holders                                                    |  |  | 28 |     
|                            
|ITEM 6                       |                                                                                                        |  |  |   
|                             | Exhibits and Reports on Form 8-K                                                                       |  |  | 28 |     
|                             | Signature Page                                                                                         |  |  | 29 |     

2



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##### Table of Contents









PART I.  FINANCIAL INFORMATION
ITEM 1  FINANCIAL STATEMENTS

ALLIED HOLDINGS, INC. AND SUBSIDIARIES




CONSOLIDATED BALANCE SHEETS
(In Thousands)

|                                            |                                                                                                                                               |  |                                            |         |   |             |         |         |              |         |  | 
|------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------ | ------- | - | ----------- | ------- | ------- | ------------ | ------- |  | 
|                                            |                                                                                                                                               |  |                                            |         |   | June 30,    |         |         | December 31, |        
|                                            |                                                                                                                                               |  |                                            |         |   | 2002        |         |         | 2001         |        
|                                            |                                                                                                                                               |  |                                            |         |   |             |         |         |              |        
|                                            |                                                                                                                                               |  |                                            |         |   | (Unaudited) |         |         |              |         | 
|ASSETS                                      |                                                                                                                                               |  |                                            |         |   |             |         |        
|CURRENT ASSETS:                             |                                                                                                                                               |  |                                            |         |   |             |         |        
|                                            | Cash and cash equivalents                                                                                                                     |  | $                                          | 19,471  |   |             | $       | 10,543  |             
|                                            | Short-term investments                                                                                                                        |  |                                            | 66,023  |   |             |         | 64,794  |             
|                                            | Receivables, net of allowance for doubtful accounts of
$5,403 and $11,058, respectively                                                       |  |                                            | 61,902  |   |             |         | 72,292  |             
|                                            | Inventories                                                                                                                                   |  |                                            | 5,150   |   |             |         | 5,349   |             
|                                            | Deferred tax assets                                                                                                                           |  |                                            | 34,394  |   |             |         | 32,403  |             
|                                            | Prepayments and other current assets                                                                                                          |  |                                            | 18,940  |   |             |         | 18,921  |             
|                                            |                                                                                                                                               |  |                                            |         |   |            
|                                            |                                                                                                                                               |  | Total current assets                       |         |   | 205,880     |         |         |              | 204,302 | 
|                                            |                                                                                                                                               |  |                                            |         |   |            
|PROPERTY AND EQUIPMENT, NET                 |                                                                                                                                               |  | 194,426                                    |         |   |             | 214,641 |        
|                                            |                                                                                                                                               |  |                                            |         |   |            
|OTHER ASSETS:                               |                                                                                                                                               |  |                                            |         |   |             |         |        
|                                            | Goodwill, net                                                                                                                                 |  |                                            | 86,114  |   |             |         | 90,230  |             
|                                            | Other                                                                                                                                         |  |                                            | 26,770  |   |             |         | 24,219  |             
|                                            |                                                                                                                                               |  |                                            |         |   |            
|                                            |                                                                                                                                               |  | Total other assets                         |         |   | 112,884     |         |         |              | 114,449 | 
|                                            |                                                                                                                                               |  |                                            |         |   |            
|                                            |                                                                                                                                               |  | Total assets                               |         | $ | 513,190     |         |         | $            | 533,392 | 
|                                            |                                                                                                                                               |  |                                            |         |   |            
|                                           
|LIABILITIES AND STOCKHOLDERS EQUITY        |                                                                                                                                               |  |                                            |         |   |             |         |        
|                                           
|CURRENT LIABILITIES:                        |                                                                                                                                               |  |                                            |         |   |             |         |        
|                                            | Current maturities of long-term debt                                                                                                          |  | $                                          | 3,500   |   |             | $       | 2,625   |             
|                                            | Trade accounts payable                                                                                                                        |  |                                            | 40,669  |   |             |         | 40,232  |             
|                                            | Accrued liabilities                                                                                                                           |  |                                            | 84,231  |   |             |         | 82,963  |             
|                                            |                                                                                                                                               |  |                                            |         |   |            
|                                            |                                                                                                                                               |  | Total current liabilities                  |         |   | 128,400     |         |         |              | 125,820 | 
|                                            |                                                                                                                                               |  |                                            |         |   |            
|LONG-TERM DEBT, less current maturities     |                                                                                                                                               |  | 261,483                                    |         |   |             | 286,533 |        
|                                            |                                                                                                                                               |  |                                            |         |   |            
|POSTRETIREMENT BENEFITS OTHER THAN PENSIONS |                                                                                                                                               |  | 9,171                                      |         |   |             | 9,363   |        
|                                            |                                                                                                                                               |  |                                            |         |   |            
|DEFERRED INCOME TAXES                       |                                                                                                                                               |  | 23,849                                     |         |   |             | 21,383  |        
|                                            |                                                                                                                                               |  |                                            |         |   |            
|OTHER LONG-TERM LIABILITIES                 |                                                                                                                                               |  | 73,261                                     |         |   |             | 72,296  |        
|                                            |                                                                                                                                               |  |                                            |         |   |            
|STOCKHOLDERS EQUITY:                       |                                                                                                                                               |  |                                            |         |   |             |         |        
|                                            | Common stock, no par value; 20,000 shares authorized, 8,362
and 8,274 shares outstanding at June 30, 2002
and December 31, 2001, respectively |  |                                            |        |   |             |         |        |             
|                                            | Additional paid-in capital                                                                                                                    |  |                                            | 46,829  |   |             |         | 46,520  |             
|                                            | Treasury stock at cost, 139 shares at June 30, 2002
and December 31, 2001                                                                     |  |                                            | (707    | ) |             |         | (707    | )           
|                                            | Retained deficit                                                                                                                              |  |                                            | (22,033 | ) |             |         | (18,894 | )           
|                                            | Accumulated other comprehensive loss, net of tax                                                                                              |  |                                            | (7,063  | ) |             |         | (8,922  | )           
|                                            |                                                                                                                                               |  |                                            |         |   |            
|                                            |                                                                                                                                               |  | Total stockholders equity                 |         |   | 17,026      |         |         |              | 17,997  | 
|                                            |                                                                                                                                               |  |                                            |         |   |            
|                                            |                                                                                                                                               |  | Total liabilities and stockholders equity |         | $ | 513,190     |         |         | $            | 533,392 | 
|                                            |                                                                                                                                               |  |                                            |         |   |            

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

3



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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES




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

|                                                                                          |                                                                |                          |         |                            |         |   |                          |         |         |      |         |         |         |   |          |         |         |  
|----------------------------------------------------------------------------------------- | -------------------------------------------------------------- | ------------------------ | ------- | -------------------------- | ------- | - | ------------------------ | ------- | ------- | ---- | ------- | ------- | ------- | - | -------- | ------- | ------- | -
|                                                                                          |                                                                |                          |         | For the Three Months Ended |         |   | For the Six Months Ended |        
|                                                                                          |                                                                |                          |         | June 30,                   |         |   | June 30,                 |        
|                                                                                          |                                                                |                          |         |                            |         |   |                          |        
|                                                                                          |                                                                |                          |         | 2002                       |         |   | 2001                     |         |         | 2002 |         |         | 2001    |  
|                                                                                          |                                                                |                          |         |                            |         |   |                          |         |         |      |         |         |         |  
|                                                                                         
|REVENUES                                                                                  |                                                                | $                        | 238,984 |                            |         | $ | 250,195                  |         |         | $    | 452,243 |         |         | $ | 468,374  |        
|                                                                                          |                                                                |                          |         |                            |         |   |                          |         |         |      |         |        
|OPERATING EXPENSES:                                                                       |                                                                |                          |         |                            |         |   |                          |         |         |      |         |         |         |   |          |        
|                                                                                          | Salaries, wages and fringe benefits                            |                          |         | 127,513                    |         |   |                          | 140,589 |         |      |         | 246,049 |         |   |          | 272,306 |        
|                                                                                          | Operating supplies and expenses                                |                          |         | 35,906                     |         |   |                          | 39,895  |         |      |         | 66,811  |         |   |          | 81,337  |        
|                                                                                          | Purchased transportation                                       |                          |         | 25,328                     |         |   |                          | 28,666  |         |      |         | 47,107  |         |   |          | 51,962  |        
|                                                                                          | Insurance and claims                                           |                          |         | 12,929                     |         |   |                          | 13,768  |         |      |         | 23,500  |         |   |          | 27,057  |        
|                                                                                          | Operating taxes and licenses                                   |                          |         | 8,630                      |         |   |                          | 8,507   |         |      |         | 17,093  |         |   |          | 17,133  |        
|                                                                                          | Depreciation and amortization                                  |                          |         | 13,282                     |         |   |                          | 15,281  |         |      |         | 26,945  |         |   |          | 30,305  |        
|                                                                                          | Rents                                                          |                          |         | 1,856                      |         |   |                          | 1,592   |         |      |         | 3,210   |         |   |          | 3,662   |        
|                                                                                          | Communications and utilities                                   |                          |         | 1,873                      |         |   |                          | 1,914   |         |      |         | 3,865   |         |   |          | 3,952   |        
|                                                                                          | Other operating expenses                                       |                          |         | 1,455                      |         |   |                          | 3,590   |         |      |         | 4,715   |         |   |          | 7,613   |        
|                                                                                          | Loss (gain) on disposal of operating assets, net               |                          |         | 315                        |         |   |                          | (2,576  | )       |      |         | (714    | )       |   |          | (2,743  | )      
|                                                                                          |                                                                |                          |         |                            |         |   |                          |         |         |      |         |        
|                                                                                          |                                                                | Total operating expenses |         |                            | 229,087 |   |                          |         | 251,226 |      |         |         | 438,581 |   |          |         | 492,584 |  
|                                                                                          |                                                                |                          |         |                            |         |   |                          |         |         |      |         |        
|                                                                                          |                                                                | Operating income (loss)  |         |                            | 9,897   |   |                          |         | (1,031  | )    |         |         | 13,662  |   |          |         | (24,210 | )
|                                                                                          |                                                                |                          |         |                            |         |   |                          |         |         |      |         |        
|OTHER INCOME (EXPENSE):                                                                   |                                                                |                          |         |                            |         |   |                          |         |         |      |         |         |         |   |          |        
|                                                                                          | Equity in earnings of UK and Brazil joint ventures, net of tax |                          |         |                           |         |   |                          | 1,330   |         |      |         |        |         |   |          | 2,539   |        
|                                                                                          | Interest expense                                               |                          |         | (7,610                     | )       |   |                          | (9,387  | )       |      |         | (15,732 | )       |   |          | (17,853 | )      
|                                                                                          | Interest income                                                |                          |         | 615                        |         |   |                          | 626     |         |      |         | 887     |         |   |          | 1,590   |        
|                                                                                          | Gain on early extinguishment of debt                           |                          |         |                           |         |   |                          |        |         |      |         | 2,750   |         |   |          |        |        
|                                                                                          | Other, net                                                     |                          |         |                           |         |   |                          |        |         |      |         | (207    | )       |   |          |        |        
|                                                                                          |                                                                |                          |         |                            |         |   |                          |         |         |      |         |        
|                                                                                          |                                                                |                          | (6,995  | )                          |         |   | (7,431                   | )       |         |      | (12,302 | )       |         |   | (13,724  | )      
|                                                                                          |                                                                |                          |         |                            |         |   |                          |         |         |      |         |        
|INCOME (LOSS) BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE |                                                                |                          | 2,902   |                            |         |   | (8,462                   | )       |         |      | 1,360   |         |         |   | (37,934  | )      
|                                                                                         
|INCOME TAX (EXPENSE) BENEFIT                                                              |                                                                |                          | (793    | )                          |         |   | 2,746                    |         |         |      | (407    | )       |         |   | 13,356   |        
|                                                                                          |                                                                |                          |         |                            |         |   |                          |         |         |      |         |        
|INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE                  |                                                                |                          | 2,109   |                            |         |   | (5,716                   | )       |         |      | 953     |         |         |   | (24,578  | )      
|                                                                                         
|CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE,
NET OF TAX                           |                                                                |                          |        |                            |         |   |                         |         |         |      | (4,092  | )       |         |   |         |        
|                                                                                          |                                                                |                          |         |                            |         |   |                          |         |         |      |         |        
|NET INCOME (LOSS)                                                                         |                                                                | $                        | 2,109   |                            |         |   | ($5,716                  | )       |         |      | ($3,139 | )       |         |   | ($24,578 | )      
|                                                                                          |                                                                |                          |         |                            |         |   |                          |         |         |      |         |        
|BASIC & DILUTED NET INCOME (LOSS) PER COMMON SHARE:                                       |                                                                |                          |         |                            |         |   |                          |         |         |      |         |         |         |   |          |        
|                                                                                         
|INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE                  |                                                                |                          |         |                            |         |   |                          |         |         |      |         |         |         |   |          |        
|                                                                                          | BASIC                                                          |                          | $       | 0.25                       |         |   |                          | ($0.71  | )       |      | $       | 0.12    |         |   |          | ($3.04  | )      
|                                                                                          | DILUTED                                                        |                          | $       | 0.24                       |         |   |                          | ($0.71  | )       |      | $       | 0.11    |         |   |          | ($3.04  | )      
|                                                                                         
|CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE, NET OF TAX                           |                                                                |                          |         |                            |         |   |                          |         |         |      |         |         |         |   |          |        
|                                                                                          | BASIC                                                          |                          |         |                           |         |   |                          |        |         |      |         | ($0.50  | )       |   |          |        |        
|                                                                                          | DILUTED                                                        |                          |         |                           |         |   |                          |        |         |      |         | ($0.47  | )       |   |          |        |        
|                                                                                          |                                                                |                          |         |                            |         |   |                          |         |         |      |         |        
|NET INCOME (LOSS)                                                                         |                                                                |                          |         |                            |         |   |                          |         |         |      |         |         |         |   |          |        
|                                                                                          | BASIC                                                          |                          | $       | 0.25                       |         |   |                          | ($0.71  | )       |      |         | ($0.38  | )       |   |          | ($3.04  | )      
|                                                                                          |                                                                |                          |         |                            |         |   |                          |         |         |      |         |        
|                                                                                          | DILUTED                                                        |                          | $       | 0.24                       |         |   |                          | ($0.71  | )       |      |         | ($0.36  | )       |   |          | ($3.04  | )      
|                                                                                          |                                                                |                          |         |                            |         |   |                          |         |         |      |         |        
|WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:                                               |                                                                |                          |         |                            |         |   |                          |         |         |      |         |         |         |   |          |        
|                                                                                          | BASIC                                                          |                          |         | 8,300                      |         |   |                          | 8,086   |         |      |         | 8,259   |         |   |          | 8,083   |        
|                                                                                          |                                                                |                          |         |                            |         |   |                          |         |         |      |         |        
|                                                                                          | DILUTED                                                        |                          |         | 8,781                      |         |   |                          | 8,086   |         |      |         | 8,793   |         |   |          | 8,083   |        
|                                                                                          |                                                                |                          |         |                            |         |   |                          |         |         |      |         |        

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

4



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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES




CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)

|                                                             |                                                                                 |                                                          |                                                     |                                                     |        |                          |         |          |             |        |         |  
|------------------------------------------------------------ | ------------------------------------------------------------------------------- | -------------------------------------------------------- | --------------------------------------------------- | --------------------------------------------------- | ------ | ------------------------ | ------- | -------- | ----------- | ------ | ------- | -
|                                                             |                                                                                 |                                                          |                                                     |                                                     |        | For the Six Months Ended |        
|                                                             |                                                                                 |                                                          |                                                     |                                                     |        | June 30,                 |        
|                                                             |                                                                                 |                                                          |                                                     |                                                     |        |                          |        
|                                                             |                                                                                 |                                                          |                                                     |                                                     |        | 2002                     |         |          | 2001        |       
|                                                             |                                                                                 |                                                          |                                                     |                                                     |        |                          |         |          |             |       
|                                                             |                                                                                 |                                                          |                                                     |                                                     |        | (Unaudited)              |         |          | (Unaudited) |       
|CASH FLOWS FROM OPERATING ACTIVITIES:                        |                                                                                 |                                                          |                                                     |                                                     |        |                          |         |         
|                                                             | Net loss                                                                        |                                                          |                                                     | ($3,139                                             | )      |                          |         | ($24,578 | )          
|                                                             | Adjustments to reconcile net loss to net
cash provided by operating activities: |                                                          |                                                     |                                                     |        |                          |         |          |            
|                                                             |                                                                                 | Gain on early extinguishment of debt                     |                                                     |                                                     | (2,750 | )                        |         |          |            |       
|                                                             |                                                                                 | Interest expense paid in kind                            |                                                     |                                                     | 377    |                          |         |          |            |       
|                                                             |                                                                                 | Amortization of deferred financing costs                 |                                                     |                                                     | 2,028  |                          |         |          | 1,653       |       
|                                                             |                                                                                 | Depreciation and amortization                            |                                                     |                                                     | 26,945 |                          |         |          | 30,305      |       
|                                                             |                                                                                 | Cumulative effect of change in accounting principle      |                                                     |                                                     | 5,194  |                          |         |          |            |       
|                                                             |                                                                                 | Gain on disposal of assets and other, net                |                                                     |                                                     | (507   | )                        |         |          | (2,743      | )     
|                                                             |                                                                                 | Deferred income taxes                                    |                                                     |                                                     | (634   | )                        |         |          | (13,356     | )     
|                                                             |                                                                                 | Compensation expense related to stock options and grants |                                                     |                                                     | 148    |                          |         |          | 138         |       
|                                                             |                                                                                 | Equity in earnings of joint ventures                     |                                                     |                                                     |       |                          |         |          | (2,539      | )     
|                                                             |                                                                                 | Amortization of Teamsters Union contract costs           |                                                     |                                                     | 1,200  |                          |         |          | 1,202       |       
|                                                             |                                                                                 | Change in operating assets and liabilities:              |                                                     |                                                     |        |                          |         |          |             |       
|                                                             |                                                                                 |                                                          | Receivables, net of allowance for doubtful accounts |                                                     |        | 10,957                   |         |          |             | 20,827 |        
|                                                             |                                                                                 |                                                          | Inventories                                         |                                                     |        | 238                      |         |          |             | 415    |        
|                                                             |                                                                                 |                                                          | Prepayments and other current assets                |                                                     |        | 92                       |         |          |             | (1,635 | )      
|                                                             |                                                                                 |                                                          | Trade accounts payable                              |                                                     |        | 217                      |         |          |             | (4,084 | )      
|                                                             |                                                                                 |                                                          | Accrued liabilities                                 |                                                     |        | 1,993                    |         |          |             | 12,620 |        
|                                                             |                                                                                 |                                                          |                                                     |                                                     |        |                         
|                                                             |                                                                                 |                                                          |                                                     | Total adjustments                                   |        |                          | 45,498  |          |             |        | 42,803  |  
|                                                             |                                                                                 |                                                          |                                                     |                                                     |        |                         
|                                                             |                                                                                 |                                                          |                                                     | Net cash provided by operating activities           |        |                          | 42,359  |          |             |        | 18,225  |  
|                                                             |                                                                                 |                                                          |                                                     |                                                     |        |                         
|CASH FLOWS FROM INVESTING ACTIVITIES:                        |                                                                                 |                                                          |                                                     |                                                     |        |                          |         |         
|                                                             | Purchases of property and equipment                                             |                                                          |                                                     | (7,470                                              | )      |                          |         | (16,942  | )          
|                                                             | Proceeds from sale of property and equipment                                    |                                                          |                                                     | 2,857                                               |        |                          |         | 4,745    |            
|                                                             | Investment in joint ventures                                                    |                                                          |                                                     |                                                    |        |                          |         | (464     | )          
|                                                             | Proceeds from sale of equity investment in joint venture                        |                                                          |                                                     | 2,700                                               |        |                          |         |         |            
|                                                             | Increase in short-term investments                                              |                                                          |                                                     | (1,229                                              | )      |                          |         | (2,590   | )          
|                                                             | Increase in the cash surrender value of life insurance                          |                                                          |                                                     | (317                                                | )      |                          |         | (240     | )          
|                                                             |                                                                                 |                                                          |                                                     |                                                     |        |                         
|                                                             |                                                                                 |                                                          |                                                     | Net cash used in investing activities               |        |                          | (3,459  | )        |             |        | (15,491 | )
|                                                             |                                                                                 |                                                          |                                                     |                                                     |        |                         
|CASH FLOWS FROM FINANCING ACTIVITIES:                        |                                                                                 |                                                          |                                                     |                                                     |        |                          |         |         
|                                                             | (Repayments) additions to revolving credit facilities, net                      |                                                          |                                                     | (60,723                                             | )      |                          |         | 11,869   |            
|                                                             | Additions to long-term debt                                                     |                                                          |                                                     | 82,751                                              |        |                          |         |         |            
|                                                             | Repayment of long-term debt                                                     |                                                          |                                                     | (43,830                                             | )      |                          |         | (104     | )          
|                                                             | Payment of deferred financing costs                                             |                                                          |                                                     | (8,829                                              | )      |                          |         | (2,507   | )          
|                                                             | Proceeds from issuance of common stock                                          |                                                          |                                                     | 161                                                 |        |                          |         | 217      |            
|                                                             | Other, net                                                                      |                                                          |                                                     | 373                                                 |        |                          |         | 281      |            
|                                                             |                                                                                 |                                                          |                                                     |                                                     |        |                         
|                                                             |                                                                                 |                                                          |                                                     | Net cash (used in) provided by financing activities |        |                          | (30,097 | )        |             |        | 9,756   |  
|                                                             |                                                                                 |                                                          |                                                     |                                                     |        |                         
|                                                            
|EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS |                                                                                 |                                                          | 125                                                 |                                                     |        |                          | (1,429  | )       
|                                                            
|NET INCREASE IN CASH AND CASH EQUIVALENTS                    |                                                                                 |                                                          | 8,928                                               |                                                     |        |                          | 11,061  |         
|                                                            
|CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR               |                                                                                 |                                                          | 10,543                                              |                                                     |        |                          | 2,373   |         
|                                                             |                                                                                 |                                                          |                                                     |                                                     |        |                         
|CASH AND CASH EQUIVALENTS AT END OF PERIOD                   |                                                                                 | $                                                        | 19,471                                              |                                                     |        | $                        | 13,434  |         
|                                                             |                                                                                 |                                                          |                                                     |                                                     |        |                         

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

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Allied Holdings, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)



|1. |  | Basis of Presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | The unaudited consolidated financial statements included herein have been
prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Accordingly, they do not include all of the information
and footnotes required by accounting principles generally accepted in the
United States for complete financial statements. The statements contained
herein reflect all adjustments, all of which are of a normal, recurring
nature, which are, in the opinion of management, necessary to present fairly
the financial condition, results of operations and cash flows for the
periods presented. Operating results for the three and six month periods
ended June 30, 2002 are not necessarily indicative of the results that may
be expected for the year ended December 31, 2002. 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 2001 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 financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements.
Estimates also affect the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|3. |  | 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 stockholders and
distribution to stockholders. The Company had comprehensive income of $4.1
million for the second quarter of 2002 versus a comprehensive loss of $4.0
million for the second quarter of 2001. For the first six months of 2002,
the Company had a comprehensive loss of $1.3 million, versus a comprehensive
loss of $26.6 million for the first six months of 2001. The difference
between comprehensive income and net income is the foreign currency
translation net of income taxes.                                                                                                                                                                                                                                                                                                                               
|  
|4. |  | Accounting for Derivative Instruments and Hedging Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|  
|   |  | SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, as amended, establishes accounting and reporting standards
requiring that every derivative instrument (including certain derivative
instruments embedded in other contracts) be recorded in the balance sheet as
either an asset or liability measured at its fair value. SFAS No. 133
requires that changes in the derivatives fair value be recognized currently
in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivatives gains and losses to
offset related results on the hedged item in the income statement, and
requires that a company must formally document, designate, and assess the
effectiveness of transactions that receive hedge accounting.                                                                                                                                                                                                                                    

6



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##### Table of Contents





|   |  | From time to time, the Company enters into future contracts to manage the
risk associated with changes in fuel prices. Gains and losses from fuel
hedging contracts are recognized as part of fuel expense when the Company
uses the underlying fuel being hedged. During 2001, Allied Automotive Group
entered into a forward purchase commitment to purchase one million gallons
of low sulfur diesel fuel per month until August 2002 at determinable prices
defined within the agreement. The Company is evaluating additional forward
purchase commitments. The Company does not enter into fuel hedging contracts
for speculative purposes. At June 30, 2002, the Company did not have any
outstanding fuel hedging contracts or other derivative instruments that fall
under the provisions of SFAS No. 133 as amended by SFAS No. 138, Accounting
for Certain Derivative Instruments and Certain Hedging Activities.                 
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|5. |  | Recent Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|  
|   |  | In June 2001, the Financial Accounting Standards Board (FASB), issued SFAS
No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other
Intangible Assets. SFAS No. 141 prospectively prohibits the
pooling-of-interests method of accounting for business combinations
initiated after June 30, 2001. SFAS No. 142 requires companies to cease
amortizing goodwill that existed at June 30, 2001. The Company adopted SFAS
No. 142 effective January 1, 2002. For information regarding goodwill and
the impact of adoption of SFAS No. 142 had on the Companys consolidated
financial statements, refer to Note 6. SFAS No. 141 did not impact the
earnings or financial position of the Company.                                                                                                                                                                                                                             
|  
|   |  | In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations, which addresses accounting and reporting for asset retirement
costs of long-lived assets resulting from legal obligations associated with
acquisition, construction, or development transactions. The Company plans
to adopt SFAS No. 143 in the first quarter of fiscal year 2003. Management
will evaluate the impact of the adoption of this standard on the
consolidated financial statements during fiscal year 2002.                                                                                                                                                                                                                                                                                                                                                                                                                          
|  
|   |  | In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets, which clarifies accounting and reporting
for assets held for sale, scheduled for abandonment or other disposal, and
recognition of impairment loss related to the carrying value of long-lived
assets. The Company adopted this standard on January 1, 2002 and there was
no impact on the financial position or results of operations of the Company
as of the date of the adoption.                                                                                                                                                                                                                                                                                                                                                                                                                                          
|  
|   |  | 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 July 2002, the FASB issued Statement No. 146, Accounting for Costs
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 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 Statement is
effective prospectively for exit or disposal activities initiated after
December 31, 2002. Management does not anticipate that the Statement will
have a material impact on the financial position or results of operations of
the Company as of the date of adoption.

7



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|6. |  | Goodwill                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | In accordance with SFAS No. 142, the Company no longer amortizes goodwill
but will review 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. Pursuant to the adoption of SFAS No. 142,
the Company evaluated its reporting units within the guidance of SFAS No.
142 and SFAS No. 131, Disclosures about Segments of an Enterprise and
Related Information. The Companys reporting units are the Allied
Automotive Group and the Axis Group. The adoption of SFAS No. 142 required
the Company to perform an initial impairment assessment on all goodwill and
indefinite lived intangible assets as of January 1, 2002. The Company
compared the fair value of goodwill to current carrying value. Fair values
were derived using discounted cash flow analyses. The assumptions used in
these discounted cash flow analyses were consistent with the Companys
internal planning. The cumulative effect of this change in accounting
principle was a $5.2 million decrease to the Axis Group goodwill. The
deferred income tax benefit related to this change was approximately $1.1
million. The $4.1 million cumulative effect of this change in accounting
principle, net of income taxes, is included in the accompanying statements
of operations for the six months ended June 30, 2002.
|  
|   |  | The following table sets forth the carrying value of goodwill by reporting
unit as of June 30, 2002 and December 31, 2001 (in thousands):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

|                                                              |  |            |        |  |            |   |        |       |  |   |        |  
|------------------------------------------------------------- |  | ---------- | ------ |  | ---------- | - | ------ | ----- |  | - | ------ | -
|                                                              |  | Allied     |        |  |            |   |        |       |  |   |       
|                                                              |  | Automotive |        |  |            |   |        |       |  |   |       
|                                                              |  | Group      |        |  | Axis Group |   |        | Total | 
|                                                              |  |            |        |  |            |   |        |       | 
|Balance as of December 31, 2001                               |  | $          | 72,839 |  |            | $ | 17,391 |       |  | $ | 90,230 |  
|Increase in carrying amount
due to a change in
currency rates |  |            | 1,073  |  |            |   | 5      |       |  |   | 1,078  |  
|Impairment loss                                               |  |            |       |  |            |   | (5,194 | )     |  |   | (5,194 | )
|                                                              |  |            |        |  |            |   |        |       | 
|Balance as of June 30, 2002                                   |  | $          | 73,912 |  |            | $ | 12,202 |       |  | $ | 86,114 |  
|                                                              |  |            |        |  |            |   |        |       | 



| |  | The following table summarizes and reconciles net income before the
cumulative effect of the accounting change for the three and six months
ended June 30, 2002 and 2001, adjusted to exclude amortization expense
recognized in such periods related to goodwill (in thousands):
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                         |                       |         |       |                            |      |   |                          |     |       |      |     |   |      |   |         |       |       |  
|------------------------------------------------------------------------ | --------------------- | ------- | ----- | -------------------------- | ---- | - | ------------------------ | --- | ----- | ---- | --- | - | ---- | - | ------- | ----- | ----- | -
|                                                                         |                       |         |       | For the three months ended |      |   | For the six months ended |    
|                                                                         |                       |         |       | June 30                    |      |   | June 30                  |    
|                                                                         |                       |         |       |                            |      |   |                          |    
|                                                                         |                       |         |       | 2002                       |      |   | 2001                     |     |       | 2002 |     |   | 2001 |  
|                                                                         |                       |         |       |                            |      |   |                          |     |       |      |     |   |      |  
|Reported net income (loss)
before cumulative effect of
accounting change |                       | $       | 2,109 |                            |      | $ | (5,716                   | )   |       | $    | 953 |   |      | $ | (24,578 | )    
|Add back after-tax amounts:                                              |                       |         |       |                            |      |   |                          |     |       |      |     |   |      |   |         |      
|                                                                         | Goodwill amortization |         |       |                           |      |   |                          | 598 |       |      |     |  |      |   |         | 1,150 |      
|                                                                         |                       |         |       |                            |      |   |                          |     |       |      |     |  
|Adjusted net income (loss)
before cumulative effect of
accounting change |                       | $       | 2,109 |                            |      | $ | (5,118                   | )   |       | $    | 953 |   |      | $ | (23,428 | )    
|                                                                         |                       |         |       |                            |      |   |                          |     |       |      |     |  
|Income (loss) per share before
accounting change:                        |                       |         |       |                            |      |   |                          |     |       |      |     |   |      |   |         |      
|                                                                         |                       | Basic   |       |                            | 0.25 |   |                          |     | (0.71 | )    |     |   | 0.12 |   |         |       | (3.04 | )
|                                                                         |                       | Diluted |       |                            | 0.24 |   |                          |     | (0.71 | )    |     |   | 0.11 |   |         |       | (3.04 | )
|Goodwill amortization                                                    |                       |         |       |                            |      |   |                          |     |       |      |     |   |      |   |         |      
|                                                                         |                       | Basic   |       |                            |     |   |                          |     | 0.07  |      |     |   |     |   |         |       | 0.14  |  
|                                                                         |                       | Diluted |       |                            |     |   |                          |     | 0.07  |      |     |   |     |   |         |       | 0.14  |  
|Adjusted basic income (loss)
per share before accounting
change          |                       |         |       |                            |      |   |                          |     |       |      |     |   |      |   |         |      
|                                                                         |                       |         |       |                            |      |   |                          |     |       |      |     |  
|                                                                         |                       | Basic   |       | $                          | 0.25 |   |                          | $   | (0.64 | )    |     | $ | 0.12 |   |         | $     | (2.90 | )
|                                                                         |                       |         |       |                            |      |   |                          |     |       |      |     |  
|                                                                         |                       | Diluted |       | $                          | 0.24 |   |                          | $   | (0.64 | )    |     | $ | 0.11 |   |         | $     | (2.90 | )
|                                                                         |                       |         |       |                            |      |   |                          |     |       |      |     |  

8



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|7. |  | Fleet Refurbishment Program                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | As part of the Companys turnaround plan, the Company is focusing on
maintaining the existing fleet through an extensive refurbishment program
which is expected to increase the useful life of a rig to an average of 15
years. These refurbishments are depreciated over an estimated useful life
of 6 years, using the straight-line method of depreciation. The program
began in 2002 and is expected to be completed in 2004 at an approximate
total cost of $45 to $55 million for the refurbishment of
approximately 1,500 rigs over
the three year period. As of June 30, 2002 total capital expenditures
related to the refurbishment program were approximately $5 million. The
Company estimates it will spend approximately $8 to $12 million on the
program in the second half of fiscal year 2002.                           
|  
|8. |  | Workforce Reduction Expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  
|   |  | As part of its turnaround initiatives, the Company has implemented a program
to achieve a significant reduction in corporate overhead expenses and to
upgrade certain personnel. Targeted in the plan are workforce reductions
and additional efforts to decrease discretionary spending and eliminate
fixed costs. The Company terminated approximately 90 and 85 corporate and
field employees during the six months ended June 30, 2002 and the six months
ended June 30, 2001 respectively. The accrued benefits related to the
terminations are included in accrued liabilities and as such, the Company
expects to pay the accrued benefits within the next 12 months. The
following table summarizes the activity in the accrual for termination
benefits for the three and six months ended June 30, 2002 and 2001, (in
thousands):

|                                                                   |  |                    |       |   |                  |   |        |         |  |   |         |   |  |   |        |  
|------------------------------------------------------------------ |  | ------------------ | ----- | - | ---------------- | - | ------ | ------- |  | - | ------- | - |  | - | ------ | -
|                                                                   |  | Three Months Ended |       |   | Six Months Ended |  
|                                                                   |  | June 30            |       |   | June 30          |   |        | June 30 |  |   | June 30 |  
|                                                                   |  |                    |       |   |                  |  
|                                                                   |  | 2002               |       |   | 2001             |   |        | 2002    |  |   | 2001    |  
|                                                                   |  |                    |       |   |                  |   |        |         |  |   |         |  
|Beginning balance                                                  |  | $                  | 2,100 |   |                  | $ | 4,700  |         |  | $ | 3,700   |   |  | $ | 1,600  |  
|Additions to reserve charged to
salaries, wages, & fringe benefits |  |                    | 500   |   |                  |   | 600    |         |  |   | 900     |   |  |   | 5,600  |  
|Cash payments                                                      |  |                    | (900  | ) |                  |   | (1,300 | )       |  |   | (2,900  | ) |  |   | (3,200 | )
|                                                                   |  |                    |       |   |                  |   |        |         |  |   |         |  
|Ending balance                                                     |  | $                  | 1,700 |   |                  | $ | 4,000  |         |  | $ | 1,700   |   |  | $ | 4,000  |  
|                                                                   |  |                    |       |   |                  |   |        |         |  |   |         |  

9



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|9. |  | Long-Term Debt                                                                                  
|-- |  | ------------------------------------------------------------------------------------------------
|  
|   |  | Long-term debt consisted of the following at June 30, 2002 and December 31,
2001 (in thousands):

|                                           |  |          |         |   |              |   |         |  
|------------------------------------------ |  | -------- | ------- | - | ------------ | - | ------- | -
|                                           |  | June 30, |         |   | December 31, |  
|                                           |  | 2002     |         |   | 2001         |  
|                                           |  |          |         |   |              |  
|Revolving credit facility                  |  | $        | 114,983 |   |              | $ | 98,900  |  
|Senior notes                               |  |          | 150,000 |   |              |   | 150,000 |  
|Senior subordinated notes                  |  |          |        |   |              |   | 40,258  |  
|                                           |  |          |         |   |              |  
|                                           |  |          | 264,983 |   |              |   | 289,158 |  
|Less: current maturities of long-term debt |  |          | (3,500  | ) |              |   | (2,625  | )
|                                           |  |          |         |   |              |  
|                                           |  | $        | 261,483 |   |              | $ | 286,533 |  
|                                           |  |          |         |   |              |  



| |  | 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 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) (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 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 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 June
30, 2002, $38.2 million was outstanding under the Revolver, and
approximately $24.6 million was committed under letters of credit. As of
June 30, 2002 the Company had approximately $33.2 million available under
the Revolver. The Revolver matures on February 25, 2005.

10



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|    |  | The Term Loans are comprised of four loans: $17.5 million Term Loan A, $25.0
million Term Loan B, $11.0 million Term Loan C, and $29.3 million Term Loan
D. The Term Loans (except Term Loan D) mature on February 25, 2005. Term
Loan D matures on February 26, 2005. Cash proceeds from certain asset sales
and other transactions are required to be used to repay the Term Loans, as
specified in the Credit Facility. In addition, the paid in kind PIK
interest on Term Loans B and C to be paid at maturity is included in the
loan balances. As of June 30, 2002, the amount outstanding for the Term
Loans was $11.2 million for Term Loan A, $25.2 million for Term Loan B,
$11.1 million for Term Loan C and $29.3 million for Term Loan D. 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 addition, certain subsidiaries of the
Company jointly and severally guarantee the obligations of the Company under
the Credit Facility.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | 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 6.5%. The
interest rate on Term Loan B includes PIK interest of 3.5% that will be
payable upon maturity. The minimum interest rate for Term Loan B is 11.5%.
Term Loan C is payable in full at maturity with interest payable monthly
based upon the prime rate plus 9%. The interest rate on Term Loan C also
includes PIK interest of 5% that will be payable upon maturity. The minimum
interest rate for Term Loan C is 14%. Term Loan D is payable in full at
maturity with interest payable quarterly based upon the prime rate plus
3.5%. In addition, the PIK interest on Term Loans B and C to be paid at
maturity is included in the loan balances.                                                                                                                                               
|   
|    |  | 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, or sell assets. The financial covenants require the
Company to maintain a minimum consolidated earnings before interest, taxes,
depreciation and amortization amount and include leverage and fixed charge
coverage ratios.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|    |  | The Company does not anticipate any covenant violations during 2002. There
can be no assurance, however, 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 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. |  | Employee Benefits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|    |  | As part of the Companys turnaround efforts in the first quarter, the Allied
Holdings Inc. Defined Benefit Pension Plan (the Plan) was amended in
February 2002 to freeze the Plan. The amendment resulted in a curtailment
of the Plan effective April 30, 2002, under which employees do not
accumulate any new benefits and new participants are not added to the Plan.
The Companys net pension expense for 2001 was $2.6 million. As a result of
freezing the Plan, the Company expects net pension expense to be $304,000
for 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|11. |  | 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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

11



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| |  | of transporting
automobiles and light trucks from manufacturing plants, ports, auctions, and
railway distribution points to automobile dealerships. Axis Group provides
distribution, automobile inspection, auction, yard management, intramodal
transport, accessorization and dealer prep for the automotive industry.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                     |  |                    |         |   |                  |   |         |      |  |   |         |   |  |   |         |  
|------------------------------------ |  | ------------------ | ------- | - | ---------------- | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                     |  | Three Months Ended |         |   | Six Months Ended |  
|                                     |  | June 30,           |         |   | June 30,         |  
|                                     |  |                    |         |   |                  |  
|                                     |  | 2002               |         |   | 2001             |   |         | 2002 |  |   | 2001    |  
|                                     |  |                    |         |   |                  |   |         |      |  |   |         |  
|Revenuesunaffiliated
customers:     |  |                    |         |   |                  |   |         |      |  |   |         |   |  |   |         |  
|Allied Automotive Group              |  | $                  | 231,480 |   |                  | $ | 242,790 |      |  | $ | 438,090 |   |  | $ | 454,814 |  
|Axis Group                           |  |                    | 7,504   |   |                  |   | 7,405   |      |  |   | 14,153  |   |  |   | 13,560  |  
|                                     |  |                    |         |   |                  |   |         |      |  |   |         |  
|                                     |  | $                  | 238,984 |   |                  | $ | 250,195 |      |  | $ | 452,243 |   |  | $ | 468,374 |  
|                                     |  |                    |         |   |                  |   |         |      |  |   |         |  
|Depreciation and amortization:       |  |                    |         |   |                  |   |         |      |  |   |         |   |  |   |         |  
|Allied Automotive Group              |  | $                  | 11,808  |   |                  | $ | 13,506  |      |  | $ | 23,998  |   |  | $ | 26,789  |  
|Axis Group                           |  |                    | 730     |   |                  |   | 897     |      |  |   | 1,437   |   |  |   | 1,791   |  
|Corporate/other                      |  |                    | 744     |   |                  |   | 878     |      |  |   | 1,510   |   |  |   | 1,725   |  
|                                     |  |                    |         |   |                  |   |         |      |  |   |         |  
|                                     |  | $                  | 13,282  |   |                  | $ | 15,281  |      |  | $ | 26,945  |   |  | $ | 30,305  |  
|                                     |  |                    |         |   |                  |   |         |      |  |   |         |  
|Operating profit (loss):             |  |                    |         |   |                  |   |         |      |  |   |         |   |  |   |         |  
|Allied Automotive Group              |  | $                  | 10,447  |   |                  | $ | 1,455   |      |  | $ | 16,002  |   |  | $ | (14,674 | )
|Axis Group                           |  |                    | 1,480   |   |                  |   | 1,049   |      |  |   | 1,643   |   |  |   | 597     |  
|Corporate/other                      |  |                    | (2,030  | ) |                  |   | (3,535  | )    |  |   | (3,983  | ) |  |   | (10,133 | )
|                                     |  |                    |         |   |                  |   |         |      |  |   |         |  
|                                     |  |                    | 9,897   |   |                  |   | (1,031  | )    |  |   | 13,662  |   |  |   | (24,210 | )
|Reconciling items:                   |  |                    |         |   |                  |   |         |      |  |   |         |   |  |   |         |  
|Equity income in joint ventures      |  |                    |        |   |                  | $ | 1,330   |      |  |   |        |   |  | $ | 2,539   |  
|Interest expense                     |  |                    | (7,610  | ) |                  |   | (9,387  | )    |  |   | (15,732 | ) |  |   | (17,853 | )
|Interest income                      |  |                    | 615     |   |                  |   | 626     |      |  |   | 887     |   |  |   | 1,590   |  
|Gain on early extinguishment
of debt |  |                    |        |   |                  |   |        |      |  |   | 2,750   |   |  |   |        |  
|Other, net                           |  |                    |        |   |                  |   |        |      |  |   | (207    | ) |  |   |        |  
|                                     |  |                    |         |   |                  |   |         |      |  |   |         |  
|Income (loss) before income
taxes    |  | $                  | 2,902   |   |                  | $ | (8,462  | )    |  | $ | 1,360   |   |  | $ | (37,934 | )
|                                     |  |                    |         |   |                  |   |         |      |  |   |         |  
|Capital expenditures:                |  |                    |         |   |                  |   |         |      |  |   |         |   |  |   |         |  
|Allied Automotive Group              |  | $                  | 4,778   |   |                  | $ | 8,072   |      |  | $ | 7,386   |   |  | $ | 15,060  |  
|Axis Group                           |  |                    | 66      |   |                  |   | 1,291   |      |  |   | 84      |   |  |   | 1,815   |  
|Corporate/other                      |  |                    |        |   |                  |   |        |      |  |   |        |   |  |   | 67      |  
|                                     |  |                    |         |   |                  |   |         |      |  |   |         |  
|                                     |  | $                  | 4,844   |   |                  | $ | 9,363   |      |  | $ | 7,470   |   |  | $ | 16,942  |  
|                                     |  |                    |         |   |                  |   |         |      |  |   |         |  

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|                        |  |          |         |  |              |   |         | 
|----------------------- |  | -------- | ------- |  | ------------ | - | ------- | 
|                        |  | June 30, |         |  | December 31, |  
|                        |  | 2002     |         |  | 2001         |  
|                        |  |          |         |  |              |  
|Total assets:           |  |          |         |  |              |   |         | 
|Allied Automotive Group |  | $        | 327,295 |  |              | $ | 353,558 | 
|Axis Group              |  |          | 34,554  |  |              |   | 43,881  | 
|Corporate/other         |  |          | 151,341 |  |              |   | 135,953 | 
|                        |  |          |         |  |              |  
|                        |  | $        | 513,190 |  |              | $ | 533,392 | 
|                        |  |          |         |  |              |  



| |  | Geographic financial information for 2002 and 2001 is as follows (in
thousands):
| |  | --------------------------------------------------------------------------------

|              |  |                    |         |  |                  |   |         |      |  |   |         |  |  |   |         | 
|------------- |  | ------------------ | ------- |  | ---------------- | - | ------- | ---- |  | - | ------- |  |  | - | ------- | 
|              |  | Three Months Ended |         |  | Six Months Ended |  
|              |  | June 30,           |         |  | June 30,         |  
|              |  |                    |         |  |                  |  
|              |  | 2002               |         |  | 2001             |   |         | 2002 |  |   | 2001    | 
|              |  |                    |         |  |                  |   |         |      |  |   |         | 
|Revenues:     |  |                    |         |  |                  |   |         |      |  |   |         |  |  |   |         | 
|United States |  | $                  | 193,744 |  |                  | $ | 203,969 |      |  | $ | 371,972 |  |  | $ | 385,267 | 
|Canada        |  |                    | 45,240  |  |                  |   | 46,226  |      |  |   | 80,271  |  |  |   | 83,107  | 
|              |  |                    |         |  |                  |   |         |      |  |   |         | 
|              |  | $                  | 238,984 |  |                  | $ | 250,195 |      |  | $ | 452,243 |  |  | $ | 468,374 | 
|              |  |                    |         |  |                  |   |         |      |  |   |         | 



|12. |  | Supplemental Guarantor Information                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | The following condensed consolidating balance sheets, statements of
operations and statements of cash flows present the financial statements of
the parent company, and the combined financial statements of the Guarantor
Subsidiaries and Nonguarantor Subsidiaries. The Guarantors are jointly and
severally liable for the Companys obligations under the Notes and there are
no restrictions on the ability of the Guarantors to make distributions to
the Company.

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SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
JUNE 30, 2002
In Thousands
(Unaudited)

|                                            |                                                     |                            |              |                                            |        |          |         |          |              |         |         |              |        |        |              |          |         |              |           |         |        |         |         | 
|------------------------------------------- | --------------------------------------------------- | -------------------------- | ------------ | ------------------------------------------ | ------ | -------- | ------- | -------- | ------------ | ------- | ------- | ------------ | ------ | ------ | ------------ | -------- | ------- | ------------ | --------- | ------- | ------ | ------- | ------- | 
|                                            |                                                     |                            |              |                                            |        | ALLIED   |         |          | GUARANTOR    |         |         | NONGUARANTOR |        |        |              |          |         |              |           |         |       
|                                            |                                                     |                            |              |                                            |        | HOLDINGS |         |          | SUBSIDIARIES |         |         | SUBSIDIARIES |        |        | ELIMINATIONS |          |         | CONSOLIDATED |          
|                                            |                                                     |                            |              |                                            |        |          |         |          |              |         |         |              |        |        |              |          |         |              |          
|CURRENT ASSETS:                             |                                                     |                            |              |                                            |        |          |         |          |              |         |         |              |        |        |              |          |         |              |           |        
|                                            | Cash and cash equivalents                           |                            |              |                                           |        |          | $       | 2,092    |              |         | $       | 17,379       |        |        |              |         |         |              | $         | 19,471  |       
|                                            | Short-term investments                              |                            |              |                                           |        |          |         |         |              |         |         | 66,023       |        |        |              |         |         |              |           | 66,023  |       
|                                            | Receivables, net of allowance for doubtful accounts |                            |              |                                           |        |          |         | 58,987   |              |         |         | 2,915        |        |        |              |         |         |              |           | 61,902  |       
|                                            | Inventories                                         |                            |              |                                           |        |          |         | 5,150    |              |         |         |             |        |        |              |         |         |              |           | 5,150   |       
|                                            | Deferred tax asset                                  |                            |              | 30,901                                     |        |          |         | 2,666    |              |         |         | 827          |        |        |              |         |         |              |           | 34,394  |       
|                                            | Prepayments and other current assets                |                            |              | 867                                        |        |          |         | 17,950   |              |         |         | 123          |        |        |              |         |         |              |           | 18,940  |       
|                                            |                                                     |                            |              |                                            |        |          |         |          |              |         |         |              |        |        |             
|                                            |                                                     |                            |              | Total current assets                       |        |          | 31,768  |          |              |         | 86,845  |              |        |        | 87,267       |          |         |              |          |         |        |         | 205,880 | 
|                                            |                                                     |                            |              |                                            |        |          |         |          |              |         |         |              |        |        |             
|                                           
|PROPERTY AND EQUIPMENT, NET                 |                                                     |                            | 10,235       |                                            |        |          | 180,832 |          |              |         | 3,359   |              |        |        |             |          |         |              | 194,426   |        
|                                           
|OTHER ASSETS:                               |                                                     |                            |              |                                            |        |          |         |          |              |         |         |              |        |        |              |          |         |              |           |        
|                                            | Goodwill, net                                       |                            |              | 1,515                                      |        |          |         | 84,599   |              |         |         |             |        |        |              |         |         |              |           | 86,114  |       
|                                            | Other                                               |                            |              | 21,568                                     |        |          |         | 4,204    |              |         |         | 998          |        |        |              |         |         |              |           | 26,770  |       
|                                            | Deferred tax asset                                  |                            |              | 11,831                                     |        |          |         |         |              |         |         |             |        |        |              | (11,831  | )       |              |           |        |       
|                                            | Intercompany receivables                            |                            |              | 48,157                                     |        |          |         |         |              |         |         |             |        |        |              | (48,157  | )       |              |           |        |       
|                                            | Investment in subsidiaries                          |                            |              | 51,551                                     |        |          |         | 7,972    |              |         |         |             |        |        |              | (59,523  | )       |              |           |        |       
|                                            |                                                     |                            |              |                                            |        |          |         |          |              |         |         |              |        |        |             
|                                            |                                                     |                            |              | Total other assets                         |        |          | 134,622 |          |              |         | 96,775  |              |        |        | 998          |          |         |              | (119,511  | )       |        |         | 112,884 | 
|                                            |                                                     |                            |              |                                            |        |          |         |          |              |         |         |              |        |        |             
|                                            |                                                     |                            | Total assets |                                            | $      | 176,625  |         |          | $            | 364,452 |         |              | $      | 91,624 |              |          |         | ($119,511    | )         |         | $      | 513,190 |        
|                                            |                                                     |                            |              |                                            |        |          |         |          |              |         |         |              |        |        |             
|                                           
|CURRENT LIABILITIES:                        |                                                     |                            |              |                                            |        |          |         |          |              |         |         |              |        |        |              |          |         |              |           |        
|                                            | Current maturities of long-term debt                |                            |              |                                           |        |          | $       | 3,500    |              |         |         |             |        |        |              |         |         |              | $         | 3,500   |       
|                                            | Trade accounts payable                              |                            |              | 1,744                                      |        |          |         | 38,722   |              |         |         | 203          |        |        |              |         |         |              |           | 40,669  |       
|                                            | Deferred tax liability                              |                            |              |                                           |        |          |         |         |              |         |         |             |        |        |              |         |         |              |           |        |       
|                                            | Intercompany payables                               |                            |              |                                           |        |          |         | 48,129   |              |         |         | 28           |        |        |              | (48,157  | )       |              |           |        |       
|                                            | Accrued liabilities                                 |                            |              | 4,310                                      |        |          |         | 56,955   |              |         |         | 22,966       |        |        |              |         |         |              |           | 84,231  |       
|                                            |                                                     |                            |              |                                            |        |          |         |          |              |         |         |              |        |        |             
|                                            |                                                     |                            |              | Total current liabilities                  |        |          | 6,054   |          |              |         | 147,306 |              |        |        | 23,197       |          |         |              | (48,157   | )       |        |         | 128,400 | 
|                                            |                                                     |                            |              |                                            |        |          |         |          |              |         |         |              |        |        |             
|                                           
|LONG-TERM DEBT, less current maturities     |                                                     |                            | 150,000      |                                            |        |          | 111,483 |          |              |         |        |              |        |        |             |          |         |              | 261,483   |        
|                                           
|POSTRETIREMENT BENEFITS OTHER THAN PENSIONS |                                                     |                            |             |                                            |        |          | 9,171   |          |              |         |        |              |        |        |             |          |         |              | 9,171     |        
|                                           
|DEFERRED INCOME TAXES                       |                                                     |                            |             |                                            |        |          | 35,680  |          |              |         |        |              |        |        | (11,831      | )        |         |              | 23,849    |        
|                                           
|OTHER LONG-TERM LIABILITIES                 |                                                     |                            | 3,545        |                                            |        |          | 32,601  |          |              |         | 37,115  |              |        |        |             |          |         |              | 73,261    |        
|                                           
|STOCKHOLDERS EQUITY:                       |                                                     |                            |              |                                            |        |          |         |          |              |         |         |              |        |        |              |          |         |              |           |        
|                                            | Common stock, no par value                          |                            |              |                                           |        |          |         |         |              |         |         |             |        |        |              |         |         |              |           |        |       
|                                            | Additional paid-in capital                          |                            |              | 46,829                                     |        |          |         | 165,779  |              |         |         | 13,927       |        |        |              | (179,706 | )       |              |           | 46,829  |       
|                                            | Treasury stock                                      |                            |              | (707                                       | )      |          |         |         |              |         |         |             |        |        |              |         |         |              |           | (707    | )     
|                                            | Retained (deficit) earnings                         |                            |              | (22,033                                    | )      |          |         | (126,949 | )            |         |         | 17,385       |        |        |              | 109,564  |         |              |           | (22,033 | )     
|                                            | Cumulative other comprehensive loss, net of tax     |                            |              | (7,063                                     | )      |          |         | (10,619  | )            |         |         |             |        |        |              | 10,619   |         |              |           | (7,063  | )     
|                                            |                                                     |                            |              |                                            |        |          |         |          |              |         |         |              |        |        |             
|                                            |                                                     | Total stockholders equity |              |                                            | 17,026 |          |         |          | 28,211       |         |         |              | 31,312 |        |              |          | (59,523 | )            |           |         | 17,026 |        
|                                            |                                                     |                            |              |                                            |        |          |         |          |              |         |         |              |        |        |             
|                                            |                                                     |                            |              | Total liabilities and stockholders equity |        | $        | 176,625 |          |              | $       | 364,452 |              |        | $      | 91,624       |          |         |              | ($119,511 | )       |        | $       | 513,190 | 
|                                            |                                                     |                            |              |                                            |        |          |         |          |              |         |         |              |        |        |             

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SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2001
In Thousands
(Unaudited)

|                                            |                                                     |                            |                           |                                            |        |          |         |         |              |         |         |              |        |        |              |          |         |              |           |         |        |         |         | 
|------------------------------------------- | --------------------------------------------------- | -------------------------- | ------------------------- | ------------------------------------------ | ------ | -------- | ------- | ------- | ------------ | ------- | ------- | ------------ | ------ | ------ | ------------ | -------- | ------- | ------------ | --------- | ------- | ------ | ------- | ------- | 
|                                            |                                                     |                            |                           |                                            |        | ALLIED   |         |         | GUARANTOR    |         |         | NONGUARANTOR |        |        |              |          |         |              |           |         |       
|                                            |                                                     |                            |                           |                                            |        | HOLDINGS |         |         | SUBSIDIARIES |         |         | SUBSIDIARIES |        |        | ELIMINATIONS |          |         | CONSOLIDATED |          
|                                            |                                                     |                            |                           |                                            |        |          |         |         |              |         |         |              |        |        |              |          |         |              |          
|CURRENT ASSETS:                             |                                                     |                            |                           |                                            |        |          |         |         |              |         |         |              |        |        |              |          |         |              |           |        
|                                            | Cash and cash equivalents                           |                            | $                         | 209                                        |        |          | $       | 1,063   |              |         | $       | 9,271        |        |        |              |         |         |              | $         | 10,543  |       
|                                            | Short-term investments                              |                            |                           |                                           |        |          |         |        |              |         |         | 64,794       |        |        |              |         |         |              |           | 64,794  |       
|                                            | Receivables, net of allowance for doubtful accounts |                            |                           | 24                                         |        |          |         | 69,112  |              |         |         | 3,156        |        |        |              |         |         |              |           | 72,292  |       
|                                            | Inventories                                         |                            |                           |                                           |        |          |         | 5,344   |              |         |         | 5            |        |        |              |         |         |              |           | 5,349   |       
|                                            | Deferred tax asset                                  |                            |                           | 31,658                                     |        |          |         | 493     |              |         |         | 252          |        |        |              |         |         |              |           | 32,403  |       
|                                            | Prepayments and other current assets                |                            |                           | 1,161                                      |        |          |         | 17,645  |              |         |         | 115          |        |        |              |         |         |              |           | 18,921  |       
|                                            |                                                     |                            |                           |                                            |        |          |         |         |              |         |         |              |        |        |             
|                                            |                                                     |                            |                           | Total current assets                       |        |          | 33,052  |         |              |         | 93,657  |              |        |        | 77,593       |          |         |              |          |         |        |         | 204,302 | 
|                                            |                                                     |                            |                           |                                            |        |          |         |         |              |         |         |              |        |        |             
|                                           
|PROPERTY AND EQUIPMENT, NET                 |                                                     |                            | 11,743                    |                                            |        |          | 199,378 |         |              |         | 3,520   |              |        |        |             |          |         |              | 214,641   |        
|                                           
|OTHER ASSETS:                               |                                                     |                            |                           |                                            |        |          |         |         |              |         |         |              |        |        |              |          |         |              |           |        
|                                            | Goodwill, net                                       |                            |                           | 1,515                                      |        |          |         | 88,715  |              |         |         |             |        |        |              |         |         |              |           | 90,230  |       
|                                            | Other                                               |                            |                           | 14,404                                     |        |          |         | 5,742   |              |         |         | 4,073        |        |        |              |         |         |              |           | 24,219  |       
|                                            | Deferred tax asset                                  |                            |                           | 14,362                                     |        |          |         |        |              |         |         |             |        |        |              | (14,362  | )       |              |           |        |       
|                                            | Intercompany receivables                            |                            |                           | 233,827                                    |        |          |         |        |              |         |         |             |        |        |              | (233,827 | )       |              |           |        |       
|                                            | Investment in subsidiaries                          |                            |                           | 11,697                                     |        |          |         | 8,814   |              |         |         |             |        |        |              | (20,511  | )       |              |           |        |       
|                                            |                                                     |                            |                           |                                            |        |          |         |         |              |         |         |              |        |        |             
|                                            |                                                     |                            |                           | Total other assets                         |        |          | 275,805 |         |              |         | 103,271 |              |        |        | 4,073        |          |         |              | (268,700  | )       |        |         | 114,449 | 
|                                            |                                                     |                            |                           |                                            |        |          |         |         |              |         |         |              |        |        |             
|                                            |                                                     |                            | Total assets              |                                            | $      | 320,600  |         |         | $            | 396,306 |         |              | $      | 85,186 |              |          |         | ($268,700    | )         |         | $      | 533,392 |        
|                                            |                                                     |                            |                           |                                            |        |          |         |         |              |         |         |              |        |        |             
|                                           
|CURRENT LIABILITIES:                        |                                                     |                            |                           |                                            |        |          |         |         |              |         |         |              |        |        |              |          |         |              |           |        
|                                            | Current maturities of long-term debt                |                            | $                         | 2,625                                      |        |          |         |        |              |         |         |             |        |        |              |         |         |              | $         | 2,625   |       
|                                            | Trade accounts payable                              |                            |                           | 2,753                                      |        |          |         | 37,326  |              |         |         | 153          |        |        |              |         |         |              |           | 40,232  |       
|                                            | Intercompany payables                               |                            |                           |                                           |        |          |         | 230,040 |              |         |         | 3,787        |        |        |              | (233,827 | )       |              |           |        |       
|                                            | Accrued liabilities                                 |                            |                           | 7,157                                      |        |          |         | 61,460  |              |         |         | 14,346       |        |        |              |         |         |              |           | 82,963  |       
|                                            |                                                     |                            |                           |                                            |        |          |         |         |              |         |         |              |        |        |             
|                                            |                                                     |                            | Total current liabilities |                                            |        | 12,535   |         |         |              | 328,826 |         |              |        | 18,286 |              |          |         | (233,827     | )         |         |        | 125,820 |        
|                                            |                                                     |                            |                           |                                            |        |          |         |         |              |         |         |              |        |        |             
|                                           
|LONG-TERM DEBT, less current maturities     |                                                     |                            | 286,523                   |                                            |        |          | 10      |         |              |         |        |              |        |        |             |          |         |              | 286,533   |        
|                                           
|POSTRETIREMENT BENEFITS OTHER THAN PENSIONS |                                                     |                            |                          |                                            |        |          | 9,363   |         |              |         |        |              |        |        |             |          |         |              | 9,363     |        
|                                           
|DEFERRED INCOME TAXES                       |                                                     |                            |                          |                                            |        |          | 35,745  |         |              |         |        |              |        |        | (14,362      | )        |         |              | 21,383    |        
|                                           
|OTHER LONG-TERM LIABILITIES                 |                                                     |                            | 3,545                     |                                            |        |          | 34,906  |         |              |         | 33,845  |              |        |        |             |          |         |              | 72,296    |        
|                                           
|STOCKHOLDERS EQUITY:                       |                                                     |                            |                           |                                            |        |          |         |         |              |         |         |              |        |        |              |          |         |              |           |        
|                                            | Common stock, no par value                          |                            |                           |                                           |        |          |         |        |              |         |         |             |        |        |              |         |         |              |           |        |       
|                                            | Additional paid-in capital                          |                            |                           | 46,520                                     |        |          |         | 91,548  |              |         |         | 13,849       |        |        |              | (105,397 | )       |              |           | 46,520  |       
|                                            | Treasury stock                                      |                            |                           | (707                                       | )      |          |         |        |              |         |         |             |        |        |              |         |         |              |           | (707    | )     
|                                            | Retained (deficit) earnings                         |                            |                           | (18,894                                    | )      |          |         | (90,158 | )            |         |         | 19,206       |        |        |              | 70,952   |         |              |           | (18,894 | )     
|                                            | Cumulative other comprehensive loss, net of tax     |                            |                           | (8,922                                     | )      |          |         | (13,934 | )            |         |         |              |        |        |              | 13,934   |         |              |           | (8,922  | )     
|                                            |                                                     |                            |                           |                                            |        |          |         |         |              |         |         |              |        |        |             
|                                            |                                                     | Total stockholders equity |                           |                                            | 17,997 |          |         |         | (12,544      | )       |         |              | 33,055 |        |              |          | (20,511 | )            |           |         | 17,997 |        
|                                            |                                                     |                            |                           |                                            |        |          |         |         |              |         |         |              |        |        |             
|                                            |                                                     |                            |                           | Total liabilities and stockholders equity |        | $        | 320,600 |         |              | $       | 396,306 |              |        | $      | 85,186       |          |         |              | ($268,700 | )       |        | $       | 533,392 | 
|                                            |                                                     |                            |                           |                                            |        |          |         |         |              |         |         |              |        |        |             

15



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##### Table of Contents



SUPPLEMENTAL CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2002
In Thousands
(Unaudited)

|                             |                                           |                          |       |          |        |   |              |         |         |              |       |       |              |   |          |              |         |   |         |         |         | 
|---------------------------- | ----------------------------------------- | ------------------------ | ----- | -------- | ------ | - | ------------ | ------- | ------- | ------------ | ----- | ----- | ------------ | - | -------- | ------------ | ------- | - | ------- | ------- | ------- | 
|                             |                                           |                          |       | ALLIED   |        |   | GUARANTOR    |         |         | NONGUARANTOR |       |       |              |   |          |              |         |   |        
|                             |                                           |                          |       | HOLDINGS |        |   | SUBSIDIARIES |         |         | SUBSIDIARIES |       |       | ELIMINATIONS |   |          | CONSOLIDATED |        
|                             |                                           |                          |       |          |        |   |              |         |         |              |       |       |              |   |          |              |        
|REVENUES                     |                                           | $                        | 2,535 |          |        | $ | 238,716      |         |         | $            | 9,397 |       |              |   | ($11,664 | )            |         | $ | 238,984 |        
|                             |                                           |                          |       |          |        |   |              |         |         |              |       |       |              |   |         
|OPERATING EXPENSES:          |                                           |                          |       |          |        |   |              |         |         |              |       |       |              |   |          |              |         |   |         |        
|                             | Salaries, wages and fringe benefits       |                          |       | 1,959    |        |   |              | 125,554 |         |              |       |      |              |   |          |             |         |   |         | 127,513 |        
|                             | Operating supplies and expenses           |                          |       | 461      |        |   |              | 35,399  |         |              |       | 46    |              |   |          |             |         |   |         | 35,906  |        
|                             | Purchased transportation                  |                          |       |         |        |   |              | 25,328  |         |              |       |      |              |   |          |             |         |   |         | 25,328  |        
|                             | Insurance and claims                      |                          |       |         |        |   |              | 12,927  |         |              |       | 9,131 |              |   |          | (9,129       | )       |   |         | 12,929  |        
|                             | Operating taxes and licenses              |                          |       | 54       |        |   |              | 8,576   |         |              |       |      |              |   |          |             |         |   |         | 8,630   |        
|                             | Depreciation and amortization             |                          |       | 744      |        |   |              | 12,420  |         |              |       | 118   |              |   |          |             |         |   |         | 13,282  |        
|                             | Rents                                     |                          |       | 424      |        |   |              | 1,431   |         |              |       | 1     |              |   |          |             |         |   |         | 1,856   |        
|                             | Communications and utilities              |                          |       | 141      |        |   |              | 1,729   |         |              |       | 3     |              |   |          |             |         |   |         | 1,873   |        
|                             | Other operating expenses                  |                          |       | 691      |        |   |              | 3,164   |         |              |       | 135   |              |   |          | (2,535       | )       |   |         | 1,455   |        
|                             | Loss on disposal of operating assets, net |                          |       |         |        |   |              | 315     |         |              |       |      |              |   |          |             |         |   |         | 315     |        
|                             |                                           |                          |       |          |        |   |              |         |         |              |       |       |              |   |         
|                             |                                           | Total operating expenses |       |          | 4,474  |   |              |         | 226,843 |              |       |       | 9,434        |   |          |              | (11,664 | ) |         |         | 229,087 | 
|                             |                                           |                          |       |          |        |   |              |         |         |              |       |       |              |   |         
|                             |                                           | Operating (loss) income  |       |          | (1,939 | ) |              |         | 11,873  |              |       |       | (37          | ) |          |              |        |   |         |         | 9,897   | 
|                             |                                           |                          |       |          |        |   |              |         |         |              |       |       |              |   |         
|OTHER INCOME (EXPENSE):      |                                           |                          |       |          |        |   |              |         |         |              |       |       |              |   |          |              |         |   |         |        
|                             | Interest expense                          |                          |       | (11,714  | )      |   |              | (2,280  | )       |              |       | (43   | )            |   |          | 6,427        |         |   |         | (7,610  | )      
|                             | Interest income                           |                          |       | 6,379    |        |   |              | 20      |         |              |       | 643   |              |   |          | (6,427       | )       |   |         | 615     |        
|                             | Gain on early extinguishment of debt      |                          |       |         |        |   |              |        |         |              |       |      |              |   |          |             |         |   |         |        |        
|                             | Intercompany dividends                    |                          |       | 818      |        |   |              | (818    | )       |              |       |      |              |   |          |             |         |   |         |        |        
|                             | Equity in earnings of subsidiaries        |                          |       | 9,498    |        |   |              | 36      |         |              |       |      |              |   |          | (9,534       | )       |   |         |        |        
|                             |                                           |                          |       |          |        |   |              |         |         |              |       |       |              |   |         
|                             |                                           |                          | 4,981 |          |        |   | (3,042       | )       |         |              | 600   |       |              |   | (9,534   | )            |         |   | (6,995  | )      
|                             |                                           |                          |       |          |        |   |              |         |         |              |       |       |              |   |         
|INCOME BEFORE INCOME TAXES   |                                           |                          | 3,042 |          |        |   | 8,831        |         |         |              | 563   |       |              |   | (9,534   | )            |         |   | 2,902   |        
|INCOME TAX (EXPENSE) BENEFIT |                                           |                          | (933  | )        |        |   | 998          |         |         |              | (858  | )     |              |   |         |              |         |   | (793    | )      
|                             |                                           |                          |       |          |        |   |              |         |         |              |       |       |              |   |         
|NET INCOME (LOSS)            |                                           | $                        | 2,109 |          |        | $ | 9,829        |         |         |              | ($295 | )     |              |   | ($9,534  | )            |         | $ | 2,109   |        
|                             |                                           |                          |       |          |        |   |              |         |         |              |       |       |              |   |         

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

|                                  |                                                  |                          |         |          |        |   |              |         |         |              |       |       |              |   |          |              |         |   |         |         |         |  
|--------------------------------- | ------------------------------------------------ | ------------------------ | ------- | -------- | ------ | - | ------------ | ------- | ------- | ------------ | ----- | ----- | ------------ | - | -------- | ------------ | ------- | - | ------- | ------- | ------- | -
|                                  |                                                  |                          |         | ALLIED   |        |   | GUARANTOR    |         |         | NONGUARANTOR |       |       |              |   |          |              |         |   |        
|                                  |                                                  |                          |         | HOLDINGS |        |   | SUBSIDIARIES |         |         | SUBSIDIARIES |       |       | ELIMINATIONS |   |          | CONSOLIDATED |        
|                                  |                                                  |                          |         |          |        |   |              |         |         |              |       |       |              |   |          |              |        
|REVENUES                          |                                                  | $                        | 2,475   |          |        | $ | 249,749      |         |         | $            | 9,538 |       |              |   | ($11,567 | )            |         | $ | 250,195 |        
|                                  |                                                  |                          |         |          |        |   |              |         |         |              |       |       |              |   |         
|OPERATING EXPENSES:               |                                                  |                          |         |          |        |   |              |         |         |              |       |       |              |   |          |              |         |   |         |        
|                                  | Salaries, wages and fringe benefits              |                          |         | 2,325    |        |   |              | 138,264 |         |              |       |      |              |   |          |             |         |   |         | 140,589 |        
|                                  | Operating supplies and expenses                  |                          |         | 72       |        |   |              | 39,773  |         |              |       | 50    |              |   |          |             |         |   |         | 39,895  |        
|                                  | Purchased transportation                         |                          |         |         |        |   |              | 28,666  |         |              |       |      |              |   |          |             |         |   |         | 28,666  |        
|                                  | Insurance and claims                             |                          |         |         |        |   |              | 13,900  |         |              |       | 8,960 |              |   |          | (9,092       | )       |   |         | 13,768  |        
|                                  | Operating taxes and licenses                     |                          |         | 46       |        |   |              | 8,461   |         |              |       |      |              |   |          |             |         |   |         | 8,507   |        
|                                  | Depreciation and amortization                    |                          |         | 878      |        |   |              | 14,214  |         |              |       | 189   |              |   |          |             |         |   |         | 15,281  |        
|                                  | Rents                                            |                          |         | 509      |        |   |              | 1,080   |         |              |       | 3     |              |   |          |             |         |   |         | 1,592   |        
|                                  | Communications and utilities                     |                          |         | 98       |        |   |              | 1,810   |         |              |       | 6     |              |   |          |             |         |   |         | 1,914   |        
|                                  | Other operating expenses                         |                          |         | 1,846    |        |   |              | 4,125   |         |              |       | 94    |              |   |          | (2,475       | )       |   |         | 3,590   |        
|                                  | Gain on disposal of operating assets, net        |                          |         |         |        |   |              | (2,576  | )       |              |       |      |              |   |          |             |         |   |         | (2,576  | )      
|                                  |                                                  |                          |         |          |        |   |              |         |         |              |       |       |              |   |         
|                                  |                                                  | Total operating expenses |         |          | 5,774  |   |              |         | 247,717 |              |       |       | 9,302        |   |          |              | (11,567 | ) |         |         | 251,226 |  
|                                  |                                                  |                          |         |          |        |   |              |         |         |              |       |       |              |   |         
|                                  |                                                  | Operating (loss) income  |         |          | (3,299 | ) |              |         | 2,032   |              |       |       | 236          |   |          |              |        |   |         |         | (1,031  | )
|                                  |                                                  |                          |         |          |        |   |              |         |         |              |       |       |              |   |         
|OTHER INCOME (EXPENSE):           |                                                  |                          |         |          |        |   |              |         |         |              |       |       |              |   |          |              |         |   |         |        
|                                  | Equity in earnings of joint ventures, net of tax |                          |         |         |        |   |              | 1,218   |         |              |       | 112   |              |   |          |             |         |   |         | 1,330   |        
|                                  | Interest expense                                 |                          |         | (9,046   | )      |   |              | (8,073  | )       |              |       | (56   | )            |   |          | 7,788        |         |   |         | (9,387  | )      
|                                  | Interest income                                  |                          |         | 7,785    |        |   |              | 49      |         |              |       | 580   |              |   |          | (7,788       | )       |   |         | 626     |        
|                                  | Intercompany dividends                           |                          |         | 1,729    |        |   |              | (1,729  | )       |              |       |      |              |   |          |             |         |   |         |        |        
|                                  | Equity in (losses) earnings of subsidiaries      |                          |         | (5,238   | )      |   |              | 220     |         |              |       |      |              |   |          | 5,018        |         |   |         |        |        
|                                  |                                                  |                          |         |          |        |   |              |         |         |              |       |       |              |   |         
|                                  |                                                  |                          | (4,770  | )        |        |   | (8,315       | )       |         |              | 636   |       |              |   | 5,018    |              |         |   | (7,431  | )      
|                                  |                                                  |                          |         |          |        |   |              |         |         |              |       |       |              |   |         
|(LOSS) INCOME BEFORE INCOME TAXES |                                                  |                          | (8,069  | )        |        |   | (6,283       | )       |         |              | 872   |       |              |   | 5,018    |              |         |   | (8,462  | )      
|INCOME TAX BENEFIT (EXPENSE)      |                                                  |                          | 2,353   |          |        |   | 696          |         |         |              | (303  | )     |              |   |         |              |         |   | 2,746   |        
|                                  |                                                  |                          |         |          |        |   |              |         |         |              |       |       |              |   |         
|NET (LOSS) INCOME                 |                                                  |                          | ($5,716 | )        |        |   | ($5,587      | )       |         | $            | 569   |       |              | $ | 5,018    |              |         |   | ($5,716 | )      
|                                  |                                                  |                          |         |          |        |   |              |         |         |              |       |       |              |   |         

16



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##### Table of Contents



SUPPLEMENTAL CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2002
In Thousands
(Unaudited)

|                                                                                        |                                           |                          |         |          |        |   |              |         |         |              |        |        |              |  |          |              |         |   |         |         |         | 
|--------------------------------------------------------------------------------------- | ----------------------------------------- | ------------------------ | ------- | -------- | ------ | - | ------------ | ------- | ------- | ------------ | ------ | ------ | ------------ |  | -------- | ------------ | ------- | - | ------- | ------- | ------- | 
|                                                                                        |                                           |                          |         | ALLIED   |        |   | GUARANTOR    |         |         | NONGUARANTOR |        |        |              |  |          |              |         |   |        
|                                                                                        |                                           |                          |         | HOLDINGS |        |   | SUBSIDIARIES |         |         | SUBSIDIARIES |        |        | ELIMINATIONS |  |          | CONSOLIDATED |        
|                                                                                        |                                           |                          |         |          |        |   |              |         |         |              |        |        |              |  |          |              |        
|REVENUES                                                                                |                                           | $                        | 5,070   |          |        | $ | 451,483      |         |         | $            | 19,019 |        |              |  | ($23,329 | )            |         | $ | 452,243 |        
|                                                                                        |                                           |                          |         |          |        |   |              |         |         |              |        |        |              |  |         
|OPERATING EXPENSES:                                                                     |                                           |                          |         |          |        |   |              |         |         |              |        |        |              |  |          |              |         |   |         |        
|                                                                                        | Salaries, wages and fringe benefits       |                          |         | 3,435    |        |   |              | 242,614 |         |              |        |       |              |  |          |             |         |   |         | 246,049 |        
|                                                                                        | Operating supplies and expenses           |                          |         | 787      |        |   |              | 65,939  |         |              |        | 85     |              |  |          |             |         |   |         | 66,811  |        
|                                                                                        | Purchased transportation                  |                          |         |         |        |   |              | 47,107  |         |              |        |       |              |  |          |             |         |   |         | 47,107  |        
|                                                                                        | Insurance and claims                      |                          |         |         |        |   |              | 23,498  |         |              |        | 18,261 |              |  |          | (18,259      | )       |   |         | 23,500  |        
|                                                                                        | Operating taxes and licenses              |                          |         | 108      |        |   |              | 16,985  |         |              |        |       |              |  |          |             |         |   |         | 17,093  |        
|                                                                                        | Depreciation and amortization             |                          |         | 1,510    |        |   |              | 25,198  |         |              |        | 237    |              |  |          |             |         |   |         | 26,945  |        
|                                                                                        | Rents                                     |                          |         | 847      |        |   |              | 2,360   |         |              |        | 3      |              |  |          |             |         |   |         | 3,210   |        
|                                                                                        | Communications and utilities              |                          |         | 326      |        |   |              | 3,533   |         |              |        | 6      |              |  |          |             |         |   |         | 3,865   |        
|                                                                                        | Other operating expenses                  |                          |         | 1,856    |        |   |              | 7,708   |         |              |        | 221    |              |  |          | (5,070       | )       |   |         | 4,715   |        
|                                                                                        | Gain on disposal of operating assets, net |                          |         |         |        |   |              | (714    | )       |              |        |       |              |  |          |             |         |   |         | (714    | )      
|                                                                                        |                                           |                          |         |          |        |   |              |         |         |              |        |        |              |  |         
|                                                                                        |                                           | Total operating expenses |         |          | 8,869  |   |              |         | 434,228 |              |        |        | 18,813       |  |          |              | (23,329 | ) |         |         | 438,581 | 
|                                                                                        |                                           |                          |         |          |        |   |              |         |         |              |        |        |              |  |         
|                                                                                        |                                           | Operating (loss) income  |         |          | (3,799 | ) |              |         | 17,255  |              |        |        | 206          |  |          |              |        |   |         |         | 13,662  | 
|                                                                                        |                                           |                          |         |          |        |   |              |         |         |              |        |        |              |  |         
|OTHER INCOME (EXPENSE):                                                                 |                                           |                          |         |          |        |   |              |         |         |              |        |        |              |  |          |              |         |   |         |        
|                                                                                        | Interest expense                          |                          |         | (20,129  | )      |   |              | (8,182  | )       |              |        | (132   | )            |  |          | 12,711       |         |   |         | (15,732 | )      
|                                                                                        | Interest income                           |                          |         | 12,614   |        |   |              | 34      |         |              |        | 950    |              |  |          | (12,711      | )       |   |         | 887     |        
|                                                                                        | Gain on early extinguishment of debt      |                          |         | 2,750    |        |   |              |        |         |              |        |       |              |  |          |             |         |   |         | 2,750   |        
|                                                                                        | Other, net                                |                          |         |         |        |   |              |        |         |              |        | (207   | )            |  |          |             |         |   |         | (207    | )      
|                                                                                        | Intercompany dividends                    |                          |         | 978      |        |   |              | (978    | )       |              |        |       |              |  |          |             |         |   |         |        |        
|                                                                                        | Equity in earnings of subsidiaries        |                          |         | 4,240    |        |   |              | 133     |         |              |        |       |              |  |          | (4,373       | )       |   |         |        |        
|                                                                                        |                                           |                          |         |          |        |   |              |         |         |              |        |        |              |  |         
|                                                                                        |                                           |                          | 453     |          |        |   | (8,993       | )       |         |              | 611    |        |              |  | (4,373   | )            |         |   | (12,302 | )      
|                                                                                        |                                           |                          |         |          |        |   |              |         |         |              |        |        |              |  |         
|(LOSS) INCOME
BEFORE INCOME TAXES & CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE |                                           |                          | (3,346  | )        |        |   | 8,262        |         |         |              | 817    |        |              |  | (4,373   | )            |         |   | 1,360   |        
|INCOME TAX BENEFIT (EXPENSE)                                                            |                                           |                          | 207     |          |        |   | 972          |         |         |              | (1,586 | )      |              |  |         |              |         |   | (407    | )      
|                                                                                        |                                           |                          |         |          |        |   |              |         |         |              |        |        |              |  |         
|(LOSS) INCOME BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE                |                                           |                          | (3,139  | )        |        |   | 9,234        |         |         |              | (769   | )      |              |  | (4,373   | )            |         |   | 953     |        
|CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE, NET OF TAX                         |                                           |                          |        |          |        |   | (4,092       | )       |         |              |       |        |              |  |         |              |         |   | (4,092  | )      
|                                                                                        |                                           |                          |         |          |        |   |              |         |         |              |        |        |              |  |         
|NET (LOSS) INCOME                                                                       |                                           |                          | ($3,139 | )        |        | $ | 5,142        |         |         |              | ($769  | )      |              |  | ($4,373  | )            |         |   | ($3,139 | )      
|                                                                                        |                                           |                          |         |          |        |   |              |         |         |              |        |        |              |  |         

SUPPLEMENTAL CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2001
In Thousands
(Unaudited)

|                                  |                                                  |                          |          |          |         |   |              |         |         |              |        |        |              |   |          |              |         |   |          |         |         |  
|--------------------------------- | ------------------------------------------------ | ------------------------ | -------- | -------- | ------- | - | ------------ | ------- | ------- | ------------ | ------ | ------ | ------------ | - | -------- | ------------ | ------- | - | -------- | ------- | ------- | -
|                                  |                                                  |                          |          | ALLIED   |         |   | GUARANTOR    |         |         | NONGUARANTOR |        |        |              |   |          |              |         |   |         
|                                  |                                                  |                          |          | HOLDINGS |         |   | SUBSIDIARIES |         |         | SUBSIDIARIES |        |        | ELIMINATIONS |   |          | CONSOLIDATED |        
|                                  |                                                  |                          |          |          |         |   |              |         |         |              |        |        |              |   |          |              |        
|REVENUES                          |                                                  | $                        | 4,950    |          |         | $ | 467,525      |         |         | $            | 19,033 |        |              |   | ($23,134 | )            |         | $ | 468,374  |        
|OPERATING EXPENSES:               |                                                  |                          |          |          |         |   |              |         |         |              |        |        |              |   |          |              |         |   |          |        
|                                  | Salaries, wages and fringe benefits              |                          |          | 7,446    |         |   |              | 264,860 |         |              |        |       |              |   |          |             |         |   |          | 272,306 |        
|                                  | Operating supplies and expenses                  |                          |          | 975      |         |   |              | 80,309  |         |              |        | 53     |              |   |          |             |         |   |          | 81,337  |        
|                                  | Purchased transportation                         |                          |          |         |         |   |              | 51,962  |         |              |        |       |              |   |          |             |         |   |          | 51,962  |        
|                                  | Insurance and claims                             |                          |          |         |         |   |              | 27,702  |         |              |        | 17,539 |              |   |          | (18,184      | )       |   |          | 27,057  |        
|                                  | Operating taxes and licenses                     |                          |          | 93       |         |   |              | 17,040  |         |              |        |       |              |   |          |             |         |   |          | 17,133  |        
|                                  | Depreciation and amortization                    |                          |          | 1,725    |         |   |              | 28,224  |         |              |        | 356    |              |   |          |             |         |   |          | 30,305  |        
|                                  | Rents                                            |                          |          | 1,041    |         |   |              | 2,618   |         |              |        | 3      |              |   |          |             |         |   |          | 3,662   |        
|                                  | Communications and utilities                     |                          |          | 112      |         |   |              | 3,834   |         |              |        | 6      |              |   |          |             |         |   |          | 3,952   |        
|                                  | Other operating expenses                         |                          |          | 3,606    |         |   |              | 8,823   |         |              |        | 134    |              |   |          | (4,950       | )       |   |          | 7,613   |        
|                                  | Gain on disposal of operating assets, net        |                          |          |         |         |   |              | (2,743  | )       |              |        |       |              |   |          |             |         |   |          | (2,743  | )      
|                                  |                                                  |                          |          |          |         |   |              |         |         |              |        |        |              |   |         
|                                  |                                                  | Total operating expenses |          |          | 14,998  |   |              |         | 482,629 |              |        |        | 18,091       |   |          |              | (23,134 | ) |          |         | 492,584 |  
|                                  |                                                  |                          |          |          |         |   |              |         |         |              |        |        |              |   |         
|                                  |                                                  | Operating (loss) income  |          |          | (10,048 | ) |              |         | (15,104 | )            |        |        | 942          |   |          |              |        |   |          |         | (24,210 | )
|                                  |                                                  |                          |          |          |         |   |              |         |         |              |        |        |              |   |         
|OTHER INCOME (EXPENSE):           |                                                  |                          |          |          |         |   |              |         |         |              |        |        |              |   |          |              |         |   |          |        
|                                  | Equity in earnings of joint ventures, net of tax |                          |          |         |         |   |              | 2,437   |         |              |        | 102    |              |   |          |             |         |   |          | 2,539   |        
|                                  | Interest expense                                 |                          |          | (17,069  | )       |   |              | (16,132 | )       |              |        | (96    | )            |   |          | 15,444       |         |   |          | (17,853 | )      
|                                  | Interest income                                  |                          |          | 15,495   |         |   |              | 112     |         |              |        | 1,427  |              |   |          | (15,444      | )       |   |          | 1,590   |        
|                                  | Intercompany dividends                           |                          |          | 1,980    |         |   |              | (1,980  | )       |              |        |       |              |   |          |             |         |   |          |        |        
|                                  | Equity in (losses) earnings of subsidiaries      |                          |          | (28,117  | )       |   |              | 416     |         |              |        |       |              |   |          | 27,701       |         |   |          |        |        
|                                  |                                                  |                          |          |          |         |   |              |         |         |              |        |        |              |   |         
|                                  |                                                  |                          | (27,711  | )        |         |   | (15,147      | )       |         |              | 1,433  |        |              |   | 27,701   |              |         |   | (13,724  | )      
|                                  |                                                  |                          |          |          |         |   |              |         |         |              |        |        |              |   |         
|(LOSS) INCOME BEFORE INCOME TAXES |                                                  |                          | (37,759  | )        |         |   | (30,251      | )       |         |              | 2,375  |        |              |   | 27,701   |              |         |   | (37,934  | )      
|INCOME TAX BENEFIT (EXPENSE)      |                                                  |                          | 13,181   |          |         |   | 912          |         |         |              | (737   | )      |              |   |         |              |         |   | 13,356   |        
|                                  |                                                  |                          |          |          |         |   |              |         |         |              |        |        |              |   |         
|NET (LOSS) INCOME                 |                                                  |                          | ($24,578 | )        |         |   | ($29,339     | )       |         | $            | 1,638  |        |              | $ | 27,701   |              |         |   | ($24,578 | )      
|                                  |                                                  |                          |          |          |         |   |              |         |         |              |        |        |              |   |         

17



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##### Table of Contents



SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2002
In Thousands

|                                                             |                                                                                                    |                                                          |                                                     |                                                     |        |          |          |         |              |          |          |              |      |        |              |         |       |              |        |         |        |        |         |  
|------------------------------------------------------------ | -------------------------------------------------------------------------------------------------- | -------------------------------------------------------- | --------------------------------------------------- | --------------------------------------------------- | ------ | -------- | -------- | ------- | ------------ | -------- | -------- | ------------ | ---- | ------ | ------------ | ------- | ----- | ------------ | ------ | ------- | ------ | ------ | ------- | -
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |        | ALLIED   |          |         | GUARANTOR    |          |          | NONGUARANTOR |      |        |              |         |       |              |        |         |       
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |        | HOLDINGS |          |         | SUBSIDIARIES |          |          | SUBSIDIARIES |      |        | ELIMINATIONS |         |       | CONSOLIDATED |       
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |        |          |          |         |              |          |          |              |      |        |              |         |       |              |       
|CASH FLOWS FROM OPERATING ACTIVITIES                         |                                                                                                    |                                                          |                                                     |                                                     |        |          |          |         |              |          |          |              |      |        |              |         |       |              |        |        
|                                                             | Net (loss) income                                                                                  |                                                          |                                                     | ($3,139                                             | )      |          | $        | 5,142   |              |          |          | ($769        | )    |        |              | ($4,373 | )     |              |        | ($3,139 | )     
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |        |          |          |         |              |          |          |              |      |        |              |        
|                                                             | Adjustments to reconcile net (loss) income to net
cash (used in) provided by operating activities: |                                                          |                                                     |                                                     |        |          |          |         |              |          |          |              |      |        |              |         |       |              |        |         |       
|                                                             |                                                                                                    | Gain on early extinguishment of debt                     |                                                     |                                                     | (2,750 | )        |          |         |             |          |          |              |      |        |              |         |       |              |        |         | (2,750 | )     
|                                                             |                                                                                                    | Interest expense paid in kind                            |                                                     |                                                     |       |          |          |         | 377          |          |          |              |      |        |              |         |       |              |        |         | 377    |       
|                                                             |                                                                                                    | Amortization of deferred financing costs                 |                                                     |                                                     | 2,028  |          |          |         |             |          |          |              |      |        |              |         |       |              |        |         | 2,028  |       
|                                                             |                                                                                                    | Depreciation and amortization                            |                                                     |                                                     | 1,510  |          |          |         | 25,198       |          |          |              | 237  |        |              |         |      |              |        |         | 26,945 |       
|                                                             |                                                                                                    | Cumulative effect of change in accounting principle      |                                                     |                                                     |       |          |          |         | 5,194        |          |          |              |     |        |              |         |      |              |        |         | 5,194  |       
|                                                             |                                                                                                    | Gain on disposal of assets and other, net                |                                                     |                                                     |       |          |          |         | (507         | )        |          |              |     |        |              |         |      |              |        |         | (507   | )     
|                                                             |                                                                                                    | Deferred income taxes                                    |                                                     |                                                     | 1,832  |          |          |         | (1,891       | )        |          |              | (575 | )      |              |         |      |              |        |         | (634   | )     
|                                                             |                                                                                                    | Compensation expense related to stock options and grants |                                                     |                                                     | 148    |          |          |         |             |          |          |              |     |        |              |         |      |              |        |         | 148    |       
|                                                             |                                                                                                    | Equity in earnings of subsidiaries                       |                                                     |                                                     | (4,240 | )        |          |         | (133         | )        |          |              |     |        |              |         | 4,373 |              |        |         |       |       
|                                                             |                                                                                                    | Amortization of Teamsters Union contract costs           |                                                     |                                                     |       |          |          |         | 1,200        |          |          |              |     |        |              |         |      |              |        |         | 1,200  |       
|                                                             |                                                                                                    | Change in operating assets and liabilities:              |                                                     |                                                     |        |          |          |         |              |          |          |              |      |        |              |         |       |              |        |         |        |       
|                                                             |                                                                                                    |                                                          | Receivables, net of allowance for doubtful accounts |                                                     |        | 24       |          |         |              | 10,692   |          |              |      | 241    |              |         |       |             |        |         |        | 10,957 |        
|                                                             |                                                                                                    |                                                          | Inventories                                         |                                                     |        |         |          |         |              | 233      |          |              |      | 5      |              |         |       |             |        |         |        | 238    |        
|                                                             |                                                                                                    |                                                          | Prepayments and other current assets                |                                                     |        | 294      |          |         |              | (194     | )        |              |      | (8     | )            |         |       |             |        |         |        | 92     |        
|                                                             |                                                                                                    |                                                          | Intercompany receivables and payables               |                                                     |        | 185,670  |          |         |              | (181,911 | )        |              |      | (3,759 | )            |         |       |             |        |         |        |       |        
|                                                             |                                                                                                    |                                                          | Trade accounts payable                              |                                                     |        | (1,009   | )        |         |              | 1,176    |          |              |      | 50     |              |         |       |             |        |         |        | 217    |        
|                                                             |                                                                                                    |                                                          | Accrued liabilities                                 |                                                     |        | (2,847   | )        |         |              | (6,678   | )        |              |      | 11,890 |              |         |       |             |        |         |        | 2,365  |        
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |        |          |          |         |              |          |          |              |      |        |              |        
|                                                             |                                                                                                    |                                                          |                                                     | Total adjustments                                   |        |          | 180,660  |         |              |          | (147,244 | )            |      |        | 8,081        |         |       |              | 4,373  |         |        |        | 45,870  |  
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |        |          |          |         |              |          |          |              |      |        |              |        
|                                                             |                                                                                                    |                                                          |                                                     | Net cash provided by (used in) operating activities |        |          | 177,521  |         |              |          | (142,102 | )            |      |        | 7,312        |         |       |              |       |         |        |        | 42,731  |  
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |        |          |          |         |              |          |          |              |      |        |              |        
|CASH FLOWS FROM INVESTING ACTIVITIES:                        |                                                                                                    |                                                          |                                                     |                                                     |        |          |          |         |              |          |          |              |      |        |              |         |       |              |        |        
|                                                             | Purchases of property and equipment                                                                |                                                          |                                                     |                                                    |        |          |          | (7,470  | )            |          |          |             |      |        |              |        |       |              |        | (7,470  | )     
|                                                             | Intercompany sale of property and equipment                                                        |                                                          |                                                     | (2                                                  | )      |          |          | 2       |              |          |          |             |      |        |              |        |       |              |        |        |       
|                                                             | Proceeds from sale of property and equipment                                                       |                                                          |                                                     |                                                    |        |          |          | 2,857   |              |          |          |             |      |        |              |        |       |              |        | 2,857   |       
|                                                             | Proceeds from sale of equity investment in joint venture                                           |                                                          |                                                     |                                                    |        |          |          |        |              |          |          | 2,700        |      |        |              |        |       |              |        | 2,700   |       
|                                                             | Capital contribution                                                                               |                                                          |                                                     | (73,178                                             | )      |          |          | 73,100  |              |          |          | 78           |      |        |              |        |       |              |        |        |       
|                                                             | Return of capital                                                                                  |                                                          |                                                     | 40,881                                              |        |          |          | (39,829 | )            |          |          | (1,052       | )    |        |              |        |       |              |        |        |       
|                                                             | Increase in short-term investments                                                                 |                                                          |                                                     |                                                    |        |          |          |        |              |          |          | (1,229       | )    |        |              |        |       |              |        | (1,229  | )     
|                                                             | Increase in cash surrender value of life insurance                                                 |                                                          |                                                     | (317                                                | )      |          |          |        |              |          |          |             |      |        |              |        |       |              |        | (317    | )     
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |        |          |          |         |              |          |          |              |      |        |              |        
|                                                             |                                                                                                    |                                                          |                                                     | Net cash provided by (used in) investing activities |        |          | (32,616  | )       |              |          | 28,660   |              |      |        | 497          |         |       |              |       |         |        |        | (3,459  | )
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |        |          |          |         |              |          |          |              |      |        |              |        
|CASH FLOWS FROM FINANCING ACTIVITIES:                        |                                                                                                    |                                                          |                                                     |                                                     |        |          |          |         |              |          |          |              |      |        |              |         |       |              |        |        
|                                                             | (Repayments) additions to revolving credit facilities, net                                         |                                                          |                                                     | (98,900                                             | )      |          |          | 38,177  |              |          |          |             |      |        |              |         |       |              |        | (60,723 | )     
|                                                             | Additions to long-term debt                                                                        |                                                          |                                                     |                                                    |        |          |          | 82,751  |              |          |          |             |      |        |              |         |       |              |        | 82,751  |       
|                                                             | Repayment of long-term debt                                                                        |                                                          |                                                     | (37,498                                             | )      |          |          | (6,332  | )            |          |          |             |      |        |              |         |       |              |        | (43,830 | )     
|                                                             | Payment of deferred financing costs                                                                |                                                          |                                                     | (8,829                                              | )      |          |          |        |              |          |          |             |      |        |              |        |       |              |        | (8,829  | )     
|                                                             | Proceeds from issuance of common stock                                                             |                                                          |                                                     | 161                                                 |        |          |          |        |              |          |          |             |      |        |              |        |       |              |        | 161     |       
|                                                             | Other, net                                                                                         |                                                          |                                                     | (48                                                 | )      |          |          | 122     |              |          |          | 299          |      |        |              |        |       |              |        | 373     |       
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |        |          |          |         |              |          |          |              |      |        |              |        
|                                                             |                                                                                                    |                                                          |                                                     | Net cash (used in) provided by financing activities |        |          | (145,114 | )       |              |          | 114,718  |              |      |        | 299          |         |       |              |       |         |        |        | (30,097 | )
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |        |          |          |         |              |          |          |              |      |        |              |        
|EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS |                                                                                                    |                                                          |                                                    |                                                     |        |          | (247     | )       |              |          |         |              |      |        |             |         |       |              | (247   | )      
|NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS         |                                                                                                    |                                                          | (209                                                | )                                                   |        |          | 1,029    |         |              |          | 8,108    |              |      |        |             |         |       |              | 8,928  |        
|CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR               |                                                                                                    |                                                          | 209                                                 |                                                     |        |          | 1,063    |         |              |          | 9,271    |              |      |        |             |         |       |              | 10,543 |        
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |        |          |          |         |              |          |          |              |      |        |              |        
|CASH AND CASH EQUIVALENTS AT END OF PERIOD                   |                                                                                                    |                                                          |                                                    |                                                     |        | $        | 2,092    |         |              | $        | 17,379   |              |      |        |             |         |       | $            | 19,471 |        
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |        |          |          |         |              |          |          |              |      |        |              |        

18



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##### Table of Contents



SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2001
In Thousands

|                                                             |                                                                                                    |                                                          |                                                     |                                                     |         |          |        |          |              |        |         |              |      |        |              |        |         |              |         |          |         |        |         |  
|------------------------------------------------------------ | -------------------------------------------------------------------------------------------------- | -------------------------------------------------------- | --------------------------------------------------- | --------------------------------------------------- | ------- | -------- | ------ | -------- | ------------ | ------ | ------- | ------------ | ---- | ------ | ------------ | ------ | ------- | ------------ | ------- | -------- | ------- | ------ | ------- | -
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |         | ALLIED   |        |          | GUARANTOR    |        |         | NONGUARANTOR |      |        |              |        |         |              |         |          |        
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |         | HOLDINGS |        |          | SUBSIDIARIES |        |         | SUBSIDIARIES |      |        | ELIMINATIONS |        |         | CONSOLIDATED |        
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |         |          |        |          |              |        |         |              |      |        |              |        |         |              |        
|CASH FLOWS FROM OPERATING ACTIVITIES                         |                                                                                                    |                                                          |                                                     |                                                     |         |          |        |          |              |        |         |              |      |        |              |        |         |              |         |         
|                                                             | Net (loss) income                                                                                  |                                                          |                                                     | ($24,578                                            | )       |          |        | ($29,339 | )            |        | $       | 1,638        |      |        | $            | 27,701 |         |              |         | ($24,578 | )      
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |         |          |        |          |              |        |         |              |      |        |              |       
|                                                             | Adjustments to reconcile net (loss) income to net
cash (used in) provided by operating activities: |                                                          |                                                     |                                                     |         |          |        |          |              |        |         |              |      |        |              |        |         |              |         |          |        
|                                                             |                                                                                                    | Amortization of deferred financing costs                 |                                                     |                                                     | 2,028   |          |        |          | (375         | )      |         |              |     |        |              |        |        |              |         |          | 1,653   |       
|                                                             |                                                                                                    | Depreciation and amortization                            |                                                     |                                                     | 1,725   |          |        |          | 28,224       |        |         |              | 356  |        |              |        |        |              |         |          | 30,305  |       
|                                                             |                                                                                                    | Gain on sale disposal of assets and other, net           |                                                     |                                                     |        |          |        |          | (2,743       | )      |         |              |     |        |              |        |        |              |         |          | (2,743  | )     
|                                                             |                                                                                                    | Deferred income taxes                                    |                                                     |                                                     | (15,000 | )        |        |          | 1,644        |        |         |              |     |        |              |        |        |              |         |          | (13,356 | )     
|                                                             |                                                                                                    | Compensation expense related to stock options and grants |                                                     |                                                     | 138     |          |        |          |             |        |         |              |     |        |              |        |        |              |         |          | 138     |       
|                                                             |                                                                                                    | Equity in earnings of joint ventures                     |                                                     |                                                     |        |          |        |          | (2,437       | )      |         |              | (102 | )      |              |        |        |              |         |          | (2,539  | )     
|                                                             |                                                                                                    | Equity in losses (earnings) of subsidiaries              |                                                     |                                                     | 28,117  |          |        |          | (416         | )      |         |              |     |        |              |        | (27,701 | )            |         |          |        |       
|                                                             |                                                                                                    | Amortization of Teamsters Union contract costs           |                                                     |                                                     |        |          |        |          | 1,202        |        |         |              |     |        |              |        |        |              |         |          | 1,202   |       
|                                                             |                                                                                                    | Change in operating assets and liabilities:              |                                                     |                                                     |         |          |        |          |              |        |         |              |      |        |              |        |         |              |         |          |         |       
|                                                             |                                                                                                    |                                                          | Receivables, net of allowance for doubtful accounts |                                                     |         | 774      |        |          |              | 22,897 |         |              |      | (2,844 | )            |        |         |             |         |          |         | 20,827 |        
|                                                             |                                                                                                    |                                                          | Inventories                                         |                                                     |         |         |        |          |              | 415    |         |              |      |       |              |        |         |             |         |          |         | 415    |        
|                                                             |                                                                                                    |                                                          | Prepayments and other current assets                |                                                     |         | 407      |        |          |              | (4,151 | )       |              |      | 2,109  |              |        |         |             |         |          |         | (1,635 | )      
|                                                             |                                                                                                    |                                                          | Intercompany receivables and payables               |                                                     |         | (9,071   | )      |          |              | 7,667  |         |              |      | 1,404  |              |        |         |             |         |          |         |       |        
|                                                             |                                                                                                    |                                                          | Trade accounts payable                              |                                                     |         | 899      |        |          |              | (5,040 | )       |              |      | 57     |              |        |         |             |         |          |         | (4,084 | )      
|                                                             |                                                                                                    |                                                          | Accrued liabilities                                 |                                                     |         | 6,579    |        |          |              | (4,648 | )       |              |      | 10,689 |              |        |         |             |         |          |         | 12,620 |        
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |         |          |        |          |              |        |         |              |      |        |              |       
|                                                             |                                                                                                    |                                                          |                                                     | Total adjustments                                   |         |          | 16,596 |          |              |        | 42,239  |              |      |        | 11,669       |        |         |              | (27,701 | )        |         |        | 42,803  |  
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |         |          |        |          |              |        |         |              |      |        |              |       
|                                                             |                                                                                                    |                                                          |                                                     | Net cash (used in) provided by operating activities |         |          | (7,982 | )        |              |        | 12,900  |              |      |        | 13,307       |        |         |              |        |          |         |        | 18,225  |  
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |         |          |        |          |              |        |         |              |      |        |              |       
|CASH FLOWS FROM INVESTING ACTIVITIES:                        |                                                                                                    |                                                          |                                                     |                                                     |         |          |        |          |              |        |         |              |      |        |              |        |         |              |         |         
|                                                             | Purchases of property and equipment                                                                |                                                          |                                                     | (67                                                 | )       |          |        | (16,155  | )            |        |         | (720         | )    |        |              |       |         |              |         | (16,942  | )      
|                                                             | Intercompany sale of property and equipment                                                        |                                                          |                                                     | 811                                                 |         |          |        | (811     | )            |        |         |             |      |        |              |       |         |              |         |         |        
|                                                             | Proceeds from sale of property and equipment                                                       |                                                          |                                                     |                                                    |         |          |        | 4,745    |              |        |         |             |      |        |              |       |         |              |         | 4,745    |        
|                                                             | Investment in joint ventures                                                                       |                                                          |                                                     |                                                    |         |          |        |         |              |        |         | (464         | )    |        |              |       |         |              |         | (464     | )      
|                                                             | Intercompany dividend received (paid)                                                              |                                                          |                                                     | 1,980                                               |         |          |        | (1,980   | )            |        |         |             |      |        |              |       |         |              |         |         |        
|                                                             | Increase in short-term investments                                                                 |                                                          |                                                     |                                                    |         |          |        |         |              |        |         | (2,590       | )    |        |              |       |         |              |         | (2,590   | )      
|                                                             | Increase in cash surrender value of life insurance                                                 |                                                          |                                                     | (240                                                | )       |          |        |         |              |        |         |             |      |        |              |       |         |              |         | (240     | )      
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |         |          |        |          |              |        |         |              |      |        |              |       
|                                                             |                                                                                                    |                                                          |                                                     | Net cash provided by (used in) investing activities |         |          | 2,484  |          |              |        | (14,201 | )            |      |        | (3,774       | )      |         |              |        |          |         |        | (15,491 | )
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |         |          |        |          |              |        |         |              |      |        |              |       
|CASH FLOWS FROM FINANCING ACTIVITIES:                        |                                                                                                    |                                                          |                                                     |                                                     |         |          |        |          |              |        |         |              |      |        |              |        |         |              |         |         
|                                                             | (Repayments) additions to revolving credit facilities, net                                         |                                                          |                                                     | 10,676                                              |         |          |        | 1,193    |              |        |         |             |      |        |              |       |         |              |         | 11,869   |        
|                                                             | Additions to long-term debt                                                                        |                                                          |                                                     |                                                    |         |          |        |         |              |        |         |             |      |        |              |       |         |              |         |         |        
|                                                             | Repayment of long-term debt                                                                        |                                                          |                                                     |                                                    |         |          |        | (104     | )            |        |         |              |      |        |              |        |         |              |         | (104     | )      
|                                                             | Payment of deferred financing costs                                                                |                                                          |                                                     | (2,507                                              | )       |          |        |         |              |        |         |             |      |        |              |       |         |              |         | (2,507   | )      
|                                                             | Proceeds from issuance of common stock                                                             |                                                          |                                                     | 217                                                 |         |          |        |         |              |        |         |             |      |        |              |       |         |              |         | 217      |        
|                                                             | Other, net                                                                                         |                                                          |                                                     | (2,314                                              | )       |          |        | 1,243    |              |        |         | 1,352        |      |        |              |       |         |              |         | 281      |        
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |         |          |        |          |              |        |         |              |      |        |              |       
|                                                             |                                                                                                    |                                                          |                                                     | Net cash provided by financing activities           |         |          | 6,072  |          |              |        | 2,332   |              |      |        | 1,352        |        |         |              |        |          |         |        | 9,756   |  
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |         |          |        |          |              |        |         |              |      |        |              |       
|EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS |                                                                                                    |                                                          |                                                    |                                                     |         |          | (508   | )        |              |        | (921    | )            |      |        |             |        |         |              | (1,429  | )       
|NET INCREASE IN CASH AND CASH EQUIVALENTS                    |                                                                                                    |                                                          | 574                                                 |                                                     |         |          | 523    |          |              |        | 9,964   |              |      |        |             |        |         |              | 11,061  |         
|CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR               |                                                                                                    |                                                          | (1,213                                              | )                                                   |         |          | 2,063  |          |              |        | 1,523   |              |      |        |             |        |         |              | 2,373   |         
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |         |          |        |          |              |        |         |              |      |        |              |       
|CASH AND CASH EQUIVALENTS AT END OF PERIOD                   |                                                                                                    |                                                          | ($639                                               | )                                                   |         | $        | 2,586  |          |              | $      | 11,487  |              |      |        |             |        |         | $            | 13,434  |         
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |         |          |        |          |              |        |         |              |      |        |              |       

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

Results of Operations

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

|                                                                                          |                                                  |                          |       |                    |       |                  |       |      |        |      |       |      |       |   |       |      |       | 
|----------------------------------------------------------------------------------------- | ------------------------------------------------ | ------------------------ | ----- | ------------------ | ----- | ---------------- | ----- | ---- | ------ | ---- | ----- | ---- | ----- | - | ----- | ---- | ----- | 
|                                                                                          |                                                  |                          |       | Three Months Ended |       | Six Months Ended
|                                                                                          |                                                  |                          |       | June 30            |       | June 30         
|                                                                                          |                                                  |                          |       |                    |       |                 
|                                                                                          |                                                  |                          |       | 2002               |       | 2001             |       | 2002 |        | 2001 |      
|                                                                                          |                                                  |                          |       |                    |       |                  |       |      |        |     
|Revenues                                                                                  |                                                  |                          | 100.0 | %                  |       |                  | 100.0 | %    |        |      | 100.0 | %    |       |   | 100.0 | %   
|                                                                                          |                                                  |                          |       |                    |       |                  |       |      |        |      |       |      |       |   |       |     
|Operating expenses:                                                                       |                                                  |                          |       |                    |       |                  |       |      |        |      |       |      |       |   |       |     
|                                                                                          | Salaries, wages and fringe benefits              |                          |       | 53.4               |       |                  |       | 56.2 |        |      |       | 54.4 |       |   |       | 58.1 |      
|                                                                                          | Operating supplies and expenses                  |                          |       | 15.0               |       |                  |       | 15.9 |        |      |       | 14.8 |       |   |       | 17.4 |      
|                                                                                          | Purchased transportation                         |                          |       | 10.6               |       |                  |       | 11.5 |        |      |       | 10.4 |       |   |       | 11.1 |      
|                                                                                          | Insurance and claims                             |                          |       | 5.4                |       |                  |       | 5.5  |        |      |       | 5.2  |       |   |       | 5.8  |      
|                                                                                          | Operating taxes and licenses                     |                          |       | 3.6                |       |                  |       | 3.4  |        |      |       | 3.8  |       |   |       | 3.7  |      
|                                                                                          | Depreciation and amortization                    |                          |       | 5.6                |       |                  |       | 6.1  |        |      |       | 6.0  |       |   |       | 6.5  |      
|                                                                                          | Rents                                            |                          |       | 0.8                |       |                  |       | 0.6  |        |      |       | 0.7  |       |   |       | 0.8  |      
|                                                                                          | Communications and utilities                     |                          |       | 0.8                |       |                  |       | 0.8  |        |      |       | 0.9  |       |   |       | 0.8  |      
|                                                                                          | Other operating expenses                         |                          |       | 0.6                |       |                  |       | 1.4  |        |      |       | 1.0  |       |   |       | 1.6  |      
|                                                                                          | Loss (gain) on sale of operating assets          |                          |       | 0.1                |       |                  |       | (1.0 | )      |      |       | (0.2 | )     |   |       | (0.6 | )    
|                                                                                          |                                                  |                          |       |                    |       |                  |       |      |        |      |       |      |       |   |       |     
|                                                                                          |                                                  | Total operating expenses |       |                    | (95.9 | )                |       |      | (100.4 | )    |       |      | (97.0 | ) |       |      | 105.2 | 
|                                                                                          |                                                  |                          |       |                    |       |                  |       |      |        |      |       |      |       |   |       |     
|Operating income (loss)                                                                   |                                                  |                          | 4.1   |                    |       |                  | (0.4  | )    |        |      | 3.0   |      |       |   | (5.2  | )   
|                                                                                          |                                                  |                          |       |                    |       |                  |       |      |        |      |       |      |       |   |       |     
|Other income (expense):                                                                   |                                                  |                          |       |                    |       |                  |       |      |        |      |       |      |       |   |       |     
|                                                                                          | Equity in earnings of joint ventures, net of tax |                          |       | 0.0                |       |                  |       | 0.5  |        |      |       | 0.0  |       |   |       | 0.5  |      
|                                                                                          | Interest expense                                 |                          |       | (3.2               | )     |                  |       | (3.8 | )      |      |       | (3.5 | )     |   |       | (3.8 | )    
|                                                                                          | Interest income                                  |                          |       | 0.3                |       |                  |       | 0.3  |        |      |       | 0.2  |       |   |       | 0.3  |      
|                                                                                          | Gain on early extinguishment of debt             |                          |       | 0.0                |       |                  |       | 0.0  |        |      |       | 0.6  |       |   |       | 0.0  |      
|                                                                                          |                                                  |                          |       |                    |       |                  |       |      |        |      |       |      |       |   |       |     
|                                                                                          |                                                  |                          | (2.9  | )                  |       |                  | (3.0  | )    |        |      | (2.7  | )    |       |   | (3.0  | )   
|                                                                                          |                                                  |                          |       |                    |       |                  |       |      |        |      |       |      |       |   |       |     
|Income (loss) before income taxes and cumulative
effect of change in accounting principle |                                                  |                          | 1.2   |                    |       |                  | (3.4  | )    |        |      | 0.3   |      |       |   | (8.2  | )   
|Income tax (expense) benefit                                                              |                                                  |                          | (0.3  | )                  |       |                  | 1.1   |      |        |      | (0.1  | )    |       |   | 2.9   |     
|                                                                                          |                                                  |                          |       |                    |       |                  |       |      |        |      |       |      |       |   |       |     
|Income before cumulative effect of change in
accounting principle                         |                                                  |                          | 0.9   |                    |       |                  | (2.3  | )    |        |      | 0.2   |      |       |   | (5.3  | )   
|Cumulative effect of change in accounting principle, net of tax                           |                                                  |                          | 0.0   |                    |       |                  | 0.0   |      |        |      | (0.9  | )    |       |   | 0.0   |     
|                                                                                          |                                                  |                          |       |                    |       |                  |       |      |        |      |       |      |       |   |       |     
|Net income (loss)                                                                         |                                                  |                          | 0.9   | %                  |       |                  | (2.3  | )%   |        |      | (0.7  | )%   |       |   | (5.3  | )%  
|                                                                                          |                                                  |                          |       |                    |       |                  |       |      |        |      |       |      |       |   |       |     

Three and Six Months Ended June 30, 2002 Compared to Three and Six Months Ended June 30, 2001

Revenues were $239.0 million for the second quarter of 2002 versus
revenues of $250.2 million for the second quarter of 2001, a decrease of
$11.2 million, or 4.5%. For the six-month period ended June 30, 2002,
revenues were $452.2 million, versus revenues of $468.4 million for the
six-month period ended June 30, 2001, a decrease of $16.2 million, or
3.5%.

The decrease in revenues was due to a decline in vehicle deliveries
resulting primarily from the decision to exit non-performing locations in
the fourth quarter of 2001 and in 2002. Offsetting the impact on revenues
from the volume decline was an increase in the Allied Automotive Group
revenue per unit. This increase is primarily the result of the
implementation by Allied Automotive Group of a new administrative
processing fee in September 2001.

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Net income was $2.1 million during the second quarter of 2002 versus a
net loss of $5.7 million during the second quarter of 2001. Basic
earnings per share in the second quarter of 2002 were $.25 and diluted
earnings per share were $0.24 versus basic and diluted loss per share of
$0.71 in the second quarter of 2001. For the six-month period ended June
30, 2002, the Company experienced a net loss of $3.1 million versus a net
loss of $24.6 million for the six-month period ended June 30, 2001. Basic
loss per share was $0.38 and diluted loss per share was $0.36 for the
six-month period ended June 30, 2002 versus basic and diluted loss per
share of $3.04 for the six-month period ended June 30, 2001. Net income
for the six-month period ended June 30, 2002 included a $1.7 million
after-tax gain on the early extinguishment of the Companys subordinated
notes and a $4.1 after-tax charge related to the impairment of goodwill at
the Companys Axis Group subsidiary. The impairment charge resulted from
the Companys adoption of SFAS 142 as described below.

Earnings before interest, taxes, depreciation and amortization, and gains
and losses on disposal of assets (EBITDA) were $23.5 million during the
second quarter of 2002 versus $11.7 million during the second quarter of
2001. For the six-month period ended June 30, 2002 EBITDA was $39.9
million versus $3.4 million for the six-month period ended June 30, 2001.
The significant improvement in EBITDA was due to the ongoing execution of
the Companys turnaround initiatives related to improved revenue quality,
productivity, workforce reductions and the continued elimination of
non-contributory expenses and assets.

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

Salaries, wages and fringe benefits decreased from 56.2 % of revenues in
the second quarter of 2001 to 53.4 % of revenues in the second quarter of
2002, and from 58.1% of revenues for the six-month period ended June 30,
2001 to 54.4 % of revenues for the six-month period ended June 30, 2002.
The decrease was primarily due to continued productivity and efficiency
improvements implemented by the Companys turnaround initiatives. In
addition, the Company incurred $5.6 million of workforce reduction
expenses for the six-month period ended June 30, 2001 compared to $0.9
million of workforce reduction and severance expenses which were related
to a reduction in overhead expenses and the upgrade of personnel as part
of the turnaround initiatives for the first six months of 2002.

Operating supplies and expenses decreased from 15.9% of revenues in the
second quarter of 2001 to 15.0% of revenues in the second quarter of 2002,
and decreased from 17.4% of revenues for the six-month period ended June
30, 2001 to 14.8% of revenues for the six-month period ended June 30,
2002. The decrease was due primarily to a decrease in fuel costs
experienced in the first and second quarters of 2002 versus 2001, combined
with a reduction in the maintenance costs of rigs in service. The
decreased maintenance costs are a result of the Company operating
approximately 10.1% fewer rigs in the second quarter of 2002 as well as
managements efforts to aggressively reduce overhead costs and unnecessary
spending. These efforts are consistent with the Companys turnaround
initiatives.

Purchased transportation decreased from 11.5% of revenues in the second
quarter of 2001 to 10.6% of revenues in the second quarter of 2002, and
decreased from 11.1% of revenues for the six-month period ended June 30,
2001 to 10.4% of revenues for the six-month period ended June 30, 2002.
The decrease was due primarily to a decrease in the number of
owner-operators resulting from the closing of unprofitable terminals in
the fourth quarter of 2001.

Insurance and claims expense decreased from 5.5% of revenues in the second
quarter of 2001 to 5.4% of revenues in the second quarter of 2002, and
decreased from 5.8% of revenue for the six-month period ended June 30,
2001 to 5.2% of revenues for the six-month period ended June 30, 2002. The
decrease was a result of lower cargo claims experienced on shipped
vehicles as well as a reduction in auto liability self-insured claims.
Allied Automotive Group is aggressively managing its cargo and auto
liability claims costs as part of its turnaround plan.

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Depreciation and amortization expense decreased from 6.1% of revenues in
the second quarter of 2001 to 5.6% of revenues in the second quarter of
2002, and decreased from 6.5% of revenues for the six-month period ended
June 30, 2001 to 6.0% of revenues for the six-month period ended June 30,
2001. The decrease is due primarily to the reduction of amortization
expense resulting from the Companys adoption of SFAS No. 142, Goodwill
and Other Intangibles which became effective January 1, 2002. During the
second quarter of 2001, the Company recorded $0.9 million of amortization
expense and $1.8 million for the six-month period ended June 30, 2001
related to goodwill. The remaining decrease is primarily due to the sale
of non-performing assets during 2001 and reduced capital expenditures in
2002.

Other operating expenses decreased from 1.4% of revenues in the second
quarter of 2001 to 0.6% of revenues in the second quarter of 2002, and
decreased from 1.6% of revenues for the six-month period ended June 30,
2001 to 1.0% of revenues for the six-month period ended June 30, 2002.
The decrease was due primarily to overall lower professional fees for
consultants. During 2001, the Company engaged outside consultants,
including Jay Alix and Associates, to aid in the planning and analysis of
its turnaround initiatives and the refinancing of its revolving credit
facility and subordinated debt.

Gain on disposition of assets decreased from a gain of $2.6 million in the
second quarter of 2001 to a loss of $0.3 million in the second quarter of
2002, and decreased from a gain of $2.7 million for the six-month period
ended June 30, 2001 to a gain of $0.7 million for the six-month period
ended June 30, 2002. As part of the Companys turnaround initiatives, the
Company has disposed of non-performing assets.

Equity in earnings of joint ventures, net of tax, decreased to $0 in the
second quarter of 2002 and for the six-month period ended June 30, 2002,
from earnings of $1.3 million in the second quarter of 2001 and $2.5
million the six-month period ended June 30, 2001. The decrease is due to
the sale of the Companys joint ventures in the United Kingdom in the
fourth quarter of 2001 and the sale of its joint venture interest in
Brazil during April 2002.

Interest expense decreased from 3.8% of revenues in the second quarter of
2001 to 3.2% of revenues in the second quarter of 2002, and decreased from
3.8% of revenues for the six-month period ended June 30, 2001 to 3.5% of
revenues for the six-month period ended June 30, 2002. The decrease was
due to higher debt levels and effective interest rates in 2001 versus 2002,
as well as the incurrence in 2001 of additional costs related to the
amendment of the Companys revolving credit facility and its senior
subordinated notes.

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 million
for the Company. Pursuant to the adoption of SFAS No. 142, the Company
will annually test goodwill for impairment.

The adoption of SFAS No. 145 required that the gain on the early
extinguishment of debt the Company recorded during the first quarter of
2002 be reclassified from an extraordinary item to other income.

As part of the Companys turnaround efforts in the first quarter of 2002,
the Allied Holdings Inc. Defined Benefit Pension Plan was amended in
February 2002 to freeze the Plan. The amendment resulted in a curtailment
of the Plan effective April 30, 2002, under which employees do not
accumulate any new benefits and new participants are not added to the
Plan. The Companys net pension expense for 2001 was $2.6 million. As a
result of freezing the Plan, the Company expects net pension expense to be
$304,000 for 2002.

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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 refurbishment
and maintenance of rigs and terminal facilities, the payment of operating
expenses and the payment of interest and principal associated with
long-term debt.

Net cash provided by operating activities totaled $42.3 million for the
six-month period ended June 30, 2002, versus $18.2 million for the
six-month period ended June 30, 2001. The increase was due primarily to an
increase in earnings from a net loss of $24.6 million for the first six
months of 2001 to $0.9 million for the first six months of 2002 of income
before the cumulative effect of a change in accounting principle.

Net cash used in investing activities totaled $3.5 million for the
six-month period ended June 30, 2002, versus $15.5 million for the
six-month period ended June 30, 2001. Cash paid to purchase capital items
decreased from $16.9 million in the first six months of 2001 to $7.5
million in the first six months of 2002. The Company has embarked on a
significant fleet refurbishment program that is expected to enable the
Company to refurbish approximately 15% of its active fleet in 2002. The
fleet refurbishment program is being implemented slowly to ensure quality
and therefore capital expenditures will be weighted more towards the
second half of the year. The Company anticipates capital expenditures in
a range of $25 to $30 million in calendar year 2002, which is driven
primarily by the fleet refurbishment program, compared to capital
expenditures of $21.5 million in 2001.

Net cash used in financing activities totaled $30.1 million for the
six-month period ended June 30, 2002, versus net cash provided by
financing activities of $9.8 million for the six-month period ended June
30, 2001. During the first six months of 2002, long-term debt was reduced
by $24.2 million, compared to borrowings of long-term debt of $11.9
million in the first six months of 2001. The repayment of debt was
primarily due to a reduction in the net loss experienced by the Company
and lower working capital requirements as well as cash proceeds from the
sale of the investment in the joint venture in Brazil. The Company also
paid $8.8 million in deferred financing costs related the refinancing of
its revolving credit facility and its senior subordinated notes.

As part of the Companys Credit Facility, as described in Note 9, the
Revolver and Term Loans A, B, and C mature on February 25, 2005. Term Loan
D matures on February 26, 2005 and the Notes mature on October 1, 2007.
As part of the debt agreements governing these Term Loans, the repayment
of Term Loan A includes eleven installment payments with the outstanding
balance due at maturity and the repayment of Term Loan B includes 5
installment payments with the outstanding balance due at maturity. Term
Loans C and D, as well as the Notes, are to be repaid in full at maturity.
For more comprehensive information regarding the outstanding balances at
June 30, 2002 and the related interest rates, refer to Note 9.

The Company began trading its common stock on the American Stock Exchange
(AMEX) under the symbol AHI, effective April 8, 2002. The Companys
common stock was previously listed on the New York Stock Exchange
(NYSE). As previously announced, the Company had been operating under a
plan that was approved by the NYSE in August 2001. The plan was to bring
the Companys total market capitalization and shareholders equity above
NYSEs continued listing requirement of $50 million by November 29, 2002.
The Company believes, however, that the change to AMEX better allows for
management of business without the uncertainty and distractions associated
with meeting NYSE standards. Management does not expect a significant
change in shareholder liquidity as a result of the move to the AMEX.

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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.

Short-term Investments The Company does not use derivative financial
instruments in its investment portfolio. The Company places its
investments in instruments that meet high credit quality standards, as
specified in the Companys investment policy guidelines. The policy also
limits the amount of credit exposure to any one issue, issuer, and type of
instrument. Short-term investments at June 30, 2002, which are recorded
at fair value of $66.0 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 $6.6
million.

Interest Rates The Company primarily issues long-term debt obligations
to support general corporate purposes including capital expenditures and
working capital needs. The Senior Notes of the Companys long-term debt
obligations bear a fixed rate of interest while the rates for the
Revolving Credit Facility and Term Loans are variable, based on a fixed
percent and the prime rate. 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.

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, 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. During 2001 Allied Automotive Group entered
into a forward purchase commitment to purchase one million gallons of low
sulfur diesel fuel per month until August 2002 at determinable prices
defined within the agreement. A 10% increase in diesel fuel prices would
reduce pre-tax income by $3.6 million over the next fiscal year assuming
2002 levels of fuel consumption.

Foreign Currency Exchange Rates Although the majority of the Companys
operations are in the United States, the Company does have foreign
subsidiaries (primarily Canada). The net investments in foreign
subsidiaries translated into dollars using exchange rates at June 30,
2002, are $77.1 million. The potential loss in fair value impacting other
comprehensive income resulting from a hypothetical 10% change in quoted
foreign currency exchange rates amounts to $7.7 million. The Company does
not use derivative financial instruments to hedge its exposure to changes
in foreign currency exchange rates.

Revenue Variability The Companys revenues are variable and can be
impacted by sudden unexpected changes in Original Equipment Manufacturer
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
generally 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 fuel costs fluctuations discussed
herein, inflation has not significantly affected the Companys results of
operations.

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Critical Accounting Policies

The Company has certain critical accounting policies that are important to
the portrayal of financial condition and results of operation. These
critical accounting policies require subjective or complex judgments. The
Companys critical accounting policies include claims and insurance
reserves, accounts receivable valuation reserves and the income tax
valuation reserve.

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 are discounted at 6% to their present
value. 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 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. In addition, 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.

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 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 deferred revenue, 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
taxes 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 $5.3 million as of June 30,
2002 due to uncertainties related to the Companys ability to utilize some
of the deferred tax assets, primarily consisting of certain net operating
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 June 30, 2002 was $10.5 million, net of a
valuation allowance of $5.3 million.

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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 plans, intentions or expectations, (ii) general industry trends,
competitive conditions and customer preferences, (iii) the Companys
management information systems, (iv) the Companys efforts to reduce
costs, (v) the adequacy of the Companys sources of cash to finance its
current and future operations and (vi) resolution of litigation without
material adverse effect on the Company. This notice is intended to take
advantage of the safe harbor provided by the Private Securities
Litigation Reform Act of 1995 with respect to such forward-looking
statements. 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; the highly
competitive nature of the automotive distribution industry; dependence on
the 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; ability of the Company to negotiate contracts expiring in
the future with customers and Union representatives of its employees on
terms favorable to the Company; the variability of quarterly results and
seasonality of the automotive distribution industry; the Companys highly
leveraged financial position; 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; increases in fuel prices; increased frequency and
severity of work related accidents and workers compensation claims;
availability of appropriate insurance coverage; increased expenses due to
layoffs of employees; changes in regulatory requirements, including
environmental regulations, 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 and the Companys Annual
Report on Form 10-K for the fiscal year ended December 31, 2001. 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.

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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 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 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-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.

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PART II

OTHER INFORMATION




Item 4. Submission of Matters to a Vote of Security Holders

On May 22, 2002 the Annual Meeting of Shareholders was held. The following
Directors were elected for terms that will expire on the date of the
annual meeting in the year indicated below. The number of shares voted
for, against and abstentions are also indicated.

Proposal I (Election of Directors)

|                    |  |     |           |  |          |  |           |      |  |  |      | 
|------------------- |  | --- | --------- |  | -------- |  | --------- | ---- |  |  | ---- | 
|                    |  | FOR |           |  | WITHHELD |  |           | TERM | 
|                    |  |     |           |  |          |  |           |      | 
|Guy W. Rutland, III |  |     | 6,368,355 |  |          |  | 437,352   |      |  |  | 2005 | 
|Robert R. Woodson   |  |     | 5,781,246 |  |          |  | 1,024,461 |      |  |  | 2005 | 
|J. Leland Strange   |  |     | 6,382,352 |  |          |  | 423,355   |      |  |  | 2005 | 

The following Directors terms will continue as indicated.

|                     |  |  |  |  |  |  |  |  |  |  |  | 
|-------------------- |  |  |  |  |  |  |  |  |  |  |  | 
|Robert J. Rutland    |  |  |  |  |  |  |  |  |  |  |  | 
|Hugh E. Sawyer       |  |  |  |  |  |  |  |  |  |  |  | 
|William P. Benton    |  |  |  |  |  |  |  |  |  |  |  | 
|David G. Bannister   |  |  |  |  |  |  |  |  |  |  |  | 
|Guy W. Rutland, IV   |  |  |  |  |  |  |  |  |  |  |  | 
|Berner F. Wilson, Jr |  |  |  |  |  |  |  |  |  |  |  | 
|Thomas E. Boland     |  |  |  |  |  |  |  |  |  |  |  | 

Proposal II (Amend the Companys Amended and Restated Long Term Incentive Plan
to increase the number of shares subject to the Plan by 500,000)

|          |  |         |         |  |         |  |       |         |  |  |           | 
|--------- |  | ------- | ------- |  | ------- |  | ----- | ------- |  |  | --------- | 
|FOR       |  | AGAINST |         |  | ABSTAIN |  |       | NO VOTE | 
|          |  |         |         |  |         |  |       |         | 
|4,648,901 |  |         | 507,679 |  |         |  | 4,425 |         |  |  | 1,644,702 | 




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

a) Exhibits: None

b) Reports on Form 8-K:

On April 2, 2002, the Company filed with the Commission a Current Report
on Form 8-K regarding the dismissal of its independent public
accountants, Arthur Andersen LLP and the engagement of KPMG LLP as its
new independent auditors, which Current Report was amended on April 19,
2002.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

|                      |  |  |  |  |  |                                                                                                                         
|--------------------- |  |  |  |  |  | ------------------------------------------------------------------------------------------------------------------------
|                      |  |  |  |  |  | Allied Holdings, Inc.                                                                                                   
|                     
|August 14, 2002(Date) |  |  |  |  |  | /s/ Hugh E. SawyerHugh E. Sawyer
on behalf of Registrant as
President and
Chief Executive Officer                       
|                     
|                     
|August 14, 2002(Date) |  |  |  |  |  | /s/ Daniel H. PopkyDaniel H. Popky
on behalf of Registrant as
Senior Vice President, Finance
and Chief Financial Officer

29