##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2005
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from
 Commission File Number: 0-22276
 ALLIED HOLDINGS, INC.
 (Exact name of registrant as specified in its charter)
 GEORGIA
    
    58-0360550(State or other jurisdiction of
    
    (I.R.S. Employer Identificationincorporation or organization)
    
    Number)
 Suite 200, 160 Clairemont Avenue, Decatur, Georgia 30030
 
 (Address of principal executive offices)
 (404) 373-4285
 
 (Registrants telephone number, including area code)
  þ o
  o þ
 o þ




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ALLIED HOLDINGS, INC. AND SUBSIDIARIES
 TABLE OF CONTENTS
 PAGEPART I  FINANCIAL INFORMATIONITEM
1  Financial StatementsConsolidated Balance Sheets - June 30, 2005 (unaudited) and December 31, 2004
    
    
    1Consolidated Statements of Operations - Three and Six Month Periods Ended June 30, 2005 and 2004 (unaudited)
    
    
    2Consolidated Statements of Cash Flows - Six Month Periods Ended June 30, 2005 and 2004 (unaudited)
    
    
    3Notes to the Consolidated Financial Statements
    
    
    4ITEM
2  Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    29ITEM
3  Quantitative and Qualitative Disclosures About Market Risk
    
    
    44ITEM
4  Controls and Procedures
    
    
    44PART II  OTHER INFORMATIONITEM
1  Legal Proceedings
    
    
    45ITEM
4  Submission of Matters to a Vote of Security Holders
    
    
    45ITEM
5  Other Information
    
    
    46ITEM
6  Exhibits
    
    
    46Signature Page
    
    
    47EX-4.3(G) SEVENTH AMENDMENT TO THE AMENDED & RESTATED FINANCING AGREEMENTEX-4.3(H) EIGHTH AMENDMENT TO THE AMENDED & RESTATED FINANCING AGREEMENTEX-4.4 SENIOR SECURED CREDIT AGREEMENTEX-31.1 SECTION 302, CERTIFICATION BY HUGH E. SAWYEREX-31.2 SECTION 302, CERTIFICATION BY THOMAS H. KINGEX-32.1 SECTION 906, CERTIFICATION BY HUGH E. SAWYEREX-32.2 SECTION 906, CERTIFICATION BY THOMAS H. KING




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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 31,2005
    
    
    2004(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    3,003
    
    
    $
    2,516Restricted cash, cash equivalents and other time deposits
    
    
    32,717
    
    
    
    27,378Receivables, net of allowances of $2,138 and $2,156 as of June 30, 2005
and December 31, 2004, respectively
    
    
    57,294
    
    
    
    57,309Inventories
    
    
    4,999
    
    
    
    4,649Deferred income taxes
    
    
    4,438
    
    
    
    4,632Prepayments and other current assets
    
    
    22,767
    
    
    
    12,414Total current assets
    
    
    125,218
    
    
    
    108,898Property and equipment, net of accumulated depreciation
    
    
    126,248
    
    
    
    135,635Goodwill, net
    
    
    3,932
    
    
    
    83,977Other assets:Restricted cash, cash equivalents and other time deposits
    
    
    66,582
    
    
    
    55,502Other noncurrent assets
    
    
    30,951
    
    
    
    37,520Total other assets
    
    
    97,533
    
    
    
    93,022Total assets
    
    $
    352,931
    
    
    $
    421,532LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilities:Current portion of long-term debt
    
    $
    113,638
    
    
    $
    13,500Borrowings under revolving credit facilities
    
    
    16,564
    
    
    
    2,972Accounts and notes payable
    
    
    35,367
    
    
    
    34,690Accrued liabilities
    
    
    85,980
    
    
    
    85,463Total current liabilities
    
    
    251,549
    
    
    
    136,625Long-term debt, less current portion
    
    
    150,000
    
    
    
    234,766Postretirement benefits other than pensions
    
    
    4,844
    
    
    
    5,082Deferred income taxes
    
    
    4,451
    
    
    
    16,164Other long-term liabilities
    
    
    69,530
    
    
    
    70,444Commitments and contingencies
    
    
    
    
    
    
    Stockholders deficit:Preferred stock, no par value. Authorized 5,000 shares; none outstanding
    
    
    
    
    
    
    Common stock, no par value. Authorized 20,000 shares; 8,980 and 8,919
outstanding at June 30, 2005 and December 31, 2004, respectively
    
    
    
    
    
    
    Additional paid-in capital
    
    
    48,545
    
    
    
    48,421Treasury stock, 139 shares at cost
    
    
    (707
    )
    
    
    (707
    )Accumulated deficit
    
    
    (174,015
    )
    
    
    (88,907
    )Accumulated other comprehensive loss, net of tax
    
    
    (1,266
    )
    
    
    (356
    )Total stockholders deficit
    
    
    (127,443
    )
    
    
    (41,549
    )Total liabilities and stockholders deficit
    
    $
    352,931
    
    
    $
    421,532
  1




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ALLIED HOLDINGS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Revenues
    
    $
    232,554
    
    
    $
    236,616
    
    
    $
    453,504
    
    
    $
    448,860Operating expenses:Salaries, wages, and fringe benefits
    
    
    118,105
    
    
    
    127,918
    
    
    
    239,333
    
    
    
    247,865Operating supplies and expenses
    
    
    44,115
    
    
    
    41,513
    
    
    
    85,624
    
    
    
    78,559Purchased transportation
    
    
    31,382
    
    
    
    28,588
    
    
    
    60,243
    
    
    
    54,494Insurance and claims
    
    
    9,695
    
    
    
    9,641
    
    
    
    18,578
    
    
    
    18,804Operating taxes and licenses
    
    
    7,637
    
    
    
    8,096
    
    
    
    15,411
    
    
    
    14,655Depreciation and amortization
    
    
    7,050
    
    
    
    9,929
    
    
    
    15,242
    
    
    
    20,315Rents
    
    
    1,949
    
    
    
    2,029
    
    
    
    3,798
    
    
    
    3,745Communications and utilities
    
    
    1,479
    
    
    
    1,351
    
    
    
    3,390
    
    
    
    3,305Other operating expenses
    
    
    4,479
    
    
    
    2,765
    
    
    
    7,059
    
    
    
    4,951Impairment of goodwill
    
    
    79,172
    
    
    
    
    
    
    
    79,172
    
    
    
    (Gain) loss on disposal of operating assets, net
    
    
    (421
    )
    
    
    127
    
    
    
    (377
    )
    
    
    (1,010
    )Total operating expenses
    
    
    304,642
    
    
    
    231,957
    
    
    
    527,473
    
    
    
    445,683Operating (loss) income
    
    
    (72,088
    )
    
    
    4,659
    
    
    
    (73,969
    )
    
    
    3,177Other income (expense):Interest expense
    
    
    (14,739
    )
    
    
    (7,577
    )
    
    
    (22,951
    )
    
    
    (14,945
    )Investment income
    
    
    578
    
    
    
    131
    
    
    
    1,016
    
    
    
    188Foreign exchange loss, net
    
    
    (412
    )
    
    
    (966
    )
    
    
    (611
    )
    
    
    (1,121
    )Other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (100
    )(14,573
    )
    
    
    (8,412
    )
    
    
    (22,546
    )
    
    
    (15,978
    )Loss before income taxes
    
    
    (86,661
    )
    
    
    (3,753
    )
    
    
    (96,515
    )
    
    
    (12,801
    )Income tax benefit
    
    
    11,611
    
    
    
    
    
    
    
    11,407
    
    
    
    Net loss
    
    $
    (75,050
    )
    
    $
    (3,753
    )
    
    $
    (85,108
    )
    
    $
    (12,801
    )Basic and diluted loss per common share:Net loss:Basic and diluted
    
    $
    (8.36
    )
    
    $
    (0.43
    )
    
    $
    (9.50
    )
    
    $
    (1.48
    )Weighted average common shares outstanding:Basic and diluted
    
    
    8,980
    
    
    
    8,704
    
    
    
    8,960
    
    
    
    8,663
  2




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ALLIED HOLDINGS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Six Months EndedJune 30,2005
    
    
    2004Cash flows from operating activities:Net loss
    
    $
    (85,108
    )
    
    $
    (12,801
    )Adjustments to reconcile net loss to net cash used in operating activities:Write-off and amortization of deferred financing costs
    
    
    6,464
    
    
    
    1,402Depreciation and amortization
    
    
    15,242
    
    
    
    20,315Impairment of goodwill
    
    
    79,172
    
    
    
    Gain on disposal of assets and other, net
    
    
    (377
    )
    
    
    (1,010
    )Foreign exchange loss, net
    
    
    611
    
    
    
    1,121Deferred income taxes
    
    
    (11,260
    )
    
    
    Compensation expense related to stock options and grants
    
    
    
    
    
    
    390Change in operating assets and liabilities:Receivables, net of allowances
    
    
    (168
    )
    
    
    (4,557
    )Inventories
    
    
    (371
    )
    
    
    394Prepayments and other assets
    
    
    (4,897
    )
    
    
    (5,754
    )Accounts and notes payable
    
    
    (1,647
    )
    
    
    (6,136
    )Accrued liabilities
    
    
    (659
    )
    
    
    3,760Net cash used in operating activities
    
    
    (2,998
    )
    
    
    (2,876
    )Cash flows from investing activities:Purchases of property and equipment
    
    
    (8,699
    )
    
    
    (13,281
    )Proceeds from sales of property and equipment
    
    
    2,836
    
    
    
    2,038(Increase) decrease in restricted cash, cash equivalents and other time deposits
    
    
    (16,419
    )
    
    
    55,321Increase in restricted investments
    
    
    
    
    
    
    (66,981
    )Funds deposited with insurance carriers
    
    
    (8,054
    )
    
    
    (32,024
    )Funds returned from insurance carriers
    
    
    3,070
    
    
    
    30,730Decrease in the cash surrender value of life insurance
    
    
    58
    
    
    
    147Net cash used in investing activities
    
    
    (27,208
    )
    
    
    (24,050
    )Cash flows from financing activities:Additions to
revolving credit facility, net
    
    
    13,592
    
    
    
    29,555Additions to long-term debt
    
    
    25,000
    
    
    
    Repayment of long-term debt
    
    
    (9,628
    )
    
    
    (11,417
    )Payment of deferred financing costs
    
    
    (625
    )
    
    
    Proceeds from insurance financing arrangements
    
    
    8,470
    
    
    
    28,608Repayments of insurance financing arrangements
    
    
    (6,060
    )
    
    
    (16,890
    )Proceeds from issuance of common stock
    
    
    124
    
    
    
    423Net cash provided by financing activities
    
    
    30,873
    
    
    
    30,279Effect of exchange rate changes on cash and cash equivalents
    
    
    (180
    )
    
    
    (200
    )Net change in cash and cash equivalents
    
    
    487
    
    
    
    3,153Cash and cash equivalents at beginning of period
    
    
    2,516
    
    
    
    2,148Cash and cash equivalents at end of period
    
    $
    3,003
    
    
    $
    5,301Supplemental cash flow information:Cash paid (refunds received) during the period for:Interest
    
    $
    15,812
    
    
    $
    13,600Income taxes, net of refunds
    
    
    (472
    )
    
    
    411
  3




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ALLIED HOLDINGS, INC. AND SUBSIDIARIES
 
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 (Throughout this Quarterly Report on Form 10-Q, we will use the terms we, our, us and
Allied to refer to Allied Holdings, Inc. and its subsidiaries).
 (1) Voluntary Reorganization under Chapter 11
    The Wall Street Journal
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ALLIED HOLDINGS, INC. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
       5




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ALLIED HOLDINGS, INC. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
 (2) Accounting and Reporting Policies
 Basis of Presentation
   Accounting for Reorganization
 Financial Reporting by Entities in Reorganization Under the Bankruptcy Code
  Use of Estimates and Seasonality
  6




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ALLIED HOLDINGS, INC. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
   (3) Recent Accounting Pronouncements
 Accounting for Conditional Asset Retirement Obligations Accounting for Asset Retirement Obligations,
 Share-Based Payment Accounting for Stock-Based Compensation, Accounting for Stock Issued to Employees Statement of Cash Flows.
  7




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ALLIED HOLDINGS, INC. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
  Accounting and Disclosure
Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of
2004 Accounting for Income Taxes,
 (4) Prepayments and Other Current Assets
  June 30,
    
    
    December 31,2005
    
    
    2004Tires on tractors and trailers
    
    $
    2,328
    
    
    $
    2,231Prepaid insurance
    
    
    14,508
    
    
    
    4,058Prepaid licenses
    
    
    3,125
    
    
    
    1,570Other
    
    
    2,806
    
    
    
    4,555$
    22,767
    
    
    $
    12,414
 (5) Property and Equipment
  June 30,
    
    
    December 31,2005
    
    
    2004Cost
    
    $
    540,320
    
    
    $
    555,713Accumulated depreciation and amortization
    
    
    (414,072
    )
    
    
    (420,078
    )$
    126,248
    
    
    $
    135,635
  8




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ALLIED HOLDINGS, INC. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
 (6) Goodwill
 Goodwill and Other Intangible Assets
    AlliedAutomotive
    
    
    AxisGroup
    
    
    Group
    
    
    TotalBalance as of December 31, 2004
    
    $
    80,041
    
    
    $
    3,936
    
    
    $
    83,977Impairment of goodwill
    
    
    (79,172
    )
    
    
    
    
    
    
    (79,172
    )Changes in carrying amounts due to changes in currency rates
    
    
    (869
    )
    
    
    (4
    )
    
    
    (873
    )Balance as of June 30, 2005
    
    $
    
    
    
    $
    3,932
    
    
    $
    3,932
 9




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ALLIED HOLDINGS, INC. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
 (7) Other Noncurrent Assets
  June 30,
    
    
    December 31,2005
    
    
    2004Cash surrender value of life insurance
    
    $
    6,169
    
    
    $
    6,227Deferred financing costs
    
    
    1,557
    
    
    
    7,396Prepaid pension cost
    
    
    17,988
    
    
    
    18,114Prepaid tires
    
    
    2,716
    
    
    
    2,597Deposits and other
    
    
    2,521
    
    
    
    3,186$
    30,951
    
    
    $
    37,520
  June 30,
    
    
    December 31,2005
    
    
    2004Cost
    
    $
    15,860
    
    
    $
    15,235Accumulated amortization
    
    
    (14,303
    )
    
    
    (7,839
    )$
    1,557
    
    
    $
    7,396
  (8) Accounts and Notes Payable and Accrued Liabilities
   June 30,
    
    
    December 31,2005
    
    
    2004Wages and benefits
    
    $
    34,677
    
    
    $
    31,059Claims and insurance reserves
    
    
    35,265
    
    
    
    36,764Accrued interest
    
    
    5,431
    
    
    
    4,756Accrued taxes
    
    
    3,372
    
    
    
    5,320Purchased transportation
    
    
    3,978
    
    
    
    1,942Other
    
    
    3,257
    
    
    
    5,622$
    85,980
    
    
    $
    85,463
 10




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ALLIED HOLDINGS, INC. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
  (9) Claims and Insurance Reserves
         11




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ALLIED HOLDINGS, INC. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
   June 30,
    
    
    December 31,2005
    
    
    2004Accrued liabilities  current
    
    $
    35,265
    
    
    $
    36,764Other long-term liabilities  noncurrent
    
    
    67,212
    
    
    
    67,621$
    102,477
    
    
    $
    104,385
  (10) Employee Benefit Plans
 (a) Pension and Postretirement Benefit Plans
  Defined Benefit
    
    
    Postretirement BenefitPension Plans
    
    
    PlansThree Months Ended June 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Service cost
    
    $
    12
    
    
    $
    22
    
    
    $
    11
    
    
    $
    17Interest cost
    
    
    431
    
    
    
    676
    
    
    
    147
    
    
    
    197Expected return on plan assets
    
    
    (617
    )
    
    
    (783
    )
    
    
    
    
    
    
    Amortization of:Unrecognized net actuarial loss
    
    
    280
    
    
    
    356
    
    
    
    134
    
    
    
    Prior service cost
    
    
    7
    
    
    
    12
    
    
    
    (68
    )
    
    
    (23
    )Transition asset
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    Recognized actuarial loss
    
    
    
    
    
    
    54
    
    
    
    
    
    
    
    23Net period benefit cost
    
    $
    113
    
    
    $
    332
    
    
    $
    224
    
    
    $
    214
 12




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ALLIED HOLDINGS, INC. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
 Defined Benefit
    
    
    Postretirement BenefitPension Plans
    
    
    PlansSix Months Ended June 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Service cost
    
    $
    33
    
    
    $
    45
    
    
    $
    24
    
    
    $
    30Interest cost
    
    
    1,174
    
    
    
    1,352
    
    
    
    323
    
    
    
    350Expected return on plan assets
    
    
    (1,679
    )
    
    
    (1,567
    )
    
    
    
    
    
    
    Amortization of:Unrecognized net actuarial loss
    
    
    762
    
    
    
    711
    
    
    
    295
    
    
    
    Prior service cost
    
    
    19
    
    
    
    24
    
    
    
    (149
    )
    
    
    (40
    )Transition asset
    
    
    
    
    
    
    (10
    )
    
    
    
    
    
    
    Recognized actuarial loss
    
    
    
    
    
    
    108
    
    
    
    
    
    
    
    40Net period benefit cost
    
    $
    309
    
    
    $
    663
    
    
    $
    493
    
    
    $
    380
  (b) Employee Stock Purchase Plan
  (11) Long-Term Debt and Borrowings Under the Revolving Credit Facility
  June 30,
    
    
    December 31,2005
    
    
    2004Term Loan A
    
    $
    68,638
    
    
    $
    78,266Term Loan B
    
    
    20,000
    
    
    
    20,000Term Loan C
    
    
    25,000
    
    
    
    Senior notes
    
    
    150,000
    
    
    
    150,000263,638
    
    
    
    248,266Less current portion of long-term debt
    
    
    (113,638
    )
    
    
    (13,500
    )$
    150,000
    
    
    $
    234,766
  13




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ALLIED HOLDINGS, INC. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
  Pre-Petition Credit Facilities
    
    
    The amount outstanding under the Revolver could not exceed $24.9 million for the period
July 25, 2005 to August 1, 2005;
    
    The amount outstanding under letters of credit could not exceed $43.7 million for the
period July 25, 2005 to August 1, 2005; and
    
    The aggregate principal amount of loans and letter of credit obligations outstanding, as
defined in the Pre-petition Facility, could not exceed at the end of any business day for
the period May 1, 2005 to August 1, 2005 either (i) four times the consolidated earnings
before interest, taxes, depreciation, and amortization, as was defined in the Pre-petition
Facility, for the most recently completed twelve months after giving effect to certain
adjustments as were provided for in the Pre-petition Facility, or (ii) the maximum
principal
amount of indebtedness which was otherwise permitted to be incurred under Section 2.01 (b)
of the Pre-petition Facility.
    14




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ALLIED HOLDINGS, INC. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
   Senior Notes
 5 8
 
    
    Haul Insurance Ltd.;
    
    Arrendadora de Equipo Para el Transporte de Automoviles, S. de R.L. de C.V.;
    
    Axis Logistica, S. de R.L. de C.V.
    (12) Income Taxes
  15




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ALLIED HOLDINGS, INC. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
 (13) Commitments and Contingencies
 (a) Effect of Chapter 11 Filings
   (b) Letters of Credit
  (c) Litigation, Claims, Assessments
   (d) Purchase and Service Contract Commitments
  16




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
  (e) Leases
  (f) Collective Bargaining Agreements
  (14) Earnings (Loss) Per Common Share
 Earnings Per Share,
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Basic and Diluted Loss Per Share:Net loss
    
    $
    (75,050
    )
    
    $
    (3,753
    )
    
    $
    (85,108
    )
    
    $
    (12,801
    )Weighted-average number of common
shares outstanding:Basic and diluted
    
    
    8,980
    
    
    
    8,704
    
    
    
    8,960
    
    
    
    8,663Net loss per common share:Basic and diluted
    
    $
    (8.36
    )
    
    $
    (0.43
    )
    
    $
    (9.50
    )
    
    $
    (1.48
    )
  17




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
  (15) Stock-Based Compensation
 Accounting for Stock Issued to Employees, Accounting for Stock-Based Compensation, Accounting for Stock-Based
Compensation  Transition and Disclosure, an amendment of FASB Statement No. 123.
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Reported net loss
    
    $
    (75,050
    )
    
    $
    (3,753
    )
    
    $
    (85,108
    )
    
    $
    (12,801
    )Plus: stock-based
employee compensation
included in reported
net loss
    
    
    
    
    
    
    195
    
    
    
    
    
    
    
    390Less: stock-based
employee compensation
determined using the
fair value method
    
    
    (179
    )
    
    
    (385
    )
    
    
    (327
    )
    
    
    (755
    )Pro forma net loss
    
    $
    (75,229
    )
    
    $
    (3,943
    )
    
    $
    (85,435
    )
    
    $
    (13,166
    )Loss per share:As reported:Basic and Diluted
    
    $
    (8.36
    )
    
    $
    (0.43
    )
    
    $
    (9.50
    )
    
    $
    (1.48
    )Pro forma:Basic and Diluted
    
    $
    (8.38
    )
    
    $
    (0.45
    )
    
    $
    (9.54
    )
    
    $
    (1.52
    )
  (16) Other Comprehensive Loss
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net loss
    
    $
    (75,050
    )
    
    $
    (3,753
    )
    
    $
    (85,108
    )
    
    $
    (12,801
    )Foreign currency translation adjustments
    
    
    (605
    )
    
    
    (1,117
    )
    
    
    (910
    )
    
    
    (1,520
    )$
    (75,655
    )
    
    $
    (4,870
    )
    
    $
    (86,018
    )
    
    $
    (14,321
    )
 18




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)
 (Unaudited)
   June 30,
    
    
    December 31,2005
    
    
    2004Cumulative foreign currency translation adjustments
    
    $
    482
    
    
    $
    1,392Cumulative minimum pension liability adjustments
    
    
    (1,748
    )
    
    
    (1,748
    )$
    (1,266
    )
    
    $
    (356
    )
 (17) Industry Segment and Geographic Information
 Disclosure About Segments of an Enterprise and
Related Information
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Revenues  unaffiliated customers:Allied Automotive Group
    
    $
    225,888
    
    
    $
    230,005
    
    
    $
    440,503
    
    
    $
    435,672Axis Group
    
    
    6,666
    
    
    
    6,611
    
    
    
    13,001
    
    
    
    13,188Total
    
    $
    232,554
    
    
    $
    236,616
    
    
    $
    453,504
    
    
    $
    448,860Operating (loss) income:Allied Automotive Group
    
    $
    (68,308
    )
    
    $
    6,407
    
    
    $
    (68,833
    )
    
    $
    6,893Axis Group
    
    
    570
    
    
    
    637
    
    
    
    992
    
    
    
    1,293Corporate/other
    
    
    (4,350
    )
    
    
    (2,385
    )
    
    
    (6,128
    )
    
    
    (5,009
    )Total
    
    
    (72,088
    )
    
    
    4,659
    
    
    
    (73,969
    )
    
    
    3,177Reconciling items:Interest expense
    
    
    (14,739
    )
    
    
    (7,577
    )
    
    
    (22,951
    )
    
    
    (14,945
    )Investment income
    
    
    578
    
    
    
    131
    
    
    
    1,016
    
    
    
    188Foreign exchange loss, net
    
    
    (412
    )
    
    
    (966
    )
    
    
    (611
    )
    
    
    (1,121
    )Other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (100
    )Loss before income taxes
    
    $
    (86,661
    )
    
    $
    (3,753
    )
    
    $
    (96,515
    )
    
    $
    (12,801
    )
  19




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
 June 30,
    
    
    December 31,2005
    
    
    2004Total Assets:Allied Automotive Group
    
    $
    203,861
    
    
    $
    274,228Axis Group
    
    
    22,263
    
    
    
    19,690Corporate/other
    
    
    126,807
    
    
    
    127,614Total
    
    $
    352,931
    
    
    $
    421,532
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Revenues:United States
    
    $
    184,133
    
    
    $
    186,859
    
    
    $
    364,702
    
    
    $
    362,078Canada
    
    
    48,421
    
    
    
    49,757
    
    
    
    88,802
    
    
    
    86,782Total
    
    $
    232,554
    
    
    $
    236,616
    
    
    $
    453,504
    
    
    $
    448,860
 June 30,
    
    
    December 31,2005
    
    
    2004Long-lived assets:United States
    
    $
    91,541
    
    
    $
    97,621Canada
    
    
    34,707
    
    
    
    38,014Total
    
    $
    126,248
    
    
    $
    135,635
   (18) Supplemental Guarantor Information
   20




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
 NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
 SUPPLEMENTAL CONSOLIDATING BALANCE SHEET INFORMATION
June 30, 2005
(In thousands)
 Allied
    
    
    Guarantor
    
    
    NonguarantorHoldings
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCurrent assets:Cash and cash equivalents
    
    $
    600
    
    
    $
    386
    
    
    $
    2,017
    
    
    $
    
    
    
    $
    3,003Restricted cash, cash equivalents and other time
deposits
    
    
    
    
    
    
    
    
    
    
    32,717
    
    
    
    
    
    
    
    32,717Receivables, net of allowances
    
    
    
    
    
    
    56,260
    
    
    
    1,034
    
    
    
    
    
    
    
    57,294Inventories
    
    
    
    
    
    
    4,999
    
    
    
    
    
    
    
    
    
    
    
    4,999Deferred income taxes
    
    
    32,320
    
    
    
    (27,864
    )
    
    
    (18
    )
    
    
    
    
    
    
    4,438Prepayments and other
current assets
    
    
    918
    
    
    
    28,754
    
    
    
    6,035
    
    
    
    (12,940
    )
    
    
    22,767Total current assets
    
    
    33,838
    
    
    
    62,535
    
    
    
    41,785
    
    
    
    (12,940
    )
    
    
    125,218Property and equipment, net of accumulated depreciation
    
    
    4,092
    
    
    
    118,979
    
    
    
    3,177
    
    
    
    
    
    
    
    126,248Goodwill, net
    
    
    
    
    
    
    3,932
    
    
    
    
    
    
    
    
    
    
    
    3,932Other assets:Restricted cash, cash equivalents and other time
deposits
    
    
    
    
    
    
    
    
    
    
    66,582
    
    
    
    
    
    
    
    66,582Other noncurrent assets
    
    
    25,849
    
    
    
    4,559
    
    
    
    543
    
    
    
    
    
    
    
    30,951Intercompany receivables (payables)
    
    
    74,151
    
    
    
    (64,412
    )
    
    
    (9,739
    )
    
    
    
    
    
    
    Investment in subsidiaries
    
    
    (97,866
    )
    
    
    6,473
    
    
    
    
    
    
    
    91,393
    
    
    
    Total other assets
    
    
    2,134
    
    
    
    (53,380
    )
    
    
    57,386
    
    
    
    91,393
    
    
    
    97,533Total assets
    
    $
    40,064
    
    
    $
    132,066
    
    
    $
    102,348
    
    
    $
    78,453
    
    
    $
    352,931Current liabilities:Current portion of long-term debt
    
    $
    
    
    
    $
    113,638
    
    
    $
    
    
    
    $
    
    
    
    $
    113,638Borrowings under revolving credit facilities
    
    
    
    
    
    
    16,564
    
    
    
    
    
    
    
    
    
    
    
    16,564Accounts and notes payable
    
    
    2,751
    
    
    
    32,394
    
    
    
    13,162
    
    
    
    (12,940
    )
    
    
    35,367Intercompany payables (receivables)
    
    
    7,087
    
    
    
    (7,087
    )
    
    
    
    
    
    
    
    
    
    
    Accrued liabilities
    
    
    7,161
    
    
    
    56,577
    
    
    
    22,242
    
    
    
    
    
    
    
    85,980Total current liabilities
    
    
    16,999
    
    
    
    212,086
    
    
    
    35,404
    
    
    
    (12,940
    )
    
    
    251,549Long-term debt, less current portion
    
    
    150,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    150,000Postretirement benefits other
than pensions
    
    
    
    
    
    
    4,844
    
    
    
    
    
    
    
    
    
    
    
    4,844Deferred income taxes
    
    
    
    
    
    
    4,451
    
    
    
    
    
    
    
    
    
    
    
    4,451Other long-term liabilities
    
    
    508
    
    
    
    23,990
    
    
    
    45,032
    
    
    
    
    
    
    
    69,530Commitments and contingencies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stockholders (deficit) equity:Common stock, no par value
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Additional paid-in capital
    
    
    48,545
    
    
    
    166,130
    
    
    
    2,488
    
    
    
    (168,618
    )
    
    
    48,545Treasury stock
    
    
    (707
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (707
    )(Accumulated deficit) retained earnings
    
    
    (174,015
    )
    
    
    (267,803
    )
    
    
    19,424
    
    
    
    248,379
    
    
    
    (174,015
    )Accumulated other comprehensive loss,
net of tax
    
    
    (1,266
    )
    
    
    (11,632
    )
    
    
    
    
    
    
    11,632
    
    
    
    (1,266
    )Total stockholders (deficit) equity
    
    
    (127,443
    )
    
    
    (113,305
    )
    
    
    21,912
    
    
    
    91,393
    
    
    
    (127,443
    )Total liabilities and stockholders
(deficit) equity
    
    $
    40,064
    
    
    $
    132,066
    
    
    $
    102,348
    
    
    $
    78,453
    
    
    $
    352,931
 21




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
 SUPPLEMENTAL CONSOLIDATING BALANCE SHEET INFORMATION
December 31, 2004
(In thousands)
 Allied
    
    
    Guarantor
    
    
    NonguarantorHoldings
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCurrent assets:Cash and cash equivalents
    
    $
    
    
    
    $
    533
    
    
    $
    1,983
    
    
    $
    
    
    
    $
    2,516Restricted cash, cash equivalents and other time
deposits
    
    
    
    
    
    
    
    
    
    
    27,378
    
    
    
    
    
    
    
    27,378Receivables, net of allowances
    
    
    
    
    
    
    55,407
    
    
    
    1,902
    
    
    
    
    
    
    
    57,309Inventories
    
    
    
    
    
    
    4,649
    
    
    
    
    
    
    
    
    
    
    
    4,649Deferred income taxes
    
    
    2,927
    
    
    
    1,705
    
    
    
    
    
    
    
    
    
    
    
    4,632Prepayments and other
current assets
    
    
    1,699
    
    
    
    10,465
    
    
    
    250
    
    
    
    
    
    
    
    12,414Total current assets
    
    
    4,626
    
    
    
    72,759
    
    
    
    31,513
    
    
    
    
    
    
    
    108,898Property and equipment, net of accumulated depreciation
    
    
    4,744
    
    
    
    127,676
    
    
    
    3,215
    
    
    
    
    
    
    
    135,635Goodwill, net
    
    
    1,515
    
    
    
    82,462
    
    
    
    
    
    
    
    
    
    
    
    83,977Other assets:Restricted cash, cash equivalents and other time
deposits
    
    
    
    
    
    
    
    
    
    
    55,502
    
    
    
    
    
    
    
    55,502Other noncurrent assets
    
    
    31,995
    
    
    
    4,907
    
    
    
    618
    
    
    
    
    
    
    
    37,520Deferred income taxes
    
    
    17,843
    
    
    
    
    
    
    
    
    
    
    
    (17,843
    )
    
    
    Intercompany receivables (payables)
    
    
    75,147
    
    
    
    (72,978
    )
    
    
    (2,169
    )
    
    
    
    
    
    
    Investment in subsidiaries
    
    
    (9,070
    )
    
    
    6,170
    
    
    
    
    
    
    
    2,900
    
    
    
    Total other assets
    
    
    115,915
    
    
    
    (61,901
    )
    
    
    53,951
    
    
    
    (14,943
    )
    
    
    93,022Total assets
    
    $
    126,800
    
    
    $
    220,996
    
    
    $
    88,679
    
    
    $
    (14,943
    )
    
    $
    421,532Current liabilities:Current portion of long-term debt
    
    $
    
    
    
    $
    13,500
    
    
    $
    
    
    
    $
    
    
    
    $
    13,500Borrowings under revolving credit facilities
    
    
    
    
    
    
    2,972
    
    
    
    
    
    
    
    
    
    
    
    2,972Accounts and notes payable
    
    
    3,818
    
    
    
    30,696
    
    
    
    176
    
    
    
    
    
    
    
    34,690Intercompany payables (receivables)
    
    
    6,956
    
    
    
    (6,956
    )
    
    
    
    
    
    
    
    
    
    
    Accrued liabilities
    
    
    7,067
    
    
    
    47,923
    
    
    
    30,473
    
    
    
    
    
    
    
    85,463Total current liabilities
    
    
    17,841
    
    
    
    88,135
    
    
    
    30,649
    
    
    
    
    
    
    
    136,625Long-term debt, less current portion
    
    
    150,000
    
    
    
    84,766
    
    
    
    
    
    
    
    
    
    
    
    234,766Postretirement benefits other
than pensions
    
    
    
    
    
    
    5,082
    
    
    
    
    
    
    
    
    
    
    
    5,082Deferred income taxes
    
    
    
    
    
    
    33,990
    
    
    
    17
    
    
    
    (17,843
    )
    
    
    16,164Other long-term liabilities
    
    
    508
    
    
    
    33,595
    
    
    
    36,341
    
    
    
    
    
    
    
    70,444Commitments and contingencies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stockholders (deficit) equity:Preferred stock, no par value
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Common stock, no par value
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Additional paid-in capital
    
    
    48,421
    
    
    
    166,130
    
    
    
    2,488
    
    
    
    (168,618
    )
    
    
    48,421Treasury stock
    
    
    (707
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (707
    )(Accumulated deficit) retained earnings
    
    
    (88,907
    )
    
    
    (179,239
    )
    
    
    19,184
    
    
    
    160,055
    
    
    
    (88,907
    )Accumulated other comprehensive loss,
net of tax
    
    
    (356
    )
    
    
    (11,463
    )
    
    
    
    
    
    
    11,463
    
    
    
    (356
    )Total stockholders (deficit) equity
    
    
    (41,549
    )
    
    
    (24,572
    )
    
    
    21,672
    
    
    
    2,900
    
    
    
    (41,549
    )Total liabilities and stockholders
(deficit) equity
    
    $
    126,800
    
    
    $
    220,996
    
    
    $
    88,679
    
    
    $
    (14,943
    )
    
    $
    421,532
 22




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
 SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
Three Months Ended June 30, 2005
(In thousands)
 Allied
    
    
    Guarantor
    
    
    NonguarantorHoldings
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    6,681
    
    
    $
    232,072
    
    
    $
    10,012
    
    
    $
    (16,211
    )
    
    $
    232,554Operating expenses:Salaries, wages and fringe benefits
    
    
    1,366
    
    
    
    116,739
    
    
    
    
    
    
    
    
    
    
    
    118,105Operating supplies and expenses
    
    
    3,500
    
    
    
    40,520
    
    
    
    95
    
    
    
    
    
    
    
    44,115Purchased transportation
    
    
    
    
    
    
    31,382
    
    
    
    
    
    
    
    
    
    
    
    31,382Insurance and claims
    
    
    
    
    
    
    9,694
    
    
    
    9,531
    
    
    
    (9,530
    )
    
    
    9,695Operating taxes and licenses
    
    
    48
    
    
    
    7,589
    
    
    
    
    
    
    
    
    
    
    
    7,637Depreciation and amortization
    
    
    299
    
    
    
    6,616
    
    
    
    135
    
    
    
    
    
    
    
    7,050Rents
    
    
    385
    
    
    
    1,562
    
    
    
    2
    
    
    
    
    
    
    
    1,949Communications and utilities
    
    
    832
    
    
    
    639
    
    
    
    8
    
    
    
    
    
    
    
    1,479Other operating expenses
    
    
    3,058
    
    
    
    8,063
    
    
    
    39
    
    
    
    (6,681
    )
    
    
    4,479Impairment of goodwill
    
    
    1,515
    
    
    
    77,657
    
    
    
    
    
    
    
    
    
    
    
    79,172Gain on disposal of operating assets, net
    
    
    
    
    
    
    (421
    )
    
    
    
    
    
    
    
    
    
    
    (421
    )Total operating expenses
    
    
    11,003
    
    
    
    300,040
    
    
    
    9,810
    
    
    
    (16,211
    )
    
    
    304,642Operating (loss) income
    
    
    (4,322
    )
    
    
    (67,968
    )
    
    
    202
    
    
    
    
    
    
    
    (72,088
    )Other income (expense):Interest expense
    
    
    (1,483
    )
    
    
    (13,194
    )
    
    
    (62
    )
    
    
    
    
    
    
    (14,739
    )Investment income
    
    
    
    
    
    
    8
    
    
    
    570
    
    
    
    
    
    
    
    578Foreign exchange loss, net
    
    
    
    
    
    
    (356
    )
    
    
    (56
    )
    
    
    
    
    
    
    (412
    )Equity in (losses) earnings of subsidiaries
    
    
    (81,010
    )
    
    
    208
    
    
    
    
    
    
    
    80,802
    
    
    
    (82,493
    )
    
    
    (13,334
    )
    
    
    452
    
    
    
    80,802
    
    
    
    (14,573
    )(Loss) income before income taxes
    
    
    (86,815
    )
    
    
    (81,302
    )
    
    
    654
    
    
    
    80,802
    
    
    
    (86,661
    )Income tax benefit (expense)
    
    
    11,765
    
    
    
    
    
    
    
    (154
    )
    
    
    
    
    
    
    11,611Net (loss) income
    
    $
    (75,050
    )
    
    $
    (81,302
    )
    
    $
    500
    
    
    $
    80,802
    
    
    $
    (75,050
    )
 23




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
 SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
Three Months Ended June 30, 2004
(In thousands)
 Allied
    
    
    Guarantor
    
    
    NonguarantorHoldings
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    6,680
    
    
    $
    236,181
    
    
    $
    10,317
    
    
    $
    (16,562
    )
    
    $
    236,616Operating expenses:Salaries, wages and fringe benefits
    
    
    1,680
    
    
    
    126,238
    
    
    
    
    
    
    
    
    
    
    
    127,918Operating supplies and expenses
    
    
    3,613
    
    
    
    37,834
    
    
    
    66
    
    
    
    
    
    
    
    41,513Purchased transportation
    
    
    
    
    
    
    28,588
    
    
    
    
    
    
    
    
    
    
    
    28,588Insurance and claims
    
    
    
    
    
    
    9,639
    
    
    
    9,884
    
    
    
    (9,882
    )
    
    
    9,641Operating taxes and licenses
    
    
    44
    
    
    
    8,052
    
    
    
    
    
    
    
    
    
    
    
    8,096Depreciation and amortization
    
    
    648
    
    
    
    9,162
    
    
    
    119
    
    
    
    
    
    
    
    9,929Rents
    
    
    475
    
    
    
    1,553
    
    
    
    1
    
    
    
    
    
    
    
    2,029Communications and utilities
    
    
    742
    
    
    
    602
    
    
    
    7
    
    
    
    
    
    
    
    1,351Other operating expenses
    
    
    1,781
    
    
    
    7,576
    
    
    
    88
    
    
    
    (6,680
    )
    
    
    2,765Loss on disposal of operating assets, net
    
    
    
    
    
    
    127
    
    
    
    
    
    
    
    
    
    
    
    127Total operating expenses
    
    
    8,983
    
    
    
    229,371
    
    
    
    10,165
    
    
    
    (16,562
    )
    
    
    231,957Operating (loss) income
    
    
    (2,303
    )
    
    
    6,810
    
    
    
    152
    
    
    
    
    
    
    
    4,659Other income (expense):Interest expense
    
    
    (1,306
    )
    
    
    (6,199
    )
    
    
    (72
    )
    
    
    
    
    
    
    (7,577
    )Investment income
    
    
    
    
    
    
    10
    
    
    
    121
    
    
    
    
    
    
    
    131Foreign exchange loss, net
    
    
    
    
    
    
    (842
    )
    
    
    (124
    )
    
    
    
    
    
    
    (966
    )Equity in (losses) earnings of
subsidiaries
    
    
    (144
    )
    
    
    149
    
    
    
    
    
    
    
    (5
    )
    
    
    (1,450
    )
    
    
    (6,882
    )
    
    
    (75
    )
    
    
    (5
    )
    
    
    (8,412
    )(Loss) income before income taxes
    
    
    (3,753
    )
    
    
    (72
    )
    
    
    77
    
    
    
    (5
    )
    
    
    (3,753
    )Income tax (expense) benefit
    
    
    
    
    
    
    (337
    )
    
    
    337
    
    
    
    
    
    
    
    Net (loss) income
    
    $
    (3,753
    )
    
    $
    (409
    )
    
    $
    414
    
    
    $
    (5
    )
    
    $
    (3,753
    )
 24




---



##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
 SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
Six Months Ended June 30, 2005
(In thousands)
 Allied
    
    
    Guarantor
    
    
    NonguarantorHoldings
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    13,360
    
    
    $
    452,673
    
    
    $
    19,892
    
    
    $
    (32,421
    )
    
    $
    453,504Operating expenses:Salaries, wages and fringe benefits
    
    
    3,031
    
    
    
    236,302
    
    
    
    
    
    
    
    
    
    
    
    239,333Operating supplies and expenses
    
    
    6,832
    
    
    
    78,627
    
    
    
    165
    
    
    
    
    
    
    
    85,624Purchased transportation
    
    
    
    
    
    
    60,243
    
    
    
    
    
    
    
    
    
    
    
    60,243Insurance and claims
    
    
    
    
    
    
    17,999
    
    
    
    19,640
    
    
    
    (19,061
    )
    
    
    18,578Operating taxes and licenses
    
    
    95
    
    
    
    15,316
    
    
    
    
    
    
    
    
    
    
    
    15,411Depreciation and amortization
    
    
    697
    
    
    
    14,278
    
    
    
    267
    
    
    
    
    
    
    
    15,242Rents
    
    
    750
    
    
    
    3,044
    
    
    
    4
    
    
    
    
    
    
    
    3,798Communications and utilities
    
    
    1,813
    
    
    
    1,566
    
    
    
    11
    
    
    
    
    
    
    
    3,390Other operating expenses
    
    
    4,692
    
    
    
    15,645
    
    
    
    82
    
    
    
    (13,360
    )
    
    
    7,059Impairment of goodwill
    
    
    1,515
    
    
    
    77,657
    
    
    
    
    
    
    
    
    
    
    
    79,172Gain on disposal of operating assets, net
    
    
    (2
    )
    
    
    (375
    )
    
    
    
    
    
    
    
    
    
    
    (377
    )Total operating expenses
    
    
    19,423
    
    
    
    520,302
    
    
    
    20,169
    
    
    
    (32,421
    )
    
    
    527,473Operating loss
    
    
    (6,063
    )
    
    
    (67,629
    )
    
    
    (277
    )
    
    
    
    
    
    
    (73,969
    )Other income (expense):Interest expense
    
    
    (2,166
    )
    
    
    (20,666
    )
    
    
    (119
    )
    
    
    
    
    
    
    (22,951
    )Investment income
    
    
    
    
    
    
    18
    
    
    
    998
    
    
    
    
    
    
    
    1,016Foreign exchange loss, net
    
    
    
    
    
    
    (587
    )
    
    
    (24
    )
    
    
    
    
    
    
    (611
    )Equity in (losses) earnings of subsidiaries
    
    
    (88,626
    )
    
    
    303
    
    
    
    
    
    
    
    88,323
    
    
    
    (90,792
    )
    
    
    (20,932
    )
    
    
    855
    
    
    
    88,323
    
    
    
    (22,546
    )(Loss) income before income taxes
    
    
    (96,855
    )
    
    
    (88,561
    )
    
    
    578
    
    
    
    88,323
    
    
    
    (96,515
    )Income tax benefit (expense)
    
    
    11,747
    
    
    
    (2
    )
    
    
    (338
    )
    
    
    
    
    
    
    11,407Net (loss) income
    
    $
    (85,108
    )
    
    $
    (88,563
    )
    
    $
    240
    
    
    $
    88,323
    
    
    $
    (85,108
    )
 25




---



##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
 SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
Six Months Ended June 30, 2004
(In thousands)
 Allied
    
    
    Guarantor
    
    
    NonguarantorHoldings
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    13,366
    
    
    $
    448,046
    
    
    $
    20,579
    
    
    $
    (33,131
    )
    
    $
    448,860Operating expenses:Salaries, wages and fringe benefits
    
    
    4,379
    
    
    
    243,486
    
    
    
    
    
    
    
    
    
    
    
    247,865Operating supplies and expenses
    
    
    6,835
    
    
    
    71,594
    
    
    
    130
    
    
    
    
    
    
    
    78,559Purchased transportation
    
    
    
    
    
    
    54,494
    
    
    
    
    
    
    
    
    
    
    
    54,494Insurance and claims
    
    
    
    
    
    
    18,800
    
    
    
    19,769
    
    
    
    (19,765
    )
    
    
    18,804Operating taxes and licenses
    
    
    78
    
    
    
    14,577
    
    
    
    
    
    
    
    
    
    
    
    14,655Depreciation and amortization
    
    
    1,330
    
    
    
    18,747
    
    
    
    238
    
    
    
    
    
    
    
    20,315Rents
    
    
    945
    
    
    
    2,797
    
    
    
    3
    
    
    
    
    
    
    
    3,745Communications and utilities
    
    
    1,749
    
    
    
    1,543
    
    
    
    13
    
    
    
    
    
    
    
    3,305Other operating expenses
    
    
    2,946
    
    
    
    15,246
    
    
    
    125
    
    
    
    (13,366
    )
    
    
    4,951Gain on disposal of operating assets, net
    
    
    
    
    
    
    (1,010
    )
    
    
    
    
    
    
    
    
    
    
    (1,010
    )Total operating expenses
    
    
    18,262
    
    
    
    440,274
    
    
    
    20,278
    
    
    
    (33,131
    )
    
    
    445,683Operating (loss) income
    
    
    (4,896
    )
    
    
    7,772
    
    
    
    301
    
    
    
    
    
    
    
    3,177Other income (expense):Interest expense
    
    
    (3,054
    )
    
    
    (11,722
    )
    
    
    (169
    )
    
    
    
    
    
    
    (14,945
    )Investment income
    
    
    
    
    
    
    18
    
    
    
    170
    
    
    
    
    
    
    
    188Foreign exchange loss, net
    
    
    
    
    
    
    (1,007
    )
    
    
    (114
    )
    
    
    
    
    
    
    (1,121
    )Other, net
    
    
    
    
    
    
    (100
    )
    
    
    
    
    
    
    
    
    
    
    (100
    )Equity in (losses) earnings of subsidiaries
    
    
    (4,851
    )
    
    
    270
    
    
    
    
    
    
    
    4,581
    
    
    
    (7,905
    )
    
    
    (12,541
    )
    
    
    (113
    )
    
    
    4,581
    
    
    
    (15,978
    )(Loss) income before income taxes
    
    
    (12,801
    )
    
    
    (4,769
    )
    
    
    188
    
    
    
    4,581
    
    
    
    (12,801
    )Income tax (expense) benefit
    
    
    
    
    
    
    (298
    )
    
    
    298
    
    
    
    
    
    
    
    Net (loss) income
    
    $
    (12,801
    )
    
    $
    (5,067
    )
    
    $
    486
    
    
    $
    4,581
    
    
    $
    (12,801
    )
 26




---



##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
 SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
Six Months Ended June 30, 2005
(In thousands)
 Allied
    
    
    Guarantor
    
    
    NonguarantorHoldings
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net (loss) income
    
    $
    (85,108
    )
    
    $
    (88,563
    )
    
    $
    240
    
    
    $
    88,323
    
    
    $
    (85,108
    )Adjustments to reconcile net (loss) income to net
cash provided by (used in) operating activities:Write-off and amortization of deferred financing costs
    
    
    6,464
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,464Depreciation and amortization
    
    
    697
    
    
    
    14,278
    
    
    
    267
    
    
    
    
    
    
    
    15,242Impairment of goodwill
    
    
    1,515
    
    
    
    77,657
    
    
    
    
    
    
    
    
    
    
    
    79,172Gain on disposal of assets and other, net
    
    
    (2
    )
    
    
    (375
    )
    
    
    
    
    
    
    
    
    
    
    (377
    )Foreign exchange loss, net
    
    
    
    
    
    
    611
    
    
    
    
    
    
    
    
    
    
    
    611Deferred income taxes
    
    
    (11,295
    )
    
    
    35
    
    
    
    
    
    
    
    
    
    
    
    (11,260
    )Equity in losses (earnings) of subsidiaries
    
    
    88,626
    
    
    
    (303
    )
    
    
    
    
    
    
    (88,323
    )
    
    
    Change in operating assets and liabilities:Receivables, net of allowances
    
    
    
    
    
    
    (1,036
    )
    
    
    868
    
    
    
    
    
    
    
    (168
    )Inventories
    
    
    
    
    
    
    (371
    )
    
    
    
    
    
    
    
    
    
    
    (371
    )Prepayments and other assets
    
    
    363
    
    
    
    524
    
    
    
    (5,784
    )
    
    
    
    
    
    
    (4,897
    )Accounts and notes payable
    
    
    (1,067
    )
    
    
    (13,566
    )
    
    
    12,986
    
    
    
    
    
    
    
    (1,647
    )Intercompany payables
    
    
    131
    
    
    
    (7,701
    )
    
    
    7,570
    
    
    
    
    
    
    
    Accrued liabilities
    
    
    94
    
    
    
    (1,213
    )
    
    
    460
    
    
    
    
    
    
    
    (659
    )Net cash provided by (used in) operating activities
    
    
    418
    
    
    
    (20,023
    )
    
    
    16,607
    
    
    
    
    
    
    
    (2,998
    )Cash flows from investing activities:Purchases of property and equipment
    
    
    
    
    
    
    (8,545
    )
    
    
    (154
    )
    
    
    
    
    
    
    (8,699
    )Proceeds from sale of property and equipment
    
    
    
    
    
    
    2,836
    
    
    
    
    
    
    
    
    
    
    
    2,836Increase in restricted cash, cash equivalents and other time deposits
    
    
    
    
    
    
    
    
    
    
    (16,419
    )
    
    
    
    
    
    
    (16,419
    )Funds deposited with insurance carriers
    
    
    
    
    
    
    (8,054
    )
    
    
    
    
    
    
    
    
    
    
    (8,054
    )Funds returned from insurance carriers
    
    
    
    
    
    
    3,070
    
    
    
    
    
    
    
    
    
    
    
    3,070Decrease in the cash surrender value of life insurance
    
    
    58
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    58Net cash provided by (used in) investing activities
    
    
    58
    
    
    
    (10,693
    )
    
    
    (16,573
    )
    
    
    
    
    
    
    (27,208
    )Cash flows from financing activities:Additions to
revolving credit facilities, net
    
    
    
    
    
    
    13,592
    
    
    
    
    
    
    
    
    
    
    
    13,592Additions to long-term debt
    
    
    
    
    
    
    25,000
    
    
    
    
    
    
    
    
    
    
    
    25,000Repayment of long-term debt
    
    
    
    
    
    
    (9,628
    )
    
    
    
    
    
    
    
    
    
    
    (9,628
    )Payment of deferred financing costs
    
    
    
    
    
    
    (625
    )
    
    
    
    
    
    
    
    
    
    
    (625
    )Proceeds from insurance financing arrangements
    
    
    
    
    
    
    8,470
    
    
    
    
    
    
    
    
    
    
    
    8,470Repayments of insurance financing arrangements
    
    
    
    
    
    
    (6,060
    )
    
    
    
    
    
    
    
    
    
    
    (6,060
    )Proceeds from issuance of common stock
    
    
    124
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    124Net cash provided by financing activities
    
    
    124
    
    
    
    30,749
    
    
    
    
    
    
    
    
    
    
    
    30,873Effect of exchange rate changes on cash and
cash equivalents
    
    
    
    
    
    
    (180
    )
    
    
    
    
    
    
    
    
    
    
    (180
    )Net change in cash and cash equivalents
    
    
    600
    
    
    
    (147
    )
    
    
    34
    
    
    
    
    
    
    
    487Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    533
    
    
    
    1,983
    
    
    
    
    
    
    
    2,516Cash and cash equivalents at end of period
    
    $
    600
    
    
    $
    386
    
    
    $
    2,017
    
    
    $
    
    
    
    $
    3,003
 27




---



##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (Unaudited)
 SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
Six Months Ended June 30, 2004
(In thousands)
 Allied
    
    
    Guarantor
    
    
    NonguarantorHoldings
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net (loss) income
    
    $
    (12,801
    )
    
    $
    (5,067
    )
    
    $
    486
    
    
    $
    4,581
    
    
    $
    (12,801
    )Adjustments to reconcile net (loss) income to net
cash (used in) provided by operating activities:Amortization of deferred financing costs
    
    
    1,402
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,402Depreciation and amortization
    
    
    1,330
    
    
    
    18,747
    
    
    
    238
    
    
    
    
    
    
    
    20,315Gain on disposal of assets and other, net
    
    
    
    
    
    
    (1,010
    )
    
    
    
    
    
    
    
    
    
    
    (1,010
    )Foreign exchange loss, net
    
    
    
    
    
    
    1,121
    
    
    
    
    
    
    
    
    
    
    
    1,121Deferred income taxes
    
    
    
    
    
    
    91
    
    
    
    (91
    )
    
    
    
    
    
    
    Compensation expense related to stock options and grants
    
    
    390
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    390Equity in losses (earnings) of subsidiaries
    
    
    4,851
    
    
    
    (270
    )
    
    
    
    
    
    
    (4,581
    )
    
    
    Change in operating assets and liabilities:Receivables, net of allowances
    
    
    
    
    
    
    (6,872
    )
    
    
    2,315
    
    
    
    
    
    
    
    (4,557
    )Inventories
    
    
    
    
    
    
    394
    
    
    
    
    
    
    
    
    
    
    
    394Prepayments and other assets
    
    
    290
    
    
    
    (1,559
    )
    
    
    (4,485
    )
    
    
    
    
    
    
    (5,754
    )Accounts and notes payable
    
    
    525
    
    
    
    (6,572
    )
    
    
    (89
    )
    
    
    
    
    
    
    (6,136
    )Intercompany payables
    
    
    5,760
    
    
    
    (2,570
    )
    
    
    (3,190
    )
    
    
    
    
    
    
    Accrued liabilities
    
    
    (2,771
    )
    
    
    (13,699
    )
    
    
    20,230
    
    
    
    
    
    
    
    3,760Net cash (used in) provided by operating activities
    
    
    (1,024
    )
    
    
    (17,266
    )
    
    
    15,414
    
    
    
    
    
    
    
    (2,876
    )Cash flows from investing activities:Purchases of property and equipment
    
    
    (95
    )
    
    
    (13,110
    )
    
    
    (76
    )
    
    
    
    
    
    
    (13,281
    )Proceeds from sale of property and equipment
    
    
    
    
    
    
    2,038
    
    
    
    
    
    
    
    
    
    
    
    2,038Decrease in restricted cash, cash equivalents and other time deposits
    
    
    
    
    
    
    
    
    
    
    55,321
    
    
    
    
    
    
    
    55,321Increase in restricted investments
    
    
    
    
    
    
    
    
    
    
    (66,981
    )
    
    
    
    
    
    
    (66,981
    )Funds deposited with insurance carriers
    
    
    
    
    
    
    (32,024
    )
    
    
    
    
    
    
    
    
    
    
    (32,024
    )Funds returned from insurance carriers
    
    
    
    
    
    
    30,730
    
    
    
    
    
    
    
    
    
    
    
    30,730Decrease in the cash surrender value of life insurance
    
    
    147
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    147Net cash provided by (used in) investing activities
    
    
    52
    
    
    
    (12,366
    )
    
    
    (11,736
    )
    
    
    
    
    
    
    (24,050
    )Cash flows from financing activities:Additions to
revolving credit facility, net
    
    
    
    
    
    
    29,555
    
    
    
    
    
    
    
    
    
    
    
    29,555Repayment of long-term debt
    
    
    
    
    
    
    (11,417
    )
    
    
    
    
    
    
    
    
    
    
    (11,417
    )Proceeds from insurance financing arrangements
    
    
    
    
    
    
    28,608
    
    
    
    
    
    
    
    
    
    
    
    28,608Repayments of insurance financing arrangements
    
    
    
    
    
    
    (16,890
    )
    
    
    
    
    
    
    
    
    
    
    (16,890
    )Proceeds from issuance of common stock
    
    
    423
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    423Net cash provided by financing activities
    
    
    423
    
    
    
    29,856
    
    
    
    
    
    
    
    
    
    
    
    30,279Effect of exchange rate changes on cash and
cash equivalents
    
    
    
    
    
    
    (200
    )
    
    
    
    
    
    
    
    
    
    
    (200
    )Net change in cash and cash equivalents
    
    
    (549
    )
    
    
    24
    
    
    
    3,678
    
    
    
    
    
    
    
    3,153Cash and cash equivalents at beginning of period
    
    
    549
    
    
    
    1,166
    
    
    
    433
    
    
    
    
    
    
    
    2,148Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    1,190
    
    
    $
    4,111
    
    
    $
    
    
    
    $
    5,301
 28




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 You should read the discussion and analysis in this section in conjunction with the consolidated
financial statements and accompanying notes included in Item 1. Financial Statements of this
Quarterly Report on Form 10-Q and the consolidated financial statements, related notes and other
financial information included in our Annual Report on Form10-K for the year ended December 31,
2004. In addition, we use forward-looking statements in the discussion that follows.
Forward-looking statements by nature involve risks and uncertainties and hence our actual results
could differ materially from our expectations as a result of various factors, some of which we
discuss below in Cautionary Notice Regarding Forward-Looking Statements and in our 2004 Annual
Report on Form 10-K filed with the SEC.
 Executive Overview
 Chapter 11 Proceedings
    
    
    pay pre-petition wages, payroll taxes, certain employee benefits and related expenses;
    
    maintain and pay obligations with respect to our insurance programs, including the
continued payment of workers compensation claims on an uninterrupted basis in the
ordinary course of business, all premiums and other amounts due and owing with respect to
the insurance programs; and
    
    enter into financing arrangements for insurance premiums.
    29




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##### Table of Contents



Other Events
       
    
    With respect to the Revolver, the amount outstanding could not exceed $24.9 million for
the period July 25, 2005 to August 1, 2005;
    
    With respect to our letter of credit obligations, the amount outstanding could not
exceed $43.7 million for the period July 25, 2005 to August 1, 2005;
    
    With respect to the aggregate principal amount of loans and letter of credit
obligations, as defined in the Pre-petition Facility, and solely for the period May 1,
2005 to August 1, 2005, the amount outstanding could not exceed at the end of any business
day either (i) four times the consolidated
earnings before interest, taxes, depreciation, and amortization, as defined in the
Pre-petition Facility, for the most recently completed twelve months after giving effect to
certain adjustments as provided for in the Pre-petition Facility, or (ii) the maximum
principal amount of indebtedness which is otherwise permitted to be incurred under Section
2.01 (b) of the Pre-petition Facility.
  30




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##### Table of Contents




    
    Results of Operations;
    
    Liquidity and Capital Resources;
    
    Off-Balance Sheet Arrangements;
    
    Disclosures About Market Risks;
    
    Critical Accounting Policies and Estimates;
    
    Recent Accounting Pronouncements;
    
    Factors Which May Affect Future Results; and
    
    Cautionary Notice Regarding Forward-looking Statements.
 Results of Operations
 Three Months Ended June 30, 2005 Compared to Three Months Ended June 30, 2004
  31




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##### Table of Contents



Second Quarter2005
    
    2004As a % of revenuesRevenues
    
    
    100.0
    %
    
    
    100.0
    %Operating expenses:Salaries, wages, and fringe benefits
    
    
    50.8
    %
    
    
    54.1
    %Operating supplies and expenses
    
    
    19.0
    %
    
    
    17.5
    %Purchased transportation
    
    
    13.5
    %
    
    
    12.1
    %Insurance and claims
    
    
    4.2
    %
    
    
    4.1
    %Operating taxes and licenses
    
    
    3.3
    %
    
    
    3.4
    %Depreciation and amortization
    
    
    3.0
    %
    
    
    4.2
    %Rents
    
    
    0.8
    %
    
    
    0.9
    %Communications and utilities
    
    
    0.6
    %
    
    
    0.6
    %Other operating expenses
    
    
    1.9
    %
    
    
    1.2
    %Impairment of goodwill
    
    
    34.0
    %
    
    
    (Gain) loss on disposal of operating assets, net
    
    
    (0.2
    )%
    
    
    0.1
    %Total operating expenses
    
    
    130.9
    %
    
    
    98.2
    %Operating (loss) income
    
    
    (30.9
    )%
    
    
    1.8
    %Other
income (expense):Interest expense
    
    
    (6.3
    )%
    
    
    (3.2
    )%Investment income
    
    
    0.2
    %
    
    
    0.1
    %Foreign
exchange loss, net
    
    
    (0.2
    )%
    
    
    (0.4
    )%(6.3
    )%
    
    
    (3.5
    )%Loss before income taxes
    
    
    (37.2
    )%
    
    
    (1.7
    )%Income tax benefit
    
    
    5.0
    %
    
    
    Net loss
    
    
    (32.2
    )%
    
    
    (1.7
    )%
 Revenues
    32




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##### Table of Contents



Salaries, wages, and fringe benefits
   Operating supplies and expenses
  Purchased transportation
  Depreciation and amortization
  33




---



##### Table of Contents



Other operating expenses
  Impairment of goodwill
  Goodwill and
Other Intangible Assets,
 Gain (loss) on disposal of operating assets
  Interest expense
  34




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##### Table of Contents



Income taxes
  Six Months Ended June 30, 2005 Compared to Six Months Ended June 30, 2004
  Six Months Ended June 30,2005
    
    2004As a % of revenuesRevenues
    
    
    100.0
    %
    
    
    100.0
    %Operating expenses:Salaries, wages, and fringe benefits
    
    
    52.8
    %
    
    
    55.2
    %Operating supplies and expenses
    
    
    18.9
    %
    
    
    17.5
    %Purchased transportation
    
    
    13.3
    %
    
    
    12.1
    %Insurance and claims
    
    
    4.1
    %
    
    
    4.2
    %Operating taxes and licenses
    
    
    3.4
    %
    
    
    3.3
    %Depreciation and amortization
    
    
    3.4
    %
    
    
    4.5
    %Rents
    
    
    0.8
    %
    
    
    0.8
    %Communications and utilities
    
    
    0.7
    %
    
    
    0.7
    %Other operating expenses
    
    
    1.6
    %
    
    
    1.1
    %Impairment of goodwill
    
    
    17.5
    %
    
    
    Gain on disposal of operating assets, net
    
    
    (0.1
    )%
    
    
    (0.2
    )%Total operating expenses
    
    
    116.4
    %
    
    
    99.2
    %Operating
(loss) income
    
    
    (16.4
    )%
    
    
    0.8
    %Other income (expense):Interest expense
    
    
    (5.1
    )%
    
    
    (3.3
    )%Investment income
    
    
    0.2
    %
    
    
    Foreign
exchange loss, net
    
    
    (0.1
    )%
    
    
    (0.2
    )%(5.0
    )%
    
    
    (3.5
    )%Loss before income taxes
    
    
    (21.4
    )%
    
    
    (2.7
    )%Income tax benefit
    
    
    2.5
    %
    
    
    Net loss
    
    
    (18.9
    )%
    
    
    (2.7
    )%
 Revenues
  35




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##### Table of Contents



Salaries, wages, and fringe benefits
    Operating supplies and expenses
  36




---



##### Table of Contents



Purchased transportation
  Depreciation and amortization
  Other operating expenses
  Impairment of goodwill
  Interest expense
  Income taxes
  Liquidity and Capital Resources
 Working Capital
  37




---



##### Table of Contents



Operating Activities
  Investing Activities
   38




---



##### Table of Contents



Financing Activities
  Debt, Contractual Obligations and Letters of Credit
 Financial Reporting by Entities in Reorganization Under
the Bankruptcy Code
    39




---



##### Table of Contents



Off-Balance Sheet Arrangements
  Disclosures About Market Risks
  Fuel Prices
  Interest Rates
 The Wall Street
Journal
 Risk Management Retention
  40




---



##### Table of Contents



Foreign Currency Exchange Rates
   Inflation
  Critical Accounting Policies and Estimates
   Recent Accounting Pronouncements
 Accounting for Conditional Asset Retirement Obligations Accounting for Asset Retirement Obligations,
 41




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##### Table of Contents



Share-Based Payment Accounting for Stock-Based Compensation, Accounting for Stock Issued to Employees Statement of Cash Flows.
  Accounting and Disclosure
Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of
2004 Accounting for Income Taxes,
 Factors Which May Affect Future Results
  42




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##### Table of Contents



Cautionary Notice Regarding Forward-Looking Statements
  
    
    the effect that the Chapter 11 filing will have on our operations and the value of our securities;
    
    our strategy, intentions and expectations;
    
    general industry trends, competitive conditions and customer preferences;
    
    our management information systems;
    
    our remanufacturing program;
    
    our fleet investments and efforts to reduce costs;
    
    the adequacy of cash to finance our current and future operations; and
    
    resolution of litigation without a material adverse effect on our financial
condition and results of operations.
  
    
    the impact of the Chapter 11 Case and the related circumstances which could
materially affect the amounts of assets and liabilities included in the
consolidated financial statements or our market share;
    
    risks associated with our ability to obtain approval of and/or to implement our plan of reorganization;
    
    risks associated with our ability to obtain exit financing to replace the DIP Facility;
    
    our ability to comply with the terms of our current debt agreements and customer contracts;
    
    economic recessions or downturns in new vehicle production or sales;
    
    war in the Middle East;
    
    increases in the cost and availability of fuel;
    
    the highly competitive nature of the automotive distribution industry;
    
    dependence on the automotive industry and ongoing initiatives of customers to reduce costs;
    
    loss or reduction of revenues generated by our major customers or the loss of
any such customers;
    
    the variability of OEM production and seasonality of the automotive distribution industry;
    
    our highly leveraged financial position;
    
    our ability to obtain financing in the future;
    
    our ability to fund future capital requirements;
    
    increased costs, capital expenditure requirements and other consequences of our
aging fleet of Rigs as well as historical Rig purchasing cycles;
    
    labor disputes involving us or our significant customers;
    
    dependence on our key personnel;
    
    the availability of strategic acquisitions or joint venture partners;
    
    increased frequency and severity of employee related accidents and workers
compensation claims;
    
    availability of appropriate insurance coverages in all categories;
    
    changes in the regulatory requirements which are applicable to our business;
    
    changes in vehicle sizes, configurations and weights which may adversely impact
vehicle deliveries per load;
    
    risks associated with doing business in foreign countries;
    
    the availability of qualified drivers;
    
    dependence on legacy information systems;
    
    dependence on IBM for mainframe and system support;
    
    increased frequency and severity of cargo claims;
    
    increased frequency and severity of traffic accidents;
    
    excess manufacturer production capacity which could lead OEMs to close manufacturing facilities;
    
    efforts to improve network efficiency; and
 43




---



##### Table of Contents




    
    other risk factors set forth from time to time in our SEC reports, including
but not limited to, our 2004 Annual Report on Form 10-K and this Quarterly Report
on Form 10-Q.
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures.
 Changes in Internal Control Over Financial Reporting
    44




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
   
 Item 4. Submission of Matters to a Vote of Security Holders
  ELECTION OF DIRECTORS
 NOMINEES
    
    VOTES FOR
    
    
    VOTES WITHHELDGuy W. Rutland, III
    
    
    6,352,766
    
    
    
    1,877,820J. Leland Strange
    
    
    7,404,383
    
    
    
    826,203Robert R. Woodson
    
    
    6,360,032
    
    
    
    1,870,554
  
    
    David G. Bannister;
    
    William P. Benton;
    
    Robert J. Rutland ; and
    
    Hugh E. Sawyer.
  
    
    Thomas E. Boland;
    
    Guy W. Rutland, IV; and
    
    Berner F. Wilson, Jr.
 
 45




---



##### Table of Contents



Item 5. Other Information
  
 Item 6. Exhibits and Reports on Form 8-K:
 (a) Exhibit Index
 Exhibit No.
    
    Description4.3 (g)
    
    Seventh Amendment dated July 11, 2005 to the Amended and Restated Financing Agreement, dated as of September 4, 2003, by and among Allied Holdings, Inc., Allied Systems
Ltd. (LP), each subsidiary of Allied Holdings, Inc. listed as a Guarantor on the signature pages thereto, each of the lenders from time to time party thereto as a
Lender, Ableco Finance LLC, as collateral agent, and Wells Fargo Foothill, Inc., as administrative agent.4.3 (h)
    
    Eighth Amendment dated July 25, 2005 to the Amended and Restated Financing Agreement, dated as of September 4, 2003, by and among Allied Holdings, Inc., Allied Systems
Ltd. (LP), each subsidiary of Allied Holdings, Inc. listed as a Guarantor on the signature pages thereto, each of the lenders from time to time party thereto as a
Lender, Ableco Finance LLC, as collateral agent, and Wells Fargo Foothill, Inc., as administrative agent.4.4
    
    Senior Secured, Super-Priority Debtor-in-Possession Credit Agreement (this Agreement), dated as of August 1, 2005, by and among (a) ALLIED HOLDINGS, INC., a
Georgia corporation (Allied Holdings), and ALLIED SYSTEMS, LTD. (L.P.), a Georgia limited partnership (Allied Systems), each as a debtor-in-possession; (b)
the other Credit Parties; (c) GENERAL ELECTRIC CAPITAL CORPORATION (GE Capital), as Administrative Agent, Collateral Agent, co-Revolver Agent and co-Syndication
Agent; (d) MORGAN STANLEY SENIOR FUNDING, INC. (Morgan Stanley), as co-Term Loan B Agent, co-Syndication Agent, co-Bookrunner and co-Term Loan B Lead Arranger;
(e) MARATHON STRUCTURED FINANCE FUND, L.P. (Marathon), as co-Revolver Agent, Term Loan A Agent, co-Term Loan B Agent, Term Loan A Lead Arranger, co-Term Loan B Lead
Arranger and co-Revolver Lead Arranger; (f) the other Lenders from time to time; and (f) GE CAPITAL MARKETS, INC. (GECMG), as co-Revolver Lead Arranger and co-Bookrunner.31.1
    
    Rule 13a-14(a)/15d-14(a) Certification by Hugh E. Sawyer.31.2
    
    Rule 13a-14(a)/15d-14(a) Certification by Thomas H. King.32.1
    
    Section 1350 Certification by Hugh E. Sawyer.32.2
    
    Section 1350 Certification by Thomas H. King.
 46




---



##### Table of Contents



SIGNATURES
  ALLIED HOLDINGS, INC.Date: September 22, 2005
    
    By:
    
    /s/ Hugh E. SawyerHugh E. Sawyer,President and Chief Executive OfficerDate: September 22, 2005By:
    
    /s/ Thomas H. KingThomas H. King,Executive Vice President and Chief FinancialOfficer (Principal Financial and Accounting Officer)
 47




---



##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description4.3 (g)
    
    Seventh Amendment dated July 11, 2005 to the Amended and Restated Financing Agreement, dated as of September 4,
2003, by and among Allied Holdings, Inc., Allied Systems Ltd. (LP), each subsidiary of Allied Holdings, Inc.
listed as a Guarantor on the signature pages thereto, each of the lenders from time to time party thereto as a
Lender, Ableco Finance LLC, as collateral agent, and Wells Fargo Foothill, Inc., as administrative agent.4.3 (h)
    
    Eighth Amendment dated July 25, 2005 to the Amended and Restated Financing Agreement, dated as of September 4,
2003, by and among Allied Holdings, Inc., Allied Systems Ltd. (LP), each subsidiary of Allied Holdings, Inc.
listed as a Guarantor on the signature pages thereto, each of the lenders from time to time party thereto as a
Lender, Ableco Finance LLC, as collateral agent, and Wells Fargo Foothill, Inc., as administrative agent.4.4
    
    Senior Secured, Super-Priority Debtor-in-Possession Credit Agreement (this Agreement), dated as of August
1, 2005, by and among (a) ALLIED HOLDINGS, INC., a Georgia corporation (Allied Holdings), and ALLIED
SYSTEMS, LTD. (L.P.), a Georgia limited partnership (Allied Systems), each as a debtor-in-possession; (b)
the other Credit Parties; (c) GENERAL ELECTRIC CAPITAL CORPORATION (GE Capital), as Administrative Agent,
Collateral Agent, co-Revolver Agent and co-Syndication Agent; (d) MORGAN STANLEY SENIOR FUNDING, INC. (Morgan
Stanley), as co-Term Loan B Agent, co-Syndication Agent, co-Bookrunner and co-Term Loan B Lead Arranger; (e)
MARATHON STRUCTURED FINANCE FUND, L.P. (Marathon), as co-Revolver Agent, Term Loan A Agent, co-Term Loan B
Agent, Term Loan A Lead Arranger, co-Term Loan B Lead Arranger and co-Revolver Lead Arranger; (f) the other
Lenders from time to time; and (f) GE CAPITAL MARKETS, INC. (GECMG), as co-Revolver Lead Arranger and
co-Bookrunner.31.1
    
    Rule 13a-14(a)/15d-14(a) Certification by Hugh E. Sawyer.31.2
    
    Rule 13a-14(a)/15d-14(a) Certification by Thomas H. King.32.1
    
    Section 1350 Certification by Hugh E. Sawyer.32.2
    
    Section 1350 Certification by Thomas H. King.
 48