##### 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, 2006
 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.
  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
 (404) 373-4285  (Registrants telephone number, including area code)
 www.alliedholdings.com  (Web Page)
 þ o
  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, 2006 and December 31, 2005 (unaudited)
    
    
    1Consolidated
Statements of Operations
-
Three and Six Month Periods Ended June 30, 2006 and 2005 (unaudited)
    
    
    2Consolidated
Statements of Cash Flows
-
Six Months Ended June 30, 2006 and 2005 (unaudited)
    
    
    3Notes to the Consolidated Financial Statements (unaudited)
    
    
    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 1A - Risk Factors
    
    
    45ITEM 6 - Exhibits
    
    
    51Signatures
    
    
    52EX-31.1 SECTION 302 CERTIFICATION OF CEOEX-31.2 SECTION 302 CERTIFICATION OF CFOEX-32.1 SECTION 906 CERTIFICATION OF CEOEX-32.2 SECTION 906 CERTIFICATION OF CFO




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
 
 CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 June 30,
    
    
    December 31,2006
    
    
    2005ASSETSCurrent assets:Cash and cash equivalents
    
    $
    3,521
    
    
    $
    4,117Restricted cash, cash equivalents and other time deposits
    
    
    32,915
    
    
    
    32,830Receivables, net of allowances of $2,254 and $2,218 as of June 30, 2006
and December 31, 2005, respectively
    
    
    54,236
    
    
    
    61,427Inventories
    
    
    5,150
    
    
    
    5,132Deferred income taxes
    
    
    
    
    
    
    128Prepayments and other current assets
    
    
    34,737
    
    
    
    59,434Total current assets
    
    
    130,559
    
    
    
    163,068Property and equipment, net of accumulated depreciation
    
    
    122,659
    
    
    
    123,904Goodwill, net
    
    
    3,545
    
    
    
    3,545Other assets:Restricted cash, cash equivalents and other time deposits
    
    
    69,944
    
    
    
    69,764Deferred income taxes
    
    
    63
    
    
    
    Other noncurrent assets
    
    
    22,234
    
    
    
    22,835Total other assets
    
    
    92,241
    
    
    
    92,599Total assets
    
    $
    349,004
    
    
    $
    383,116LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilities not subject to compromise:Debtor-in-possession credit facility
    
    $
    142,401
    
    
    $
    151,997Canadian revolving credit facility
    
    
    464
    
    
    
    Accounts and notes payable
    
    
    40,152
    
    
    
    57,196Accrued liabilities
    
    
    80,394
    
    
    
    83,317Deferred income taxes
    
    
    80
    
    
    
    Total current liabilities
    
    
    263,491
    
    
    
    292,510Long-term liabilities not subject to compromise:Postretirement benefits other than pensions
    
    
    4,357
    
    
    
    4,412Deferred income taxes
    
    
    
    
    
    
    143Other long-term liabilities
    
    
    71,260
    
    
    
    74,096Total long-term liabilities
    
    
    75,617
    
    
    
    78,651Liabilities subject to compromise
    
    
    199,479
    
    
    
    199,322Commitments 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 shares
outstanding at June 30, 2006 and December 31, 2005
    
    
    
    
    
    
    Additional paid-in capital
    
    
    48,731
    
    
    
    48,545Treasury stock, 139 shares at cost
    
    
    (707
    )
    
    
    (707
    )Accumulated deficit
    
    
    (216,634
    )
    
    
    (214,631
    )Accumulated other comprehensive loss, net of tax
    
    
    (20,973
    )
    
    
    (20,574
    )Total stockholders deficit
    
    
    (189,583
    )
    
    
    (187,367
    )Total liabilities and stockholders deficit
    
    $
    349,004
    
    
    $
    383,116
  1




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Revenues
    
    $
    245,382
    
    
    $
    232,554
    
    
    $
    486,210
    
    
    $
    453,504Operating expenses:Salaries, wages, and fringe benefits
    
    
    114,863
    
    
    
    118,105
    
    
    
    240,476
    
    
    
    239,333Operating supplies and expenses
    
    
    50,341
    
    
    
    44,115
    
    
    
    99,003
    
    
    
    85,624Purchased transportation
    
    
    32,670
    
    
    
    31,382
    
    
    
    63,578
    
    
    
    60,243Insurance and claims
    
    
    10,235
    
    
    
    9,695
    
    
    
    21,168
    
    
    
    18,578Operating taxes and licenses
    
    
    7,355
    
    
    
    7,637
    
    
    
    15,053
    
    
    
    15,411Depreciation and amortization
    
    
    7,283
    
    
    
    7,050
    
    
    
    14,499
    
    
    
    15,242Rents
    
    
    1,739
    
    
    
    1,949
    
    
    
    3,492
    
    
    
    3,798Communications and utilities
    
    
    1,501
    
    
    
    1,479
    
    
    
    3,438
    
    
    
    3,390Other operating expenses
    
    
    1,983
    
    
    
    4,479
    
    
    
    4,048
    
    
    
    7,059Impairment of goodwill
    
    
    
    
    
    
    79,172
    
    
    
    
    
    
    
    79,172Gain on disposal of operating assets, net
    
    
    (201
    )
    
    
    (421
    )
    
    
    (255
    )
    
    
    (377
    )Total operating expenses
    
    
    227,769
    
    
    
    304,642
    
    
    
    464,500
    
    
    
    527,473Operating income (loss)
    
    
    17,613
    
    
    
    (72,088
    )
    
    
    21,710
    
    
    
    (73,969
    )Other income (expense):Interest expense (excludes contractual interest of $3,234
and $6,469 for the three and six months ended June 30,
2006, respectively)
    
    
    (9,525
    )
    
    
    (14,739
    )
    
    
    (19,066
    )
    
    
    (22,951
    )Investment income
    
    
    1,212
    
    
    
    578
    
    
    
    2,248
    
    
    
    1,016Foreign exchange gains (losses), net
    
    
    1,755
    
    
    
    (412
    )
    
    
    1,585
    
    
    
    (611
    )Total other income (expense)
    
    
    (6,558
    )
    
    
    (14,573
    )
    
    
    (15,233
    )
    
    
    (22,546
    )Income (loss) before reorganization items and income taxes
    
    
    11,055
    
    
    
    (86,661
    )
    
    
    6,477
    
    
    
    (96,515
    )Reorganization items
    
    
    (4,707
    )
    
    
    
    
    
    
    (8,290
    )
    
    
    Income (loss) before income taxes
    
    
    6,348
    
    
    
    (86,661
    )
    
    
    (1,813
    )
    
    
    (96,515
    )Income tax (expense) benefit
    
    
    (63
    )
    
    
    11,611
    
    
    
    (190
    )
    
    
    11,407Net income (loss)
    
    $
    6,285
    
    
    $
    (75,050
    )
    
    $
    (2,003
    )
    
    $
    (85,108
    )Basic and diluted earnings (loss) per common share:Net income (loss):Basic and diluted
    
    $
    0.70
    
    
    $
    (8.36
    )
    
    $
    (0.22
    )
    
    $
    (9.50
    )Weighted average common shares outstanding:Basic and diluted
    
    
    8,980
    
    
    
    8,980
    
    
    
    8,980
    
    
    
    8,960
  2




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Six Months Ended June 30,2006
    
    
    2005Cash flows from operating activities:Net loss
    
    $
    (2,003
    )
    
    $
    (85,108
    )Adjustments to reconcile net loss to net cash provided by (used in) operating activities:Write-off and amortization of deferred financing costs
    
    
    5,595
    
    
    
    6,464Depreciation and amortization
    
    
    14,499
    
    
    
    15,242Impairment of goodwill
    
    
    
    
    
    
    79,172Reorganization items
    
    
    8,290
    
    
    
    Gain on disposal of assets
    
    
    (255
    )
    
    
    (377
    )Foreign exchange (gains) losses
    
    
    (1,585
    )
    
    
    611Deferred income taxes
    
    
    2
    
    
    
    (11,260
    )Stock-based compensation expense
    
    
    186
    
    
    
    Change in operating assets and liabilities:Receivables, net of allowances
    
    
    7,610
    
    
    
    (168
    )Inventories
    
    
    33
    
    
    
    (371
    )Prepayments and other assets
    
    
    17,700
    
    
    
    (4,839
    )Accounts and notes payable
    
    
    866
    
    
    
    (1,647
    )Accrued liabilities
    
    
    (6,432
    )
    
    
    (659
    )Net cash provided by (used in) operating activities before payment of reorganization items
    
    
    44,506
    
    
    
    (2,940
    )Reorganization items paid
    
    
    (6,549
    )
    
    
    Net cash provided by (used in) operating activities
    
    
    37,957
    
    
    
    (2,940
    )Cash flows from investing activities:Purchases of property and equipment
    
    
    (12,564
    )
    
    
    (8,699
    )Proceeds from sales of property and equipment
    
    
    834
    
    
    
    2,836Increase in restricted cash, cash equivalents and other time deposits
    
    
    (265
    )
    
    
    (16,419
    )Funds deposited with insurance carriers
    
    
    (698
    )
    
    
    (8,054
    )Funds returned from insurance carriers
    
    
    2,935
    
    
    
    3,070Net cash used in investing activities
    
    
    (9,758
    )
    
    
    (27,266
    )Cash flows from financing activities:Repayment of debtor-in-possession revolving credit facility, net
    
    
    (9,596
    )
    
    
    Additions to Canadian revolving credit facilities, net
    
    
    464
    
    
    
    Additions to pre-petition revolving credit facilities, net
    
    
    
    
    
    
    13,592Additions to long-term debt
    
    
    
    
    
    
    25,000Repayment of pre-petition debt
    
    
    
    
    
    
    (9,628
    )Payment of deferred financing costs
    
    
    
    
    
    
    (625
    )Proceeds from insurance financing arrangements
    
    
    178
    
    
    
    8,470Repayments of insurance financing arrangements
    
    
    (19,352
    )
    
    
    (6,060
    )Proceeds from issuance of common stock
    
    
    
    
    
    
    124Net cash (used in) provided by financing activities
    
    
    (28,306
    )
    
    
    30,873Effect of exchange rate changes on cash and cash equivalents
    
    
    (489
    )
    
    
    (180
    )Net change in cash and cash equivalents
    
    
    (596
    )
    
    
    487Cash and cash equivalents at beginning of period
    
    
    4,117
    
    
    
    2,516Cash and cash equivalents at end of period
    
    $
    3,521
    
    
    $
    3,003Supplemental cash flow information:Cash paid (refunds received) during the period for:Interest
    
    $
    11,600
    
    
    $
    15,812Income taxes, net
    
    
    168
    
    
    
    (472
    )
  3




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
 
 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. (a Georgia corporation) and its subsidiaries on a
consolidated basis and, as the context requires, to Allied Holdings, Inc. and its subsidiaries that
filed for Chapter 11 pursuant to the U.S Bankruptcy Code.)
 (1) Organization and Operations
 Company Overview
  Chapter 11 Overview
   (2) Accounting and Reporting Policies
 Basis of Presentation
 Financial Reporting by Entities in Reorganization Under the Bankruptcy Code
 4




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
 (Unaudited)
   Use of Estimates and Seasonality
   (3) Accounting for Reorganization
  
    
    separated liabilities that are subject to compromise from liabilities that are not
subject to compromise;
 5




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ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
 (Unaudited)
 
    
    distinguished transactions and events that are directly associated with the
reorganization from the ongoing operations of the business; and
    
    ceased accruing interest on the 85/8% senior notes (Senior
Notes).
 Liabilities Subject to Compromise
     June 30,
    
    
    December 31,2006
    
    
    2005Accounts payable
    
    $
    25,076
    
    
    $
    24,922Senior Notes
    
    
    150,000
    
    
    
    150,000Accrued interest on Senior Notes
    
    
    4,313
    
    
    
    4,313Multiemployer pension withdrawal liabilities
    
    
    15,847
    
    
    
    15,847Accrued claims and insurance reserves
    
    
    3,112
    
    
    
    3,109Other accrued liabilities
    
    
    1,131
    
    
    
    1,131$
    199,479
    
    
    $
    199,322
 Reorganization Items
  6




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ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
 (Unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30, 2006
    
    
    June 30, 2006Legal and professional fees
    
    $
    3,849
    
    
    $
    6,528Employee retention plan
    
    
    773
    
    
    
    1,589Other reorganization items
    
    
    85
    
    
    
    173$
    4,707
    
    
    $
    8,290
 Condensed Financial Statement Information of the Debtors and Non-debtors
  Condensed Consolidating Balance Sheet Information
June 30, 2006
(In thousands)
 Debtors
    
    
    Non-Debtors
    
    
    Eliminations
    
    
    ConsolidatedCurrent assets
    
    $
    92,460
    
    
    $
    38,060
    
    
    $
    39
    
    
    $
    130,559Intercompany receivables
(payables)
    
    
    16,282
    
    
    
    (16,282
    )
    
    
    
    
    
    
    Property and equipment, net
    
    
    119,178
    
    
    
    3,481
    
    
    
    
    
    
    
    122,659Goodwill, net
    
    
    3,545
    
    
    
    
    
    
    
    
    
    
    
    3,545Investment in subsidiaries
    
    
    23,827
    
    
    
    6,223
    
    
    
    (30,050
    )
    
    
    Other assets
    
    
    21,904
    
    
    
    70,337
    
    
    
    
    
    
    
    92,241Total assets
    
    $
    277,196
    
    
    $
    101,819
    
    
    $
    (30,011
    )
    
    $
    349,004Liabilities not subject to
compromise:Current liabilities
    
    $
    240,058
    
    
    $
    24,032
    
    
    $
    (599
    )
    
    $
    263,491Other noncurrent liabilities
    
    
    26,303
    
    
    
    49,314
    
    
    
    
    
    
    
    75,617Liabilities subject to compromise
    
    
    199,479
    
    
    
    
    
    
    
    
    
    
    
    199,479Stockholders (deficit) equity
    
    
    (188,644
    )
    
    
    28,473
    
    
    
    (29,412
    )
    
    
    (189,583
    )Total liabilities and
stockholders (deficit)
equity
    
    $
    277,196
    
    
    $
    101,819
    
    
    $
    (30,011
    )
    
    $
    349,004
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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
 (Unaudited)
 Condensed Consolidating Balance Sheet Information
December 31, 2005
(In thousands)
 Debtors
    
    
    Non-Debtors
    
    
    Eliminations
    
    
    ConsolidatedCurrent assets
    
    $
    121,807
    
    
    $
    41,261
    
    
    $
    
    
    
    $
    163,068Intercompany receivables (payables)
    
    
    14,744
    
    
    
    (14,744
    )
    
    
    
    
    
    
    Property and equipment, net
    
    
    120,212
    
    
    
    3,692
    
    
    
    
    
    
    
    123,904Goodwill, net
    
    
    3,545
    
    
    
    
    
    
    
    
    
    
    
    3,545Investment in subsidiaries
    
    
    21,169
    
    
    
    6,223
    
    
    
    (27,392
    )
    
    
    Other assets
    
    
    22,366
    
    
    
    70,233
    
    
    
    
    
    
    
    92,599Total assets
    
    $
    303,843
    
    
    $
    106,665
    
    
    $
    (27,392
    )
    
    $
    383,116Liabilities not subject to compromise:Current liabilities
    
    $
    264,265
    
    
    $
    28,245
    
    
    $
    
    
    
    $
    292,510Other noncurrent liabilities
    
    
    26,684
    
    
    
    51,967
    
    
    
    
    
    
    
    78,651Liabilities subject to compromise
    
    
    199,322
    
    
    
    
    
    
    
    
    
    
    
    199,322Stockholders (deficit) equity
    
    
    (186,428
    )
    
    
    26,453
    
    
    
    (27,392
    )
    
    
    (187,367
    )Total liabilities and
stockholders (deficit) equity
    
    $
    303,843
    
    
    $
    106,665
    
    
    $
    (27,392
    )
    
    $
    383,116
 Condensed Consolidating Statement of Operations Information
For the Three Months Ended June 30, 2006
(In thousands)
 Debtors
    
    
    Non-Debtors
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    244,590
    
    
    $
    1,133
    
    
    $
    (341
    )
    
    $
    245,382Operating expenses
    
    
    227,181
    
    
    
    929
    
    
    
    (341
    )
    
    
    227,769Operating income
    
    
    17,409
    
    
    
    204
    
    
    
    
    
    
    
    17,613Other (expense) income, net
    
    
    (6,395
    )
    
    
    1,309
    
    
    
    (1,472
    )
    
    
    (6,558
    )Income before reorganization
items and income taxes
    
    
    11,014
    
    
    
    1,513
    
    
    
    (1,472
    )
    
    
    11,055Reorganization items
    
    
    (4,707
    )
    
    
    
    
    
    
    
    
    
    
    (4,707
    )Income before income taxes
    
    
    6,307
    
    
    
    1,513
    
    
    
    (1,472
    )
    
    
    6,348Income tax expense
    
    
    (22
    )
    
    
    (445
    )
    
    
    404
    
    
    
    (63
    )Net income
    
    $
    6,285
    
    
    $
    1,068
    
    
    $
    (1,068
    )
    
    $
    6,285
 8




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
 (Unaudited)
 Condensed Consolidating Statement of Operations Information
For the Six Months Ended June 30, 2006
(In thousands)
 Debtors
    
    
    Non-Debtors
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    484,360
    
    
    $
    2,531
    
    
    $
    (681
    )
    
    $
    486,210Operating expenses
    
    
    463,188
    
    
    
    1,993
    
    
    
    (681
    )
    
    
    464,500Operating income
    
    
    21,172
    
    
    
    538
    
    
    
    
    
    
    
    21,710Other (expense) income, net
    
    
    (14,844
    )
    
    
    2,269
    
    
    
    (2,658
    )
    
    
    (15,233
    )Income before reorganization
items and income taxes
    
    
    6,328
    
    
    
    2,807
    
    
    
    (2,658
    )
    
    
    6,477Reorganization items
    
    
    (8,290
    )
    
    
    
    
    
    
    
    
    
    
    (8,290
    )(Loss) income before income taxes
    
    
    (1,962
    )
    
    
    2,807
    
    
    
    (2,658
    )
    
    
    (1,813
    )Income tax expense
    
    
    (41
    )
    
    
    (787
    )
    
    
    638
    
    
    
    (190
    )Net (loss) income
    
    $
    (2,003
    )
    
    $
    2,020
    
    
    $
    (2,020
    )
    
    $
    (2,003
    )
 Condensed Consolidating Statement of Cash Flows Information
For the Six Months Ended June 30, 2006
(In thousands)
 Debtors
    
    
    Non-Debtors
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by (used in):Operating activities
    
    $
    38,684
    
    
    $
    (727
    )
    
    $
    
    
    
    $
    37,957Investing activities
    
    
    (9,461
    )
    
    
    (297
    )
    
    
    
    
    
    
    (9,758
    )Financing activities
    
    
    (28,306
    )
    
    
    
    
    
    
    
    
    
    
    (28,306
    )Effect of exchange rate changes on cash and
cash equivalents
    
    
    (489
    )
    
    
    
    
    
    
    
    
    
    
    (489
    )Net change in cash and cash equivalents
    
    
    428
    
    
    
    (1,024
    )
    
    
    
    
    
    
    (596
    )Cash and cash equivalents at beginning of period
    
    
    730
    
    
    
    3,387
    
    
    
    
    
    
    
    4,117Cash and cash equivalents at end of period
    
    $
    1,158
    
    
    $
    2,363
    
    
    $
    
    
    
    $
    3,521
 (4) Recent Accounting Pronouncements
 Accounting for Uncertainty in Income Taxes Accounting for Income Taxes,
 9




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ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
 (Unaudited)
  (5) Prepayments and Other Current Assets
  June 30,
    
    
    December 31,2006
    
    
    2005Prepaid insurance
    
    $
    24,719
    
    
    $
    50,185Prepaid licenses
    
    
    2,990
    
    
    
    1,532Tires on tractors and trailers
    
    
    2,278
    
    
    
    2,245Short-term deposits with pre-petition lenders
    
    
    2,679
    
    
    
    2,679Other
    
    
    2,071
    
    
    
    2,793$
    34,737
    
    
    $
    59,434
 (6) Property and Equipment
  June 30,
    
    
    December 31,2006
    
    
    2005Cost
    
    $
    526,120
    
    
    $
    528,206Accumulated depreciation and
amortization
    
    
    (403,461
    )
    
    
    (404,302
    )$
    122,659
    
    
    $
    123,904
  (7) Other Noncurrent Assets
  June 30,
    
    
    December 31,2006
    
    
    2005Deposits with insurance companies
    
    $
    10,093
    
    
    $
    4,961Interest in split-dollar life insurance policies
    
    
    6,139
    
    
    
    6,181Other deposits
    
    
    2,593
    
    
    
    2,599Deferred financing costs
    
    
    
    
    
    
    5,595Other
    
    
    3,409
    
    
    
    3,499$
    22,234
    
    
    $
    22,835
 10




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
 (Unaudited)
  December 31,2005Cost
    
    $
    7,646Accumulated amortization
    
    
    (2,051
    )$
    5,595
   (8) Accounts and Notes Payable and Accrued Liabilities
   June 30,
    
    
    December 31,2006
    
    
    2005Claims and insurance reserves
    
    $
    38,265
    
    
    $
    39,602Wages and benefits
    
    
    27,746
    
    
    
    30,748Accrued taxes
    
    
    3,986
    
    
    
    4,017Accrued interest
    
    
    4,788
    
    
    
    3,761Purchased transportation
    
    
    4,484
    
    
    
    3,563Other
    
    
    1,125
    
    
    
    1,626$
    80,394
    
    
    $
    83,317
 (9) Claims and Insurance Reserves
   11




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
 (Unaudited)
   June 30,
    
    
    December 31,2006
    
    
    2005Accrued liabilities  current
    
    $
    38,265
    
    
    $
    39,602Other long-term liabilities  noncurrent
    
    
    66,900
    
    
    
    70,040105,165
    
    
    
    109,642Liabilities subject to compromise
    
    
    3,112
    
    
    
    3,109Total liability included in the consolidated balance sheets
    
    $
    108,277
    
    
    $
    112,751
   (10) Employee Benefit Plans
 (a) Pension and Postretirement Benefit Plans
  Defined Benefit
    
    
    Postretirement BenefitPension Plans
    
    
    PlansThree Months Ended June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Service cost
    
    $
    23
    
    
    $
    12
    
    
    $
    14
    
    
    $
    11Interest cost
    
    
    762
    
    
    
    431
    
    
    
    164
    
    
    
    147Expected return on plan assets
    
    
    (1,014
    )
    
    
    (617
    )
    
    
    
    
    
    
    Amortization of:Unrecognized net actuarial loss
    
    
    524
    
    
    
    280
    
    
    
    169
    
    
    
    134Prior service cost
    
    
    12
    
    
    
    7
    
    
    
    (82
    )
    
    
    (68
    )Net periodic benefit cost
    
    $
    307
    
    
    $
    113
    
    
    $
    265
    
    
    $
    224
 12




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
 (Unaudited)
 Defined Benefit
    
    
    Postretirement BenefitPension Plans
    
    
    PlansSix Months Ended June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Service cost
    
    $
    46
    
    
    $
    33
    
    
    $
    28
    
    
    $
    24Interest cost
    
    
    1,524
    
    
    
    1,174
    
    
    
    328
    
    
    
    323Expected return on plan assets
    
    
    (2,028
    )
    
    
    (1,679
    )
    
    
    
    
    
    
    Amortization of:Unrecognized net actuarial loss
    
    
    1,048
    
    
    
    762
    
    
    
    338
    
    
    
    295Prior service cost
    
    
    24
    
    
    
    19
    
    
    
    (164
    )
    
    
    (149
    )Net periodic benefit cost
    
    $
    614
    
    
    $
    309
    
    
    $
    530
    
    
    $
    493
    (b) Employee Retention Plan
  (11) Debt
  June 30,
    
    
    December 31,2006
    
    
    2005Current liabilities not subject to compromise:DIP Facility  Revolver
    
    $
    42,401
    
    
    $
    51,997DIP Facility  Term Loan A
    
    
    20,000
    
    
    
    20,000DIP Facility  Term Loan B
    
    
    80,000
    
    
    
    80,000$
    142,401
    
    
    $
    151,997Canadian revolving credit facility (in U.S. dollars)
    
    $
    464
    
    
    $
    Liabilities subject to compromise:Senior Notes
    
    $
    150,000
    
    
    $
    150,000
 13




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
 (Unaudited)
 DIP Facility
 The
Wall Street Journal
     14




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
 (Unaudited)
    Canadian Revolving Credit Facility
  Senior Notes
 5
  
    
    Haul Insurance Limited;
    
    Arrendadora de Equipo Para el Transporte de Automoviles, S. de R.L. de C.V. ;
    
    Axis Logistica, S. de R.L. de C.V. ;
    
    Axis Operadora Hermosillo; and
    
    Ace Operations, LLC.
   15




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
 (Unaudited)
  (12) Impairment of Goodwill
 Goodwill and Other
Intangible Assets
  (13) Income Taxes
  16




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
 (Unaudited)
 (14) Commitments and Contingencies
 (a) Effect of Chapter 11 Filings
   (b) Letters of Credit
   (c) Litigation, Claims, Assessments
   17




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
 (Unaudited)
 (d) Purchase and Service Contract Commitments
  (e) Leases
  (f) Collective Bargaining Agreements
     (15) Earnings (Loss) Per Common Share
 Earnings Per Share,
 18




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
 (Unaudited)
  (16) Stock-Based Compensation
   Accounting for Stock-Based Compensation
 Share-Based Payment
  19




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
 (Unaudited)
   Three Months Ended
    
    
    Six Months EndedJune 30, 2005
    
    
    June 30, 2005Reported net loss
    
    $
    (75,050
    )
    
    $
    (85,108
    )Less: stock-based employee
compensation determined
using the fair-value-based
method (no applicable income
tax effect)
    
    
    (179
    )
    
    
    (327
    )Pro forma net loss
    
    $
    (75,229
    )
    
    $
    (85,435
    )Loss per share:As reported:Basic and Diluted
    
    $
    (8.36
    )
    
    $
    (9.50
    )Pro forma:Basic and Diluted
    
    $
    (8.38
    )
    
    $
    (9.54
    )
  Weighted-Weighted-
    
    
    AverageNumber of
    
    
    Average
    
    
    Remaining
    
    
    AggregateOptions
    
    
    Exercise
    
    
    Contractual
    
    
    Intrinsic Value(in thousands)
    
    
    Price
    
    
    Life
    
    
    (in thousands)Outstanding as of December 31, 2005
    
    
    1,573
    
    
    $
    3.67Forfeited
    
    
    (5
    )
    
    $
    3.05Outstanding as of June 30, 2006
    
    
    1,568
    
    
    $
    3.67
    
    
    6.0 years
    
    
    3⁄4Exercisable at June 30, 2006
    
    
    1,374
    
    
    $
    3.55
    
    
    5.7 years
    
    
    3⁄4Vested and expected to vest at June 30, 2006
    
    
    1,508
    
    
    $
    3.64
    
    
    5.9 years
    
    
    3⁄4
  (17) Other Comprehensive Income (Loss)
  20




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
 (Unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Net income (loss)
    
    $
    6,285
    
    
    $
    (75,050
    )
    
    $
    (2,003
    )
    
    $
    (85,108
    )Foreign currency
translation
adjustments
    
    
    (455
    )
    
    
    (605
    )
    
    
    (399
    )
    
    
    (910
    )$
    5,830
    
    
    $
    (75,655
    )
    
    $
    (2,402
    )
    
    $
    (86,018
    )
   June 30,
    
    
    December 31,2006
    
    
    2005Cumulative foreign currency translation adjustments
    
    $
    (82
    )
    
    $
    317Cumulative minimum pension liability adjustments
    
    
    (20,891
    )
    
    
    (20,891
    )$
    (20,973
    )
    
    $
    (20,574
    )
 (18) Industry Segment and Geographic Information
 Disclosure About Segments of an Enterprise and
Related Information
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Revenues   unaffiliated customers:Allied Automotive Group
    
    $
    238,421
    
    
    $
    225,888
    
    
    $
    471,833
    
    
    $
    440,503Axis Group
    
    
    6,961
    
    
    
    6,666
    
    
    
    14,377
    
    
    
    13,001Total
    
    $
    245,382
    
    
    $
    232,554
    
    
    $
    486,210
    
    
    $
    453,504Operating income (loss):Allied Automotive Group
    
    $
    16,547
    
    
    $
    (68,308
    )
    
    $
    20,001
    
    
    $
    (68,833
    )Axis Group
    
    
    1,770
    
    
    
    570
    
    
    
    3,331
    
    
    
    992Corporate/other
    
    
    (704
    )
    
    
    (4,350
    )
    
    
    (1,622
    )
    
    
    (6,128
    )Total
    
    
    17,613
    
    
    
    (72,088
    )
    
    
    21,710
    
    
    
    (73,969
    )Reconciling items:Interest expense
    
    
    (9,525
    )
    
    
    (14,739
    )
    
    
    (19,066
    )
    
    
    (22,951
    )Investment income
    
    
    1,212
    
    
    
    578
    
    
    
    2,248
    
    
    
    1,016Foreign exchange gains (losses), net
    
    
    1,755
    
    
    
    (412
    )
    
    
    1,585
    
    
    
    (611
    )Income (loss) before reorganization
items and income taxes
    
    
    11,055
    
    
    
    (86,661
    )
    
    
    6,477
    
    
    
    (96,515
    )Reorganization items
    
    
    (4,707
    )
    
    
    
    
    
    
    (8,290
    )
    
    
    Income (loss) before income taxes
    
    $
    6,348
    
    
    $
    (86,661
    )
    
    $
    (1,813
    )
    
    $
    (96,515
    )
 21




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
 (Unaudited)
  June 30,
    
    
    December 31,2006
    
    
    2005Allied Automotive Group
    
    $
    211,014
    
    
    $
    233,394Axis Group
    
    
    19,561
    
    
    
    22,141Corporate/other
    
    
    118,429
    
    
    
    127,581Total
    
    $
    349,004
    
    
    $
    383,116
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Revenues:United States
    
    $
    187,921
    
    
    $
    184,133
    
    
    $
    380,019
    
    
    $
    364,702Canada
    
    
    57,461
    
    
    
    48,421
    
    
    
    106,191
    
    
    
    88,802Total
    
    $
    245,382
    
    
    $
    232,554
    
    
    $
    486,210
    
    
    $
    453,504
 June 30,
    
    
    December 31,2006
    
    
    2005Long-lived assets:United States
    
    $
    90,069
    
    
    $
    90,223Canada
    
    
    32,590
    
    
    
    33,681Total
    
    $
    122,659
    
    
    $
    123,904
   (19) Supplemental Guarantor Information
  22




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
 (Unaudited)
  SUPPLEMENTAL CONSOLIDATING BALANCE SHEET INFORMATION
June 30, 2006
(In thousands)
 Allied
    
    
    Guarantor
    
    
    NonguarantorHoldings
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCurrent assets:Cash and cash equivalents
    
    $
    (35
    )
    
    $
    1,155
    
    
    $
    2,401
    
    
    $
    
    
    
    $
    3,521Restricted cash, cash equivalents and other time deposits
    
    
    
    
    
    
    
    
    
    
    32,915
    
    
    
    
    
    
    
    32,915Receivables, net of allowances
    
    
    
    
    
    
    52,792
    
    
    
    1,444
    
    
    
    
    
    
    
    54,236Inventories
    
    
    
    
    
    
    5,150
    
    
    
    
    
    
    
    
    
    
    
    5,150Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    (39
    )
    
    
    39
    
    
    
    Prepayments and other
current assets
    
    
    3,369
    
    
    
    30,028
    
    
    
    1,340
    
    
    
    
    
    
    
    34,737Total current assets
    
    
    3,334
    
    
    
    89,125
    
    
    
    38,061
    
    
    
    39
    
    
    
    130,559Property and equipment, net of accumulated depreciation
    
    
    3,373
    
    
    
    115,805
    
    
    
    3,481
    
    
    
    
    
    
    
    122,659Goodwill, net
    
    
    
    
    
    
    3,545
    
    
    
    
    
    
    
    
    
    
    
    3,545Other assets:Restricted cash, cash equivalents and other time deposits
    
    
    
    
    
    
    
    
    
    
    69,944
    
    
    
    
    
    
    
    69,944Deferred income taxes
    
    
    63
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    63Other noncurrent assets
    
    
    6,187
    
    
    
    15,653
    
    
    
    394
    
    
    
    
    
    
    
    22,234Intercompany receivables (payables)
    
    
    79,034
    
    
    
    (79,034
    )
    
    
    
    
    
    
    
    
    
    
    Investment in subsidiaries
    
    
    (85,106
    )
    
    
    5,654
    
    
    
    
    
    
    
    79,452
    
    
    
    Total other assets
    
    
    178
    
    
    
    (57,727
    )
    
    
    70,338
    
    
    
    79,452
    
    
    
    92,241Total assets
    
    $
    6,885
    
    
    $
    150,748
    
    
    $
    111,880
    
    
    $
    79,491
    
    
    $
    349,004Current liabilities not subject to compromise:Debtor-in-possession credit facility
    
    $
    142,401
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    142,401Canadian revolving credit facility
    
    
    
    
    
    
    464
    
    
    
    
    
    
    
    
    
    
    
    464Accounts and notes payable
    
    
    5,735
    
    
    
    33,743
    
    
    
    674
    
    
    
    
    
    
    
    40,152Intercompany (receivables) payables
    
    
    (119,190
    )
    
    
    101,850
    
    
    
    17,340
    
    
    
    
    
    
    
    Accrued liabilities
    
    
    6,888
    
    
    
    50,756
    
    
    
    23,349
    
    
    
    (599
    )
    
    
    80,394Deferred income taxes
    
    
    80
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    80Total current liabilities
    
    
    35,914
    
    
    
    186,813
    
    
    
    41,363
    
    
    
    (599
    )
    
    
    263,491Long-term liabilities not subject to compromise:Postretirement benefits other than pensions
    
    
    
    
    
    
    4,357
    
    
    
    
    
    
    
    
    
    
    
    4,357Other long-term liabilities
    
    
    3,051
    
    
    
    18,894
    
    
    
    49,315
    
    
    
    
    
    
    
    71,260Total long-term liabilities
    
    
    3,051
    
    
    
    23,251
    
    
    
    49,315
    
    
    
    
    
    
    
    75,617Liabilities subject to compromise
    
    
    157,503
    
    
    
    41,976
    
    
    
    
    
    
    
    
    
    
    
    199,479Commitments and contingencies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stockholders (deficit) equity :Preferred stock, no par value
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Common stock, no par value
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Additional paid-in capital
    
    
    48,731
    
    
    
    166,130
    
    
    
    2,488
    
    
    
    (168,618
    )
    
    
    48,731Treasury stock
    
    
    (707
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (707
    )(Accumulated deficit) retained earnings
    
    
    (216,634
    )
    
    
    (250,912
    )
    
    
    18,714
    
    
    
    232,198
    
    
    
    (216,634
    )Accumulated other comprehensive loss,
net of tax
    
    
    (20,973
    )
    
    
    (16,510
    )
    
    
    
    
    
    
    16,510
    
    
    
    (20,973
    )Total stockholders (deficit) equity
    
    
    (189,583
    )
    
    
    (101,292
    )
    
    
    21,202
    
    
    
    80,090
    
    
    
    (189,583
    )Total
liabilities and stockholders (deficit) equity
    
    $
    6,885
    
    
    $
    150,748
    
    
    $
    111,880
    
    
    $
    79,491
    
    
    $
    349,004
 23




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
 (Unaudited)
 SUPPLEMENTAL CONSOLIDATING BALANCE SHEET INFORMATION
December 31, 2005
(In thousands)
 Allied
    
    
    Guarantor
    
    
    NonguarantorHoldings
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCurrent assets:Cash and cash equivalents
    
    $
    
    
    
    $
    730
    
    
    $
    3,387
    
    
    $
    
    
    
    $
    4,117Restricted cash, cash equivalents and other time deposits
    
    
    
    
    
    
    
    
    
    
    32,830
    
    
    
    
    
    
    
    32,830Receivables, net of allowances
    
    
    
    
    
    
    59,896
    
    
    
    1,531
    
    
    
    
    
    
    
    61,427Inventories
    
    
    
    
    
    
    5,132
    
    
    
    
    
    
    
    
    
    
    
    5,132Deferred income taxes
    
    
    151
    
    
    
    
    
    
    
    (23
    )
    
    
    
    
    
    
    128Prepayments and other current assets
    
    
    3,364
    
    
    
    52,535
    
    
    
    3,535
    
    
    
    
    
    
    
    59,434Total current assets
    
    
    3,515
    
    
    
    118,293
    
    
    
    41,260
    
    
    
    
    
    
    
    163,068Property and equipment, net of accumulated depreciation
    
    
    3,762
    
    
    
    116,450
    
    
    
    3,692
    
    
    
    
    
    
    
    123,904Goodwill, net
    
    
    
    
    
    
    3,545
    
    
    
    
    
    
    
    
    
    
    
    3,545Other assets:Restricted cash, cash equivalents and other time deposits
    
    
    
    
    
    
    
    
    
    
    69,764
    
    
    
    
    
    
    
    69,764Other noncurrent assets
    
    
    11,826
    
    
    
    10,541
    
    
    
    468
    
    
    
    
    
    
    
    22,835Intercompany receivables (payables)
    
    
    76,862
    
    
    
    (76,862
    )
    
    
    
    
    
    
    
    
    
    
    Investment in subsidiaries
    
    
    (95,374
    )
    
    
    5,282
    
    
    
    
    
    
    
    90,092
    
    
    
    Total other assets
    
    
    (6,686
    )
    
    
    (61,039
    )
    
    
    70,232
    
    
    
    90,092
    
    
    
    92,599Total assets
    
    $
    591
    
    
    $
    177,249
    
    
    $
    115,184
    
    
    $
    90,092
    
    
    $
    383,116Current liabilities not subject to compromise:Debtor-in-possession credit facility
    
    $
    151,997
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    151,997Accounts and notes payable
    
    
    3,764
    
    
    
    52,682
    
    
    
    750
    
    
    
    
    
    
    
    57,196Intercompany (receivables) payables
    
    
    (133,008
    )
    
    
    117,201
    
    
    
    15,807
    
    
    
    
    
    
    
    Accrued liabilities
    
    
    5,027
    
    
    
    50,812
    
    
    
    27,478
    
    
    
    
    
    
    
    83,317Total current liabilities
    
    
    27,780
    
    
    
    220,695
    
    
    
    44,035
    
    
    
    
    
    
    
    292,510Long-term liabilities not subject to compromise:Postretirement benefits other than pensions
    
    
    
    
    
    
    4,412
    
    
    
    
    
    
    
    
    
    
    
    4,412Deferred income taxes
    
    
    143
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    143Other long-term liabilities
    
    
    2,521
    
    
    
    19,608
    
    
    
    51,967
    
    
    
    
    
    
    
    74,096Total long-term liabilities
    
    
    2,664
    
    
    
    24,020
    
    
    
    51,967
    
    
    
    
    
    
    
    78,651Liabilities subject to compromise
    
    
    157,514
    
    
    
    41,808
    
    
    
    
    
    
    
    
    
    
    
    199,322Commitments and contingencies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stockholders (deficit) equity :Preferred stock, no par value
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    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
    
    
    (214,631
    )
    
    
    (261,466
    )
    
    
    16,694
    
    
    
    244,772
    
    
    
    (214,631
    )Accumulated other comprehensive loss,
net of tax
    
    
    (20,574
    )
    
    
    (13,938
    )
    
    
    
    
    
    
    13,938
    
    
    
    (20,574
    )Total stockholders (deficit) equity
    
    
    (187,367
    )
    
    
    (109,274
    )
    
    
    19,182
    
    
    
    90,092
    
    
    
    (187,367
    )Total liabilities and stockholders
(deficit) equity
    
    $
    591
    
    
    $
    177,249
    
    
    $
    115,184
    
    
    $
    90,092
    
    
    $
    383,116
 24




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
 (Unaudited)
 SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
Three Months Ended June 30, 2006
(In thousands)
 Allied
    
    
    Guarantor
    
    
    NonguarantorHoldings
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    6,513
    
    
    $
    244,590
    
    
    $
    1,133
    
    
    $
    (6,854
    )
    
    $
    245,382Operating expenses:Salaries, wages and fringe benefits
    
    
    962
    
    
    
    113,642
    
    
    
    259
    
    
    
    
    
    
    
    114,863Operating supplies and expenses
    
    
    3,438
    
    
    
    46,760
    
    
    
    143
    
    
    
    
    
    
    
    50,341Purchased transportation
    
    
    
    
    
    
    32,653
    
    
    
    17
    
    
    
    
    
    
    
    32,670Insurance and claims
    
    
    
    
    
    
    10,232
    
    
    
    344
    
    
    
    (341
    )
    
    
    10,235Operating taxes and licenses
    
    
    54
    
    
    
    7,301
    
    
    
    
    
    
    
    
    
    
    
    7,355Depreciation and amortization
    
    
    197
    
    
    
    6,927
    
    
    
    159
    
    
    
    
    
    
    
    7,283Rents
    
    
    379
    
    
    
    1,355
    
    
    
    5
    
    
    
    
    
    
    
    1,739Communications and utilities
    
    
    830
    
    
    
    658
    
    
    
    13
    
    
    
    
    
    
    
    1,501Other operating expenses
    
    
    1,327
    
    
    
    7,185
    
    
    
    (16
    )
    
    
    (6,513
    )
    
    
    1,983Gain on disposal of operating assets, net
    
    
    
    
    
    
    (201
    )
    
    
    
    
    
    
    
    
    
    
    (201
    )Total operating expenses
    
    
    7,187
    
    
    
    226,512
    
    
    
    924
    
    
    
    (6,854
    )
    
    
    227,769Operating (loss) income
    
    
    (674
    )
    
    
    18,078
    
    
    
    209
    
    
    
    
    
    
    
    17,613Other income (expense):Interest expense
    
    
    (2,873
    )
    
    
    (6,599
    )
    
    
    (53
    )
    
    
    
    
    
    
    (9,525
    )Investment income
    
    
    
    
    
    
    16
    
    
    
    1,196
    
    
    
    
    
    
    
    1,212Foreign exchange gains, net
    
    
    
    
    
    
    1,593
    
    
    
    162
    
    
    
    
    
    
    
    1,755Equity in earnings of subsidiaries
    
    
    14,297
    
    
    
    106
    
    
    
    
    
    
    
    (14,403
    )
    
    
    Total other income (expense)
    
    
    11,424
    
    
    
    (4,884
    )
    
    
    1,305
    
    
    
    (14,403
    )
    
    
    (6,558
    )Income before reorganization items and income taxes
    
    
    10,750
    
    
    
    13,194
    
    
    
    1,514
    
    
    
    (14,403
    )
    
    
    11,055Reorganization items
    
    
    (4,446
    )
    
    
    (261
    )
    
    
    
    
    
    
    
    
    
    
    (4,707
    )Income before income taxes
    
    
    6,304
    
    
    
    12,933
    
    
    
    1,514
    
    
    
    (14,403
    )
    
    
    6,348Income tax expense
    
    
    (19
    )
    
    
    (1
    )
    
    
    (447
    )
    
    
    404
    
    
    
    (63
    )Net income
    
    $
    6,285
    
    
    $
    12,932
    
    
    $
    1,067
    
    
    $
    (13,999
    )
    
    $
    6,285
 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 losses, net
    
    
    
    
    
    
    (356
    )
    
    
    (56
    )
    
    
    
    
    
    
    (412
    )Equity in (losses) earnings of subsidiaries
    
    
    (69,263
    )
    
    
    208
    
    
    
    
    
    
    
    69,055
    
    
    
    Total other income (expense)
    
    
    (70,746
    )
    
    
    (13,334
    )
    
    
    452
    
    
    
    69,055
    
    
    
    (14,573
    )(Loss) income before income taxes
    
    
    (75,068
    )
    
    
    (81,302
    )
    
    
    654
    
    
    
    69,055
    
    
    
    (86,661
    )Income tax benefit (expense)
    
    
    
    
    
    
    11,765
    
    
    
    (154
    )
    
    
    
    
    
    
    11,611Net (loss) income
    
    $
    (75,068
    )
    
    $
    (69,537
    )
    
    $
    500
    
    
    $
    69,055
    
    
    $
    (75,050
    )
 25




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
 (Unaudited)
 SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
Six Months Ended June 30, 2006
(In thousands)
 Allied
    
    
    Guarantor
    
    
    NonguarantorHoldings
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    13,025
    
    
    $
    484,360
    
    
    $
    2,531
    
    
    $
    (13,706
    )
    
    $
    486,210Operating expenses:Salaries, wages and fringe benefits
    
    
    2,173
    
    
    
    237,778
    
    
    
    525
    
    
    
    
    
    
    
    240,476Operating supplies and expenses
    
    
    6,857
    
    
    
    91,871
    
    
    
    275
    
    
    
    
    
    
    
    99,003Purchased transportation
    
    
    
    
    
    
    63,541
    
    
    
    37
    
    
    
    
    
    
    
    63,578Insurance and claims
    
    
    
    
    
    
    21,162
    
    
    
    687
    
    
    
    (681
    )
    
    
    21,168Operating taxes and licenses
    
    
    114
    
    
    
    14,939
    
    
    
    
    
    
    
    
    
    
    
    15,053Depreciation and amortization
    
    
    401
    
    
    
    13,778
    
    
    
    320
    
    
    
    
    
    
    
    14,499Rents
    
    
    740
    
    
    
    2,743
    
    
    
    9
    
    
    
    
    
    
    
    3,492Communications and utilities
    
    
    1,698
    
    
    
    1,715
    
    
    
    25
    
    
    
    
    
    
    
    3,438Other operating expenses
    
    
    2,604
    
    
    
    14,357
    
    
    
    112
    
    
    
    (13,025
    )
    
    
    4,048Gain on disposal of operating assets, net
    
    
    
    
    
    
    (255
    )
    
    
    
    
    
    
    
    
    
    
    (255
    )Total operating expenses
    
    
    14,587
    
    
    
    461,629
    
    
    
    1,990
    
    
    
    (13,706
    )
    
    
    464,500Operating (loss) income
    
    
    (1,562
    )
    
    
    22,731
    
    
    
    541
    
    
    
    
    
    
    
    21,710Other income (expense):Interest expense
    
    
    (5,300
    )
    
    
    (13,650
    )
    
    
    (116
    )
    
    
    
    
    
    
    (19,066
    )Investment income
    
    
    
    
    
    
    25
    
    
    
    2,223
    
    
    
    
    
    
    
    2,248Foreign exchange gains, net
    
    
    
    
    
    
    1,426
    
    
    
    159
    
    
    
    
    
    
    
    1,585Equity in earnings of subsidiaries
    
    
    12,837
    
    
    
    370
    
    
    
    
    
    
    
    (13,207
    )
    
    
    Total other income (expense)
    
    
    7,537
    
    
    
    (11,829
    )
    
    
    2,266
    
    
    
    (13,207
    )
    
    
    (15,233
    )Income before reorganization items and income taxes
    
    
    5,975
    
    
    
    10,902
    
    
    
    2,807
    
    
    
    (13,207
    )
    
    
    6,477Reorganization items
    
    
    (7,941
    )
    
    
    (349
    )
    
    
    
    
    
    
    
    
    
    
    (8,290
    )(Loss) income before income taxes
    
    
    (1,966
    )
    
    
    10,553
    
    
    
    2,807
    
    
    
    (13,207
    )
    
    
    (1,813
    )Income tax expense
    
    
    (37
    )
    
    
    (3
    )
    
    
    (788
    )
    
    
    638
    
    
    
    (190
    )Net (loss) income
    
    $
    (2,003
    )
    
    $
    10,550
    
    
    $
    2,019
    
    
    $
    (12,569
    )
    
    $
    (2,003
    )
 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 losses, net
    
    
    
    
    
    
    (587
    )
    
    
    (24
    )
    
    
    
    
    
    
    (611
    )Equity in (losses) earnings of subsidiaries
    
    
    (76,879
    )
    
    
    303
    
    
    
    
    
    
    
    76,576
    
    
    
    Total other income (expense)
    
    
    (79,045
    )
    
    
    (20,932
    )
    
    
    855
    
    
    
    76,576
    
    
    
    (22,546
    )(Loss) income before income taxes
    
    
    (85,108
    )
    
    
    (88,561
    )
    
    
    578
    
    
    
    76,576
    
    
    
    (96,515
    )Income tax benefit (expense)
    
    
    
    
    
    
    11,745
    
    
    
    (338
    )
    
    
    
    
    
    
    11,407Net (loss) income
    
    $
    (85,108
    )
    
    $
    (76,816
    )
    
    $
    240
    
    
    $
    76,576
    
    
    $
    (85,108
    )
 26




---



##### Table of Contents



SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
Six Months Ended June 30, 2006
(In thousands)
 Allied
    
    
    Guarantor
    
    
    NonguarantorHoldings
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net (loss) income
    
    $
    (2,003
    )
    
    $
    10,550
    
    
    $
    2,019
    
    
    $
    (12,569
    )
    
    $
    (2,003
    )Adjustments to reconcile net (loss) income to net
cash provided by (used in) operating activities:Amortization of deferred financing costs
    
    
    5,595
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,595Depreciation and amortization
    
    
    401
    
    
    
    13,778
    
    
    
    320
    
    
    
    
    
    
    
    14,499Reorganization items
    
    
    7,941
    
    
    
    349
    
    
    
    
    
    
    
    
    
    
    
    8,290Gain on disposal of assets and other, net
    
    
    
    
    
    
    (255
    )
    
    
    
    
    
    
    
    
    
    
    (255
    )Foreign exchange gains
    
    
    
    
    
    
    (1,585
    )
    
    
    
    
    
    
    
    
    
    
    (1,585
    )Deferred income taxes
    
    
    25
    
    
    
    
    
    
    
    16
    
    
    
    (39
    )
    
    
    2Stock-based compensation expense
    
    
    186
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    186Equity in losses of subsidiaries
    
    
    (12,837
    )
    
    
    (370
    )
    
    
    
    
    
    
    13,207
    
    
    
    Change in operating assets and liabilities:Receivables, net of allowances
    
    
    
    
    
    
    7,523
    
    
    
    87
    
    
    
    
    
    
    
    7,610Inventories
    
    
    
    
    
    
    33
    
    
    
    
    
    
    
    
    
    
    
    33Prepayments and other assets
    
    
    27
    
    
    
    15,478
    
    
    
    2,195
    
    
    
    
    
    
    
    17,700Accounts and notes payable
    
    
    1,959
    
    
    
    (1,017
    )
    
    
    (76
    )
    
    
    
    
    
    
    866Intercompany payables/receivables
    
    
    13,816
    
    
    
    (15,349
    )
    
    
    1,533
    
    
    
    
    
    
    
    Accrued liabilities
    
    
    965
    
    
    
    (17
    )
    
    
    (6,781
    )
    
    
    (599
    )
    
    
    (6,432
    )Net cash provided by (used in) operating activities
before payment of reorganization items
    
    
    16,075
    
    
    
    29,118
    
    
    
    (687
    )
    
    
    
    
    
    
    44,506Reorganization items paid
    
    
    (6,514
    )
    
    
    (35
    )
    
    
    
    
    
    
    
    
    
    
    (6,549
    )Net cash provided by (used in) operating activities
    
    
    9,561
    
    
    
    29,083
    
    
    
    (687
    )
    
    
    
    
    
    
    37,957Cash flows from investing activities:Purchases of property and equipment
    
    
    
    
    
    
    (12,530
    )
    
    
    (34
    )
    
    
    
    
    
    
    (12,564
    )Proceeds from sales of property and equipment
    
    
    
    
    
    
    834
    
    
    
    
    
    
    
    
    
    
    
    834Decrease in restricted cash, cash equivalents and other time deposits
    
    
    
    
    
    
    
    
    
    
    (265
    )
    
    
    
    
    
    
    (265
    )Funds deposited with insurance carriers
    
    
    
    
    
    
    (698
    )
    
    
    
    
    
    
    
    
    
    
    (698
    )Funds returned from insurance carriers
    
    
    
    
    
    
    2,935
    
    
    
    
    
    
    
    
    
    
    
    2,935Net cash used in investing activities
    
    
    
    
    
    
    (9,459
    )
    
    
    (299
    )
    
    
    
    
    
    
    (9,758
    )Cash flows from financing activities:Repayments of debtor-in-possession revolving credit facilities, net
    
    
    (9,596
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,596
    )Additions to Canadian revolving credit facilities, net
    
    
    
    
    
    
    464
    
    
    
    
    
    
    
    
    
    
    
    464Proceeds from insurance financing arrangements
    
    
    
    
    
    
    178
    
    
    
    
    
    
    
    
    
    
    
    178Repayments of insurance financing arrangements
    
    
    
    
    
    
    (19,352
    )
    
    
    
    
    
    
    
    
    
    
    (19,352
    )Net cash used in financing activities
    
    
    (9,596
    )
    
    
    (18,710
    )
    
    
    
    
    
    
    
    
    
    
    (28,306
    )Effect of exchange rate changes on cash and
cash equivalents
    
    
    
    
    
    
    (489
    )
    
    
    
    
    
    
    
    
    
    
    (489
    )Net change in cash and cash equivalents
    
    
    (35
    )
    
    
    425
    
    
    
    (986
    )
    
    
    
    
    
    
    (596
    )Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    730
    
    
    
    3,387
    
    
    
    
    
    
    
    4,117Cash and cash equivalents at end of period
    
    $
    (35
    )
    
    $
    1,155
    
    
    $
    2,401
    
    
    $
    
    
    
    $
    3,521
 27




---



##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
 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
    )
    
    $
    (76,816
    )
    
    $
    240
    
    
    $
    76,576
    
    
    $
    (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 losses, net
    
    
    
    
    
    
    611
    
    
    
    
    
    
    
    
    
    
    
    611Deferred income taxes
    
    
    452
    
    
    
    (11,712
    )
    
    
    
    
    
    
    
    
    
    
    (11,260
    )Equity in losses (earnings) of subsidiaries
    
    
    76,879
    
    
    
    (303
    )
    
    
    
    
    
    
    (76,576
    )
    
    
    Change in operating assets and liabilities:Receivables, net of allowances
    
    
    
    
    
    
    (1,036
    )
    
    
    868
    
    
    
    
    
    
    
    (168
    )Inventories
    
    
    
    
    
    
    (371
    )
    
    
    
    
    
    
    
    
    
    
    (371
    )Prepayments and other assets
    
    
    421
    
    
    
    524
    
    
    
    (5,784
    )
    
    
    
    
    
    
    (4,839
    )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
    
    
    476
    
    
    
    (20,023
    )
    
    
    16,607
    
    
    
    
    
    
    
    (2,940
    )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
    
    
    
    
    
    
    
    
    
    
    
    3,070Net cash used in investing activities
    
    
    
    
    
    
    (10,693
    )
    
    
    (16,573
    )
    
    
    
    
    
    
    (27,266
    )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
 28




---



##### 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 Form 10-K for the year ended December 31,
2005. 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 under Item 1A Risk
Factors in this Quarterly Report on Form 10-Q.
 Executive Overview
     29




---



##### Table of Contents



Due to these uncertainties, an investment in our
common stock or debt securities is highly speculative and accordingly, we urge investors to
exercise caution with respect to existing and future investments in our common stock or debt
securities.
  
    
    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, 2006 Compared to Three Months Ended June 30, 2005
  30




---



##### Table of Contents



Three Months Ended June 30,2006
    
    2005As a % of revenuesRevenues
    
    
    100.0
    %
    
    
    100.0
    %Operating expenses:Salaries, wages, and fringe benefits
    
    
    46.8
    %
    
    
    50.8
    %Operating supplies and expenses
    
    
    20.5
    %
    
    
    19.0
    %Purchased transportation
    
    
    13.3
    %
    
    
    13.5
    %Insurance and claims
    
    
    4.2
    %
    
    
    4.2
    %Operating taxes and licenses
    
    
    3.0
    %
    
    
    3.3
    %Depreciation and amortization
    
    
    3.0
    %
    
    
    3.0
    %Rents
    
    
    0.7
    %
    
    
    0.8
    %Communications and utilities
    
    
    0.6
    %
    
    
    0.6
    %Other operating expenses
    
    
    0.8
    %
    
    
    1.9
    %Impairment of goodwill
    
    
    0.0
    %
    
    
    34.0
    %Gain on disposal of operating assets
    
    
    (0.1
    )%
    
    
    (0.2
    )%Total operating expenses
    
    
    92.8
    %
    
    
    130.9
    %Operating income (loss)
    
    
    7.2
    %
    
    
    (30.9
    )%Other income (expense):Interest expense
    
    
    (3.9
    )%
    
    
    (6.3
    )%Investment income
    
    
    0.5
    %
    
    
    0.2
    %Foreign exchange gains (losses), net
    
    
    0.7
    %
    
    
    (0.2
    )%(2.7
    )%
    
    
    (6.3
    )%Income (loss) before reorganization items and income taxes
    
    
    4.5
    %
    
    
    (37.2
    )%Reorganization items
    
    
    (1.9
    )%
    
    
    0.0
    %Income (loss) before income taxes
    
    
    2.6
    %
    
    
    (37.2
    )%Income tax (expense) benefit
    
    
    (0.0
    )%
    
    
    5.0
    %Net income (loss)
    
    
    2.6
    %
    
    
    (32.2
    )%
 Revenues
     31




---



##### Table of Contents



Salaries, wages, and fringe benefits
  32




---



##### Table of Contents



Operating supplies and expenses
   Purchased transportation
  33




---



##### Table of Contents



Insurance and claims
  Operating taxes and licenses
  Other operating expenses
  Impairment of goodwill
  Interest expense
     34




---



##### Table of Contents



Investment income
  Foreign exchange gains (losses)
  Reorganization items
  Income taxes
  Six Months Ended June 30, 2006 Compared to Six Months Ended June 30, 2005
  35




---



##### Table of Contents



Six Months Ended June 30,2006
    
    2005As a % of revenuesRevenues
    
    
    100.0
    %
    
    
    100.0
    %Operating expenses:Salaries, wages, and fringe benefits
    
    
    49.5
    %
    
    
    52.8
    %Operating supplies and expenses
    
    
    20.4
    %
    
    
    18.9
    %Purchased transportation
    
    
    13.1
    %
    
    
    13.3
    %Insurance and claims
    
    
    4.4
    %
    
    
    4.1
    %Operating taxes and licenses
    
    
    3.1
    %
    
    
    3.4
    %Depreciation and amortization
    
    
    3.0
    %
    
    
    3.4
    %Rents
    
    
    0.7
    %
    
    
    0.8
    %Communications and utilities
    
    
    0.7
    %
    
    
    0.7
    %Other operating expenses
    
    
    0.8
    %
    
    
    1.6
    %Impairment of goodwill
    
    
    0.0
    %
    
    
    17.5
    %Gain on disposal of operating assets
    
    
    (0.1
    )%
    
    
    (0.1
    )%Total operating expenses
    
    
    95.6
    %
    
    
    116.4
    %Operating income (loss)
    
    
    4.4
    %
    
    
    (16.4
    )%Other income (expense):Interest expense
    
    
    (3.9
    )%
    
    
    (5.1
    )%Investment income
    
    
    0.5
    %
    
    
    0.2
    %Foreign exchange gains (losses), net
    
    
    0.3
    %
    
    
    (0.1
    )%(3.1
    )%
    
    
    (5.0
    )%Income (loss) before reorganization items and income taxes
    
    
    1.3
    %
    
    
    (21.4
    )%Reorganization items
    
    
    (1.7
    )%
    
    
    0.0
    %Loss before income taxes
    
    
    (0.4
    )%
    
    
    (21.4
    )%Income tax (expense) benefit
    
    
    (0.0
    )%
    
    
    2.5
    %Net loss
    
    
    (0.4
    )%
    
    
    (18.9
    )%
 Revenues
     36




---



##### Table of Contents



Salaries, wages, and fringe benefits
    Operating supplies and expenses
  37




---



##### Table of Contents



Purchased transportation
  Insurance and claims
  Operating taxes and licenses
  Depreciation and amortization
  Other operating expenses
  Impairment of goodwill
  38




---



##### Table of Contents



Interest expense
     Investment income
  Foreign exchange gains (losses)
  Reorganization items
  Income taxes
 39




---



##### Table of Contents



Liquidity and Capital Resources
    
    
    Rescheduling and deferring capital expenditures;
    
    Obtaining the Bankruptcy Courts approval to reduce wages paid to our collective
bargaining employees covered under the Master Agreement with the IBT by 10% for the months
of May and June 2006;
    
    Obtaining the Bankruptcy Courts approval to delay wage and cost of living increases to
our collective bargaining employees that were previously scheduled to go into effect on
June 1, 2006;
    
    Implementing unpaid furloughs for certain nonbargaining employees for certain periods in
May and June 2006;
    
    Filing a motion with the Bankruptcy Court to terminate certain nonbargaining retiree
benefits, which motion is still pending approval by the Bankruptcy Court; and
    
    Implementing other internal cost-saving initiatives.
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Operating Activities
  Investing Activities
     Financing Activities
  Debt and Letters of Credit
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Off-Balance Sheet Arrangements
  Disclosures About Market Risks
  Fuel Prices
  Interest Rates
 The Wall Street Journal
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Risk Management Retention
    Foreign Currency Exchange Rates
   Inflation
  Critical Accounting Policies and Estimates
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Recent Accounting Pronouncements
  Factors Which May Affect Future Results
 Our business is subject to certain risks, including the risks set forth in Part II, Item 1A.Risk
Factors. Readers of this Quarterly Report on Form 10-Q should take such risks into account in
evaluating any investment decision involving our securities. More detailed information concerning
these and other risks is contained in other sections of this Quarterly Report on Form 10-Q and our
other Reports filed with the SEC.
 Cautionary Notice Regarding Forward-Looking Statements
   
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures.
 (b) Changes in Internal Control Over Financial Reporting.
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PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
   
 Item 1A. Risk Factors
 Our business is subject to certain risks, including the risks described below. Readers of this
Quarterly Report on Form 10-Q should take such risks into account in evaluating any investment
decision involving our securities. This Item 1A does not describe all risks applicable to our
business and is intended only as a summary of certain material factors that affect our operations
and the carhaul industry in which we operate. More detailed information concerning these and other
risks is contained in other sections of this Quarterly Report on Form 10-Q and our other reports
filed with the SEC.
 We may not be able to successfully reorganize under Chapter 11, which would likely terminate
our future business prospects and our ability to continue as a going concern and result in a
liquidation of our assets.
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We have a significant amount of debt and substantially all our assets are pledged as collateral for
debt obligations, which could limit our operational flexibility and customer relationships or
otherwise adversely affect our financial condition.
  
    
    We may not be able to repay, refinance or extend our debt as it matures. The Revolver
under the DIP Facility matures on February 2, 2007 and the term loans under the DIP
Facility mature on June 30, 2007;
    
    If we are not able to refinance or extend our debt when it matures, we may not be able
to repay the debt;
    
    Substantially all our assets are pledged as collateral for our debt and as a result we
are limited in our ability to sell assets to generate additional cash;
    
    Our flexibility in responding to changes in the business and industry may be reduced;
    
    We may be more vulnerable to economic downturns;
    
    We may be unable to invest in our fleet of Rigs;
    
    We may be unable to meet customer demands; and
    
    We may be limited in our ability to withstand competitive pressures.
 The terms of our DIP Facility place restrictions on us, which create risks of default and reduces
our flexibility.
   We will be required to make significant capital expenditures on our Rigs in the coming years or we
may not be able to maintain our current level of terminal operations or customer relationships.
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If we are not able to modify our Master Agreement with the IBT in the U.S. or renegotiate our other
union contracts on terms favorable to us as they expire, or if work stoppages or other labor
disruptions occur during such negotiations, it could preclude us from emerging from bankruptcy and
would have a material adverse effect on our operations.
   Rising interest rates could adversely affect our cash flow and interest expense.
   A shortage of fuel or higher fuel prices resulting from fuel shortages or other factors could have
a detrimental effect on the automotive industry or the automotive transportation industry and could
materially and adversely affect our operations.
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A further decline in the automotive industry could have a material adverse effect on our
operations.
  The internal strategies of our largest customers could have a material effect on our performance.
  Losses may exceed our insurance coverage or reserves.
   We have a history of losses and may not be able to improve our performance to achieve
profitability.
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Our restricted cash, cash equivalents and other time deposits are not available for use in our
general operations even if they were needed to fund our operations.
  If we do not maintain our relationships with major customers or these relationships are terminated,
reduced or redesigned, our operations could be materially and adversely affected.
   Competition in the automotive transportation industry could result in a loss of our market share or
a reduction in our rates, which could have a material adverse effect on our operations.
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Our common stock is not currently listed on a national securities exchange, which could make it
more difficult for investors to liquidate their shares, result in a decline in the stock price and
make it difficult for us to raise additional capital.
  Adverse changes in the foreign business climate, primarily in Canada, could adversely affect our
operations.
  Major changes in key personnel on whom we depend could adversely affect our operations.
  The loss of our Teamster drivers and mechanics could adversely affect our operations.
  We have previously had material weaknesses in our internal control over financial reporting,
and any unidentified material weaknesses could cause us to fail to meet our SEC and other
reporting requirements.
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Item 6. Exhibits
 (a) Exhibit Index
 Exhibit No.
    
    Description31.1
    
    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.
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SIGNATURES
  ALLIED HOLDINGS, INC.Date: September 8, 2006
    
    By:
    
    /s/ Hugh E. SawyerHugh E. Sawyer,President and Chief Executive OfficerDate: September 8, 2006By:
    
    /s/ Thomas H. KingThomas H. King,Executive Vice President and Chief FinancialOfficer (Principal Financial and Accounting Officer)
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EXHIBIT INDEX
 Exhibit No.
    
    Description31.1
    
    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.
 53