##### 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 March 31, 2007
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
 For the transition period from  to
 Commission File Number: 001-13867
 ALLIED SYSTEMS HOLDINGS, INC.
  DELAWARE
    
    58-0360550(State or other jurisdiction of
    
    (I.R.S. Employer Identificationincorporation or organization)
    
    Number)
 Suite 200, 160 Clairemont Avenue, Decatur, Georgia 30030
 (404) 373-4285  (Registrants telephone number, including area code)
 Allied Holdings, Inc.
 (Former name, former address and former fiscal year, if changed since last report)
 www.alliedholdings.com  (Web Page)
  o þ
  o o þ
  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 -
March 31, 2007 and December 31, 2006 (unaudited)
    
    
    1Consolidated Statements of Operations -
Three Months Ended March 31, 2007 and 2006 (unaudited)
    
    
    2Consolidated Statements of Cash Flows -
Three Months Ended March 31, 2007 and 2006 (unaudited)
    
    
    3Notes to the Consolidated Financial Statements (unaudited)
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    32Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    43Item 4. Controls and Procedures
    
    
    43PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    43Item 1A. Risk Factors
    
    
    43Item 5. Other Information
    
    
    48Item 6. Exhibits
    
    
    49SIGNATURES
    
    
    50EX-10.20(B) CONTRACT CARRIAGE AGREEMENT DATED APRIL 1, 2007EX-10.22(A) SECOND AMENDMENT TO MOTOR TRANSPORTATION CONTRACTEX-10.25 AMENDED AND RESTATED EMPLOYMENT AGREEMENT / KEITH RENTZELEX-10.26 AMENDED AND RESTATED EMPLOYMENT AGREEMENT / ROBERT FERRELLEX-10.27 SEVERANCE AGREEMENT / JOE MARINELLIEX-31.1 SECTION 302 CERTIFICATION OF THE CEOEX-31.2 SECTION 302 CERTIFICATION OF THE CFOEX-32.1 SECTION 906 CERTIFICATION OF THE CEOEX-32.2 SECTION 906 CERTIFICATION OF THE CFO




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Financial Statements
 ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
 
 CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 March 31,
    
    
    December 31,2007
    
    
    2006ASSETSCurrent assets:Cash and cash equivalents
    
    $
    28,172
    
    
    $
    2,314Restricted cash, cash equivalents and other time deposits
    
    
    32,278
    
    
    
    32,436Receivables, net of allowances of $1,460 and $1,701 as of March 31, 2007
and December 31, 2006, respectively
    
    
    49,041
    
    
    
    52,427Inventories
    
    
    4,766
    
    
    
    4,916Deferred income taxes
    
    
    2,982
    
    
    
    1,907Prepayments and other current assets
    
    
    19,665
    
    
    
    21,463Total current assets
    
    
    136,904
    
    
    
    115,463Property and equipment, net of accumulated depreciation
    
    
    134,787
    
    
    
    129,231Goodwill, net
    
    
    3,545
    
    
    
    3,545Other assets:Restricted cash, cash equivalents and other time deposits
    
    
    65,534
    
    
    
    65,857Other noncurrent assets
    
    
    33,119
    
    
    
    24,672Total other assets
    
    
    98,653
    
    
    
    90,529Total assets
    
    $
    373,889
    
    
    $
    338,768LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilities not subject to compromise:Debtor-in-possession credit facility
    
    $
    
    
    
    $
    161,357Canadian revolving credit facility
    
    
    372
    
    
    
    Accounts and notes payable
    
    
    30,090
    
    
    
    26,364Accrued liabilities
    
    
    75,950
    
    
    
    74,439Deferred income taxes
    
    
    106
    
    
    
    106Total current liabilities
    
    
    106,518
    
    
    
    262,266Long-term liabilities not subject to compromise:Debtor-in-possession credit facility
    
    
    205,000
    
    
    
    Postretirement benefits other than pensions
    
    
    14,202
    
    
    
    14,227Deferred income taxes
    
    
    3,003
    
    
    
    1,926Other long-term liabilities
    
    
    63,552
    
    
    
    65,269Total long-term liabilities
    
    
    285,757
    
    
    
    81,422Liabilities subject to compromise
    
    
    199,351
    
    
    
    199,212Commitments 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 March 31, 2007 and December 31, 2006
    
    
    
    
    
    
    Additional paid-in capital
    
    
    49,138
    
    
    
    49,081Treasury stock, 139 shares at cost
    
    
    (707
    )
    
    
    (707
    )Accumulated deficit
    
    
    (242,193
    )
    
    
    (228,432
    )Accumulated other comprehensive loss, net of tax
    
    
    (23,975
    )
    
    
    (24,074
    )Total stockholders deficit
    
    
    (217,737
    )
    
    
    (204,132
    )Total liabilities and stockholders deficit
    
    $
    373,889
    
    
    $
    338,768
  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 March 31,2007
    
    
    2006Revenues
    
    $
    193,121
    
    
    $
    240,828Operating expenses:Salaries, wages and fringe benefits
    
    
    100,535
    
    
    
    125,613Operating supplies and expenses
    
    
    43,113
    
    
    
    48,662Purchased transportation
    
    
    22,907
    
    
    
    30,908Insurance and claims
    
    
    8,905
    
    
    
    10,933Operating taxes and licenses
    
    
    6,696
    
    
    
    7,698Depreciation and amortization
    
    
    7,779
    
    
    
    7,216Rents
    
    
    1,896
    
    
    
    1,753Communications and utilities
    
    
    1,841
    
    
    
    1,937Other operating expenses
    
    
    2,105
    
    
    
    2,065Loss (gain) on disposal of operating assets, net
    
    
    30
    
    
    
    (54
    )Total operating expenses
    
    
    195,807
    
    
    
    236,731Operating (loss) income
    
    
    (2,686
    )
    
    
    4,097Other income (expense):Interest expense (excludes contractual interest of $3,234 in 2007
and 2006)
    
    
    (7,592
    )
    
    
    (9,541
    )Investment income
    
    
    1,202
    
    
    
    1,036Foreign exchange gains (losses), net
    
    
    343
    
    
    
    (170
    )Total other income (expense)
    
    
    (6,047
    )
    
    
    (8,675
    )Loss before reorganization items and income taxes
    
    
    (8,733
    )
    
    
    (4,578
    )Reorganization items
    
    
    (3,668
    )
    
    
    (3,583
    )Loss before income taxes
    
    
    (12,401
    )
    
    
    (8,161
    )Income tax expense
    
    
    (195
    )
    
    
    (127
    )Net loss
    
    $
    (12,596
    )
    
    $
    (8,288
    )Basic and diluted loss per common share:Net loss:Basic and diluted
    
    $
    (1.40
    )
    
    $
    (0.92
    )Weighted-average common shares outstanding:Basic and diluted
    
    
    8,980
    
    
    
    8,980
  2




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ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except per share data)
(Unaudited)
 Three Months Ended March 31,2007
    
    
    2006Cash flows from operating activities:Net loss
    
    $
    (12,596
    )
    
    $
    (8,288
    )Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation and amortization
    
    
    7,779
    
    
    
    7,216Loss (gain) on disposal of operating assets, net
    
    
    30
    
    
    
    (54
    )Write-off and amortization of deferred financing costs
    
    
    124
    
    
    
    3,631Interest expense paid in kind
    
    
    3,444
    
    
    
    Foreign exchange (gain) losses, net
    
    
    (343
    )
    
    
    170Reorganization items
    
    
    3,668
    
    
    
    3,583Deferred income taxes
    
    
    2
    
    
    
    1Stock-based compensation expense
    
    
    57
    
    
    
    93Change in operating assets and liabilities:Receivables, net of allowances
    
    
    3,474
    
    
    
    2,011Inventories
    
    
    161
    
    
    
    (19
    )Prepayments and other assets
    
    
    1,187
    
    
    
    3,697Accounts and notes payable
    
    
    2,413
    
    
    
    (247
    )Accrued liabilities
    
    
    (1,219
    )
    
    
    4,213Net cash provided by operating activities before payment of reorganization items
    
    
    8,181
    
    
    
    16,007Reorganization items paid
    
    
    (2,589
    )
    
    
    (2,936
    )Net cash provided by operating activities
    
    
    5,592
    
    
    
    13,071Cash flows from investing activities:Purchases of property and equipment
    
    
    (11,589
    )
    
    
    (6,216
    )Proceeds from sales of property and equipment
    
    
    152
    
    
    
    149Decrease in restricted cash, cash equivalents and other time deposits
    
    
    481
    
    
    
    9Funds deposited with insurance carriers
    
    
    (504
    )
    
    
    (574
    )Funds returned from insurance carriers
    
    
    964
    
    
    
    1,908Net cash used in investing activities
    
    
    (10,496
    )
    
    
    (4,724
    )Cash flows from financing activities:Net repayments of original debtor-in-possession revolving credit facility
    
    
    (45,005
    )
    
    
    (1,501
    )Net borrowings under Canadian revolving credit facility
    
    
    372
    
    
    
    Proceeds from new debtor-in-possession facility term borrowings
    
    
    205,000
    
    
    
    Proceeds from original debtor-in-possession facility term borrowings
    
    
    2,000
    
    
    
    Repayment of original debtor-in-possession facility term borrowings
    
    
    (121,796
    )
    
    
    Payment of financing costs
    
    
    (8,121
    )
    
    
    Proceeds from insurance financing arrangements
    
    
    
    
    
    
    178Repayments of insurance financing arrangements
    
    
    (1,611
    )
    
    
    (8,182
    )Net cash provided by (used in) financing activities
    
    
    30,839
    
    
    
    (9,505
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (77
    )
    
    
    (77
    )Net change in cash and cash equivalents
    
    
    25,858
    
    
    
    (1,235
    )Cash and cash equivalents at beginning of period
    
    
    2,314
    
    
    
    4,117Cash and cash equivalents at end of period
    
    $
    28,172
    
    
    $
    2,882Supplemental cash flow information:Cash paid during the year for:Interest
    
    $
    4,339
    
    
    $
    5,223Income taxes, net
    
    
    321
    
    
    
    150Supplemental disclosure of noncash financing activity:Interest paid in kind via addition to term debt
    
    $
    3,444
    
    
    $
    
  3




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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) or its successor, Allied Systems Holdings, Inc. (a Delaware 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 protection pursuant to the U.S. Bankruptcy Code.)
 (1) Organization and Operations
 Company Overview
  Chapter 11 Overview
     i)
    
    Payment in cash, reinstatement, return of collateral or other treatment of other
secured claims, as agreed to with the holder of each such claim;ii)
    
    Distribution of new common stock of Allied Systems Holdings, Inc. on a pro rata basis
to the holders of allowed general unsecured claims;iii)
    
    Cancellation of the existing
common stock interests in Allied Holdings, Inc. (holders of equity interests receive
nothing under the Joint Plan); andiv)
    
    Assumption of selected contracts.
   4




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ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
  (2) Accounting and Reporting Policies
 Basis of Presentation
 Financial Reporting by Entities in Reorganization Under the Bankruptcy
Code
    Use of Estimates and Seasonality
  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)
   (3) Accounting for Reorganization
  
    
    separated liabilities that are subject to compromise from liabilities that are not
subject to compromise;
    
    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) as of the Petition Date.
  Liabilities Subject to Compromise
  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)
    March 31,
    
    
    December 31,2007
    
    
    2006Accounts payable
    
    $
    25,326
    
    
    $
    25,156Senior Notes
    
    
    150,000
    
    
    
    150,000Accrued interest on Senior Notes
    
    
    4,313
    
    
    
    4,313Multiemployer pension withdrawal
liabilities
    
    
    15,847
    
    
    
    15,847Accrued claims and insurance reserves
    
    
    2,969
    
    
    
    3,000Other accrued liabilities
    
    
    896
    
    
    
    896$
    199,351
    
    
    $
    199,212
 Reorganization Items
  Three Months Ended March 31,2007
    
    
    2006Legal and professional fees
    
    $
    3,204
    
    
    $
    2,678Employee retention plan
    
    
    360
    
    
    
    817Other reorganization items
    
    
    104
    
    
    
    88$
    3,668
    
    
    $
    3,583
 Condensed Financial Statement Information of the Debtors and Non-debtors
  7




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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
March 31, 2007
(In thousands)
 Debtors
    
    
    Non-Debtors
    
    
    Eliminations
    
    
    ConsolidatedCurrent assets
    
    $
    100,936
    
    
    $
    36,704
    
    
    $
    (736
    )
    
    $
    136,904Intercompany receivables (payables)
    
    
    19,808
    
    
    
    (19,808
    )
    
    
    
    
    
    
    Property and equipment, net
    
    
    128,933
    
    
    
    5,854
    
    
    
    
    
    
    
    134,787Goodwill, net
    
    
    3,545
    
    
    
    
    
    
    
    
    
    
    
    3,545Investment in subsidiaries
    
    
    20,059
    
    
    
    6,220
    
    
    
    (26,279
    )
    
    
    Other assets
    
    
    32,883
    
    
    
    65,770
    
    
    
    
    
    
    
    98,653Total assets
    
    $
    306,164
    
    
    $
    94,740
    
    
    $
    (27,015
    )
    
    $
    373,889Liabilities not subject to compromise:Current liabilities
    
    $
    84,794
    
    
    $
    24,525
    
    
    $
    (2,801
    )
    
    $
    106,518Other noncurrent liabilities
    
    
    238,815
    
    
    
    46,942
    
    
    
    
    
    
    
    285,757Liabilities subject to compromise
    
    
    199,351
    
    
    
    
    
    
    
    
    
    
    
    199,351Stockholders (deficit) equity
    
    
    (216,796
    )
    
    
    23,273
    
    
    
    (24,214
    )
    
    
    (217,737
    )Total liabilities and stockholders (deficit) equity
    
    $
    306,164
    
    
    $
    94,740
    
    
    $
    (27,015
    )
    
    $
    373,889
 Condensed Consolidating Balance Sheet Information
December 31, 2006
(In thousands)
 Debtors
    
    
    Non-Debtors
    
    
    Eliminations
    
    
    ConsolidatedCurrent assets
    
    $
    78,646
    
    
    $
    36,796
    
    
    $
    21
    
    
    $
    115,463Intercompany receivables (payables)
    
    
    16,953
    
    
    
    (16,953
    )
    
    
    
    
    
    
    Property and equipment, net
    
    
    125,236
    
    
    
    3,995
    
    
    
    
    
    
    
    129,231Goodwill, net
    
    
    3,545
    
    
    
    
    
    
    
    
    
    
    
    3,545Investment in subsidiaries
    
    
    18,931
    
    
    
    6,220
    
    
    
    (25,151
    )
    
    
    Other assets
    
    
    24,402
    
    
    
    66,127
    
    
    
    
    
    
    
    90,529Total assets
    
    $
    267,713
    
    
    $
    96,185
    
    
    $
    (25,130
    )
    
    $
    338,768Liabilities not subject to compromise:Current liabilities
    
    $
    237,603
    
    
    $
    26,273
    
    
    $
    (1,610
    )
    
    $
    262,266Other noncurrent liabilities
    
    
    34,092
    
    
    
    47,330
    
    
    
    
    
    
    
    81,422Liabilities subject to compromise
    
    
    199,212
    
    
    
    
    
    
    
    
    
    
    
    199,212Stockholders (deficit) equity
    
    
    (203,194
    )
    
    
    22,582
    
    
    
    (23,520
    )
    
    
    (204,132
    )Total liabilities and stockholders (deficit) equity
    
    $
    267,713
    
    
    $
    96,185
    
    
    $
    (25,130
    )
    
    $
    338,768
 8




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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 Three Months Ended March 31, 2007
(In thousands)
 Debtors
    
    
    Non-Debtors
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    191,574
    
    
    $
    1,836
    
    
    $
    (289
    )
    
    $
    193,121Operating expenses
    
    
    194,478
    
    
    
    1,618
    
    
    
    (289
    )
    
    
    195,807Operating (loss) income
    
    
    (2,904
    )
    
    
    218
    
    
    
    
    
    
    
    (2,686
    )Other (expense) income, net
    
    
    (5,944
    )
    
    
    1,232
    
    
    
    (1,335
    )
    
    
    (6,047
    )(Loss) income before reorganization
items and income taxes
    
    
    (8,848
    )
    
    
    1,450
    
    
    
    (1,335
    )
    
    
    (8,733
    )Reorganization items
    
    
    (3,668
    )
    
    
    
    
    
    
    
    
    
    
    (3,668
    )(Loss) income before income taxes
    
    
    (12,516
    )
    
    
    1,450
    
    
    
    (1,335
    )
    
    
    (12,401
    )Income tax expense
    
    
    (80
    )
    
    
    (549
    )
    
    
    434
    
    
    
    (195
    )Net (loss) income
    
    $
    (12,596
    )
    
    $
    901
    
    
    $
    (901
    )
    
    $
    (12,596
    )
 Condensed Consolidating Statement of Operations Information
For the Three Months Ended March 31, 2006
(In thousands)
 Debtors
    
    
    Non-Debtors
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    239,770
    
    
    $
    1,398
    
    
    $
    (340
    )
    
    $
    240,828Operating expenses
    
    
    236,007
    
    
    
    1,064
    
    
    
    (340
    )
    
    
    236,731Operating income
    
    
    3,763
    
    
    
    334
    
    
    
    
    
    
    
    4,097Other (expense) income, net
    
    
    (8,449
    )
    
    
    960
    
    
    
    (1,186
    )
    
    
    (8,675
    )(Loss) income before reorganization
items and income taxes
    
    
    (4,686
    )
    
    
    1,294
    
    
    
    (1,186
    )
    
    
    (4,578
    )Reorganization items
    
    
    (3,583
    )
    
    
    
    
    
    
    
    
    
    
    (3,583
    )(Loss) income before income taxes
    
    
    (8,269
    )
    
    
    1,294
    
    
    
    (1,186
    )
    
    
    (8,161
    )Income tax expense
    
    
    (19
    )
    
    
    (342
    )
    
    
    234
    
    
    
    (127
    )Net (loss) income
    
    $
    (8,288
    )
    
    $
    952
    
    
    $
    (952
    )
    
    $
    (8,288
    )
 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)
 Condensed Consolidating Statement of Cash Flows Information
For the Three Months Ended March 31, 2007
(In thousands)
 Debtors
    
    
    Non-Debtors
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by (used in):Operating activities
    
    $
    4,020
    
    
    $
    1,572
    
    
    $
    
    
    
    $
    5,592Investing activities
    
    
    (8,627
    )
    
    
    (1,869
    )
    
    
    
    
    
    
    (10,496
    )Financing activities
    
    
    30,839
    
    
    
    
    
    
    
    
    
    
    
    30,839Effect of exchange rate changes on cash and
cash equivalents
    
    
    (143
    )
    
    
    66
    
    
    
    
    
    
    
    (77
    )Net change in cash and cash equivalents
    
    
    26,089
    
    
    
    (231
    )
    
    
    
    
    
    
    25,858Cash and cash equivalents at beginning of
period
    
    
    189
    
    
    
    2,125
    
    
    
    
    
    
    
    2,314Cash and cash equivalents at end of period
    
    $
    26,278
    
    
    $
    1,894
    
    
    $
    
    
    
    $
    28,172
 Condensed Consolidating Statement of Cash Flows Information
For the Three Months Ended March 31, 2006
(In thousands)
 Debtors
    
    
    Non-Debtors
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by (used in):Operating activities
    
    $
    13,895
    
    
    $
    (824
    )
    
    $
    
    
    
    $
    13,071Investing activities
    
    
    (4,710
    )
    
    
    (14
    )
    
    
    
    
    
    
    (4,724
    )Financing activities
    
    
    (9,505
    )
    
    
    
    
    
    
    
    
    
    
    (9,505
    )Effect of exchange rate changes on cash and
cash equivalents
    
    
    (77
    )
    
    
    
    
    
    
    
    
    
    
    (77
    )Net change in cash and cash equivalents
    
    
    (397
    )
    
    
    (838
    )
    
    
    
    
    
    
    (1,235
    )Cash and cash equivalents at beginning of
period
    
    
    730
    
    
    
    3,387
    
    
    
    
    
    
    
    4,117Cash and cash equivalents at end of period
    
    $
    333
    
    
    $
    2,549
    
    
    $
    
    
    
    $
    2,882
 Pro Forma Fresh-Start Balance Sheet
     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)
  March 31, 2007
    
    
    Plan
    
    
    Fresh Start
    
    
    March 31, 2007As Reported
    
    
    Effects
    
    
    Adjustments
    
    
    Pro forma(In thousands)Current assets
    
    $
    136,904
    
    
    $
    (987
    )(f)
    
    $
    (1,793
    )(i)
    
    $
    134,124Property and equipment, net
    
    
    134,787
    
    
    
    14,699
    (h)
    
    
    31,407
    (i)
    
    
    180,893Goodwill, net
    
    
    3,545
    
    
    
    
    
    
    
    (3,545
    )(e)
    
    
    Intangibles
    
    
    
    
    
    
    
    
    
    
    22,500
    (k)
    
    
    22,500Unallocated reorganization value
    
    
    
    
    
    
    
    
    
    
    63,989
    (g)
    
    
    63,989Other assets
    
    
    98,653
    
    
    
    
    
    
    
    (7,573
    )(a),(i)
    
    
    91,080Total assets
    
    $
    373,889
    
    
    $
    13,712
    
    
    $
    104,985
    
    
    $
    492,586Liabilities not subject to compromise:Current
    
    $
    106,518
    
    
    $
    3,729
    (c),(f)
    
    $
    (147
    )(j)
    
    $
    110,100Long-term
    
    
    285,757
    
    
    
    
    
    
    
    (1,271
    )(j)
    
    
    284,486Liabilities subject to compromise
    
    
    199,351
    
    
    
    (199,351
    )(c),(f)
    
    
    
    
    
    
    Stockholders (deficit) equity
    
    
    (217,737
    )
    
    
    209,334
    (b)
    
    
    106,403
    (d)
    
    
    98,000Total liabilities and
stockholders (deficit) equity
    
    $
    373,889
    
    
    $
    13,712
    
    
    $
    104,985
    
    
    $
    492,586
 
 (a)
    
    Reflects the estimated pro forma elimination of the deferred financing costs related to the
New DIP Facility and the estimated pro forma fair value adjustments related to royalties and
the defined benefit pension plan assets.(b)
    
    Reflects the pro forma issuance of Allied Systems Holdings, Inc. common stock to
certain pre-petition creditors, the pro forma cancellation of Allied Holdings, Inc. common and
treasury stock, the estimated pro forma gain on the settlement of liabilities subject to
compromise and the estimated pro forma effect of the conversion of the Rig Financing to
Allied Systems Holdings, Inc. common stock (see Note 11).(c)
    
    Reflects the estimated pro forma discharge of Allieds pre-petition liabilities in
accordance with the Joint Plan. Discharge of Allieds pre-petition liabilities is estimated
to include $198.1 million to be exchanged for Allied Systems Holdings, Inc. common stock and
$1.3 million to be paid in cash.(d)
    
    Reflects the elimination of historical accumulated deficit and other equity accounts and
an adjustment to stockholders equity to result in the estimated reorganized equity value in
accordance with SOP 90-7.(e)
    
    Reflects the pro forma elimination of the carrying amount of pre-confirmation goodwill.(f)
    
    Reflects the estimated pro forma accrual of contract cure costs of assumed contracts and
leases, professional fees related to the consummation of the Joint Plan and the estimated pro
forma effects resulting from the replacement of directors and officers insurance policies
effected upon our emergence from Chapter 11. 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)
 (g)
    
    Reflects the estimated pro forma unallocated reorganization value.(h)
    
    Reflects the pro forma effect of capital expenditures financed through the Rig Financing,
which was converted to Allied Systems Holdings, Inc. common stock upon our emergence from
Chapter 11 (see Note 11).(i)
    
    Reflects the estimated pro forma fair value adjustments relating to property and
equipment.(j)
    
    Reflects the estimated pro forma fair value adjustments related to the defined benefit
pension and other postretirement benefit plans.(k)
    
    Reflects the estimated pro forma fair value adjustments relating to customer
relationships, developed technology, trademarks and trade names. (4) Recent Accounting Pronouncements
 Fair Value Measurements Disclosures about Fair Value of Financial
Instruments,
 Employers Accounting for Defined Benefit Pension and Other Postretirement Plans  an amendment of
FASB Statements No. 87, 88, 106 and 132(R),
 The Fair Value Option For Financial Assets and
Financial Liabilities, including an Amendment of SFAS No. 115
 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)
  (5) Prepayments and Other Current Assets
  March 31,
    
    
    December 31,2007
    
    
    2006Prepaid insurance
    
    $
    10,547
    
    
    $
    14,689Tires on tractors and trailers
    
    
    2,325
    
    
    
    2,360Prepaid licenses
    
    
    3,773
    
    
    
    1,285Other
    
    
    3,020
    
    
    
    3,129$
    19,665
    
    
    $
    21,463
 (6) Property and Equipment
  March 31,
    
    
    December 31,2007
    
    
    2006Cost
    
    $
    536,847
    
    
    $
    527,844Accumulated depreciation
    
    
    (402,060
    )
    
    
    (398,613
    )$
    134,787
    
    
    $
    129,231
  (7) Other Noncurrent Assets
  March 31,
    
    
    December 31,2007
    
    
    2006Deposits with insurance companies
    
    $
    10,547
    
    
    $
    10,547Deferred financing costs
    
    
    8,121
    
    
    
    124Interest in split-dollar life insurance policies
    
    
    5,973
    
    
    
    5,973Tires on tractors and trailers
    
    
    2,906
    
    
    
    2,950Overfunded pension plans
    
    
    2,793
    
    
    
    2,473Other deposits
    
    
    2,544
    
    
    
    2,336Other
    
    
    235
    
    
    
    269$
    33,119
    
    
    $
    24,672
 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)
  March 31,
    
    
    December 31,2007
    
    
    2006Cost
    
    $
    8,121
    
    
    $
    345Accumulated amortization
    
    
    
    
    
    
    (221
    )$
    8,121
    
    
    $
    124
  (8) Accounts and Notes Payable and Accrued Liabilities
   March 31,
    
    
    December 31,2007
    
    
    2006Insurance and claims
    
    $
    37,095
    
    
    $
    38,786Wages and benefits
    
    
    28,917
    
    
    
    27,272Accrued taxes
    
    
    5,647
    
    
    
    3,797Accrued interest
    
    
    157
    
    
    
    738Purchased transportation
    
    
    3,051
    
    
    
    2,723Other
    
    
    1,083
    
    
    
    1,123$
    75,950
    
    
    $
    74,439
 (9) Insurance and Claims
    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)
 March 31,
    
    
    December 31,2007
    
    
    2006Accrued liabilities  current
    
    $
    37,095
    
    
    $
    38,786Other long-term liabilities  noncurrent
    
    
    60,571
    
    
    
    64,30797,666
    
    
    
    103,093Liabilities subject to compromise
    
    
    2,969
    
    
    
    3,000Total liability included in the consolidated balance sheets
    
    $
    100,635
    
    
    $
    106,093
   (10) Employee Benefit Plans
 (a) Pension and Postretirement Benefit Plans
  Defined Benefit
    
    
    Postretirement BenefitPension Plans
    
    
    PlansThree Months Ended March 31,2007
    
    
    2006
    
    
    2007
    
    
    2006Service cost
    
    $
    18
    
    
    $
    23
    
    
    $
    17
    
    
    $
    14Interest cost
    
    
    773
    
    
    
    762
    
    
    
    185
    
    
    
    164Expected return on plan assets
    
    
    (1,112
    )
    
    
    (1,014
    )
    
    
    
    
    
    
    Amortization of:Unrecognized net actuarial loss
    
    
    325
    
    
    
    524
    
    
    
    184
    
    
    
    169Prior service cost (credits)
    
    
    12
    
    
    
    12
    
    
    
    (76
    )
    
    
    (82
    )Net periodic benefit cost
    
    $
    16
    
    
    $
    307
    
    
    $
    310
    
    
    $
    265
    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)
 (b) Employee Retention Plan
   (11) Debt
  March 31,
    
    
    December 31,2007
    
    
    2006Current liabilities not subject to compromise:Original DIP Revolver
    
    $
    
    
    
    $
    45,005Original DIP Facility  Term Loan A
    
    
    
    
    
    
    20,000Original DIP Facility  Term Loan B
    
    
    
    
    
    
    85,709Original DIP Facility  Term Loan C
    
    
    
    
    
    
    10,643Canadian revolving credit facility
    
    
    372
    
    
    
    $
    372
    
    
    $
    161,357Noncurrent liabilities not subject to compromise:New DIP Facility
    
    $
    205,000
    
    
    $
    Liabilities subject to compromise:Senior Notes
    
    $
    150,000
    
    
    $
    150,000
 Original DIP Facility
 The Wall Street Journal
  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)
  New DIP Facility
  1 2
  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)
   Secured Credit Facilities
   
    
    First Lien Term Loan Facility  At our option, either the Base Rate (which is equal to the
greater of the prime rate as published from time to time in The Wall Street Journalor the
federal funds rate plus one-half of 1% ) plus 3.0%, or the Adjusted Eurodollar Rate plus 4.0%;
 
    
    Second Lien Term Loan Facility  At our option, either the Base Rate plus 6.5%, or the
Adjusted Eurodollar Rate plus 7.5%;
 
    
    First Lien Revolver  At our option, either the Base Rate plus 1.0%, or the Adjusted
Eurodollar Rate plus 2.0%.
     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)
    Debt Classification
 Classification of Short-Term Obligations Expected To Be Refinanced
 Canadian Revolving Credit Facility
  Rig Financing
  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)
 Senior Notes
 5
 (12) Income Taxes
  Accounting for Uncertainty in
Income Taxes Accounting for Income
Taxes,
    (13) Commitments and Contingencies
 (a) Chapter 11 Filing and Emergence
 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)
    (b) Letters of Credit
  (c) Litigation, Claims, Assessments
   (d) Purchase and Service Contract Commitments
  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)
 (e) Leases
  (f) Collective Bargaining Agreements
   
    
    Total U.S. wage concessions of 15%, limited to $35 million per year during the three-year
duration of the agreement;
    
    The elimination of future Teamster wage increases;
    
    A wage freeze relating to the salaries of management and other nonbargaining employees
during the three-year duration of the agreement, subject to certain exceptions;
    
    The right of Teamsters in the U.S. to receive a portion of earnings before interest,
taxes, depreciation and amortization (EBITDA) in excess of the projections included in the
Disclosure Statement for the Joint Plan;
    
    A requirement that a new Chief Executive Officer be appointed by the Effective Date; and
    
    A requirement that within ninety days of the Effective Date, Allied and the IBT reach an
agreement regarding the potential to have the employees of the Axis Group who perform carhaul
work be represented by the IBT and have all carhaul work controlled by the Axis Group
assigned by right of first refusal to our
Automotive Group or another carhaul company subject to the Master Agreement. Allied and the
IBT have extended the date to October 26, 2007 to reach an agreement on this matter. If
Allied and the IBT can not reach a mutual agreement on this matter by October 26, 2007, we
will have four months to sell those operations within the Axis Group.
   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)
  (g) Employee Agreements with Certain Executive Officers
    (14) Earnings (Loss) Per Common Share
 Earnings Per Share,
  (15) Stock-Based Compensation
   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)
 Share-Based Payment
 (16) Other Comprehensive Income (Loss)
  Three Months EndedMarch 31,2007
    
    
    2006Net loss
    
    $
    (12,596
    )
    
    $
    (8,288
    )Reclassification adjustment of amounts
recognized as components of net
periodic benefit cost, net of taxes of
$0
    
    
    444
    
    
    
    Foreign currency translation
adjustments, net of taxes of $0
    
    
    (345
    )
    
    
    56$
    (12,497
    )
    
    $
    (8,232
    )
  March 31,
    
    
    December 31,2007
    
    
    2006Foreign currency translation adjustments
    
    $
    (189
    )
    
    $
    156Pension and other postretirement benefit plan adjustments
    
    
    (23,786
    )
    
    
    (24,230
    )$
    (23,975
    )
    
    $
    (24,074
    )
 (17) Industry Segment and Geographic Information
 Disclosure About Segments of an Enterprise and
Related Information
  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)
 Three Months Ended March 31,2007
    
    
    2006Revenues   unaffiliated customers:Allied Automotive Group
    
    $
    185,521
    
    
    $
    233,412Axis Group
    
    
    7,600
    
    
    
    7,416Total
    
    $
    193,121
    
    
    $
    240,828Operating (loss) income:Allied Automotive Group
    
    $
    (2,942
    )
    
    $
    3,454Axis Group
    
    
    1,472
    
    
    
    1,561Corporate/other
    
    
    (1,216
    )
    
    
    (918
    )Total
    
    
    (2,686
    )
    
    
    4,097Reconciling items:Interest expense
    
    
    (7,592
    )
    
    
    (9,541
    )Investment income
    
    
    1,202
    
    
    
    1,036Foreign exchange gains (losses), net
    
    
    343
    
    
    
    (170
    )Loss before reorganization items and income taxes
    
    
    (8,733
    )
    
    
    (4,578
    )Reorganization items
    
    
    (3,668
    )
    
    
    (3,583
    )Loss before income taxes
    
    $
    (12,401
    )
    
    $
    (8,161
    )
  March 31,
    
    
    December 31,2007
    
    
    2006Total assets:Allied Automotive Group
    
    $
    202,750
    
    
    $
    201,040Axis Group
    
    
    22,495
    
    
    
    23,532Corporate/other
    
    
    148,644
    
    
    
    114,196Total
    
    $
    373,889
    
    
    $
    338,768
  Three Months Ended March 31,2007
    
    
    2006Revenues:United States
    
    $
    147,194
    
    
    $
    191,040Canada
    
    
    44,380
    
    
    
    48,730Other foreign operations
    
    
    1,547
    
    
    
    1,058Total
    
    $
    193,121
    
    
    $
    240,828
 March 31,
    
    
    December 31,2007
    
    
    2006Long-lived assets:United States
    
    $
    96,134
    
    
    $
    93,805Canada
    
    
    32,799
    
    
    
    31,431Other foreign operations
    
    
    5,854
    
    
    
    3,995Total
    
    $
    134,787
    
    
    $
    129,231
  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)
  (18) Supplemental Guarantor Information
   26




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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
March 31, 2007
(In thousands)
 Allied
    
    
    Guarantor
    
    
    NonguarantorHoldings
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCurrent assets:Cash and cash equivalents
    
    $
    25,821
    
    
    $
    457
    
    
    $
    1,894
    
    
    $
    
    
    
    $
    28,172Restricted cash, cash equivalents and other time
deposits
    
    
    
    
    
    
    
    
    
    
    32,278
    
    
    
    
    
    
    
    32,278Receivables, net of allowances
    
    
    
    
    
    
    46,914
    
    
    
    2,127
    
    
    
    
    
    
    
    49,041Inventories
    
    
    
    
    
    
    4,766
    
    
    
    
    
    
    
    
    
    
    
    4,766Deferred income taxes
    
    
    2,982
    
    
    
    
    
    
    
    (27
    )
    
    
    27
    
    
    
    2,982Prepayments and other
current assets
    
    
    1,128
    
    
    
    18,867
    
    
    
    433
    
    
    
    (763
    )
    
    
    19,665Total current assets
    
    
    29,931
    
    
    
    71,004
    
    
    
    36,705
    
    
    
    (736
    )
    
    
    136,904Property and equipment, net of accumulated depreciation
    
    
    3,079
    
    
    
    125,854
    
    
    
    5,854
    
    
    
    
    
    
    
    134,787Goodwill, net
    
    
    
    
    
    
    3,545
    
    
    
    
    
    
    
    
    
    
    
    3,545Other assets:Restricted cash, cash equivalents and other time
deposits
    
    
    
    
    
    
    
    
    
    
    65,534
    
    
    
    
    
    
    
    65,534Other noncurrent assets
    
    
    16,671
    
    
    
    16,211
    
    
    
    237
    
    
    
    
    
    
    
    33,119Intercompany receivables (payables)
    
    
    77,326
    
    
    
    (77,326
    )
    
    
    
    
    
    
    
    
    
    
    Investment in subsidiaries
    
    
    (107,001
    )
    
    
    5,910
    
    
    
    
    
    
    
    101,091
    
    
    
    Total other assets
    
    
    (13,004
    )
    
    
    (55,205
    )
    
    
    65,771
    
    
    
    101,091
    
    
    
    98,653Total assets
    
    $
    20,006
    
    
    $
    145,198
    
    
    $
    108,330
    
    
    $
    100,355
    
    
    $
    373,889Current liabilities not subject to compromise:Canadian revolving credit facility
    
    $
    
    
    
    $
    372
    
    
    $
    
    
    
    $
    
    
    
    $
    372Accounts and notes payable
    
    
    4,677
    
    
    
    25,279
    
    
    
    897
    
    
    
    (763
    )
    
    
    30,090Intercompany (receivables) payables
    
    
    (138,287
    )
    
    
    117,419
    
    
    
    20,868
    
    
    
    
    
    
    
    Accrued liabilities
    
    
    5,372
    
    
    
    49,105
    
    
    
    23,511
    
    
    
    (2,038
    )
    
    
    75,950Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    106
    
    
    
    
    
    
    
    106Total current liabilities
    
    
    (128,238
    )
    
    
    192,175
    
    
    
    45,382
    
    
    
    (2,801
    )
    
    
    106,518Long-term liabilities not subject to compromise:Debtor-in-possession credit facility
    
    
    205,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    205,000Postretirement benefits other than pensions
    
    
    
    
    
    
    14,202
    
    
    
    
    
    
    
    
    
    
    
    14,202Deferred income taxes
    
    
    3,003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,003Other long-term liabilities
    
    
    296
    
    
    
    16,313
    
    
    
    46,943
    
    
    
    
    
    
    
    63,552Total long-term liabilities
    
    
    208,299
    
    
    
    30,515
    
    
    
    46,943
    
    
    
    
    
    
    
    285,757Liabilities subject to compromise
    
    
    157,682
    
    
    
    41,669
    
    
    
    
    
    
    
    
    
    
    
    199,351Commitments and contingencies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stockholders (deficit) equity :Preferred stock, no par value
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Common stock, no par value
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Additional paid-in capital
    
    
    49,138
    
    
    
    166,130
    
    
    
    2,488
    
    
    
    (168,618
    )
    
    
    49,138Treasury stock
    
    
    (707
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (707
    )(Accumulated deficit) retained earnings
    
    
    (242,193
    )
    
    
    (262,173
    )
    
    
    13,940
    
    
    
    248,233
    
    
    
    (242,193
    )Accumulated other comprehensive loss,
net of tax
    
    
    (23,975
    )
    
    
    (23,118
    )
    
    
    (423
    )
    
    
    23,541
    
    
    
    (23,975
    )Total stockholders (deficit) equity
    
    
    (217,737
    )
    
    
    (119,161
    )
    
    
    16,005
    
    
    
    103,156
    
    
    
    (217,737
    )Total liabilities and stockholders
(deficit) equity
    
    $
    20,006
    
    
    $
    145,198
    
    
    $
    108,330
    
    
    $
    100,355
    
    
    $
    373,889
 27




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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, 2006
(In thousands)
 Allied
    
    
    Guarantor
    
    
    NonguarantorHoldings
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCurrent assets:Cash and cash equivalents
    
    $
    
    
    
    $
    189
    
    
    $
    2,125
    
    
    $
    
    
    
    $
    2,314Restricted cash, cash equivalents and other time
deposits
    
    
    
    
    
    
    
    
    
    
    32,436
    
    
    
    
    
    
    
    32,436Receivables, net of allowances
    
    
    
    
    
    
    51,035
    
    
    
    1,392
    
    
    
    
    
    
    
    52,427Inventories
    
    
    
    
    
    
    4,916
    
    
    
    
    
    
    
    
    
    
    
    4,916Deferred income taxes
    
    
    1,907
    
    
    
    
    
    
    
    (21
    )
    
    
    21
    
    
    
    1,907Prepayments and other
current assets
    
    
    867
    
    
    
    19,731
    
    
    
    865
    
    
    
    
    
    
    
    21,463Total current assets
    
    
    2,774
    
    
    
    75,871
    
    
    
    36,797
    
    
    
    21
    
    
    
    115,463Property and equipment, net of accumulated depreciation
    
    
    3,140
    
    
    
    122,096
    
    
    
    3,995
    
    
    
    
    
    
    
    129,231Goodwill, net
    
    
    
    
    
    
    3,545
    
    
    
    
    
    
    
    
    
    
    
    3,545Other assets:Restricted cash, cash equivalents and other time
deposits
    
    
    
    
    
    
    
    
    
    
    65,857
    
    
    
    
    
    
    
    65,857Other noncurrent assets
    
    
    8,279
    
    
    
    16,125
    
    
    
    268
    
    
    
    
    
    
    
    24,672Intercompany receivables (payables)
    
    
    76,868
    
    
    
    (76,868
    )
    
    
    
    
    
    
    
    
    
    
    Investment in subsidiaries
    
    
    (98,564
    )
    
    
    5,954
    
    
    
    
    
    
    
    92,610
    
    
    
    Total other assets
    
    
    (13,417
    )
    
    
    (54,789
    )
    
    
    66,125
    
    
    
    92,610
    
    
    
    90,529Total assets
    
    $
    (7,503
    )
    
    $
    146,723
    
    
    $
    106,917
    
    
    $
    92,631
    
    
    $
    338,768Current liabilities not subject to compromise:Debtor-in-possession credit facility
    
    $
    161,357
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    161,357Accounts and notes payable
    
    
    3,269
    
    
    
    23,039
    
    
    
    56
    
    
    
    
    
    
    
    26,364Intercompany (receivables) payables
    
    
    (133,318
    )
    
    
    115,309
    
    
    
    18,009
    
    
    
    
    
    
    
    Accrued liabilities
    
    
    5,825
    
    
    
    44,120
    
    
    
    26,104
    
    
    
    (1,610
    )
    
    
    74,439Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    106
    
    
    
    
    
    
    
    106Total current liabilities
    
    
    37,133
    
    
    
    182,468
    
    
    
    44,275
    
    
    
    (1,610
    )
    
    
    262,266Long-term liabilities not subject to compromise:Postretirement benefits other than pensions
    
    
    
    
    
    
    14,227
    
    
    
    
    
    
    
    
    
    
    
    14,227Deferred income taxes
    
    
    1,926
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,926Other long-term liabilities
    
    
    60
    
    
    
    17,879
    
    
    
    47,330
    
    
    
    
    
    
    
    65,269Total long-term liabilities
    
    
    1,986
    
    
    
    32,106
    
    
    
    47,330
    
    
    
    
    
    
    
    81,422Liabilities subject to compromise
    
    
    157,510
    
    
    
    41,702
    
    
    
    
    
    
    
    
    
    
    
    199,212Commitments and contingencies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stockholders (deficit) equity :Preferred stock, no par value
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Common stock, no par value
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Additional paid-in capital
    
    
    49,081
    
    
    
    166,130
    
    
    
    2,488
    
    
    
    (168,618
    )
    
    
    49,081Treasury stock
    
    
    (707
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (707
    )(Accumulated deficit) retained earnings
    
    
    (228,432
    )
    
    
    (253,206
    )
    
    
    13,039
    
    
    
    240,167
    
    
    
    (228,432
    )Accumulated other comprehensive loss,
net of tax
    
    
    (24,074
    )
    
    
    (22,477
    )
    
    
    (215
    )
    
    
    22,692
    
    
    
    (24,074
    )Total stockholders (deficit) equity
    
    
    (204,132
    )
    
    
    (109,553
    )
    
    
    15,312
    
    
    
    94,241
    
    
    
    (204,132
    )Total liabilities and stockholders
(deficit) equity
    
    $
    (7,503
    )
    
    $
    146,723
    
    
    $
    106,917
    
    
    $
    92,631
    
    
    $
    338,768
 28




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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 March 31, 2007
(In thousands)
 Allied
    
    
    Guarantor
    
    
    NonguarantorHoldings
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    6,431
    
    
    $
    191,574
    
    
    $
    1,836
    
    
    $
    (6,720
    )
    
    $
    193,121Operating expenses:Salaries, wages and fringe benefits
    
    
    1,066
    
    
    
    98,995
    
    
    
    474
    
    
    
    
    
    
    
    100,535Operating supplies and expenses
    
    
    3,673
    
    
    
    39,086
    
    
    
    354
    
    
    
    
    
    
    
    43,113Purchased transportation
    
    
    
    
    
    
    22,881
    
    
    
    26
    
    
    
    
    
    
    
    22,907Insurance and claims
    
    
    
    
    
    
    8,898
    
    
    
    296
    
    
    
    (289
    )
    
    
    8,905Operating taxes and licenses
    
    
    67
    
    
    
    6,543
    
    
    
    86
    
    
    
    
    
    
    
    6,696Depreciation and amortization
    
    
    194
    
    
    
    7,308
    
    
    
    277
    
    
    
    
    
    
    
    7,779Rents
    
    
    363
    
    
    
    1,524
    
    
    
    9
    
    
    
    
    
    
    
    1,896Communications and utilities
    
    
    829
    
    
    
    990
    
    
    
    22
    
    
    
    
    
    
    
    1,841Other operating expenses
    
    
    1,416
    
    
    
    7,046
    
    
    
    74
    
    
    
    (6,431
    )
    
    
    2,105Loss on disposal of operating assets, net
    
    
    
    
    
    
    30
    
    
    
    
    
    
    
    
    
    
    
    30Total operating expenses
    
    
    7,608
    
    
    
    193,301
    
    
    
    1,618
    
    
    
    (6,720
    )
    
    
    195,807Operating (loss) income
    
    
    (1,177
    )
    
    
    (1,727
    )
    
    
    218
    
    
    
    
    
    
    
    (2,686
    )Other income (expense):Interest expense
    
    
    (1,197
    )
    
    
    (6,337
    )
    
    
    (58
    )
    
    
    
    
    
    
    (7,592
    )Investment income
    
    
    
    
    
    
    10
    
    
    
    1,192
    
    
    
    
    
    
    
    1,202Foreign exchange gains, net
    
    
    
    
    
    
    245
    
    
    
    98
    
    
    
    
    
    
    
    343Equity in (losses) earnings of subsidiaries
    
    
    (6,677
    )
    
    
    165
    
    
    
    
    
    
    
    6,512
    
    
    
    Total other income (expense)
    
    
    (7,874
    )
    
    
    (5,917
    )
    
    
    1,232
    
    
    
    6,512
    
    
    
    (6,047
    )(Loss) income before reorganization items and income taxes
    
    
    (9,051
    )
    
    
    (7,644
    )
    
    
    1,450
    
    
    
    6,512
    
    
    
    (8,733
    )Reorganization items
    
    
    (3,526
    )
    
    
    (141
    )
    
    
    (1
    )
    
    
    
    
    
    
    (3,668
    )(Loss) income before income taxes
    
    
    (12,577
    )
    
    
    (7,785
    )
    
    
    1,449
    
    
    
    6,512
    
    
    
    (12,401
    )Income tax expense
    
    
    (19
    )
    
    
    (62
    )
    
    
    (548
    )
    
    
    434
    
    
    
    (195
    )Net (loss) income
    
    $
    (12,596
    )
    
    $
    (7,847
    )
    
    $
    901
    
    
    $
    6,946
    
    
    $
    (12,596
    )
 SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
Three Months Ended March 31, 2006
(In thousands)
 Allied
    
    
    Guarantor
    
    
    NonguarantorHoldings
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    6,512
    
    
    $
    239,770
    
    
    $
    1,398
    
    
    $
    (6,852
    )
    
    $
    240,828Operating expenses:Salaries, wages and fringe benefits
    
    
    1,211
    
    
    
    124,136
    
    
    
    266
    
    
    
    
    
    
    
    125,613Operating supplies and expenses
    
    
    3,419
    
    
    
    45,111
    
    
    
    132
    
    
    
    
    
    
    
    48,662Purchased transportation
    
    
    
    
    
    
    30,888
    
    
    
    20
    
    
    
    
    
    
    
    30,908Insurance and claims
    
    
    
    
    
    
    10,930
    
    
    
    343
    
    
    
    (340
    )
    
    
    10,933Operating taxes and licenses
    
    
    60
    
    
    
    7,638
    
    
    
    
    
    
    
    
    
    
    
    7,698Depreciation and amortization
    
    
    204
    
    
    
    6,851
    
    
    
    161
    
    
    
    
    
    
    
    7,216Rents
    
    
    361
    
    
    
    1,388
    
    
    
    4
    
    
    
    
    
    
    
    1,753Communications and utilities
    
    
    868
    
    
    
    1,057
    
    
    
    12
    
    
    
    
    
    
    
    1,937Other operating expenses
    
    
    1,277
    
    
    
    7,172
    
    
    
    128
    
    
    
    (6,512
    )
    
    
    2,065Gain on disposal of operating assets, net
    
    
    
    
    
    
    (54
    )
    
    
    
    
    
    
    
    
    
    
    (54
    )Total operating expenses
    
    
    7,400
    
    
    
    235,117
    
    
    
    1,066
    
    
    
    (6,852
    )
    
    
    236,731Operating (loss) income
    
    
    (888
    )
    
    
    4,653
    
    
    
    332
    
    
    
    
    
    
    
    4,097Other income (expense):Interest expense
    
    
    (2,427
    )
    
    
    (7,051
    )
    
    
    (63
    )
    
    
    
    
    
    
    (9,541
    )Investment income
    
    
    
    
    
    
    9
    
    
    
    1,027
    
    
    
    
    
    
    
    1,036Foreign exchange losses, net
    
    
    
    
    
    
    (167
    )
    
    
    (3
    )
    
    
    
    
    
    
    (170
    )Equity in (losses) earnings of subsidiaries
    
    
    (1,460
    )
    
    
    264
    
    
    
    
    
    
    
    1,196
    
    
    
    Total other income (expense)
    
    
    (3,887
    )
    
    
    (6,945
    )
    
    
    961
    
    
    
    1,196
    
    
    
    (8,675
    )(Loss) income before reorganization items and income taxes
    
    
    (4,775
    )
    
    
    (2,292
    )
    
    
    1,293
    
    
    
    1,196
    
    
    
    (4,578
    )Reorganization items
    
    
    (3,495
    )
    
    
    (88
    )
    
    
    
    
    
    
    
    
    
    
    (3,583
    )(Loss) income before income taxes
    
    
    (8,270
    )
    
    
    (2,380
    )
    
    
    1,293
    
    
    
    1,196
    
    
    
    (8,161
    )Income tax (expense) benefit
    
    
    (18
    )
    
    
    (2
    )
    
    
    (341
    )
    
    
    234
    
    
    
    (127
    )Net (loss) income
    
    $
    (8,288
    )
    
    $
    (2,382
    )
    
    $
    952
    
    
    $
    1,430
    
    
    $
    (8,288
    )
 29




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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 CASH FLOWS INFORMATION
Three Months Ended March 31, 2007
(In thousands)
 Allied
    
    
    Guarantor
    
    
    NonguarantorHoldings
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net (loss) income
    
    $
    (12,596
    )
    
    $
    (7,847
    )
    
    $
    901
    
    
    $
    6,946
    
    
    $
    (12,596
    )Adjustments to reconcile net (loss) income to net
cash (used in) provided by operating activities:Depreciation and amortization
    
    
    194
    
    
    
    7,308
    
    
    
    277
    
    
    
    
    
    
    
    7,779Gain on disposal of operating assets, net
    
    
    
    
    
    
    30
    
    
    
    
    
    
    
    
    
    
    
    30Write-off and amortization of deferred financing costs
    
    
    124
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    124Interest expense paid in kind
    
    
    3,444
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,444Foreign exchange gains
    
    
    
    
    
    
    (245
    )
    
    
    (98
    )
    
    
    
    
    
    
    (343
    )Reorganization items
    
    
    3,526
    
    
    
    141
    
    
    
    1
    
    
    
    
    
    
    
    3,668Deferred income taxes
    
    
    2
    
    
    
    (6
    )
    
    
    6
    
    
    
    
    
    
    
    2Stock-based compensation expense
    
    
    57
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    57Equity in (earnings) losses of subsidiaries
    
    
    6,677
    
    
    
    (165
    )
    
    
    
    
    
    
    (6,512
    )
    
    
    Change in operating assets and liabilities:
    
    
    
    
    
    
    
    
    

    Receivables, net of allowances
    
    
    
    
    
    
    4,209
    
    
    
    (735
    )
    
    
    
    
    
    
    3,474Inventories
    
    
    
    
    
    
    161
    
    
    
    
    
    
    
    
    
    
    
    161Prepayments and other assets
    
    
    (376
    )
    
    
    1,060
    
    
    
    503
    
    
    
    
    
    
    
    1,187Accounts and notes payable
    
    
    447
    
    
    
    1,125
    
    
    
    841
    
    
    
    
    
    
    
    2,413Intercompany payables/receivables
    
    
    (4,969
    )
    
    
    2,110
    
    
    
    2,859
    
    
    
    
    
    
    
    Accrued liabilities
    
    
    (168
    )
    
    
    2,365
    
    
    
    (2,982
    )
    
    
    (434
    )
    
    
    (1,219
    )Net cash (used in) provided by operating activities
before payment of reorganization items
    
    
    (3,638
    )
    
    
    10,246
    
    
    
    1,573
    
    
    
    
    
    
    
    8,181Reorganization items paid
    
    
    (2,486
    )
    
    
    (102
    )
    
    
    (1
    )
    
    
    
    
    
    
    (2,589
    )Net cash (used in) provided by operating activities
    
    
    (6,124
    )
    
    
    10,144
    
    
    
    1,572
    
    
    
    
    
    
    
    5,592Cash flows from investing activities:Purchases of property and equipment
    
    
    (133
    )
    
    
    (9,106
    )
    
    
    (2,350
    )
    
    
    
    
    
    
    (11,589
    )Proceeds from sales of property and equipment
    
    
    
    
    
    
    152
    
    
    
    
    
    
    
    
    
    
    
    152Decrease in restricted cash, cash equivalents and other time deposits
    
    
    
    
    
    
    
    
    
    
    481
    
    
    
    
    
    
    
    481Funds deposited with insurance carriers
    
    
    
    
    
    
    (504
    )
    
    
    
    
    
    
    
    
    
    
    (504
    )Funds returned from insurance carriers
    
    
    
    
    
    
    964
    
    
    
    
    
    
    
    
    
    
    
    964Net cash used in investing activities
    
    
    (133
    )
    
    
    (8,494
    )
    
    
    (1,869
    )
    
    
    
    
    
    
    (10,496
    )Cash flows from financing activities:Net repayments of original debtor-in-possession revolving credit facility
    
    
    (45,005
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (45,005
    )Net borrowings under Canadian revolving credit facility
    
    
    
    
    
    
    372
    
    
    
    
    
    
    
    
    
    
    
    372Proceeds from new debtor-in-possession facility term borrowings
    
    
    205,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    205,000Proceeds from original debtor-in-possession facility term borrowings
    
    
    2,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,000Repayment of original debtor-in-possession facility term borrowings
    
    
    (121,796
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (121,796
    )Payment of deferred financing costs
    
    
    (8,121
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,121
    )Repayments of insurance financing arrangements
    
    
    
    
    
    
    (1,611
    )
    
    
    
    
    
    
    
    
    
    
    (1,611
    )Net cash provided by (used in) financing activities
    
    
    32,078
    
    
    
    (1,239
    )
    
    
    
    
    
    
    
    
    
    
    30,839Effect of exchange rate changes on cash and
cash equivalents
    
    
    
    
    
    
    (143
    )
    
    
    66
    
    
    
    
    
    
    
    (77
    )Net change in cash and cash equivalents
    
    
    25,821
    
    
    
    268
    
    
    
    (231
    )
    
    
    
    
    
    
    25,858Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    189
    
    
    
    2,125
    
    
    
    
    
    
    
    2,314Cash and cash equivalents at end of period
    
    $
    25,821
    
    
    $
    457
    
    
    $
    1,894
    
    
    $
    
    
    
    $
    28,172
 30




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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 CASH FLOWS INFORMATIONThree Months Ended March 31, 2006
(In thousands)
 Allied
    
    
    Guarantor
    
    
    NonguarantorHoldings
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net (loss) income
    
    $
    (8,288
    )
    
    $
    (2,382
    )
    
    $
    952
    
    
    $
    1,430
    
    
    $
    (8,288
    )Adjustments to reconcile net (loss) income to net
cash provided by (used in) operating activities:Depreciation and amortization
    
    
    204
    
    
    
    6,851
    
    
    
    161
    
    
    
    
    
    
    
    7,216Gain on disposal of assets and other, net
    
    
    
    
    
    
    (54
    )
    
    
    
    
    
    
    
    
    
    
    (54
    )Amortization of deferred financing costs
    
    
    3,631
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,631Foreign exchange losses
    
    
    
    
    
    
    170
    
    
    
    
    
    
    
    
    
    
    
    170Reorganization items
    
    
    3,495
    
    
    
    88
    
    
    
    
    
    
    
    
    
    
    
    3,583Deferred income taxes
    
    
    24
    
    
    
    
    
    
    
    13
    
    
    
    (36
    )
    
    
    1Stock-based compensation expense
    
    
    93
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    93Equity in losses (earnings) of subsidiaries
    
    
    1,460
    
    
    
    (264
    )
    
    
    
    
    
    
    (1,196
    )
    
    
    Change in operating assets and liabilities:Receivables, net of allowances
    
    
    
    
    
    
    2,234
    
    
    
    (223
    )
    
    
    
    
    
    
    2,011Inventories
    
    
    
    
    
    
    (19
    )
    
    
    
    
    
    
    
    
    
    
    (19
    )Prepayments and other assets
    
    
    (3
    )
    
    
    2,404
    
    
    
    1,296
    
    
    
    
    
    
    
    3,697Accounts and notes payable
    
    
    1,298
    
    
    
    (1,863
    )
    
    
    318
    
    
    
    
    
    
    
    (247
    )Intercompany payables/receivables
    
    
    2,014
    
    
    
    (2,303
    )
    
    
    289
    
    
    
    
    
    
    
    Accrued liabilities
    
    
    504
    
    
    
    7,497
    
    
    
    (3,590
    )
    
    
    (198
    )
    
    
    4,213Net cash provided by (used in) operating activities
before payment of reorganization items
    
    
    4,432
    
    
    
    12,359
    
    
    
    (784
    )
    
    
    
    
    
    
    16,007Reorganization items paid
    
    
    (2,931
    )
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    (2,936
    )Net cash provided by (used in) operating activities
    
    
    1,501
    
    
    
    12,354
    
    
    
    (784
    )
    
    
    
    
    
    
    13,071Cash flows from investing activities:Purchases of property and equipment
    
    
    
    
    
    
    (6,190
    )
    
    
    (26
    )
    
    
    
    
    
    
    (6,216
    )Proceeds from sales of property and equipment
    
    
    
    
    
    
    149
    
    
    
    
    
    
    
    
    
    
    
    149Decrease in restricted cash, cash equivalents and other time deposits
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    
    
    
    
    9Funds deposited with insurance carriers
    
    
    
    
    
    
    (574
    )
    
    
    
    
    
    
    
    
    
    
    (574
    )Funds returned from insurance carriers
    
    
    
    
    
    
    1,908
    
    
    
    
    
    
    
    
    
    
    
    1,908Net cash provided by (used in) investing activities
    
    
    
    
    
    
    (4,707
    )
    
    
    (17
    )
    
    
    
    
    
    
    (4,724
    )Cash flows from financing activities:Net repayments of original debtor-in-possession revolving credit
facility
    
    
    (1,501
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,501
    )Proceeds from insurance financing arrangements
    
    
    
    
    
    
    178
    
    
    
    
    
    
    
    
    
    
    
    178Repayments of insurance financing arrangements
    
    
    
    
    
    
    (8,182
    )
    
    
    
    
    
    
    
    
    
    
    (8,182
    )Net cash used in financing activities
    
    
    (1,501
    )
    
    
    (8,004
    )
    
    
    
    
    
    
    
    
    
    
    (9,505
    )Effect of exchange rate changes on cash and
cash equivalents
    
    
    
    
    
    
    (77
    )
    
    
    
    
    
    
    
    
    
    
    (77
    )Net change in cash and cash equivalents
    
    
    
    
    
    
    (434
    )
    
    
    (801
    )
    
    
    
    
    
    
    (1,235
    )Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    730
    
    
    
    3,387
    
    
    
    
    
    
    
    4,117Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    296
    
    
    $
    2,586
    
    
    $
    
    
    
    $
    2,882
 31




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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 Form 10-K for the year ended December 31,
2006. 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 in Part II, Item 1A. Risk Factors in this Quarterly Report on Form 10-Q.
 Executive Overview
   i)
    
    Payment in cash, reinstatement, return of collateral or other treatment of other
secured claims, as agreed with the holder of each such claim;ii)
    
    Distribution of new common stock of Allied Systems Holdings, Inc. on a pro rata basis
to the holders of allowed general unsecured claims;iii)
    
    Cancellation of the existing common stock interests in Allied Holdings, Inc. (holders
of equity interests receive nothing under the Joint Plan); andiv)
    
    Assumption of selected contracts.
    32




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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 March 31, 2007 Compared to Three Months Ended March 31, 2006
  33




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##### Table of Contents



As a % of revenuesThree Months ended March 31,2007
    
    2006%
    
    
    
    %Revenues
    
    
    100.0
    %
    
    
    100.0
    %Operating expenses:Salaries, wages, and fringe benefits
    
    
    52.1
    %
    
    
    52.2
    %Operating supplies and expenses
    
    
    22.3
    %
    
    
    20.2
    %Purchased transportation
    
    
    11.9
    %
    
    
    12.8
    %Insurance and claims
    
    
    4.6
    %
    
    
    4.5
    %Operating taxes and licenses
    
    
    3.5
    %
    
    
    3.2
    %Depreciation and amortization
    
    
    4.0
    %
    
    
    3.0
    %Rents
    
    
    1.0
    %
    
    
    0.7
    %Communications and utilities
    
    
    1.0
    %
    
    
    0.8
    %Other operating expenses
    
    
    1.1
    %
    
    
    0.9
    %Loss (gain) on disposal of operating assets, net
    
    
    0.0
    %
    
    
    (0.0
    )%Total operating expenses
    
    
    101.5
    %
    
    
    98.3
    %Operating (loss) income
    
    
    (1.5
    )%
    
    
    1.7
    %Other income (expense):Interest expense
    
    
    (3.9
    )%
    
    
    (4.0
    )%Investment income
    
    
    0.6
    %
    
    
    0.4
    %Foreign exchange gains (losses), net
    
    
    0.2
    %
    
    
    (0.1
    )%Total other income (expense):
    
    
    (3.1
    )%
    
    
    (3.7
    )%Loss before reorganization items and income taxes
    
    
    (4.6
    )%
    
    
    (2.0
    )%Reorganization items
    
    
    (1.9
    )%
    
    
    (1.5
    )%Loss before income taxes
    
    
    (6.5
    )%
    
    
    (3.5
    )%Income tax expense
    
    
    (0.1
    )%
    
    
    (0.1
    )%Net loss
    
    
    (6.6
    )%
    
    
    (3.6
    )%
 Revenues
       34




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##### Table of Contents



Salaries, wages and fringe benefits
  
    
    The decrease in the number of vehicles delivered in the first quarter of 2007 compared to
the first quarter of 2006, which resulted in a decrease in bargaining wages and benefits of
approximately $18.4 million. Driver pay is based primarily on the number of miles driven to
deliver vehicles and is affected by changes in revenue related to changes in volume.
    
    Lower workers compensation expense of $5.8 million due primarily to the effect of lower
premiums for 2007 coverage and to a lesser extent, favorable development of claims from prior
years of $1.0 million; and
    
    A reduction in non-bargaining salaries and benefits of $1.3 million due primarily to a 5.9%
reduction in the average number of employees and lower costs for employee medical claims in
the first quarter of 2007 compared to the first quarter of 2006.
  35




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##### Table of Contents



Operating supplies and expenses
    
    
    A decrease of $3.0 million in fuel expense due primarily to the lower number of vehicles
delivered, partially offset by an increase in the average price of fuel. We estimate that the
lower number of vehicles delivered resulted in a reduction in fuel expense of approximately
$3.7 million which was partially offset by approximately $0.7 million due to the increase in
the price of fuel; and
    
    A decrease of $2.8 million in repairs and maintenance primarily as a result of the lower
number of miles driven to deliver vehicles.
  Purchased transportation
  Insurance and claims
  36




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##### Table of Contents



Operating taxes and licenses
  Depreciation and amortization
  Interest expense
  
    
    Lower amortization of deferred financing costs in the first quarter of 2007 compared to the
first quarter of 2006. Primarily as a result of the first quarter 2006 accelerated
amortization of deferred financing costs related to the Original DIP Facility, deferred
financing costs in the first quarter of 2007 were $3.5 million lower than the first quarter of
2006. In March 2006, the amortization period for the deferred financing costs related to the
Original DIP Facility was revised to end on the extended date of the forbearance period, May
18, 2006. Previously, the costs were being amortized through the original maturity date,
February 2, 2007.
    
    Lower interest of $0.5 million related to insurance financing arrangements as a result of
lower insurance borrowings in 2007 compared to 2006.
  
    
    A prepayment penalty of $1.1 million, incurred during the first quarter of 2007, in respect
of the Original DIP Facility;
    
    Lender fees of approximately $0.6 million incurred during the first quarter of 2007,
related to the Original DIP Facility; and
    
    An increase in the effective interest rate. Average interest rates were approximately 0.95
percentage points higher in the first quarter of 2007 compared to the first quarter of 2006
resulting in additional interest expense of approximately $0.4 million.
 Investment income
  37




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##### Table of Contents



Reorganization items
  Income taxes
  Liquidity and Capital Resources
  Operating Activities
  Investing Activities
   38




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##### Table of Contents



Financing Activities
  
    
    Net borrowings under our credit facilities were approximately $40.6 million in the first
quarter of 2007. In the first quarter of 2006, we had net repayments of $1.5 million under
the then revolving credit facility;
    
    During the first quarter of 2007, the repayments under insurance financing arrangements
were $6.6 million lower than the repayments during the first quarter of 2006 since more
premiums were financed for the 2006 coverage; and
    
    In the first quarter of 2007, we paid financing costs of $8.1 million related to the New
DIP Facility, partially offsetting the other increases.
 Debt and Letters of Credit
   
    
    First Lien Term Loan Facility  At our option, either the Base Rate (which is equal to
the greater of the prime rate as published from time to time in The Wall Street Journalor
the federal funds rate plus one-half of 1%) plus 3.0%, or the Adjusted Eurodollar Rate plus
4.0%;
    
    Second Lien Term Loan Facility  At our option, either the Base Rate plus 6.5%, or the
Adjusted Eurodollar Rate plus 7.5%; and
    
    First Lien Revolver  At our option, either the Base Rate plus 1.0%, or the Adjusted
Eurodollar Rate plus 2.0%.To mitigate the risk of rising interest rates, in August 2007 we entered into floating-to-fixed
interest rate swap agreements with an aggregate notional value of $180 million. These interest
rate swap agreements have three-year terms and fix the LIBOR component to a weighted-average fixed
rate of 5.13% during the terms. Our Secured Credit Facilities require us to hedge a minimum of 50%
of the aggregate principal amount of the total indebtedness under
those facilities at the date of the conversion. Future results
of operations could be impacted by unrealized gains or losses related to these interest rate swap
agreements.
  39




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##### Table of Contents



Off-Balance Sheet Arrangements
  Disclosures About Market Risks
  Fuel Prices
  Interest Rates
  40




---



##### Table of Contents



Risk Management Retention
    Foreign Currency Exchange Rates
   Inflation
  Critical Accounting Policies and Estimates
  41




---



##### Table of Contents



Accounting for Uncertainty in Income Taxes 
   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 Securities and Exchange Commission (SEC).
 Cautionary Notice Regarding Forward-Looking Statements
  42




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##### Table of Contents



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.
  
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
   
 Item 1A. Risk Factors
  43




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##### Table of Contents



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.
    
    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 the Secured Credit Facilities place restrictions on us, which create risks of default
and limits our flexibility.
   We will be required to make significant capital expenditures on our Rigs in the coming years and we
may not be able to maintain our current level of terminal operations or customer relationships.
   44




---



##### Table of Contents



If we are not able to renegotiate our union contracts on terms favorable to us as they expire, or
if work stoppages or other labor disruptions occur during such negotiations, it could 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.
   A further decline in the automotive industry could have a material adverse effect on our
operations.
  45




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##### Table of Contents



The internal strategies of our largest customers could have a material effect on our performance.
  Losses may exceed our insurance coverage or liabilities recorded.
    We have a history of losses and may not be able to improve our performance to achieve
profitability.
  Our restricted cash, cash equivalents and other time deposits are not available for use in our
operations even if needed to fund our operations.
  46




---



##### Table of Contents



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.
  Our
common stock is not currently listed on a national securities
exchange, and is subject to restrictions on transfer 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.
  We
may terminate our SEC reporting obligations, which could make an
investment in our common stock less liquid.
  Adverse changes in the foreign business climate, primarily in Canada, could adversely affect our
operations.
 47




---



##### Table of Contents



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.
     48




---



##### Table of Contents



Item 5. Other Information
  th
 
 Item 6. Exhibits
 (a) Exhibit Index
 Exhibit No.
    
    Description10.20(b) £
    
    Contract Carriage Agreement dated April 1, 2007, by and
between TOYOTA MOTOR SALES, U.S.A., INC., and ALLIED
SYSTEMS, LTD. (L.P.)10.22(a) £
    
    SECOND AMENDMENTto Motor Transportation Contract dated 11th
day of June, 2007, by and between AMERICAN HONDA MOTOR CO.,
INC. and ALLIED SYSTEMS, LTD.10.25
    
    AMENDED AND RESTATED EMPLOYMENT AGREEMENT dated July 2007,
by and between KEITH RENTZEL and ALLIED AUTOMOTIVE GROUP,
INC.10.26
    
    AMENDED AND RESTATED EMPLOYMENT AGREEMENT dated July 2007,
by and between ROBERT FERRELL and ALLIED AUTOMOTIVE GROUP,
INC.10.27
    
    SEVERANCE AGREEMENT between JOE MARINELLI and ALLIED
AUTOMOTIVE GROUP, INC.31.1
    
    Rule 13a-14(a)/15d-14(a) Certification by Mark J. Gendregske.31.2
    
    Rule 13a-14(a)/15d-14(a) Certification by Thomas H. King.32.1
    
    Section 1350 Certification by Mark J. Gendregske.32.2
    
    Section 1350 Certification by Thomas H. King.
 
 £
    
    Confidential treatment has been requested with respect to portions of this exhibit. 49




---



##### Table of Contents



SIGNATURES
  ALLIED HOLDINGS, INC.Date: October 11, 2007
    By:
    /s/ Mark J. GendregskeMark J. Gendregske,President and Chief Executive OfficerDate: October 11, 2007
    By:
    /s/ Thomas H. KingThomas H. King,Executive Vice President and Chief Financial
Officer (Principal Financial and Accounting 
   Officer) 50




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description10.20(b) £
    
    Contract Carriage Agreement dated April 1, 2007, by and
between TOYOTA MOTOR SALES, U.S.A., INC., and ALLIED
SYSTEMS, LTD. (L.P.)10.22(a) £
    
    SECOND AMENDMENTto Motor Transportation Contract dated 11th
day of June, 2007, by and between AMERICAN HONDA MOTOR CO.,
INC. and ALLIED SYSTEMS, LTD.10.25
    
    AMENDED AND RESTATED EMPLOYMENT AGREEMENT dated July 2007,
by and between KEITH RENTZEL and ALLIED AUTOMOTIVE GROUP,
INC.10.26
    
    AMENDED AND RESTATED EMPLOYMENT AGREEMENT dated July 2007,
by and between ROBERT FERRELL and ALLIED AUTOMOTIVE GROUP,
INC.10.27
    
    SEVERANCE AGREEMENT between JOE MARINELLI and ALLIED
AUTOMOTIVE GROUP, INC.31.1
    
    Rule 13a-14(a)/15d-14(a) Certification by Mark J. Gendregske.31.2
    
    Rule 13a-14(a)/15d-14(a) Certification by Thomas H. King.32.1
    
    Section 1350 Certification by Mark J. Gendregske.32.2
    
    Section 1350 Certification by Thomas H. King.
 51