##### 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 September 30, 2005
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from
 Commission File Number: 0-22276
 
 ALLIED HOLDINGS, INC.
  GEORGIA

(State or other jurisdiction of
incorporation or organization)
    
    58-0360550
(I.R.S. Employer Identification
Number)
 Suite 200, 160 Clairemont Avenue, Decatur, Georgia 30030
 (404) 373-4285
 www.alliedholdings.com  (Web Page)
 þ o
 o þ
 o þ
 Outstanding common stock, no par value at December 2, 2005
    
    
    8,980,329




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ALLIED HOLDINGS, INC. AND SUBSIDIARIES
 TABLE OF CONTENTS
 PAGEPART I  FINANCIAL INFORMATIONITEM
1  Financial StatementsConsolidated
Balance Sheets September 30, 2005 (unaudited) and December 31, 2004
    
    
    1Consolidated
Statements of Operations Three and Nine Month Periods Ended September 30, 2005 and 2004 (unaudited)
    
    
    2Consolidated
Statements of Cash Flows Nine Month Periods Ended September 30, 2005 and 2004 (unaudited)
    
    
    3Notes to the Consolidated Financial Statements
    
    
    4ITEM
2  Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    32ITEM 3  Quantitative and Qualitative Disclosures About Market Risk
    
    
    48ITEM 4  Controls and Procedures
    
    
    48PART II  OTHER INFORMATIONITEM 1  Legal Proceedings
    
    
    49ITEM 5  Other Information
    
    
    49ITEM 6  Exhibits
    
    
    49Signature Page
    
    
    50EX-4.4(A) THIRD AMENDMENT TO DEBTOR-IN-POSSESSION CREDIT AGREEMENTEX-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
 
 ITEM 1  Financial Statements
 ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
 
 CONSOLIDATED BALANCE SHEETS
(In thousands)
 September 30,
    
    
    December 31,2005
    
    
    2004(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    3,896
    
    
    $
    2,516Restricted cash, cash equivalents and other time deposits
    
    
    33,882
    
    
    
    27,378Receivables, net of allowances of $2,104 and $2,156 as of September 30, 2005
and December 31, 2004, respectively
    
    
    54,853
    
    
    
    57,309Inventories
    
    
    5,227
    
    
    
    4,649Deferred income taxes
    
    
    3,975
    
    
    
    4,632Prepayments and other current assets
    
    
    19,176
    
    
    
    12,414Total current assets
    
    
    121,009
    
    
    
    108,898Property and equipment, net of accumulated depreciation
    
    
    125,049
    
    
    
    135,635Goodwill, net
    
    
    3,938
    
    
    
    83,977Other assets:Restricted cash, cash equivalents and other time deposits
    
    
    68,684
    
    
    
    55,502Other noncurrent assets
    
    
    36,960
    
    
    
    37,520Total other assets
    
    
    105,644
    
    
    
    93,022Total assets
    
    $
    355,640
    
    
    $
    421,532LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilities not subject to compromise:Current portion of long-term debt
    
    $
    
    
    
    $
    13,500Borrowings under pre-petition revolving credit facility
    
    
    
    
    
    
    2,972Debtor-in-possession credit facility
    
    
    141,517
    
    
    
    Accounts and notes payable
    
    
    16,876
    
    
    
    34,690Accrued liabilities
    
    
    77,616
    
    
    
    85,463Total current liabilities
    
    
    236,009
    
    
    
    136,625Long-term liabilities not subject to compromise:Long-term debt, less current portion
    
    
    
    
    
    
    234,766Postretirement benefits other than pensions
    
    
    4,763
    
    
    
    5,082Deferred income taxes
    
    
    3,989
    
    
    
    16,164Other long-term liabilities
    
    
    68,968
    
    
    
    70,444Total long-term liabilities
    
    
    77,720
    
    
    
    326,456Liabilities subject to compromise
    
    
    185,432
    
    
    
    Commitments and contingencies
    
    
    
    
    
    
    Stockholders deficit:Preferred stock, no par value. Authorized 5,000 shares; none outstanding
    
    
    
    
    
    
    Common stock, no par value. Authorized 20,000 shares; 8,980 and 8,919 shares
outstanding at September 30, 2005 and December 31, 2004, respectively
    
    
    
    
    
    
    Additional paid-in capital
    
    
    48,545
    
    
    
    48,421Treasury stock, 139 shares at cost
    
    
    (707
    )
    
    
    (707
    )Accumulated deficit
    
    
    (190,011
    )
    
    
    (88,907
    )Accumulated other comprehensive loss, net of tax
    
    
    (1,348
    )
    
    
    (356
    )Total stockholders deficit
    
    
    (143,521
    )
    
    
    (41,549
    )Total liabilities and stockholders deficit
    
    $
    355,640
    
    
    $
    421,532
  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
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Revenues
    
    $
    203,090
    
    
    $
    207,599
    
    
    $
    656,594
    
    
    $
    656,459Operating expenses:Salaries, wages, and fringe benefits
    
    
    110,285
    
    
    
    111,298
    
    
    
    349,618
    
    
    
    359,163Operating supplies and expenses
    
    
    41,781
    
    
    
    36,371
    
    
    
    127,405
    
    
    
    114,930Purchased transportation
    
    
    28,586
    
    
    
    27,072
    
    
    
    88,829
    
    
    
    81,566Insurance and claims
    
    
    8,587
    
    
    
    11,401
    
    
    
    27,165
    
    
    
    30,205Operating taxes and licenses
    
    
    6,785
    
    
    
    6,848
    
    
    
    22,196
    
    
    
    21,503Depreciation and amortization
    
    
    6,698
    
    
    
    9,517
    
    
    
    21,940
    
    
    
    29,832Rents
    
    
    1,810
    
    
    
    2,008
    
    
    
    5,608
    
    
    
    5,753Communications and utilities
    
    
    1,185
    
    
    
    1,455
    
    
    
    4,575
    
    
    
    4,760Other operating expenses
    
    
    2,655
    
    
    
    2,105
    
    
    
    9,714
    
    
    
    7,056Impairment of goodwill
    
    
    
    
    
    
    
    
    
    
    79,172
    
    
    
    (Gain) loss on disposal of operating assets, net
    
    
    (85
    )
    
    
    305
    
    
    
    (462
    )
    
    
    (705
    )Total operating expenses
    
    
    208,287
    
    
    
    208,380
    
    
    
    735,760
    
    
    
    654,063Operating (loss) income
    
    
    (5,197
    )
    
    
    (781
    )
    
    
    (79,166
    )
    
    
    2,396Other income (expense):Interest expense (contractual interest: $11.7 million and
$34.7 million in the respective 2005 periods)
    
    
    (9,571
    )
    
    
    (8,754
    )
    
    
    (32,522
    )
    
    
    (23,699
    )Investment income
    
    
    847
    
    
    
    567
    
    
    
    1,863
    
    
    
    755Foreign exchange gains
    
    
    1,893
    
    
    
    1,735
    
    
    
    1,282
    
    
    
    614Other, net
    
    
    
    
    
    
    (91
    )
    
    
    
    
    
    
    (191
    )(6,831
    )
    
    
    (6,543
    )
    
    
    (29,377
    )
    
    
    (22,521
    )Loss before reorganization items and income taxes
    
    
    (12,028
    )
    
    
    (7,324
    )
    
    
    (108,543
    )
    
    
    (20,125
    )Reorganization items
    
    
    (3,929
    )
    
    
    
    
    
    
    (3,929
    )
    
    
    Loss before income taxes
    
    
    (15,957
    )
    
    
    (7,324
    )
    
    
    (112,472
    )
    
    
    (20,125
    )Income tax (expense) benefit
    
    
    (39
    )
    
    
    (310
    )
    
    
    11,368
    
    
    
    (310
    )Net loss
    
    $
    (15,996
    )
    
    $
    (7,634
    )
    
    $
    (101,104
    )
    
    $
    (20,435
    )Basic and diluted loss per common share:Net loss:Basic and diluted
    
    $
    (1.78
    )
    
    $
    (0.87
    )
    
    $
    (11.26
    )
    
    $
    (2.35
    )Weighted average common shares outstanding:Basic and diluted
    
    
    8,980
    
    
    
    8,791
    
    
    
    8,980
    
    
    
    8,705
  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)
 Nine Months EndedSeptember 30,2005
    
    
    2004Cash flows from operating activities:Net loss
    
    $
    (101,104
    )
    
    $
    (20,435
    )Adjustments to reconcile net loss to net cash provided by operating activities:Write-off and amortization of deferred financing costs
    
    
    7,368
    
    
    
    2,094Depreciation and amortization
    
    
    21,940
    
    
    
    29,832Impairment of goodwill
    
    
    79,172
    
    
    
    Reorganization items
    
    
    3,929
    
    
    
    Gain on disposal of assets
    
    
    (462
    )
    
    
    (705
    )Foreign
exchange gains, net
    
    
    (1,282
    )
    
    
    (614
    )Deferred income taxes
    
    
    (11,261
    )
    
    
    Compensation expense related to stock options and grants
    
    
    
    
    
    
    475Change in operating assets and liabilities:Receivables, net of allowances
    
    
    2,729
    
    
    
    (236
    )Inventories
    
    
    (547
    )
    
    
    (27
    )Prepayments and other assets
    
    
    (3,035
    )
    
    
    (2,597
    )Accounts and notes payable
    
    
    7,593
    
    
    
    (6,005
    )Accrued liabilities
    
    
    (292
    )
    
    
    10,795Net cash provided by operating activities before payment of reorganization items
    
    
    4,748
    
    
    
    12,577Reorganization items paid
    
    
    (712
    )
    
    
    Net cash provided by operating activities
    
    
    4,036
    
    
    
    12,577Cash flows from investing activities:Purchases of property and equipment
    
    
    (12,574
    )
    
    
    (18,054
    )Proceeds from sales of property and equipment
    
    
    2,851
    
    
    
    2,117Increase in restricted cash, cash equivalents and other time deposits
    
    
    (19,686
    )
    
    
    (582
    )Funds deposited with insurance carriers
    
    
    (8,182
    )
    
    
    (32,024
    )Funds returned from insurance carriers
    
    
    4,131
    
    
    
    33,743Decrease in the cash surrender value of life insurance
    
    
    26
    
    
    
    147Net cash used in investing activities
    
    
    (33,434
    )
    
    
    (14,653
    )Cash flows from financing activities:(Repayments of) additions to revolving credit facilities, net
    
    
    (2,972
    )
    
    
    18,226Additions to pre-petition long-term debt
    
    
    25,000
    
    
    
    Repayment of pre-petition long-term debt
    
    
    (123,266
    )
    
    
    (14,792
    )Additions to DIP revolving credit facility, net
    
    
    41,517
    
    
    
    Additions to DIP facility term borrowings
    
    
    100,000
    
    
    
    Payment of deferred financing costs
    
    
    (8,079
    )
    
    
    Proceeds from insurance financing arrangements
    
    
    8,470
    
    
    
    28,608Repayments of insurance financing arrangements
    
    
    (10,122
    )
    
    
    (26,225
    )Proceeds from issuance of common stock
    
    
    124
    
    
    
    526Net cash provided by financing activities
    
    
    30,672
    
    
    
    6,343Effect of exchange rate changes on cash and cash equivalents
    
    
    106
    
    
    
    487Net change in cash and cash equivalents
    
    
    1,380
    
    
    
    4,754Cash and cash equivalents at beginning of period
    
    
    2,516
    
    
    
    2,148Cash and cash equivalents at end of period
    
    $
    3,896
    
    
    $
    6,902Supplemental cash flow information:Cash paid (refunds received) during the period for:Interest
    
    $
    21,295
    
    
    $
    18,370Income taxes, net
    
    
    (492
    )
    
    
    488
  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. and its subsidiaries and as the context requires to
Allied Holdings, Inc. and the subsidiaries that filed for Chapter 11 protection.)
 (1) Voluntary Reorganization under Chapter 11
 Overview
      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)
  DIP Facility
  Accounting for Reorganization
 Financial Reporting by Entities in Reorganization Under the Bankruptcy Code
 
    
    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).
 Liabilities Subject to Compromise
    5




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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)
 Accounts payable
    
    $
    25,657Accrued interest on Senior Notes
    
    
    4,313Accrued claims and insurance reserves
    
    
    4,319Other accrued liabilities
    
    
    1,143Senior Notes
    
    
    150,000$
    185,432
  Reorganization Items
  Legal and professional fees
    
    $
    2,203Write-off of deferred financing costs
    
    
    1,442Provision for rejected executory contracts and leases
    
    
    220Other reorganization items
    
    
    64$
    3,929
 Condensed Financial Statement Information of the Debtors and Non-debtors
  6




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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)
 Unaudited Condensed Consolidating Balance Sheet Information
September 30, 2005
(In thousands)
 Debtors
    
    
    Non-Debtors
    
    
    Eliminations
    
    
    ConsolidatedCurrent assets
    
    $
    85,843
    
    
    $
    43,119
    
    
    $
    (7,953
    )
    
    $
    121,009Intercompany receivables (payables)  current
    
    
    11,827
    
    
    
    (11,827
    )
    
    
    
    
    
    
    Property and equipment, net
    
    
    121,821
    
    
    
    3,228
    
    
    
    
    
    
    
    125,049Goodwill, net
    
    
    3,938
    
    
    
    
    
    
    
    
    
    
    
    3,938Investment in related party
    
    
    31,488
    
    
    
    7,559
    
    
    
    (39,047
    )
    
    
    Other assets
    
    
    36,454
    
    
    
    69,190
    
    
    
    
    
    
    
    105,644Total assets
    
    $
    291,371
    
    
    $
    111,269
    
    
    $
    (47,000
    )
    
    $
    355,640Liabilities not subject to compromise:Current liabilities
    
    $
    213,182
    
    
    $
    30,780
    
    
    $
    (7,953
    )
    
    $
    236,009Long-term debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other noncurrent liabilities
    
    
    31,129
    
    
    
    46,591
    
    
    
    
    
    
    
    77,720Liabilities subject to compromise
    
    
    185,432
    
    
    
    
    
    
    
    
    
    
    
    185,432Stockholders (deficit) equity
    
    
    (138,372
    )
    
    
    33,898
    
    
    
    (39,047
    )
    
    
    (143,521
    )Total liabilities and stockholders (deficit) equity
    
    $
    291,371
    
    
    $
    111,269
    
    
    $
    (47,000
    )
    
    $
    355,640
 Unaudited Condensed Consolidating Statement of Operations Information
For the Three Months Ended September 30, 2005
(In thousands)
 Debtors
    
    
    Non-Debtors
    
    
    Eliminations
    
    
    ConsolidatedOperating revenues
    
    $
    202,450
    
    
    $
    10,171
    
    
    $
    (9,531
    )
    
    $
    203,090Operating expenses
    
    
    207,670
    
    
    
    10,148
    
    
    
    (9,531
    )
    
    
    208,287Operating (loss) income
    
    
    (5,220
    )
    
    
    23
    
    
    
    
    
    
    
    (5,197
    )Other (expenses) income, net
    
    
    (7,792
    )
    
    
    961
    
    
    
    
    
    
    
    (6,831
    )(Loss) income before reorganization
items and income taxes
    
    
    (13,012
    )
    
    
    984
    
    
    
    
    
    
    
    (12,028
    )Reorganization items
    
    
    (3,929
    )
    
    
    
    
    
    
    
    
    
    
    (3,929
    )(Loss) income before income taxes
    
    
    (16,941
    )
    
    
    984
    
    
    
    
    
    
    
    (15,957
    )Income tax expense
    
    
    (21
    )
    
    
    (18
    )
    
    
    
    
    
    
    (39
    )Net (loss) income
    
    $
    (16,962
    )
    
    $
    966
    
    
    $
    
    
    
    $
    (15,996
    )
 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)
 Unaudited Condensed Consolidating Statement of Operations Information
For the Nine Months Ended September 30, 2005
(In thousands)
 Debtors
    
    
    Non-Debtors
    
    
    Eliminations
    
    
    ConsolidatedOperating revenues
    
    $
    654,284
    
    
    $
    30,902
    
    
    $
    (28,592
    )
    
    $
    656,594Operating expenses
    
    
    733,727
    
    
    
    30,625
    
    
    
    (28,592
    )
    
    
    735,760Operating (loss) income
    
    
    (79,443
    )
    
    
    277
    
    
    
    
    
    
    
    (79,166
    )Other (expense) income, net
    
    
    (31,183
    )
    
    
    1,806
    
    
    
    
    
    
    
    (29,377
    )(Loss) income before reorganization
items and income taxes
    
    
    (110,626
    )
    
    
    2,083
    
    
    
    
    
    
    
    (108,543
    )Reorganization items
    
    
    (3,929
    )
    
    
    
    
    
    
    
    
    
    
    (3,929
    )(Loss) income before income taxes
    
    
    (114,555
    )
    
    
    2,083
    
    
    
    
    
    
    
    (112,472
    )Income tax benefit (expense)
    
    
    11,497
    
    
    
    (129
    )
    
    
    
    
    
    
    11,368Net (loss) income
    
    $
    (103,058
    )
    
    $
    1,954
    
    
    $
    
    
    
    $
    (101,104
    )
 Unaudited Condensed Consolidating Statement of Cash Flows Information
For the Nine Months Ended September 30, 2005
(In thousands)
 Debtors
    
    
    Non-Debtors
    
    
    Eliminations
    
    
    ConsolidatedNet cash (used in) provided by:Operating activities
    
    $
    (16,350
    )
    
    $
    20,386
    
    
    $
    
    
    
    $
    4,036Investing activities
    
    
    (13,449
    )
    
    
    (19,985
    )
    
    
    
    
    
    
    (33,434
    )Financing activities
    
    
    30,672
    
    
    
    
    
    
    
    
    
    
    
    30,672Effect of exchange rate changes on cash and
cash equivalents
    
    
    156
    
    
    
    (50
    )
    
    
    
    
    
    
    106Net change in cash and cash equivalents
    
    
    1,029
    
    
    
    351
    
    
    
    
    
    
    
    1,380Cash and cash equivalents at beginning of period
    
    
    203
    
    
    
    2,313
    
    
    
    
    
    
    
    2,516Cash and cash equivalents at end of period
    
    $
    1,232
    
    
    $
    2,664
    
    
    $
    
    
    
    $
    3,896
  (2) Accounting and Reporting Policies
 Basis of Presentation
  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)
  Financial Reporting by Entities in Reorganization Under the Bankruptcy Code.
 Use of Estimates and Seasonality
   (3) Recent Accounting Pronouncements
 Accounting for Conditional Asset Retirement Obligations ccounting for Asset Retirement Obligations,
 Share-Based Payment Accounting for Stock-Based Compensation,
 9




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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)
 Accounting for Stock Issued to Employees Statement of Cash Flows.
 share-
 Accounting and Disclosure
Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of
2004 Accounting for Income Taxes,
 (4) Prepayments and Other Current Assets
  September 30,
    
    
    December 31,2005
    
    
    2004Tires on tractors and trailers
    
    $
    2,357
    
    
    $
    2,231Prepaid insurance
    
    
    7,535
    
    
    
    4,058Prepaid licenses
    
    
    2,737
    
    
    
    1,570Short-term deposits for letters of credit with pre-petition lenders
    
    
    2,179
    
    
    
    Other
    
    
    4,368
    
    
    
    4,555$
    19,176
    
    
    $
    12,414
 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)
 (5) Property and Equipment
  September 30,
    
    
    December 31,2005
    
    
    2004Cost
    
    $
    531,596
    
    
    $
    555,713Accumulated depreciation and amortization
    
    
    (406,547
    )
    
    
    (420,078
    )$
    125,049
    
    
    $
    135,635
  (6) Goodwill
 Goodwill and Other Intangible Assets
    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)
 AlliedAutomotive
    
    
    AxisGroup
    
    
    Group
    
    
    TotalBalance as of December 31, 2004
    
    $
    80,041
    
    
    $
    3,936
    
    
    $
    83,977Impairment of goodwill
    
    
    (79,172
    )
    
    
    
    
    
    
    (79,172
    )Changes in carrying amounts due to changes in currency rates
    
    
    (869
    )
    
    
    2
    
    
    
    (867
    )Balance as of September 30, 2005
    
    $
    
    
    
    $
    3,938
    
    
    $
    3,938
 (7) Other Noncurrent Assets
  September 30,
    
    
    December 31,2005
    
    
    2004Cash surrender value of life insurance
    
    $
    6,201
    
    
    $
    6,227Deferred financing costs
    
    
    6,667
    
    
    
    7,396Prepaid pension cost
    
    
    17,927
    
    
    
    18,114Tires on tractors and trailers
    
    
    2,750
    
    
    
    2,597Deposits and other
    
    
    3,415
    
    
    
    3,186$
    36,960
    
    
    $
    37,520
   September 30,
    
    
    December 31,2005
    
    
    2004Cost
    
    $
    7,454
    
    
    $
    15,235Accumulated amortization
    
    
    (787
    )
    
    
    (7,839
    )$
    6,667
    
    
    $
    7,396
  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)
 (8) Accounts and Notes Payable and Accrued Liabilities
   September 30,
    
    
    December 31,2005
    
    
    2004Wages and benefits
    
    $
    30,956
    
    
    $
    31,059Claims and insurance reserves
    
    
    35,376
    
    
    
    36,764Accrued interest
    
    
    2,860
    
    
    
    4,756Accrued taxes
    
    
    2,900
    
    
    
    5,320Purchased transportation
    
    
    3,595
    
    
    
    1,942Other
    
    
    1,929
    
    
    
    5,622$
    77,616
    
    
    $
    85,463
  (9) Claims and Insurance Reserves
       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)
     September 30,
    
    
    December 31,2005
    
    
    2004Accrued liabilities  current
    
    $
    35,376
    
    
    $
    36,764Other long-term liabilities  noncurrent
    
    
    66,451
    
    
    
    67,621Liabilities subject to compromise
    
    
    4,319
    
    
    
    $
    106,146
    
    
    $
    104,385
   (10) Employee Benefit Plans
 (a) Pension and Postretirement Benefit Plans
  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)
 Defined Benefit
    
    
    Postretirement BenefitPension Plans
    
    
    PlansThree Months Ended September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Service cost
    
    $
    30
    
    
    $
    22
    
    
    $
    15
    
    
    $
    12Interest cost
    
    
    1,088
    
    
    
    677
    
    
    
    205
    
    
    
    144Expected return on plan assets
    
    
    (1,511
    )
    
    
    (1,158
    )
    
    
    
    
    
    
    Amortization of:Unrecognized net actuarial loss
    
    
    639
    
    
    
    (36
    )
    
    
    187
    
    
    
    Prior service cost
    
    
    17
    
    
    
    12
    
    
    
    (95
    )
    
    
    (16
    )Transition asset
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    Recognized actuarial loss
    
    
    
    
    
    
    54
    
    
    
    
    
    
    
    16Net period benefit cost (benefit)
    
    $
    263
    
    
    $
    (421
    )
    
    $
    312
    
    
    $
    156
 Defined Benefit
    
    
    Postretirement BenefitPension Plans
    
    
    PlansNine Months Ended September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Service cost
    
    $
    63
    
    
    $
    67
    
    
    $
    39
    
    
    $
    36Interest cost
    
    
    2,262
    
    
    
    2,028
    
    
    
    528
    
    
    
    432Expected return on plan assets
    
    
    (3,190
    )
    
    
    (2,726
    )
    
    
    
    
    
    
    Amortization of:Unrecognized net actuarial loss
    
    
    1,401
    
    
    
    675
    
    
    
    481
    
    
    
    Prior service cost
    
    
    36
    
    
    
    36
    
    
    
    (243
    )
    
    
    (49
    )Transition asset
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    Recognized actuarial loss
    
    
    
    
    
    
    163
    
    
    
    
    
    
    
    50Net period benefit cost
    
    $
    572
    
    
    $
    241
    
    
    $
    805
    
    
    $
    469
  (b) Employee Stock Purchase Plan
  (11) Debt
  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)
 September 30,
    
    
    December 31,2005
    
    
    2004DIP Facility  Term Loan A
    
    $
    20,000
    
    
    $
    DIP Facility  Term Loan B
    
    
    80,000
    
    
    
    DIP Facility  Revolver
    
    
    41,517
    
    
    
    Pre-petition Facility  Term Loan A
    
    
    
    
    
    
    78,266Pre-petition Facility  Term Loan B
    
    
    
    
    
    
    20,000Pre-petition Facility  Revolver
    
    
    
    
    
    
    2,972Senior Notes
    
    
    150,000
    
    
    
    150,000291,517
    
    
    
    251,238Less:Pre-petition debt subject to compromise
    
    
    (150,000
    )
    
    
    DIP Facility
    
    
    (141,517
    )
    
    
    Pre-petition Facility  Revolver
    
    
    
    
    
    
    (2,972
    )Current portion of long-term debt
    
    
    
    
    
    
    (13,500
    )Long-term
debt, less current portion
    
    $
    
    
    
    $
    234,766
 DIP Facility
      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)
   Balance Sheet Classification of Borrowings Outstanding under Revolving
Credit Agreements that include both a Subjective Acceleration Clause and a Lock-Box Arrangement.
  Pre-petition Facility
   Senior Notes
 5
 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)
 
    
    Haul Insurance Ltd.;
    
    Arrendadora de Equipo Para el Transporte de Automoviles, S. de R.L. de C.V.;
    
    Axis Logistica, S. de R.L. de C.V. ;
    
    Axis Operadora Hermosillo;
    
    Ace Operations, LLC.
    (12) Income Taxes
  (13) Commitments and Contingencies
 (a) Effect of Chapter 11 Filings
   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)
  (b) Letters of Credit
  (c) Litigation, Claims, Assessments
   (d) Purchase and Service Contract Commitments
  (e) Leases
  (f) Collective Bargaining Agreements
  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)
   (14) Earnings (Loss) Per Common Share
 Earnings Per Share,
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Basic and Diluted Loss Per Share:Net loss
    
    $
    (15,996
    )
    
    $
    (7,634
    )
    
    $
    (101,104
    )
    
    $
    (20,435
    )Weighted-average number of common
shares outstanding:Basic and diluted
    
    
    8,980
    
    
    
    8,791
    
    
    
    8,980
    
    
    
    8,705Net loss per common share:Basic and diluted
    
    $
    (1.78
    )
    
    $
    (0.87
    )
    
    $
    (11.26
    )
    
    $
    (2.35
    )
  (15) Stock-Based Compensation
 Accounting for Stock Issued to Employees, Accounting for Stock-Based Compensation, Accounting for Stock-Based
Compensation  Transition and Disclosure, an amendment of FASB Statement No. 123.
 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
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Reported net loss
    
    $
    (15,996
    )
    
    $
    (7,634
    )
    
    $
    (101,104
    )
    
    $
    (20,435
    )Plus: stock-based
employee compensation
included in reported
net loss
    
    
    
    
    
    
    85
    
    
    
    
    
    
    
    475Less: stock-based
employee compensation
determined using the
fair value method
    
    
    (149
    )
    
    
    (300
    )
    
    
    (476
    )
    
    
    (1,055
    )Pro forma net loss
    
    $
    (16,145
    )
    
    $
    (7,849
    )
    
    $
    (101,580
    )
    
    $
    (21,015
    )Loss per share:As reported:Basic and Diluted
    
    $
    (1.78
    )
    
    $
    (0.87
    )
    
    $
    (11.26
    )
    
    $
    (2.35
    )Pro forma:Basic and Diluted
    
    $
    (1.80
    )
    
    $
    (0.89
    )
    
    $
    (11.31
    )
    
    $
    (2.41
    )
  (16) Other Comprehensive Loss
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net loss
    
    $
    (15,996
    )
    
    $
    (7,634
    )
    
    $
    (101,104
    )
    
    $
    (20,435
    )Foreign currency
translation
adjustments
    
    
    (83
    )
    
    
    2,417
    
    
    
    (992
    )
    
    
    897$
    (16,079
    )
    
    $
    (5,217
    )
    
    $
    (102,096
    )
    
    $
    (19,538
    )
   September 30,
    
    
    December 31,2005
    
    
    2004Cumulative foreign currency translation adjustments
    
    $
    400
    
    
    $
    1,392Cumulative minimum pension liability adjustments
    
    
    (1,748
    )
    
    
    (1,748
    )$
    (1,348
    )
    
    $
    (356
    )
 (17) Industry Segment and Geographic Information
 Disclosure About Segments of an Enterprise and
Related Information
 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)
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Revenues  unaffiliated customers:Allied Automotive Group
    
    $
    196,440
    
    
    $
    201,846
    
    
    $
    636,943
    
    
    $
    637,518Axis Group
    
    
    6,650
    
    
    
    5,753
    
    
    
    19,651
    
    
    
    18,941Total
    
    $
    203,090
    
    
    $
    207,599
    
    
    $
    656,594
    
    
    $
    656,459Operating (loss) income:Allied Automotive Group
    
    $
    (5,153
    )
    
    $
    228
    
    
    $
    (73,986
    )
    
    $
    7,121Axis Group
    
    
    800
    
    
    
    (150
    )
    
    
    1,792
    
    
    
    1,143Corporate/other
    
    
    (844
    )
    
    
    (859
    )
    
    
    (6,972
    )
    
    
    (5,868
    )Total
    
    
    (5,197
    )
    
    
    (781
    )
    
    
    (79,166
    )
    
    
    2,396Reconciling items:Interest expense
    
    
    (9,571
    )
    
    
    (8,754
    )
    
    
    (32,522
    )
    
    
    (23,699
    )Investment income
    
    
    847
    
    
    
    567
    
    
    
    1,863
    
    
    
    755Foreign exchange (loss) gain, net
    
    
    1,893
    
    
    
    1,735
    
    
    
    1,282
    
    
    
    614Other, net
    
    
    
    
    
    
    (91
    )
    
    
    
    
    
    
    (191
    )Loss before reorganization items and
income taxes
    
    
    (12,028
    )
    
    
    (7,324
    )
    
    
    (108,543
    )
    
    
    (20,125
    )Reorganization items
    
    
    (3,929
    )
    
    
    
    
    
    
    (3,929
    )
    
    
    Loss before income taxes
    
    $
    (15,957
    )
    
    $
    (7,324
    )
    
    $
    (112,472
    )
    
    $
    (20,125
    )
  September 30,
    
    
    December 31,2005
    
    
    2004Allied Automotive Group
    
    $
    188,401
    
    
    $
    274,228Axis Group
    
    
    23,683
    
    
    
    19,690Corporate/other
    
    
    143,556
    
    
    
    127,614Total
    
    $
    355,640
    
    
    $
    421,532
  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)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Revenues:United States
    
    $
    163,860
    
    
    $
    170,151
    
    
    $
    528,562
    
    
    $
    532,229Canada
    
    
    39,230
    
    
    
    37,448
    
    
    
    128,032
    
    
    
    124,230Total
    
    $
    203,090
    
    
    $
    207,599
    
    
    $
    656,594
    
    
    $
    656,459
 September 30,
    
    
    December 31,2005
    
    
    2004Long-lived assets:United States
    
    $
    90,172
    
    
    $
    97,621Canada
    
    
    34,877
    
    
    
    38,014Total
    
    $
    125,049
    
    
    $
    135,635
   (18) Supplemental Guarantor Information
   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
September 30, 2005
(In thousands)
 Allied
    
    
    Guarantor
    
    
    NonguarantorHoldings
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCurrent assets:$Cash and cash equivalents
    
    $
    7
    
    
    $
    1,505
    
    
    $
    2,384
    
    
    
    
    
    
    $
    3,896Restricted cash, cash equivalents and other time deposits
    
    
    
    
    
    
    
    
    
    
    33,882
    
    
    
    
    
    
    
    33,882Receivables, net of allowances
    
    
    
    
    
    
    53,622
    
    
    
    1,231
    
    
    
    
    
    
    
    54,853Inventories
    
    
    
    
    
    
    5,227
    
    
    
    
    
    
    
    
    
    
    
    5,227Deferred income taxes
    
    
    4,021
    
    
    
    
    
    
    
    (46
    )
    
    
    
    
    
    
    3,975Prepayments and other
current assets
    
    
    3,565
    
    
    
    18,517
    
    
    
    5,047
    
    
    
    (7,953
    )
    
    
    19,176Total current assets
    
    
    7,593
    
    
    
    78,871
    
    
    
    42,498
    
    
    
    (7,953
    )
    
    
    121,009Property and equipment, net of accumulated depreciation
    
    
    3,878
    
    
    
    117,968
    
    
    
    3,203
    
    
    
    
    
    
    
    125,049Goodwill, net
    
    
    
    
    
    
    3,938
    
    
    
    
    
    
    
    
    
    
    
    3,938Other assets:Restricted cash, cash equivalents and other time deposits
    
    
    
    
    
    
    
    
    
    
    68,684
    
    
    
    
    
    
    
    68,684Other noncurrent assets
    
    
    30,919
    
    
    
    5,536
    
    
    
    505
    
    
    
    
    
    
    
    36,960Intercompany receivables (payables)
    
    
    76,627
    
    
    
    (76,627
    )
    
    
    
    
    
    
    
    
    
    
    Investment in subsidiaries
    
    
    (100,114
    )
    
    
    7,067
    
    
    
    
    
    
    
    93,047
    
    
    
    Total other assets
    
    
    7,432
    
    
    
    (64,024
    )
    
    
    69,189
    
    
    
    93,047
    
    
    
    105,644Total assets
    
    $
    18,903
    
    
    $
    136,753
    
    
    $
    114,890
    
    
    $
    85,094
    
    
    $
    355,640Current liabilities not subject to compromise:$Debtor-in-possession credit facility
    
    $
    141,517
    
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    $
    141,517Accounts and notes payable
    
    
    2,871
    
    
    
    13,952
    
    
    
    8,006
    
    
    
    (7,953
    )
    
    
    16,876Intercompany (receivables) payables
    
    
    (147,788
    )
    
    
    133,696
    
    
    
    14,092
    
    
    
    
    
    
    
    Accrued liabilities
    
    
    4,066
    
    
    
    50,395
    
    
    
    23,155
    
    
    
    
    
    
    
    77,616Total current liabilities
    
    
    666
    
    
    
    198,043
    
    
    
    45,253
    
    
    
    (7,953
    )
    
    
    236,009Long-term liabilities not subject to compromise:Postretirement benefits other than pensions
    
    
    
    
    
    
    4,763
    
    
    
    
    
    
    
    
    
    
    
    4,763Deferred income taxes
    
    
    3,989
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,989Other long-term liabilities
    
    
    508
    
    
    
    21,870
    
    
    
    46,590
    
    
    
    
    
    
    
    68,968Total long-term liabilities
    
    
    4,497
    
    
    
    26,633
    
    
    
    46,590
    
    
    
    
    
    
    
    77,720Liabilities subject to compromise
    
    
    157,261
    
    
    
    28,171
    
    
    
    
    
    
    
    
    
    
    
    185,432Commitments and contingencies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stockholders (deficit) equity :Common stock, no par value
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Additional paid-in capital
    
    
    48,545
    
    
    
    166,130
    
    
    
    2,488
    
    
    
    (168,618
    )
    
    
    48,545Treasury stock
    
    
    (707
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (707
    )(Accumulated deficit) retained earnings
    
    
    (190,011
    )
    
    
    (268,034
    )
    
    
    20,559
    
    
    
    247,475
    
    
    
    (190,011
    )Accumulated other comprehensive loss,
net of tax
    
    
    (1,348
    )
    
    
    (14,190
    )
    
    
    
    
    
    
    14,190
    
    
    
    (1,348
    )Total stockholders (deficit) equity
    
    
    (143,521
    )
    
    
    (116,094
    )
    
    
    23,047
    
    
    
    93,047
    
    
    
    (143,521
    )Total liabilities and stockholders
(deficit) equity
    
    $
    18,903
    
    
    $
    136,753
    
    
    $
    114,890
    
    
    $
    85,094
    
    
    $
    355,640
 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 BALANCE SHEET INFORMATION
December 31, 2004
(In thousands)
 Allied
    
    
    Guarantor
    
    
    NonguarantorHoldings
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCurrent assets:Cash and cash equivalents
    
    $
    
    
    
    $
    533
    
    
    $
    1,983
    
    
    $
    
    
    
    $
    2,516Restricted cash, cash equivalents and other time deposits
    
    
    
    
    
    
    
    
    
    
    27,378
    
    
    
    
    
    
    
    27,378Receivables, net of allowances
    
    
    
    
    
    
    55,407
    
    
    
    1,902
    
    
    
    
    
    
    
    57,309Inventories
    
    
    
    
    
    
    4,649
    
    
    
    
    
    
    
    
    
    
    
    4,649Deferred income taxes
    
    
    2,927
    
    
    
    1,705
    
    
    
    
    
    
    
    
    
    
    
    4,632Prepayments and other
current assets
    
    
    1,699
    
    
    
    10,465
    
    
    
    250
    
    
    
    
    
    
    
    12,414Total current assets
    
    
    4,626
    
    
    
    72,759
    
    
    
    31,513
    
    
    
    
    
    
    
    108,898Property and equipment, net of accumulated depreciation
    
    
    4,744
    
    
    
    127,676
    
    
    
    3,215
    
    
    
    
    
    
    
    135,635Goodwill, net
    
    
    1,515
    
    
    
    82,462
    
    
    
    
    
    
    
    
    
    
    
    83,977Other assets:Restricted cash, cash equivalents and other time deposits
    
    
    
    
    
    
    
    
    
    
    55,502
    
    
    
    
    
    
    
    55,502Other noncurrent assets
    
    
    31,995
    
    
    
    4,907
    
    
    
    618
    
    
    
    
    
    
    
    37,520Deferred income taxes
    
    
    17,843
    
    
    
    
    
    
    
    
    
    
    
    (17,843
    )
    
    
    Intercompany receivables (payables)
    
    
    75,147
    
    
    
    (72,978
    )
    
    
    (2,169
    )
    
    
    
    
    
    
    Investment in subsidiaries
    
    
    (9,070
    )
    
    
    6,170
    
    
    
    
    
    
    
    2,900
    
    
    
    Total other assets
    
    
    115,915
    
    
    
    (61,901
    )
    
    
    53,951
    
    
    
    (14,943
    )
    
    
    93,022Total assets
    
    $
    126,800
    
    
    $
    220,996
    
    
    $
    88,679
    
    
    $
    (14,943
    )
    
    $
    421,532Current liabilities:Current portion of long-term debt
    
    $
    
    
    
    $
    13,500
    
    
    $
    
    
    
    $
    
    
    
    $
    13,500Borrowings under pre-petition revolving credit facility
    
    
    
    
    
    
    2,972
    
    
    
    
    
    
    
    
    
    
    
    2,972Accounts and notes payable
    
    
    3,818
    
    
    
    30,696
    
    
    
    176
    
    
    
    
    
    
    
    34,690Intercompany payables (receivables)
    
    
    6,956
    
    
    
    (6,956
    )
    
    
    
    
    
    
    
    
    
    
    Accrued liabilities
    
    
    7,067
    
    
    
    47,923
    
    
    
    30,473
    
    
    
    
    
    
    
    85,463Total current liabilities
    
    
    17,841
    
    
    
    88,135
    
    
    
    30,649
    
    
    
    
    
    
    
    136,625Long-term liabilities:Long-term debt, less current portion
    
    
    150,000
    
    
    
    84,766
    
    
    
    
    
    
    
    
    
    
    
    234,766Postretirement benefits other
than pensions
    
    
    
    
    
    
    5,082
    
    
    
    
    
    
    
    
    
    
    
    5,082Deferred income taxes
    
    
    
    
    
    
    33,990
    
    
    
    17
    
    
    
    (17,843
    )
    
    
    16,164Other long-term liabilities
    
    
    508
    
    
    
    33,595
    
    
    
    36,341
    
    
    
    
    
    
    
    70,444Total long-term liabilities
    
    
    150,508
    
    
    
    157,433
    
    
    
    36,358
    
    
    
    (17,843
    )
    
    
    326,456Commitments and contingencies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stockholders (deficit) equity:Common stock, no par value
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Additional paid-in capital
    
    
    48,421
    
    
    
    166,130
    
    
    
    2,488
    
    
    
    (168,618
    )
    
    
    48,421Treasury stock
    
    
    (707
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (707
    )(Accumulated deficit) retained earnings
    
    
    (88,907
    )
    
    
    (179,239
    )
    
    
    19,184
    
    
    
    160,055
    
    
    
    (88,907
    )Accumulated other comprehensive loss,
net of tax
    
    
    (356
    )
    
    
    (11,463
    )
    
    
    
    
    
    
    11,463
    
    
    
    (356
    )Total stockholders (deficit) equity
    
    
    (41,549
    )
    
    
    (24,572
    )
    
    
    21,672
    
    
    
    2,900
    
    
    
    (41,549
    )Total liabilities and stockholders
(deficit) equity
    
    $
    126,800
    
    
    $
    220,996
    
    
    $
    88,679
    
    
    $
    (14,943
    )
    
    $
    421,532
 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
Three Months Ended September 30, 2005
(In thousands)
 Allied
    
    
    Guarantor
    
    
    NonguarantorHoldings
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    6,680
    
    
    $
    202,667
    
    
    $
    9,954
    
    
    $
    (16,211
    )
    
    $
    203,090Operating expenses:Salaries, wages and fringe benefits
    
    
    839
    
    
    
    109,446
    
    
    
    
    
    
    
    
    
    
    
    110,285Operating supplies and expenses
    
    
    3,454
    
    
    
    38,210
    
    
    
    117
    
    
    
    
    
    
    
    41,781Purchased transportation
    
    
    
    
    
    
    28,457
    
    
    
    129
    
    
    
    
    
    
    
    28,586Insurance and claims
    
    
    
    
    
    
    8,585
    
    
    
    9,533
    
    
    
    (9,531
    )
    
    
    8,587Operating taxes and licenses
    
    
    47
    
    
    
    6,738
    
    
    
    
    
    
    
    
    
    
    
    6,785Depreciation and amortization
    
    
    225
    
    
    
    6,333
    
    
    
    140
    
    
    
    
    
    
    
    6,698Rents
    
    
    373
    
    
    
    1,434
    
    
    
    3
    
    
    
    
    
    
    
    1,810Communications and utilities
    
    
    675
    
    
    
    500
    
    
    
    10
    
    
    
    
    
    
    
    1,185Other operating expenses
    
    
    1,873
    
    
    
    7,412
    
    
    
    50
    
    
    
    (6,680
    )
    
    
    2,655Impairment of goodwill
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gain on disposal of operating assets, net
    
    
    
    
    
    
    (85
    )
    
    
    
    
    
    
    
    
    
    
    (85
    )Total operating expenses
    
    
    7,486
    
    
    
    207,030
    
    
    
    9,982
    
    
    
    (16,211
    )
    
    
    208,287Operating loss
    
    
    (806
    )
    
    
    (4,363
    )
    
    
    (28
    )
    
    
    
    
    
    
    (5,197
    )Other income (expense):Interest expense
    
    
    74
    
    
    
    (9,579
    )
    
    
    (66
    )
    
    
    
    
    
    
    (9,571
    )Investment income
    
    
    
    
    
    
    11
    
    
    
    836
    
    
    
    
    
    
    
    847Foreign exchange gains
    
    
    
    
    
    
    1,709
    
    
    
    184
    
    
    
    
    
    
    
    1,893Equity in
(losses) income of subsidiaries
    
    
    (11,439
    )
    
    
    594
    
    
    
    
    
    
    
    10,845
    
    
    
    (11,365
    )
    
    
    (7,265
    )
    
    
    954
    
    
    
    10,845
    
    
    
    (6,831
    )(Loss) income before reorganization items and income taxes
    
    
    (12,171
    )
    
    
    (11,628
    )
    
    
    926
    
    
    
    10,845
    
    
    
    (12,028
    )Reorganization items
    
    
    (3,825
    )
    
    
    (104
    )
    
    
    
    
    
    
    
    
    
    
    (3,929
    )(Loss) income before income taxes
    
    
    (15,996
    )
    
    
    (11,732
    )
    
    
    926
    
    
    
    10,845
    
    
    
    (15,957
    )Income tax expense
    
    
    
    
    
    
    (37
    )
    
    
    (2
    )
    
    
    
    
    
    
    (39
    )Net (loss) income
    
    $
    (15,996
    )
    
    $
    (11,769
    )
    
    $
    924
    
    
    $
    10,845
    
    
    $
    (15,996
    )
 26




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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 September 30, 2004
(In thousands)
 Allied
    
    
    Guarantor
    
    
    NonguarantorHoldings
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    6,681
    
    
    $
    207,345
    
    
    $
    10,139
    
    
    $
    (16,566
    )
    
    $
    207,599Operating expenses:Salaries, wages and fringe benefits
    
    
    484
    
    
    
    110,814
    
    
    
    
    
    
    
    
    
    
    
    111,298Operating supplies and expenses
    
    
    3,560
    
    
    
    32,723
    
    
    
    88
    
    
    
    
    
    
    
    36,371Purchased transportation
    
    
    
    
    
    
    27,072
    
    
    
    
    
    
    
    
    
    
    
    27,072Insurance and claims
    
    
    
    
    
    
    11,401
    
    
    
    9,885
    
    
    
    (9,885
    )
    
    
    11,401Operating taxes and licenses
    
    
    44
    
    
    
    6,804
    
    
    
    
    
    
    
    
    
    
    
    6,848Depreciation and amortization
    
    
    575
    
    
    
    8,822
    
    
    
    120
    
    
    
    
    
    
    
    9,517Rents
    
    
    483
    
    
    
    1,524
    
    
    
    1
    
    
    
    
    
    
    
    2,008Communications and utilities
    
    
    969
    
    
    
    481
    
    
    
    5
    
    
    
    
    
    
    
    1,455Other operating expenses
    
    
    1,388
    
    
    
    7,359
    
    
    
    39
    
    
    
    (6,681
    )
    
    
    2,105Loss on disposal of operating assets, net
    
    
    
    
    
    
    305
    
    
    
    
    
    
    
    
    
    
    
    305Total operating expenses
    
    
    7,503
    
    
    
    207,305
    
    
    
    10,138
    
    
    
    (16,566
    )
    
    
    208,380Operating (loss) income
    
    
    (822
    )
    
    
    40
    
    
    
    1
    
    
    
    
    
    
    
    (781
    )Other income (expense):Interest expense
    
    
    (1,049
    )
    
    
    (7,634
    )
    
    
    (71
    )
    
    
    
    
    
    
    (8,754
    )Investment income
    
    
    
    
    
    
    10
    
    
    
    557
    
    
    
    
    
    
    
    567Foreign exchange gains, net
    
    
    
    
    
    
    1,681
    
    
    
    54
    
    
    
    
    
    
    
    1,735Other, net
    
    
    
    
    
    
    (91
    )
    
    
    
    
    
    
    
    
    
    
    (91
    )Equity in losses of subsidiaries
    
    
    (5,711
    )
    
    
    (37
    )
    
    
    
    
    
    
    5,748
    
    
    
    (6,760
    )
    
    
    (6,071
    )
    
    
    540
    
    
    
    5,748
    
    
    
    (6,543
    )(Loss) income before income taxes
    
    
    (7,582
    )
    
    
    (6,031
    )
    
    
    541
    
    
    
    5,748
    
    
    
    (7,324
    )Income tax (expense) benefit
    
    
    (52
    )
    
    
    285
    
    
    
    (543
    )
    
    
    
    
    
    
    (310
    )Net loss
    
    $
    (7,634
    )
    
    $
    (5,746
    )
    
    $
    (2
    )
    
    $
    5,748
    
    
    $
    (7,634
    )
 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 STATEMENT OF OPERATIONS INFORMATION
Nine Months Ended September 30, 2005
(In thousands)
 Allied
    
    
    Guarantor
    
    
    NonguarantorHoldings
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    20,040
    
    
    $
    655,340
    
    
    $
    29,846
    
    
    $
    (48,632
    )
    
    $
    656,594Operating expenses:Salaries, wages and fringe benefits
    
    
    3,870
    
    
    
    345,748
    
    
    
    
    
    
    
    
    
    
    
    349,618Operating supplies and expenses
    
    
    10,286
    
    
    
    116,837
    
    
    
    282
    
    
    
    
    
    
    
    127,405Purchased transportation
    
    
    
    
    
    
    88,700
    
    
    
    129
    
    
    
    
    
    
    
    88,829Insurance and claims
    
    
    
    
    
    
    26,584
    
    
    
    29,173
    
    
    
    (28,592
    )
    
    
    27,165Operating taxes and licenses
    
    
    142
    
    
    
    22,054
    
    
    
    
    
    
    
    
    
    
    
    22,196Depreciation and amortization
    
    
    922
    
    
    
    20,611
    
    
    
    407
    
    
    
    
    
    
    
    21,940Rents
    
    
    1,123
    
    
    
    4,478
    
    
    
    7
    
    
    
    
    
    
    
    5,608Communications and utilities
    
    
    2,488
    
    
    
    2,066
    
    
    
    21
    
    
    
    
    
    
    
    4,575Other operating expenses
    
    
    6,565
    
    
    
    23,057
    
    
    
    132
    
    
    
    (20,040
    )
    
    
    9,714Impairment of goodwill
    
    
    1,515
    
    
    
    77,657
    
    
    
    
    
    
    
    
    
    
    
    79,172Gain on disposal of operating assets, net
    
    
    (2
    )
    
    
    (460
    )
    
    
    
    
    
    
    
    
    
    
    (462
    )Total operating expenses
    
    
    26,909
    
    
    
    727,332
    
    
    
    30,151
    
    
    
    (48,632
    )
    
    
    735,760Operating loss
    
    
    (6,869
    )
    
    
    (71,992
    )
    
    
    (305
    )
    
    
    
    
    
    
    (79,166
    )Other income (expense):Interest expense
    
    
    (2,092
    )
    
    
    (30,245
    )
    
    
    (185
    )
    
    
    
    
    
    
    (32,522
    )Investment income
    
    
    
    
    
    
    29
    
    
    
    1,834
    
    
    
    
    
    
    
    1,863Foreign exchange gains
    
    
    
    
    
    
    1,122
    
    
    
    160
    
    
    
    
    
    
    
    1,282Equity in (losses) earnings of subsidiaries
    
    
    (88,318
    )
    
    
    897
    
    
    
    
    
    
    
    87,421
    
    
    
    (90,410
    )
    
    
    (28,197
    )
    
    
    1,809
    
    
    
    87,421
    
    
    
    (29,377
    )(Loss) income before reorganization items and income taxes
    
    
    (97,279
    )
    
    
    (100,189
    )
    
    
    1,504
    
    
    
    87,421
    
    
    
    (108,543
    )Reorganization items
    
    
    (3,825
    )
    
    
    (104
    )
    
    
    
    
    
    
    
    
    
    
    (3,929
    )(Loss) income before income taxes
    
    
    (101,104
    )
    
    
    (100,293
    )
    
    
    1,504
    
    
    
    87,421
    
    
    
    (112,472
    )Income tax benefit (expense)
    
    
    
    
    
    
    11,497
    
    
    
    (129
    )
    
    
    
    
    
    
    11,368Net (loss) income
    
    $
    (101,104
    )
    
    $
    (88,796
    )
    
    $
    1,375
    
    
    $
    87,421
    
    
    $
    (101,104
    )
 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
Nine Months Ended September 30, 2004
(In thousands)
 Allied
    
    
    Guarantor
    
    
    NonguarantorHoldings
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    20,047
    
    
    $
    655,391
    
    
    $
    30,718
    
    
    $
    (49,697
    )
    
    $
    656,459Operating expenses:Salaries, wages and fringe benefits
    
    
    4,863
    
    
    
    354,300
    
    
    
    
    
    
    
    
    
    
    
    359,163Operating supplies and expenses
    
    
    10,395
    
    
    
    104,317
    
    
    
    218
    
    
    
    
    
    
    
    114,930Purchased transportation
    
    
    
    
    
    
    81,566
    
    
    
    
    
    
    
    
    
    
    
    81,566Insurance and claims
    
    
    
    
    
    
    30,201
    
    
    
    29,654
    
    
    
    (29,650
    )
    
    
    30,205Operating taxes and licenses
    
    
    122
    
    
    
    21,381
    
    
    
    
    
    
    
    
    
    
    
    21,503Depreciation and amortization
    
    
    1,905
    
    
    
    27,569
    
    
    
    358
    
    
    
    
    
    
    
    29,832Rents
    
    
    1,428
    
    
    
    4,321
    
    
    
    4
    
    
    
    
    
    
    
    5,753Communications and utilities
    
    
    2,718
    
    
    
    2,024
    
    
    
    18
    
    
    
    
    
    
    
    4,760Other operating expenses
    
    
    4,334
    
    
    
    22,605
    
    
    
    164
    
    
    
    (20,047
    )
    
    
    7,056Gain on disposal of operating assets, net
    
    
    
    
    
    
    (705
    )
    
    
    
    
    
    
    
    
    
    
    (705
    )Total operating expenses
    
    
    25,765
    
    
    
    647,579
    
    
    
    30,416
    
    
    
    (49,697
    )
    
    
    654,063Operating (loss) income
    
    
    (5,718
    )
    
    
    7,812
    
    
    
    302
    
    
    
    
    
    
    
    2,396Other income (expense):Interest expense
    
    
    (4,103
    )
    
    
    (19,356
    )
    
    
    (240
    )
    
    
    
    
    
    
    (23,699
    )Investment income
    
    
    
    
    
    
    28
    
    
    
    727
    
    
    
    
    
    
    
    755Foreign exchange gains (losses), net
    
    
    
    
    
    
    674
    
    
    
    (60
    )
    
    
    
    
    
    
    614Other, net
    
    
    
    
    
    
    (191
    )
    
    
    
    
    
    
    
    
    
    
    (191
    )Equity in (losses) earnings of subsidiaries
    
    
    (10,562
    )
    
    
    233
    
    
    
    
    
    
    
    10,329
    
    
    
    (14,665
    )
    
    
    (18,612
    )
    
    
    427
    
    
    
    10,329
    
    
    
    (22,521
    )(Loss) income before income taxes
    
    
    (20,383
    )
    
    
    (10,800
    )
    
    
    729
    
    
    
    10,329
    
    
    
    (20,125
    )Income tax expense
    
    
    (52
    )
    
    
    (13
    )
    
    
    (245
    )
    
    
    
    
    
    
    (310
    )Net (loss) income
    
    $
    (20,435
    )
    
    $
    (10,813
    )
    
    $
    484
    
    
    $
    10,329
    
    
    $
    (20,435
    )
 29




---



##### 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
Nine Months Ended September 30, 2005
(In thousands)
 Allied
    
    
    Guarantor
    
    
    NonguarantorHoldings
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net (loss) income
    
    $
    (101,104
    )
    
    $
    (88,796
    )
    
    $
    1,375
    
    
    $
    87,421
    
    
    $
    (101,104
    )Adjustments to reconcile net (loss) income to net
cash (used in) provided by operating activities:Write-off and amortization of deferred financing costs
    
    
    7,368
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,368Depreciation and amortization
    
    
    922
    
    
    
    20,611
    
    
    
    407
    
    
    
    
    
    
    
    21,940Impairment of goodwill
    
    
    1,515
    
    
    
    77,657
    
    
    
    
    
    
    
    
    
    
    
    79,172Reorganization items
    
    
    3,825
    
    
    
    104
    
    
    
    
    
    
    
    
    
    
    
    3,929Gain on disposal of assets and other, net
    
    
    (2
    )
    
    
    (460
    )
    
    
    
    
    
    
    
    
    
    
    (462
    )Foreign
exchange gains, net
    
    
    
    
    
    
    (1,282
    )
    
    
    
    
    
    
    
    
    
    
    (1,282
    )Deferred income taxes
    
    
    20,994
    
    
    
    (32,284
    )
    
    
    29
    
    
    
    
    
    
    
    (11,261
    )Equity in losses (earnings) of subsidiaries
    
    
    88,318
    
    
    
    (897
    )
    
    
    
    
    
    
    (87,421
    )
    
    
    Change in operating assets and liabilities:Receivables, net of allowances
    
    
    
    
    
    
    2,058
    
    
    
    671
    
    
    
    
    
    
    
    2,729Inventories
    
    
    
    
    
    
    (547
    )
    
    
    
    
    
    
    
    
    
    
    (547
    )Prepayments and other assets
    
    
    (9,682
    )
    
    
    11,444
    
    
    
    (4,797
    )
    
    
    
    
    
    
    (3,035
    )Accounts and notes payable
    
    
    (218
    )
    
    
    (19
    )
    
    
    7,830
    
    
    
    
    
    
    
    7,593Intercompany payables (receivables)
    
    
    (154,745
    )
    
    
    142,822
    
    
    
    11,923
    
    
    
    
    
    
    
    Accrued liabilities
    
    
    1,861
    
    
    
    (5,084
    )
    
    
    2,931
    
    
    
    
    
    
    
    (292
    )Net cash (used in) provided by operating activities
before payment of reorganization items
    
    
    (140,948
    )
    
    
    125,327
    
    
    
    20,369
    
    
    
    
    
    
    
    4,748Reorganization items paid
    
    
    (712
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (712
    )Net cash (used in) provided by operating activities
    
    
    (141,660
    )
    
    
    125,327
    
    
    
    20,369
    
    
    
    
    
    
    
    4,036Cash flows from investing activities:Purchases of property and equipment
    
    
    
    
    
    
    (12,292
    )
    
    
    (282
    )
    
    
    
    
    
    
    (12,574
    )Proceeds from sale of property and equipment
    
    
    
    
    
    
    2,851
    
    
    
    
    
    
    
    
    
    
    
    2,851Increase in restricted cash, cash equivalents and other time deposits
    
    
    
    
    
    
    
    
    
    
    (19,686
    )
    
    
    
    
    
    
    (19,686
    )Funds deposited with insurance carriers
    
    
    
    
    
    
    (8,182
    )
    
    
    
    
    
    
    
    
    
    
    (8,182
    )Funds returned from insurance carriers
    
    
    
    
    
    
    4,131
    
    
    
    
    
    
    
    
    
    
    
    4,131Decrease in the cash surrender value of life insurance
    
    
    26
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26Net cash provided by (used in) investing activities
    
    
    26
    
    
    
    (13,492
    )
    
    
    (19,968
    )
    
    
    
    
    
    
    (33,434
    )Cash flows from financing activities:Repayment of revolving credit facilities, net
    
    
    
    
    
    
    (2,972
    )
    
    
    
    
    
    
    
    
    
    
    (2,972
    )Additions to pre-petition long-term debt
    
    
    
    
    
    
    25,000
    
    
    
    
    
    
    
    
    
    
    
    25,000Repayment of pre-petition long-term debt
    
    
    
    
    
    
    (123,266
    )
    
    
    
    
    
    
    
    
    
    
    (123,266
    )Additions to DIP revolving credit facility, net
    
    
    41,517
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41,517Additions to DIP facility term borrowings
    
    
    100,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,000Payment of deferred financing costs
    
    
    
    
    
    
    (8,079
    )
    
    
    
    
    
    
    
    
    
    
    (8,079
    )Proceeds from insurance financing arrangements
    
    
    
    
    
    
    8,470
    
    
    
    
    
    
    
    
    
    
    
    8,470Repayments of insurance financing arrangements
    
    
    
    
    
    
    (10,122
    )
    
    
    
    
    
    
    
    
    
    
    (10,122
    )Proceeds from issuance of common stock
    
    
    124
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    124Net cash provided by (used in) financing activities
    
    
    141,641
    
    
    
    (110,969
    )
    
    
    
    
    
    
    
    
    
    
    30,672Effect of exchange rate changes on cash and
cash equivalents
    
    
    
    
    
    
    106
    
    
    
    
    
    
    
    
    
    
    
    106Net change in cash and cash equivalents
    
    
    7
    
    
    
    972
    
    
    
    401
    
    
    
    
    
    
    
    1,380Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    533
    
    
    
    1,983
    
    
    
    
    
    
    
    2,516Cash and cash equivalents at end of period
    
    $
    7
    
    
    $
    1,505
    
    
    $
    2,384
    
    
    $
    
    
    
    $
    3,896
 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 INFORMATION
Nine Months Ended September 30, 2004
(In thousands)
 Allied
    
    
    Guarantor
    
    
    NonguarantorHoldings
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash Flows From Operating Activities:Net (loss) income
    
    $
    (20,435
    )
    
    $
    (10,813
    )
    
    $
    484
    
    
    $
    10,329
    
    
    $
    (20,435
    )Adjustments to reconcile net (loss) income to net cash (used in)
provided by operating activities:Amortization of deferred financing costs
    
    
    2,094
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,094Depreciation and amortization
    
    
    1,905
    
    
    
    27,569
    
    
    
    358
    
    
    
    
    
    
    
    29,832Gain on disposal of operating assets, net
    
    
    
    
    
    
    (705
    )
    
    
    
    
    
    
    
    
    
    
    (705
    )Foreign
exchange gains, net
    
    
    
    
    
    
    (614
    )
    
    
    
    
    
    
    
    
    
    
    (614
    )Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Compensation expense related to stock options and grants
    
    
    475
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    475Equity in losses (earnings) of subsidiaries
    
    
    10,562
    
    
    
    (233
    )
    
    
    
    
    
    
    (10,329
    )
    
    
    Change in operating assets and liabilities:Receivables, net of allowance for doubtful accounts
    
    
    
    
    
    
    (3,200
    )
    
    
    2,964
    
    
    
    
    
    
    
    (236
    )Inventories
    
    
    
    
    
    
    (27
    )
    
    
    
    
    
    
    
    
    
    
    (27
    )Prepayments and other assets
    
    
    (153
    )
    
    
    (949
    )
    
    
    (1,495
    )
    
    
    
    
    
    
    (2,597
    )Accounts and notes payable
    
    
    391
    
    
    
    27,397
    
    
    
    (33,793
    )
    
    
    
    
    
    
    (6,005
    )Intercompany payables
    
    
    3,316
    
    
    
    (2,902
    )
    
    
    (414
    )
    
    
    
    
    
    
    Accrued liabilities
    
    
    760
    
    
    
    4,628
    
    
    
    5,407
    
    
    
    
    
    
    
    10,795Net cash (used in) provided by operating activities
    
    
    (1,085
    )
    
    
    40,151
    
    
    
    (26,489
    )
    
    
    
    
    
    
    12,577Cash Flows From Investing Activities:Purchases of property and equipment
    
    
    (137
    )
    
    
    (17,442
    )
    
    
    (475
    )
    
    
    
    
    
    
    (18,054
    )Proceeds from sale of property and equipment
    
    
    
    
    
    
    2,117
    
    
    
    
    
    
    
    
    
    
    
    2,117Decrease in restricted cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    (582
    )
    
    
    
    
    
    
    (582
    )Funds deposited with insurance carrier
    
    
    
    
    
    
    (32,024
    )
    
    
    
    
    
    
    
    
    
    
    (32,024
    )Funds returned from insurance carrier
    
    
    
    
    
    
    
    
    
    
    33,743
    
    
    
    
    
    
    
    33,743Decrease in cash surrender value of life insurance
    
    
    147
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    147Net cash provided by (used in) investing activities
    
    
    10
    
    
    
    (47,349
    )
    
    
    32,686
    
    
    
    
    
    
    
    (14,653
    )Cash Flows From Financing Activities:Additions to revolving credit facilities, net
    
    
    
    
    
    
    18,226
    
    
    
    
    
    
    
    
    
    
    
    18,226Repayment of long-term debt
    
    
    
    
    
    
    (14,792
    )
    
    
    
    
    
    
    
    
    
    
    (14,792
    )Proceeds from insurance premium financing
    
    
    
    
    
    
    28,608
    
    
    
    
    
    
    
    
    
    
    
    28,608Repayments of insurance premium financing
    
    
    
    
    
    
    (26,225
    )
    
    
    
    
    
    
    
    
    
    
    (26,225
    )Proceeds from issuance of common stock
    
    
    526
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    526Net cash provided by financing activities
    
    
    526
    
    
    
    5,817
    
    
    
    
    
    
    
    
    
    
    
    6,343Effect of exchange rate changes on cash and cash equivalents
    
    
    
    
    
    
    487
    
    
    
    
    
    
    
    
    
    
    
    487Net change in cash and cash equivalents
    
    
    (549
    )
    
    
    (894
    )
    
    
    6,197
    
    
    
    
    
    
    
    4,754Cash and cash equivalents at beginning of period
    
    
    549
    
    
    
    1,166
    
    
    
    433
    
    
    
    
    
    
    
    2,148Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    272
    
    
    $
    6,630
    
    
    $
    
    
    
    $
    6,902
 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 Form10-K for the year ended December 31,
2004. In addition, we use forward-looking statements in the discussion that follows.
Forward-looking statements by nature involve risks and uncertainties and hence our actual results
could differ materially from our expectations as a result of various factors, some of which we
discuss below in Cautionary Notice Regarding Forward-Looking Statements and in our 2004 Annual
Report on Form 10-K filed with the SEC.
 Executive Overview
 Chapter 11 Proceedings
    
    
    pay pre-petition wages, payroll taxes, certain employee benefits and related expenses;
    
    maintain and pay obligations with respect to our insurance programs, including the
continued payment of workers compensation claims on an uninterrupted basis in the
ordinary course of business, all premiums and other amounts due and owing with respect to
the insurance programs; and
    
    enter into financing arrangements for insurance premiums on a continuing basis.
    32




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##### 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.
 Other Events
       
    
    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
 33




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##### Table of Contents




    
    Cautionary Notice Regarding Forward-looking Statements.
 Results of Operations
 Three Months Ended September 30, 2005 Compared to Three Months Ended September 30, 2004
  Third Quarter2005
    
    2004As a % of revenuesRevenues
    
    
    100.0
    %
    
    
    100.0
    %Operating expenses:Salaries, wages, and fringe benefits
    
    
    54.3
    %
    
    
    53.6
    %Operating supplies and expenses
    
    
    20.6
    %
    
    
    17.5
    %Purchased transportation
    
    
    14.1
    %
    
    
    13.0
    %Insurance and claims
    
    
    4.2
    %
    
    
    5.5
    %Operating taxes and licenses
    
    
    3.3
    %
    
    
    3.3
    %Depreciation and amortization
    
    
    3.3
    %
    
    
    4.6
    %Rents
    
    
    0.9
    %
    
    
    1.0
    %Communications and utilities
    
    
    0.6
    %
    
    
    0.7
    %Other operating expenses
    
    
    1.3
    %
    
    
    1.0
    %Loss on disposal of operating assets, net
    
    
    
    %
    
    
    0.2
    %Total operating expenses
    
    
    102.6
    %
    
    
    100.4
    %Operating loss
    
    
    (2.6
    )%
    
    
    (0.4
    )%Other income (expense):Interest expense
    
    
    (4.7
    )%
    
    
    (4.2
    )%Investment income
    
    
    0.4
    %
    
    
    0.3
    %Foreign
exchange gains
    
    
    0.9
    %
    
    
    0.8
    %(3.4
    )%
    
    
    (3.1
    )%Loss before reorganization items and income taxes
    
    
    (6.0
    )%
    
    
    (3.5
    )%Reorganization items
    
    
    (1.9
    )%
    
    
    
    %Loss before income taxes
    
    
    (7.9
    )%
    
    
    (3.5
    )%Income tax
expense
    
    
    
    %
    
    
    (0.2
    )%Net loss
    
    
    (7.9
    )%
    
    
    (3.7
    )%
 Revenues
  34




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##### Table of Contents



Salaries, wages, and fringe benefits
  Operating supplies and expenses
  35




---



##### Table of Contents



Purchased transportation
  Insurance and claims
  Depreciation and amortization
 .
 Other operating expenses
  Interest expense
  36




---



##### Table of Contents



Reorganization items
  Income taxes
  Nine Months Ended September 30, 2005 Compared to Nine Months Ended September 30, 2004
  37




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##### Table of Contents



Nine Months Ended September 30,2005
    
    2004As a % of revenuesRevenues
    
    
    100.0
    %
    
    
    100.0
    %Operating expenses:Salaries, wages, and fringe benefits
    
    
    53.2
    %
    
    
    54.7
    %Operating supplies and expenses
    
    
    19.4
    %
    
    
    17.5
    %Purchased transportation
    
    
    13.5
    %
    
    
    12.4
    %Insurance and claims
    
    
    4.1
    %
    
    
    4.6
    %Operating taxes and licenses
    
    
    3.4
    %
    
    
    3.3
    %Depreciation and amortization
    
    
    3.3
    %
    
    
    4.5
    %Rents
    
    
    0.9
    %
    
    
    0.9
    %Communications and utilities
    
    
    0.7
    %
    
    
    0.7
    %Other operating expenses
    
    
    1.5
    %
    
    
    1.1
    %Impairment of goodwill
    
    
    12.1
    %
    
    
    Gain on disposal of operating assets, net
    
    
    (0.1
    )%
    
    
    (0.1
    )%Total operating expenses
    
    
    112.0
    %
    
    
    99.6
    %Operating
(loss) income
    
    
    (12.0
    )%
    
    
    0.4
    %Other income (expense):Interest expense
    
    
    (5.0
    )%
    
    
    (3.6
    )%Investment income
    
    
    0.3
    %
    
    
    0.1
    %Foreign
exchange gains
    
    
    0.2
    %
    
    
    0.1
    %(4.5
    )%
    
    
    (3.4
    )%Loss before reorganization items and income taxes
    
    
    (16.5
    )%
    
    
    (3.0
    )%Reorganization items
    
    
    (0.6
    )%
    
    
    Loss before income taxes
    
    
    (17.1
    )%
    
    
    (3.0
    )%Income tax benefit
    
    
    1.7
    %
    
    
    (0.1
    )%Net loss
    
    
    (15.4
    )%
    
    
    (3.1
    )%
 Revenues
    38




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##### Table of Contents



Salaries, wages, and fringe benefits
     Operating supplies and expenses
  Purchased transportation
  39




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##### Table of Contents



Insurance and claims
  Depreciation and amortization
  Other operating expenses
  Impairment of goodwill
  Interest expense
  40




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##### Table of Contents



Reorganization items
  Income taxes
  Liquidity and Capital Resources
 Working Capital
     Operating Activities
  41




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##### Table of Contents



Investing Activities
      Financing Activities
  42




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Debt, Contractual Obligations and Letters of Credit
    Off-Balance Sheet Arrangements
  Disclosures About Market Risks
  Fuel Prices
  43




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##### Table of Contents



Interest Rates
 The Wall Street Journal
 Risk Management Retention
     Foreign Currency Exchange Rates
   44




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##### Table of Contents



Inflation
  Critical Accounting Policies and Estimates
     Recent Accounting Pronouncements
 Accounting for Conditional Asset Retirement Obligations ccounting for Asset Retirement Obligations,
 Share-Based Payment Accounting for Stock-Based Compensation, Accounting for Stock Issued to Employees Statement of Cash Flows.
 45




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##### Table of Contents



Accounting and Disclosure
Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of
2004 Accounting for Income Taxes,
 Factors Which May Affect Future Results
  Cautionary Notice Regarding Forward-Looking Statements
  
    
    the effect that the Chapter 11 Proceedings will have on our operations and the
value of our securities;
    
    our strategy, intentions and expectations;
    
    general industry trends, competitive conditions and customer preferences;
    
    our management information systems;
    
    our remanufacturing program;
    
    our fleet investments and efforts to reduce costs;
 46




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##### Table of Contents




    
    the adequacy of cash to finance our current and future operations; and
    
    resolution of litigation without a material adverse effect on our financial
condition and results of operations.
  
    
    the impact of the Chapter 11 Proceedings and the related circumstances which
could materially affect the amounts of assets and liabilities included in the
consolidated financial statements or our market share;
    
    risks associated with our ability to obtain approval of and/or to implement our
plan of reorganization;
    
    risks associated with our ability to obtain exit financing to replace the DIP Facility;
    
    our ability to comply with the terms of our current debt agreements and customer contracts;
    
    economic recessions or downturns in new vehicle production or sales;
    
    war in the Middle East;
    
    increases in the cost and availability of fuel;
    
    the highly competitive nature of the automotive distribution industry and
emergence of non-union competition;
    
    dependence on the automotive industry and ongoing initiatives of customers to
reduce costs;
    
    loss or reduction of revenues generated by our major customers or the loss of
any such customers;
    
    the variability of OEM production and seasonality of the automotive distribution industry;
    
    our highly leveraged financial position;
    
    our ability to obtain financing in the future;
    
    our ability to fund future capital requirements;
    
    increased costs, capital expenditure requirements and other consequences of our
aging fleet of Rigs as well as Rig purchasing cycles;
    
    labor disputes, disruptions, work stoppages or strikes involving us or our significant customers;
    
    dependence on our key personnel;
    
    increased frequency and severity of employee related accidents and workers
compensation claims;
    
    availability of appropriate insurance coverages in all categories;
    
    changes in the regulatory requirements which are applicable to our business;
    
    changes in vehicle sizes, configurations and weights which may adversely impact
vehicle deliveries per load;
    
    risks associated with doing business in foreign countries;
    
    the availability of qualified drivers;
    
    dependence on legacy information systems;
    
    dependence on IBM for mainframe and system support;
    
    increased frequency and severity of cargo claims;
    
    increased frequency and severity of traffic accidents;
    
    excess manufacturer production capacity which could lead OEMs to close
manufacturing facilities;
    
    efforts to improve network efficiency; and
    
    other risk factors set forth from time to time in our SEC reports, including
but not limited to, our 2004 Annual Report on Form 10-K and this Quarterly Report
on Form 10-Q.
  47




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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.
 Changes in Internal Control Over Financial Reporting
     48




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
   
 Item 5. Other Information
  
 Item 6. Exhibits and Reports on Form 8-K:
 (a) Exhibit Index
 Exhibit No.




    Description4.4(a)

    
    
 
    
 
    Third Amendment to the Senior Secured Super-Priority
Debtor-in-Possession Credit Agreement, dated as of
November 16, 2005 (this Amendment), by and among: (a)
ALLIED HOLDINGS, INC., a Georgia corporation (Allied
Holdings), and ALLIED SYSTEMS, LTD. (L.P.), a Georgia
limited partnership (Allied Systems and, together with
Allied Holdings, Borrowers), each, a debtor and
debtor-in-possession; (b) the other Credit Parties
signatory hereto (the Credit Party and, together with
the Borrowers, the Credit Parties); (c) GENERAL
ELECTRIC CAPITAL CORPORATION, as Administrative Agent
(in such capacity, the Administrative Agent),
Collateral Agent, Revolver Agent and co-Syndication
Agent (GE Capital); (d) MORGAN STANLEY SENIOR FUNDING,
INC., as co-Term Loan B Agent, co-Syndication Agent,
co-Bookrunner and co-Term Loan B Lead Arranger (Morgan
Stanley); (e) MARATHON STRUCTURED FINANCE FUND, L.P.,
as Term Loan A Agent, co-Term Loan B Agent, Term Loan A
Lead Arranger, co-Term Loan B Lead Arranger and
co-Revolver Lead Arranger (Marathon); and (f) the
other Lenders signatory hereto from time to time.31.1
    
    
    
    
    
    Rule 13a-14(a)/15d-14(a) Certification by Hugh E. Sawyer.31.2
    
    
    
    
    
    Rule 13a-14(a)/15d-14(a) Certification by Thomas H. King.32.1
    
    
    
    
    
    Section 1350 Certification by Hugh E. Sawyer.32.2
    
    
    
    
    
    Section 1350 Certification by Thomas H. King.
 49




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##### Table of Contents



SIGNATURES
  ALLIED HOLDINGS, INC.Date:
December 9, 2005
    
    By:
    
    /s/ Hugh E. SawyerHugh E. Sawyer,President and Chief Executive OfficerDate:
December 9, 2005By:
    
    /s/ Thomas H. KingThomas H. King,Executive Vice President and Chief FinancialOfficer (Principal Financial and Accounting Officer)
 50




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.


    

    

    
    Description4.4(a)
    
    
    
    
    
    Third Amendment to the Senior Secured Super-Priority
Debtor-in-Possession Credit Agreement, dated as of
November 16, 2005 (this Amendment), by and among: (a)
ALLIED HOLDINGS, INC., a Georgia corporation (Allied
Holdings), and ALLIED SYSTEMS, LTD. (L.P.), a Georgia
limited partnership (Allied Systems and, together with
Allied Holdings, Borrowers), each, a debtor and
debtor-in-possession; (b) the other Credit Parties
signatory hereto (the Credit Party and, together with
the Borrowers, the Credit Parties); (c) GENERAL
ELECTRIC CAPITAL CORPORATION, as Administrative Agent (in
such capacity, the Administrative Agent), Collateral
Agent, Revolver Agent and co-Syndication Agent (GE
Capital); (d) MORGAN STANLEY SENIOR FUNDING, INC., as
co-Term Loan B Agent, co-Syndication Agent, co-Bookrunner
and co-Term Loan B Lead Arranger (Morgan Stanley); (e)
MARATHON STRUCTURED FINANCE FUND, L.P., as Term Loan A
Agent, co-Term Loan B Agent, Term Loan A Lead Arranger,
co-Term Loan B Lead Arranger and co-Revolver Lead
Arranger (Marathon); and (f) the other Lenders
signatory hereto from time to time.31.1
    
    
    
    
    
    Rule 13a-14(a)/15d-14(a) Certification by Hugh E. Sawyer.31.2
    
    
    
    
    
    Rule 13a-14(a)/15d-14(a) Certification by Thomas H. King.32.1
    
    
    
    
    
    Section 1350 Certification by Hugh E. Sawyer.32.2
    
    
    
    
    
    Section 1350 Certification by Thomas H. King.
 51