##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q

|    |  |                                                                                                                                            
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------
|[x] |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 - For the quarterly period ended September 30, 2003

or

|     |  |                                                                                                                              
|---- |  | -----------------------------------------------------------------------------------------------------------------------------
|[  ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 - For the transition period from  to
|     |  |                                                                                                                              
|     |  | Commission File Number: 0-22276                                                                                              

ALLIED HOLDINGS, INC.

(Exact name of registrant as specified in its charter)


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

Suite 200, 160 Clairemont Avenue, Decatur, Georgia 30030

(Address of principal executive offices)


(404) 373-4285

(Registrants telephone number, including area code)




---

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


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

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act of
1934).                  [  ]
Yes     [X] No

|                                                           |  |  |           | 
|---------------------------------------------------------- |  |  | --------- | 
|Outstanding common stock, no par value at October 31, 2003 |  |  | 8,741,830





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TABLE OF CONTENTS



|                                             |                                                                                               |                                            |  |  |  |  |  | 
|-------------------------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------ |  |  |  |  |  | 
|PART 1 - FINANCIAL INFORMATION              
|                                             | Item 1 - FINANCIAL STATEMENTS                                                                
|                                             |                                                                                               | CONSOLIDATED BALANCE SHEETS               
|                                             |                                                                                               | CONSOLIDATED STATEMENTS OF OPERATIONS     
|                                             |                                                                                               | CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                                             |                                                                                               | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                                             | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                             | Item 3. Quantitative and Qualitative Disclosures About Market Risk                           
|                                             | Item 4. Controls and Procedures                                                              
|PART II  OTHER INFORMATION                 
|                                             | Item 1. Legal Proceedings                                                                    
|                                             | Item 6. Exhibits and Reports on Form 8-K:                                                    
|SIGNATURES                                  
|EXHIBIT INDEX                               
|EX-31.1 SECTION 302 CERTIFICATION OF THE CEO
|EX-31.2 SECTION 302 CERTIFICATION OF THE CFO
|EX-32.1 SECTION 906 CERTIFICATION OF THE CEO
|EX-32.2 SECTION 906 CERTIFICATION OF THE CFO



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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES

INDEX

|       |  |                                                                                       |  |                                                                                                              |    |      |    | 
|------ |  | ------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------ | -- | ---- | -- | 
|       |  |                                                                                       |  |                                                                                                              |    | PAGE
|       |  |                                                                                       |  | PART I                                                                                                       |    |      |    | 
|       |  |                                                                                       |  | FINANCIAL INFORMATION                                                                                        |    |      |    | 
|ITEM 1 |  | Financial Statements                                                                  |  |                                                                                                              |    |     
|       |  |                                                                                       |  | Consolidated Balance Sheets as of September 30, 2003 and
December 31, 2002                                   |    |      | 3  | 
|       |  |                                                                                       |  | Consolidated Statements of Operations for the Three and
Nine-Month Periods Ended September 30, 2003 and 2002 |    |      | 4  | 
|       |  |                                                                                       |  | Consolidated Statements of Cash Flows for the Nine-Month Periods
Ended September 30, 2003 and 2002           |    |      | 5  | 
|       |  |                                                                                       |  | Notes to Consolidated Financial
Statements                                                                   |    |      | 6  | 
|ITEM 2 |  | Managements Discussion and Analysis of Financial Condition
and Results of Operations |  |                                                                                                              | 23 |     
|ITEM 3 |  | Quantitative and Qualitative Disclosures About Market Risk                            |  |                                                                                                              | 35 |     
|ITEM 4 |  | Controls and Procedures                                                               |  |                                                                                                              | 35 |     
|       |  |                                                                                       |  | PART II                                                                                                      |    |      |    | 
|       |  |                                                                                       |  | OTHER INFORMATION                                                                                            |    |      |    | 
|ITEM 1 |  | Legal Proceedings                                                                     |  |                                                                                                              | 36 |     
|ITEM 6 |  | Exhibits and Reports on Form
8-K                                                      |  |                                                                                                              | 37 |     
|       |  |                                                                                       |  | Signature Page                                                                                               |    |      | 38 | 

2



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##### Table of Contents









PART 1 - FINANCIAL INFORMATION
Item 1 - FINANCIAL STATEMENTS




ALLIED HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(In Thousands)

|                                            |                                                                                                                                                    |                                      |         |                                            |   |               |         |              |   |   |         | 
|------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------ | ------- | ------------------------------------------ | - | ------------- | ------- | ------------ | - | - | ------- | 
|                                            |                                                                                                                                                    |                                      |         |                                            |   | September 30, |         | December 31,
|                                            |                                                                                                                                                    |                                      |         |                                            |   | 2003          |         | 2002        
|                                            |                                                                                                                                                    |                                      |         |                                            |   |               |         |             
|                                            |                                                                                                                                                    |                                      |         |                                            |   | (unaudited)   |         |              |   |  
|                                            |                                                                                                                                                    |                                      | ASSETS  |                                            |   |               |         |              |   |   |        
|CURRENT ASSETS:                             |                                                                                                                                                    |                                      |         |                                            |   |               |         |             
|                                            | Cash and cash equivalents                                                                                                                          |                                      | $       | 83,349                                     |   |               | $       | 10,253       |  
|                                            | Short-term investments                                                                                                                             |                                      |         |                                           |   |               |         | 60,732       |  
|                                            | Receivables, net of allowance for doubtful accounts of
$3,389 and $5,587 respectively                                                              |                                      |         | 58,078                                     |   |               |         | 58,512       |  
|                                            | Inventories                                                                                                                                        |                                      |         | 4,874                                      |   |               |         | 5,071        |  
|                                            | Deferred tax assets                                                                                                                                |                                      |         | 24,034                                     |   |               |         | 39,826       |  
|                                            | Prepayments and other current assets                                                                                                               |                                      |         | 12,672                                     |   |               |         | 28,685       |  
|                                            |                                                                                                                                                    |                                      |         |                                            |   |               |         |             
|                                            |                                                                                                                                                    |                                      |         | Total current assets                       |   |               | 183,007 |              |   |   | 203,079 | 
|                                            |                                                                                                                                                    |                                      |         |                                            |   |               |         |             
|PROPERTY AND EQUIPMENT, NET                 |                                                                                                                                                    |                                      | 158,539 |                                            |   |               | 176,663 |             
|                                            |                                                                                                                                                    |                                      |         |                                            |   |               |         |             
|GOODWILL, NET                               |                                                                                                                                                    |                                      | 88,998  |                                            |   |               | 85,241  |             
|                                            |                                                                                                                                                    |                                      |         |                                            |   |               |         |             
|OTHER                                       |                                                                                                                                                    |                                      | 33,805  |                                            |   |               | 20,525  |             
|                                            |                                                                                                                                                    |                                      |         |                                            |   |               |         |             
|                                            |                                                                                                                                                    |                                      |         | Total assets                               |   | $             | 464,349 |              |   | $ | 485,508 | 
|                                            |                                                                                                                                                    |                                      |         |                                            |   |               |         |             
|                                            |                                                                                                                                                    | LIABILITIES AND STOCKHOLDERS EQUITY |         |                                            |   |               |         |              |   |  
|CURRENT LIABILITIES:                        |                                                                                                                                                    |                                      |         |                                            |   |               |         |             
|                                            | Current maturities of long-term debt                                                                                                               |                                      | $       | 17,854                                     |   |               | $       | 10,785       |  
|                                            | Trade accounts payable                                                                                                                             |                                      |         | 27,817                                     |   |               |         | 36,585       |  
|                                            | Accrued liabilities                                                                                                                                |                                      |         | 93,421                                     |   |               |         | 92,881       |  
|                                            |                                                                                                                                                    |                                      |         |                                            |   |               |         |             
|                                            |                                                                                                                                                    |                                      |         | Total current liabilities                  |   |               | 139,092 |              |   |   | 140,251 | 
|                                            |                                                                                                                                                    |                                      |         |                                            |   |               |         |             
|LONG-TERM DEBT, less current maturities     |                                                                                                                                                    |                                      | 236,376 |                                            |   |               | 237,690 |             
|                                            |                                                                                                                                                    |                                      |         |                                            |   |               |         |             
|POSTRETIREMENT BENEFITS OTHER THAN PENSIONS |                                                                                                                                                    |                                      | 6,530   |                                            |   |               | 7,467   |             
|                                            |                                                                                                                                                    |                                      |         |                                            |   |               |         |             
|DEFERRED INCOME TAXES                       |                                                                                                                                                    |                                      | 11,364  |                                            |   |               | 27,746  |             
|                                            |                                                                                                                                                    |                                      |         |                                            |   |               |         |             
|OTHER LONG-TERM LIABILITIES                 |                                                                                                                                                    |                                      | 59,653  |                                            |   |               | 62,040  |             
|                                            |                                                                                                                                                    |                                      |         |                                            |   |               |         |             
|STOCKHOLDERS EQUITY:                       |                                                                                                                                                    |                                      |         |                                            |   |               |         |             
|                                            | Preferred stock, no par value; 5,000 shares authorized, none
outstanding                                                                           |                                      |         |                                           |   |               |         |             |  
|                                            | Common stock, no par value; 20,000 shares authorized, 8,722
and 8,421 shares outstanding at September 30, 2003
and December 31, 2002, respectively |                                      |         |                                           |   |               |         |             |  
|                                            | Additional paid-in capital                                                                                                                         |                                      |         | 47,373                                     |   |               |         | 46,801       |  
|                                            | Treasury stock at cost, 139 shares at September 30, 2003
and December 31, 2002                                                                     |                                      |         | (707                                       | ) |               |         | (707         | )
|                                            | Accumulated deficit                                                                                                                                |                                      |         | (30,687                                    | ) |               |         | (26,420      | )
|                                            | Accumulated other comprehensive loss, net of tax                                                                                                   |                                      |         | (4,645                                     | ) |               |         | (9,360       | )
|                                            |                                                                                                                                                    |                                      |         |                                            |   |               |         |             
|                                            |                                                                                                                                                    |                                      |         | Total stockholders equity                 |   |               | 11,334  |              |   |   | 10,314  | 
|                                            |                                                                                                                                                    |                                      |         |                                            |   |               |         |             
|                                            |                                                                                                                                                    |                                      |         | Total liabilities and
stockholders equity |   | $             | 464,349 |              |   | $ | 485,508 | 
|                                            |                                                                                                                                                    |                                      |         |                                            |   |               |         |             

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

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ALLIED HOLDINGS, INC. AND SUBSIDIARIES

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

|                                                                |                                                  |                                          |                          |         |                            |         |                           |         |        |         |         |         |        |         |         |         |        |         | 
|--------------------------------------------------------------- | ------------------------------------------------ | ---------------------------------------- | ------------------------ | ------- | -------------------------- | ------- | ------------------------- | ------- | ------ | ------- | ------- | ------- | ------ | ------- | ------- | ------- | ------ | ------- | 
|                                                                |                                                  |                                          |                          |         | For the Three Months Ended |         | For the Nine Months Ended
|                                                                |                                                  |                                          |                          |         | September 30,              |         | September 30,            
|                                                                |                                                  |                                          |                          |         |                            |         |                          
|                                                                |                                                  |                                          |                          |         | 2003                       |         | 2002                      |         | 2003   |         | 2002   
|                                                                |                                                  |                                          |                          |         |                            |         |                           |         |        |         |        
|REVENUES                                                        |                                                  | $                                        | 197,089                  |         |                            | $       | 212,985                   |         |        | $       | 640,759 |         |        | $       | 665,228 |        
|                                                                |                                                  |                                          |                          |         |                            |         |                           |         |        |         |         |         |        |         |         |        
|OPERATING EXPENSES:                                             |                                                  |                                          |                          |         |                            |         |                           |         |        |         |         |         |        |         |         |        
|                                                                | Salaries, wages and fringe benefits              |                                          |                          | 107,369 |                            |         |                           | 117,804 |        |         |         | 348,446 |        |         |         | 363,853 |       
|                                                                | Operating supplies and expenses                  |                                          |                          | 29,960  |                            |         |                           | 33,257  |        |         |         | 103,108 |        |         |         | 100,068 |       
|                                                                | Purchased transportation                         |                                          |                          | 24,082  |                            |         |                           | 25,331  |        |         |         | 74,632  |        |         |         | 72,438  |       
|                                                                | Insurance and claims                             |                                          |                          | 8,260   |                            |         |                           | 10,844  |        |         |         | 29,094  |        |         |         | 34,344  |       
|                                                                | Operating taxes and licenses                     |                                          |                          | 6,992   |                            |         |                           | 7,638   |        |         |         | 22,989  |        |         |         | 24,731  |       
|                                                                | Depreciation and amortization                    |                                          |                          | 11,011  |                            |         |                           | 13,142  |        |         |         | 34,688  |        |         |         | 40,087  |       
|                                                                | Rents                                            |                                          |                          | 1,579   |                            |         |                           | 1,685   |        |         |         | 4,819   |        |         |         | 4,895   |       
|                                                                | Communications and utilities                     |                                          |                          | 1,745   |                            |         |                           | 1,425   |        |         |         | 5,213   |        |         |         | 5,290   |       
|                                                                | Other operating expenses                         |                                          |                          | 2,791   |                            |         |                           | 2,859   |        |         |         | 8,175   |        |         |         | 7,607   |       
|                                                                | Loss (gain) on disposal of operating assets, net |                                          |                          | 153     |                            |         |                           | 367     |        |         |         | 612     |        |         |         | (347    | )     
|                                                                |                                                  |                                          |                          |         |                            |         |                           |         |        |         |         |         |        |         |         |        
|                                                                |                                                  |                                          | Total operating expenses |         |                            | 193,942 |                           |         |        | 214,352 |         |         |        | 631,776 |         |         |        | 652,966 | 
|                                                                |                                                  |                                          |                          |         |                            |         |                           |         |        |         |         |         |        |         |         |        
|                                                                |                                                  |                                          | Operating income (loss)  |         |                            | 3,147   |                           |         |        | (1,367  | )       |         |        | 8,983   |         |         |        | 12,262  | 
|                                                                |                                                  |                                          |                          |         |                            |         |                           |         |        |         |         |         |        |         |         |        
|OTHER INCOME (EXPENSE):                                         |                                                  |                                          |                          |         |                            |         |                           |         |        |         |         |         |        |         |         |        
|                                                                | Interest expense                                 |                                          |                          | (7,366  | )                          |         |                           | (7,611  | )      |         |         | (22,120 | )      |         |         | (23,343 | )     
|                                                                | Investment income (loss)                         |                                          |                          | (398    | )                          |         |                           | 203     |        |         |         | 2,935   |        |         |         | 1,090   |       
|                                                                | Gain on early extinguishment of debt             |                                          |                          |        |                            |         |                           |        |        |         |         |        |        |         |         | 2,750   |       
|                                                                | Foreign exchange gain (loss), net                |                                          |                          | (62     | )                          |         |                           | 124     |        |         |         | 2,386   |        |         |         | 157     |       
|                                                                | Other, net                                       |                                          |                          | 1,976   |                            |         |                           | (57     | )      |         |         | 1,976   |        |         |         | (264    | )     
|                                                                |                                                  |                                          |                          |         |                            |         |                           |         |        |         |         |         |        |         |         |        
|                                                                |                                                  |                                          | (5,850                   | )       |                            |         | (7,341                    | )       |        |         | (14,823 | )       |        |         | (19,610 | )      
|                                                                |                                                  |                                          |                          |         |                            |         |                           |         |        |         |         |         |        |         |         |        
|LOSS BEFORE INCOME TAXES AND CUMULATIVE                         |                                                  |                                          |                          |         |                            |         |                           |         |        |         |         |         |        |         |         |        
|                                                                |                                                  | EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE |                          |         | (2,703                     | )       |                           |         | (8,708 | )       |         |         | (5,840 | )       |         |         | (7,348 | )      
|INCOME TAX BENEFIT                                              |                                                  |                                          | 728                      |         |                            |         | 2,226                     |         |        |         | 1,573   |         |        |         | 1,819   |        
|                                                                |                                                  |                                          |                          |         |                            |         |                           |         |        |         |         |         |        |         |         |        
|LOSS BEFORE CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE |                                                  |                                          | (1,975                   | )       |                            |         | (6,482                    | )       |        |         | (4,267  | )       |        |         | (5,529  | )      
|CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE,
NET OF TAX |                                                  |                                          |                         |         |                            |         |                          |         |        |         |        |         |        |         | (4,092  | )      
|                                                                |                                                  |                                          |                          |         |                            |         |                           |         |        |         |         |         |        |         |         |        
|NET LOSS                                                        |                                                  | ($                                       | 1,975                    | )       |                            | ($      | 6,482                     | )       |        | ($      | 4,267   | )       |        | ($      | 9,621   | )      
|                                                                |                                                  |                                          |                          |         |                            |         |                           |         |        |         |         |         |        |         |         |        
|BASIC AND DILUTED LOSS PER COMMON SHARE:                        |                                                  |                                          |                          |         |                            |         |                           |         |        |         |         |         |        |         |         |        
|LOSS BEFORE CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE |                                                  | ($                                       | 0.23                     | )       |                            | ($      | 0.78                      | )       |        | ($      | 0.50    | )       |        | ($      | 0.67    | )      
|CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE, NET OF TAX |                                                  |                                          |                         |         |                            |         |                          |         |        |         |        |         |        | ($      | 0.49    | )      
|                                                                |                                                  |                                          |                          |         |                            |         |                           |         |        |         |         |         |        |         |         |        
|NET LOSS                                                        |                                                  | ($                                       | 0.23                     | )       |                            | ($      | 0.78                      | )       |        | ($      | 0.50    | )       |        | ($      | 1.16    | )      
|                                                                |                                                  |                                          |                          |         |                            |         |                           |         |        |         |         |         |        |         |         |        
|BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING    |                                                  |                                          | 8,507                    |         |                            |         | 8,324                     |         |        |         | 8,459   |         |        |         | 8,282   |        
|                                                                |                                                  |                                          |                          |         |                            |         |                           |         |        |         |         |         |        |         |         |        

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

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##### Table of Contents






ALLIED HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)

|                                                             |                                                                          |                                                          |                                                     |                                                     |        |                           |         |         |        |        |         |  
|------------------------------------------------------------ | ------------------------------------------------------------------------ | -------------------------------------------------------- | --------------------------------------------------- | --------------------------------------------------- | ------ | ------------------------- | ------- | ------- | ------ | ------ | ------- | -
|                                                             |                                                                          |                                                          |                                                     |                                                     |        | For the Nine Months Ended
|                                                             |                                                                          |                                                          |                                                     |                                                     |        | September 30,            
|                                                             |                                                                          |                                                          |                                                     |                                                     |        |                          
|                                                             |                                                                          |                                                          |                                                     |                                                     |        | 2003                      |         | 2002   
|                                                             |                                                                          |                                                          |                                                     |                                                     |        |                           |         |        
|CASH FLOWS FROM OPERATING ACTIVITIES:                        |                                                                          |                                                          |                                                     |                                                     |        |                           |         |        
|                                                             | Net loss                                                                 |                                                          | ($                                                  | 4,267                                               | )      |                           | ($      | 9,621   | )     
|                                                             | Reconciliation of net loss to net cash provided
by operating activities: |                                                          |                                                     |                                                     |        |                           |         |         |       
|                                                             |                                                                          | Gain on early extinguishment of debt                     |                                                     |                                                     |       |                           |         |         | (2,750 | )     
|                                                             |                                                                          | Interest expense paid in kind                            |                                                     |                                                     | 1,065  |                           |         |         | 746    |       
|                                                             |                                                                          | Amortization of deferred financing costs                 |                                                     |                                                     | 3,007  |                           |         |         | 3,013  |       
|                                                             |                                                                          | Depreciation and amortization                            |                                                     |                                                     | 34,688 |                           |         |         | 40,087 |       
|                                                             |                                                                          | Loss (gain) on disposal of assets and other, net         |                                                     |                                                     | 612    |                           |         |         | (83    | )     
|                                                             |                                                                          | Foreign exchange gain, net                               |                                                     |                                                     | (2,386 | )                         |         |         | (157   | )     
|                                                             |                                                                          | Cumulative effect of change in accounting principle      |                                                     |                                                     |       |                           |         |         | 4,092  |       
|                                                             |                                                                          | Deferred income taxes                                    |                                                     |                                                     | (3,402 | )                         |         |         | (2,569 | )     
|                                                             |                                                                          | Compensation expense related to stock options and grants |                                                     |                                                     | 290    |                           |         |         | (210   | )     
|                                                             |                                                                          | Amortization of Teamsters Union contract costs           |                                                     |                                                     | 1,000  |                           |         |         | 1,800  |       
|                                                             |                                                                          | Change in operating assets and liabilities:              |                                                     |                                                     |        |                           |         |         |        |       
|                                                             |                                                                          |                                                          | Receivables, net of allowance for doubtful accounts |                                                     |        | 1,840                     |         |         |        | 12,276 |        
|                                                             |                                                                          |                                                          | Inventories                                         |                                                     |        | 336                       |         |         |        | 55     |        
|                                                             |                                                                          |                                                          | Prepayments and other current assets                |                                                     |        | 16,359                    |         |         |        | 1,556  |        
|                                                             |                                                                          |                                                          | Short-term investments                              |                                                     |        | 60,732                    |         |         |        | 2,367  |        
|                                                             |                                                                          |                                                          | Trade accounts payable                              |                                                     |        | (9,676                    | )       |         |        | (4,057 | )      
|                                                             |                                                                          |                                                          | Accrued
liabilities and other                       |                                                     |        | (18,596                   | )       |         |        | 8,533  |        
|                                                             |                                                                          |                                                          |                                                     |                                                     |        |                           |         |         |       
|                                                             |                                                                          | Net change in operating assets and liabilities           |                                                     |                                                     | 50,995 |                           |         |         | 20,730 |       
|                                                             |                                                                          |                                                          |                                                     |                                                     |        |                           |         |         |       
|                                                             |                                                                          |                                                          |                                                     | Net cash provided by operating activities           |        |                           | 81,602  |         |        |        | 55,078  |  
|                                                             |                                                                          |                                                          |                                                     |                                                     |        |                           |         |         |       
|CASH FLOWS FROM INVESTING ACTIVITIES:                        |                                                                          |                                                          |                                                     |                                                     |        |                           |         |        
|                                                             | Purchases of property and equipment                                      |                                                          |                                                     | (11,547                                             | )      |                           |         | (13,313 | )     
|                                                             | Proceeds from sale of property and equipment                             |                                                          |                                                     | 287                                                 |        |                           |         | 3,005   |       
|                                                             | Proceeds from sale of equity investment in joint venture                 |                                                          |                                                     |                                                    |        |                           |         | 2,700   |       
|                                                             | Decrease in the cash surrender value of life insurance                   |                                                          |                                                     | 2                                                   |        |                           |         | 1,341   |       
|                                                             |                                                                          |                                                          |                                                     |                                                     |        |                           |         |         |       
|                                                             |                                                                          |                                                          |                                                     | Net cash used in investing activities               |        |                           | (11,258 | )       |        |        | (6,267  | )
|                                                             |                                                                          |                                                          |                                                     |                                                     |        |                           |         |         |       
|CASH FLOWS FROM FINANCING ACTIVITIES:                        |                                                                          |                                                          |                                                     |                                                     |        |                           |         |        
|                                                             | Additions to (repayments of) revolving credit facilities, net            |                                                          |                                                     | (20,280                                             | )      |                           |         | (62,384 | )     
|                                                             | Additions to long-term debt                                              |                                                          |                                                     | 99,875                                              |        |                           |         | 82,750  |       
|                                                             | Repayment of long-term debt                                              |                                                          |                                                     | (74,905                                             | )      |                           |         | (46,360 | )     
|                                                             | Payment of deferred financing costs                                      |                                                          |                                                     | (3,031                                              | )      |                           |         | (9,262  | )     
|                                                             | Proceeds from issuance of common stock                                   |                                                          |                                                     | 282                                                 |        |                           |         | 262     |       
|                                                             | Repurchase of common stock                                               |                                                          |                                                     |                                                    |        |                           |         |        |       
|                                                             | Other, net                                                               |                                                          |                                                     | 65                                                  |        |                           |         | 549     |       
|                                                             |                                                                          |                                                          |                                                     |                                                     |        |                           |         |         |       
|                                                             |                                                                          |                                                          |                                                     | Net cash provided by (used in) financing
activities |        |                           | 2,006   |         |        |        | (34,445 | )
|                                                             |                                                                          |                                                          |                                                     |                                                     |        |                           |         |         |       
|EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS |                                                                          |                                                          | 746                                                 |                                                     |        |                           | 16      |        
|NET INCREASE IN CASH AND CASH EQUIVALENTS                    |                                                                          |                                                          | 73,096                                              |                                                     |        |                           | 14,382  |        
|CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD             |                                                                          |                                                          | 10,253                                              |                                                     |        |                           | 10,543  |        
|                                                             |                                                                          |                                                          |                                                     |                                                     |        |                           |         |         |       
|CASH AND CASH EQUIVALENTS AT END OF PERIOD                   |                                                                          | $                                                        | 83,349                                              |                                                     |        | $                         | 24,925  |        
|                                                             |                                                                          |                                                          |                                                     |                                                     |        |                           |         |         |       

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

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ALLIED HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

September 30, 2003 and 2002

(1) Basis of Presentation

The unaudited consolidated financial statements included herein have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements. The statements contained
herein reflect all adjustments, all of which are of a normal, recurring nature,
which are, in the opinion of management, necessary to present fairly the
financial condition, results of operations and cash flows for the periods
presented. Operating results for the three and nine month periods ended
September 30, 2003 are not necessarily indicative of the results that may be
expected for the year ended December 31, 2003. The interim financial statements
should be read in conjunction with the financial statements and notes thereto
of Allied Holdings, Inc. and Subsidiaries (the Company) included in the
Companys 2002 Annual Report on Form 10-K.

Certain amounts in the prior year financial statements have been reclassified
to conform to the current year presentation.

(2) Use of Estimates

The preparation of the consolidated financial statements requires management of
the Company to make a number of estimates and assumptions relating to the
reported amount of assets and liabilities and revenues and expenses during the
period to disclose contingent assets and liabilities at the date of the
consolidated financial statements. Significant items subject to such estimates
and assumptions include the carrying amount of intangibles; property, plant and
equipment; valuation allowances for receivables, inventories and deferred
income tax assets; self-insurance reserves; and assets and obligations related
to employee benefits. Actual results could differ from those estimates.

(3) Recent Accounting Pronouncements

In June 2001, FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations. SFAS No. 143 requires the Company to record the fair value of an
asset retirement obligation as a liability in the period in which it incurs a
legal obligation associated with the retirement of tangible long-lived assets
that result from the acquisition, construction, development, and/or normal use
of the assets. The Company also records a corresponding asset that is
depreciated over the life of the asset. Subsequent to the initial measurement
of the asset retirement obligation, the obligation will be adjusted at the end
of each period to reflect the passage of time and changes in the estimated
future cash flows underlying the obligation. The Company adopted the provisions
of SFAS No. 143 effective January 1, 2003. The Statement did not have a
material impact on the financial position or results of operations of the
Company as of the date of adoption.

In July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities. The Statement addresses financial accounting
and reporting for costs associated with exit or disposal activities and
nullifies EITF Issue No. 94-3, Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring). This Statement requires recognition of a
liability for a cost associated with an exit or disposal activity when the
liability is incurred, as opposed to when the entity commits to an exit plan
under EITF No. 94-3. The Company adopted the provisions of SFAS No. 146
effective January 1, 2003. The Statement did not have a material impact on the
financial position or results of operations of the Company as of the date of
adoption.

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In November 2002, the FASB issued Interpretation No. 45, Guarantors Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness to Others, an interpretation of FASB Statements No. 5, 57 and 107
and a rescission of FASB Interpretation No. 34.This Interpretation elaborates
on the disclosures to be made by a guarantor in its interim and annual
financial statements about its obligations under guarantees issued. The
Interpretation also clarifies that a guarantor is required to recognize, at
inception of a guarantee, a liability for the fair value of the obligation
undertaken. The initial recognition and measurement provisions of the
Interpretation are applicable to guarantees issued or modified after December
31, 2002. The Company adopted the recognition and measurement provisions of
the Interpretation effective January 1, 2003 for guarantees issued or modified
after December 31, 2002. The adoption of this Interpretation did not have a
material impact on the financial position or results of operations of the
Company as of the date of adoption. See note 11, Guarantees and
Indemnifications.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure, an amendment of FASB Statement No.
123. This Statement amends FASB Statement No. 123, Accounting for Stock-Based
Compensation, to provide alternative methods of transition for a voluntary
change to the fair value method of accounting for stock-based employee
compensation. In addition, this Statement amends the disclosure requirements of
Statement No. 123 to require prominent disclosures in both annual and interim
financial statements. Certain of the disclosure modifications are required for
fiscal years and interim periods ending after December 15, 2002 and are
included in the notes to these consolidated financial statements.

In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation of
Variable Interest Entities, an Interpretation of ARB No. 51. This
Interpretation addresses the consolidation of business enterprises (variable
interest entities) to which the usual condition of consolidation does not
apply. This interpretation focuses on financial interests that indicate
control. It concludes that in the absence of clear control through voting
interests, a companys exposure (variable interest) to the economic risks and
potential rewards from the variable interest entitys assets and activities
are the best evidence of control. Variable interests are rights and
obligations that convey economic gains or losses from changes in the values of
the variable interest entitys assets and liabilities. Variable interests may
arise from financial instruments, service contracts, nonvoting ownership
interests and other arrangements. If an enterprise holds a majority of the
variable interests of an entity, it would be considered the primary
beneficiary. The primary beneficiary would be required to include assets,
liabilities and the results of operations of the variable interest entity in
its financial statements. This interpretation applies immediately to variable
interest entities that are created after or for which control is obtained
after January 31, 2003. For variable interest entities created prior to
February 1, 2003, the provisions would be applied effective
July 1, 2003. Since the release of this interpretation, the FASB has issued
numerous FASB Staff positions (FSP) regarding it, three
of which remain in proposed form. On October 9, 2003, the FASB
released FSP 46-6, which deferred the effective date for the
consolidation guidance of this interpretation from July 1, 2003
to December 31, 2003, for variable interest entities existing
prior to February 1, 2003. This Interpretation is not expected to have a material impact on
the financial position or results of operations of the Company.

In April 2003, the FASB issued SFAS 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities.This Statement clarifies under
which circumstances a contract with an initial net investment meets the
characteristics of a derivative and clarifies when a derivative contains a
financing component that warrants special reporting in the statement of cash
flows. SFAS 149 amends certain other existing pronouncements. SFAS 149 is
generally effective for contracts entered into or modified after June 30, 2003
and should be applied prospectively. The adoption of SFAS 149 is not expected
to have a material impact on the financial position, results of operations or
cash flows of the Company.

In May 2003, the Financial Accounting Standards Board (FASB) issued SFAS No.
150, Accounting for Certain Instruments with Characteristics of Both
Liabilities and Equity. This Statement requires that certain financial
instruments embodying an obligation to transfer assets or to issue equity
securities be classified as liabilities. It is effective for financial
instruments entered into or modified after May 31, 2003, and
pre-existing instruments as of July 1, 2003. On October 29,
2003, the FASB voted to indefinitely defer the effective date of
SFAS 150 for mandatorily redeemable instruments as they relate
to minority interests in consolidated finite-lived entities through
the issuance of FSP 150-3. The adoption of SFAS 150, as
modified by FSP 150-3, did not have a
material impact on the financial position or results of operations of the
Company.

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(4) Prepayments and Other Current Assets

Prepayments and other current assets consist of the following at September 30,
2003 and December 31, 2002 (in thousands):

|                               |  |               |        |              |  |   |        | 
|------------------------------ |  | ------------- | ------ | ------------ |  | - | ------ | 
|                               |  | September 30, |        | December 31,
|                               |  | 2003          |        | 2002        
|                               |  |               |        |             
|Tires on tractors and trailers |  | $             | 7,179  |              |  | $ | 7,082  | 
|Prepaid insurance              |  |               | 975    |              |  |   | 1,773  | 
|Other                          |  |               | 4,518  |              |  |   | 19,830 | 
|                               |  |               |        |              |  |   |        | 
|                               |  | $             | 12,672 |              |  | $ | 28,685 | 
|                               |  |               |        |              |  |   |        | 

(5) Property and Equipment

Property and equipment consists of the following at September 30, 2003 and
December 31, 2002 (in thousands):

|                                                            |  |               |          |              |  |   |          |  
|----------------------------------------------------------- |  | ------------- | -------- | ------------ |  | - | -------- | -
|                                                            |  | September 30, |          | December 31,
|                                                            |  | 2003          |          | 2002        
|                                                            |  |               |          |             
|Tractors and trailers                                       |  | $             | 436,581  |              |  | $ | 421,615  |  
|Buildings and facilities (including leasehold
improvements) |  |               | 46,224   |              |  |   | 44,925   |  
|Land                                                        |  |               | 12,287   |              |  |   | 11,958   |  
|Furniture, fixtures, and equipment                          |  |               | 42,714   |              |  |   | 41,819   |  
|Service cars and equipment                                  |  |               | 3,547    |              |  |   | 3,111    |  
|                                                            |  |               |          |              |  |   |          |  
|                                                            |  |               | 541,353  |              |  |   | 523,428  |  
|Less accumulated depreciation and
amortization              |  |               | (382,814 | )            |  |   | (346,765 | )
|                                                            |  |               |          |              |  |   |          |  
|                                                            |  | $             | 158,539  |              |  | $ | 176,663  |  
|                                                            |  |               |          |              |  |   |          |  

Depreciation expense amounted to $10,966,000 and $12,945,000 for the quarters
ended September 30, 2003 and 2002, respectively and $34,553,000 and $39,924,000
for the nine months ended September 30, 2003 and 2002, respectively.

(6) Goodwill

In accordance with SFAS No. 142,
Goodwill and Other Intangible Assets, the
Company reviews goodwill annually for impairment, or on an interim basis if an
event occurs or circumstances change that could potentially reduce the fair
value of goodwill below its carrying value. The Company performs its annual
analysis during the fourth calendar quarter of each year. No indicators of
impairment were identified during the first nine months of 2003.

The Companys reporting units are the Allied Automotive Group and the Axis
Group. The following table sets forth the carrying value of goodwill by
reporting unit as of September 30, 2003 and December 31, 2002 (in thousands):

|                                                              |  |                   |        |       |  |       |        |  |  |   |        | 
|------------------------------------------------------------- |  | ----------------- | ------ | ----- |  | ----- | ------ |  |  | - | ------ | 
|                                                              |  | Allied Automotive |        | Axis  |  |       |        | 
|                                                              |  | Group             |        | Group |  | Total
|                                                              |  |                   |        |       |  |      
|Balance as of December 31, 2002                               |  | $                 | 73,043 |       |  | $     | 12,198 |  |  | $ | 85,241 | 
|Increase in carrying amount
due to a change in currency
rates |  |                   | 3,740  |       |  |       | 17     |  |  |   | 3,757  | 
|                                                              |  |                   |        |       |  |       |        |  |  |   |        | 
|Balance as of September 30,
2003                              |  | $                 | 76,783 |       |  | $     | 12,215 |  |  | $ | 88,998 | 
|                                                              |  |                   |        |       |  |       |        |  |  |   |        | 

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(7) Impairment of Long-Lived Assets

In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, long-lived assets, such as property, plant, and equipment,
and purchased intangibles subject to amortization, are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. Recoverability of assets to be held and
used is measured by a comparison of the carrying amount of an asset to
estimated undiscounted future cash flows expected to be generated by the asset.
If the carrying amount of an asset exceeds its estimated future cash flows, an
impairment charge is recognized for the amount by which the carrying amount of
the asset exceeds the fair value of the asset. Assets to be disposed of would
be separately presented in the balance sheet and reported at the lower of the
carrying amount or fair value less costs to sell, and would no longer be
depreciated. The assets and liabilities of a disposed group classified as held
for sale would be presented separately in the appropriate asset and liability
sections of the balance sheet.

During 2002, the Company performed an analysis of certain fleet equipment that
was idled. The assets were evaluated in order to determine if they were
candidates for the fleet remanufacturing and engine replacement program.
Approximately 1,000 tractors or trailers were not considered viable candidates
for the program and a decision was made that they would not be placed back into
operations. As a result, depreciation was accelerated to the reduced useful
life resulting in an additional charge of $2.1 million to depreciation expense
in the fourth quarter of 2002. During the second quarter of 2003, the Company
began disposal of these assets and anticipates substantial completion by the
end of 2003.

(8) Accrued Liabilities

Accrued liabilities consists of the following at September 30, 2003 and
December 31, 2002 (in thousands):

|                              |  |               |        |              |  |   |        | 
|----------------------------- |  | ------------- | ------ | ------------ |  | - | ------ | 
|                              |  | September 30, |        | December 31,
|                              |  | 2003          |        | 2002        
|                              |  |               |        |             
|Wages and benefits            |  | $             | 38,464 |              |  | $ | 41,903 | 
|Claims and insurance reserves |  |               | 35,680 |              |  |   | 35,487 | 
|Other                         |  |               | 19,277 |              |  |   | 15,491 | 
|                              |  |               |        |              |  |   |        | 
|                              |  | $             | 93,421 |              |  | $ | 92,881 | 
|                              |  |               |        |              |  |   |        | 

(9) Long-Term Debt

Long-term debt consisted of the following at September 30, 2003 and December
31, 2002 (in thousands):

|                          |                                           |   |               |         |              |   |         |         |  
|------------------------- | ----------------------------------------- | - | ------------- | ------- | ------------ | - | ------- | ------- | -
|                          |                                           |   | September 30, |         | December 31,
|                          |                                           |   | 2003          |         | 2002        
|                          |                                           |   |               |         |             
|Revolving credit facility |                                           | $ | 4,354         |         |              | $ | 24,635  |        
|Term Loan                 |                                           |   | 99,876        |         |              |   | 0       |        
|Term Loan A               |                                           |   | 0             |         |              |   | 7,474   |        
|Term Loan B               |                                           |   | 0             |         |              |   | 25,684  |        
|Term Loan C               |                                           |   | 0             |         |              |   | 11,432  |        
|Term Loan D               |                                           |   | 0             |         |              |   | 29,250  |        
|Senior notes              |                                           |   | 150,000       |         |              |   | 150,000 |        
|                          |                                           |   |               |         |              |   |         |        
|                          |                                           |   | 254,230       |         |              |   | 248,475 |        
|                          | Less current maturities of long-term debt |   |               | (17,854 | )            |   |         | (10,785 | )
|                          |                                           |   |               |         |              |   |         |        
|                          |                                           | $ | 236,376       |         |              | $ | 237,690 |        
|                          |                                           |   |               |         |              |   |         |        

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On September 30, 1997, the Company issued $150.0 million of 8 5/8% senior notes
(the Notes) through a private placement. Subsequently, the Notes were
registered with the Securities and Exchange Commission. The net proceeds from
the Notes were used to fund the acquisition of Ryder Automotive Carrier
Services, Inc. and RC Management Corp., pay related fees and expenses, and
reduce outstanding indebtedness. The Notes mature on October 1, 2007.

Borrowings under the Notes are general unsecured obligations of the Company.
The Companys obligations under the Notes are guaranteed by substantially all
of the subsidiaries of the Company (the Guarantor Subsidiaries). Haul
Insurance Ltd., Arrendadora de Equipo Para el Transporte de Automoviles, S. de
R.L. de C.V. and Axis Logistica, S. de R.L. de C.V. do not guarantee the
Companys obligations under the Notes (the Nonguarantor Subsidiaries). See
Note 17. There are no restrictions on the ability of Guarantors to make
distributions to the Company.

The Notes set forth a number of negative covenants which are binding on the
Company. The covenants limit the Companys ability to, among other things,
purchase or redeem stock, make dividend or other distributions, make
investments, and incur or repay debt (with the exception of payment of interest
or principal at stated maturity).

On February 25, 2002, the Company entered into a new credit facility which
includes certain term loans (the Term Loans) and a revolving credit facility.
Proceeds from the Term Loans were used in February 2002 to repurchase $40
million of senior subordinated notes for $37.25 million. In conjunction with
the extinguishment of these senior subordinated notes, the Company recognized a
pre-tax gain of $2.75 million during the first quarter of 2002.

The Company amended the facility in September 2003 (the Credit Facility and
amendments thereto are collectively referred to as the Credit Facility). The
Credit Facility as amended in September 2003 provides the Company with a $90.0
million revolving credit facility (the Revolver) and a $100 million term loan
(the New Term Loan). At its inception, the Credit Facility consisted of a
$120 million revolving credit facility and four Term Loans that totaled $82.75
million. As part of the amendment, the maturity date of the Credit Facility
was extended to September 2007.

The interest rate for the Revolver is based upon the prime rate plus 1.5%, or
LIBOR plus 4.5%, at managements discretion, with a minimum interest rate of
6.5%. The Credit Facility as amended provides that the New Term Loan bear
interest between 8.5% and 11.5% to be determined solely on the Companys
leverage as defined in the agreement. Prior to the amendment, the interest
rate on the Term Loans was based solely on a spread over the prime rate. Annual
commitment fees are due on the undrawn portion of the commitment.

At September 30, 2003, $4.4 million was outstanding under the Revolver, and
approximately $24.3 million was committed under letters of credit. The Company
had approximately $58.2 million available under the Revolver as of September
30, 2003.

Borrowings under the Companys Credit Facility are secured by first priority
security interest on assets of the Company and certain of its subsidiaries,
including a pledge of stock of certain subsidiaries. If the Company were unable
to repay any borrowing under its Credit Facility when due, the lenders
thereunder would have the right to proceed against the collateral granted to
them to secure the debt. Any default under the Companys debt instruments,
particularly any default that resulted in acceleration of indebtedness or
foreclosure on collateral, would have a material adverse effect on the Company.

The Credit Facility agreement sets forth a number of affirmative, negative, and
financial covenants binding on the Company. The negative covenants limit the
ability of the Company to, among other things, incur debt, incur liens, make
investments, sell assets, or declare or pay any dividends on its capital stock.
The financial covenants require the Company to maintain a minimum consolidated
earnings before interest, taxes, depreciation and amortization, and gains and
losses on disposal of operating assets amount and also include a maximum
leverage ratio. The Company was in compliance with the various covenants set
forth in the Credit Facility at September 30, 2003.

There can be no assurance that the Company will be able to comply with these
covenants or its other debt covenants or that if it fails to do so, it will be
able to obtain amendments to or waivers of such covenants. Failure of the
Company to

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comply with covenants contained in its debt instruments, if not waived, or to
adequately service debt obligations, could result in a default under the Credit
Facility. Any default under the Companys debt instruments, particularly any
default that results in an acceleration of indebtedness or foreclosure on
collateral could have a material adverse effect on the Company.

(10) Commitments and Contingencies

The Company is involved in various litigation and environmental matters
relating to employment practices, damages, and other matters arising from
operations in the ordinary course of business. In the opinion of management,
the ultimate disposition of these matters will not have a material adverse
effect on the Companys financial position or results of operations.

Since its last quarterly filing, Allied has settled all outstanding litigation
with Ryder System, Inc., which litigation was previously disclosed in company
filings. The litigation arose in connection with the acquisition by the
Company of Ryder Automotive Carrier Services, Inc. and RC Management Corp. from
Ryder System, Inc. in September 1997, and consisted of three actions. In
Ryder System, Inc. v. Allied Holdings, Inc., AH Acquisition Corp. and Allied
Automotive Group(the Ryder Action), Ryder alleged that the Company failed to
substitute itself for Ryder under an insurance policy covering third-party
claims and with various state agencies that regulate matters such as
self-insured workers compensation. Ryder also alleged that the Company was
obligated to take certain steps to transfer from Ryder to itself the ownership
and administrative responsibility for two pension plans. The other two
actions, Gateway Development & Manufacturing, Inc. v. Commercial Carriers,
Inc., et al.and Commercial Carriers, Inc. v. Gateway Development &
Manufacturing, Inc., et al.(collectively the Gateway/CCI Actions), both
centered around the contention that the Company breached legal duties with
respect to a failed business transaction involving Gateway Development, Ryder
Truck Rental, Inc., and Ryder System.

Under terms of the settlement agreement, Ryder System has paid the Company
approximately $1.4 million, and Ryders insurance carrier has paid the Company
approximately $1.6 million. The payment from Ryder represents the settlement
of various claims and disputes that have arisen since the 1997 acquisition.
The payment from Ryders insurance carrier represents a reimbursement for
amounts paid by the Company in excess of the self-insured retention for
workers compensation and automobile liability claims assumed in the
acquisition of Ryders Automotive Carrier Group. The Company and Ryder System
have agreed to dismiss all litigation each party had brought against the other
as part of the settlement, which has resulted in the complete dismissal of the
Ryder Action. Except with respect to expenses already incurred, Ryder has
agreed to indemnify Allied for all costs, including legal fees and any
potential judgment against Allied, arising out of the Gateway/CCI Actions.
Therefore, although the Gateway/CCI Actions remain pending, the settlement
provides Allied with indemnification from Ryder System as to exposure to future
legal fees or any potential judgment against the Company.

As part of the settlement agreement, the Company has issued a letter of credit
for $3.5 million in favor of Ryder System and has agreed to increase the letter
of credit by $1 million each quarter starting in the fourth quarter of 2003
through the third quarter of 2005. The letter of credit may only be drawn by
Ryder System if the Company fails to pay workers compensation and liability
claims assumed by the Company in the Ryder Automotive Carrier Group
acquisition. The Company has provided the letter of credit in favor of Ryder
System because Ryder has issued a letter of credit to its insurance carrier
relating to the workers compensation and liability claims assumed by the
Company. By September 30, 2005, and periodically thereafter, an actuarial
valuation will be made to determine the remaining outstanding amount of
workers compensation and liability claims assumed by Allied, and the letter of
credit issued by the Company in favor of Ryder System will be adjusted
accordingly.

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##### Table of Contents



(11) Guarantees and Indemnifications

Guarantees

The Company leases office space and certain terminal facilities under
noncancelable and cancelable (i.e. month-to-month) operating lease agreements,
some of which provide guarantees to third parties. With respect to the
guarantees that the Company issued in the nine months ended September 30, 2003,
the Company assessed the fair value of its obligation to stand ready to perform
under these guarantees by considering the likelihood of the occurrence of the
specified triggering events or conditions requiring performance as well as
other assumptions and factors. The Company
has not entered into any guarantees of significance in the nine months
ended September 30, 2003.

Indemnifications

The Company enters into indemnification provisions under its agreements with
certain of its customers, suppliers, service providers, and business partners
in the ordinary course of business. Under these provisions, subject to various
limitations and qualifications, the Company generally indemnifies and holds
harmless the indemnified party for losses suffered or incurred by the
indemnified party as a result of the Companys activities. The potential
losses primarily relate to obligations that are insured under the Companys
insurance programs. These indemnification provisions generally survive
termination of the underlying agreement. The maximum potential amount of
future payments the Company could be required to make under these
indemnification provisions is unlimited. The Company has not incurred material
costs to defend lawsuits or settle claims related to these indemnification
agreements and does not expect to at this time. The fair value of these agreements is
estimated to be minimal. The Company has no liabilities recorded for these
agreements as of September 30, 2003.

In addition, the Company is obligated to indemnify its directors and officers
who are, or were, serving at the Companys request in such capacities, subject
to the Companys By-laws. The maximum potential amount of future payments that
the Company could be required to make under the By-laws is unlimited; however
the Company has Director and Officer insurance policies that, in most cases,
would enable it to recover a portion of any future amounts paid. Historically,
the Company has never incurred any costs to settle claims related to these
indemnifications, and there are no claims outstanding as of September 30, 2003.
Accordingly, no liabilities for indemnifications have been recorded as of
September 30, 2003.

(12) Net Income (Loss) Per Common Share

SFAS No. 128, Earnings Per Share,requires presentation of basic and
diluted earnings per share. Basic earnings per share are calculated by dividing
net income available to common stockholders by the weighted average number of
common shares outstanding for the years presented. Diluted earnings per share
reflect the potential dilution that could occur if securities and other
contracts to issue common stock were exercised or converted into common stock
or resulted in the issuance of common stock that would then share in the
earnings of the entity.

A reconciliation of net income (loss) and the weighted average number of
common shares outstanding used to calculate basic and diluted net income (loss)
per common share for the three and nine months ended September 30, 2003 and
2002 is as follows:

|                                                     |  |  |                    |  |                   |  |       |  |      |  |       |  |  |  |       |  | 
|---------------------------------------------------- |  |  | ------------------ |  | ----------------- |  | ----- |  | ---- |  | ----- |  |  |  | ----- |  | 
|                                                     |  |  | Three Months Ended |  | Nine Months Ended
|                                                     |  |  | September 30,      |  | September 30,    
|                                                     |  |  |                    |  |                  
|                                                     |  |  | 2003               |  | 2002              |  | 2003  |  | 2002
|                                                     |  |  |                    |  |                   |  |       |  |     
|Basic and Diluted Earnings Per Share:                |  |  |                    |  |                   |  |       |  |      |  |       |  |  |  |       | 
|Weighted average number of common shares
outstanding |  |  | 8,507              |  |                   |  | 8,324 |  |      |  | 8,459 |  |  |  | 8,282 | 
|                                                     |  |  |                    |  |                   |  |       |  |      |  |       |  |  |  |       | 

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|                                                                    |                                                                     |    |                    |      |                   |    |       |      |      |    |       |      |   |    |        |      |  
|------------------------------------------------------------------- | ------------------------------------------------------------------- | -- | ------------------ | ---- | ----------------- | -- | ----- | ---- | ---- | -- | ----- | ---- | - | -- | ------ | ---- | -
|                                                                    |                                                                     |    | Three Months Ended |      | Nine Months Ended
|                                                                    |                                                                     |    | September 30,      |      | September 30,    
|                                                                    |                                                                     |    |                    |      |                  
|                                                                    |                                                                     |    | 2003               |      | 2002              |    | 2003  |      | 2002
|                                                                    |                                                                     |    |                    |      |                   |    |       |      |     
|Loss before cumulative effect of a
change in accounting principle   |                                                                     | ($ | 1,975              | )    |                   | ($ | 6,482 | )    |      | ($ | 4,267 | )    |   | ($ | 5,529  | )   
|Cumulative effect of a change in accounting
principle, net of taxes |                                                                     |    |                   |      |                   |    |      |      |      |    |      |      |   |    | (4,092 | )   
|                                                                    |                                                                     |    |                    |      |                   |    |       |      |      |    |       |      |   |    |        |     
|Net loss                                                            |                                                                     | ($ | 1,975              | )    |                   | ($ | 6,482 | )    |      | ($ | 4,267 | )    |   | ($ | 9,621  | )   
|                                                                    |                                                                     |    |                    |      |                   |    |       |      |      |    |       |      |   |    |        |     
|Net loss per share:                                                 |                                                                     |    |                    |      |                   |    |       |      |      |    |       |      |   |    |        |     
|                                                                    | Loss before cumulative effect of a
change in accounting principle   |    | ($                 | 0.23 | )                 |    | ($    | 0.78 | )    |    | ($    | 0.50 | ) |    | ($     | 0.67 | )
|                                                                    | Cumulative effect of a change in
accounting principle, net of taxes |    |                    |     |                   |    |       |     |      |    |       |     |   |    | ($     | 0.49 | )
|                                                                    |                                                                     |    |                    |      |                   |    |       |      |      |    |       |      |   |    |        |     
|Net loss per common share                                           |                                                                     | ($ | 0.23               | )    |                   | ($ | 0.78  | )    |      | ($ | 0.50  | )    |   | ($ | 1.16   | )   
|                                                                    |                                                                     |    |                    |      |                   |    |       |      |      |    |       |      |   |    |        |     

Common stock equivalents for approximately 291,000 and 318,000 shares
outstanding for the three months ended September 30, 2003 and 2002,
respectively, and 285,000 and 365,000 for the nine months ended September 30,
2003 and 2002, respectively, were excluded from the calculation of diluted
earnings per share, as the impact would have been antidilutive.

(13) Stock Option Plan

The Company applies the intrinsic-value-based method of accounting prescribed
by Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock
Issued to Employees,and related interpretations including FASB Interpretation
No. 44, Accounting for Certain Transactions Involving Stock Compensation, an
interpretation of APB Opinion No. 25,to account for its fixed-plan stock
options. Under this method, compensation expense is recorded on the date of
grant only if the current market price of the underlying stock exceeded the
exercise price. SFAS No. 123, Accounting for Stock-Based Compensation,
established accounting and disclosure requirements using a fair-value-based
method of accounting for stock-based employee compensation plans. As allowed by
SFAS No. 123, the Company has elected to continue to apply the intrinsic value
based method of accounting described above, and has adopted only the disclosure
requirements of SFAS No. 123.

The Company did not grant any significant stock options during the third
quarter of 2003. If the Company had elected to recognize compensation cost
based on the fair value at the grant dates, consistent with the method
prescribed by SFAS No. 123, net income and earnings per share, using the
Black-Scholes option pricing valuation model, would have been changed to the
pro forma amounts indicated below for the three and nine months ended September
30, 2003 and 2002 (in thousands, except per share data):

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|                                                                                                     |                   |    |                    |      |                   |    |       |      |      |    |       |      |   |    |        |      |  
|---------------------------------------------------------------------------------------------------- | ----------------- | -- | ------------------ | ---- | ----------------- | -- | ----- | ---- | ---- | -- | ----- | ---- | - | -- | ------ | ---- | -
|                                                                                                     |                   |    | Three Months Ended |      | Nine Months Ended
|                                                                                                     |                   |    | September 30,      |      | September 30,    
|                                                                                                     |                   |    |                    |      |                  
|                                                                                                     |                   |    | 2003               |      | 2002              |    | 2003  |      | 2002
|                                                                                                     |                   |    |                    |      |                   |    |       |      |     
|Reported net loss                                                                                    |                   | ($ | 1,975              | )    |                   | ($ | 6,482 | )    |      | ($ | 4,267 | )    |   | ($ | 9,621  | )   
|Plus: stock-based
employee
compensation
included in reported
net income (loss),
net of related taxes |                   |    |                   |      |                   |    |      |      |      |    |      |      |   |    |       |     
|Less: stock-based
employee
compensation
determined under the
fair value method,
net of related taxes |                   |    | (138               | )    |                   |    | (174  | )    |      |    | (394  | )    |   |    | (470   | )   
|                                                                                                     |                   |    |                    |      |                   |    |       |      |      |    |       |      |   |    |        |     
|Pro forma net loss                                                                                   |                   | ($ | 2,113              | )    |                   | ($ | 6,656 | )    |      | ($ | 4,661 | )    |   | ($ | 10,091 | )   
|                                                                                                     |                   |    |                    |      |                   |    |       |      |      |    |       |      |   |    |        |     
|Loss per share:                                                                                      |                   |    |                    |      |                   |    |       |      |      |    |       |      |   |    |        |     
|As reported:                                                                                         |                   |    |                    |      |                   |    |       |      |      |    |       |      |   |    |        |     
|                                                                                                     | Basic and diluted |    | ($                 | 0.23 | )                 |    | ($    | 0.78 | )    |    | ($    | 0.50 | ) |    | ($     | 1.16 | )
|Pro forma:                                                                                           |                   |    |                    |      |                   |    |       |      |      |    |       |      |   |    |        |     
|                                                                                                     | Basic and diluted |    | ($                 | 0.25 | )                 |    | ($    | 0.80 | )    |    | ($    | 0.56 | ) |    | ($     | 1.22 | )

(14) Comprehensive Income

Statement of Financial Accounting Standards (SFAS) No. 130, Reporting
Comprehensive Income, requires companies to report all changes in equity during
a period, except those resulting from investment by owners and distribution to
owners. The Company had a comprehensive loss of $2.2 million in the third
quarter of 2003 versus a comprehensive loss of $4.8 million in the third
quarter of 2002. For the first nine months of 2003, the Company had
comprehensive income of $0.5 million versus a comprehensive loss of $6.1
million for the first nine months of 2002. The difference between
comprehensive income (loss) and net income (loss) is the foreign currency
translation adjustment and minimum pension liability, net of income taxes.

(15) Investment Income (Loss)

Investment income (loss) consists of the following for the three and
nine-months ended September 30, 2003 and 2002 (in thousands):

|                             |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |        |  
|---------------------------- |  | ------------------ | ------ | ----------------- |  | ---- | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                             |  | Three Months Ended |        | Nine Months Ended
|                             |  | September 30,      |        | September 30,    
|                             |  |                    |        |                  
|                             |  | 2003               |        | 2002              |  | 2003 |        | 2002
|                             |  |                    |        |                   |  |      |        |     
|Interest and dividend income |  | $                  | 341    |                   |  | $    | 892    |      |  | $ | 1,870  |   |  | $ | 2,609  |  
|Realized gains (losses)      |  |                    | 2,011  |                   |  |      | (3,599 | )    |  |   | 2,593  |   |  |   | (3,405 | )
|Unrealized (losses) gains    |  |                    | (2,750 | )                 |  |      | 2,910  |      |  |   | (1,528 | ) |  |   | 1,886  |  
|                             |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |        |  
|Total                        |  | $                  | (398   | )                 |  | $    | 203    |      |  | $ | 2,935  |   |  | $ | 1,090  |  
|                             |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |        |  

(16) Industry Segment and Geographic Information

In accordance with the requirements of SFAS No. 131, Disclosure About Segments
of an Enterprise and Related Information, the Company has identified two
reportable industry segments through which it conducts its operating
activities: Allied Automotive Group and Axis Group. These two segments reflect
the organization used by management for internal reporting. Allied Automotive
Group is engaged in the business of transporting automobiles, light trucks and
SUVs from manufacturing plants, ports, auctions, and railway distribution
points to automobile

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dealerships. Axis Group, through its subsidiaries, is engaged in the business
of securing and managing vehicle distribution services, automobile inspections,
auction and yard management services, intra-modal transport, vehicle tracking,
vehicle accessorization, and dealer preparatory services for the automotive
industry.

|                                 |                                                                                  |   |         |                    |   |                   |         |         |   |      |         |         |   |   |         |         |   | 
|-------------------------------- | -------------------------------------------------------------------------------- | - | ------- | ------------------ | - | ----------------- | ------- | ------- | - | ---- | ------- | ------- | - | - | ------- | ------- | - | 
|                                 |                                                                                  |   |         | Three Months Ended |   | Nine Months Ended
|                                 |                                                                                  |   |         | September 30,      |   | September 30,    
|                                 |                                                                                  |   |         |                    |   |                  
|                                 |                                                                                  |   |         | 2003               |   | 2002              |         | 2003    |   | 2002
|                                 |                                                                                  |   |         |                    |   |                   |         |         |   |     
|Revenuesunaffiliated customers: |                                                                                  |   |         |                    |   |                   |         |         |   |      |         |         |   |   |         |        
|                                 | Allied Automotive Group                                                          |   | $       | 190,532            |   |                   | $       | 205,679 |   |      | $       | 619,832 |   |   | $       | 643,769 |  
|                                 | Axis Group                                                                       |   |         | 6,557              |   |                   |         | 7,306   |   |      |         | 20,927  |   |   |         | 21,459  |  
|                                 |                                                                                  |   |         |                    |   |                   |         |         |   |      |         |         |   |   |         |         |  
|Total                            |                                                                                  | $ | 197,089 |                    |   | $                 | 212,985 |         |   | $    | 640,759 |         |   | $ | 665,228 |        
|                                 |                                                                                  |   |         |                    |   |                   |         |         |   |      |         |         |   |   |         |         |  
|Depreciation and amortization:   |                                                                                  |   |         |                    |   |                   |         |         |   |      |         |         |   |   |         |        
|                                 | Allied Automotive Group                                                          |   | $       | 9,518              |   |                   | $       | 11,655  |   |      | $       | 30,005  |   |   | $       | 35,653  |  
|                                 | Axis Group                                                                       |   |         | 723                |   |                   |         | 769     |   |      |         | 2,186   |   |   |         | 2,206   |  
|                                 | Corporate/Other                                                                  |   |         | 770                |   |                   |         | 718     |   |      |         | 2,497   |   |   |         | 2,228   |  
|                                 |                                                                                  |   |         |                    |   |                   |         |         |   |      |         |         |   |   |         |         |  
|Total                            |                                                                                  | $ | 11,011  |                    |   | $                 | 13,142  |         |   | $    | 34,688  |         |   | $ | 40,087  |        
|                                 |                                                                                  |   |         |                    |   |                   |         |         |   |      |         |         |   |   |         |         |  
|Operating profit (loss):         |                                                                                  |   |         |                    |   |                   |         |         |   |      |         |         |   |   |         |        
|                                 | Allied Automotive Group                                                          |   | $       | 5,370              |   |                   | $       | (580    | ) |      | $       | 11,987  |   |   | $       | 15,430  |  
|                                 | Axis Group                                                                       |   |         | 886                |   |                   |         | 1,371   |   |      |         | 2,550   |   |   |         | 2,965   |  
|                                 | Corporate/Other                                                                  |   |         | (3,109             | ) |                   |         | (2,158  | ) |      |         | (5,554  | ) |   |         | (6,133  | )
|                                 |                                                                                  |   |         |                    |   |                   |         |         |   |      |         |         |   |   |         |         |  
|                                 | Total                                                                            |   | $       | 3,147              |   |                   | $       | (1,367  | ) |      | $       | 8,983   |   |   | $       | 12,262  |  
|                                 |                                                                                  |   |         |                    |   |                   |         |         |   |      |         |         |   |   |         |         |  
|Reconciling items:               |                                                                                  |   |         |                    |   |                   |         |         |   |      |         |         |   |   |         |        
|                                 | Interest expense                                                                 |   | $       | (7,366             | ) |                   | $       | (7,611  | ) |      | $       | (22,120 | ) |   | $       | (23,343 | )
|                                 | Investment (loss) income                                                         |   |         | (398               | ) |                   |         | 203     |   |      |         | 2,935   |   |   |         | 1,090   |  
|                                 | Gain on early extinguishment of
debt                                             |   |         |                   |   |                   |         |        |   |      |         |        |   |   |         | 2,750   |  
|                                 | Foreign exchange (loss) gain, net                                                |   |         | (62                | ) |                   |         | 124     |   |      |         | 2,386   |   |   |         | 157     |  
|                                 | Other, net                                                                       |   |         | 1,976              |   |                   |         | (57     | ) |      |         | 1,976   |   |   |         | (264    | )
|                                 |                                                                                  |   |         |                    |   |                   |         |         |   |      |         |         |   |   |         |         |  
|                                 | Loss before income taxes
and cumulative effect of change
in accounting principle |   | $       | (2,703             | ) |                   | $       | (8,708  | ) |      | $       | (5,840  | ) |   | $       | (7,348  | )
|                                 |                                                                                  |   |         |                    |   |                   |         |         |   |      |         |         |   |   |         |         |  
|Capital expenditures:            |                                                                                  |   |         |                    |   |                   |         |         |   |      |         |         |   |   |         |        
|                                 | Allied Automotive Group                                                          |   | $       | 2,990              |   |                   | $       | 5,739   |   |      | $       | 11,013  |   |   | $       | 13,125  |  
|                                 | Axis Group                                                                       |   |         | 64                 |   |                   |         | 98      |   |      |         | 265     |   |   |         | 182     |  
|                                 | Corporate /Other                                                                 |   |         | 76                 |   |                   |         | 6       |   |      |         | 269     |   |   |         | 6       |  
|                                 |                                                                                  |   |         |                    |   |                   |         |         |   |      |         |         |   |   |         |         |  
|                                 |                                                                                  | $ | 3,130   |                    |   | $                 | 5,843   |         |   | $    | 11,547  |         |   | $ | 13,313  |        
|                                 |                                                                                  |   |         |                    |   |                   |         |         |   |      |         |         |   |   |         |         |  

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|                        |  |               |         |              |  |   |         | 
|----------------------- |  | ------------- | ------- | ------------ |  | - | ------- | 
|                        |  | September 30, |         | December 31,
|                        |  | 2003          |         | 2002        
|                        |  |               |         |             
|Total assets:           |  |               |         |              |  |   |         | 
|Allied Automotive Group |  | $             | 280,870 |              |  | $ | 296,935 | 
|Axis Group              |  |               | 32,878  |              |  |   | 35,663  | 
|Corporate/Other         |  |               | 150,601 |              |  |   | 152,910 | 
|                        |  |               |         |              |  |   |         | 
|Total                   |  | $             | 464,349 |              |  | $ | 485,508 | 
|                        |  |               |         |              |  |   |         | 

Geographical information for the three and nine months ended September 30, 2003
and 2002 is as follows (in thousands):

|              |  |                    |         |                   |  |      |         |      |  |   |         |  |  |   |         | 
|------------- |  | ------------------ | ------- | ----------------- |  | ---- | ------- | ---- |  | - | ------- |  |  | - | ------- | 
|              |  | Three Months Ended |         | Nine Months Ended
|              |  | September 30,      |         | September 30,    
|              |  |                    |         |                  
|              |  | 2003               |         | 2002              |  | 2003 |         | 2002
|              |  |                    |         |                   |  |      |         |     
|Revenues:     |  |                    |         |                   |  |      |         |      |  |   |         |  |  |   |         | 
|United States |  | $                  | 166,678 |                   |  | $    | 179,155 |      |  | $ | 525,435 |  |  | $ | 551,127 | 
|Canada        |  |                    | 30,411  |                   |  |      | 33,830  |      |  |   | 115,324 |  |  |   | 114,101 | 
|              |  |                    |         |                   |  |      |         |      |  |   |         |  |  |   |         | 
|Total         |  | $                  | 197,089 |                   |  | $    | 212,985 |      |  | $ | 640,759 |  |  | $ | 665,228 | 
|              |  |                    |         |                   |  |      |         |      |  |   |         |  |  |   |         | 

|                   |  |               |         |              |  |   |         | 
|------------------ |  | ------------- | ------- | ------------ |  | - | ------- | 
|                   |  | September 30, |         | December 31,
|                   |  | 2003          |         | 2002        
|                   |  |               |         |             
|Long-lived assets: |  |               |         |              |  |   |         | 
|United States      |  | $             | 217,760 |              |  | $ | 224,119 | 
|Canada             |  |               | 63,582  |              |  |   | 58,310  | 
|                   |  |               |         |              |  |   |         | 
|Total              |  | $             | 281,342 |              |  | $ | 282,429 | 
|                   |  |               |         |              |  |   |         | 

Revenues are attributed to the respective countries based on the location of
the origination terminal. Substantially all of the Companys revenues and
receivables are realized in the automotive industry by the Allied Automotive
Group.

(17) Supplemental Guarantor Information

The following consolidating balance sheet information, statements of operations
information, and statements of cash flows information present the financial
statement information of the parent company and the combined financial
statements information of the Guarantor subsidiaries and Nonguarantor
Subsidiaries. The Guarantors are jointly and severally liable for the Companys
obligations under the Notes and there are no restrictions on the ability of the
Guarantors to make distributions to the Company.

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SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION
SEPTEMBER 30, 2003
(In Thousands)

|                                            |                                                     |              |                                            |                            |         |          |         |              |         |              |         |              |        |              |         |          |          |          |          |         |         |         |         | 
|------------------------------------------- | --------------------------------------------------- | ------------ | ------------------------------------------ | -------------------------- | ------- | -------- | ------- | ------------ | ------- | ------------ | ------- | ------------ | ------ | ------------ | ------- | -------- | -------- | -------- | -------- | ------- | ------- | ------- | ------- | 
|                                            |                                                     |              |                                            |                            |         | ALLIED   |         | GUARANTOR    |         | NONGUARANTOR |         |              |        |              |         |          |          |         
|                                            |                                                     |              |                                            |                            |         | HOLDINGS |         | SUBSIDIARIES |         | SUBSIDIARIES |         | ELIMINATIONS |        | CONSOLIDATED
|                                            |                                                     |              |                                            |                            |         |          |         |              |         |              |         |              |        |             
|CURRENT ASSETS:                             |                                                     |              |                                            |                            |         |          |         |              |         |              |         |              |        |              |         |          |          |          |          |        
|                                            | Cash and cash equivalents                           |              | $                                          |                           |         |          | $       | 414          |         |              | $       | 82,935       |        |              | $       |         |          |          | $        | 83,349  |        
|                                            | Short-term investments                              |              |                                            |                           |         |          |         |             |         |              |         |             |        |              |         |         |          |          |          |        |        
|                                            | Receivables, net of allowance for doubtful accounts |              |                                            |                           |         |          |         | 52,411       |         |              |         | 5,667        |        |              |         |         |          |          |          | 58,078  |        
|                                            | Inventories                                         |              |                                            |                           |         |          |         | 4,874        |         |              |         |             |        |              |         |         |          |          |          | 4,874   |        
|                                            | Deferred tax asset - current                        |              |                                            | 21,795                     |         |          |         | 2,239        |         |              |         |             |        |              |         |         |          |          |          | 24,034  |        
|                                            | Prepayments and other current assets                |              |                                            | 1,297                      |         |          |         | 11,287       |         |              |         | 88           |        |              |         |         |          |          |          | 12,672  |        
|                                            |                                                     |              |                                            |                            |         |          |         |              |         |              |         |              |        |              |         |          |          |          |          |         |        
|                                            |                                                     |              |                                            | Total current assets       |         |          | 23,092  |              |         |              | 71,225  |              |        |              | 88,690  |          |          |          |         |         |         |         | 183,007 | 
|                                            |                                                     |              |                                            |                            |         |          |         |              |         |              |         |              |        |              |         |          |          |          |          |         |        
|PROPERTY AND EQUIPMENT, NET                 |                                                     |              | 7,294                                      |                            |         |          | 148,212 |              |         |              | 3,033   |              |        |              |        |          |          |          | 158,539  |        
|OTHER ASSETS:                               |                                                     |              |                                            |                            |         |          |         |              |         |              |         |              |        |              |         |          |          |          |          |        
|                                            | Goodwill, net                                       |              |                                            | 1,515                      |         |          |         | 87,483       |         |              |         |             |        |              |         |         |          |          |          | 88,998  |        
|                                            | Other                                               |              |                                            | 31,286                     |         |          |         | 1,710        |         |              |         | 809          |        |              |         |         |          |          |          | 33,805  |        
|                                            | Deferred tax asset - noncurrent                     |              |                                            | 23,654                     |         |          |         |             |         |              |         |             |        |              |         | (23,654  | )        |          |          |        |        
|                                            | Intercompany receivables                            |              |                                            | 59,897                     |         |          |         |             |         |              |         |             |        |              |         | (59,897  | )        |          |          |        |        
|                                            | Investment in subsidiaries                          |              |                                            | 32,144                     |         |          |         | 5,544        |         |              |         |             |        |              |         | (37,688  | )        |          |          |        |        
|                                            |                                                     |              |                                            |                            |         |          |         |              |         |              |         |              |        |              |         |          |          |          |          |         |        
|                                            |                                                     |              |                                            | Total other assets         |         |          | 148,496 |              |         |              | 94,737  |              |        |              | 809     |          |          |          | (121,239 | )       |         |         | 122,803 | 
|                                            |                                                     |              |                                            |                            |         |          |         |              |         |              |         |              |        |              |         |          |          |          |          |         |        
|                                            |                                                     | Total assets |                                            | $                          | 178,882 |          |         | $            | 314,174 |              |         | $            | 92,532 |              |         | $        | (121,239 | )        |          | $       | 464,349 |        
|                                            |                                                     |              |                                            |                            |         |          |         |              |         |              |         |              |        |              |         |          |          |          |          |         |        
|CURRENT LIABILITIES:                        |                                                     |              |                                            |                            |         |          |         |              |         |              |         |              |        |              |         |          |          |          |          |        
|                                            | Current maturities of long-term debt                |              | $                                          |                           |         |          | $       | 17,854       |         |              | $       |             |        |              | $       |         |          |          | $        | 17,854  |        
|                                            | Trade accounts payable                              |              |                                            | 2,468                      |         |          |         | 25,229       |         |              |         | 120          |        |              |         |         |          |          |          | 27,817  |        
|                                            | Intercompany payables                               |              |                                            |                           |         |          |         | 54,618       |         |              |         | 5,279        |        |              |         | (59,897  | )        |          |          |        |        
|                                            | Accrued liabilities                                 |              |                                            | 14,049                     |         |          |         | 52,845       |         |              |         | 26,527       |        |              |         |         |          |          |          | 93,421  |        
|                                            |                                                     |              |                                            |                            |         |          |         |              |         |              |         |              |        |              |         |          |          |          |          |         |        
|                                            |                                                     |              |                                            | Total current liabilities  |         |          | 16,517  |              |         |              | 150,546 |              |        |              | 31,926  |          |          |          | (59,897  | )       |         |         | 139,092 | 
|                                            |                                                     |              |                                            |                            |         |          |         |              |         |              |         |              |        |              |         |          |          |          |          |         |        
|LONG-TERM DEBT, less current maturities     |                                                     |              | 150,000                                    |                            |         |          | 86,376  |              |         |              |        |              |        |              |        |          |          |          | 236,376  |        
|POSTRETIREMENT BENEFITS OTHER THAN PENSIONS |                                                     |              |                                           |                            |         |          | 6,530   |              |         |              |        |              |        |              |        |          |          |          | 6,530    |        
|DEFERRED INCOME TAXES                       |                                                     |              |                                           |                            |         |          | 34,570  |              |         |              | 448     |              |        |              | (23,654 | )        |          |          | 11,364   |        
|OTHER LONG-TERM LIABILITIES                 |                                                     |              | 1,031                                      |                            |         |          | 26,915  |              |         |              | 31,707  |              |        |              |        |          |          |          | 59,653   |        
|STOCKHOLDERS EQUITY:                       |                                                     |              |                                            |                            |         |          |         |              |         |              |         |              |        |              |         |          |          |          |          |        
|                                            | Common stock, no par value                          |              |                                            |                           |         |          |         |             |         |              |         |             |        |              |         |         |          |          |          |        |        
|                                            | Additional paid-in capital                          |              |                                            | 47,373                     |         |          |         | 166,130      |         |              |         | 2,488        |        |              |         | (168,618 | )        |          |          | 47,373  |        
|                                            | Treasury stock                                      |              |                                            | (707                       | )       |          |         |             |         |              |         |             |        |              |         |         |          |          |          | (707    | )      
|                                            | (Accumulated deficit) retained earnings             |              |                                            | (30,687                    | )       |          |         | (145,349     | )       |              |         | 25,963       |        |              |         | 119,386  |          |          |          | (30,687 | )      
|                                            | Accumulated other comprehensive loss, net of tax    |              |                                            | (4,645                     | )       |          |         | (11,544      | )       |              |         |             |        |              |         | 11,544   |          |          |          | (4,645  | )      
|                                            |                                                     |              |                                            |                            |         |          |         |              |         |              |         |              |        |              |         |          |          |          |          |         |        
|                                            |                                                     |              |                                            | Total stockholders equity |         |          | 11,334  |              |         |              | 9,237   |              |        |              | 28,451  |          |          |          | (37,688  | )       |         |         | 11,334  | 
|                                            |                                                     |              |                                            |                            |         |          |         |              |         |              |         |              |        |              |         |          |          |          |          |         |        
|                                            |                                                     |              | Total liabilities and stockholders equity |                            | $       | 178,882  |         |              | $       | 314,174      |         |              | $      | 92,532       |         |          | $        | (121,239 | )        |         | $       | 464,349 |        
|                                            |                                                     |              |                                            |                            |         |          |         |              |         |              |         |              |        |              |         |          |          |          |          |         |        

17



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##### Table of Contents



SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION
DECEMBER 31, 2002
(In Thousands)

|                                            |                                                     |                                            |                            |                      |         |          |         |              |         |              |        |              |        |              |        |          |         |         |         |         |         |         |         | 
|------------------------------------------- | --------------------------------------------------- | ------------------------------------------ | -------------------------- | -------------------- | ------- | -------- | ------- | ------------ | ------- | ------------ | ------ | ------------ | ------ | ------------ | ------ | -------- | ------- | ------- | ------- | ------- | ------- | ------- | ------- | 
|                                            |                                                     |                                            |                            |                      |         | ALLIED   |         | GUARANTOR    |         | NONGUARANTOR |        |              |        |              |        |          |         |        
|                                            |                                                     |                                            |                            |                      |         | HOLDINGS |         | SUBSIDIARIES |         | SUBSIDIARIES |        | ELIMINATIONS |        | CONSOLIDATED
|                                            |                                                     |                                            |                            |                      |         |          |         |              |         |              |        |              |        |             
|CURRENT ASSETS:                             |                                                     |                                            |                            |                      |         |          |         |              |         |              |        |              |        |              |        |          |         |         |         |        
|                                            | Cash and cash equivalents                           |                                            | $                          | 7                    |         |          | $       | 1,936        |         |              | $      | 8,310        |        |              | $      |         |         |         | $       | 10,253  |        
|                                            | Short-term investments                              |                                            |                            |                     |         |          |         |             |         |              |        | 60,732       |        |              |        |         |         |         |         | 60,732  |        
|                                            | Receivables, net of allowance for doubtful accounts |                                            |                            |                     |         |          |         | 56,003       |         |              |        | 2,509        |        |              |        |         |         |         |         | 58,512  |        
|                                            | Inventories                                         |                                            |                            |                     |         |          |         | 5,071        |         |              |        |             |        |              |        |         |         |         |         | 5,071   |        
|                                            | Deferred tax assets                                 |                                            |                            | 37,615               |         |          |         | 2,211        |         |              |        |             |        |              |        |         |         |         |         | 39,826  |        
|                                            | Prepayments and other current assets                |                                            |                            | 17,645               |         |          |         | 10,826       |         |              |        | 214          |        |              |        |         |         |         |         | 28,685  |        
|                                            |                                                     |                                            |                            |                      |         |          |         |              |         |              |        |              |        |              |        |          |         |         |         |         |        
|                                            |                                                     |                                            |                            | Total current assets |         |          | 55,267  |              |         |              | 76,047 |              |        |              | 71,765 |          |         |         |        |         |         |         | 203,079 | 
|                                            |                                                     |                                            |                            |                      |         |          |         |              |         |              |        |              |        |              |        |          |         |         |         |         |        
|PROPERTY AND EQUIPMENT, NET                 |                                                     |                                            | 8,957                      |                      |         |          | 164,501 |              |         |              | 3,205  |              |        |              |       |          |         |         | 176,663 |        
|OTHER ASSETS:                               |                                                     |                                            |                            |                      |         |          |         |              |         |              |        |              |        |              |        |          |         |         |         |        
|                                            | Goodwill, net                                       |                                            |                            | 1,515                |         |          |         | 83,726       |         |              |        |             |        |              |        |         |         |         |         | 85,241  |        
|                                            | Other                                               |                                            |                            | 16,860               |         |          |         | 2,743        |         |              |        | 922          |        |              |        |         |         |         |         | 20,525  |        
|                                            | Deferred tax asset                                  |                                            |                            | 7,445                |         |          |         |             |         |              |        |             |        |              |        | (7,445   | )       |         |         |        |        
|                                            | Intercompany receivables                            |                                            |                            | 55,952               |         |          |         |             |         |              |        | 91           |        |              |        | (56,043  | )       |         |         |        |        
|                                            | Investment in subsidiaries                          |                                            |                            | 28,466               |         |          |         | 5,111        |         |              |        |             |        |              |        | (33,577  | )       |         |         |        |        
|                                            |                                                     |                                            |                            |                      |         |          |         |              |         |              |        |              |        |              |        |          |         |         |         |         |        
|                                            |                                                     |                                            |                            | Total other assets   |         |          | 110,238 |              |         |              | 91,580 |              |        |              | 1,013  |          |         |         | (97,065 | )       |         |         | 105,766 | 
|                                            |                                                     |                                            |                            |                      |         |          |         |              |         |              |        |              |        |              |        |          |         |         |         |         |        
|                                            |                                                     |                                            | Total assets               |                      | $       | 174,462  |         |              | $       | 332,128      |        |              | $      | 75,983       |        |          | $       | (97,065 | )       |         | $       | 485,508 |        
|                                            |                                                     |                                            |                            |                      |         |          |         |              |         |              |        |              |        |              |        |          |         |         |         |         |        
|CURRENT LIABILITIES:                        |                                                     |                                            |                            |                      |         |          |         |              |         |              |        |              |        |              |        |          |         |         |         |        
|                                            | Current maturities of long-term debt                |                                            | $                          |                     |         |          | $       | 10,785       |         |              | $      |             |        |              | $      |         |         |         | $       | 10,785  |        
|                                            | Trade accounts payable                              |                                            |                            | 3,362                |         |          |         | 32,930       |         |              |        | 293          |        |              |        |         |         |         |         | 36,585  |        
|                                            | Intercompany payables                               |                                            |                            |                     |         |          |         | 56,043       |         |              |        |             |        |              |        | (56,043  | )       |         |         |        |        
|                                            | Accrued liabilities                                 |                                            |                            | 9,755                |         |          |         | 63,835       |         |              |        | 19,291       |        |              |        |         |         |         |         | 92,881  |        
|                                            |                                                     |                                            |                            |                      |         |          |         |              |         |              |        |              |        |              |        |          |         |         |         |         |        
|                                            |                                                     |                                            | Total current liabilities  |                      |         | 13,117   |         |              |         | 163,593      |        |              |        | 19,584       |        |          |         | (56,043 | )       |         |         | 140,251 |        
|                                            |                                                     |                                            |                            |                      |         |          |         |              |         |              |        |              |        |              |        |          |         |         |         |         |        
|LONG-TERM DEBT, less current maturities     |                                                     |                                            | 150,000                    |                      |         |          | 87,690  |              |         |              |       |              |        |              |       |          |         |         | 237,690 |        
|POSTRETIREMENT BENEFITS OTHER THAN PENSIONS |                                                     |                                            |                           |                      |         |          | 7,467   |              |         |              |       |              |        |              |       |          |         |         | 7,467   |        
|DEFERRED INCOME TAXES                       |                                                     |                                            |                           |                      |         |          | 34,743  |              |         |              | 448    |              |        |              | (7,445 | )        |         |         | 27,746  |        
|OTHER LONG-TERM LIABILITIES                 |                                                     |                                            | 1,031                      |                      |         |          | 31,572  |              |         |              | 29,437 |              |        |              |       |          |         |         | 62,040  |        
|STOCKHOLDERS EQUITY:                       |                                                     |                                            |                            |                      |         |          |         |              |         |              |        |              |        |              |        |          |         |         |         |        
|                                            | Common stock, no par value                          |                                            |                            |                     |         |          |         |             |         |              |        |             |        |              |        |         |         |         |         |        |        
|                                            | Additional paid-in capital                          |                                            |                            | 46,801               |         |          |         | 166,130      |         |              |        | 2,488        |        |              |        | (168,618 | )       |         |         | 46,801  |        
|                                            | Treasury stock                                      |                                            |                            | (707                 | )       |          |         |             |         |              |        |             |        |              |        |         |         |         |         | (707    | )      
|                                            | (Accumulated deficit) retained earnings             |                                            |                            | (26,420              | )       |          |         | (146,278     | )       |              |        | 24,026       |        |              |        | 122,252  |         |         |         | (26,420 | )      
|                                            | Accumulated other comprehensive loss, net of tax    |                                            |                            | (9,360               | )       |          |         | (12,789      | )       |              |        |             |        |              |        | 12,789   |         |         |         | (9,360  | )      
|                                            |                                                     |                                            |                            |                      |         |          |         |              |         |              |        |              |        |              |        |          |         |         |         |         |        
|                                            |                                                     |                                            | Total stockholders equity |                      |         | 10,314   |         |              |         | 7,063        |        |              |        | 26,514       |        |          |         | (33,577 | )       |         |         | 10,314  |        
|                                            |                                                     |                                            |                            |                      |         |          |         |              |         |              |        |              |        |              |        |          |         |         |         |         |        
|                                            |                                                     | Total liabilities and stockholders equity |                            | $                    | 174,462 |          |         | $            | 332,128 |              |        | $            | 75,983 |              |        | $        | (97,065 | )       |         | $       | 485,508 |        
|                                            |                                                     |                                            |                            |                      |         |          |         |              |         |              |        |              |        |              |        |          |         |         |         |         |        

18



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##### Table of Contents



SUPPLEMENTAL CONDENSED CONSOLIDATED INCOME STATEMENT INFORMATION
THREE MONTHS ENDED SEPTEMBER 30, 2003
(In Thousands)

|                                  |                                           |                          |        |          |        |              |         |              |         |              |       |              |       |   |         |        |         |   |         |         |         | 
|--------------------------------- | ----------------------------------------- | ------------------------ | ------ | -------- | ------ | ------------ | ------- | ------------ | ------- | ------------ | ----- | ------------ | ----- | - | ------- | ------ | ------- | - | ------- | ------- | ------- | 
|                                  |                                           |                          |        | ALLIED   |        | GUARANTOR    |         | NONGUARANTOR |         |              |       |              |       |   |         |       
|                                  |                                           |                          |        | HOLDINGS |        | SUBSIDIARIES |         | SUBSIDIARIES |         | ELIMINATIONS |       | CONSOLIDATED
|                                  |                                           |                          |        |          |        |              |         |              |         |              |       |             
|REVENUES                          |                                           | $                        | 6,805  |          |        | $            | 196,733 |              |         | $            | 9,251 |              |       | $ | (15,700 | )      |         | $ | 197,089 |        
|                                  |                                           |                          |        |          |        |              |         |              |         |              |       |              |       |   |         |        |         |   |         |        
|OPERATING EXPENSES:               |                                           |                          |        |          |        |              |         |              |         |              |       |              |       |   |         |        |         |   |         |        
|                                  | Salaries, wages and fringe benefits       |                          |        | 3,469    |        |              |         | 103,900      |         |              |       |             |       |   |         |       |         |   |         | 107,369 |        
|                                  | Operating supplies and expenses           |                          |        | 2,298    |        |              |         | 27,609       |         |              |       | 53           |       |   |         |       |         |   |         | 29,960  |        
|                                  | Purchased transportation                  |                          |        |         |        |              |         | 24,082       |         |              |       |             |       |   |         |       |         |   |         | 24,082  |        
|                                  | Insurance and claims                      |                          |        |         |        |              |         | 8,260        |         |              |       | 8,895        |       |   |         | (8,895 | )       |   |         | 8,260   |        
|                                  | Operating taxes and licenses              |                          |        | 59       |        |              |         | 6,933        |         |              |       |             |       |   |         |       |         |   |         | 6,992   |        
|                                  | Depreciation and amortization             |                          |        | 770      |        |              |         | 10,120       |         |              |       | 121          |       |   |         |       |         |   |         | 11,011  |        
|                                  | Rents                                     |                          |        | 473      |        |              |         | 1,104        |         |              |       | 2            |       |   |         |       |         |   |         | 1,579   |        
|                                  | Communications and utilities              |                          |        | 1,256    |        |              |         | 484          |         |              |       | 5            |       |   |         |       |         |   |         | 1,745   |        
|                                  | Other operating expenses                  |                          |        | 1,550    |        |              |         | 8,003        |         |              |       | 43           |       |   |         | (6,805 | )       |   |         | 2,791   |        
|                                  | Loss on disposal of operating assets, net |                          |        |         |        |              |         | 153          |         |              |       |             |       |   |         |       |         |   |         | 153     |        
|                                  |                                           |                          |        |          |        |              |         |              |         |              |       |              |       |   |         |        |         |   |         |        
|                                  |                                           | Total operating expenses |        |          | 9,875  |              |         |              | 190,648 |              |       |              | 9,119 |   |         |        | (15,700 | ) |         |         | 193,942 | 
|                                  |                                           |                          |        |          |        |              |         |              |         |              |       |              |       |   |         |        |         |   |         |        
|                                  |                                           | Operating (loss) income  |        |          | (3,070 | )            |         |              | 6,085   |              |       |              | 132   |   |         |        |        |   |         |         | 3,147   | 
|                                  |                                           |                          |        |          |        |              |         |              |         |              |       |              |       |   |         |        |         |   |         |        
|OTHER INCOME (EXPENSE):           |                                           |                          |        |          |        |              |         |              |         |              |       |              |       |   |         |        |         |   |         |        
|                                  | Interest expense                          |                          |        | (1,640   | )      |              |         | (5,632       | )       |              |       | (94          | )     |   |         |       |         |   |         | (7,366  | )      
|                                  | Investment income                         |                          |        |         |        |              |         | 12           |         |              |       | (410         | )     |   |         |       |         |   |         | (398    | )      
|                                  | Foreign exchange loss, net                |                          |        |         |        |              |         | (23          | )       |              |       | (39          | )     |   |         |       |         |   |         | (62     | )      
|                                  | Equity in earnings of subsidiaries        |                          |        | 142      |        |              |         | 86           |         |              |       |             |       |   |         | (228   | )       |   |         |        |        
|                                  | Other, net                                |                          |        | 1,976    |        |              |         |             |         |              |       |             |       |   |         |       |         |   |         | 1,976   |        
|                                  |                                           |                          |        |          |        |              |         |              |         |              |       |              |       |   |         |        |         |   |         |        
|                                  |                                           |                          | 478    |          |        |              | (5,557  | )            |         |              | (543  | )            |       |   | (228    | )      |         |   | (5,850  | )      
|                                  |                                           |                          |        |          |        |              |         |              |         |              |       |              |       |   |         |        |         |   |         |        
|(LOSS) INCOME BEFORE INCOME TAXES |                                           |                          | (2,592 | )        |        |              | 528     |              |         |              | (411  | )            |       |   | (228    | )      |         |   | (2,703  | )      
|INCOME TAX BENEFIT (EXPENSE)      |                                           |                          | 617    |          |        |              |        |              |         |              | 111   |              |       |   |        |        |         |   | 728     |        
|                                  |                                           |                          |        |          |        |              |         |              |         |              |       |              |       |   |         |        |         |   |         |        
|NET (LOSS) INCOME                 |                                           | $                        | (1,975 | )        |        | $            | 528     |              |         | $            | (300  | )            |       | $ | (228    | )      |         | $ | (1,975  | )      
|                                  |                                           |                          |        |          |        |              |         |              |         |              |       |              |       |   |         |        |         |   |         |        

SUPPLEMENTAL CONDENSED CONSOLIDATED INCOME STATEMENT INFORMATION
THREE MONTHS ENDED SEPTEMBER 30, 2002
(In Thousands)

|                                                                                        |                                             |                          |        |          |        |              |         |              |         |              |       |              |       |   |         |        |         |   |         |         |         |  
|--------------------------------------------------------------------------------------- | ------------------------------------------- | ------------------------ | ------ | -------- | ------ | ------------ | ------- | ------------ | ------- | ------------ | ----- | ------------ | ----- | - | ------- | ------ | ------- | - | ------- | ------- | ------- | -
|                                                                                        |                                             |                          |        | ALLIED   |        | GUARANTOR    |         | NONGUARANTOR |         |              |       |              |       |   |         |       
|                                                                                        |                                             |                          |        | HOLDINGS |        | SUBSIDIARIES |         | SUBSIDIARIES |         | ELIMINATIONS |       | CONSOLIDATED
|                                                                                        |                                             |                          |        |          |        |              |         |              |         |              |       |             
|REVENUES                                                                                |                                             | $                        | 6,435  |          |        | $            | 212,625 |              |         | $            | 9,490 |              |       | $ | (15,565 | )      |         | $ | 212,985 |        
|                                                                                        |                                             |                          |        |          |        |              |         |              |         |              |       |              |       |   |         |        |         |   |         |        
|OPERATING EXPENSES:                                                                     |                                             |                          |        |          |        |              |         |              |         |              |       |              |       |   |         |        |         |   |         |        
|                                                                                        | Salaries, wages and fringe benefits         |                          |        | 3,634    |        |              |         | 114,170      |         |              |       |             |       |   |         |       |         |   |         | 117,804 |        
|                                                                                        | Operating supplies and expenses             |                          |        | 1,941    |        |              |         | 31,259       |         |              |       | 57           |       |   |         |       |         |   |         | 33,257  |        
|                                                                                        | Purchased transportation                    |                          |        |         |        |              |         | 25,331       |         |              |       |             |       |   |         |       |         |   |         | 25,331  |        
|                                                                                        | Insurance and claims                        |                          |        |         |        |              |         | 10,844       |         |              |       | 9,130        |       |   |         | (9,130 | )       |   |         | 10,844  |        
|                                                                                        | Operating taxes and licenses                |                          |        | 58       |        |              |         | 7,580        |         |              |       |             |       |   |         |       |         |   |         | 7,638   |        
|                                                                                        | Depreciation and amortization               |                          |        | 718      |        |              |         | 12,306       |         |              |       | 118          |       |   |         |       |         |   |         | 13,142  |        
|                                                                                        | Rents                                       |                          |        | 547      |        |              |         | 1,136        |         |              |       | 2            |       |   |         |       |         |   |         | 1,685   |        
|                                                                                        | Communications and utilities                |                          |        | 541      |        |              |         | 882          |         |              |       | 2            |       |   |         |       |         |   |         | 1,425   |        
|                                                                                        | Other operating expenses                    |                          |        | 1,056    |        |              |         | 8,174        |         |              |       | 64           |       |   |         | (6,435 | )       |   |         | 2,859   |        
|                                                                                        | Loss on disposal of operating assets, net   |                          |        |         |        |              |         | 160          |         |              |       | 207          |       |   |         |       |         |   |         | 367     |        
|                                                                                        |                                             |                          |        |          |        |              |         |              |         |              |       |              |       |   |         |        |         |   |         |        
|                                                                                        |                                             | Total operating expenses |        |          | 8,495  |              |         |              | 211,842 |              |       |              | 9,580 |   |         |        | (15,565 | ) |         |         | 214,352 |  
|                                                                                        |                                             |                          |        |          |        |              |         |              |         |              |       |              |       |   |         |        |         |   |         |        
|                                                                                        |                                             | Operating (loss) income  |        |          | (2,060 | )            |         |              | 783     |              |       |              | (90   | ) |         |        |        |   |         |         | (1,367  | )
|                                                                                        |                                             |                          |        |          |        |              |         |              |         |              |       |              |       |   |         |        |         |   |         |        
|OTHER INCOME (EXPENSE):                                                                 |                                             |                          |        |          |        |              |         |              |         |              |       |              |       |   |         |        |         |   |         |        
|                                                                                        | Interest expense                            |                          |        | (4,791   | )      |              |         | (2,831       | )       |              |       | (39          | )     |   |         | 50     |         |   |         | (7,611  | )      
|                                                                                        | Investment income                           |                          |        |         |        |              |         | 1            |         |              |       | 252          |       |   |         | (50    | )       |   |         | 203     |        
|                                                                                        | Intercompany dividends                      |                          |        | 166      |        |              |         | (166         | )       |              |       |             |       |   |         |       |         |   |         |        |        
|                                                                                        | Foreign exchange gain, net                  |                          |        |         |        |              |         | 124          |         |              |       |             |       |   |         |       |         |   |         | 124     |        
|                                                                                        | Other, net                                  |                          |        |         |        |              |         | (206         | )       |              |       | 149          |       |   |         |       |         |   |         | (57     | )      
|                                                                                        | Equity in (losses) earnings of subsidiaries |                          |        | (2,665   | )      |              |         | 156          |         |              |       |             |       |   |         | 2,509  |         |   |         |        |        
|                                                                                        |                                             |                          |        |          |        |              |         |              |         |              |       |              |       |   |         |        |         |   |         |        
|                                                                                        |                                             |                          | (7,290 | )        |        |              | (2,922  | )            |         |              | 362   |              |       |   | 2,509   |        |         |   | (7,341  | )      
|                                                                                        |                                             |                          |        |          |        |              |         |              |         |              |       |              |       |   |         |        |         |   |         |        
|(LOSS) INCOME
BEFORE INCOME TAXES &
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE |                                             |                          | (9,350 | )        |        |              | (2,139  | )            |         |              | 272   |              |       |   | 2,509   |        |         |   | (8,708  | )      
|INCOME TAX BENEFIT (EXPENSE)                                                            |                                             |                          | 2,868  |          |        |              | (39     | )            |         |              | (603  | )            |       |   |        |        |         |   | 2,226   |        
|                                                                                        |                                             |                          |        |          |        |              |         |              |         |              |       |              |       |   |         |        |         |   |         |        
|(LOSS) INCOME BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE                |                                             |                          | (6,482 | )        |        |              | (2,178  | )            |         |              | (331  | )            |       |   | 2,509   |        |         |   | (6,482  | )      
|CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE, NET OF TAX                         |                                             |                          |       |          |        |              |        |              |         |              |      |              |       |   |        |        |         |   |        |        
|                                                                                        |                                             |                          |        |          |        |              |         |              |         |              |       |              |       |   |         |        |         |   |         |        
|NET LOSS                                                                                |                                             | $                        | (6,482 | )        |        | $            | (2,178  | )            |         | $            | (331  | )            |       | $ | 2,509   |        |         | $ | (6,482  | )      
|                                                                                        |                                             |                          |        |          |        |              |         |              |         |              |       |              |       |   |         |        |         |   |         |        

19



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##### Table of Contents



SUPPLEMENTAL CONDENSED CONSOLIDATED INCOME STATEMENT INFORMATION
NINE MONTHS ENDED SEPTEMBER 30, 2003
(In Thousands)

|                                  |                                           |                          |        |          |        |              |         |              |         |              |        |              |        |   |         |         |         |   |         |         |         | 
|--------------------------------- | ----------------------------------------- | ------------------------ | ------ | -------- | ------ | ------------ | ------- | ------------ | ------- | ------------ | ------ | ------------ | ------ | - | ------- | ------- | ------- | - | ------- | ------- | ------- | 
|                                  |                                           |                          |        | ALLIED   |        | GUARANTOR    |         | NONGUARANTOR |         |              |        |              |        |   |         |        
|                                  |                                           |                          |        | HOLDINGS |        | SUBSIDIARIES |         | SUBSIDIARIES |         | ELIMINATIONS |        | CONSOLIDATED
|                                  |                                           |                          |        |          |        |              |         |              |         |              |        |             
|REVENUES                          |                                           | $                        | 20,909 |          |        | $            | 639,719 |              |         | $            | 27,509 |              |        | $ | (47,378 | )       |         | $ | 640,759 |        
|                                  |                                           |                          |        |          |        |              |         |              |         |              |        |              |        |   |         |         |         |   |         |        
|OPERATING EXPENSES:               |                                           |                          |        |          |        |              |         |              |         |              |        |              |        |   |         |         |         |   |         |        
|                                  | Salaries, wages and fringe benefits       |                          |        | 8,634    |        |              |         | 339,812      |         |              |        |             |        |   |         |        |         |   |         | 348,446 |        
|                                  | Operating supplies and expenses           |                          |        | 6,841    |        |              |         | 96,136       |         |              |        | 131          |        |   |         |        |         |   |         | 103,108 |        
|                                  | Purchased transportation                  |                          |        |         |        |              |         | 74,632       |         |              |        |             |        |   |         |        |         |   |         | 74,632  |        
|                                  | Insurance and claims                      |                          |        |         |        |              |         | 29,247       |         |              |        | 26,316       |        |   |         | (26,469 | )       |   |         | 29,094  |        
|                                  | Operating taxes and licenses              |                          |        | 182      |        |              |         | 22,807       |         |              |        |             |        |   |         |        |         |   |         | 22,989  |        
|                                  | Depreciation and amortization             |                          |        | 2,497    |        |              |         | 31,838       |         |              |        | 353          |        |   |         |        |         |   |         | 34,688  |        
|                                  | Rents                                     |                          |        | 1,461    |        |              |         | 3,353        |         |              |        | 5            |        |   |         |        |         |   |         | 4,819   |        
|                                  | Communications and utilities              |                          |        | 3,106    |        |              |         | 2,096        |         |              |        | 11           |        |   |         |        |         |   |         | 5,213   |        
|                                  | Other operating expenses                  |                          |        | 3,693    |        |              |         | 25,153       |         |              |        | 238          |        |   |         | (20,909 | )       |   |         | 8,175   |        
|                                  | Loss on disposal of operating assets, net |                          |        |         |        |              |         | 612          |         |              |        |             |        |   |         |        |         |   |         | 612     |        
|                                  |                                           |                          |        |          |        |              |         |              |         |              |        |              |        |   |         |         |         |   |         |        
|                                  |                                           | Total operating expenses |        |          | 26,414 |              |         |              | 625,686 |              |        |              | 27,054 |   |         |         | (47,378 | ) |         |         | 631,776 | 
|                                  |                                           |                          |        |          |        |              |         |              |         |              |        |              |        |   |         |         |         |   |         |        
|                                  |                                           | Operating (loss) income  |        |          | (5,505 | )            |         |              | 14,033  |              |        |              | 455    |   |         |         |        |   |         |         | 8,983   | 
|                                  |                                           |                          |        |          |        |              |         |              |         |              |        |              |        |   |         |         |         |   |         |        
|OTHER INCOME (EXPENSE):           |                                           |                          |        |          |        |              |         |              |         |              |        |              |        |   |         |         |         |   |         |        
|                                  | Interest expense                          |                          |        | (5,614   | )      |              |         | (16,312      | )       |              |        | (194         | )      |   |         |        |         |   |         | (22,120 | )      
|                                  | Investment income                         |                          |        |         |        |              |         | 54           |         |              |        | 2,881        |        |   |         |        |         |   |         | 2,935   |        
|                                  | Foreign exchange gain (loss) gains, net   |                          |        |         |        |              |         | 2,398        |         |              |        | (12          | )      |   |         |        |         |   |         | 2,386   |        
|                                  | Equity in earnings of subsidiaries        |                          |        | 2,433    |        |              |         | 433          |         |              |        |             |        |   |         | (2,866  | )       |   |         |        |        
|                                  | Other, net                                |                          |        | 1,976    |        |              |         |             |         |              |        |             |        |   |         |        |         |   |         | 1,976   |        
|                                  |                                           |                          |        |          |        |              |         |              |         |              |        |              |        |   |         |         |         |   |         |        
|                                  |                                           |                          | (1,205 | )        |        |              | (13,427 | )            |         |              | 2,675  |              |        |   | (2,866  | )       |         |   | (14,823 | )      
|                                  |                                           |                          |        |          |        |              |         |              |         |              |        |              |        |   |         |         |         |   |         |        
|(LOSS) INCOME BEFORE INCOME TAXES |                                           |                          | (6,710 | )        |        |              | 606     |              |         |              | 3,130  |              |        |   | (2,866  | )       |         |   | (5,840  | )      
|INCOME TAX BENEFIT (EXPENSE)      |                                           |                          | 2,443  |          |        |              | 323     |              |         |              | (1,193 | )            |        |   |        |         |         |   | 1,573   |        
|                                  |                                           |                          |        |          |        |              |         |              |         |              |        |              |        |   |         |         |         |   |         |        
|NET (LOSS) INCOME                 |                                           | $                        | (4,267 | )        |        | $            | 929     |              |         | $            | 1,937  |              |        | $ | (2,866  | )       |         | $ | (4,267  | )      
|                                  |                                           |                          |        |          |        |              |         |              |         |              |        |              |        |   |         |         |         |   |         |        

SUPPLEMENTAL CONDENSED CONSOLIDATED INCOME STATEMENT INFORMATION
NINE MONTHS ENDED SEPTEMBER 30, 2002
(In Thousands)

|                                                                                        |                                                  |                          |         |          |        |              |         |              |         |              |        |              |        |   |         |         |         |   |         |         |         | 
|--------------------------------------------------------------------------------------- | ------------------------------------------------ | ------------------------ | ------- | -------- | ------ | ------------ | ------- | ------------ | ------- | ------------ | ------ | ------------ | ------ | - | ------- | ------- | ------- | - | ------- | ------- | ------- | 
|                                                                                        |                                                  |                          |         | ALLIED   |        | GUARANTOR    |         | NONGUARANTOR |         |              |        |              |        |   |         |        
|                                                                                        |                                                  |                          |         | HOLDINGS |        | SUBSIDIARIES |         | SUBSIDIARIES |         | ELIMINATIONS |        | CONSOLIDATED
|                                                                                        |                                                  |                          |         |          |        |              |         |              |         |              |        |             
|REVENUES                                                                                |                                                  | $                        | 11,505  |          |        | $            | 664,108 |              |         | $            | 28,509 |              |        | $ | (38,894 | )       |         | $ | 665,228 |        
|                                                                                        |                                                  |                          |         |          |        |              |         |              |         |              |        |              |        |   |         |         |         |   |         |        
|OPERATING EXPENSES:                                                                     |                                                  |                          |         |          |        |              |         |              |         |              |        |              |        |   |         |         |         |   |         |        
|                                                                                        | Salaries, wages and fringe benefits              |                          |         | 7,069    |        |              |         | 356,784      |         |              |        |             |        |   |         |        |         |   |         | 363,853 |        
|                                                                                        | Operating supplies and expenses                  |                          |         | 2,728    |        |              |         | 97,198       |         |              |        | 142          |        |   |         |        |         |   |         | 100,068 |        
|                                                                                        | Purchased transportation                         |                          |         |         |        |              |         | 72,438       |         |              |        |             |        |   |         |        |         |   |         | 72,438  |        
|                                                                                        | Insurance and claims                             |                          |         |         |        |              |         | 34,342       |         |              |        | 27,391       |        |   |         | (27,389 | )       |   |         | 34,344  |        
|                                                                                        | Operating taxes and licenses                     |                          |         | 166      |        |              |         | 24,565       |         |              |        |             |        |   |         |        |         |   |         | 24,731  |        
|                                                                                        | Depreciation and amortization                    |                          |         | 2,228    |        |              |         | 37,504       |         |              |        | 355          |        |   |         |        |         |   |         | 40,087  |        
|                                                                                        | Rents                                            |                          |         | 1,394    |        |              |         | 3,496        |         |              |        | 5            |        |   |         |        |         |   |         | 4,895   |        
|                                                                                        | Communications and utilities                     |                          |         | 867      |        |              |         | 4,415        |         |              |        | 8            |        |   |         |        |         |   |         | 5,290   |        
|                                                                                        | Other operating expenses                         |                          |         | 2,904    |        |              |         | 15,923       |         |              |        | 285          |        |   |         | (11,505 | )       |   |         | 7,607   |        
|                                                                                        | (Gain) loss on disposal of operating assets, net |                          |         |         |        |              |         | (554         | )       |              |        | 207          |        |   |         |         |         |   |         | (347    | )      
|                                                                                        |                                                  |                          |         |          |        |              |         |              |         |              |        |              |        |   |         |         |         |   |         |        
|                                                                                        |                                                  | Total operating expenses |         |          | 17,356 |              |         |              | 646,111 |              |        |              | 28,393 |   |         |         | (38,894 | ) |         |         | 652,966 | 
|                                                                                        |                                                  |                          |         |          |        |              |         |              |         |              |        |              |        |   |         |         |         |   |         |        
|                                                                                        |                                                  | Operating (loss) income  |         |          | (5,851 | )            |         |              | 17,997  |              |        |              | 116    |   |         |         |        |   |         |         | 12,262  | 
|                                                                                        |                                                  |                          |         |          |        |              |         |              |         |              |        |              |        |   |         |         |         |   |         |        
|OTHER INCOME (EXPENSE):                                                                 |                                                  |                          |         |          |        |              |         |              |         |              |        |              |        |   |         |         |         |   |         |        
|                                                                                        | Interest expense                                 |                          |         | (12,307  | )      |              |         | (11,005      | )       |              |        | (171         | )      |   |         | 140     |         |   |         | (23,343 | )      
|                                                                                        | Investment income                                |                          |         | 1        |        |              |         | 27           |         |              |        | 1,202        |        |   |         | (140    | )       |   |         | 1,090   |        
|                                                                                        | Gain on early extinguishment of debt             |                          |         | 2,750    |        |              |         |             |         |              |        |             |        |   |         |        |         |   |         | 2,750   |        
|                                                                                        | Intercompany dividends                           |                          |         | 1,144    |        |              |         | (1,144       | )       |              |        |             |        |   |         |        |         |   |         |        |        
|                                                                                        | Foreign exchange (loss) gain, net                |                          |         | (8       | )      |              |         | 165          |         |              |        |             |        |   |         |        |         |   |         | 157     |        
|                                                                                        | Other, net                                       |                          |         |         |        |              |         | (206         | )       |              |        | (58          | )      |   |         |        |         |   |         | (264    | )      
|                                                                                        | Equity in earnings of subsidiaries               |                          |         | 1,575    |        |              |         | 289          |         |              |        |             |        |   |         | (1,864  | )       |   |         |        |        
|                                                                                        |                                                  |                          |         |          |        |              |         |              |         |              |        |              |        |   |         |         |         |   |         |        
|                                                                                        |                                                  |                          | (6,845  | )        |        |              | (11,874 | )            |         |              | 973    |              |        |   | (1,864  | )       |         |   | (19,610 | )      
|                                                                                        |                                                  |                          |         |          |        |              |         |              |         |              |        |              |        |   |         |         |         |   |         |        
|(LOSS) INCOME
BEFORE INCOME TAXES &
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE |                                                  |                          | (12,696 | )        |        |              | 6,123   |              |         |              | 1,089  |              |        |   | (1,864  | )       |         |   | (7,348  | )      
|INCOME TAX BENEFIT (EXPENSE)                                                            |                                                  |                          | 3,075   |          |        |              | 933     |              |         |              | (2,189 | )            |        |   |        |         |         |   | 1,819   |        
|                                                                                        |                                                  |                          |         |          |        |              |         |              |         |              |        |              |        |   |         |         |         |   |         |        
|(LOSS) INCOME BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE                |                                                  |                          | (9,621  | )        |        |              | 7,056   |              |         |              | (1,100 | )            |        |   | (1,864  | )       |         |   | (5,529  | )      
|CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE, NET OF TAX                         |                                                  |                          |        |          |        |              | (4,092  | )            |         |              |       |              |        |   |        |         |         |   | (4,092  | )      
|                                                                                        |                                                  |                          |         |          |        |              |         |              |         |              |        |              |        |   |         |         |         |   |         |        
|NET (LOSS) INCOME                                                                       |                                                  | $                        | (9,621  | )        |        | $            | 2,964   |              |         | $            | (1,100 | )            |        | $ | (1,864  | )       |         | $ | (9,621  | )      
|                                                                                        |                                                  |                          |         |          |        |              |         |              |         |              |        |              |        |   |         |         |         |   |         |        

20



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##### Table of Contents



SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
NINE MONTHS ENDED SEPTEMBER 30, 2003
(In Thousands)

|                                                             |                                                                                   |                                                          |                                                     |                                                     |        |          |        |              |         |              |         |              |        |              |        |        |        |   |        |         |        |         |         |  
|------------------------------------------------------------ | --------------------------------------------------------------------------------- | -------------------------------------------------------- | --------------------------------------------------- | --------------------------------------------------- | ------ | -------- | ------ | ------------ | ------- | ------------ | ------- | ------------ | ------ | ------------ | ------ | ------ | ------ | - | ------ | ------- | ------ | ------- | ------- | -
|                                                             |                                                                                   |                                                          |                                                     |                                                     |        | ALLIED   |        | GUARANTOR    |         | NONGUARANTOR |         |              |        |              |        |        |        |  
|                                                             |                                                                                   |                                                          |                                                     |                                                     |        | HOLDINGS |        | SUBSIDIARIES |         | SUBSIDIARIES |         | ELIMINATIONS |        | CONSOLIDATED
|                                                             |                                                                                   |                                                          |                                                     |                                                     |        |          |        |              |         |              |         |              |        |             
|CASH FLOWS FROM OPERATING ACTIVITIES:                        |                                                                                   |                                                          |                                                     |                                                     |        |          |        |              |         |              |         |              |        |              |        |        |        |   |        |        
|                                                             | Net (loss) income                                                                 |                                                          | $                                                   | (4,267                                              | )      |          | $      | 929          |         |              | $       | 1,937        |        |              | $      | (2,866 | )      |   | $      | (4,267  | )     
|                                                             |                                                                                   |                                                          |                                                     |                                                     |        |          |        |              |         |              |         |              |        |              |        |        |        |   |        |         |       
|                                                             | Reconciliation of net (loss) income to net
cash provided by operating activities: |                                                          |                                                     |                                                     |        |          |        |              |         |              |         |              |        |              |        |        |        |   |        |         |       
|                                                             |                                                                                   | Interest expense paid in kind                            |                                                     |                                                     |       |          |        |              | 1,065   |              |         |              |       |              |        |        |       |   |        |         | 1,065  |        
|                                                             |                                                                                   | Amortization of deferred financing costs                 |                                                     |                                                     | 3,007  |          |        |              |        |              |         |              |       |              |        |        |       |   |        |         | 3,007  |        
|                                                             |                                                                                   | Depreciation and amortization                            |                                                     |                                                     | 2,497  |          |        |              | 31,838  |              |         |              | 353    |              |        |        |       |   |        |         | 34,688 |        
|                                                             |                                                                                   | Loss on disposal of assets and other, net                |                                                     |                                                     |       |          |        |              | 612     |              |         |              |       |              |        |        |       |   |        |         | 612    |        
|                                                             |                                                                                   | Foreign exchange gain, net                               |                                                     |                                                     |       |          |        |              | (2,386  | )            |         |              |       |              |        |        |       |   |        |         | (2,386 | )      
|                                                             |                                                                                   | Deferred income taxes                                    |                                                     |                                                     | (3,402 | )        |        |              |        |              |         |              |       |              |        |        |       |   |        |         | (3,402 | )      
|                                                             |                                                                                   | Compensation expense related to stock options and grants |                                                     |                                                     | 290    |          |        |              |        |              |         |              |       |              |        |        |       |   |        |         | 290    |        
|                                                             |                                                                                   | Equity in earnings of subsidiaries                       |                                                     |                                                     | (2,433 | )        |        |              | (433    | )            |         |              |       |              |        |        | (2,866 | ) |        |         |       |        
|                                                             |                                                                                   | Amortization of Teamsters Union contract costs           |                                                     |                                                     |       |          |        |              | 1,000   |              |         |              |       |              |        |        |       |   |        |         | 1,000  |        
|                                                             |                                                                                   | Change in operating assets and liabilities:              |                                                     |                                                     |        |          |        |              |         |              |         |              |        |              |        |        |        |   |        |         |        |        
|                                                             |                                                                                   |                                                          | Receivables, net of allowance for doubtful accounts |                                                     |        |         |        |              |         | 4,998        |         |              |        | (3,158       | )      |        |        |  |        |         |        | 1,840   |        
|                                                             |                                                                                   |                                                          | Inventories                                         |                                                     |        |         |        |              |         | 336          |         |              |        |             |        |        |        |  |        |         |        | 336     |        
|                                                             |                                                                                   |                                                          | Prepayments and other current assets                |                                                     |        | 16,348   |        |              |         | (115         | )       |              |        | 126          |        |        |        |  |        |         |        | 16,359  |        
|                                                             |                                                                                   |                                                          | Short-term investments                              |                                                     |        |         |        |              |         |             |         |              |        | 60,732       |        |        |        |  |        |         |        | 60,732  |        
|                                                             |                                                                                   |                                                          | Trade accounts payable                              |                                                     |        | (894     | )      |              |         | (8,609       | )       |              |        | (173         | )      |        |        |  |        |         |        | (9,676  | )      
|                                                             |                                                                                   |                                                          | Intercompany receivables                            |                                                     |        | 2,535    |        |              |         | (7,905       | )       |              |        | 5,370        |        |        |        |  |        |         |        |        |        
|                                                             |                                                                                   |                                                          | Accrued
liabilities and other                       |                                                     |        | (10,152  | )      |              |         | (17,950      | )       |              |        | 9,506        |        |        |        |  |        |         |        | (18,596 | )      
|                                                             |                                                                                   |                                                          |                                                     |                                                     |        |          |        |              |         |              |         |              |        |              |        |        |        |   |        |         |       
|                                                             |                                                                                   | Net change in operating assets and liabilities           |                                                     |                                                     | 7,837  |          |        |              | (29,245 | )            |         |              | 72,403 |              |        |        |       |   |        |         | 50,995 |        
|                                                             |                                                                                   |                                                          |                                                     |                                                     |        |          |        |              |         |              |         |              |        |              |        |        |        |   |        |         |       
|                                                             |                                                                                   |                                                          |                                                     | Net cash provided by operating activities           |        |          | 3,529  |              |         |              | 3,380   |              |        |              | 74,693 |        |        |   |       |         |        |         | 81,602  |  
|                                                             |                                                                                   |                                                          |                                                     |                                                     |        |          |        |              |         |              |         |              |        |              |        |        |        |   |        |         |       
|CASH FLOWS FROM INVESTING ACTIVITIES:                        |                                                                                   |                                                          |                                                     |                                                     |        |          |        |              |         |              |         |              |        |              |        |        |        |   |        |        
|                                                             | Purchases of property and equipment                                               |                                                          |                                                     | (269                                                | )      |          |        | (11,210      | )       |              |         | (68          | )      |              |        |       |        |   |        | (11,547 | )     
|                                                             | Proceeds from sale of property and equipment                                      |                                                          |                                                     |                                                    |        |          |        | 287          |         |              |         |             |        |              |        |       |        |   |        | 287     |       
|                                                             | Decrease in cash surrender value of life insurance                                |                                                          |                                                     | 2                                                   |        |          |        |             |         |              |         |             |        |              |        |       |        |   |        | 2       |       
|                                                             |                                                                                   |                                                          |                                                     |                                                     |        |          |        |              |         |              |         |              |        |              |        |        |        |   |        |         |       
|                                                             |                                                                                   |                                                          |                                                     | Net cash used in investing activities               |        |          | (267   | )            |         |              | (10,923 | )            |        |              | (68    | )      |        |   |       |         |        |         | (11,258 | )
|                                                             |                                                                                   |                                                          |                                                     |                                                     |        |          |        |              |         |              |         |              |        |              |        |        |        |   |        |         |       
|CASH FLOWS FROM FINANCING ACTIVITIES:                        |                                                                                   |                                                          |                                                     |                                                     |        |          |        |              |         |              |         |              |        |              |        |        |        |   |        |        
|                                                             | Repayments of revolving credit facilities, net                                    |                                                          |                                                     |                                                    |        |          |        | (20,280      | )       |              |         |             |        |              |        |       |        |   |        | (20,280 | )     
|                                                             | Additions to long-term debt                                                       |                                                          |                                                     |                                                    |        |          |        | 99,875       |         |              |         |             |        |              |        |       |        |   |        | 99,875  |       
|                                                             | Repayment of long-term debt                                                       |                                                          |                                                     |                                                    |        |          |        | (74,905      | )       |              |         |             |        |              |        |       |        |   |        | (74,905 | )     
|                                                             | Payment of deferred financing costs                                               |                                                          |                                                     | (3,031                                              | )      |          |        |             |         |              |         |             |        |              |        |       |        |   |        | (3,031  | )     
|                                                             | Proceeds from issuance of common stock                                            |                                                          |                                                     | 282                                                 |        |          |        |             |         |              |         |             |        |              |        |       |        |   |        | 282     |       
|                                                             | Other, net                                                                        |                                                          |                                                     | (520                                                | )      |          |        | 585          |         |              |         |             |        |              |        |       |        |   |        | 65      |       
|                                                             |                                                                                   |                                                          |                                                     |                                                     |        |          |        |              |         |              |         |              |        |              |        |        |        |   |        |         |       
|                                                             |                                                                                   |                                                          |                                                     | Net cash (used in) provided by financing activities |        |          | (3,269 | )            |         |              | 5,275   |              |        |              |       |        |        |   |       |         |        |         | 2,006   |  
|                                                             |                                                                                   |                                                          |                                                     |                                                     |        |          |        |              |         |              |         |              |        |              |        |        |        |   |        |         |       
|EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS |                                                                                   |                                                          |                                                    |                                                     |        |          | 746    |              |         |              |        |              |        |              |       |        |        |   | 746    |        
|NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS         |                                                                                   |                                                          | (7                                                  | )                                                   |        |          | (1,522 | )            |         |              | 74,625  |              |        |              |       |        |        |   | 73,096 |        
|CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD             |                                                                                   |                                                          | 7                                                   |                                                     |        |          | 1,936  |              |         |              | 8,310   |              |        |              |       |        |        |   | 10,253 |        
|                                                             |                                                                                   |                                                          |                                                     |                                                     |        |          |        |              |         |              |         |              |        |              |        |        |        |   |        |         |       
|CASH AND CASH EQUIVALENTS AT END OF PERIOD                   |                                                                                   | $                                                        |                                                    |                                                     |        | $        | 414    |              |         | $            | 82,935  |              |        | $            |       |        |        | $ | 83,349 |        
|                                                             |                                                                                   |                                                          |                                                     |                                                     |        |          |        |              |         |              |         |              |        |              |        |        |        |   |        |         |       

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##### Table of Contents



SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2002
In Thousands

|                                                             |                                                                                                    |                                                          |                                                     |                                                     |         |          |          |              |          |              |          |              |        |              |       |        |       |   |        |         |        |        |         |  
|------------------------------------------------------------ | -------------------------------------------------------------------------------------------------- | -------------------------------------------------------- | --------------------------------------------------- | --------------------------------------------------- | ------- | -------- | -------- | ------------ | -------- | ------------ | -------- | ------------ | ------ | ------------ | ----- | ------ | ----- | - | ------ | ------- | ------ | ------ | ------- | -
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |         | ALLIED   |          | GUARANTOR    |          | NONGUARANTOR |          |              |        |              |       |        |       |  
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |         | HOLDINGS |          | SUBSIDIARIES |          | SUBSIDIARIES |          | ELIMINATIONS |        | CONSOLIDATED
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |         |          |          |              |          |              |          |              |        |             
|CASH FLOWS FROM OPERATING ACTIVITIES                         |                                                                                                    |                                                          |                                                     |                                                     |         |          |          |              |          |              |          |              |        |              |       |        |       |   |        |        
|                                                             | Net (loss) income                                                                                  |                                                          | $                                                   | (9,621                                              | )       |          | $        | 2,964        |          |              | $        | (1,100       | )      |              | $     | (1,864 | )     |   | $      | (9,621  | )     
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |         |          |          |              |          |              |          |              |        |              |       |        |       |   |        |         |       
|                                                             | Adjustments to reconcile net (loss) income to net
cash provided by (used in) operating activities: |                                                          |                                                     |                                                     |         |          |          |              |          |              |          |              |        |              |       |        |       |   |        |         |       
|                                                             |                                                                                                    | Gain on early extinguishment of debt                     |                                                     |                                                     | (2,750  | )        |          |              |         |              |          |              |       |              |       |        |      |   |        |         | (2,750 | )     
|                                                             |                                                                                                    | Interest expense paid in kind                            |                                                     |                                                     |        |          |          |              | 746      |              |          |              |       |              |       |        |      |   |        |         | 746    |       
|                                                             |                                                                                                    | Amortization of deferred financing costs                 |                                                     |                                                     | 3,013   |          |          |              |         |              |          |              |       |              |       |        |      |   |        |         | 3,013  |       
|                                                             |                                                                                                    | Depreciation and amortization                            |                                                     |                                                     | 2,228   |          |          |              | 37,504   |              |          |              | 355    |              |       |        |      |   |        |         | 40,087 |       
|                                                             |                                                                                                    | Gain on disposal of assets and other, net                |                                                     |                                                     |        |          |          |              | (83      | )            |          |              |       |              |       |        |      |   |        |         | (83    | )     
|                                                             |                                                                                                    | Foreign exchange gain, net                               |                                                     |                                                     | 8       |          |          |              | (165     | )            |          |              |       |              |       |        |      |   |        |         | (157   | )     
|                                                             |                                                                                                    | Cumulative effect of change in accounting principle      |                                                     |                                                     |        |          |          |              | 4,092    |              |          |              |       |              |       |        |      |   |        |         | 4,092  |       
|                                                             |                                                                                                    | Deferred income taxes                                    |                                                     |                                                     | 704     |          |          |              | (2,698   | )            |          |              | (575   | )            |       |        |      |   |        |         | (2,569 | )     
|                                                             |                                                                                                    | Compensation expense related to stock options and grants |                                                     |                                                     | (210    | )        |          |              |         |              |          |              |       |              |       |        |      |   |        |         | (210   | )     
|                                                             |                                                                                                    | Equity in earnings of subsidiaries                       |                                                     |                                                     | (1,575  | )        |          |              | (289     | )            |          |              |       |              |       |        | 1,864 |   |        |         |       |       
|                                                             |                                                                                                    | Amortization of Teamsters Union contract costs           |                                                     |                                                     |        |          |          |              | 1,800    |              |          |              |       |              |       |        |      |   |        |         | 1,800  |       
|                                                             |                                                                                                    | Change in operating assets and liabilities:              |                                                     |                                                     |         |          |          |              |          |              |          |              |        |              |       |        |       |   |        |         |        |       
|                                                             |                                                                                                    |                                                          | Receivables, net of allowance for doubtful accounts |                                                     |         | 24       |          |              |          | 11,826       |          |              |        | 426          |       |        |       |  |        |         |        | 12,276 |        
|                                                             |                                                                                                    |                                                          | Inventories                                         |                                                     |         |         |          |              |          | 50           |          |              |        | 5            |       |        |       |  |        |         |        | 55     |        
|                                                             |                                                                                                    |                                                          | Prepayments and other current assets                |                                                     |         | (635     | )        |              |          | 2,136        |          |              |        | 55           |       |        |       |  |        |         |        | 1,556  |        
|                                                             |                                                                                                    |                                                          | Short-term investments                              |                                                     |         |         |          |              |          |             |          |              |        | 2,367        |       |        |       |  |        |         |        | 2,367  |        
|                                                             |                                                                                                    |                                                          | Trade accounts payable                              |                                                     |         | 48       |          |              |          | (4,181       | )        |              |        | 76           |       |        |       |  |        |         |        | (4,057 | )      
|                                                             |                                                                                                    |                                                          | Intercompany payables                               |                                                     |         | 186,845  |          |              |          | (180,485     | )        |              |        | (6,360       | )     |        |       |  |        |         |        |       |        
|                                                             |                                                                                                    |                                                          | Accrued liabilities                                 |                                                     |         | (2,080   | )        |              |          | (3,483       | )        |              |        | 14,096       |       |        |       |  |        |         |        | 8,533  |        
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |         |          |          |              |          |              |          |              |        |              |       |        |       |   |        |         |       
|                                                             |                                                                                                    | Net change in operating assets and liabilities           |                                                     |                                                     | 184,202 |          |          |              | (174,137 | )            |          |              | 10,665 |              |       |        |      |   |        |         | 20,730 |       
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |         |          |          |              |          |              |          |              |        |              |       |        |       |   |        |         |       
|                                                             |                                                                                                    |                                                          |                                                     | Net cash provided by (used in) operating activities |         |          | 175,999  |              |          |              | (130,266 | )            |        |              | 9,345 |        |       |   |       |         |        |        | 55,078  |  
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |         |          |          |              |          |              |          |              |        |              |       |        |       |   |        |         |       
|CASH FLOWS FROM INVESTING ACTIVITIES:                        |                                                                                                    |                                                          |                                                     |                                                     |         |          |          |              |          |              |          |              |        |              |       |        |       |   |        |        
|                                                             | Purchases of property and equipment                                                                |                                                          |                                                     | (6                                                  | )       |          |          | (13,303      | )        |              |          | (4           | )      |              |       |       |       |   |        | (13,313 | )     
|                                                             | Intercompany sale of property and equipment                                                        |                                                          |                                                     | (2                                                  | )       |          |          | 2            |          |              |          |             |        |              |       |       |       |   |        |        |       
|                                                             | Proceeds from sale of property and equipment                                                       |                                                          |                                                     |                                                    |         |          |          | 3,005        |          |              |          |             |        |              |       |       |       |   |        | 3,005   |       
|                                                             | Proceeds from sale of equity investment in joint venture                                           |                                                          |                                                     |                                                    |         |          |          |             |          |              |          | 2,700        |        |              |       |       |       |   |        | 2,700   |       
|                                                             | Capital contribution                                                                               |                                                          |                                                     | (73,178                                             | )       |          |          | 73,100       |          |              |          | 78           |        |              |       |        |       |   |        |        |       
|                                                             | Return of capital                                                                                  |                                                          |                                                     | 40,881                                              |         |          |          | (39,829      | )        |              |          | (1,052       | )      |              |       |        |       |   |        |        |       
|                                                             | Increase in cash surrender value of life insurance                                                 |                                                          |                                                     | 1,341                                               |         |          |          |             |          |              |          |             |        |              |       |       |       |   |        | 1,341   |       
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |         |          |          |              |          |              |          |              |        |              |       |        |       |   |        |         |       
|                                                             |                                                                                                    |                                                          |                                                     | Net cash (used in) provided by investing activities |         |          | (30,964  | )            |          |              | 22,975   |              |        |              | 1,722 |        |       |   |       |         |        |        | (6,267  | )
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |         |          |          |              |          |              |          |              |        |              |       |        |       |   |        |         |       
|CASH FLOWS FROM FINANCING ACTIVITIES:                        |                                                                                                    |                                                          |                                                     |                                                     |         |          |          |              |          |              |          |              |        |              |       |        |       |   |        |        
|                                                             | (Repayments) additions to revolving credit facilities, net                                         |                                                          |                                                     | (98,900                                             | )       |          |          | 36,516       |          |              |          |             |        |              |       |       |       |   |        | (62,384 | )     
|                                                             | Additions to long-term debt                                                                        |                                                          |                                                     |                                                    |         |          |          | 82,750       |          |              |          |             |        |              |       |       |       |   |        | 82,750  |       
|                                                             | Repayment of long-term debt                                                                        |                                                          |                                                     | (37,498                                             | )       |          |          | (8,862       | )        |              |          |             |        |              |       |       |       |   |        | (46,360 | )     
|                                                             | Payment of deferred financing costs                                                                |                                                          |                                                     | (9,262                                              | )       |          |          |             |          |              |          |             |        |              |       |       |       |   |        | (9,262  | )     
|                                                             | Proceeds from issuance of common stock                                                             |                                                          |                                                     | 262                                                 |         |          |          |             |          |              |          |             |        |              |       |       |       |   |        | 262     |       
|                                                             | Other, net                                                                                         |                                                          |                                                     | 154                                                 |         |          |          | 95           |          |              |          | 300          |        |              |       |       |       |   |        | 549     |       
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |         |          |          |              |          |              |          |              |        |              |       |        |       |   |        |         |       
|                                                             |                                                                                                    |                                                          |                                                     | Net cash (used in) provided by financing activities |         |          | (145,244 | )            |          |              | 110,499  |              |        |              | 300   |        |       |   |       |         |        |        | (34,445 | )
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |         |          |          |              |          |              |          |              |        |              |       |        |       |   |        |         |       
|EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS |                                                                                                    |                                                          |                                                    |                                                     |         |          | 16       |              |          |              |         |              |        |              |      |        |       |   | 16     |        
|NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS         |                                                                                                    |                                                          | (209                                                | )                                                   |         |          | 3,224    |              |          |              | 11,367   |              |        |              |      |        |       |   | 14,382 |        
|CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD             |                                                                                                    |                                                          | 209                                                 |                                                     |         |          | 1,063    |              |          |              | 9,271    |              |        |              |      |        |       |   | 10,543 |        
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |         |          |          |              |          |              |          |              |        |              |       |        |       |   |        |         |       
|CASH AND CASH EQUIVALENTS AT END OF PERIOD                   |                                                                                                    | $                                                        |                                                    |                                                     |         | $        | 4,287    |              |          | $            | 20,638   |              |        | $            |      |        |       | $ | 24,925 |        
|                                                             |                                                                                                    |                                                          |                                                     |                                                     |         |          |          |              |          |              |          |              |        |              |       |        |       |   |        |         |       

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##### Table of Contents






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

Results of Operations

The Company, through its subsidiaries, generates revenues by providing services
to the automotive industry. Allied Automotive Group, Inc. (AAG) is the
largest motor carrier in North America specializing in the transportation of
new automobiles, light trucks and SUVs, for most of the major domestic and
foreign automotive manufacturers.

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

|                                                                                 |                                              |                          |       |                    |      |                   |       |      |       |      |       |      |      |  |       |      |       |  
|-------------------------------------------------------------------------------- | -------------------------------------------- | ------------------------ | ----- | ------------------ | ---- | ----------------- | ----- | ---- | ----- | ---- | ----- | ---- | ---- |  | ----- | ---- | ----- | -
|                                                                                 |                                              |                          |       | Three Months Ended |      | Nine Months Ended
|                                                                                 |                                              |                          |       | September 30       |      | September 30     
|                                                                                 |                                              |                          |       |                    |      |                  
|                                                                                 |                                              |                          |       | 2003               |      | 2002              |       | 2003 |       | 2002
|                                                                                 |                                              |                          |       |                    |      |                   |       |      |       |     
|Revenues                                                                         |                                              |                          | 100.0 | %                  |      |                   | 100.0 | %    |       |      | 100.0 | %    |      |  | 100.0 | %   
|                                                                                 |                                              |                          |       |                    |      |                   |       |      |       |      |       |      |      |  |       |     
|Operating expenses:                                                              |                                              |                          |       |                    |      |                   |       |      |       |      |       |      |      |  |       |     
|                                                                                 | Salaries, wages and fringe benefits          |                          |       | 54.5               |      |                   |       | 55.3 |       |      |       | 54.4 |      |  |       | 54.7 |      
|                                                                                 | Operating supplies and expenses              |                          |       | 15.2               |      |                   |       | 15.6 |       |      |       | 16.1 |      |  |       | 15.1 |      
|                                                                                 | Purchased transportation                     |                          |       | 12.2               |      |                   |       | 11.9 |       |      |       | 11.6 |      |  |       | 10.9 |      
|                                                                                 | Insurance and claims                         |                          |       | 4.2                |      |                   |       | 5.1  |       |      |       | 4.5  |      |  |       | 5.2  |      
|                                                                                 | Operating taxes and licenses                 |                          |       | 3.5                |      |                   |       | 3.6  |       |      |       | 3.6  |      |  |       | 3.7  |      
|                                                                                 | Depreciation and amortization                |                          |       | 5.6                |      |                   |       | 6.2  |       |      |       | 5.4  |      |  |       | 6.0  |      
|                                                                                 | Rents                                        |                          |       | 0.8                |      |                   |       | 0.8  |       |      |       | 0.8  |      |  |       | 0.8  |      
|                                                                                 | Communications and utilities                 |                          |       | 0.9                |      |                   |       | 0.7  |       |      |       | 0.8  |      |  |       | 0.8  |      
|                                                                                 | Other operating expenses                     |                          |       | 1.4                |      |                   |       | 1.3  |       |      |       | 1.3  |      |  |       | 1.1  |      
|                                                                                 | Loss (gain) on sale of operating assets, net |                          |       | 0.1                |      |                   |       | 0.2  |       |      |       | 0.1  |      |  |       | (0.1 | )    
|                                                                                 |                                              |                          |       |                    |      |                   |       |      |       |      |       |      |      |  |       |     
|                                                                                 |                                              | Total operating expenses |       |                    | 98.4 |                   |       |      | 100.7 |      |       |      | 98.6 |  |       |      | (98.2 | )
|                                                                                 |                                              |                          |       |                    |      |                   |       |      |       |      |       |      |      |  |       |     
|Operating income (loss)                                                          |                                              |                          | 1.6   |                    |      |                   | (0.7  | )    |       |      | 1.4   |      |      |  | 1.8   |     
|Other income (expense):                                                          |                                              |                          |       |                    |      |                   |       |      |       |      |       |      |      |  |       |     
|                                                                                 | Interest expense                             |                          |       | (3.8               | )    |                   |       | (3.6 | )     |      |       | (3.5 | )    |  |       | (3.5 | )    
|                                                                                 | Investment income (loss)                     |                          |       | (0.2               | )    |                   |       | 0.1  |       |      |       | 0.5  |      |  |       | 0.2  |      
|                                                                                 | Gain on early extinguishment of debt         |                          |       | 0.0                |      |                   |       | 0.0  |       |      |       | 0.0  |      |  |       | 0.4  |      
|                                                                                 | Foreign exchange gain, net                   |                          |       | 0.0                |      |                   |       | 0.1  |       |      |       | 0.4  |      |  |       | 0.0  |      
|                                                                                 | Other, net                                   |                          |       | 1.0                |      |                   |       | 0.0  |       |      |       | 0.3  |      |  |       | 0.0  |      
|                                                                                 |                                              |                          |       |                    |      |                   |       |      |       |      |       |      |      |  |       |     
|                                                                                 |                                              |                          | (3.0  | )                  |      |                   | (3.4  | )    |       |      | (2.3  | )    |      |  | (2.9  | )   
|Loss before income taxes and cumulative effect
of change in accounting principle |                                              |                          | (1.4  | )                  |      |                   | (4.1  | )    |       |      | (0.9  | )    |      |  | (1.1  | )   
|Income tax benefit                                                               |                                              |                          | 0.4   |                    |      |                   | 1.1   |      |       |      | 0.2   |      |      |  | 0.3   |     
|                                                                                 |                                              |                          |       |                    |      |                   |       |      |       |      |       |      |      |  |       |     
|Loss before cumulative effect of change in
accounting
principle                  |                                              |                          | (1.0  | )                  |      |                   | (3.0  | )    |       |      | (0.7  | )    |      |  | (0.8  | )   
|Cumulative effect of change in accounting
principle, net of tax                  |                                              |                          | 0.0   |                    |      |                   | 0.0   |      |       |      | 0.0   |      |      |  | (0.6  | )   
|                                                                                 |                                              |                          |       |                    |      |                   |       |      |       |      |       |      |      |  |       |     
|Net Loss                                                                         |                                              |                          | (1.0  | )%                 |      |                   | (3.0  | )%   |       |      | (0.7  | )%   |      |  | (1.4  | )%  
|                                                                                 |                                              |                          |       |                    |      |                   |       |      |       |      |       |      |      |  |       |     

Three and Nine Months Ended September 30, 2003 Compared to Three and Nine
Months Ended September 30, 2002

Revenues were $197.1 million in the third quarter of 2003 compared to revenues
of $213.0 million in the third quarter of 2002, a decrease of $15.9 million, or
7.5%. For the nine-month period ended September 30, 2003, revenues were $640.8
million, versus revenues of $665.2 million for the nine-month period ended
September 30, 2002, a decrease of $24.4 million, or 3.7%. The decline in
revenues in the third quarter and for the first nine months of 2003 versus 2002

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was due primarily to a decline in the number of vehicle deliveries, lower
production levels by the automotive manufacturers, as well the Companys
decision to exit non-performing business, including the traffic for
General Motors in Jessup, Maryland. During
the fourth quarter of 2003, the Company will cease delivering a portion of the
business it currently transports from the General Motors Saturn Spring Hill,
Tennessee location. Both pieces of traffic at these locations has
historically generated operating losses
with aggregate annual revenues of $16.6 million.

Vehicle deliveries declined by 6.2% in the first nine months of 2003, while
North American new vehicle production declined by 4.2%. Offsetting the decline
in revenues due to the decrease in vehicle deliveries was an increase in the
revenue generated per vehicle delivered of 6.9% in the third quarter of 2003
and 2.7% for the first nine months of 2003 compared to the same period in 2002.
The increase in revenue per vehicle is due primarily to ancillary revenue in
the US operations related to the model changeovers and new product launches.
These vehicles are held until all launch related issues are resolved. During
this time the Company will shuttle the vehicles to a holding yard and may
shuttle them back to the plant as necessary until the vehicles are cleared for
delivery to the dealerships. Accordingly, the changeovers and new product
launches cause an increase in revenues without a corresponding increase in the
number of vehicles delivered. In addition, revenue per vehicle delivered in
Canada increased due to the higher Canadian dollar exchange rates.

The Company recorded a net loss of $2.0 million in the third quarter of 2003
versus a net loss of $6.5 million in the third quarter of 2002. Results for
the third quarter of 2003 include a gain of approximately $2.0 million related
to the settlement of the Ryder litigation claim discussed in footnote 10. This
amount is included in the statement of operations as other income. Basic and
diluted loss per share in the third quarter of 2003 was $0.23 versus $0.78 in
the third quarter of 2002. For the nine-month period ended September 30, 2003,
the Company experienced a net loss of $4.3 million versus a net loss of $9.6
million for the nine-month period ended September 30, 2002. Results for the
first nine months of 2002 include a $2.8 million pre-tax gain on the early
extinguishment of the Companys subordinated notes and a $4.1 million after-tax
charge ($5.2 million pre-tax) related to the impairment of goodwill at the
Companys Axis Group subsidiary. Basic and diluted loss per share were $0.50
for the nine-month period ended September 30, 2003 versus basic and diluted
loss per share of $1.16 for the nine-month period ended September 30, 2002.

Earnings before interest, taxes, depreciation and amortization, gains and
losses on disposal of assets, gain on the early extinguishment of debt, foreign
exchange gains and losses, investment income and losses, cumulative effect of
accounting changes and other income (Adjusted EBITDA) for the third quarter
of 2003 were $14.3 million compared to $12.1 million of Adjusted EBITDA
reported during the third quarter of 2002. Adjusted EBITDA for the third
quarter of 2003 was adversely affected by decreased vehicle deliveries arising
from original equipment manufacturer (OEM) production
declines in 2003 versus
2002. The decline in revenue was more than offset by the Companys internal
initiatives that continued to gain traction. These initiatives, which include
managements focus to improve quality and safety, led to a decline in incidents
and amounts expensed by $2.6 million for cargo damage and worker injuries as
compared to the same period in 2002.

For the nine-month period ended September 30, 2003 Adjusted EBITDA was $44.3
million versus $52.0 million for the nine-month period ended September 30,
2002. During the first nine months of 2003, Adjusted EBITDA was adversely affected by a decrease in vehicle
deliveries and increased fuel and wages costs, which were partially offset by the
positive impact of the Companys internal initiatives to reduce costs related
to insurance and claims expense and improved operating efficiencies.

Adjusted EBITDA is presented because management believes it provides useful
information to investors regarding the Companys ability to generate cash flows
that can be used to service debt and provide for capital expenditures.
Adjusted EBITDA is also a component of certain financial covenants in the
Companys debt agreements. The Companys net loss is the closest measure in
the Companys financial statements prepared in accordance with Generally
Accepted Accounting Principles (GAAP), in terms of comparability to Adjusted
EBITDA. As such, a reconciliation of Adjusted EBITDA to the net loss for the
quarters and nine months ended September 30, 2003 and 2002 are provided below.
Because Adjusted EBITDA is not a measure determined in accordance with GAAP and
is thus susceptible to varying calculations, Adjusted EBITDA as presented may
not be comparable to other similarly titled measures used by other companies.

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The following table reconciles Adjusted EBITDA to Net loss for the three and
nine months ended September 30, 2003 and 2002 (in thousands):

|                                                                |  |    |                    |   |                   |    |        |   |      |    |        |   |  |    |        |   | 
|--------------------------------------------------------------- |  | -- | ------------------ | - | ----------------- | -- | ------ | - | ---- | -- | ------ | - |  | -- | ------ | - | 
|                                                                |  |    | Three Months Ended |   | Nine Months Ended
|                                                                |  |    | September 30,      |   | September 30,    
|                                                                |  |    |                    |   |                  
|                                                                |  |    | 2003               |   | 2002              |    | 2003   |   | 2002
|                                                                |  |    |                    |   |                   |    |        |   |     
|Reconciliation of Net loss to Adjusted EBITDA:                  |  |    |                    |   |                   |    |        |   |      |    |        |   |  |    |        |  
|Net loss                                                        |  | ($ | 1,975              | ) |                   | ($ | 6,482  | ) |      | ($ | 4,267  | ) |  | ($ | 9,621  | )
|Income tax benefit                                              |  |    | (728               | ) |                   |    | (2,226 | ) |      |    | (1,573 | ) |  |    | (1,819 | )
|Interest expense                                                |  |    | 7,366              |   |                   |    | 7,611  |   |      |    | 22,120 |   |  |    | 23,343 |  
|Investment losses (income)                                      |  |    | 398                |   |                   |    | (203   | ) |      |    | (2,935 | ) |  |    | (1,090 | )
|Gain on early extinguishment of debt                            |  |    |                   |   |                   |    |       |   |      |    |       |   |  |    | (2,750 | )
|Foreign exchange losses (gains), net                            |  |    | 62                 |   |                   |    | (124   | ) |      |    | (2,386 | ) |  |    | (157   | )
|Other, net                                                      |  |    | (1,976             | ) |                   |    | 57     |   |      |    | (1,976 | ) |  |    | 264    |  
|Cumulative effect of change in accounting
principle, net of tax |  |    |                   |   |                   |    |       |   |      |    |       |   |  |    | 4,092  |  
|Loss (gain) on disposal of operating assets                     |  |    | 153                |   |                   |    | 367    |   |      |    | 612    |   |  |    | (347   | )
|Depreciation and Amortization                                   |  |    | 11,011             |   |                   |    | 13,142 |   |      |    | 34,688 |   |  |    | 40,087 |  
|                                                                |  |    |                    |   |                   |    |        |   |      |    |        |   |  |    |        |  
|Adjusted EBITDA                                                 |  | $  | 14,311             |   |                   | $  | 12,142 |   |      | $  | 44,283 |   |  | $  | 52,002 |  
|                                                                |  |    |                    |   |                   |    |        |   |      |    |        |   |  |    |        |  

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

Salaries, wages and fringe benefits decreased from 55.3% of revenues in the
third quarter of 2002 to 54.5% of revenues in the third quarter of 2003, and
decreased from 54.7% of revenues for the nine-month period ended September 30,
2002 to 54.4% of revenues for the nine-month period ended September 30, 2003.
The decrease is due primarily to increased driver productivity and a reduction
in workers compensation expense, which are a result of the Companys ongoing
initiatives to improve productivity and to reduce worker injuries. The benefit
of the internal initiatives more than offset the impact of Teamster wage and
benefit inflation.

During the second quarter of 2003, the Company began operating under a new
five-year agreement with the International Brotherhood of Teamsters
(Teamsters) in the United States. The agreement was effective beginning June
1, 2003. The new agreement with the Teamsters in the United States covers
approximately 70% of the Companys employees. Economic provisions of the new
agreement include a wage freeze for the first two years of the agreement and
wage increases of approximately 2.0% on June 1, 2005, 2.0% on June 1, 2006, and
an additional 2.5% on June 1, 2007. The agreement provides for increases in
health, welfare and pension contributions by the Company during each year of
the agreement. The economic provisions of the contract are anticipated to
increase the Companys U.S. Teamster labor costs approximately 1.1% in year one
of the agreement, 1.3% in year two, 2.5% in year three, 2.5% in year four, and
3.0% in year five of the agreement.

During March 2003, the Company renegotiated a contract that expired October 31,
2002 with the Teamsters Union in Eastern Canada. The employees governed by
this contract represent approximately 70% of the Companys total bargaining
unit employees in Canada. The employees in Eastern Canada agreed to a
three-year contract with a wage freeze in the first two years and increases in
the third year. Health and welfare costs were frozen for the entire three-year
agreement and there were pension increases each year of the new contract. The
additional pension contributions will increase costs approximately 0.2% in year
one of the agreement and approximately 0.6% in year two of the agreement. The
wage and pension increases in year three of the agreement will increase costs
approximately 3.2%.

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During the third quarter of 2003, the Company
granted 250 shares of the Companys common stock to all
non-bargaining employees. In order to earn the stock, employees were required
to take a one-week furlough and remain working with the Company for one year
from the date of grant. The Company recorded a charge to deferred compensation
of approximately $660,000 as a result of the grant, of which $110,000
was recorded as expense during the third quarter of 2003.

Operating supplies and expenses decreased from 15.6% of revenues in the third
quarter of 2002 to 15.2% of revenues in the third quarter of 2003, and
increased from 15.1% of revenues for the nine-month period ended September 30,
2002 to 16.1% of revenues for the nine-month period ended September 30, 2003.
The increase for the nine-month period was due primarily to an increase in fuel
costs experienced in 2003. Fuel costs increased by an average of 19% per
gallon, resulting in higher fuel expense of $5.1 million in the first nine
months of 2003 versus the first nine months of 2002. The Company has
negotiated fuel surcharges with customers representing approximately 64.0% of
the Companys customers, which enables it to pass on fuel costs to such
customers. However, the customer fuel surcharges typically reset at the
beginning of each quarter based on the fuel prices from the previous quarter.
Therefore, there is a one-quarter lag between the time fuel prices change and
the adjustment to the fuel surcharge. Fuel surcharges are recorded as a
component of revenue.

Purchased transportation increased from 11.9% of revenues in the third quarter
of 2002 to 12.2% of revenues in the third quarter of 2003, and increased from
10.9% of revenues for the nine-month period ended September 30, 2002 to 11.6%
of revenues for the nine-month period ended September 30, 2003. The increase
was due primarily to a shift in the mix of owner-operators versus company
drivers and an increase in business at locations where owner-operators are
utilized for vehicle deliveries. All costs for owner-operators are included in
purchased transportation expense.

Insurance and claims expense decreased from 5.1% of revenues in the third
quarter of 2002 to 4.2% of revenues in the third quarter of 2003, and decreased
from 5.2% of revenues for the nine-month period ended September 30, 2002 to
4.5% of revenues for the nine-month period ended September 30, 2003. The
decrease was due primarily to lower cargo claims experienced on shipped
vehicles, resulting from the Companys ongoing initiatives to improve quality
and safety measures, as well as improve claims processing to eliminate payment
of claims not caused by the Company.

Depreciation and amortization decreased from 6.2% of revenues in the third
quarter of 2002 to 5.6% of revenues in the third quarter of 2003, and decreased
from 6.0% of revenues for the nine-month period ended September 30, 2002 to
5.4% of revenues for the nine-month period ended September 30, 2003. The
decrease is due primarily to the disposal of assets in 2002 with a net book
value of approximately $5.1 million, combined with capital spending that was
lower than depreciation and amortization expense in calendar year 2002 as well
as for the first nine months of 2003.

During 2002, the Company performed an analysis of certain fleet equipment that
was idled. The assets were evaluated in order to determine if they were
candidates for the fleet remanufacturing and engine replacement program.
Approximately 1,000 tractors or trailers were not considered viable candidates
for the program and a decision was made that they would not be placed back into
operations. As a result, depreciation was accelerated to the reduced useful
life resulting in an additional charge of $2.1 million to depreciation expense
in the fourth quarter of 2002. During the second quarter of 2003, the Company
began disposal of these assets and anticipates substantial completion by the end of 2003.

The Company continues its tractor and trailer (Rig) remanufacturing program
to remanufacture existing owned Rigs rather than purchasing new Rigs.
Remanufacturing existing Rigs requires less capital spending than purchasing
new Rigs. During the third quarter of 2003, the Company remanufactured
approximately 38 Rigs and replaced approximately 36 engines in its tractors.
The total remanufactured Rigs and replaced engines during the life of the
program are approximately 478 and 536, respectively. During the first nine
months of 2003 the Company spent $8.9 million on Rigs as a part of the
remanufacturing program. Total capital expenditures for the first
nine months of 2003 were $11.5 million. The Company expects to spend between $15.0 and $20.0
million on capital expenditures during calendar year 2003 related primarily to
the fleet remanufacturing program.

Other operating expenses increased from 1.3% of revenues in the third quarter
of 2002 to 1.4% of revenues in the third quarter of 2003, and increased from
1.1% of revenues for the nine-month period ended September 30, 2002 to 1.3% of

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revenues for the nine-month period ended September 30, 2003. The increase was
due primarily to additional expenses related to the negotiation of the new
agreement with the Teamsters that were incurred mainly during the second and
third quarters of 2003 and to the professional fees incurred to settle
litigation during the third quarter. The settlement of this litigation is
described in more detail in Part II, Item 1. Legal Proceedings.

Investment income decreased from $0.2 million in the third quarter of 2002 to a
loss of $0.4 million in the third quarter of 2003, and increased from $1.1
million for the nine-month period ended September 30, 2002 to $2.9 million for
the nine-month period ended September 30, 2003, which included $1.8 million
interest and dividend income, $2.6 million realized gains and $1.5 million
unrealized losses. The net increase for the nine-month period was due to an
increase in value on marketable debt and equity securities held by the
Companys captive insurance company. The reduction in investment income during
the third quarter of 2003 was due to a rise in interest rates that reduced the
value of the Companys marketable debt securities as well as the conversion of
marketable debt and equity securities to cash during July 2003.

Foreign exchange gains, net decreased from $0.1 million in the third quarter of
2002 to a loss of $62,000 in the third quarter of 2003, and increased from $0.2
million for the nine-month period ended September 30, 2002 to $2.4 million for
the nine-month period ended September 30, 2003. The increase for the nine-month
period was due primarily to favorable exchange rate changes related to the
Companys operating subsidiary in Canada that resulted from a strengthening of
the Canadian dollar in relation to the
U.S. dollar, which did not continue during the third quarter of 2003. The
Canadian dollar has increased in value by approximately 16%, as compared to the
U.S. dollar, since the beginning of 2003.

Financial Condition, Liquidity and Capital Resources

The Companys sources of liquidity are funds provided by operations and
borrowings under its revolving credit facility with a syndicate of lenders. The
Companys primary liquidity needs are for the payment of operating expenses,
the refurbishment and maintenance of Rigs and terminal facilities, and the
payment of interest and principal associated with long-term debt.

Net cash provided by operating activities totaled $81.6 million for the
nine-month period ended September 30, 2003 versus $55.1 million for the
nine-month period ended September 30, 2002. The increase in cash provided by
operations was due primarily to the movement of the Companys captive insurance
companys short-term investments to cash and cash equivalents in July 2003.
The $60.7 million of cash provided by this change was partly offset by reduced
operating cash flows, increased funding of the Companys captive insurance
company, as well as changes in working capital. During the three month period
ended September 30, 2003, the Companys captive insurance company converted
approximately $60.7 million of marketable debt and equity securities to cash
and cash equivalents. The change in short-term investments resulted from
increased collateral requirements due to a change in insurance carriers. The
Company is aggressively pursuing alternatives to resolve the collateral
requirements. As a result, the investments held by the captive
insurance company have
been converted into cash and cash equivalents that are highly liquid, which
will reduce the amount of assets necessary to secure the lines of credit.
The increase in cash provided by the conversion of the short-term investments
was partially offset by a decrease in cash generated from accounts receivable
as compared to the prior period as well as an increase in cash used to settle
accounts payable and accrued liabilities. During 2002, the Company reduced its
accounts receivable outstanding with customers by $13.8 million. As of
December 31, 2001 the average days outstanding in accounts receivable were
31.2, which was reduced to 23.2 and 19.8 at December 31, 2002 and September 30,
2003 respectively.

Net cash used in investing activities totaled $11.3 million for the nine-month
period ended September 30, 2003 versus $6.3 million for the nine-month period
ended September 30, 2002. Cash paid to purchase capital items, which are
related mainly to the fleet remanufacturing program, decreased by $1.8 million
while cash proceeds from the sale of assets and joint ventures decreased by
$5.4 million. The Company did not sell any significant assets in the first
nine months of 2003. The Company reduced the number of Rigs remanufactured
during the third quarter of 2003 primarily due to cutbacks in production levels
by the OEMs. The Company will continue to evaluate the

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progression of the
remanufacturing program throughout 2003. Capital expenditures for fiscal year
2003 are expected to be in the range of $15.0 million to $20.0 million related
mainly to the fleet remanufacturing program.

Net cash provided by financing activities totaled $2.0 million for the
nine-month period ended September 30, 2003 versus net cash used in financing
activities of $34.4 million for the nine-month period ended September 30, 2002.
Debt repayments were lower in 2003 due to reduced operating cash flows,
increased working capital requirements, lower cash proceeds from asset sales,
and the increase in funding requirements of the Companys captive insurance
company.

On February 25, 2002, the Company entered into a new credit facility which
includes certain term loans (the Term Loans) and a revolving credit facility.
Proceeds from the Term Loans were used in February 2002 to repurchase $40
million of senior subordinated notes for $37.25 million. In conjunction with
the extinguishment of these senior subordinated notes, the Company recognized a
pre-tax gain of $2.75 million during the first quarter of 2002.

The Company amended the facility in September 2003 (the Credit Facility and
amendments thereto are collectively referred to as the Credit Facility). The
Credit Facility as amended in September 2003 provides the Company with a $90.0
million revolving credit facility (the Revolver) and a $100 million term loan
(the New Term Loan). At its inception, the Credit Facility consisted of a
$120 million revolving credit facility and four Term Loans that totaled $82.75
million. As part of the amendment, the maturity date of the Credit Facility
was extended to September 2007.

The interest rate for the Revolver is based upon the prime rate plus 1.5%, or
LIBOR plus 4.5%, at managements discretion, with a minimum interest rate of
6.5%. The Credit Facility as amended provides that the New Term Loan bear
interest between 8.5% and 11.5% to be determined solely on the Companys
leverage as defined in the agreement. Prior to the amendment, the interest
rate on the Term Loans was based solely on a spread over the prime rate. Annual
commitment fees are due on the undrawn portion of the commitment.

At September 30, 2003, $4.4 million was outstanding under the Revolver, and
approximately $24.3 million was committed under letters of credit. The Company
had approximately $58.2 million available under the Revolver as of September
30, 2003.

Borrowings under the Companys Credit Facility are secured by a first priority
security interest on assets of the Company and certain of its subsidiaries,
including a pledge of stock of certain subsidiaries. In addition, certain
subsidiaries of the Company jointly and severally guarantee the obligations of
the Company under the Credit Facility.

The Credit Facility agreement sets forth a number of affirmative, negative and
financial covenants binding on the Company. The negative covenants limit the
ability of the Company to, among other things, incur debt, incur liens, make
investments, sell assets, or declare or pay any dividends on its capital stock.
The financial covenants require the Company to maintain minimum consolidated
earnings before interest, taxes, depreciation and amortization, and gains and
losses on disposal of operating assets, and also include a maximum leverage
ratio. The minimum consolidated EBITDA, as defined in the Credit Facility, is
$50.0 million and is tested monthly based on the prior rolling twelve-month
period.

Future maturities of long-term debt are as follows at September 30, 2003 (in
thousands):

|                                      |  |   |         | 
|------------------------------------- |  | - | ------- | 
|October 1, 2003 to September 30, 2004 |  | $ | 17,854  | 
|October 1, 2004 to September 30, 2005 |  |   | 13,500  | 
|October 1, 2005 to September 30, 2006 |  |   | 13,500  | 
|October 1, 2006 to September 30, 2007 |  |   | 13,500  | 
|October 1, 2007                       |  |   | 195,876 | 
|                                      |  |   |         | 
|                                      |  | $ | 254,230 | 
|                                      |  |   |         | 

The Company has certain long-term
contractual obligations, including operating lease obligations and
purchase and service contract commitments that are not required to be
recorded in the Company's consolidated balance sheet. The Company has
no material changes to this disclosure as made in its Annual Report
on Form 10-K for the year ended December 31, 2002.

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Quantitative and Qualitative Disclosures about Market Risk

Disclosures About Market Risks

The market risk inherent in the Companys market risk sensitive instruments and
positions is the potential loss arising from adverse changes in short-term
investment prices, interest rates, fuel prices, and foreign currency exchange
rates.

Investments

The Company does not use derivative financial instruments in its investment
portfolio. The Company places its investments in instruments that meet high
credit quality standards, as specified in the Companys investment policy
guidelines. The policy also limits the amount of credit exposure to any one
issue, issuer, and type of instrument.

Interest Rates

The Company primarily issues long-term debt obligations to support general
corporate purposes including capital expenditures and working capital needs.
The majority of the Companys long-term debt obligations bear a fixed rate of
interest. A one-percentage point increase in interest rates affecting the
Companys floating rate long-term debt would reduce pre-tax income by $1.5
million over the next fiscal year. A one-percentage point change in interest
rates would not have a material effect on the fair value of the Companys fixed
rate long-term debt.

Substantial Leverage

The Company has consolidated indebtedness, which is substantial in relation to
its stockholders equity. As of September 30, 2003, the Company had total
long-term debt of approximately $254.2 million (excluding
approximately $121.2
million of trade payables and other accrued liabilities) and stockholders
equity of approximately $11.3 million. In addition, the Company has additional
capacity for borrowings available under its revolving credit facility, which is
discussed in the Financial Condition, Liquidity and Capital Resources section
of Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operationsincluded in this Quarterly Report on Form 10-Q. The
Companys leveraged financial position exposes it to the risk of increased
interest rates, may impede its ability to obtain financing in the future for
working capital, capital expenditures and general corporate purposes, and may
make the Company more vulnerable to economic downturns and work stoppages, and
limit its ability to withstand competitive pressures.

The Companys debt instruments contain a number of affirmative, negative, and
financial covenants, which limit the ability of the Company to, among other
things, incur debt, incur liens, make investments, make capital expenditures,
make dividend or other distributions or enter into a merger or consolidation
transaction. As of September 30, 2003, the Company was in compliance with the
terms of its various debt covenants. There can be no assurance, however, that
the Company will be able to comply with its debt covenants in the future or
that, if it fails to do so, it will be able to obtain amendments to or waivers
of such covenants on commercially reasonable terms, if at all.

The Company will need to use a large portion of its future earnings to pay
principal and interest on its substantial debt obligations, which will reduce
the amount of money available for use in its operations, capital reinvestment,
or for responding to potential business opportunities as they arise. The
ability of the Company to generate the cash necessary to service its debt is
subject to a number of external factors beyond its control, and there can be no
assurance that the Company will be able to generate sufficient cash through its
operations to enable it to meet its obligations. If the Company does not
generate enough cash to enable it to meet its debt obligations, it may be

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required to take actions such as reducing or delaying capital expenditures,
selling assets, restructuring or financing its debt or seeking additional
equity capital. There can be no assurance that any of these actions could be
effected
on commercially reasonable terms, if at all, and the terms of existing or
future indebtedness may restrict the Company from adopting any of these
alternatives.

Any failure of the Company to comply with the covenants contained in its debt
instruments, if not waived, or to adequately service its debt obligations,
could result in a default under its debt instruments. If a default occurs under
any of the Companys debt instruments, the lenders thereunder may elect to
declare all borrowings outstanding, together with interest and other fees, to
be immediately due and payable. Borrowings under the Companys credit facility
are collateralized with the assets of the Company and certain of its
subsidiaries. If the Company were unable to repay any borrowing under its
credit facility when due, the lenders thereunder would have the right to
proceed against the collateral granted to them to secure the debt. Any default
under the Companys debt instruments, particularly any default that resulted in
acceleration of indebtedness or foreclosure on collateral, would have a
material adverse effect on the Company.

Labor Matters

Employees of the Companys subsidiary, Allied Systems, which represents
approximately 70% of the Companys workforce, are represented by the
International Brotherhood of Teamsters Union in the United States. A new
collective bargaining agreement, which covers the Companys employees
represented by the Teamsters, commenced on June 1, 2003 and will expire on May
31, 2008.

Economic provisions of the agreement include a wage freeze for the first two
years of the agreement and wage increases of approximately 2% on June 1, 2005,
2% on June 1, 2006, and an additional 2.5% on June 1, 2007. The agreement
provides for increases in health, welfare and pension contributions by the
Company during each year of the agreement. The economic provisions of the
contract will increase the Companys U.S. Teamster labor costs approximately
1.1% in year one of the agreement, 1.3% in year two, 2.5% in year three, 2.5%
in year four, and 3.0% in year five of the agreement. In addition to the
economic provisions, the agreement contains key changes in work-rule provisions
that provide increased flexibility in the Companys operations in order to meet
evolving client expectations and potentially improve the Companys ability to
compete for new business.

Fuel Prices

Allied Automotive Group is dependent on diesel fuel to operate its fleet of
Rigs. Diesel fuel prices are subject to fluctuations due to unpredictable
factors such as weather, government policies, and changes in global demand and
global production. To reduce price risk caused by market fluctuations, Allied
Automotive Group periodically purchases fuel in advance of consumption. As of
September 30, 2003 the Company had no fuel purchase commitments outstanding. A
10% increase in diesel fuel prices would reduce pre-tax income by $4.5 million
over the next fiscal year assuming levels of fuel consumption and pricing in
the remainder of 2003 is consistent with the first nine months of 2003, without
taking into account any positive impact arising from fuel surcharges.

Competition

The automotive transportation industry is highly competitive, as Allied
Automotive Group currently competes with other motor carriers of varying sizes,
as well as with railroads. Allied Automotive Group also competes with non-union
motor carriers and broker operations that sub-contract carhaul transportation
services to low-cost independent owner-operators. The development of new
methods of hauling vehicles could also lead to competition.

The carhaul business is labor intensive for union carhaul companies. Wages and
benefits represented approximately $107.4 million of the Companys consolidated
operating expenses for the quarter ended September 30, 2003. There

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has been an
increase in the number of carhaul companies that utilize non-union labor, and
the market share represented by such companies has increased. Carhaul companies
that utilize non-union labor operate at a
significant cost advantage as compared to Allied Automotive Group and other
union carhaul companies due to lower labor costs, primarily as a result of
lower benefit and pension costs. Non-union competitors also operate without
work rules which apply to Allied Automotive Group and other union companies,
which provide non-union companies with a competitive advantage. Non-union
companies, which operate at a significant cost advantage to Allied Automotive
Group, may be able to provide delivery services at a cost to customers that are
less than the cost of Allied Automotive Groups services. Railroads, which
specialize in long-haul transportation, may be able to provide delivery
services at a cost to customers that are less than the long-haul delivery cost
of Allied Automotive Groups services.

Self Insurance Claims

Each of the Companys operating subsidiaries is responsible for defining risks
and securing appropriate insurance programs and coverage at cost effective
rates for the Company. The Company records the insurance program premiums and
the estimated cost of the uninsured portion of loss claims as insurance
expense. The amount recorded for estimated loss claims is based on managements
evaluation of the nature and severity of claims and actuarially determined
estimates of future claim development based on historical trends. The Company
formed Haul Insurance Limited in December 1995 as a captive insurance
subsidiary to provide reinsurance coverage to its licensed insurance carriers
for certain types of losses within retentions (as noted below), for non-self
insured workers compensation, automobile liability and general liability, as
indicated above. Other coverages are provided by non-related primary and
reinsurance companies.

For the period of January 1, 2003 through September 30, 2003, in the United
States, AAG retains up to $650,000 of liability for each claim for workers
compensation and up to $500,000 of liability for automobile and general
liability, including personal injury and property damage claims. In addition to
the $500,000 per occurrence deductible for automobile liability, there is a
$1.5 million aggregate deductible for those claims which exceed the $500,000
per occurrence deductible subject to a $1.0 million per claim limit. AAG also
has a $1.0 million interaggregate limit for losses from $1.0 million to $2.0
million, and an additional $3.0 million aggregate limit for losses from $2.0
million to $5.0 million. AAG also retains up to $250,000 of liability for each
cargo damage claim and physical damage claim to its owned and leased
automobiles and tractor trailer units. In Canada, AAG retains up to CDN
$500,000 of liability for each claim for personal injury, property damage or
cargo damage. Also, in Canada, there is a CDN $500,000 aggregate limit for
losses above CDN $500,000.

Effective October 1, 2003, AAG changed its retention limits for automobile
claims. The $3.0 million aggregate limit for losses exceeding $2.0 million
will increase to $4.0 million. These new retention limits are in place for the
fourth quarter 2003. Effective January 1, 2004, AAG will retain up to $1.0
million of liability for automobile claims. In addition to the $1.0 million
deductible, there will be a $7.0 million aggregate deductible for those claims
which exceed $1.0 million.

If Allied Automotive Group were to experience a material increase in the
frequency or severity of accidents, workers compensation claims, stolen
equipment or other loss events or unfavorable developments in existing claims
over those anticipated, the Companys operating results could be adversely
affected. The insurance market is contracting and it is becoming increasingly
more difficult to obtain insurance coverage. While the Company currently has
insurance coverage, there can be no assurance that the Company will be able to
obtain insurance coverage in the future.

Dependence on Major Customers

Allied Automotive Groups business is highly dependent upon General Motors,
Ford, DaimlerChrysler, Toyota and Honda, its largest customers. The Company
operates under written contracts with General Motors, UPS Autogistics, Inc. on
behalf of Ford, DaimlerChrysler, Toyota and Honda. The contracts with UPS
Autogistics, DaimlerChrysler and Toyota can be terminated by location for any
reason or no reason based on 60 to 150 days

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notice. Although Allied Automotive
Group believes that its relationships with these customers is mutually
satisfactory, there can be no assurance that these relationships will not be
terminated in whole or in part in the
future. Furthermore, automotive manufacturers are relying increasingly on
fourth party logistics companies and re-engineering vehicle delivery practices,
which could result in a reduction of services provided by the Company for some
or all of its major customers. A significant reduction in the production
levels, plant closings or the imposition of vendor price reductions by these
manufacturers, or the loss of General Motors, UPS Autogistics, DaimlerChrysler,
Toyota or Honda as a customer, or a significant reduction in the services
provided for any of these customers by Allied Automotive Group would have a
material adverse effect upon the Company. General Motors, DaimlerChrysler and
Ford, in particular, have publicly announced plans to significantly reduce
vendor costs including those costs associated with logistics services.

Foreign Currency Exchange Rates

Although the majority of the Companys operations are in the United States, the
Company does have foreign subsidiaries (primarily Canada). The net investment
in foreign subsidiaries translated into dollars using month-end exchange rates
at September 30, 2003 is $75.4 million. The potential loss in fair value
impacting other comprehensive income resulting from a hypothetical 10% change
in quoted foreign currency exchange rates amounts to $7.5 million. At September
30, 2003 a payable balance of $14.2 million related to intercompany
transactions was outstanding on the Companys Canadian subsidiary. The
potential loss from a hypothetical 10% change in quoted foreign currency
exchange rates related to this balance amounts to $1.4 million as of September
30, 2003. The Company does not use derivative financial instruments to hedge
its exposure to changes in foreign currency exchange rates.

Revenue Variability

The Companys revenues are variable and can be impacted by sudden unexpected
changes in OEM production levels. In addition, the Companys revenues are
seasonal, with the second and fourth quarters generally experiencing higher
revenues than the first and third quarters. The volume of vehicles shipped
during the second and fourth quarters is generally higher due to the
introduction of new models, which are shipped to dealers during those periods
and the higher spring and early summer sales of automobiles and light trucks.
During the first and third quarters, vehicle shipments typically decline due to
lower sales volume during those periods and scheduled plant shut downs. Except
for the impact of rising fuel costs discussed herein, inflation has not
significantly affected the Companys results of operations. Automobile
manufacturers have made production cutbacks during 2003. As a result, the
Company may experience a decline in vehicle deliveries during the fourth
quarter.

Dependence on Automotive Industry

The automotive transportation industry is dependent upon the volume of new
automobiles and light trucks manufactured, imported and sold. The automotive
industry is highly cyclical, and the demand for new automobiles and light
trucks is directly affected by such external factors as general economic
conditions in the United States, unemployment, consumer confidence, federal
policies, the possibility of war, terrorist activities, and the availability of
affordable new car financing. As a result, the Companys results of operations
are adversely affected by cyclical downturns in the general economy or in the
automotive industry and by consumer preferences in purchasing new automobiles,
SUVs, and light trucks. Inventories of new vehicles in the second quarter of
2003 were significantly higher than the 2002 levels and sales of new vehicles
in the second quarter of 2003 were lower than the 2002 levels. As a result,
automotive manufacturers reduced new vehicle production in the third quarter of
2003 as compared to the third quarter of 2002. A significant decline in the
volume of automobiles, SUVs, and light trucks manufactured as well as sold in
North America, or a material change in the overall mix of vehicles
manufactured, could similarly have a material adverse effect on the Company.

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Contractual Obligations

The Company has certain long-term contractual obligations, including operating
lease obligations and purchase and service contract commitments that are not
required to be recorded in the Companys consolidated balance sheet.
The Company has no material changes to this disclosure as made in its Annual
Report on Form 10-K for the year ended December 31, 2002.

Dependence on Key Personnel

The success of the Company is dependent upon its senior management team, as
well as its ability to attract and retain qualified personnel. The Companys
credit facility provides that the facility may be terminated in the event Hugh
E. Sawyer ceases to be involved in the day-to-day operation of the Company,
unless a successor reasonably acceptable to the lenders is appointed within 90
days of his cessation of involvement with the Company. There is no assurance
that the Company will be able to retain its existing senior management or to
attract additional qualified personnel.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make decisions based upon estimates, assumptions, and factors it
considers as relevant to the circumstances. Such decisions include the
selection of applicable accounting principles and the use of judgment in their
application, the results of which impact reported amounts and disclosures.
Changes in future economic conditions or other business circumstances may
affect the outcomes of managements estimates and assumptions. Accordingly,
actual results could differ from those anticipated.

The Companys critical accounting policies include the following:

CLAIMS AND INSURANCE RESERVES  Reserves for self-insured workers
compensation, automobile, and general liability losses are subject to
managements evaluation of the nature and severity of claims and actuarially
determined estimates of future claims development based on historical
trends adjusted for current industry trends.
The Company receives third-party actuarial valuations to assist in the
determination of its claims and insurance reserves. The actuarial estimates for
self-insured workers compensation and automobile liability are discounted
using managements estimate of weighted risk free interest rates for each claim
year to their present values. The claims and insurance reserves are adjusted
periodically as such claims mature to reflect changes in actuarial estimates
based on actual experience.

ACCOUNTS RECEIVABLE VALUATION RESERVES  Substantially all revenue is derived
from transporting new automobiles and light trucks from manufacturing plants,
ports, auctions, and railway distribution points to automobile dealerships.
Revenue is recorded when the vehicles are delivered to the dealerships. The
Company makes significant estimates to determine the collectibility of its
accounts receivable on the balance sheet. Estimates include assessments of the
potential for customer billing adjustments based on the timing of delivery, the
accuracy of pricing, as well as evaluation of the historical aging of customer
accounts. In addition, estimates include periodic evaluations of the credit
worthiness of customers including the impact of market and economic conditions
on their viability to satisfy amounts owed to the Company.

ACCOUNTING FOR INCOME TAXES  As part of the process of preparing the Companys
consolidated financial statements the Company is required to estimate income
taxes in each of the jurisdictions in which the Company operates. This process
involves estimating actual current tax exposure, together with assessing
temporary differences resulting from differing treatment of items, such as
depreciation expense, for tax and accounting purposes. These differences
result in deferred tax assets and liabilities, which are included within the
Companys consolidated balance sheet. The Company must then assess the
likelihood that the deferred tax assets will be recovered from future taxable
income and to the extent the Company believes that recovery is not likely, the
Company must establish a valuation allowance. To the extent the Company
establishes a valuation allowance or increases this allowance in a period, the
Company must include an expense within the tax provision in the statements of
operations.

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Significant management judgment is required in determining the Companys
provision for income taxes, deferred tax assets and liabilities and any
valuation allowance recorded against the net deferred tax assets. The net
deferred tax asset as of September 30, 2003 was $12.7 million net of a
valuation allowance of $7.1 million. The Company has recorded a valuation
allowance of $7.1 million as of September 30, 2003 due to uncertainties related
to the Companys ability to utilize some of the deferred tax assets, primarily
consisting of certain capital losses carried forward and foreign tax credits,
before they expire. The valuation allowance is based on managements estimate
of taxable income by jurisdiction in which the Company operates and the period
over which the deferred tax assets will be recoverable. In the event that
actual results differ from these estimates or the Company adjusts these
estimates in future periods, the Company may need to establish an additional
valuation allowance, which could materially impact the financial position and
results of operations.

PROPERTY AND EQUIPMENT   The Company operates approximately 3,800
company-owned Rigs, revenue equipment, in connection with its business.
Property and equipment, including revenue equipment, are stated at cost and
depreciated using the straight-line method over the estimated useful life down
to estimated salvage value. The actual life, if different than estimated, could
have an impact on depreciation expense in the Companys consolidated statements
of operations.

GOODWILL  Pursuant to SFAS 142, goodwill is evaluated annually for impairment,
or on an interim basis if an event occurs or circumstances change that would
reduce the fair value of goodwill below its carrying value. The fair value of
goodwill is derived by using a discounted cash flow analysis. This analysis
involves estimates and assumptions by management regarding future revenue
streams and expenses. Changes to these assumptions and estimates could have a
material effect on the carrying value of goodwill and result in an impairment
charge in the Companys consolidated statements of operations. During 2003 the
Companys goodwill increased by approximately $3.8 million. The increase was
due primarily to favorable exchange rate changes related to the Companys
operating subsidiary in Canada that resulted from a strengthening of the
Canadian dollar in relation to the U.S. dollar that continued during the third
quarter of 2003. The Canadian dollar increased in value by
approximately 16%,
as compared to the U.S. dollar since the beginning of 2003.

CAUTIONARY NOTICE REGARDING
FORWARD-LOOKING STATEMENTS This Quarterly Report
on Form 10-Q contains, and from time to time the Company and its officers,
directors, or employees may make other forward-looking statements, including
statements regarding, among other items, (i) the Companys strategy, intentions
or expectations, (ii) general industry trends, competitive conditions and
customer preferences, (iii) the Companys management information systems, (iv)
the Companys remanufacturing program and the disposal of certain tractor or
trailers, (v) the Companys efforts to reduce costs, (vi) the adequacy of the
Companys sources of cash to finance its current and future operations, (vii)
the effects of the new Teamster agreements in the U.S. and in Canada, (viii)
the capital expenditures of the Company in 2003, (ix) the ability of the
Company to comply with the financial covenants set forth in the Credit
Facility, and (x) resolution of litigation and renegotiation of split-dollar
life insurance agreements without material adverse effect on the Company. This
notice is intended to take advantage of the safe harbor provided by the
Private Securities Litigation Reform Act of 1995 with respect to such
forward-looking statements. Without limiting the generality of the foregoing,
the words believe, anticipate, seek, expect, estimate, intend,
plan, and similar expressions are intended to identify such forward-looking
statements. These forward-looking statements involve a number of risks and
uncertainties. Among others, factors that could cause actual results to differ
materially from historical results or results expressed or implied by such
forward-looking statements are the following: economic recessions or downturns
in new vehicle production or sales; war in the Middle East; increases in the
cost and availability of fuel; the highly competitive nature of the automotive
distribution industry; price competition with non-union carriers; dependence on
the automotive industry; loss or reduction of revenues generated by the
Companys major customers or the loss of any such customers; the variability of
OEM production and seasonality of the automotive distribution industry;
potential plant closings by the OEMs; the Companys highly leveraged financial
position; labor disputes involving the Company or its significant customers;
the dependence on key personnel who have been hired or retained by the Company;
the availability of strategic acquisitions or joint venture partners; increased
frequency and severity of

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work related accidents and workers compensation
claims; availability of appropriate insurance coverages;
increased expenses due to layoffs of employees; changes in regulatory
requirements which are applicable to the Companys business; changes in vehicle
sizes and weights which may adversely impact vehicle deliveries per load; risks
associated with doing business in foreign countries; and other risk factors set
forth from time to time in the Companys Securities and Exchange Commission
reports, including but not limited to, this Quarterly Report on Form 10-Q and
the Companys Annual Report on Form 10-K for the year ended December 31, 2002.
Many of these factors are beyond the Companys ability to control or predict,
and readers are cautioned not to put undue reliance on such forward-looking
statements. The Company disclaims any obligation to update or review any
forward-looking statements contained in this Quarterly Report or in any
statement referencing the risk factors and other cautionary statements set
forth in this Quarterly Report.




Item 3. Quantitative and Qualitative Disclosures About Market Risk

The information required under this item is provided under the caption
Disclosures about Market Risks under Item 2. Managements Discussion and
Analysis of Financial Condition and Results of Operations.




Item 4. Controls and Procedures



| | (a) |  | Evaluation of Disclosure Controls and Procedures.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | The Company maintains a system of disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act
of 1934) designed to provide reasonable assurance as to the reliability of
the financial statements and other disclosures included in this report, as
well as to safeguard assets from unauthorized use or disposition. The
Companys Chief Executive Officer and Chief Financial Officer evaluated
the effectiveness of the Companys disclosure controls as of the end of
the period covered by this Form 10-Q. Based upon that evaluation, the
Chief Executive Officer and Chief Financial Officer concluded that the
Companys disclosure controls and procedures are effective in alerting
them in a timely manner of material information required to be included in
the Companys periodic Securities and Exchange Commission filings.
|
| | (b) |  | Changes in Internal Control Over Financial Reporting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |     |  | No changes were made to the Companys internal control over financial
reporting during the Companys most recent fiscal quarter that has
materially affected, or is reasonably likely to materially affect, the
Companys internal control over financial reporting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               




PART II  OTHER INFORMATION




Item 1. Legal Proceedings



| |  |  | The Company is involved in various litigation and environmental matters
relating to employment practices, damages, and other matters arising from
operations in the ordinary course of business. In the opinion of management,
the ultimate disposition of these matters will not have a material adverse
effect on the Companys financial position or results of operations.                                                                                                                                                                                                                                                                                              
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Since its last quarterly filing, Allied has settled all outstanding
litigation with Ryder System, Inc., which litigation was previously disclosed
in company filings. The litigation arose in connection with the acquisition
by the Company of Ryder Automotive Carrier Services, Inc. and RC Management
Corp. from Ryder System, Inc. in September 1997, and consisted of three
actions. In Ryder Systems, Inc. v. Allied Holdings, Inc., AH Acquisition
Corp. and Allied Automotive Group(the Ryder Action), Ryder alleged that
the Company failed to substitute itself for Ryder under an insurance policy
covering third-party claims and with various state agencies

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| |  |  | that regulate
matters such as self-insured workers compensation. Ryder also alleged that
the Company was
obligated to take certain steps to transfer from Ryder to itself the
ownership and administrative responsibility for two pension plans. The other
two actions, Gateway Development & Manufacturing, Inc. v. Commercial
Carriers, Inc., et al.and Commercial Carriers, Inc. v. Gateway Development &
Manufacturing, Inc., et al.(collectively the Gateway/CCI Actions), both
centered around the contention that the Company breached legal duties with
respect to a failed business transaction involving Gateway Development, Ryder
Truck Rental, Inc., and Ryder System.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Under terms of the settlement agreement, Ryder System has paid the Company
approximately $1.4 million, and Ryders insurance carrier has paid the
Company approximately $1.6 million. The payment from Ryder represents the
settlement of various claims and disputes that have arisen since the 1997
acquisition. The payment from Ryders insurance carrier represents a
reimbursement for amounts paid by the Company in excess of the self-insured
retention for workers compensation and automobile liability claims assumed
in the acquisition of Ryders Automotive Carrier Group. The Company and
Ryder System have agreed to dismiss all litigation each party had brought
against the other as part of the settlement, which has resulted in the
complete dismissal of the Ryder Action. Except with respect to expenses
already incurred, Ryder has agreed to indemnify Allied for all costs,
including legal fees and any potential judgment against Allied, arising out
of the Gateway/CCI Actions. Therefore, although the Gateway/CCI Actions
remain pending, the settlement will provide Allied with indemnification from
Ryder System as to exposure to future legal fees or any potential judgment
against the Company.
|
| |  |  | As part of the settlement agreement, the Company has issued a letter of
credit for $3.5 million in favor of Ryder System and has agreed to increase
the letter of credit by $1 million each quarter starting in the fourth
quarter 2003 through the third quarter of 2005. The letter of credit may
only be drawn by Ryder System if the Company fails to pay workers
compensation and liability claims assumed by the Company in the Ryder
Automotive Carrier Group acquisition. The Company has provided the letter of
credit in favor of Ryder System because Ryder has issued a letter of credit
to its insurance carrier relating to the workers compensation and liability
claims assumed by the Company. By September 30, 2005, and periodically
thereafter, an actuarial valuation will be made to determine the remaining
outstanding amount of workers compensation and liability claims assumed by
Allied, and the letter of credit issued by the Company in favor of Ryder
System will be adjusted accordingly.                                                                                                                                                                                                            




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



|(a) |  | Exhibit Index
|--- |  | -------------

|            |  |                                                           
|----------- |  | ----------------------------------------------------------
|Exhibit No. |  | Description                                               
|            |  |                                                           
|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 Daniel H. Popky.
|           
|32.1        |  | Section 1350 Certification by Hugh E. Sawyer.             
|           
|32.2        |  | Section 1350 Certification by Daniel H. Popky.            

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---



|(b) |  | Reports on Form 8-K                                                                                                                                                                                                                                             
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | On July 5, 2003, Allied Holdings, Inc. filed with the Commission a Current
Report on Form 8-K attaching a press release issued by it on July 30,
2003.                                                                                                          
|   
|    |  | On September 5, 2003, Allied Holdings, Inc. filed with the Commission a
Current Report on Form 8-K announcing the completion of an amendment to
its senior credit facility and attaching a press release related thereto
and the amended senior credit facility.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

| |                       |  | 
| | --------------------- |  | 
| | ALLIED HOLDINGS, INC.

Date: November 14, 2003

| |     |  |                                                     
| | --- |  | ----------------------------------------------------
| | By: |  | /s/ HUGH E. SAWYER                                  
| |     |  |                                                     
| |     |  | Hugh E. Sawyer,President and Chief Executive Officer

Date: November 14, 2003

| |     |  |                                                                                                               
| | --- |  | --------------------------------------------------------------------------------------------------------------
| | By: |  | /s/ DANIEL H. POPKY                                                                                           
| |     |  |                                                                                                               
| |     |  | Daniel H. Popky,Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)

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EXHIBIT INDEX

|            |  |                                                           
|----------- |  | ----------------------------------------------------------
|Exhibit No. |  | Description                                               
|            |  |                                                           
|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 Daniel H. Popky.
|           
|32.1        |  | Section 1350 Certification by Hugh E. Sawyer.             
|           
|32.2        |  | Section 1350 Certification by Daniel H. Popky.            

39