##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
 For the quarterly period ended September 30, 2006
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
 For the transition period from  to
 Commission File Number: 0-22276
 ALLIED HOLDINGS, INC.
  GEORGIA
    
    58-0360550(State or other jurisdiction of
    
    (I.R.S. Employer Identificationincorporation or organization)
    
    Number)
 Suite 200, 160 Clairemont Avenue, Decatur, Georgia 30030
  (404) 373-4285
  www.alliedholdings.com
 (Web Page)
 þ o
  o o þ
 o þ
 Outstanding
common stock, no par value at November 4, 2006  8,980,329




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##### 



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
 TABLE OF CONTENTS
 PAGEPART I  FINANCIAL INFORMATIONITEM 1  Financial StatementsConsolidated Balance Sheets 
September 30, 2006 and December 31, 2005 (unaudited)
    
    
    1Consolidated Statements of Operations 
Three and Nine Month Periods Ended September 30, 2006 and 2005 (unaudited)
    
    
    2Consolidated Statements of Cash Flows 
Nine Months Ended September 30, 2006 and 2005 (unaudited)
    
    
    3Notes to the Consolidated Financial Statements (unaudited)
    
    
    4ITEM 2  Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    32ITEM 3  Quantitative and Qualitative Disclosures About Market Risk
    
    
    48ITEM 4  Controls and Procedures
    
    
    48PART II  OTHER INFORMATIONITEM 1  Legal Proceedings
    
    
    49ITEM 1A  Risk Factors
    
    
    49ITEM 6  Exhibits
    
    
    55Signatures
    
    
    56EX-31.1 SECTION 302 CERTIFICATION OF CEOEX-31.2 SECTION 302 CERTIFICATION OF CFOEX-32.1 SECTION 906 CERTIFICATION OF CEOEX-32.2 SECTION 906 CERTIFICATION OF CFO




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 
 ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 September 30,
    
    
    December 31,2006
    
    
    2005ASSETSCurrent assets:Cash and cash equivalents
    
    $
    5,862
    
    
    $
    4,117Restricted cash, cash equivalents and other time deposits
    
    
    32,537
    
    
    
    32,830Receivables, net of allowances of $1,970 and $2,218 as of September
30, 2006
and December 31, 2005, respectively
    
    
    50,139
    
    
    
    61,427Inventories
    
    
    5,181
    
    
    
    5,132Deferred income taxes
    
    
    
    
    
    
    128Prepayments and other current assets
    
    
    20,683
    
    
    
    59,434Total current assets
    
    
    114,402
    
    
    
    163,068Property and equipment, net of accumulated depreciation
    
    
    128,940
    
    
    
    123,904Goodwill, net
    
    
    3,545
    
    
    
    3,545Other assets:Restricted cash, cash equivalents and other time deposits
    
    
    66,059
    
    
    
    69,764Deferred income taxes
    
    
    127
    
    
    
    Other noncurrent assets
    
    
    24,083
    
    
    
    22,835Total other assets
    
    
    90,269
    
    
    
    92,599Total assets
    
    $
    337,156
    
    
    $
    383,116LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilities not subject to compromise:Debtor-in-possession credit facility
    
    $
    156,172
    
    
    $
    151,997Accounts and notes payable
    
    
    29,097
    
    
    
    57,196Accrued liabilities
    
    
    74,645
    
    
    
    83,317Deferred income taxes
    
    
    145
    
    
    
    Total current liabilities
    
    
    260,059
    
    
    
    292,510Long-term liabilities not subject to compromise:Postretirement benefits other than pensions
    
    
    4,314
    
    
    
    4,412Deferred income taxes
    
    
    
    
    
    
    143Other long-term liabilities
    
    
    70,361
    
    
    
    74,096Total long-term liabilities
    
    
    74,675
    
    
    
    78,651Liabilities subject to compromise
    
    
    199,199
    
    
    
    199,322Commitments and contingencies
    
    
    
    
    
    
    Stockholders deficit:Preferred stock, no par value. Authorized 5,000 shares; none outstanding
    
    
    
    
    
    
    Common stock, no par value. Authorized 20,000 shares; 8,980 shares
outstanding at September 30, 2006 and December 31, 2005
    
    
    
    
    
    
    Additional paid-in capital
    
    
    48,825
    
    
    
    48,545Treasury stock, 139 shares at cost
    
    
    (707
    )
    
    
    (707
    )Accumulated deficit
    
    
    (223,832
    )
    
    
    (214,631
    )Accumulated other comprehensive loss, net of tax
    
    
    (21,063
    )
    
    
    (20,574
    )Total stockholders deficit
    
    
    (196,777
    )
    
    
    (187,367
    )Total liabilities and stockholders deficit
    
    $
    337,156
    
    
    $
    383,116
  1




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Revenues
    
    $
    202,151
    
    
    $
    203,090
    
    
    $
    688,361
    
    
    $
    656,594Operating expenses:Salaries, wages and fringe benefits
    
    
    104,897
    
    
    
    110,285
    
    
    
    345,373
    
    
    
    349,618Operating supplies and expenses
    
    
    43,221
    
    
    
    41,781
    
    
    
    142,224
    
    
    
    127,405Purchased transportation
    
    
    26,111
    
    
    
    28,586
    
    
    
    89,689
    
    
    
    88,829Insurance and claims
    
    
    10,006
    
    
    
    8,587
    
    
    
    31,174
    
    
    
    27,165Operating taxes and licenses
    
    
    6,616
    
    
    
    6,785
    
    
    
    21,669
    
    
    
    22,196Depreciation and amortization
    
    
    6,927
    
    
    
    6,698
    
    
    
    21,426
    
    
    
    21,940Rents
    
    
    1,842
    
    
    
    1,810
    
    
    
    5,334
    
    
    
    5,608Communications and utilities
    
    
    1,438
    
    
    
    1,185
    
    
    
    4,876
    
    
    
    4,575Other operating expenses
    
    
    2,064
    
    
    
    2,655
    
    
    
    6,112
    
    
    
    9,714Impairment of goodwill
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    79,172Gain on disposal of operating assets, net
    
    
    (5
    )
    
    
    (85
    )
    
    
    (260
    )
    
    
    (462
    )Total operating expenses
    
    
    203,117
    
    
    
    208,287
    
    
    
    667,617
    
    
    
    735,760Operating (loss) income
    
    
    (966
    )
    
    
    (5,197
    )
    
    
    20,744
    
    
    
    (79,166
    )Other income (expense):Interest expense (excludes contractual
interest of $3,234 and $9,703 for
the three and nine months ended September
30, 2006, respectively and $2,156 for the
three and nine months ended September 30,
2005)
    
    
    (5,537
    )
    
    
    (9,571
    )
    
    
    (24,603
    )
    
    
    (32,522
    )Investment income
    
    
    1,252
    
    
    
    847
    
    
    
    3,500
    
    
    
    1,863Foreign exchange gains, net
    
    
    257
    
    
    
    1,893
    
    
    
    1,842
    
    
    
    1,282Total other income (expense)
    
    
    (4,028
    )
    
    
    (6,831
    )
    
    
    (19,261
    )
    
    
    (29,377
    )(Loss) income before reorganization items
and income taxes
    
    
    (4,994
    )
    
    
    (12,028
    )
    
    
    1,483
    
    
    
    (108,543
    )Reorganization items
    
    
    (2,082
    )
    
    
    (3,929
    )
    
    
    (10,372
    )
    
    
    (3,929
    )Loss before income taxes
    
    
    (7,076
    )
    
    
    (15,957
    )
    
    
    (8,889
    )
    
    
    (112,472
    )Income tax (expense) benefit
    
    
    (122
    )
    
    
    (39
    )
    
    
    (312
    )
    
    
    11,368Net loss
    
    $
    (7,198
    )
    
    $
    (15,996
    )
    
    $
    (9,201
    )
    
    $
    (101,104
    )Basic and diluted loss per common share:Net loss:Basic and diluted
    
    $
    (0.80
    )
    
    $
    (1.78
    )
    
    $
    (1.02
    )
    
    $
    (11.26
    )Weighted-average number of common shares
outstanding:Basic and diluted
    
    
    8,980
    
    
    
    8,980
    
    
    
    8,980
    
    
    
    8,980
  2




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Nine Months EndedSeptember 30,2006
    
    
    2005Cash flows from operating activities:Net loss
    
    $
    (9,201
    )
    
    $
    (101,104
    )Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation and amortization
    
    
    21,426
    
    
    
    21,940Impairment of goodwill
    
    
    
    
    
    
    79,172Gain on disposal of assets
    
    
    (260
    )
    
    
    (462
    )Write-off and amortization of deferred financing costs
    
    
    5,706
    
    
    
    7,368Interest expense paid in kind
    
    
    3,045
    
    
    
    Foreign exchange gains
    
    
    (1,842
    )
    
    
    (1,282
    )Reorganization items
    
    
    10,372
    
    
    
    3,929Deferred income taxes
    
    
    3
    
    
    
    (11,261
    )Stock-based compensation expense
    
    
    280
    
    
    
    Change in operating assets and liabilities:Receivables, net of allowances
    
    
    11,765
    
    
    
    2,729Inventories
    
    
    9
    
    
    
    (547
    )Prepayments and other assets
    
    
    29,986
    
    
    
    (3,009
    )Accounts and notes payable
    
    
    2,054
    
    
    
    7,593Accrued liabilities
    
    
    (14,084
    )
    
    
    (292
    )Net cash provided by operating activities before payment of
reorganization items
    
    
    59,259
    
    
    
    4,774Reorganization items paid
    
    
    (9,629
    )
    
    
    (712
    )Net cash provided by operating activities
    
    
    49,630
    
    
    
    4,062Cash flows from investing activities:Purchases of property and equipment
    
    
    (25,668
    )
    
    
    (12,574
    )Proceeds from sales of property and equipment
    
    
    927
    
    
    
    2,851Decrease (increase) in restricted cash, cash equivalents and other time
deposits
    
    
    3,998
    
    
    
    (19,686
    )Funds deposited with insurance carriers
    
    
    (1,008
    )
    
    
    (8,182
    )Funds returned from insurance carriers
    
    
    3,395
    
    
    
    4,131Net cash used in investing activities
    
    
    (18,356
    )
    
    
    (33,460
    )Cash flows from financing activities:(Repayment
of) addition to debtor-in-possession revolving credit facility, net
    
    
    (8,870
    )
    
    
    41,517Repayment of
pre-petition revolving credit facilities, net
    
    
    
    
    
    
    (2,972
    )Additions to
debtor-in-possession term debt
    
    
    10,000
    
    
    
    100,000Additions to
pre-petition term debt
    
    
        
    
    
    
    25,000Repayment of
pre-petition term debt
    
    
        
    
    
    
    (123,266
    )Payment of deferred financing costs
    
    
    (345
    )
    
    
    (8,079
    )Proceeds from insurance financing arrangements
    
    
    178
    
    
    
    8,470Repayments of insurance financing arrangements
    
    
    (29,964
    )
    
    
    (10,122
    )Proceeds from issuance of common stock
    
    
    
    
    
    
    124Net cash (used in) provided by financing activities
    
    
    (29,001
    )
    
    
    30,672Effect of exchange rate changes on cash and cash equivalents
    
    
    (528
    )
    
    
    106Net change in cash and cash equivalents
    
    
    1,745
    
    
    
    1,380Cash and cash equivalents at beginning of period
    
    
    4,117
    
    
    
    2,516Cash and cash equivalents at end of period
    
    $
    5,862
    
    
    $
    3,896Supplemental cash flow information:Cash paid (refunds received) during the period for:Interest
    
    $
    17,807
    
    
    $
    22,737Income taxes, net
    
    
    234
    
    
    
    (492
    )Supplemental disclosure of noncash financing activity:Interest paid in kind via addition to term debt
    
    $
    3,045
    
    
    $
    .
  3




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##### Table of Contents

\

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 (Throughout this Quarterly Report on Form 10-Q, we will use the terms we, our, us and
Allied to refer to Allied Holdings, Inc. (a Georgia corporation) and its subsidiaries on a
consolidated basis and, as the context requires, to Allied Holdings, Inc. and its subsidiaries that
filed for Chapter 11 pursuant to the U.S Bankruptcy Code.)
 (1) Organization and Operations
 Company Overview
  Chapter 11 Overview
   (2) Accounting and Reporting Policies
 Basis of Presentation
 Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code
 4




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##### Table of Contents



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




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 
    
    distinguished transactions and events that are directly associated with the
reorganization from the ongoing operations of the business; and
    
    ceased accruing interest on the 85/8% senior notes (Senior
Notes).
 Liabilities Subject to Compromise
     September 30,
    
    
    December 31,2006
    
    
    2005Accounts payable
    
    $
    24,905
    
    
    $
    24,922Senior Notes
    
    
    150,000
    
    
    
    150,000Accrued interest on Senior Notes
    
    
    4,313
    
    
    
    4,313Multiemployer pension withdrawal
liabilities
    
    
    15,847
    
    
    
    15,847Accrued claims and insurance reserves
    
    
    3,003
    
    
    
    3,109Other accrued liabilities
    
    
    1,131
    
    
    
    1,131$
    199,199
    
    
    $
    199,322
 Reorganization Items
  6




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Legal and professional fees
    
    $
    1,382
    
    
    $
    2,203
    
    
    $
    7,909
    
    
    $
    2,203Write-off of deferred financing costs
    
    
    
    
    
    
    1,442
    
    
    
    
    
    
    
    1,442Employee retention plan
    
    
    618
    
    
    
    
    
    
    
    2,208
    
    
    
    Other reorganization items
    
    
    82
    
    
    
    284
    
    
    
    255
    
    
    
    284$
    2,082
    
    
    $
    3,929
    
    
    $
    10,372
    
    
    $
    3,929
 Condensed Financial Statement Information of the Debtors and Non-debtors
  Condensed Consolidating Balance Sheet Information
September 30, 2006
(In thousands)
 Debtors
    
    
    Non-Debtors
    
    
    Eliminations
    
    
    ConsolidatedCurrent assets
    
    $
    73,255
    
    
    $
    41,121
    
    
    $
    26
    
    
    $
    114,402Intercompany receivables (payables)
    
    
    19,036
    
    
    
    (19,036
    )
    
    
    
    
    
    
    Property and equipment, net
    
    
    125,559
    
    
    
    3,381
    
    
    
    
    
    
    
    128,940Goodwill, net
    
    
    3,545
    
    
    
    
    
    
    
    
    
    
    
    3,545Investment in subsidiaries
    
    
    25,271
    
    
    
    6,223
    
    
    
    (31,494
    )
    
    
    Other assets
    
    
    22,969
    
    
    
    67,300
    
    
    
    
    
    
    
    90,269Total assets
    
    $
    269,635
    
    
    $
    98,989
    
    
    $
    (31,468
    )
    
    $
    337,156Liabilities not subject to compromise:Current liabilities
    
    $
    238,557
    
    
    $
    22,805
    
    
    $
    (1,303
    )
    
    $
    260,059Other noncurrent liabilities
    
    
    27,718
    
    
    
    46,957
    
    
    
    
    
    
    
    74,675Liabilities subject to compromise
    
    
    199,199
    
    
    
    
    
    
    
    
    
    
    
    199,199Stockholders (deficit) equity
    
    
    (195,839
    )
    
    
    29,227
    
    
    
    (30,165
    )
    
    
    (196,777
    )Total liabilities and
stockholders (deficit) equity
    
    $
    269,635
    
    
    $
    98,989
    
    
    $
    (31,468
    )
    
    $
    337,156
 7




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ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Condensed Consolidating Balance Sheet Information
December 31, 2005
(In thousands)
 Debtors
    
    
    Non-Debtors
    
    
    Eliminations
    
    
    ConsolidatedCurrent assets
    
    $
    121,807
    
    
    $
    41,261
    
    
    $
    
    
    
    $
    163,068Intercompany receivables (payables)
    
    
    14,744
    
    
    
    (14,744
    )
    
    
    
    
    
    
    Property and equipment, net
    
    
    120,212
    
    
    
    3,692
    
    
    
    
    
    
    
    123,904Goodwill, net
    
    
    3,545
    
    
    
    
    
    
    
    
    
    
    
    3,545Investment in subsidiaries
    
    
    21,169
    
    
    
    6,223
    
    
    
    (27,392
    )
    
    
    Other assets
    
    
    22,366
    
    
    
    70,233
    
    
    
    
    
    
    
    92,599Total assets
    
    $
    303,843
    
    
    $
    106,665
    
    
    $
    (27,392
    )
    
    $
    383,116Liabilities not subject to compromise:Current liabilities
    
    $
    264,265
    
    
    $
    28,245
    
    
    $
    
    
    
    $
    292,510Other noncurrent liabilities
    
    
    26,684
    
    
    
    51,967
    
    
    
    
    
    
    
    78,651Liabilities subject to compromise
    
    
    199,322
    
    
    
    
    
    
    
    
    
    
    
    199,322Stockholders (deficit) equity
    
    
    (186,428
    )
    
    
    26,453
    
    
    
    (27,392
    )
    
    
    (187,367
    )Total liabilities and stockholders (deficit) equity
    
    $
    303,843
    
    
    $
    106,665
    
    
    $
    (27,392
    )
    
    $
    383,116
 Condensed Consolidating Statement of Operations Information
For the Three Months Ended September 30, 2006
(In thousands)
 Debtors
    
    
    Non-Debtors
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    201,085
    
    
    $
    1,406
    
    
    $
    (340
    )
    
    $
    202,151Operating expenses
    
    
    202,336
    
    
    
    1,121
    
    
    
    (340
    )
    
    
    203,117Operating (expense) income
    
    
    (1,251
    )
    
    
    285
    
    
    
    
    
    
    
    (966
    )Other (expense) income, net
    
    
    (3,838
    )
    
    
    1,255
    
    
    
    (1,445
    )
    
    
    (4,028
    )(Loss) income before reorganization
items and income taxes
    
    
    (5,089
    )
    
    
    1,540
    
    
    
    (1,445
    )
    
    
    (4,994
    )Reorganization items
    
    
    (2,082
    )
    
    
    
    
    
    
    
    
    
    
    (2,082
    )(Loss) income before income taxes
    
    
    (7,171
    )
    
    
    1,540
    
    
    
    (1,445
    )
    
    
    (7,076
    )Income tax expense
    
    
    (27
    )
    
    
    (786
    )
    
    
    691
    
    
    
    (122
    )Net (loss) income
    
    $
    (7,198
    )
    
    $
    754
    
    
    $
    (754
    )
    
    $
    (7,198
    )
 8




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ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Unaudited Condensed Consolidating Statement of Operations Information
For the Three Months Ended September 30, 2005
(In thousands)
 Debtors
    
    
    Non-Debtors
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    202,450
    
    
    $
    10,171
    
    
    $
    (9,531
    )
    
    $
    203,090Operating expenses
    
    
    207,670
    
    
    
    10,148
    
    
    
    (9,531
    )
    
    
    208,287Operating (loss) income
    
    
    (5,220
    )
    
    
    23
    
    
    
    
    
    
    
    (5,197
    )Other (expenses) income, net
    
    
    (7,295
    )
    
    
    961
    
    
    
    (497
    )
    
    
    (6,831
    )(Loss) income before reorganization
items and income taxes
    
    
    (12,515
    )
    
    
    984
    
    
    
    (497
    )
    
    
    (12,028
    )Reorganization items
    
    
    (3,929
    )
    
    
    
    
    
    
    
    
    
    
    (3,929
    )(Loss) income before income taxes
    
    
    (16,444
    )
    
    
    984
    
    
    
    (497
    )
    
    
    (15,957
    )Income tax expense
    
    
    (21
    )
    
    
    (18
    )
    
    
    
    
    
    
    (39
    )Net (loss) income
    
    $
    (16,465
    )
    
    $
    966
    
    
    $
    (497
    )
    
    $
    (15,996
    )
 Condensed Consolidating Statement of Operations Information
For the Nine Months Ended September 30, 2006
(In thousands)
 Debtors
    
    
    Non-Debtors
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    685,445
    
    
    $
    3,937
    
    
    $
    (1,021
    )
    
    $
    688,361Operating expenses
    
    
    665,524
    
    
    
    3,114
    
    
    
    (1,021
    )
    
    
    667,617Operating income
    
    
    19,921
    
    
    
    823
    
    
    
    
    
    
    
    20,744Other (expense) income, net
    
    
    (18,682
    )
    
    
    3,524
    
    
    
    (4,103
    )
    
    
    (19,261
    )Income before reorganization
items and income taxes
    
    
    1,239
    
    
    
    4,347
    
    
    
    (4,103
    )
    
    
    1,483Reorganization items
    
    
    (10,372
    )
    
    
    
    
    
    
    
    
    
    
    (10,372
    )(Loss) income before income taxes
    
    
    (9,133
    )
    
    
    4,347
    
    
    
    (4,103
    )
    
    
    (8,889
    )Income tax expense
    
    
    (68
    )
    
    
    (1,573
    )
    
    
    1,329
    
    
    
    (312
    )Net (loss) income
    
    $
    (9,201
    )
    
    $
    2,774
    
    
    $
    (2,774
    )
    
    $
    (9,201
    )
 Unaudited Condensed Consolidating Statement of Operations Information
For the Nine Months Ended September 30, 2005
(In thousands)
 Debtors
    
    
    Non-Debtors
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    654,284
    
    
    $
    30,902
    
    
    $
    (28,592
    )
    
    $
    656,594Operating expenses
    
    
    733,727
    
    
    
    30,625
    
    
    
    (28,592
    )
    
    
    735,760Operating (loss) income
    
    
    (79,443
    )
    
    
    277
    
    
    
    
    
    
    
    (79,166
    )Other (expense) income, net
    
    
    (29,868
    )
    
    
    1,806
    
    
    
    (1,315
    )
    
    
    (29,377
    )(Loss) income before reorganization
items and income taxes
    
    
    (109,311
    )
    
    
    2,083
    
    
    
    (1,315
    )
    
    
    (108,543
    )Reorganization items
    
    
    (3,929
    )
    
    
    
    
    
    
    
    
    
    
    (3,929
    )(Loss) income before income taxes
    
    
    (113,240
    )
    
    
    2,083
    
    
    
    (1,315
    )
    
    
    (112,472
    )Income tax benefit (expense)
    
    
    11,497
    
    
    
    (129
    )
    
    
    
    
    
    
    11,368Net (loss) income
    
    $
    (101,743
    )
    
    $
    1,954
    
    
    $
    (1,315
    )
    
    $
    (101,104
    )
 9




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Condensed Consolidating Statement of Cash Flows Information
For the Nine Months Ended September 30, 2006
(In thousands)
 Debtors
    
    
    Non-Debtors
    
    
    Eliminations
    
    
    ConsolidatedNet cash provided by (used in):Operating activities
    
    $
    51,735
    
    
    $
    (2,105
    )
    
    $
    
    
    
    $
    49,630Investing activities
    
    
    (22,299
    )
    
    
    3,943
    
    
    
    
    
    
    
    (18,356
    )Financing activities
    
    
    (29,001
    )
    
    
    
    
    
    
    
    
    
    
    (29,001
    )Effect of exchange rate changes on cash and
cash equivalents
    
    
    (750
    )
    
    
    222
    
    
    
    
    
    
    
    (528
    )Net change in cash and cash equivalents
    
    
    (315
    )
    
    
    2,060
    
    
    
    
    
    
    
    1,745Cash and cash equivalents at beginning of period
    
    
    730
    
    
    
    3,387
    
    
    
    
    
    
    
    4,117Cash and cash equivalents at end of period
    
    $
    415
    
    
    $
    5,447
    
    
    $
    
    
    
    $
    5,862
 Unaudited Condensed Consolidating Statement of Cash Flows Information
For the Nine Months Ended September 30, 2005
(In thousands)
 Debtors
    
    
    Non-Debtors
    
    
    Eliminations
    
    
    ConsolidatedNet cash (used in) provided by:Operating activities
    
    $
    (16,173
    )
    
    $
    20,235
    
    
    $
    
    
    
    $
    4,062Investing activities
    
    
    (13,475
    )
    
    
    (19,985
    )
    
    
    
    
    
    
    (33,460
    )Financing activities
    
    
    30,672
    
    
    
    
    
    
    
    
    
    
    
    30,672Effect of exchange rate changes on cash and
cash equivalents
    
    
    5
    
    
    
    101
    
    
    
    
    
    
    
    106Net change in cash and cash equivalents
    
    
    1,029
    
    
    
    351
    
    
    
    
    
    
    
    1,380Cash and cash equivalents at beginning of period
    
    
    203
    
    
    
    2,313
    
    
    
    
    
    
    
    2,516Cash and cash equivalents at end of period
    
    $
    1,232
    
    
    $
    2,664
    
    
    $
    
    
    
    $
    3,896
 (4) Recent Accounting Pronouncements
 Accounting for Uncertainty in Income Taxes Accounting for Income Taxes,
 10




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Accounting for Purchases of Life Insurance  Determining the
Amount that Could be Realized in Accordance with FASB Technical Bulletin No 85-4, Accounting for
Purchases of Life Insurance
 Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements
 Fair Value Measurements Disclosures about Fair Value of Financial Instruments,
 Employers Accounting for Defined Benefit Pension
and Other Postretirement Plans  an amendment of FASB Statements No. 87, 88, 106 and 132(R)
 11




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
   Employers
Accounting for Pensions, Employers Accounting for Postretirement
Benefits Other Than Pensions.
    Technical Corrections of FASB Statement No. 123(R).
 (5) Prepayments and Other Current Assets
  September 30,
    
    
    December 31,2006
    
    
    2005Prepaid insurance
    
    $
    12,598
    
    
    $
    50,185Prepaid licenses
    
    
    2,520
    
    
    
    1,532Tires on tractors and trailers
    
    
    2,318
    
    
    
    2,245Short-term deposits with pre-petition lenders
    
    
    118
    
    
    
    2,679Prepaid taxes
    
    
    1,414
    
    
    
    1,163Other
    
    
    1,715
    
    
    
    1,630$
    20,683
    
    
    $
    59,434
 12




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 (6) Property and Equipment
  September 30,
    
    
    December 31,2006
    
    
    2005Cost
    
    $
    532,114
    
    
    $
    528,206Accumulated depreciation and amortization
    
    
    (403,174
    )
    
    
    (404,302
    )$
    128,940
    
    
    $
    123,904
   (7) Other Noncurrent Assets
  September 30,
    
    
    December 31,2006
    
    
    2005Deposits with insurance companies
    
    $
    11,092
    
    
    $
    5,100Interest in split-dollar life insurance policies
    
    
    6,139
    
    
    
    6,181Other deposits
    
    
    3,189
    
    
    
    2,599Deferred financing costs
    
    
    234
    
    
    
    5,595Other
    
    
    3,429
    
    
    
    3,360$
    24,083
    
    
    $
    22,835
  13




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 September 30,
    
    
    December 31,2006
    
    
    2005Cost
    
    $
    345
    
    
    $
    7,646Accumulated amortization
    
    
    (111
    )
    
    
    (2,051
    )$
    234
    
    
    $
    5,595
   (8) Accounts and Notes Payable and Accrued Liabilities
   September 30,
    
    
    December 31,2006
    
    
    2005Claims and insurance reserves
    
    $
    37,115
    
    
    $
    39,602Wages and benefits
    
    
    28,614
    
    
    
    30,748Accrued taxes
    
    
    3,605
    
    
    
    4,017Accrued interest
    
    
    593
    
    
    
    3,761Purchased transportation
    
    
    3,559
    
    
    
    3,563Other
    
    
    1,159
    
    
    
    1,626$
    74,645
    
    
    $
    83,317
 (9) Claims and Insurance Reserves
  14




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
   September 30,
    
    
    December 31,2006
    
    
    2005Accrued liabilities  current
    
    $
    37,115
    
    
    $
    39,602Other long-term liabilities  noncurrent
    
    
    65,828
    
    
    
    70,040102,943
    
    
    
    109,642Liabilities subject to compromise
    
    
    3,003
    
    
    
    3,109Total liability included in the consolidated balance sheets
    
    $
    105,946
    
    
    $
    112,751
   (10) Employee Benefit Plans
 (a) Pension
and Postretirement Benefit Plans
  Defined Benefit
    
    
    Postretirement BenefitPension Plans
    
    
    PlansThree Months Ended September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Service cost
    
    $
    23
    
    
    $
    30
    
    
    $
    14
    
    
    $
    15Interest cost
    
    
    762
    
    
    
    1,088
    
    
    
    164
    
    
    
    205Expected return on plan assets
    
    
    (1,014
    )
    
    
    (1,511
    )
    
    
    
    
    
    
    Amortization of:Unrecognized net actuarial loss
    
    
    524
    
    
    
    639
    
    
    
    169
    
    
    
    187Prior service cost
    
    
    12
    
    
    
    17
    
    
    
    (82
    )
    
    
    (95
    )Net periodic benefit cost
    
    $
    307
    
    
    $
    263
    
    
    $
    265
    
    
    $
    312
 15




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Defined Benefit
    
    
    Postretirement BenefitPension Plans
    
    
    PlansNine Months Ended September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Service cost
    
    $
    69
    
    
    $
    63
    
    
    $
    42
    
    
    $
    39Interest cost
    
    
    2,286
    
    
    
    2,262
    
    
    
    492
    
    
    
    528Expected return on plan assets
    
    
    (3,042
    )
    
    
    (3,190
    )
    
    
    
    
    
    
    Amortization of:Unrecognized net actuarial loss
    
    
    1,572
    
    
    
    1,401
    
    
    
    507
    
    
    
    481Prior service cost
    
    
    36
    
    
    
    36
    
    
    
    (246
    )
    
    
    (243
    )Net periodic benefit cost
    
    $
    921
    
    
    $
    572
    
    
    $
    795
    
    
    $
    805
    (b) Employee
Retention Plan
  (11) Debt
  September 30,
    
    
    December 31,2006
    
    
    2005Current liabilities not subject to compromise:DIP Facility  Revolver
    
    $
    43,127
    
    
    $
    51,997DIP Facility  Term Loan A
    
    
    20,000
    
    
    
    20,000DIP Facility  Term Loan B
    
    
    82,790
    
    
    
    80,000DIP Facility  Term Loan C
    
    
    10,255
    
    
    
    $
    156,172
    
    
    $
    151,997Liabilities subject to compromise:Senior Notes
    
    $
    150,000
    
    
    $
    150,000
 16




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 DIP
Facility
 The
Wall Street Journal
     17




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
    Canadian Revolving Credit Facility
  Senior Notes
 5/ 8
  
    
    Haul Insurance Limited;
    
    Arrendadora de Equipo Para el Transporte de Automoviles, S. de R.L. de C.V. ;
    
    Axis Logistica, S. de R.L. de C.V. ;
    
    Axis Operadora Hermosillo; and
    
    Ace Operations, LLC.
   18




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
   (12) Impairment of Goodwill
 Goodwill and Other Intangible Assets
  (13) Income Taxes
  (14) Commitments and Contingencies
 (a) Effect of Chapter 11 Filings
 19




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
   (b) Letters of Credit
   (c) Litigation, Claims, Assessments
   (d) Purchase and Service Contract Commitments
  20




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 (e) Leases
  (f) Collective Bargaining Agreements
      (15) Earnings (Loss) Per Common Share
 21




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 Earnings Per Share,
 (16) Stock-Based Compensation
   Accounting for Stock-Based Compensation
 Share-Based Payment
  22




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
    Three Months Ended
    
    
    Nine Months EndedSeptember 30, 2005
    
    
    September 30, 2005Reported net loss
    
    $
    (15,996
    )
    
    $
    (101,104
    )Less: stock-based
employee compensation
determined using the
fair-value-based method
(no applicable income
tax effect)
    
    
    (149
    )
    
    
    (476
    )Pro forma net loss
    
    $
    (16,145
    )
    
    $
    (101,580
    )Loss per share:As reported:Basic and Diluted
    
    $
    (1.78
    )
    
    $
    (11.26
    )Pro forma:Basic and Diluted
    
    $
    (1.80
    )
    
    $
    (11.31
    )
  Weighted-Weighted-
    
    AverageNumber of
    
    Average
    
    Remaining
    
    AggregateOptions
    
    Exercise
    
    Contractual
    
    Intrinsic Value(in thousands)
    
    Price
    
    Life
    
    (in thousands)Outstanding as of December 31, 2005
    
    
    1,573
    
    
    $
    3.67Forfeited
    
    
    (18
    )
    
    $
    4.32Outstanding as of September 30, 2006
    
    
    1,555
    
    
    $
    3.66
    
    
    5.8 years
    
    
    Exercisable at September 30, 2006
    
    
    1,371
    
    
    $
    3.53
    
    
    5.4 years
    
    
    Vested and expected to vest at September 30, 2006
    
    
    1,496
    
    
    $
    3.63
    
    
    5.7 years
    
    
    
  (17) Other Comprehensive Income (Loss)
 23




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Net loss
    
    $
    (7,198
    )
    
    $
    (15,996
    )
    
    $
    (9,201
    )
    
    $
    (101,104
    )Foreign currency
translation
adjustments
    
    
    (90
    )
    
    
    (83
    )
    
    
    (489
    )
    
    
    (992
    )$
    (7,288
    )
    
    $
    (16,079
    )
    
    $
    (9,690
    )
    
    $
    (102,096
    )
   September 30,
    
    
    December 31,2006
    
    
    2005Cumulative foreign currency translation adjustments
    
    $
    (172
    )
    
    $
    317Cumulative minimum pension liability adjustments
    
    
    (20,891
    )
    
    
    (20,891
    )$
    (21,063
    )
    
    $
    (20,574
    )
 (18) Industry Segment and Geographic Information
 Disclosure About Segments of an Enterprise and
Related Information
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Revenues   unaffiliated customers:Allied Automotive Group
    
    $
    194,836
    
    
    $
    196,440
    
    
    $
    666,669
    
    
    $
    636,943Axis Group
    
    
    7,315
    
    
    
    6,650
    
    
    
    21,692
    
    
    
    19,651Total
    
    $
    202,151
    
    
    $
    203,090
    
    
    $
    688,361
    
    
    $
    656,594Operating income (loss):Allied Automotive Group
    
    $
    (2,334
    )
    
    $
    (5,153
    )
    
    $
    17,667
    
    
    $
    (73,986
    )Axis Group
    
    
    1,742
    
    
    
    800
    
    
    
    5,073
    
    
    
    1,792Corporate/other
    
    
    (374
    )
    
    
    (844
    )
    
    
    (1,996
    )
    
    
    (6,972
    )Total
    
    
    (966
    )
    
    
    (5,197
    )
    
    
    20,744
    
    
    
    (79,166
    )Reconciling items:Interest expense
    
    
    (5,537
    )
    
    
    (9,571
    )
    
    
    (24,603
    )
    
    
    (32,522
    )Investment income
    
    
    1,252
    
    
    
    847
    
    
    
    3,500
    
    
    
    1,863Foreign exchange gains, net
    
    
    257
    
    
    
    1,893
    
    
    
    1,842
    
    
    
    1,282(Loss) income before reorganization items and income taxes
    
    
    (4,994
    )
    
    
    (12,028
    )
    
    
    1,483
    
    
    
    (108,543
    )Reorganization items
    
    
    (2,082
    )
    
    
    (3,929
    )
    
    
    (10,372
    )
    
    
    (3,929
    )Loss before income taxes
    
    $
    (7,076
    )
    
    $
    (15,957
    )
    
    $
    (8,889
    )
    
    $
    (112,472
    )
  24




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 September 30,
    
    
    December 31,2006
    
    
    2005Allied Automotive Group
    
    $
    199,898
    
    
    $
    233,394Axis Group
    
    
    21,515
    
    
    
    22,141Corporate/other
    
    
    115,743
    
    
    
    127,581Total
    
    $
    337,156
    
    
    $
    383,116
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Revenues:United States
    
    $
    155,584
    
    
    $
    163,860
    
    
    $
    535,603
    
    
    $
    528,562Canada
    
    
    46,567
    
    
    
    39,230
    
    
    
    152,758
    
    
    
    128,032Total
    
    $
    202,151
    
    
    $
    203,090
    
    
    $
    688,361
    
    
    $
    656,594
 September 30,
    
    
    December 31,2006
    
    
    2005Long-lived assets:United States
    
    $
    93,776
    
    
    $
    90,223Canada
    
    
    35,164
    
    
    
    33,681Total
    
    $
    128,940
    
    
    $
    123,904
   (19) Supplemental Guarantor Information
   25




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 SUPPLEMENTAL CONSOLIDATING BALANCE SHEET INFORMATION
September 30, 2006
(In thousands)
 Allied
    
    
    Guarantor
    
    
    NonguarantorHoldings
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCurrent assets:Cash and cash equivalents
    
    $
    
    
    
    $
    389
    
    
    $
    5,473
    
    
    $
    
    
    
    $
    5,862Restricted cash, cash equivalents and other time deposits
    
    
    
    
    
    
    
    
    
    
    32,537
    
    
    
    
    
    
    
    32,537Receivables, net of allowances
    
    
    
    
    
    
    48,155
    
    
    
    1,984
    
    
    
    
    
    
    
    50,139Inventories
    
    
    
    
    
    
    5,181
    
    
    
    
    
    
    
    
    
    
    
    5,181Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    (26
    )
    
    
    26
    
    
    
    Prepayments and other
current assets
    
    
    889
    
    
    
    18,642
    
    
    
    1,152
    
    
    
    
    
    
    
    20,683Total current assets
    
    
    889
    
    
    
    72,367
    
    
    
    41,120
    
    
    
    26
    
    
    
    114,402Property and equipment, net of accumulated depreciation
    
    
    3,322
    
    
    
    122,237
    
    
    
    3,381
    
    
    
    
    
    
    
    128,940Goodwill, net
    
    
    
    
    
    
    3,545
    
    
    
    
    
    
    
    
    
    
    
    3,545Other assets:Restricted cash, cash equivalents and other time deposits
    
    
    
    
    
    
    
    
    
    
    66,059
    
    
    
    
    
    
    
    66,059Deferred income taxes
    
    
    127
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    127Other noncurrent assets
    
    
    6,421
    
    
    
    16,421
    
    
    
    1,241
    
    
    
    
    
    
    
    24,083Intercompany receivables (payables)
    
    
    79,331
    
    
    
    (79,331
    )
    
    
    
    
    
    
    
    
    
    
    Investment in subsidiaries
    
    
    (90,843
    )
    
    
    5,884
    
    
    
    
    
    
    
    84,959
    
    
    
    Total other assets
    
    
    (4,964
    )
    
    
    (57,026
    )
    
    
    67,300
    
    
    
    84,959
    
    
    
    90,269Total assets
    
    $
    (753
    )
    
    $
    141,123
    
    
    $
    111,801
    
    
    $
    84,985
    
    
    $
    337,156Current liabilities not subject to compromise:Debtor-in-possession credit facility
    
    $
    156,172
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    156,172Accounts and notes payable
    
    
    4,417
    
    
    
    24,289
    
    
    
    391
    
    
    
    
    
    
    
    29,097Intercompany (receivables) payables
    
    
    (129,559
    )
    
    
    109,463
    
    
    
    20,096
    
    
    
    
    
    
    
    Accrued liabilities
    
    
    4,154
    
    
    
    49,392
    
    
    
    22,402
    
    
    
    (1,303
    )
    
    
    74,645Deferred income taxes
    
    
    145
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    145Total current liabilities
    
    
    35,329
    
    
    
    183,144
    
    
    
    42,889
    
    
    
    (1,303
    )
    
    
    260,059Long-term liabilities not subject to compromise:Postretirement benefits other than pensions
    
    
    
    
    
    
    4,314
    
    
    
    
    
    
    
    
    
    
    
    4,314Other long-term liabilities
    
    
    3,185
    
    
    
    20,220
    
    
    
    46,956
    
    
    
    
    
    
    
    70,361Total long-term liabilities
    
    
    3,185
    
    
    
    24,534
    
    
    
    46,956
    
    
    
    
    
    
    
    74,675Liabilities subject to compromise
    
    
    157,510
    
    
    
    41,689
    
    
    
    
    
    
    
    
    
    
    
    199,199Commitments and contingencies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stockholders (deficit) equity :Preferred stock, no par value
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Common stock, no par value
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Additional paid-in capital
    
    
    48,825
    
    
    
    166,130
    
    
    
    2,488
    
    
    
    (168,618
    )
    
    
    48,825Treasury stock
    
    
    (707
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (707
    )(Accumulated deficit) retained earnings
    
    
    (223,832
    )
    
    
    (257,477
    )
    
    
    19,468
    
    
    
    238,009
    
    
    
    (223,832
    )Accumulated other comprehensive loss,
net of tax
    
    
    (21,063
    )
    
    
    (16,897
    )
    
    
    
    
    
    
    16,897
    
    
    
    (21,063
    )Total stockholders (deficit) equity
    
    
    (196,777
    )
    
    
    (108,244
    )
    
    
    21,956
    
    
    
    86,288
    
    
    
    (196,777
    )Total liabilities and stockholders
(deficit) equity
    
    $
    (753
    )
    
    $
    141,123
    
    
    $
    111,801
    
    
    $
    84,985
    
    
    $
    337,156
 26




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 SUPPLEMENTAL CONSOLIDATING BALANCE SHEET INFORMATION
December 31, 2005
(In thousands)
 Allied
    
    
    Guarantor
    
    
    NonguarantorHoldings
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCurrent assets:Cash and cash equivalents
    
    $
    
    
    
    $
    730
    
    
    $
    3,387
    
    
    $
    
    
    
    $
    4,117Restricted cash, cash equivalents and other time deposits
    
    
    
    
    
    
    
    
    
    
    32,830
    
    
    
    
    
    
    
    32,830Receivables, net of allowances
    
    
    
    
    
    
    59,896
    
    
    
    1,531
    
    
    
    
    
    
    
    61,427Inventories
    
    
    
    
    
    
    5,132
    
    
    
    
    
    
    
    
    
    
    
    5,132Deferred income taxes
    
    
    151
    
    
    
    
    
    
    
    (23
    )
    
    
    
    
    
    
    128Prepayments and other current assets
    
    
    3,364
    
    
    
    52,535
    
    
    
    3,535
    
    
    
    
    
    
    
    59,434Total current assets
    
    
    3,515
    
    
    
    118,293
    
    
    
    41,260
    
    
    
    
    
    
    
    163,068Property and equipment, net of accumulated depreciation
    
    
    3,762
    
    
    
    116,450
    
    
    
    3,692
    
    
    
    
    
    
    
    123,904Goodwill, net
    
    
    
    
    
    
    3,545
    
    
    
    
    
    
    
    
    
    
    
    3,545Other assets:Restricted cash, cash equivalents and other time deposits
    
    
    
    
    
    
    
    
    
    
    69,764
    
    
    
    
    
    
    
    69,764Other noncurrent assets
    
    
    11,826
    
    
    
    10,541
    
    
    
    468
    
    
    
    
    
    
    
    22,835Intercompany receivables (payables)
    
    
    76,862
    
    
    
    (76,862
    )
    
    
    
    
    
    
    
    
    
    
    Investment in subsidiaries
    
    
    (95,374
    )
    
    
    5,282
    
    
    
    
    
    
    
    90,092
    
    
    
    Total other assets
    
    
    (6,686
    )
    
    
    (61,039
    )
    
    
    70,232
    
    
    
    90,092
    
    
    
    92,599Total assets
    
    $
    591
    
    
    $
    177,249
    
    
    $
    115,184
    
    
    $
    90,092
    
    
    $
    383,116Current liabilities not subject to compromise:Debtor-in-possession credit facility
    
    $
    151,997
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    151,997Accounts and notes payable
    
    
    3,764
    
    
    
    52,682
    
    
    
    750
    
    
    
    
    
    
    
    57,196Intercompany (receivables) payables
    
    
    (133,008
    )
    
    
    117,201
    
    
    
    15,807
    
    
    
    
    
    
    
    Accrued liabilities
    
    
    5,027
    
    
    
    50,812
    
    
    
    27,478
    
    
    
    
    
    
    
    83,317Total current liabilities
    
    
    27,780
    
    
    
    220,695
    
    
    
    44,035
    
    
    
    
    
    
    
    292,510Long-term liabilities not subject to compromise:Postretirement benefits other than pensions
    
    
    
    
    
    
    4,412
    
    
    
    
    
    
    
    
    
    
    
    4,412Deferred income taxes
    
    
    143
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    143Other long-term liabilities
    
    
    2,521
    
    
    
    19,608
    
    
    
    51,967
    
    
    
    
    
    
    
    74,096Total long-term liabilities
    
    
    2,664
    
    
    
    24,020
    
    
    
    51,967
    
    
    
    
    
    
    
    78,651Liabilities subject to compromise
    
    
    157,514
    
    
    
    41,808
    
    
    
    
    
    
    
    
    
    
    
    199,322Commitments and contingencies
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stockholders (deficit) equity :Preferred stock, no par value
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Common stock, no par value
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Additional paid-in capital
    
    
    48,545
    
    
    
    166,130
    
    
    
    2,488
    
    
    
    (168,618
    )
    
    
    48,545Treasury stock
    
    
    (707
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (707
    )(Accumulated deficit) retained earnings
    
    
    (214,631
    )
    
    
    (261,466
    )
    
    
    16,694
    
    
    
    244,772
    
    
    
    (214,631
    )Accumulated other comprehensive loss,
net of tax
    
    
    (20,574
    )
    
    
    (13,938
    )
    
    
    
    
    
    
    13,938
    
    
    
    (20,574
    )Total stockholders (deficit) equity
    
    
    (187,367
    )
    
    
    (109,274
    )
    
    
    19,182
    
    
    
    90,092
    
    
    
    (187,367
    )Total liabilities and stockholders
(deficit) equity
    
    $
    591
    
    
    $
    177,249
    
    
    $
    115,184
    
    
    $
    90,092
    
    
    $
    383,116
 27




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
Three Months Ended September 30, 2006
(In thousands)
 Allied
    
    
    Guarantor
    
    
    NonguarantorHoldings
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    6,512
    
    
    $
    201,084
    
    
    $
    1,407
    
    
    $
    (6,852
    )
    
    $
    202,151Operating expenses:Salaries, wages and fringe benefits
    
    
    727
    
    
    
    103,890
    
    
    
    280
    
    
    
    
    
    
    
    104,897Operating supplies and expenses
    
    
    3,416
    
    
    
    39,559
    
    
    
    246
    
    
    
    
    
    
    
    43,221Purchased transportation
    
    
    
    
    
    
    26,094
    
    
    
    17
    
    
    
    
    
    
    
    26,111Insurance and claims
    
    
    19
    
    
    
    9,982
    
    
    
    345
    
    
    
    (340
    )
    
    
    10,006Operating taxes and licenses
    
    
    61
    
    
    
    6,555
    
    
    
    
    
    
    
    
    
    
    
    6,616Depreciation and amortization
    
    
    208
    
    
    
    6,559
    
    
    
    160
    
    
    
    
    
    
    
    6,927Rents
    
    
    395
    
    
    
    1,443
    
    
    
    4
    
    
    
    
    
    
    
    1,842Communications and utilities
    
    
    892
    
    
    
    532
    
    
    
    14
    
    
    
    
    
    
    
    1,438Other operating expenses
    
    
    1,119
    
    
    
    7,400
    
    
    
    57
    
    
    
    (6,512
    )
    
    
    2,064Gain on disposal of operating assets, net
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    (5
    )Total operating expenses
    
    
    6,837
    
    
    
    202,009
    
    
    
    1,123
    
    
    
    (6,852
    )
    
    
    203,117Operating (loss) income
    
    
    (325
    )
    
    
    (925
    )
    
    
    284
    
    
    
    
    
    
    
    (966
    )Other income (expense):Interest expense
    
    
    709
    
    
    
    (6,202
    )
    
    
    (44
    )
    
    
    
    
    
    
    (5,537
    )Investment income
    
    
    
    
    
    
    16
    
    
    
    1,236
    
    
    
    
    
    
    
    1,252Foreign exchange gains, net
    
    
    
    
    
    
    194
    
    
    
    63
    
    
    
    
    
    
    
    257Equity in (losses) earnings of subsidiaries
    
    
    (5,350
    )
    
    
    231
    
    
    
    
    
    
    
    5,119
    
    
    
    Total other income (expense)
    
    
    (4,641
    )
    
    
    (5,761
    )
    
    
    1,255
    
    
    
    5,119
    
    
    
    (4,028
    )(Loss) income before reorganization items and income taxes
    
    
    (4,966
    )
    
    
    (6,686
    )
    
    
    1,539
    
    
    
    5,119
    
    
    
    (4,994
    )Reorganization items
    
    
    (2,213
    )
    
    
    131
    
    
    
    
    
    
    
    
    
    
    
    (2,082
    )(Loss) income before income taxes
    
    
    (7,179
    )
    
    
    (6,555
    )
    
    
    1,539
    
    
    
    5,119
    
    
    
    (7,076
    )Income tax expense
    
    
    (19
    )
    
    
    (9
    )
    
    
    (785
    )
    
    
    691
    
    
    
    (122
    )Net (loss) income
    
    $
    (7,198
    )
    
    $
    (6,564
    )
    
    $
    754
    
    
    $
    5,810
    
    
    $
    (7,198
    )
 SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
Three Months Ended September 30, 2005
(In thousands)
 Allied
    
    
    Guarantor
    
    
    NonguarantorHoldings
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    6,680
    
    
    $
    202,667
    
    
    $
    9,954
    
    
    $
    (16,211
    )
    
    $
    203,090Operating expenses:Salaries, wages and fringe benefits
    
    
    839
    
    
    
    109,446
    
    
    
    
    
    
    
    
    
    
    
    110,285Operating supplies and expenses
    
    
    3,454
    
    
    
    38,210
    
    
    
    117
    
    
    
    
    
    
    
    41,781Purchased transportation
    
    
    
    
    
    
    28,457
    
    
    
    129
    
    
    
    
    
    
    
    28,586Insurance and claims
    
    
    
    
    
    
    8,585
    
    
    
    9,533
    
    
    
    (9,531
    )
    
    
    8,587Operating taxes and licenses
    
    
    47
    
    
    
    6,738
    
    
    
    
    
    
    
    
    
    
    
    6,785Depreciation and amortization
    
    
    225
    
    
    
    6,333
    
    
    
    140
    
    
    
    
    
    
    
    6,698Rents
    
    
    373
    
    
    
    1,434
    
    
    
    3
    
    
    
    
    
    
    
    1,810Communications and utilities
    
    
    675
    
    
    
    500
    
    
    
    10
    
    
    
    
    
    
    
    1,185Other operating expenses
    
    
    1,873
    
    
    
    7,412
    
    
    
    50
    
    
    
    (6,680
    )
    
    
    2,655Impairment of goodwill
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gain on disposal of operating assets, net
    
    
    
    
    
    
    (85
    )
    
    
    
    
    
    
    
    
    
    
    (85
    )Total operating expenses
    
    
    7,486
    
    
    
    207,030
    
    
    
    9,982
    
    
    
    (16,211
    )
    
    
    208,287Operating loss
    
    
    (806
    )
    
    
    (4,363
    )
    
    
    (28
    )
    
    
    
    
    
    
    (5,197
    )Other income (expense):Interest expense
    
    
    74
    
    
    
    (9,579
    )
    
    
    (66
    )
    
    
    
    
    
    
    (9,571
    )Investment income
    
    
    
    
    
    
    11
    
    
    
    836
    
    
    
    
    
    
    
    847Foreign exchange gains
    
    
    
    
    
    
    1,709
    
    
    
    184
    
    
    
    
    
    
    
    1,893Equity in losses of subsidiaries
    
    
    (11,439
    )
    
    
    594
    
    
    
    
    
    
    
    10,845
    
    
    
    Total other income (expense)
    
    
    (11,365
    )
    
    
    (7,265
    )
    
    
    954
    
    
    
    10,845
    
    
    
    (6,831
    )(Loss) income before reorganization items and income taxes
    
    
    (12,171
    )
    
    
    (11,628
    )
    
    
    926
    
    
    
    10,845
    
    
    
    (12,028
    )Reorganization items
    
    
    (3,825
    )
    
    
    (104
    )
    
    
    
    
    
    
    
    
    
    
    (3,929
    )(Loss) income before income taxes
    
    
    (15,996
    )
    
    
    (11,732
    )
    
    
    926
    
    
    
    10,845
    
    
    
    (15,957
    )Income tax expense
    
    
    
    
    
    
    (37
    )
    
    
    (2
    )
    
    
    
    
    
    
    (39
    )Net (loss) income
    
    $
    (15,996
    )
    
    $
    (11,769
    )
    
    $
    924
    
    
    $
    10,845
    
    
    $
    (15,996
    )
 28




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
Nine Months Ended September 30, 2006
(In thousands)
 Allied
    
    
    Guarantor
    
    
    NonguarantorHoldings
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    19,537
    
    
    $
    685,444
    
    
    $
    3,938
    
    
    $
    (20,558
    )
    
    $
    688,361Operating expenses:Salaries, wages and fringe benefits
    
    
    2,900
    
    
    
    341,668
    
    
    
    805
    
    
    
    
    
    
    
    345,373Operating supplies and expenses
    
    
    10,273
    
    
    
    131,430
    
    
    
    521
    
    
    
    
    
    
    
    142,224Purchased transportation
    
    
    
    
    
    
    89,635
    
    
    
    54
    
    
    
    
    
    
    
    89,689Insurance and claims
    
    
    19
    
    
    
    31,144
    
    
    
    1,032
    
    
    
    (1,021
    )
    
    
    31,174Operating taxes and licenses
    
    
    175
    
    
    
    21,494
    
    
    
    
    
    
    
    
    
    
    
    21,669Depreciation and amortization
    
    
    609
    
    
    
    20,337
    
    
    
    480
    
    
    
    
    
    
    
    21,426Rents
    
    
    1,135
    
    
    
    4,186
    
    
    
    13
    
    
    
    
    
    
    
    5,334Communications and utilities
    
    
    2,590
    
    
    
    2,247
    
    
    
    39
    
    
    
    
    
    
    
    4,876Other operating expenses
    
    
    3,723
    
    
    
    21,757
    
    
    
    169
    
    
    
    (19,537
    )
    
    
    6,112Gain on disposal of operating assets, net
    
    
    
    
    
    
    (260
    )
    
    
    
    
    
    
    
    
    
    
    (260
    )Total operating expenses
    
    
    21,424
    
    
    
    663,638
    
    
    
    3,113
    
    
    
    (20,558
    )
    
    
    667,617Operating (loss) income
    
    
    (1,887
    )
    
    
    21,806
    
    
    
    825
    
    
    
    
    
    
    
    20,744Other income (expense):Interest expense
    
    
    (4,591
    )
    
    
    (19,852
    )
    
    
    (160
    )
    
    
    
    
    
    
    (24,603
    )Investment income
    
    
    
    
    
    
    41
    
    
    
    3,459
    
    
    
    
    
    
    
    3,500Foreign exchange gains, net
    
    
    
    
    
    
    1,620
    
    
    
    222
    
    
    
    
    
    
    
    1,842Equity in earnings of subsidiaries
    
    
    7,487
    
    
    
    601
    
    
    
    
    
    
    
    (8,088
    )
    
    
    Total other income (expense)
    
    
    2,896
    
    
    
    (17,590
    )
    
    
    3,521
    
    
    
    (8,088
    )
    
    
    (19,261
    )Income before reorganization items and income taxes
    
    
    1,009
    
    
    
    4,216
    
    
    
    4,346
    
    
    
    (8,088
    )
    
    
    1,483Reorganization items
    
    
    (10,154
    )
    
    
    (218
    )
    
    
    
    
    
    
    
    
    
    
    (10,372
    )(Loss) income before income taxes
    
    
    (9,145
    )
    
    
    3,998
    
    
    
    4,346
    
    
    
    (8,088
    )
    
    
    (8,889
    )Income tax expense
    
    
    (56
    )
    
    
    (12
    )
    
    
    (1,573
    )
    
    
    1,329
    
    
    
    (312
    )Net (loss) income
    
    $
    (9,201
    )
    
    $
    3,986
    
    
    $
    2,773
    
    
    $
    (6,759
    )
    
    $
    (9,201
    )
 SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
Nine Months Ended September 30, 2005
(In thousands)
 Allied
    
    
    Guarantor
    
    
    NonguarantorHoldings
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues
    
    $
    20,040
    
    
    $
    655,340
    
    
    $
    29,846
    
    
    $
    (48,632
    )
    
    $
    656,594Operating expenses:Salaries, wages and fringe benefits
    
    
    3,870
    
    
    
    345,748
    
    
    
    
    
    
    
    
    
    
    
    349,618Operating supplies and expenses
    
    
    10,286
    
    
    
    116,837
    
    
    
    282
    
    
    
    
    
    
    
    127,405Purchased transportation
    
    
    
    
    
    
    88,700
    
    
    
    129
    
    
    
    
    
    
    
    88,829Insurance and claims
    
    
    
    
    
    
    26,584
    
    
    
    29,173
    
    
    
    (28,592
    )
    
    
    27,165Operating taxes and licenses
    
    
    142
    
    
    
    22,054
    
    
    
    
    
    
    
    
    
    
    
    22,196Depreciation and amortization
    
    
    922
    
    
    
    20,611
    
    
    
    407
    
    
    
    
    
    
    
    21,940Rents
    
    
    1,123
    
    
    
    4,478
    
    
    
    7
    
    
    
    
    
    
    
    5,608Communications and utilities
    
    
    2,488
    
    
    
    2,066
    
    
    
    21
    
    
    
    
    
    
    
    4,575Other operating expenses
    
    
    6,565
    
    
    
    23,057
    
    
    
    132
    
    
    
    (20,040
    )
    
    
    9,714Impairment of goodwill
    
    
    1,515
    
    
    
    77,657
    
    
    
    
    
    
    
    
    
    
    
    79,172Gain on disposal of operating assets, net
    
    
    (2
    )
    
    
    (460
    )
    
    
    
    
    
    
    
    
    
    
    (462
    )Total operating expenses
    
    
    26,909
    
    
    
    727,332
    
    
    
    30,151
    
    
    
    (48,632
    )
    
    
    735,760Operating loss
    
    
    (6,869
    )
    
    
    (71,992
    )
    
    
    (305
    )
    
    
    
    
    
    
    (79,166
    )Other income (expense):Interest expense
    
    
    (2,092
    )
    
    
    (30,245
    )
    
    
    (185
    )
    
    
    
    
    
    
    (32,522
    )Investment income
    
    
    
    
    
    
    29
    
    
    
    1,834
    
    
    
    
    
    
    
    1,863Foreign exchange gains
    
    
    
    
    
    
    1,122
    
    
    
    160
    
    
    
    
    
    
    
    1,282Equity in (losses) earnings of subsidiaries
    
    
    (88,318
    )
    
    
    897
    
    
    
    
    
    
    
    87,421
    
    
    
    Total other income (expense)
    
    
    (90,410
    )
    
    
    (28,197
    )
    
    
    1,809
    
    
    
    87,421
    
    
    
    (29,377
    )(Loss) income before reorganization items and income taxes
    
    
    (97,279
    )
    
    
    (100,189
    )
    
    
    1,504
    
    
    
    87,421
    
    
    
    (108,543
    )Reorganization items
    
    
    (3,825
    )
    
    
    (104
    )
    
    
    
    
    
    
    
    
    
    
    (3,929
    )(Loss) income before income taxes
    
    
    (101,104
    )
    
    
    (100,293
    )
    
    
    1,504
    
    
    
    87,421
    
    
    
    (112,472
    )Income tax benefit (expense)
    
    
    
    
    
    
    11,497
    
    
    
    (129
    )
    
    
    
    
    
    
    11,368Net (loss) income
    
    $
    (101,104
    )
    
    $
    (88,796
    )
    
    $
    1,375
    
    
    $
    87,421
    
    
    $
    (101,104
    )
 29




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
Nine Months Ended September 30, 2006
(In thousands)
 Allied
    
    
    Guarantor
    
    
    NonguarantorHoldings
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net (loss) income
    
    $
    (9,201
    )
    
    $
    3,986
    
    
    $
    2,773
    
    
    $
    (6,759
    )
    
    $
    (9,201
    )Adjustments to reconcile net (loss) income to net
cash (used in) provided by operating activities:Depreciation and amortization
    
    
    609
    
    
    
    20,337
    
    
    
    480
    
    
    
    
    
    
    
    21,426Gain on disposal of assets and other, net
    
    
    
    
    
    
    (260
    )
    
    
    
    
    
    
    
    
    
    
    (260
    )Write-off and amortization of deferred financing costs
    
    
    5,706
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,706Interest expense paid in kind
    
    
    3,045
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,045Foreign exchange gains
    
    
    
    
    
    
    (1,620
    )
    
    
    (222
    )
    
    
    
    
    
    
    (1,842
    )Reorganization items
    
    
    10,154
    
    
    
    218
    
    
    
    
    
    
    
    
    
    
    
    10,372Deferred income taxes
    
    
    26
    
    
    
    
    
    
    
    3
    
    
    
    (26
    )
    
    
    3Stock-based compensation expense
    
    
    280
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    280Equity in earnings of subsidiaries
    
    
    (7,487
    )
    
    
    (601
    )
    
    
    
    
    
    
    8,088
    
    
    
    Change in operating assets and liabilities:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Receivables, net of allowances
    
    
    
    
    
    
    12,218
    
    
    
    (453
    )
    
    
    
    
    
    
    11,765Inventories
    
    
    
    
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    9Prepayments and other assets
    
    
    2,502
    
    
    
    25,987
    
    
    
    1,497
    
    
    
    
    
    
    
    29,986Accounts and notes payable
    
    
    649
    
    
    
    1,764
    
    
    
    (359
    )
    
    
    
    
    
    
    2,054Intercompany payables/receivables
    
    
    3,448
    
    
    
    (7,737
    )
    
    
    4,289
    
    
    
    
    
    
    
    Accrued liabilities
    
    
    (912
    )
    
    
    (1,782
    )
    
    
    (10,087
    )
    
    
    (1,303
    )
    
    
    (14,084
    )Net cash provided by (used in) operating activities
before payment of reorganization items
    
    
    8,819
    
    
    
    52,519
    
    
    
    (2,079
    )
    
    
    
    
    
    
    59,259Reorganization items paid
    
    
    (9,452
    )
    
    
    (177
    )
    
    
    
    
    
    
    
    
    
    
    (9,629
    )Net cash (used in) provided by operating activities
    
    
    (633
    )
    
    
    52,342
    
    
    
    (2,079
    )
    
    
    
    
    
    
    49,630Cash flows from investing activities:Purchases of property and equipment
    
    
    (152
    )
    
    
    (25,461
    )
    
    
    (55
    )
    
    
    
    
    
    
    (25,668
    )Proceeds from sales of property and equipment
    
    
    
    
    
    
    927
    
    
    
    
    
    
    
    
    
    
    
    927Decrease in restricted cash, cash equivalents and other time deposits
    
    
    
    
    
    
    
    
    
    
    3,998
    
    
    
    
    
    
    
    3,998Funds deposited with insurance carriers
    
    
    
    
    
    
    (1,008
    )
    
    
    
    
    
    
    
    
    
    
    (1,008
    )Funds returned from insurance carriers
    
    
    
    
    
    
    3,395
    
    
    
    
    
    
    
    
    
    
    
    3,395Net cash (used in) provided by investing activities
    
    
    (152
    )
    
    
    (22,147
    )
    
    
    3,943
    
    
    
    
    
    
    
    (18,356
    )Cash flows from financing activities:Repayments of debtor-in-possession revolving credit facilities, net
    
    
    (8,870
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,870
    )Additions to debtor-in-possession term debt
    
    
    10,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,000Payment of deferred financing costs
    
    
    (345
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (345
    )Proceeds from insurance financing arrangements
    
    
    
    
    
    
    178
    
    
    
    
    
    
    
    
    
    
    
    178Repayments of insurance financing arrangements
    
    
    
    
    
    
    (29,964
    )
    
    
    
    
    
    
    
    
    
    
    (29,964
    )Net cash used in financing activities
    
    
    785
    
    
    
    (29,786
    )
    
    
    
    
    
    
    
    
    
    
    (29,001
    )Effect of exchange rate changes on cash and
cash equivalents
    
    
    
    
    
    
    (750
    )
    
    
    222
    
    
    
    
    
    
    
    (528
    )Net change in cash and cash equivalents
    
    
    
    
    
    
    (341
    )
    
    
    2,086
    
    
    
    
    
    
    
    1,745Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    730
    
    
    
    3,387
    
    
    
    
    
    
    
    4,117Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    389
    
    
    $
    5,473
    
    
    $
    
    
    
    $
    5,862
 30




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##### Table of Contents



ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)
 SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
Nine Months Ended September 30, 2005
(In thousands)
 Allied
    
    
    Guarantor
    
    
    NonguarantorHoldings
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net (loss) income
    
    $
    (101,104
    )
    
    $
    (88,796
    )
    
    $
    1,375
    
    
    $
    87,421
    
    
    $
    (101,104
    )Adjustments to reconcile net (loss) income to net
cash (used in) provided by operating activities:Depreciation and amortization
    
    
    922
    
    
    
    20,611
    
    
    
    407
    
    
    
    
    
    
    
    21,940Impairment of goodwill
    
    
    1,515
    
    
    
    77,657
    
    
    
    
    
    
    
    
    
    
    
    79,172Gain on disposal of assets and other, net
    
    
    (2
    )
    
    
    (460
    )
    
    
    
    
    
    
    
    
    
    
    (462
    )Write-off and amortization of deferred financing costs
    
    
    7,368
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,368Foreign exchange gains
    
    
    
    
    
    
    (1,122
    )
    
    
    (160
    )
    
    
    
    
    
    
    (1,282
    )Reorganization items
    
    
    3,825
    
    
    
    104
    
    
    
    
    
    
    
    
    
    
    
    3,929Deferred income taxes
    
    
    20,994
    
    
    
    (32,284
    )
    
    
    29
    
    
    
    
    
    
    
    (11,261
    )Equity in losses (earnings) of subsidiaries
    
    
    88,318
    
    
    
    (897
    )
    
    
    
    
    
    
    (87,421
    )
    
    
    Change in operating assets and liabilities:Receivables, net of allowances
    
    
    
    
    
    
    2,058
    
    
    
    671
    
    
    
    
    
    
    
    2,729Inventories
    
    
    
    
    
    
    (547
    )
    
    
    
    
    
    
    
    
    
    
    (547
    )Prepayments and other assets
    
    
    (9,656
    )
    
    
    11,444
    
    
    
    (4,797
    )
    
    
    
    
    
    
    (3,009
    )Accounts and notes payable
    
    
    (218
    )
    
    
    (19
    )
    
    
    7,830
    
    
    
    
    
    
    
    7,593Intercompany payables (receivables)
    
    
    (154,745
    )
    
    
    142,822
    
    
    
    11,923
    
    
    
    
    
    
    
    Accrued liabilities
    
    
    1,861
    
    
    
    (5,084
    )
    
    
    2,931
    
    
    
    
    
    
    
    (292
    )Net cash (used in) provided by operating activities
before payment of reorganization items
    
    
    (140,922
    )
    
    
    125,487
    
    
    
    20,209
    
    
    
    
    
    
    
    4,774Reorganization items paid
    
    
    (712
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (712
    )Net cash (used in) provided by operating activities
    
    
    (141,634
    )
    
    
    125,487
    
    
    
    20,209
    
    
    
    
    
    
    
    4,062Cash flows from investing activities:Purchases of property and equipment
    
    
    
    
    
    
    (12,292
    )
    
    
    (282
    )
    
    
    
    
    
    
    (12,574
    )Proceeds from sale of property and equipment
    
    
    
    
    
    
    2,851
    
    
    
    
    
    
    
    
    
    
    
    2,851Increase in restricted cash, cash equivalents and other time deposits
    
    
    
    
    
    
    
    
    
    
    (19,686
    )
    
    
    
    
    
    
    (19,686
    )Funds deposited with insurance carriers
    
    
    
    
    
    
    (8,182
    )
    
    
    
    
    
    
    
    
    
    
    (8,182
    )Funds returned from insurance carriers
    
    
    
    
    
    
    4,131
    
    
    
    
    
    
    
    
    
    
    
    4,131Net cash used in investing activities
    
    
    
    
    
    
    (13,492
    )
    
    
    (19,968
    )
    
    
    
    
    
    
    (33,460
    )Cash flows from financing activities:Additions to DIP revolving credit facility, net
    
    
    41,517
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41,517Repayment of revolving credit facilities, net
    
    
    
    
    
    
    (2,972
    )
    
    
    
    
    
    
    
    
    
    
    (2,972
    )Additions to DIP facility term borrowings
    
    
    100,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,000Additions to pre-petition long-term debt
    
    
    
    
    
    
    25,000
    
    
    
    
    
    
    
    
    
    
    
    25,000Repayment of pre-petition long-term debt
    
    
    
    
    
    
    (123,266
    )
    
    
    
    
    
    
    
    
    
    
    (123,266
    )Payment of deferred financing costs
    
    
    
    
    
    
    (8,079
    )
    
    
    
    
    
    
    
    
    
    
    (8,079
    )Proceeds from insurance financing arrangements
    
    
    
    
    
    
    8,470
    
    
    
    
    
    
    
    
    
    
    
    8,470Repayments of insurance financing arrangements
    
    
    
    
    
    
    (10,122
    )
    
    
    
    
    
    
    
    
    
    
    (10,122
    )Proceeds from issuance of common stock
    
    
    124
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    124Net cash provided by (used in) financing activities
    
    
    141,641
    
    
    
    (110,969
    )
    
    
    
    
    
    
    
    
    
    
    30,672Effect of exchange rate changes on cash and
cash equivalents
    
    
    
    
    
    
    (54
    )
    
    
    160
    
    
    
    
    
    
    
    106Net change in cash and cash equivalents
    
    
    7
    
    
    
    972
    
    
    
    401
    
    
    
    
    
    
    
    1,380Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    533
    
    
    
    1,983
    
    
    
    
    
    
    
    2,516Cash and cash equivalents at end of period
    
    $
    7
    
    
    $
    1,505
    
    
    $
    2,384
    
    
    $
    
    
    
    $
    3,896
 31




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 You should read the discussion and analysis in this section in conjunction with the consolidated
financial statements and accompanying notes included in Item 1. Financial Statements of this
Quarterly Report on Form 10-Q and the consolidated financial statements, related notes and other
financial information included in our Annual Report on Form10-K for the year ended December 31,
2005. In addition, we use forward-looking statements in the discussion that follows.
Forward-looking statements by nature involve risks and uncertainties and hence our actual results
could differ materially from our expectations as a result of various factors, some of which we
discuss below under Item 1A Risk Factors in this Quarterly Report on Form 10-Q.
 Executive Overview
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Due to these uncertainties, an investment in our common stock
or debt securities is highly speculative and accordingly, we urge investors to exercise caution
with respect to existing and future investments in our common stock or debt securities.
   
    
    Results of Operations;
    
    Liquidity and Capital Resources;
    
    Off-Balance Sheet Arrangements;
    
    Disclosures About Market Risks;
    
    Critical Accounting Policies and Estimates;
    
    Recent Accounting Pronouncements;
    
    Factors Which May Affect Future Results; and
    
    Cautionary Notice Regarding Forward-looking Statements.
 33




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Results of Operations
 Three Months Ended September 30, 2006 Compared to Three Months Ended September 30, 2005
  Three Months Ended September 30,2006
    
    2005As a % of revenuesRevenues
    
    
    100.0
    %
    
    
    100.0
    %Operating expenses:Salaries, wages and fringe benefits
    
    
    51.9
    %
    
    
    54.3
    %Operating supplies and expenses
    
    
    21.4
    %
    
    
    20.6
    %Purchased transportation
    
    
    12.9
    %
    
    
    14.1
    %Insurance and claims
    
    
    4.9
    %
    
    
    4.2
    %Operating taxes and licenses
    
    
    3.3
    %
    
    
    3.3
    %Depreciation and amortization
    
    
    3.4
    %
    
    
    3.3
    %Rents
    
    
    0.9
    %
    
    
    0.9
    %Communications and utilities
    
    
    0.7
    %
    
    
    0.6
    %Other operating expenses
    
    
    1.0
    %
    
    
    1.3
    %Impairment of goodwill
    
    
    0.0
    %
    
    
    0.0
    %Gain on disposal of operating assets
    
    
    (0.0
    )%
    
    
    0.0
    %Total operating expenses
    
    
    100.4
    %
    
    
    102.6
    %Operating loss
    
    
    (0.4
    )%
    
    
    (2.6
    )%Other income (expense):Interest expense
    
    
    (2.7
    )%
    
    
    (4.7
    )%Investment income
    
    
    0.6
    %
    
    
    0.4
    %Foreign exchange gains, net
    
    
    0.1
    %
    
    
    0.9
    %Total other income (expense)
    
    
    (2.0
    )%
    
    
    (3.4
    )%Loss before reorganization items and income taxes
    
    
    (2.4
    )%
    
    
    (6.0
    )%Reorganization items
    
    
    (1.0
    )%
    
    
    (1.9
    )%Loss before income taxes
    
    
    (3.4
    )%
    
    
    (7.9
    )%Income tax expense
    
    
    (0.1
    )%
    
    
    0.0
    %Net loss
    
    
    (3.5
    )%
    
    
    (7.9
    )%
 Revenues
   34




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35




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Salaries, wages and fringe benefits
    Operating supplies and expenses
  36




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Purchased transportation
  Insurance and claims
  Other operating expenses
  Interest expense
    Investment income
  Foreign exchange gains, net
  37




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Reorganization items
  Income taxes
  Nine Months Ended September 30, 2006 Compared to Nine Months Ended September 30, 2005
  38




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Nine Months Ended September 30,2006
    
    2005As a % of revenuesRevenues
    
    
    100.0
    %
    
    
    100.0
    %Operating expenses:Salaries, wages and fringe benefits
    
    
    50.2
    %
    
    
    53.2
    %Operating supplies and expenses
    
    
    20.7
    %
    
    
    19.4
    %Purchased transportation
    
    
    13.0
    %
    
    
    13.5
    %Insurance and claims
    
    
    4.5
    %
    
    
    4.1
    %Operating taxes and licenses
    
    
    3.1
    %
    
    
    3.4
    %Depreciation and amortization
    
    
    3.1
    %
    
    
    3.3
    %Rents
    
    
    0.8
    %
    
    
    0.9
    %Communications and utilities
    
    
    0.7
    %
    
    
    0.7
    %Other operating expenses
    
    
    0.9
    %
    
    
    1.5
    %Impairment of goodwill
    
    
    0.0
    %
    
    
    12.1
    %Gain on disposal of operating assets
    
    
    (0.0
    )%
    
    
    (0.1
    )%Total operating expenses
    
    
    97.0
    %
    
    
    112.0
    %Operating income (loss)
    
    
    3.0
    %
    
    
    (12.0
    )%Other income (expense):Interest expense
    
    
    (3.6
    )%
    
    
    (5.0
    )%Investment income
    
    
    0.5
    %
    
    
    0.3
    %Foreign exchange gains, net
    
    
    0.3
    %
    
    
    0.2
    %Total other income (expense)
    
    
    (2.8
    )%
    
    
    (4.5
    )%Income (loss) before reorganization items and income taxes
    
    
    0.2
    %
    
    
    (16.5
    )%Reorganization items
    
    
    (1.5
    )%
    
    
    (0.6
    )%Loss before income taxes
    
    
    (1.3
    )%
    
    
    (17.1
    )%Income tax (expense) benefit
    
    
    (0.0
    )%
    
    
    1.7
    %Net loss
    
    
    (1.3
    )%
    
    
    (15.4
    )%
 Revenues
    39




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Salaries, wages and fringe benefits
   40




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Operating supplies and expenses
   Purchased transportation
  Insurance and claims
  Operating taxes and licenses
  41




---



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Depreciation and amortization
  Other operating expenses
  Impairment of goodwill
  Interest expense
     42




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Investment income
  Foreign exchange gains, net
  Reorganization items
  Income taxes
  Liquidity and Capital Resources
   43




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
    
    Rescheduling and deferring capital expenditures;
    
    Obtaining the Bankruptcy Courts approval to reduce wages paid to our collective
bargaining employees covered under the Master Agreement with the IBT by 10% for the months
of May and June 2006;
    
    Obtaining the Bankruptcy Courts approval to delay, to
July 1, 2006, wage and cost of living increases to
our collective bargaining employees that were previously scheduled to go into effect on
June 1, 2006;
    
    Implementing unpaid furloughs for certain nonbargaining employees for certain periods in
May and June 2006;
    
    Filing a motion with the Bankruptcy Court to terminate certain nonbargaining retiree
benefits, which motion is still pending approval by the Bankruptcy Court; and
    
    Implementing other internal cost-saving initiatives.
    Operating Activities
  44




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Investing Activities
     Financing Activities
  45




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Debt and Letters of Credit
    Off-Balance Sheet Arrangements
  Disclosures About Market Risks
  Fuel Prices
  Interest Rates
  46




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The Wall Street Journal
 Risk Management Retention
    Foreign Currency Exchange Rates
   Inflation
  Critical Accounting Policies and Estimates
  47




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Recent Accounting Pronouncements
  Factors Which May Affect Future Results
 Our business is subject to certain risks, including the risks set forth in Part II, Item 1A.Risk
Factors. Readers of this Quarterly Report on Form 10-Q should take such risks into account in
evaluating any investment decision involving our securities. More detailed information concerning
these and other risks is contained in other sections of this Quarterly Report on Form 10-Q and our
other reports filed with the SEC.
 Cautionary Notice Regarding Forward-Looking Statements
   
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures.
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##### Table of Contents



(b) Changes in Internal Control Over Financial Reporting.
      
 PART
II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
   
 Item 1A. Risk Factors
 Our business is subject to certain risks, including the risks described below. Readers of this
Quarterly Report on Form 10-Q should take such risks into account in evaluating any investment
decision involving our securities. This Item 1A does not describe all risks applicable to our
business and is intended only as a summary of certain material factors that affect our operations
and the vehicle-hauling industry in which we operate. More detailed information concerning these
and other risks is contained in other sections of this Quarterly Report on Form 10-Q and our other
reports filed with the SEC.
 We may not be able to successfully reorganize under Chapter 11, which would likely terminate
our future business prospects and our ability to continue as a going concern and result in a
liquidation of our assets.
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We have a significant amount of debt and substantially all our assets are pledged as collateral for
debt obligations, which could limit our operational flexibility and customer relationships or
otherwise adversely affect our financial condition.
  
    
    We may not be able to repay, refinance or extend our debt as it matures. The Revolver
under the DIP Facility matures on February 2, 2007, and the term loans under the DIP
Facility mature on June 30, 2007;
    
    If we are not able to refinance or extend our debt when it matures, we may not be able
to repay the debt;
    
    We may not be able to fund our insurance programs which must
be maintained in order for us to remain in business;
    
    Substantially all our assets are pledged as collateral for our debt and as a result we
are limited in our ability to sell assets to generate additional cash;
    
    Our flexibility in responding to changes in the business and industry may be reduced;
    
    We may be more vulnerable to economic downturns;
    
    Our major customers may further reduce production levels;
    
    We may be unable to invest in our fleet of Rigs;
    
    We may be unable to meet customer demands; and
    
    We may be limited in our ability to withstand competitive pressures.
 The terms of our DIP Facility place restrictions on us, which create risks of default and reduces
our flexibility.
   50




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##### Table of Contents



We will be required to make significant capital expenditures on our Rigs in the coming years or we
may not be able to maintain our current level of terminal operations or customer relationships.
   If we are not able to modify our Master Agreement with the IBT in the U.S. or renegotiate our other
union contracts on terms favorable to us as they expire, or if work stoppages or other labor
disruptions occur during such negotiations, it could preclude us from emerging from bankruptcy and
would have a material adverse effect on our operations.
   Rising interest rates could adversely affect our cash flow and interest expense.
   51




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A shortage of fuel or higher fuel prices resulting from fuel shortages or other factors could have
a detrimental effect on the automotive industry or the automotive transportation industry and could
materially and adversely affect our operations.
   A further decline in the automotive industry could have a material adverse effect on our
operations.
  The internal strategies of our largest customers could have a material effect on our performance.
  Losses may exceed our insurance coverage or reserves.
   52




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##### Table of Contents



We have a history of losses and may not be able to improve our performance to achieve
profitability.
  Our restricted cash, cash equivalents and other time deposits are not available for use in our
general operations even if they were needed to fund our operations.
  If we do not maintain our relationships with major customers or these relationships are terminated,
reduced or redesigned, our operations could be materially and adversely affected.
   Competition in the automotive transportation industry could result in a loss of our market share or
a reduction in our rates, which could have a material adverse effect on our operations.
  53




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Our common stock is not currently listed on a national securities exchange, which could make it
more difficult for investors to liquidate their shares, result in a decline in the stock price and
make it difficult for us to raise additional capital.
  Adverse changes in the foreign business climate, primarily in Canada, could adversely affect our
operations.
  Major changes in key personnel on whom we depend could adversely affect our operations.
  The loss of our Teamster drivers and mechanics could adversely affect our operations.
  We have previously had material weaknesses in our internal control over financial reporting,
and any unidentified material weaknesses could cause us to fail to meet our SEC and other
reporting requirements.
  54




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Item 6. Exhibits
 (a) Exhibit Index
 Exhibit No.
    
    Description31.1
    
    Rule 13a-14(a)/15d-14(a) Certification by Hugh E. Sawyer.31.2
    
    Rule 13a-14(a)/15d-14(a) Certification by Thomas H. King.32.1
    
    Section 1350 Certification by Hugh E. Sawyer.32.2
    
    Section 1350 Certification by Thomas H. King.
 55




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##### Table of Contents



SIGNATURES
  ALLIED HOLDINGS, INC.Date: November 14, 2006
    
    By:
    
    /s/ Hugh E. SawyerHugh E. Sawyer,President and Chief Executive OfficerDate: November 14, 2006By:
    
    /s/ Thomas H. KingThomas H. King,Executive Vice President and Chief FinancialOfficer (Principal Financial and AccountingOfficer)
 56




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EXHIBIT INDEX
 Exhibit No.
    
    Description31.1
    
    Rule 13a-14(a)/15d-14(a) Certification by Hugh E. Sawyer.31.2
    
    Rule 13a-14(a)/15d-14(a) Certification by Thomas H. King.32.1
    
    Section 1350 Certification by Hugh E. Sawyer.32.2
    
    Section 1350 Certification by Thomas H. King.
 57