1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 - FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 - For the transition period from to
------ ------
Commission File Number: 0-22276
ALLIED HOLDINGS, INC.
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(Exact name of registrant as specified in its charter)
GEORGIA 58-0360550
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(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
SUITE 200, 160 CLAIREMONT AVENUE, DECATUR, GEORGIA 30030
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(Address of principal executive offices)
(404) 373-4285
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [ ] No
Outstanding common stock, No par value at April 21, 2001................................................ 8,229,218
TOTAL NUMBER OF PAGES INCLUDED IN THIS REPORT: 23
1
2
INDEX
PART I
FINANCIAL INFORMATION
PAGE
ITEM 1: FINANCIAL STATEMENTS
Consolidated Balance Sheets as of March 31, 2001 and
December 31, 2000...................................................................... 3
Consolidated Statements of Operations for the Three
Month Periods Ended March 31, 2001 and 2000........................................ 4
Consolidated Statements of Cash Flows for the Three
Month Periods Ended March 31, 2001 and 2000............................................ 5
Notes to Consolidated Financial Statements................................................ 6
ITEM 2
Management's Discussion and Analysis of Financial
Condition and Results of Operations.................................................... 17
ITEM 3
Quantitative and Qualitative Disclosures about
Market Risk............................................................................ 20
PART II
OTHER INFORMATION
ITEM 6
Exhibits and Reports on Form 8-K...........................................................22
Signature Pages............................................................................23
2
3
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
MARCH 31 DECEMBER 31
2001 2000
----------- ----------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 7,869 $ 2,373
Short-term investments 68,885 59,892
Receivables, net of allowance for doubtful accounts 97,874 114,266
Inventories 7,099 7,415
Deferred tax assets 9,616 10,191
Prepayments and other current assets 18,712 19,355
--------- ---------
Total current assets 210,055 213,492
--------- ---------
PROPERTY AND EQUIPMENT, NET 250,592 259,362
--------- ---------
OTHER ASSETS:
Goodwill, net 93,075 95,159
Other 44,961 42,526
--------- ---------
Total other assets 138,036 137,685
--------- ---------
Total assets $ 598,683 $ 610,539
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 148,170 $ 109
Trade accounts payable 41,320 45,975
Accrued liabilities 90,469 79,487
--------- ---------
Total current liabilities 279,959 125,571
--------- ---------
LONG-TERM DEBT, less current maturities 190,008 324,876
--------- ---------
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS 9,768 9,943
--------- ---------
DEFERRED INCOME TAXES 7,885 21,414
--------- ---------
OTHER LONG-TERM LIABILITIES 74,344 69,594
--------- ---------
STOCKHOLDERS' EQUITY:
Common stock, no par value; 20,000 shares authorized, 8,210 and
8,187 shares outstanding at March 31,
2001 and December 31, 2000, respectively 0 0
Additional paid-in capital 46,144 45,990
Retained earnings 1,740 20,602
Cumulative other comprehensive income, net of tax (10,458) (6,744)
Common stock in treasury, at cost, 139 shares at March 31,
2001 and December 31, 2000 (707) (707)
--------- ---------
Total stockholders' equity 36,719 59,141
--------- ---------
Total liabilities and stockholders' equity $ 598,683 $ 610,539
========= =========
The accompanying notes are an integral part of these
consolidated balance sheets.
3
4
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR THE THREE MONTHS ENDED
MARCH 31
----------------------------------
2001 2000
(UNAUDITED) (UNAUDITED)
REVENUES $218,179 $282,884
--------- ---------
OPERATING EXPENSES:
Salaries, wages and fringe benefits 131,717 154,838
Operating supplies and expenses 41,442 51,582
Purchased transportation 23,296 27,153
Insurance and claims 13,289 12,056
Operating taxes and licenses 8,626 10,859
Depreciation and amortization 15,024 15,242
Rents 2,070 2,326
Communications and utilities 2,038 2,209
Other operating expenses 3,856 2,658
--------- ---------
Total operating expenses 241,358 278,923
--------- ---------
Operating (loss) income (23,179) 3,961
--------- ---------
OTHER INCOME (EXPENSE):
Equity in earnings of joint ventures, net of tax 1,209 901
Interest expense (8,466) (8,401)
Interest income 964 1,320
--------- ---------
(6,293) (6,180)
--------- ---------
LOSS BEFORE INCOME TAXES (29,472) (2,219)
INCOME TAX BENEFIT 10,610 1,184
--------- ---------
NET LOSS $ (18,862) $ (1,035)
========= =========
PER COMMON SHARE - BASIC AND DILUTED $ (2.35) $ (0.13)
========= =========
COMMON SHARES OUTSTANDING - BASIC AND DILUTED 8,020 7,898
========= =========
The accompanying notes are an integral part of these consolidated statements.
4
5
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
FOR THE THREE MONTHS ENDED
MARCH 31
-------------------------------
2001 2000
---------- ----------
(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(18,862) $ (1,035)
-------- --------
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization 15,024 15,242
(Gain) loss on sale of property and equipment (168) 103
Deferred income taxes (10,593) (374)
Compensation expense related to stock options and grants 69 237
Equity in earnings of joint ventures (1,209) (901)
Amortization of Teamsters Union signing bonus 600 606
Change in operating assets and liabilities excluding
effect of businesses acquired:
Receivables, net of allowance for doubtful accounts 15,161 (8,007)
Inventories 232 5
Prepayments and other current assets 504 (4,059)
Trade accounts payable (4,348) (215)
Accrued liabilities 15,856 8,553
-------- --------
Total adjustments 31,128 11,190
-------- --------
Net cash provided by operating activities 12,266 10,155
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (7,579) (3,241)
Proceeds from sale of property and equipment 436 44
Purchase of business, net of cash acquired 0 (8,185)
Investment in joint ventures (464) 0
Increase in short-term investments (8,993) (9,267)
Increase in the cash surrender value of life insurance (120) (120)
-------- --------
Net cash used in investing activities (16,720) (20,769)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayments of) issuance of long-term debt, net 13,193 (79)
Proceeds from issuance of common stock 85 218
Repurchase of common stock 0 (282)
Other, net (2,260) 1,653
-------- --------
Net cash provided by financing activities 11,018 1,510
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS (1,068) (545)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,496 (9,649)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 2,373 13,984
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 7,869 $ 4,335
======== ========
The accompanying notes are an integral part of these consolidated statements.
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6
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
Note 1. Basis of Presentation
The unaudited consolidated financial statements included herein have
been prepared pursuant to the rules and regulations of the Securities
and Exchange Commission. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally
accepted in the United States for complete financial statements. The
statements contained herein reflect all adjustments, all of which are
of a normal, recurring nature, which are, in the opinion of
management, necessary to present fairly the financial condition,
results of operations and cash flows for the periods presented.
Operating results for the three-month period ended March 31, 2001 are
not necessarily indicative of the results that may be expected for the
year ended December 31, 2001. The interim financial statements should
be read in conjunction with the financial statements and notes thereto
of Allied Holdings, Inc. and Subsidiaries, (the "Company") included in
the Company's 2000 Annual Report on Form 10-K.
Note 2. Long-Term Debt and Supplemental Guarantor Information
On September 30, 1997, the Company issued $150 million of 8 5/8%
senior notes (the "Notes") through a private placement. Subsequently,
the senior notes were registered with the Securities and Exchange
Commission. The net proceeds from the Notes were used to fund the
acquisition of Ryder Automotive Carrier Services, Inc. and RC
Management Corp., pay related fees and expenses, and reduce
outstanding indebtedness. The Company's obligations under the Notes
are guaranteed by substantially all of the subsidiaries of the Company
(the "Guarantor Subsidiaries"). Haul Insurance Ltd., Arrendadora de
Equipo Para el Transporte de Automoviles, S. de R.L. de C.V., Axis
Logistica, S. de R.L. de C.V. and Axis Netherlands C.V. do not
guarantee the Company's obligations under the Notes (the "Nonguarantor
Subsidiaries"). The following condensed consolidating balance sheets,
statements of operations and statements of cash flows present the
financial statements of the parent company, and the combined financial
statements of the Guarantor Subsidiaries and Nonguarantor
subsidiaries. The Guarantors are jointly and severally liable for the
Company's obligations under the Notes and there are no restrictions on
the ability of the Guarantors to make distributions to the Company.
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7
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
MARCH 31, 2001
IN THOUSANDS
ALLIED GUARANTOR NONGUARANTOR
HOLDINGS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ ------------ ------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $ 76 $ 3,926 $ 3,867 $ -- $ 7,869
Short-term investments -- -- 68,885 -- 68,885
Receivables, net of allowance for doubtful accounts 33 94,112 3,729 -- 97,874
Inventories -- 7,099 -- -- 7,099
Deferred tax asset - current 8,009 1,025 582 -- 9,616
Prepayments and other current assets 1,873 16,458 381 -- 18,712
--------- --------- -------- --------- ---------
Total current assets 9,991 122,620 77,444 -- 210,055
--------- --------- -------- --------- ---------
PROPERTY AND EQUIPMENT, NET 14,973 231,884 3,735 -- 250,592
OTHER ASSETS:
Goodwill, net 1,603 91,472 -- -- 93,075
Other 15,503 19,279 10,179 -- 44,961
Deferred tax asset - noncurrent 18,357 -- -- (18,357) --
Intercompany receivables 274,149 -- -- (274,149) --
Investment in subsidiaries 52,800 14,325 -- (67,125) --
--------- --------- -------- --------- ---------
Total other assets 362,412 125,076 10,179 (359,631) 138,036
--------- --------- -------- --------- ---------
Total assets $ 387,376 $ 479,580 $ 91,358 $(359,631) $ 598,683
========= ========= ======== ========= =========
CURRENT LIABILITIES:
Current maturities of long-term debt $ 148,103 $ 67 $ -- $ -- $ 148,170
Trade accounts payable 1,650 37,737 1,933 -- 41,320
Intercompany payables -- 270,508 3,641 (274,149) --
Accrued liabilities 10,904 66,202 13,363 -- 90,469
--------- --------- -------- --------- ---------
Total current liabilities 160,657 374,514 18,937 (274,149) 279,959
--------- --------- -------- --------- ---------
LONG-TERM DEBT, LESS CURRENT MATURITIES 190,000 8 -- -- 190,008
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS -- 9,768 -- -- 9,768
DEFERRED INCOME TAXES -- 26,242 -- (18,357) 7,885
OTHER LONG-TERM LIABILITIES -- 34,968 39,376 -- 74,344
STOCKHOLDERS' EQUITY:
Common stock, no par value -- -- -- -- --
Additional paid-in capital 46,144 89,000 14,279 (103,279) 46,144
Retained earnings 1,740 (42,246) 21,379 20,867 1,740
Cumulative other comprehensive income, net of tax (10,458) (12,674) (2,613) 15,287 (10,458)
Treasury stock (707) -- -- -- (707)
--------- --------- -------- --------- ---------
Total stockholders' equity 36,719 34,080 33,045 (67,125) 36,719
--------- --------- -------- --------- ---------
Total liabilities and stockholders' equity $ 387,376 $ 479,580 $ 91,358 $(359,631) $ 598,683
========= ========= ======== ========= =========
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SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2000
In Thousands
ALLIED GUARANTOR NONGUARANTOR
HOLDINGS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ ------------ ------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $ (1,213) $ 2,063 $ 1,523 $ -- $ 2,373
Short-term investments -- -- 59,892 -- 59,892
Receivables, net of allowance for doubtful accounts 805 112,876 585 -- 114,266
Inventories -- 7,415 -- -- 7,415
Deferred tax asset - current 8,009 1,600 582 -- 10,191
Prepayments and other current assets 1,974 15,007 2,374 -- 19,355
--------- --------- -------- --------- ---------
Total current assets 9,575 138,961 64,956 -- 213,492
--------- --------- -------- --------- ---------
PROPERTY AND EQUIPMENT, NET 16,319 239,866 3,177 -- 259,362
OTHER ASSETS:
Goodwill, net 1,633 93,526 -- -- 95,159
Other 15,732 16,372 10,422 -- 42,526
Deferred tax asset - noncurrent 17,585 -- -- (17,585) --
Intercompany receivables 260,850 -- -- (260,850) --
Investment in subsidiaries 80,057 14,072 -- (94,129) --
--------- --------- -------- --------- ---------
Total other assets 375,857 123,970 10,422 (372,564) 137,685
--------- --------- -------- --------- ---------
Total assets $ 401,751 $ 502,797 $ 78,555 $(372,564) $ 610,539
========= ========= ======== ========= =========
CURRENT LIABILITIES:
Current maturities of long-term debt $ -- $ 109 $ -- $ -- $ 109
Trade accounts payable 1,590 43,475 910 -- 45,975
Intercompany payables -- 259,268 1,582 (260,850) --
Accrued liabilities 16,592 51,684 11,211 -- 79,487
--------- --------- -------- --------- ---------
Total current liabilities 18,182 354,536 13,703 (260,850) 125,571
--------- --------- -------- --------- ---------
LONG-TERM DEBT, LESS CURRENT MATURITIES 324,428 448 -- -- 324,876
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS -- 9,943 -- -- 9,943
DEFERRED INCOME TAXES -- 38,999 -- (17,585) 21,414
OTHER LONG-TERM LIABILITIES -- 36,660 32,934 -- 69,594
STOCKHOLDERS' EQUITY:
Common stock, no par value -- -- -- -- --
Additional paid-in capital 45,990 81,180 13,612 (94,792) 45,990
Retained earnings 20,602 (10,171) 20,309 (10,138) 20,602
Cumulative other comprehensive income, net of tax (6,744) (8,798) (2,003) 10,801 (6,744)
Treasury stock (707) -- -- -- (707)
--------- --------- -------- --------- ---------
Total stockholders' equity 59,141 62,211 31,918 (94,129) 59,141
--------- --------- -------- --------- ---------
Total liabilities and stockholders' equity $ 401,751 $ 502,797 $ 78,555 $(372,564) $ 610,539
========= ========= ======== ========= =========
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SUPPLEMENTAL CONDENSED CONSOLIDATED INCOME STATEMENT
THREE MONTHS ENDED MARCH 31, 2001
IN THOUSANDS
ALLIED GUARANTOR NONGUARANTOR
HOLDINGS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
REVENUES $ -- $ 217,776 $ 9,495 $ (9,092) $ 218,179
-------- --------- -------- -------- ---------
OPERATING EXPENSES:
Salaries, wages and fringe benefits 5,121 126,596 -- -- 131,717
Operating supplies and expenses 903 40,536 3 -- 41,442
Purchased transportation -- 23,296 -- -- 23,296
Insurance and claims -- 13,802 8,579 (9,092) 13,289
Operating taxes and licenses 47 8,579 -- -- 8,626
Depreciation and amortization 847 14,010 167 -- 15,024
Rents 532 1,538 -- -- 2,070
Communications and utilities 14 2,024 -- -- 2,038
Other operating expenses (715) 4,531 40 -- 3,856
-------- --------- -------- -------- ---------
Total operating expenses 6,749 234,912 8,789 (9,092) 241,358
-------- --------- -------- -------- ---------
Operating (loss) income (6,749) (17,136) 706 -- (23,179)
-------- --------- -------- -------- ---------
OTHER INCOME (EXPENSE):
Equity in earnings (loss) of joint ventures, net of tax -- 1,219 (10) -- 1,209
Interest expense (8,023) (8,059) (40) 7,656 (8,466)
Interest income 7,710 63 847 (7,656) 964
Intercompany dividends 251 (251) -- -- --
Equity in net loss of subsidiaries (22,879) -- -- 22,879 --
-------- --------- -------- -------- ---------
(22,941) (7,028) 797 22,879 (6,293)
-------- --------- -------- -------- ---------
(LOSS) INCOME BEFORE INCOME TAXES (29,690) (24,164) 1,503 22,879 (29,472)
INCOME TAX BENEFIT (PROVISION) 10,828 216 (434) -- 10,610
-------- --------- -------- -------- ---------
NET (LOSS) INCOME $(18,862) $ (23,948) $ 1,069 $ 22,879 $ (18,862)
======== ========= ======== ======== =========
SUPPLEMENTAL CONDENSED CONSOLIDATED INCOME STATEMENT
THREE MONTHS ENDED MARCH 31, 2000
IN THOUSANDS
ALLIED GUARANTOR NONGUARANTOR
HOLDINGS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------ ------------ ------------
REVENUES $ 1,242 $ 281,472 $ 9,626 $(9,456) $ 282,884
------- --------- ------- ------- ---------
OPERATING EXPENSES:
Salaries, wages and fringe benefits 1,658 153,180 -- -- 154,838
Operating supplies and expenses 375 51,195 12 -- 51,582
Purchased transportation -- 27,153 -- -- 27,153
Insurance and claims -- 12,374 7,896 (8,214) 12,056
Operating taxes and licenses 3 10,856 -- -- 10,859
Depreciation and amortization 30 14,843 369 -- 15,242
Rents 20 2,306 -- -- 2,326
Communications and utilities 7 2,202 -- -- 2,209
Other operating expenses 732 3,043 125 (1,242) 2,658
------- --------- ------- ------- ---------
Total operating expenses 2,825 277,152 8,402 (9,456) 278,923
------- --------- ------- ------- ---------
Operating (loss) income (1,583) 4,320 1,224 -- 3,961
------- --------- ------- ------- ---------
OTHER INCOME (EXPENSE):
Equity in earnings (loss) of joint ventures, net of tax -- 999 (98) -- 901
Interest expense (7,416) (8,660) (28) 7,703 (8,401)
Interest income 7,702 86 1,235 (7,703) 1,320
Equity in net loss of subsidiaries (1,460) -- -- 1,460 --
------- --------- ------- ------- ---------
(1,174) (7,575) 1,109 1,460 (6,180)
------- --------- ------- ------- ---------
(LOSS) INCOME BEFORE INCOME TAXES (2,757) (3,255) 2,333 1,460 (2,219)
INCOME TAX BENEFIT (PROVISION) 1,722 116 (654) -- 1,184
------- --------- ------- ------- ---------
NET (LOSS) INCOME $(1,035) $ (3,139) $ 1,679 $ 1,460 $ (1,035)
======= ========= ======= ======= =========
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SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2001
IN THOUSANDS
ALLIED GUARANTOR NONGUARANTOR ELIMINA- CONSO-
HOLDINGS SUBSIDIARIES SUBSIDIARIES TIONS LIDATED
-------- ------------ ------------ -------- -------
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income $(18,862) $(23,948) $ 1,069 $ 22,879 $(18,862)
-------- -------- -------- -------- --------
Adjustments to reconcile net (loss) income to net cash (used in)
provided by operating activities:
Depreciation and amortization 847 14,010 167 -- 15,024
Gain on sale of property and equipment -- (168) -- -- (168)
Deferred income taxes -- (10,593) -- -- (10,593)
Compensation expense related to stock options and grants 69 -- -- -- 69
Equity in (earnings) loss of joint ventures -- (1,219) 10 -- (1,209)
Equity in net loss of subsidiaries 22,879 -- -- (22,879) --
Amortization of Teamsters Union signing bonus -- 600 -- -- 600
Change in operating assets and liabilities:
Receivables, net of allowance for doubtful accounts 772 17,533 (3,144) -- 15,161
Inventories -- 232 -- -- 232
Prepayments and other current assets 101 (1,590) 1,993 -- 504
Intercompany receivables and payables (13,299) 11,240 2,059 -- --
Trade accounts payable 60 (5,431) 1,023 -- (4,348)
Accrued liabilities (5,096) 12,358 8,594 -- 15,856
-------- -------- -------- -------- --------
Total adjustments 6,333 36,972 10,702 (22,879) 31,128
-------- -------- -------- -------- --------
Net cash (used in) provided by operating activities (12,529) 13,024 11,771 -- 12,266
-------- -------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (63) (6,907) (609) -- (7,579)
Proceeds from sale of property and equipment -- 436 -- -- 436
Investment in joint ventures -- -- (464) -- (464)
Intercompany dividend received (paid) 251 (251) -- -- --
Increase in short-term investments -- -- (8,993) -- (8,993)
Increase in cash surrender value of life insurance (120) -- -- -- (120)
-------- -------- -------- -------- --------
Net cash provided by (used in) investing activities 68 (6,722) (10,066) -- (16,720)
-------- -------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayment of) long-term debt, net 13,675 (482) -- -- 13,193
Proceeds from issuance of common stock 85 -- -- -- 85
Other, net (10) (3,499) 1,249 -- (2,260)
-------- -------- -------- -------- --------
Net cash provided by (used in) financing activities 13,750 (3,981) 1,249 -- 11,018
-------- -------- -------- -------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS -- (458) (610) -- (1,068)
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,289 1,863 2,344 -- 5,496
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR (1,213) 2,063 1,523 -- 2,373
-------- -------- -------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 76 $ 3,926 $ 3,867 $ -- $ 7,869
======== ======== ======== ======== ========
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11
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2000
IN THOUSANDS
ALLIED GUARANTOR NONGUARANTOR ELIMINA- CONSO-
HOLDINGS SUBSIDIARIES SUBSIDIARIES TIONS LIDATED
-------- ------------ ------------ -------- -------
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income $(1,035) $ (3,139) $ 1,679 $ 1,460 $ (1,035)
------- -------- -------- ------- --------
Adjustments to reconcile net (loss) income to net cash (used in)
provided by operating activities:
Depreciation and amortization 30 14,843 369 -- 15,242
Loss on sale of property and equipment -- 103 -- -- 103
Deferred income taxes (32) (342) -- -- (374)
Compensation expense related to stock options and grants 237 -- -- -- 237
Equity in earnings (loss) of joint ventures -- (999) 98 -- (901)
Equity in net loss of subsidiaries 1,460 -- -- (1,460) --
Amortization of Teamsters Union signing bonus -- 606 -- -- 606
Change in operating assets and liabilities:
Receivables, net of allowance for doubtful accounts 7 (7,192) (822) -- (8,007)
Inventories -- 5 -- -- 5
Prepayments and other current assets (276) (3,700) (83) -- (4,059)
Trade accounts payable 99 (87) (227) -- (215)
Intercompany payables (3,276) 3,226 50 -- --
Accrued liabilities 1,244 4,583 2,726 -- 8,553
------- -------- -------- ------- --------
Total adjustments (507) 11,046 2,111 (1,460) 11,190
------- -------- -------- ------- --------
Net cash (used in) provided by operating activities (1,542) 7,907 3,790 -- 10,155
------- -------- -------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment -- (1,868) (1,373) -- (3,241)
Proceeds from sale of property and equipment -- 44 -- -- 44
Purchase of business, net of cash acquired -- (8,185) -- -- (8,185)
Intercompany dividend received (paid) 47 (47) -- -- --
Increase in short-term investments -- -- (9,267) -- (9,267)
Increase in cash surrender value of life insurance -- (120) -- -- (120)
------- -------- -------- ------- --------
Net cash provided by (used in) investing activities 47 (10,176) (10,640) -- (20,769)
------- -------- -------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt, net -- (79) -- -- (79)
Proceeds from issuance of common stock 218 -- -- -- 218
Repurchase of common stock (282) -- -- -- (282)
Other, net (12) 251 1,414 -- 1,653
------- -------- -------- ------- --------
Net cash (used in) provided by financing activities (76) 172 1,414 -- 1,510
------- -------- -------- ------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS -- (244) (301) -- (545)
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,571) (2,341) (5,737) -- (9,649)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,852 3,179 8,953 -- 13,984
------- -------- -------- ------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 281 $ 838 $ 3,216 $ -- $ 4,335
======= ======== ======== ======= ========
11
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Note 3. Comprehensive Income
The Company had a comprehensive loss of $22.6 million in the first
quarter of 2001 versus a comprehensive loss of $1.5 million in the
first quarter of 2000. The difference between comprehensive loss and
net loss is the foreign currency translation adjustment, net of income
taxes.
Note 4. Accounting for Derivative Instruments and Hedging Activities
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards "SFAS" No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended, the statement
establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments
embedded in other contracts) be recorded in the balance sheet as
either an asset or liability measured at its fair value. SFAS No. 133
requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are
met. Special accounting for qualifying hedges allows a derivative's
gains and losses to offset related results on the hedged item in the
income statement, and requires that a company must formally document,
designate, and assess the effectiveness of transactions that receive
hedge accounting.
From time to time, the Company enters into future contracts to manage
the risk associated with changes in fuel prices. Gains and losses from
fuel hedging contracts are recognized as part of fuel expense when the
Company uses the underlying fuel being hedged. The Company does not
enter into fuel hedging contracts for speculative purposes. At March
31, 2001, the Company did not have any outstanding fuel hedging
contracts or other derivative instruments that fall under the
provisions of SFAS No. 133. The Company will adopt SFAS No. 133 prior
to entering into additional future fuel hedging contracts, and does
not expect it to have a material impact on its financial position or
results of operations.
Note 5. Workforce Reduction Expense
During 2000, the Company recorded a pre-tax $2.5 million workforce
reduction charge related to terminating approximately 100 employees.
During 2000, severance payments amounted to approximately $0.9
million. During the first quarter of 2001, the Company recorded a
pre-tax workforce reduction charge of $5.0 million related to
terminating approximately 65 employees and severance payments amounted
to approximately $1.9 million. At March 31, 2001, approximately $4.7
million is outstanding and included in accrued liabilities.
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Note 6. Segment Reporting
In accordance with the requirements of SFAS No. 131, "Disclosure About
Segments of an Enterprise and Related Information," the Company has
identified two reportable industry segments through which it conducts
its operating activities: Allied Automotive Group and Axis Group.
These two segments reflect the organization used by management for
internal reporting. Allied Automotive Group is engaged in the business
of transporting automobiles and light trucks from manufacturing
plants, ports, auctions, and railway distribution points to automobile
dealerships. Axis Group provides distribution, automobile inspection,
auction, and logistics services for the automotive industry.
Three Months Ended March 31,
-----------------------------
2001 2000
--------- ---------
Revenues--unaffiliated customers:
Allied Automotive Group $ 212,024 $ 276,983
Axis Group 6,155 5,893
Corporate/other -- 8
--------- ---------
Total $ 218,179 $ 282,884
========= =========
Depreciation and amortization:
Allied Automotive Group $ 13,283 $ 13,274
Axis Group 894 628
Corporate/other 847 1,340
--------- ---------
Total $ 15,024 $ 15,242
========= =========
Operating profit (loss):
Allied Automotive Group $ (16,129) $ 7,166
Axis Group (452) (303)
Corporate/other (6,598) (2,902)
--------- ---------
Total (23,179) 3,961
Reconciling items:
Equity income in joint ventures $ 1,209 $ 901
Interest expense (8,466) (8,401)
Interest income 964 1,320
--------- ---------
(Loss) income before income taxes $ (29,472) $ (2,219)
========= =========
Capital expenditures:
Allied Automotive Group $ 6,988 $ 1,723
Axis Group 524 444
Corporate/other 67 1,074
--------- ---------
$ 7,579 $ 3,241
========= =========
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March 31, December 31,
2001 2000
--------- -----------
Total assets:
Allied Automotive Group $ 419,735 $ 437,945
Axis Group 60,929 64,869
Corporate/other 118,019 107,725
---------- ----------
Total $ 598,683 $ 610,539
========== ==========
Geographic financial information for 2001 and 2000 is as follows (in
thousands):
Three Months Ended March 31,
------------------------------
2001 2000
----------- -----------
Revenues:
United States $ 181,298 $ 234,938
Canada 36,881 47,946
----------- -----------
$ 218,179 $ 282,884
=========== ===========
Revenues are attributed to the respective countries based on the
location of the origination terminal.
Note 7. Equity Investments
Axis Group has entered into three joint ventures for the purpose of
managing the distribution of vehicles in the United Kingdom and
Brazil. Axis Group initially invested $10,395,000 in the ventures. The
Company is accounting for the investments under the equity method of
accounting with its share of the ventures' earnings or loss reflected
as equity in earnings (loss) of joint ventures in the consolidated
statements of operations. The related equity investments are included
in other assets in the accompanying consolidated balance sheets.
Equity in earnings for these joint ventures is recorded net of income
taxes in the consolidated statements of operations by the Company.
Income taxes related to the joint ventures for the periods ended March
31, 2001, and 2000 were $517,000 and $388,000, respectively.
The majority of the Company's equity in earnings of joint ventures in
2001 was derived from its joint venture in the United Kingdom, Ansa
Logistics Limited. Summarized financial information of Ansa Logistics
Limited for the periods ended March 31, 2001 and 2000 (in thousands):
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March 31, December 31,
2001 2000
--------- ------------
Current assets $ 34,098 $34,799
Other assets 3,762 5,019
-------- -------
Total assets $ 37,860 $39,818
======== =======
Current liabilities $ 26,371 $32,194
======== =======
Three Months Ended March 31,
2001 2000
---------------------------
Revenues $28,371 $28,483
======= =======
Operating income $ 3,738 $ 3,234
======= =======
Income from continuing operations $ 3,826 $ 3,234
======= =======
Net income $ 2,372 $ 2,005
======= =======
Note 8. Litigation
The Company is routinely a party to litigation incidental to its
business, primarily involving claims for personal injury and property
damage incurred in the transportation of vehicles. The Company does
not believe that any of such pending litigation, if adversely
determined, would have a material adverse effect on the Company.
The Company is defending two pieces of related litigation in the
Supreme Court of Erie County, New York: Gateway Development &
Manufacturing, Inc. v. Commercial Carriers, Inc., et al., Index No.
1997/8920 (the "Gateway Case"), and Commercial Carriers, Inc., v.
Gateway Development & Manufacturing, Inc., et al. (the "CCI Case"),
Index No. I2000/8184. The claims at issue in both the Gateway Case and
the CCI Case center around the contention that the Company breached
legal duties with respect to a failed business transaction involving
Gateway Development & Manufacturing, Inc., Ryder Truck Rental, Inc.,
and Ryder System, Inc. In the Gateway Case, the Company has sought and
received summary judgment in its favor on the sole claim (for tortious
interference with contract) asserted against it by Gateway Development
& Manufacturing, Inc., but anticipates the filing and service of
cross-claims that the court has permitted to be asserted against the
Company by the other defendants in that action. In the CCI Case, the
Company has accepted or expects to accept service of a separate
complaint asserting claims against the Company that are virtually
identical to the cross-claims that the Company expects to be asserted
against it by the other defendants in the Gateway Case. It is
anticipated that the claims asserted in both the Gateway Case and the
CCI Case will be resolved in a unified proceeding. With respect to the
entirety of this litigation, the Company intends to continue its
vigorous defense against the claims asserted it, as management
believes all of those claims are without merit. While the
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ultimate results of this litigation cannot be predicted, management
does not expect that the resolution of these proceedings will have a
material adverse effect on the Company's consolidated financial
position or results of operations.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Revenues were $218.2 million in the first quarter of 2001 versus
revenues of $282.9 million in the first quarter of 2000, a decrease of
22.9%. The decrease in revenues was due to lower vehicle delivery
volumes resulting from decreased new vehicle production and sales. New
vehicle production in the United States and Canada in the first
quarter of 2001 was at its lowest level since 1993 in a first quarter
without labor disputes. Production for the Big Three automakers - all
major customers of AAG - declined by 23 percent. The production cuts
helped new vehicle inventories decline from 77 days at year-end to 63
days at the end of the first quarter. New vehicle inventories are now
just slightly higher than the 61-day supply at the end of the first
quarter in 2000.
The Company experienced a net loss of $18.9 million in the first
quarter of 2001 versus a net loss of $1.0 million in the first quarter
of 2000. Basic and diluted loss per share in the first quarter of 2001
were $2.35 versus basic and diluted loss per share of $0.13 in the
first quarter of 2000.
Consolidated revenues were down $64.7 million, primarily due to the
significant drop in volume. Vehicle deliveries declined 837,000 units,
which translates into $75 million of revenue at an average revenue per
unit. The Company estimates that the volume decline in the first
quarter of 2001, at an average margin per unit, reduced net earnings
by $15.4 million. Offsetting the impact on revenues from the volume
decline was a 3.7% increase in AAG's revenue per unit from $86.54 to
$89.71. Most of the increase in the revenue per unit was due to fuel
surcharges that offset higher fuel costs during the quarter.
Due to the significant volume decline, the Company has implemented a
program to achieve a $25 million reduction in overhead expenses.
During the first quarter of 2001, the Company recorded an after-tax
charge of $3.2 million, or $0.40 per share, for severance and
workforce reduction expenses relating to its overhead reduction
program.
The Company recently amended its revolving credit facility and its
senior subordinated notes to avoid defaults relating to its financial
covenants. The maturity date of the amended revolving credit facility
has been accelerated from September 30, 2002 to January 31, 2002. The
Company is engaged in discussions with a number of lenders to replace
its revolving credit facility, and completion of the financing is
anticipated by year-end. There can be no assurance acceptable
financing can be obtained by January 31, 2002, which may have a
material adverse effect on the Company. The Company expensed
approximately $0.5 million, or $0.06 per share, of administrative
costs related to the amendments during the first quarter of 2001.
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The following is a discussion of the changes in the Company's major
expense categories:
Salaries, wages and fringe benefits increased from 54.7% of revenues
in the first quarter of 2000 to 60.4% of revenues in the first
quarter of 2001. The increase was primarily due to severance charged
to expense for $4.3 million that was part of the Company's workforce
and overhead reduction program, as well as annual wage increases for
remaining employees. In addition, the significant drop in vehicle
deliveries caused operating inefficiencies which increased salaries,
wages, and fringe benefits as a percentage of revenues.
Operating supplies and expenses increased from 18.2% of revenues in
the first quarter of 2000 to 19.0% of revenues in the first quarter
of 2001. The increase was due primarily to inefficiencies related to
the decline in vehicle deliveries, combined with increases in fuel
prices.
Purchased transportation increased from 9.6% of revenues in the first
quarter of 2000 to 10.7% of revenues in the first quarter of 2001. The
increase was due primarily to the increase in the mix of loads hauled
by owner-operators versus Company drivers. The percentage of
owner-operators increased in the first quarter of 2001 versus 2000 due
to the fact that owner-operators generally have more seniority than
Company drivers. As lay-offs are done based on seniority, the
declining volumes have led to a greater percentage of idled Company
trucks.
Insurance and claims expense increased from 4.3% of revenues in the
first quarter of 2000 to 6.1% of revenues in the first quarter of
2001. The increase was a result of an increase in cargo claims expense
and costs related to higher auto, general liability and property
insurance premiums that were unaffected by the decline in vehicles
delivered.
Depreciation and amortization increased from 5.4% of revenues in the
first quarter of 2000 to 6.9% of revenues in the first quarter of
2001. Depreciation and amortization expense stayed relatively constant
although revenues declined.
Other operating expenses increased from 0.9% of revenues in the first
quarter of 2000 to 1.8% of revenues in the first quarter of 2001. The
increase was due primarily to severance and debt amendment related
costs incurred in the first quarter of 2001.
Equity in earnings of joint ventures, net of tax, increased from $0.9
million in the first quarter of 2000 to earnings of $1.2 million in
the first quarter of 2001. The increase was due primarily to improved
earnings from the Company's joint ventures in the United Kingdom.
Interest expense increased from $8.4 million, or 3.0% of revenues, in
the first quarter of 2000, to $8.5 million, or 3.9% of revenues, in
the first quarter of 2001. The increase was due to slightly higher
interest rates and higher debt levels in 2001 versus 2000.
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FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities totaled $12.3 million for
the three months ended March 31, 2001 versus $10.2 million for the
three months ended March 31, 2000. The improvement in cash provided
from operations was due to a large decrease in the accounts receivable
balance. In the first quarter of 2001, the accounts receivable balance
decreased significantly, while in the first quarter of 2000 accounts
receivable increased. The decrease in accounts receivable was
primarily due to a re-organization of the revenue process, which
increased cash collections, combined with the decrease in revenues
related to declining volumes. The change in the receivables balance
was offset by a decrease in the deferred tax liabilities due to the
net loss in the first quarter of 2001.
Net cash used in investing activities totaled $16.7 million for the
three months ended March 31, 2001 versus $20.8 million for the three
months ended March 31, 2000. The decrease was due primarily to the
purchase of CT Group, a logistics services group, in March 2000 for
$8.2 million. Capital expenditures were $7.6 million in the first
quarter of 2001 versus $3.2 million in the first quarter of 2000. The
increase is due to the timing of capital expenditures. In 2000,
capital expenditures were weighted to the last half of the year and
were $32.5 million. Planned capital expenditures have been reduced to
$20-25 million in 2001. The Company plans to reduce capital
expenditures due to the volume decline by taking rigs out of service
rather than replacing them. The average age of active rigs in 2001 is
comparable to 2000 as the number of active rigs declined from 5,085
rigs in the first quarter of 2000 versus 4,277 rigs in the first
quarter of 2001.
Net cash provided by financing activities totaled $11.0 million for
the three months ended March 31, 2001 versus $1.5 million for the
three months ended March 31, 2000. The increase was due to an increase
in borrowings during 2001 as a result of the higher net loss.
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ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
DISCLOSURES ABOUT MARKET RISKS
The market risk inherent in the Company's market risk sensitive
instruments and positions is the potential loss arising from adverse
changes in short-term investment prices, interest rates, fuel prices,
and foreign currency exchange rates.
SHORT-TERM INVESTMENTS - The Company does not use derivative financial
instruments in its investment portfolio. The Company places its
investments in instruments that meet high credit quality standards, as
specified in the Company's investment policy guidelines. The policy
also limits the amount of credit exposure to any one issue, issuer,
and type of instrument. Short-term investments at March 31, 2001,
which are recorded at a fair value of $68.9 million, have exposure to
price risk. This risk is estimated as the potential loss in fair value
resulting from a hypothetical 10% adverse change in quoted prices and
amounts to $6.9 million.
INTEREST RATES - The Company primarily issues long-term debt
obligations to support general corporate purposes including capital
expenditures and working capital needs. The majority of the Company's
long-term debt obligations bear a fixed rate of interest. A
one-percentage point increase in interest rates affecting the
Company's floating rate long-term debt would reduce pre-tax income by
$1.5 million over the next fiscal year. A one-percentage point change
in interest rates would not have a material effect on the fair value
of the Company's fixed rate long-term debt.
FUEL PRICES - The Company is dependent on diesel fuel to operate its
fleet of rigs. Diesel fuel prices are subject to fluctuations due to
unpredictable factors such as weather, government policies, changes in
global demand, and global production. To reduce price risk caused by
market fluctuations, the Company generally follows a policy of hedging
a portion of its anticipated diesel fuel consumption. The instruments
used are principally readily marketable exchange traded futures
contracts, which are designated as hedges. The changes in market value
of such contracts have a high correlation to the price changes of
diesel fuel. Gains and losses resulting from fuel hedging transactions
are recognized when the underlying fuel being hedged is used. A 10%
increase in diesel fuel prices would reduce pre-tax income by $1.3
million over the next fiscal year.
FOREIGN CURRENCY EXCHANGE RATES - Although the majority of the
Company's operations are in the United States, the Company does have
foreign subsidiaries (primarily Canada). The net investments in
foreign subsidiaries translated into dollars using exchange rates at
March 31, 2001, are $90.0 million. The potential loss in fair value
impacting other comprehensive income resulting from a hypothetical 10%
change in quoted foreign currency exchange rates amounts to $9.0
million. The Company does not use derivative financial instruments to
hedge its exposure to changes in foreign currency exchange rates.
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CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS - This Quarterly
Report on Form 10-Q contains, and from time to time the Company and its
officers, directors or employees may make other forward-looking
statements, including statements regarding, among other items, (i) the
Company's plans, intentions or expectations, (ii) general industry
trends, competitive conditions and customer preferences, (iii) the
Company's management information systems, (iv) the Company's efforts to
reduce costs, (v) the adequacy of the Company's sources of cash to
finance its current and future operations and (vi) resolution of
litigation without material adverse effect on the Company. This notice
is intended to take advantage of the "safe harbor" provided by the
Private Securities Litigation Reform Act of 1995 with respect to such
forward-looking statements. Without limiting the generality of the
foregoing, the words "believe," "anticipate," "seek," "expect,"
"estimate," "intend," "plan," and similar expressions are intended to
identify such forward-looking statements. These forward-looking
statements involve a number of risks and uncertainties. Among others,
factors that could cause actual results to differ materially from
historical results or results expressed or implied by such
forward-looking statements are the following: economic recessions or
downturns in new vehicle production or sales; the highly competitive
nature of the automotive distribution industry; dependence on the
automotive industry; loss or reduction of revenues generated by the
Company's major customers or the loss of any such customers; the
variability of quarterly results and seasonality of the automotive
distribution industry; the Company's highly leveraged financial
position; labor disputes involving the Company or its significant
customers; the dependence on key personnel who have been hired or
retained by the Company; the availability of strategic acquisitions or
joint venture partners; increases in fuel prices; increased frequency
and severity of work related accidents and workers' compensation
claims; increased expenses due to layoffs of employees; changes in
regulatory requirements which are applicable to the Company's business;
changes in vehicle sizes and weights which may adversely impact
vehicle deliveries per load; risks associated with doing business in
foreign countries; problems related to information technology systems
and computations that must be made by the Company or its customers and
vendors in 2001 or beyond; and other risk factors set forth from time
to time in the Company's Securities and Exchange Commission reports,
including but not limited to, this Quarterly Report on Form 10-Q. Many
of these factors are beyond the Company's ability to control or
predict, and readers are cautioned not to put undue reliance on such
forward-looking statements. The Company disclaims any obligation to
update or review any forward-looking statements contained in this
Quarterly Report or in any statement referencing the risk factors and
other cautionary statements set forth in this Quarterly Report.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits: None
(b) Reports on Form 8-K: None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Allied Holdings, Inc.
May 14, 2001 /s/ Robert J. Rutland
------------ -------------------------------------------
(Date) Robert J. Rutland
on behalf of Registrant as
Chairman and
Chief Executive Officer
May 14, 2001 /s/ Daniel H. Popky
------------ -------------------------------------------
(Date) Daniel H. Popky
on behalf of Registrant as
Senior Vice President, Finance
and Chief Financial Officer
23