Allied Holdings Reports Second Quarter Results
DECATUR, Ga., July 30 -- Allied Holdings, Inc. (AMEX:AHI) today reported results for the second quarter ended June 30, 2003. Net income for the second quarter was $3.4 million, compared to net income of $2.1 million in the second quarter of 2002, an increase of 61.9% or $1.3 million. Basic earnings per share in the second quarter of 2003 were $0.40 and diluted earnings per share were $0.39, versus basic earnings per share of $0.25 and diluted earnings per share of $0.24 in the second quarter last year.
Revenues for the second quarter of 2003 were $230.1 million compared to revenues of $239.0 million in the second quarter last year, a decline of 3.7 percent. Earnings before interest, taxes, depreciation and amortization, and gains and losses on disposal of assets (Adjusted EBITDA) for the second quarter of 2003 were $19.4 million compared to $23.5 million of Adjusted EBITDA reported during the second quarter last year, a decline of $4.1 million. Adjusted EBITDA is presented because management believes it provides useful information to investors regarding the Company's ability to generate cash flows that can be used to service debt and provide for capital expenditures. Adjusted EBITDA is also a component of certain financial covenants in Allied's debt agreements. A reconciliation of Adjusted EBITDA to Net Income and Operating Cash Flows is provided in the financial schedules attached to this press release.
The decline in revenues in the second quarter this year compared to last year was primarily the result of a 5.8 percent decrease in vehicle deliveries mainly as a result of lower OEM production levels. The Company estimates that the impact of lower OEM production on vehicle deliveries reduced Adjusted EBITDA in the second quarter of 2003 by approximately $4 million compared to the prior year period. Partially offsetting the impact of lower vehicle deliveries on revenues was an increase in the Canadian Dollar exchange rate. While the rise in the Canadian Dollar increased revenues in the second quarter of 2003 compared to the second quarter of 2002 when converting Canadian Dollar revenues into US Dollars, the expenses of the Company's Canadian subsidiaries also increased when converting Canadian Dollar denominated expenses into US Dollars, thus minimizing the net impact to earnings.
Commenting on the results, Hugh E. Sawyer, Allied's President and Chief Executive Officer, said, "Higher investment income from our captive insurance company and foreign currency exchange gains pushed net income higher in the second quarter of 2003 when compared to the second quarter last year. Fortunately, this increase in other income more than offset the impact of lower new vehicle production during the second quarter." Mr. Sawyer added, "During the second quarter a number of internal initiatives continued to gain traction. For example, incidents of cargo damage, worker injuries and traffic accidents actually declined versus the same period in 2002. The benefit from improved execution of internal initiatives virtually eliminated the approximate $2 million increase in costs during the second quarter from increased wages and benefits to our Teamster-represented employees. In the United States, our costs for these employees were higher during April and May of 2003, the final two months of the previous Teamster contract, versus the prior year period. Starting June 1, 2003, the Company began operating under a new five-year agreement with the Teamsters in the United States and there was no wage or benefit inflation in June of 2003. Wages under the new U.S. agreement will remain frozen for the first two years of the agreement and health, welfare and pension contributions will increase beginning August 1, 2003. We believe that this new five year contract stabilizes Allied's U.S. Teamster labor agreement during a critical phase of the Company's turnaround. We also believe that the successful ratification of the new labor agreement which became effective June 1, 2003, was an important step in the Company's ongoing revitalization effort. There was no wage and benefit inflation for our employees represented by the Teamsters in Canada during the second quarter of 2003 as a result of new labor agreements negotiated in Canada over the past year."
Revenues for the six-month period ended June 30, 2003 were $443.7 million, versus $452.2 million for the same six-month period in 2002, a decline of 1.9 percent. Allied experienced a net loss of $2.3 million in the first six- months of 2003, versus a net loss of $3.1 million for the same period in 2002. Results for the first six-months of 2002 include a $1.7 million after-tax gain on the early extinguishment of the Company's subordinated notes and a $4.1 million after-tax charge related to the impairment of goodwill at the Company's Axis Group subsidiary. Adjusted EBITDA for the first six-months of 2003 was $30.0 million, versus $39.9 million of Adjusted EBITDA in the first six-months of 2002.
During the second quarter of 2003, the Company repaid $3.8 million of long-term debt and capital expenditures were $2.5 million. For the first six months of 2003, the Company had net borrowings of $2.8 million and capital expenditures were $8.4 million. That compares to debt repayments of $24.2 million and capital expenditures of $7.5 million in the first half of 2002. Debt repayments were lower in 2003 due to reduced Adjusted EBITDA, lower cash proceeds from asset sales, and increased funding of the Company's captive insurance company because of a change in primary insurance carriers. During the first six-months of 2002, the Company received $5.6 million of cash proceeds from the sale of assets and joint ventures. In addition, Kemper, the Company's primary insurance carrier, was downgraded by A.M. Best. As a result, the Company moved its primary insurance coverage to Ace USA during the first half of 2003. The change in insurance carriers has resulted in increased contributions to the Company's captive insurance company because of delays in collateral reductions by Kemper.
The Company reduced the number of rigs remanufactured during the second quarter of 2003 mainly because of the reduction in OEM production levels during the quarter. The Company also plans to reduce the number of vehicles to be remanufactured in the second half of 2003 based on anticipated OEM production levels. The Company will continue to evaluate the number of rigs to be remanufactured in 2003 as visibility into product shipment levels improve. The Company expects to spend between $15 and $20 million on capital expenditures during calendar year 2003.
"While Allied improved net income in the second quarter as compared to the same period in 2002, we recognize that Adjusted EBITDA declined versus the prior year period. Allied remains a challenging turnaround," commented Mr. Sawyer. "Although execution of key internal initiatives has improved in the first half of 2003, the overall performance improvement was not sufficient to overcome the aggregate impact of the significant rise in fuel prices during the first quarter and the sharp decline in OEM production in the second quarter. As we prepare our operations for the second half of the year, we are clearly faced with challenging external conditions including but not limited to lower new vehicle production, increased competition in the marketplace, the Big Three's contract renewal with the UAW, and unstable fuel prices."
Mr. Sawyer added, "Given the external uncertainties, Allied's management will strive to react swiftly to these factors in a manner consistent with our commitment to flexibility and speed of execution. As we expected, 2003 has proven to be a challenging transition year for Allied. We intend to maintain tight control of costs and continue to search for additional opportunities to reduce non-essential costs such as sales, general and administrative expenses and discretionary spending where we believe it will not compromise long-term value creation. Further, we intend to maintain our focus on Allied's core value drivers related to improved driver productivity and reduced cargo claims, worker injuries and traffic accidents. Our sales team has increased the pace of organic sales activity in an attempt to secure new or additional market share in an environment of reduced OEM production. Additionally, our terminal managers are seeking new or additional sources of revenue particularly in the secondary market for used vehicles movements."
Mr. Sawyer concluded, "Our aspiration is to position our Company for any potential improvement in market or competitive conditions as we navigate through an important transition year."
About Allied Holdings
Allied Holdings, Inc. is the parent company of several subsidiaries engaged in providing distribution and transportation services of new and used vehicles to the automotive industry. The services of Allied's subsidiaries span the finished vehicle distribution continuum, and include car-hauling, intramodal transport, inspection, accessorization, and dealer prep. Allied, through its subsidiaries, is the leading company in North America specializing in the delivery of new and used vehicles.
NOTE: The information in this press release will be discussed by management today on a conference call that can be accessed at the following links: www.companyboardroom.com or www.alliedholdings.com beginning at 10:30 a.m. EDT.
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
2003 SECOND QUARTER EARNINGS RELEASE
(In Thousands, Except Per Share Data)
(Unaudited)
For the Three Months Ended
June 30,
2003 2002
Revenues $230,078 $238,984
Net income $3,372 $2,109
Income per share:
Basic $0.40 $0.25
Diluted $0.39 $0.24
Weighted average common shares outstanding:
Basic 8,462 8,300
Diluted 8,700 8,781
For the Six Months Ended
June 30,
2003 2002
Revenues $443,670 $452,243
Income (loss) before cumulative
effect of change in accounting principle ($2,292) $953
Net loss ($2,292) ($3,139)
Income (loss) per share before
cumulative effect of change
in accounting principle:
Basic ($0.27) $0.12
Diluted ($0.27) $0.11
Net loss per share:
Basic ($0.27) ($0.38)
Diluted ($0.27) ($0.36)
Weighted average common shares outstanding:
Basic 8,436 8,259
Diluted 8,436 8,793
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
June 30, December 31,
2003 2002
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $7,573 $10,253
Short-term investments 67,809 60,732
Receivables, net of allowance
for doubtful accounts of
$4,382 and $5,587
respectively 56,033 58,512
Inventories 5,514 5,071
Deferred tax assets 29,271 39,826
Prepayments and other current assets 32,523 28,685
Total current assets 198,723 203,079
PROPERTY AND EQUIPMENT, NET 166,879 176,663
GOODWILL, NET 89,128 85,241
OTHER 17,780 20,525
Total assets $472,510 $485,508
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-
term debt $11,000 $10,785
Trade accounts payable 30,331 36,585
Accrued liabilities 91,804 92,881
Total current liabilities 133,135 140,251
LONG-TERM DEBT, less current maturities 240,265 237,690
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS 7,042 7,467
DEFERRED INCOME TAXES 19,451 27,746
OTHER LONG-TERM LIABILITIES 59,378 62,040
STOCKHOLDERS' EQUITY:
Preferred stock, no par
value; 5,000 shares
authorized, none outstanding --- ---
Common stock, no par value;
20,000 shares authorized,
8,494 and 8,421 shares
outstanding at June 30, 2003
and December 31, 2002,
respectively --- ---
Additional paid-in capital 47,112 46,801
Treasury stock at cost, 139
shares at June 30, 2003
and December 31, 2002 (707) (707)
Accumulated deficit (28,712) (26,420)
Accumulated other
comprehensive loss, net of tax (4,454) (9,360)
Total stockholders' equity 13,239 10,314
Total liabilities and
stockholders' equity $472,510 $485,508
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
(Unaudited)
For the Three Months For the Six Months
Ended Ended
June 30, June 30,
2003 2002 2003 2002
REVENUES $230,078 $238,984 $443,670 $452,243
OPERATING EXPENSES:
Salaries, wages and fringe
benefits 123,502 127,513 241,077 246,049
Operating supplies and
expenses 35,968 35,906 73,148 66,811
Purchased transportation 25,837 25,527 50,550 47,107
Insurance and claims 11,477 12,929 20,834 23,500
Operating taxes and licenses 8,159 8,630 15,997 17,093
Depreciation and amortization 11,653 13,282 23,677 26,945
Rents 1,620 1,657 3,240 3,210
Communications and utilities 1,580 1,873 3,468 3,865
Other operating expenses 2,535 1,451 5,384 4,748
Loss (gain) on disposal of
operating assets, net 195 315 459 (714)
Total operating
expenses 222,526 229,083 437,834 438,614
Operating income 7,552 9,901 5,836 13,629
OTHER INCOME (EXPENSE):
Interest expense (7,373) (7,610) (14,754) (15,732)
Investment income 3,007 615 3,333 887
Gain on early extinguishment
of debt --- --- --- 2,750
Foreign exchange gains
(losses), net 1,430 (4) 2,448 33
Other, net --- --- --- (207)
(2,936) (6,999) (8,973) (12,269)
INCOME (LOSS) BEFORE INCOME TAXES
AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE 4,616 2,902 (3,137) 1,360
INCOME TAX (EXPENSE) BENEFIT (1,244) (793) 845 (407)
INCOME (LOSS) BEFORE CUMULATIVE
EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE 3,372 2,109 (2,292) 953
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE,
NET OF TAX --- --- --- (4,092)
NET INCOME (LOSS) $3,372 $2,109 ($2,292) ($3,139)
BASIC & DILUTED EARNINGS (LOSS)
PER COMMON SHARE:
INCOME (LOSS) BEFORE CUMULATIVE
EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE:
BASIC AND DILUTED $0.40 $0.25 ($0.27) $0.12
DILUTED $0.39 $0.24 ($0.27) $0.11
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING
PRINCIPLE, NET OF TAX:
BASIC --- --- --- (0.50)
DILUTED --- --- --- (0.47)
NET INCOME (LOSS):
BASIC $0.40 $0.25 ($0.27) ($0.38)
DILUTED $0.39 $0.24 ($0.27) ($0.36)
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING:
BASIC 8,462 8,300 8,436 8,259
DILUTED 8,700 8,781 8,436 8,793
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
For the Six Months Ended
June 30,
2003 2002
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($2,292) ($3,139)
Reconciliation of net loss to net
cash provided
by operating activities:
Gain on early extinguishment
of debt --- (2,750)
Interest expense paid in kind 725 377
Amortization of deferred
financing costs 2,054 2,028
Depreciation and amortization 23,677 26,945
Loss (gain) on disposal of
assets and other, net 459 (507)
Foreign exchange gains, net (2,448) (33)
Cumulative effect of change in
accounting principle --- 4,092
Deferred income taxes (671) 468
Compensation expense related
to stock options and grants 120 148
Amortization of Teamsters
Union contract costs 1,000 1,200
Change in operating assets and
liabilities:
Receivables, net of
allowance for doubtful
accounts 3,933 10,957
Inventories (299) 238
Prepayments and other
current assets (3,480) 92
Short-term investments (7,077) (1,229)
Trade accounts payable (7,194) 217
Accrued liabilities (5,313) 1,993
Net change in operating assets
and liabilities (19,430) 12,268
Net cash provided by
operating activities 3,194 41,097
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (8,417) (7,470)
Proceeds from sale of property and
equipment 31 2,857
Proceeds from sale of equity
investment in joint venture --- 2,700
Decrease (increase) in the cash
surrender value of life insurance 2 (317)
Net cash used in
investing activities (8,384) (2,230)
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to (repayments of)
revolving credit facilities, net 10,084 (60,723)
Additions to long-term debt --- 82,751
Repayment of long-term debt (8,019) (43,830)
Payment of deferred financing costs (414) (8,829)
Proceeds from issuance of common stock 191 161
Other, net 26 373
Net cash provided by
(used in) financing
activities 1,868 (30,097)
EFFECT OF EXCHANGE RATE CHANGES ON
CASH AND CASH EQUIVALENTS 642 158
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (2,680) 8,928
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 10,253 10,543
CASH AND CASH EQUIVALENTS AT END OF PERIOD $7,573 $19,471
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
2003 SECOND QUARTER EARNINGS RELEASE
OPERATING DATA
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2003 2002 2003 2002
ALLIED HOLDINGS,
EXCLUDING AAG -
CANADA & AXIS:
REVENUES $175,572,000 $186,240,000 $344,387,000 $357,819,000
OPERATING INCOME
(LOSS) $1,102,000 $1,298,000 ($2,351,000) $1,863,000
OPERATING RATIO 99.37% 99.30% 100.68% 99.48%
VEHICLES DELIVERED 1,780,504 1,888,751 3,464,717 3,555,345
LOADS DELIVERED 229,532 235,036 446,821 440,909
VEHICLES PER LOAD 7.76 8.04 7.75 8.06
REVENUE PER VEHICLE $98.61 $98.60 $99.40 $100.64
PERCENT DAMAGE
FREE DELIVERY 99.7% 99.7% 99.7% 99.7%
NUMBER OF AVERAGE
ACTIVE RIGS 3,065 3,053 3,047 3,073
AVERAGE
EMPLOYEES
DRIVERS 3,130 3,300 3,133 3,234
OTHERS 1,587 1,784 1,597 1,887
ALLIED AUTOMOTIVE
GROUP - CANADA:
REVENUES $47,526,000 $45,240,000 $84,913,000 $80,271,000
OPERATING INCOME $5,457,000 $7,121,000 $6,523,000 $10,172,000
OPERATING RATIO 88.52% 84.26% 92.32% 87.33%
VEHICLES DELIVERED 650,446 691,494 1,179,509 1,224,962
LOADS DELIVERED 86,776 88,263 157,500 157,393
VEHICLES PER LOAD 7.50 7.83 7.49 7.78
REVENUE PER VEHICLE $73.07 $65.42 $71.99 $65.53
PERCENT DAMAGE
FREE DELIVERY 99.7% 99.7% 99.7% 99.8%
NUMBER OF
AVERAGE ACTIVE RIGS 771 736 773 738
AVERAGE
EMPLOYEES
DRIVERS 1,001 989 1,050 957
OTHERS 402 519 404 504
AXIS GROUP:
REVENUES $6,980,000 $7,504,000 $14,370,000 $14,153,000
OPERATING INCOME $993,000 $1,482,000 $1,664,000 $1,594,000
CERTAIN AMOUNTS IN THE INFORMATION PRESENTED ABOVE HAVE BEEN RECLASSIFIED
TO CONFORM TO THE CURRENT YEAR PRESENTATION.
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
2003 SECOND QUARTER EARNINGS RELEASE
NON-GAAP FINANCIAL INFORMATION
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2003 2002 2003 2002
RECONCILIATION OF NET
INCOME TO ADJUSTED
EBITDA:
NET INCOME (LOSS) $3,372,000 $2,109,000 ($2,292,000) ($3,139,000)
INCOME TAX EXPENSE
(BENEFIT) 1,244,000 793,000 (845,000) 407,000
INTEREST EXPENSE 7,373,000 7,610,000 14,754,000 15,732,000
INVESTMENT INCOME (3,007,000) (615,000) (3,333,000) (887,000)
GAIN ON EARLY
EXTINGUISHMENT OF DEBT --- --- --- (2,750,000)
FOREIGN EXCHANGE
LOSSES (GAINS), NET (1,430,000) 4,000 (2,448,000) (33,000)
OTHER, NET --- --- --- 207,000
CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING
PRINCIPLE, NET OF TAX --- --- --- 4,092,000
LOSS (GAIN) ON
DISPOSAL OF OPERATING
ASSETS 195,000 315,000 459,000 (714,000)
DEPRECIATION AND
AMORTIZATION 11,653,000 13,282,000 23,677,000 26,945,000
ADJUSTED EBITDA $19,400,000 $23,498,000 $29,972,000 $39,860,000
RECONCILIATION OF
OPERATING CASH FLOWS
TO ADJUSTED EBITDA:
CASH PROVIDED BY
OPERATIONS $7,801,000 $16,726,000 3,194,000 41,097,000
ADJUSTMENTS:
INTEREST EXPENSE 7,373,000 7,610,000 14,754,000 15,732,000
INTEREST PAID IN KIND (356,000) (365,000) (725,000) (377,000)
INVESTMENT INCOME (3,007,000) (615,000) (3,333,000) (887,000)
AMORTIZATION OF
DEFERRED FINANCING
COSTS (1,042,000) (983,000) (2,054,000) (2,028,000)
INCOME TAX EXPENSE
(BENEFIT) 1,244,000 793,000 (845,000) 407,000
DEFERRED INCOME TAXES (3,730,000) (2,235,000) 671,000 (468,000)
AMORTIZATION OF
TEAMSTER UNION
CONTRACT COSTS (400,000) (600,000) (1,000,000) (1,200,000)
COMPENSATION EXPENSE
RELATED TO STOCK
OPTIONS AND GRANTS (60,000) (89,000) (120,000) (148,000)
TOTAL CHANGE IN
OPERATING ASSETS AND
LIABILITIES 11,577,000 3,256,000 19,430,000 (12,268,000)
ADJUSTED EBITDA $19,400,000 $23,498,000 $29,972,000 $39,860,000
Adjusted EBITDA represents earnings before interest, taxes, depreciation
and amortization and gains and losses on operating assets. Operating
(loss) income and net cash (used in) provided by operating activities are
the closest financial measures in the Company's financial statements
prepared in accordance with Generally Accepted Accounting Principles,
("GAAP"), in terms of comparability to Adjusted EBITDA. As such,
reconciliations of Adjusted EBITDA to Net (loss) income and Net cash (used
in) provided by operating activities for the quarters and six months ended
June 30, 2003 and 2002 are provided above. Because Adjusted EBITDA is not
a measurement determined in accordance with GAAP and is thus susceptible
to varying calculations, Adjusted EBITDA as presented above may not be
comparable to other similarly titled measures of other companies.