Allied Holdings Reports Fourth Quarter and Calendar 2003 Results

DECATUR, Ga., Feb. 17, 2004 -- Allied Holdings, Inc. (AMEX:AHI) today reported results for the fourth quarter ended December 31, 2003. The Company reported income before income taxes of $3.5 million in the fourth quarter of 2003, versus income before income taxes of $2.8 million in the fourth quarter of 2002, an improvement of $0.7 million or 25 percent. In addition, the Company continued its ongoing effort to reduce debt, repaying $7.7 million of debt during the fourth quarter of 2003. The Company's total net debt repayment for calendar 2003 was $2.0 million.

Revenues for the fourth quarter of 2003 were $224.7 million compared to revenues of $232.8 million for the fourth quarter of 2002, a decrease of 3.5 percent. The Company reported a net loss of $4.3 million, or $0.51 per basic share and diluted share, in the fourth quarter of 2003, versus net income of $2.1 million, or $0.25 per basic share and $0.24 per diluted share, in the fourth quarter of 2002. Included in the Company's results for the fourth quarter of 2003 is a non-cash $6.8 million charge to provide an increase in the valuation allowance for deferred income taxes. The Company has established a full valuation allowance for net deferred tax assets because of the Company's net losses in 2003 and prior years.

Adjusted EBITDA(1) for the fourth quarter of 2003 was $21.1 million, versus $24.6 million of Adjusted EBITDA reported during the fourth quarter last year. 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 Loss is provided in the financial schedules attached to this press release.

The decline in revenues in the fourth quarter of 2003 was due to a 6.4 percent decline in new vehicle deliveries, partially offset by higher revenue generated per vehicle delivered. The vehicle delivery decline in the fourth quarter primarily resulted from traffic exited by the Company in 2002 and early 2003. Adjusted EBITDA declined in the fourth quarter of 2003 mainly due to higher risk management expenses. While total risk management expense (which includes costs for worker injuries, cargo claims and traffic accidents) increased from $14.2 million in the fourth quarter of 2002 to $18.7 million in the fourth quarter of 2003, total risk management expense for calendar 2003 declined to $70.6 million, from $74.2 million in calendar 2002, a reduction of $3.6 million. That compares to a reduction of $10 million experienced in 2002 from costs of $84 million in 2001. Depreciation and amortization expense declined $3.9 million in the fourth quarter of 2003. The decline in depreciation and amortization is included in the Company's reported net income, but is excluded from Adjusted EBITDA.

Commenting on the results, Hugh E. Sawyer, Allied's President and Chief Executive Officer, said, "I am pleased that we were able to achieve positive, improved pre-tax income in the fourth quarter despite a decline in new vehicle deliveries. Although risk management expense did increase in the fourth quarter of 2003 compared to a very favorable fourth quarter in 2002, there continue to be signs of progress related to the Company's risk management initiatives. The reduction in Allied's total risk management expense for calendar 2003 is the by-product of aggressive initiatives to improve performance in this area of the business. While the improvement in our risk management performance has been partially mitigated by higher insurance premiums and medical inflation related to worker injuries, risk management improvement will continue to be a key priority in 2004."

Full Year Results

Revenues for the year ended December 31, 2003 were $865.5 million versus $898.1 million in 2002, a decline of 3.6 percent. Adjusted EBITDA for calendar 2003 was $65.4 million, versus $76.6 million of Adjusted EBITDA reported last year.

Allied experienced a loss before income taxes and cumulative effect of change in accounting principle of $2.3 million in 2003, compared to a loss of $4.6 million in 2002. Allied experienced a net loss of $8.6 million in 2003, compared to a net loss of $7.5 million in 2002.

Results for calendar 2003 include a $6.8 million non-cash charge to provide an increase in the valuation allowance for deferred income taxes and a $2.0 million pre-tax gain in the third quarter from the settlement of litigation with Ryder System. Results for calendar 2002 include a $2.8 million pre-tax gain on the early extinguishment of the Company's subordinated notes and a $5.2 million pre-tax charge ($4.1 million after-tax) related to the impairment of goodwill at the Company's Axis Group subsidiary.

Total debt as of December 31, 2003 was $246.5 million versus total debt of $248.5 million at December 31, 2002, a reduction of $2.0 million. Also, the Company ended the year with no borrowings outstanding on its $90 million revolving credit facility. Capital expenditures were $18.6 million during calendar 2003, versus $21.8 million in calendar 2002.

  The following are key events in 2003:

   -- AAG entered into a new five-year agreement covering its employees
      represented by the Teamsters in the United States and a three-year
      agreement covering its employees represented by the Teamsters in
      Eastern Canada.  Both agreements contained wage freezes for the first
      two years of the agreements.
   -- The Company amended its senior secured credit facility to extend the
      maturity, increase liquidity, and adjust financial covenants, among
      other changes.
   -- AAG renewed it contracts with General Motors, Toyota and Honda
   -- Axis Group began handling GMAC remarketed vehicle traffic
   -- The Company settled all outstanding litigation with Ryder System for a
      $2.0 million pre-tax gain
   -- AAG earned ISO 9001 and Q9001:2000 certification

"In my letter to the shareholders in 2002 I suggested that 2003 would be a challenging transition year for the Company and that proved to be true. During 2003 the Company faced challenging external conditions including a 3 percent decline in North American vehicle production and a 38 percent increase in fuel prices during the first quarter that reduced pre-tax income by approximately $4 million. Further, the Company did report a net loss for the year. However, there have clearly been signs of progress in 2003 related to the fundamentals -- the value drivers of the business," said Hugh Sawyer. "I believe we managed our business better during this year of transition. Our aspiration is to ultimately position the Company to create value for shareholders and customers. I am particularly pleased to report the signs of progress in Allied's damage-free delivery percentage which increased to 99.70 percent in 2003 compared to 99.56 percent in calendar 2002. Progress in this area of our business has a direct, favorable impact on our customers."

Sawyer added, "Although Allied is still a turnaround I am cautiously optimistic that we are entering the later stages of that process. Despite difficult external conditions the Company did achieve a number of important milestones during the period including new Teamster Agreements, key customer contract renewals and the successful amendment of our debt facility. Moreover, we were able to narrow our pre-tax loss as we attempted to position the Company as the clear and compelling choice for new and pre-owned vehicle distribution."

2004 Outlook

"Allied's turnaround will not be complete until the Company returns to sustained positive net income. We have established our goals for 2004 and our aim is to return Allied to positive net income and to continue reductions in our long-term debt," said Mr. Sawyer. During 2004 we expect to benefit from improving external conditions including higher North American new vehicle production, which is expected to increase 4 percent in 2004. Nevertheless, Allied is still a turnaround and it is imperative that we remain focused on improved execution and our internal initiatives related to driver productivity, reduced costs, risk management performance and organic growth in our subsidiaries. Capital expenditures during 2004 are expected to increase to between $25-35 million as we ramp-up our fleet remanufacturing program and take delivery of 50-100 new tractors that will be married with either new or remanufactured trailers."

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.

ALLIED HOLDINGS, INC. AND SUBSIDIARIES 2003 FOURTH QUARTER EARNINGS RELEASE (In Thousands, Except Per Share Data) (Unaudited) For the Three Months Ended December 31, 2003 2002 Revenues $224,704 $232,832 Income before Income Taxes $3,502 $2,785 Net income ($4,337) $2,095 Earnings per share: Basic ($0.51) $0.25 Diluted ($0.51) $0.24 Weighted average common shares outstanding: Basic 8,533 8,360 Diluted 8,533 8,646 For the Twelve Months Ended December 31, 2003 2002 Revenues $865,463 $898,060 Loss before Income Taxes and cumulative effect of change in accounting principle ($2,338) ($4,563) Loss before cumulative effect of change in accounting principle ($8,604) ($3,434) Net loss ($8,604) ($7,526) Loss per share before cumulative effect of change in accounting principle: Basic ($1.02) ($0.41) Diluted ($1.02) ($0.41) Loss per share: Basic ($1.02) ($0.91) Diluted ($1.02) ($0.91) Weighted average common shares outstanding: Basic 8,475 8,301 Diluted 8,475 8,301 ALLIED HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In Thousands) (Unaudited) December 31, December 31, 2003 2002 ASSETS CURRENT ASSETS: Cash and cash equivalents $84,232 $10,253 Short-term investments 0 60,732 Receivables, net of allowance for doubtful accounts of $3,575 and $5,587 respectively 55,110 58,512 Inventories 4,983 5,071 Deferred tax assets 20,213 20,301 Prepayments and other current assets 12,644 28,685 Total current assets 177,182 183,554 PROPERTY AND EQUIPMENT, NET 155,573 176,663 GOODWILL, NET 90,203 85,241 OTHER 32,777 20,525 Total assets $455,735 $465,983 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt $13,500 $10,785 Trade accounts payable 34,272 36,585 Accrued liabilities 80,937 92,881 Total current liabilities 128,709 140,251 LONG-TERM DEBT, less current maturities 233,000 237,690 POSTRETIREMENT BENEFITS OTHER THAN PENSIONS 5,302 7,467 DEFERRED INCOME TAXES 20,213 8,221 OTHER LONG-TERM LIABILITIES 59,697 62,040 STOCKHOLDERS' EQUITY: Preferred stock, no par value; 5,000 shares authorized, none outstanding -- -- Common stock, no par value; 20,000 shares authorized, 8,764 and 8,421 shares outstanding at December 31, 2003 and December 31, 2002, respectively -- -- Additional paid-in capital 47,511 46,801 Treasury stock at cost, 139 shares at December 31, 2003 and December 31, 2002 (707) (707) Accumulated deficit (35,024) (26,420) Accumulated other comprehensive loss, net of tax (2,966) (9,360) Total stockholders' equity 8,814 10,314 Total liabilities and stockholders' equity $455,735 $465,983 ALLIED HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands, Except Per Share Data) (Unaudited) For the Three For the Twelve Months Ended Months Ended December 31, December 31, 2003 2002 2003 2002 REVENUES $224,704 $232,832 $865,463 $898,060 OPERATING EXPENSES: Salaries, wages and fringe benefits 121,094 119,692 469,540 483,545 Operating supplies and expenses 35,404 38,474 138,512 138,542 Purchased transportation 24,972 26,671 99,604 99,109 Insurance and claims 9,074 9,156 38,168 43,500 Operating taxes and licenses 7,387 8,852 30,376 33,583 Depreciation and amortization 10,868 14,793 45,556 54,880 Rents 1,271 1,447 6,090 6,342 Communications and utilities 1,925 1,129 7,138 6,419 Other operating expenses 2,496 2,777 10,671 10,384 Loss on disposal of operating assets, net 713 1,095 1,325 748 Total operating expenses 215,204 224,086 846,980 877,052 Operating income 9,500 8,746 18,483 21,008 OTHER INCOME (EXPENSE): Interest expense (7,018) (7,284) (29,138) (30,627) Investment income 237 1,373 3,172 2,463 Gain on early extinguishment of debt -- -- -- 2,750 Foreign exchange gain (loss), net 783 (49) 3,169 108 Other, net -- (1) 1,976 (265) (5,998) (5,961) (20,821) (25,571) INCOME (LOSS) BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 3,502 2,785 (2,338) (4,563) INCOME TAX BENEFIT (EXPENSE) (7,839) (690) (6,266) 1,129 INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE (4,337) 2,095 (8,604) (3,434) CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE, NET OF TAX -- -- -- (4,092) NET INCOME (LOSS) ($4,337) $2,095 ($8,604) ($7,526) BASIC AND DILUTED EARNINGS (LOSS) PER COMMON SHARE: INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE: BASIC ($0.51) $0.25 ($1.02) ($0.41) DILUTED ($0.51) $0.24 ($1.02) ($0.41) CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE, NET OF TAX: BASIC -- -- -- ($0.49) DILUTED -- -- -- ($0.49) NET INCOME (LOSS): BASIC ($0.51) $0.25 ($1.02) ($0.91) DILUTED ($0.51) $0.24 ($1.02) ($0.91) WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: BASIC 8,533 8,360 8,475 8,301 DILUTED 8,533 8,646 8,475 8,301 ALLIED HOLDINGS, INC. AND SUBSIDIARIES 2003 FOURTH QUARTER EARNINGS RELEASE OPERATING DATA (Unaudited) THREE MONTHS ENDED TWELVE MONTHS ENDED DECEMBER 31, DECEMBER 31, 2003 2002 2003 2002 AAG, Including Allied Holdings REVENUES $217,003,000 $224,272,000 $836,835,000 $868,041,000 OPERATING INCOME $7,574,000 $7,397,000 $14,007,000 $16,696,000 OPERATING RATIO 96.51% 96.70% 98.33% 98.08% VEHICLES DELIVERED 2,264,581 2,418,933 8,867,249 9,460,917 LOADS DELIVERED 293,876 309,072 1,151,737 1,195,706 VEHICLES PER LOAD 7.71 7.83 7.70 7.91 REVENUE PER VEHICLE $95.82 $92.72 $94.37 $91.75 PERCENT DAMAGE FREE DELIVERY 99.7% 99.6% 99.7% 99.6% NUMBER OF AVERAGE ACTIVE RIGS 3,711 3,815 3,685 3,792 AVERAGE EMPLOYEES DRIVERS 4,069 4,283 4,041 4,184 OTHERS 1,934 2,104 1,972 2,248 AXIS GROUP: REVENUES $7,701,000 $8,560,000 $28,628,000 $30,019,000 OPERATING INCOME $1,926,000 $1,349,000 $4,476,000 $4,312,000 CERTAIN AMOUNTS IN THE INFORMATION PRESENTED ABOVE HAVE BEEN RECLASSIFIED TO CONFORM TO THE CURRENT YEAR PRESENTATION. ALLIED HOLDINGS, INC. AND SUBSIDIARIES 2003 FOURTH QUARTER EARNINGS RELEASE NON-GAAP FINANCIAL INFORMATION (Unaudited) THREE MONTHS ENDED TWELVE MONTHS ENDED DECEMBER 31, DECEMBER 31, 2003 2002 2003 2002 RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA: NET INCOME (LOSS) ($4,337,000) $2,095,000 ($8,604,000) ($7,526,000) INCOME TAX EXPENSE (BENEFIT) 7,839,000 690,000 6,266,000 (1,129,000) INTEREST EXPENSE 7,018,000 7,284,000 29,138,000 30,627,000 INVESTMENT INCOME (237,000) (1,373,000) (3,172,000) (2,463,000) GAIN ON EARLY EXTINGUISHMENT OF DEBT -- -- -- (2,750,000) FOREIGN EXCHANGE (GAINS) LOSSES, NET (783,000) 49,000 (3,169,000) (108,000) OTHER, NET -- 1,000 (1,976,000) 265,000 CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE, NET OF TAX -- -- -- 4,092,000 LOSS ON DISPOSAL OF OPERATING ASSETS 713,000 1,095,000 1,325,000 748,000 DEPRECIATION AND AMORTIZATION 10,868,000 14,793,000 45,556,000 54,880,000 ADJUSTED EBITDA $21,081,000 $24,634,000 $65,364,000 $76,636,000 Adjusted EBITDA is presented because management believes it provides useful information to investors regarding the Company's ability to generate cash flows that can be used to service debt and provide for capital expenditures. Adjusted EBITDA is also a component of certain financial covenants in the Company's debt agreements. The Company's net income is the closest measure in the Company's financial statements prepared in accordance with Generally Accepted Accounting Principles ("GAAP"), in terms of comparability to Adjusted EBITDA. As such, a reconciliation of Adjusted EBITDA to the net income for the quarters and twelve months ended December 31, 2003 and 2002 are provided below. Because Adjusted EBITDA is not a measure determined in accordance with GAAP and is thus susceptible to varying calculations, Adjusted EBITDA as presented may not be comparable to other similarly titled measures used by other companies.