Allied Holdings Reports Second Quarter Results
DECATUR, Ga., Aug. 5, 2004 -- Allied Holdings, Inc. (AMEX:AHI) today reported results for the second quarter ended June 30, 2004. The Company reported a net loss for the second quarter of $3.8 million, compared to net income of $3.4 million in the second quarter of 2003, a decrease of $7.2 million. Basic and diluted loss per share in the second quarter of 2004 was $0.43, versus basic earnings per share of $0.40 and diluted earnings per share of $0.39 in the second quarter last year.
Revenues for the second quarter of 2004 were $236.6 million compared to revenues of $230.1 million in the second quarter last year, an increase of $6.5 million or 2.8 percent. Earnings before interest, taxes, depreciation and amortization, and gains and losses on disposal of assets (Adjusted EBITDA) for the second quarter of 2004 were $14.7 million compared to $19.4 million of Adjusted EBITDA reported during the second quarter last year, a decline of $4.7 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. A reconciliation of Adjusted EBITDA to net income (loss) is provided in the financial schedules attached to this press release.
The decline in Adjusted EBITDA in the second quarter was primarily a result of significantly higher fuel costs, higher benefits costs related to employees covered by the Company's collective bargaining agreement with the Teamsters, the financial impact of the terms of the previously disclosed General Motors' contract renewal, higher repair and maintenance costs associated with a small number of US and Canadian terminal operations and a $3.6 million charge to expense as a result of an increase in self-insurance reserves, primarily caused by higher than expected inflationary cost trends in the Company's reserves for aged workers' compensation claims.
The Company increased its reserves for aged workers' compensation claims during the second quarter by $5.9 million. The impact of this increase in reserves was partially offset by progress in the general liability area. The net impact from these two items was an increase in self-insurance reserves during the second quarter of $3.6 million, or 3.9% of the Company's self- insurance reserves as of June 30, 2004.
Increased costs during the second quarter were partially mitigated by higher revenues, higher revenue per unit, improved driver and line haul productivity, and ongoing reductions in losses associated with cargo claims as a result of the Company's emphasis on damage-free delivery of customer products.
The increase in revenues in the second quarter this year compared to last year was primarily the result of a 0.6 percent increase in vehicle deliveries and a $2.30 increase in revenue per unit. Revenue per unit increased primarily due to higher priced rail diversion traffic, longer length of haul and improved traffic selection during the second quarter.
Allied's net loss in the quarter was primarily due to reduced investment income earned on collateral held by Allied's captive insurance company, currency exchange losses of $1.0 million related to a strengthening U.S. dollar associated with the Company's operations in Canada and the $3.6 million increase in self-insurance reserves.
Commenting on the results, Hugh E. Sawyer, Allied's President and Chief Executive Officer, said, "We are disappointed with the second quarter; however, after a poor start to the year in January we were pleased that our core operations showed signs of improvement in the second quarter versus the first quarter of 2004. In fact, Adjusted EBITDA increased from $7.8 million in the first quarter of 2004 to $14.7 million in the second quarter of 2004, which includes a $3.6 million increase in reserves for self-insured claims."
Mr. Sawyer added, "The charge to expense as a result of the increase in self-insurance reserves had a significant impact on our results in the second quarter and we clearly need to do more to improve this area of our business. In simple terms, we have focused our time, energy and financial resources on programs to reduce future workers compensation costs by reducing current period worker injuries and accidents. To date we have demonstrated progress in the number of lost time days, which are down 14% versus last year. Indeed, since 2002 lost time days are down 23%. Given the overall progress in our current period risk management initiatives we believe we have reached the point where we can now allocate more time and investment toward the potential settlement of certain workers' compensation cases that impact our reserves."
Mr. Sawyer added, "As I promised at year-end, risk management will continue to be a top priority at Allied and we have targeted future settlements of outstanding aged workers compensation claims and reductions in total risk management expense as our primary objectives. However, the underlying changes in culture, processes and accountability are challenging to achieve and the quarterly and annual improvements may be uneven."
Mr. Sawyer concluded, "We recognize that it will take a sustained effort to resolve our aged workers compensation claims and until these programs gain traction we believe we have taken a reasonable approach to establishing appropriate self-insurance reserves. We will continue to revisit the Company's self-insurance reserves on a regular basis to confirm that our reserves are adequately established."
Revenues for the six month period ended June 30, 2004 were $448.9 million, versus $443.7 million for the same six month period in 2003, an increase of 1.2 percent. Allied experienced a net loss of $12.8 million in the first six months of 2004, versus a net loss of $2.3 million in the same period of 2003. Adjusted EBITDA for the first six months of 2004 was $22.5 million, versus $30.0 million of Adjusted EBITDA in the first six months of 2003.
The Company's 2004 net loss for the six month period versus the prior year period was increased by a $3.1 million reduction in investment income earned on collateral held by Allied's captive insurance company, a $3.6 million increase in self insurance reserves and a $1.1 million currency exchange loss related to a strengthening U.S. dollar associated with the Company's operations in Canada. The Company recorded a $2.4 million gain in currency exchange during the first six months of 2003.
During the second quarter of 2004, the Company borrowed a net $6.4 million of indebtedness and capital expenditures were $8.4 million. During the second quarter of 2003, the Company paid down a net $3.8 million of indebtedness and spent $2.5 million on capital expenditures. For the first six months of 2004, the Company had net borrowings of $18.1 million of indebtedness and capital expenditures were $13.3 million. That compares to net borrowings of $2.8 million of indebtedness and capital expenditures of $8.4 million in the first half of 2003. Borrowings for the second quarter and the first six months of 2004 were higher primarily as a result of lower Adjusted EBITDA and increased capital expenditures.
The Company expects to remanufacture approximately 135 rigs during 2004 and has adjusted its estimate of 2004 capital expenditures to a range of $24 to $28 million from previous estimates of $25 to $35 million.
Mr. Sawyer added, "I am not pleased with the erosion in our second quarter and year-to-date Adjusted EBITDA and net income. However, the year is not yet over and I expect Allied's second half performance to improve. There are signs of progress in organic growth, driver productivity and cargo claims. Further, I am pleased to report that we have agreed to retain our GM yard management service operations in consideration for a negotiated price increase, which we believe will restore the profitability of these services in the second half of 2004. Additionally, we have a contractually mandated price increase which should have a positive impact on our Ford book of business during the second half of 2004."
Mr. Sawyer concluded, "Despite progress in many areas of the Company, 2004 will not be the profitable year we had originally hoped it might be. A poor start in January, escalating fuel costs, uneven OEM production cycles and increased workers' compensation reserves have made this another challenging transition year of our turnaround. Nevertheless, your management team will continue to take every appropriate step to close the gap in performance and to position the Company for better results in the second half of 2004 and the years ahead."
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
2004 SECOND QUARTER EARNINGS RELEASE
(In Thousands, Except Per Share Data)
(Unaudited)
For the Three Months Ended
June 30,
2004 2003
Revenues $236,616 $230,078
Net (loss) income ($3,753) $3,372
(Loss) earnings per share:
Basic ($0.43) $0.40
Diluted ($0.43) $0.39
Weighted average common shares outstanding:
Basic 8,704 8,462
Diluted 8,704 8,700
For the Six Months Ended
June 30,
2004 2003
Revenues $448,860 $443,670
Net loss ($12,801) ($2,292)
Loss per share:
Basic and diluted ($1.48) ($0.27)
Weighted average common shares outstanding:
Basic and diluted 8,663 8,436
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
June 30, December 31,
2004 2003
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $5,301 $2,148
Restricted cash and cash equivalents 26,763 26,267
Restricted investments 3,235 -
Receivables, net of allowance for
doubtful accounts of $2,173 and
$3,575 respectively 59,846 55,110
Inventories 4,549 4,983
Deferred income taxes 16,608 20,213
Prepayments and other current assets 17,529 12,644
Total current assets 133,831 121,365
PROPERTY AND EQUIPMENT, NET 146,295 155,573
GOODWILL, NET 89,173 90,203
OTHER ASSETS:
Restricted cash and cash equivalents - 55,817
Restricted investments 63,746 -
Other non-current assets 32,546 32,777
Total other assets 96,292 88,594
Total assets $465,591 $455,735
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $13,500 $16,374
Borrowings under revolving
credit facility 29,555 -
Accounts and notes payable 40,464 34,272
Accrued liabilities 82,707 80,937
Total current liabilities 166,226 131,583
LONG-TERM DEBT, less current maturities 221,583 230,126
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS 5,106 5,302
DEFERRED INCOME TAXES 16,608 20,213
OTHER LONG-TERM LIABILITIES 60,762 59,697
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, no par value;
5,000 shares authorized, none
outstanding - -
Common stock, no par value;
20,000 shares authorized,
8,869 and 8,764 shares
outstanding at June 30, 2004
and December 31, 2003,
respectively - -
Additional paid-in capital 48,324 47,511
Treasury stock at cost,
139 shares at June 30, 2004
and December 31, 2003, respectively (707) (707)
Accumulated deficit (47,825) (35,024)
Accumulated other comprehensive loss,
net of tax (4,486) (2,966)
Total stockholders'
equity (deficit) (4,694) 8,814
Total liabilities and
stockholders' equity
(deficit) $465,591 $455,735
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
(Unaudited)
For the Three For the Six
Months Ended Months Ended
June 30, June 30,
2004 2003 2004 2003
REVENUES $236,616 $230,078 $448,860 $443,670
OPERATING EXPENSES:
Salaries, wages and fringe
benefits 126,518 123,502 246,465 241,077
Operating supplies and expenses 41,513 35,968 78,559 73,148
Purchased transportation 28,588 25,837 54,494 50,550
Insurance and claims 11,041 11,477 20,204 20,834
Operating taxes and licenses 8,096 8,159 14,655 15,997
Depreciation and amortization 9,929 11,653 20,315 23,677
Rents 2,029 1,620 3,745 3,240
Communications and utilities 1,351 1,580 3,305 3,468
Other operating expenses 2,765 2,535 4,951 5,384
Loss (gain) on disposal of
operating assets, net 127 195 (1,010) 459
Total operating
expenses 231,957 222,526 445,683 437,834
Operating income 4,659 7,552 3,177 5,836
OTHER INCOME (EXPENSE):
Interest expense (7,577) (7,373) (14,945) (14,754)
Investment income 131 3,007 188 3,333
Gain on early extinguishment
of debt - - - -
Foreign exchange (loss) gain,
net (966) 1,430 (1,121) 2,448
Other, net - - (100) -
(8,412) (2,936) (15,978) (8,973)
(LOSS) INCOME BEFORE INCOME TAXES (3,753) 4,616 (12,801) (3,137)
INCOME TAX (PROVISION) BENEFIT - (1,244) - 845
NET (LOSS) INCOME ($3,753) $3,372 ($12,801) ($2,292)
(LOSS) EARNINGS PER COMMON SHARE:
BASIC ($0.43) $0.40 ($1.48) ($0.27)
DILUTED ($0.43) $0.39 ($1.48) ($0.27)
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING:
BASIC 8,704 8,462 8,663 8,436
DILUTED 8,704 8,700 8,663 8,436
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
2004 SECOND QUARTER EARNINGS RELEASE
OPERATING DATA
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2004 2003 2004 2003
AAG, INCLUDING
ALLIED HOLDINGS
REVENUES $230,005,000 $223,098,000 $435,672,000 $429,300,000
OPERATING INCOME $4,022,000 $6,559,000 $1,884,000 $4,172,000
OPERATING RATIO 98.25% 97.06% 99.57% 99.03%
VEHICLES DELIVERED 2,445,053 2,430,950 4,621,801 4,644,226
LOADS DELIVERED 317,311 316,308 600,945 604,321
VEHICLES PER LOAD 7.71 7.69 7.69 7.69
REVENUE PER VEHICLE $94.07 $91.77 $94.26 $92.44
PERCENT DAMAGE
FREE DELIVERY 99.75% 99.70% 99.75% 99.70%
AVERAGE NUMBER OF
ACTIVE RIGS 3,762 3,836 3,730 3,820
AVERAGE NUMBER OF
EMPLOYEES:
DRIVERS 4,108 4,131 3,935 4,183
OTHERS 1,991 1,989 1,934 2,001
AXIS GROUP:
REVENUES $6,611,000 $6,980,000 $13,188,000 $14,370,000
OPERATING INCOME $637,000 $993,000 $1,293,000 $1,664,000
CERTAIN AMOUNTS IN THE INFORMATION PRESENTED ABOVE HAVE BEEN RECLASSIFIED
TO CONFORM TO THE CURRENT YEAR PRESENTATION.
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
2004 SECOND QUARTER EARNINGS RELEASE
NON-GAAP FINANCIAL INFORMATION
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2004 2003 2004 2003
RECONCILIATION OF
NET INCOME (LOSS)
TO ADJUSTED EBITDA:
NET (LOSS) INCOME ($3,753,000) $3,372,000 ($12,801,000) ($2,292,000)
INCOME TAX EXPENSE
(BENEFIT) - 1,244,000 - (845,000)
INTEREST EXPENSE 7,577,000 7,373,000 14,945,000 14,754,000
INVESTMENT INCOME (131,000) (3,007,000) (188,000) (3,333,000)
FOREIGN EXCHANGE
(GAINS) LOSSES, NET 966,000 (1,430,000) 1,121,000 (2,448,000)
OTHER, NET - - 100,000 -
LOSS (GAIN) ON
DISPOSAL OF
OPERATING ASSETS 127,000 195,000 (1,010,000) 459,000
DEPRECIATION AND
AMORTIZATION 9,929,000 11,653,000 20,315,000 23,677,000
ADJUSTED EBITDA $14,715,000 $19,400,000 $22,482,000 $29,972,000
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 three and six
months ended June 30, 2004 and 2003 are provided above. 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.