Allied Holdings Reports Fourth Quarter and Year-End Results for 2004
DECATUR, Ga., April 27 -- Allied Holdings, Inc. (AMEX:AHI) reported fourth quarter and year-end results for 2004. The Company reported substantially lower net income for the fourth quarter and year ended December 31, 2004 due primarily to certain significant non-cash charges and erosion in the Company's Adjusted EBITDA(1).
Fourth Quarter Results
Revenues for the fourth quarter of 2004 were $238.8 million compared to revenues of $224.7 million for the fourth quarter of 2003, an increase of $14.1 million or 6.3 percent. The increase in revenues for the fourth quarter of 2004 compared to the fourth quarter of 2003 was primarily the result of an increase in revenue per unit delivered of $9.54 or 10.0 percent. The revenue improvements in the fourth quarter of 2004 compared to the fourth quarter of 2003 were due to a $2.95 per unit increase in fuel surcharges, certain rate increases net of rate reductions, and a $1.20 increase per unit as a result of the strengthening of the Canadian dollar.
The Company reported a net loss of $33.4 million or $3.75 per share for the fourth quarter of 2004 versus a net loss of $4.3 million or $0.51 per share for the fourth quarter of 2003. Included in the results for the fourth quarter of 2004 are certain significant non-cash charges of $35.9 million, which were comprised of $11.0 million related to the Company's determination that it should no longer discount self-insurance reserves, $8.3 million related to impairment of goodwill at the Company's subsidiary, Axis Group, $5.3 million of expense related to a change in the estimated remaining useful lives of certain assets and $11.3 million related to increases in the valuation allowances against the Company's deferred tax assets. Net income, excluding the aforementioned charges(1), was $2.5 million for the fourth quarter of 2004. In comparison, the fourth quarter of 2003 included a non- cash charge of $6.8 million related to increases in the valuation allowances against the Company's deferred tax assets. Net income, excluding this charge(1), was $2.5 million for the fourth quarter of 2003.
Earnings before interest, taxes, depreciation, amortization, gains and losses on disposal of assets, other non-operating income and expense items and certain significant non-cash charges ("Adjusted EBITDA")(1) for the fourth quarter of 2004 was $17.9 million compared to $21.1 million for the fourth quarter of 2003, a decline of $3.2 million. The decline in Adjusted EBITDA(1) in the fourth quarter of 2004 versus the fourth quarter of 2003 was a result of increased costs in several areas that were only partially offset by the effect of the $14.1 million increase in revenues. These costs included an increase in Teamster benefit costs of $1.2 million, an increase in operating supplies and expenses of $3.2 million primarily related to miscellaneous maintenance costs, and an increase in rents of $1.5 million. Operating taxes and licenses were also higher in the fourth quarter of 2004 compared to the same period in 2003. Most of the $14.1 million increase in revenues, primarily those due to the increase in fuel surcharge revenues and the strengthening of the Canadian dollar, had corresponding cost increases and, therefore, did not favorably impact Adjusted EBITDA(1).
Commenting on the results, Hugh E. Sawyer, the Company's President and Chief Executive Officer, said, "the Company's fourth quarter 2004 operating results were adversely impacted by a number of factors including the non-cash charges of $35.9 million. Nevertheless, there were signs of progress in our core operations as we took steps to increase pricing during the renewal of certain customer agreements, closed non-performing operations, and rationalized our cost structure."
Mr. Sawyer added, "Risk management represents an opportunity and potential risk to our financial results. Therefore, the Company devoted significant effort in 2004 to improve its performance in this area of the business. As previously reported, the Company initiated a program to settle and close outstanding aged workers' compensation claims in an effort to reduce exposure to cost inflation of claims and achieve reductions in self-insurance costs. Further, we maintained our intense focus on programs to reduce future workers' compensation costs by reducing the severity and frequency of current period worker injuries and accidents. We demonstrated improvement in the operational metrics related to workers' compensation claims. During 2004 the Company reduced the number of lost time days related to worker injuries by nearly 20%."
Full Year Results
Revenues for the year ended December 31, 2004 were $895.2 million versus $865.5 million for the same period in 2003, an increase of $29.7 million or 3.4 percent. Revenue per unit for the year ended December 31, 2004 was $98.50 compared to $94.37 for the year ended December 31, 2003. The increase in revenue per unit was primarily due to a $1.02 per unit increase in fuel surcharges and a $1.28 per unit increase as a result of the strengthening of the Canadian dollar.
The Company experienced a net loss of $53.9 million for the year ended December 31, 2004 versus a net loss of $8.6 million in the same period of 2003. The primary contributors to the increase in the Company's net loss for the year ended December 31, 2004 versus the prior year were the non-cash charges recorded in the fourth quarter of 2004 discussed above and erosion in the Company's Adjusted EBITDA(1). Several factors in addition to the non-cash charges contributed to the increase in net loss, the largest being workers' compensation expense, which increased $8.1 million due primarily to aged claims from prior years that developed adversely in 2004. Benefits for the Company's employees covered by the collective bargaining agreement with the Teamsters increased by $5.2 million. Fleet maintenance costs increased $3.9 million from 2003 to 2004 primarily due to the aging of the fleet. The cost of fuel resulted in additional expenses of $10.6 million, whereas the corresponding effect of fuel surcharges included in revenues was $8.2 million, resulting in a net unfavorable impact of $2.4 million. Auto and general liability expense was higher by $4.1 million due in part to the severity of a single claim incurred during 2004 and an increase in premiums and other fees. Rent was higher by $2.5 million primarily due to a new leased facility for the Axis Group and costs related to a facility no longer occupied by the Company. The unfavorable effect of these items was partially offset by higher revenues. Several non-operating items also fluctuated between periods affecting the net loss compared to the prior year including, interest expense, which was $2.2 million higher than 2003, investment income, which was lower by $2.0 million, foreign exchange gains, which were lower by $1.2 million and other income, which was down $2.2 million compared with the same period in 2003 due primarily to the $2.0 million of income in 2003 related to the previously disclosed settlement of litigation with Ryder System, Inc.
Adjusted EBITDA(1) for the year ended December 31, 2004 was $49.4 million versus $65.4 million for the year ended December 31, 2003, a decrease of $16.0 million. Adjusted EBITDA(1) for the year ended December 31, 2004 compared to the prior year declined due to a number of factors including those listed above as well as diminished performance at Axis, the Company's non-union subsidiary, and increased accounting and audit fees.
Also during 2004, the Company spent $22.5 million on capital expenditures, of which $11.7 million was spent on the purchase of 256 Rig engines and on the remanufacture of 114 Rigs, along with 14 additional trailers. The Company also spent $7.0 million on the acquisition of new Rigs in 2004. For 2005, the Company expects approximately $25.0 million in capital expenditures at its Allied Automotive Group subsidiary to remanufacture approximately 165 Rigs, replace approximately 470 engines and purchase approximately 100 Rigs currently under lease. The Company plans to spend approximately $5.0 million on its Axis subsidiary.
The Company established a fuel surcharge program with General Motors in the third quarter of 2004 and successfully negotiated the removal of the maximum recovery amount of fuel surcharge with General Motors in 2005. The fuel surcharge recovery from General Motors will remain in effect as long as General Motors agrees to provide a fuel surcharge to Allied and the car-haul industry. Also in April 2005, the Company amended its credit facility to provide an additional $25.0 million term loan, which it believes adds flexibility to its capital structure.
Mr. Sawyer added, "Despite significant external challenges related to unprecedented fuel cost increases and the uncertain nature of OEM production levels, we believe that 2005 Adjusted EBITDA performance will exceed the Company's 2004 results. We are sincerely disappointed with our results for 2004 and we have taken aggressive steps to position the Company for improved performance in the year ahead. We believe that our 2005 Adjusted EBITDA results will benefit from the impact of the Company's initiative to settle and close aged workers' compensation claims in order to reduce workers' compensation costs. Further, we have taken steps to rationalize overhead costs and sustain improvements in productivity, cargo claims cost and revenue per unit. We have renewed agreements with DaimlerChrysler and Toyota at higher pricing and a positive Adjusted EBITDA impact. Additionally, the Company has amended its agreement with General Motors to remove the maximum recovery of fuel surcharges in 2005 which we believe will substantially mitigate the Company's fuel risk in 2005. Our union subsidiary, Allied Automotive Group, also exited two non-performing operations at year-end. Moreover, we expect to report a better year at Axis due to our new inspection business with General Motors."
Mr. Sawyer concluded, "We do not believe that external market conditions will materially recover in 2005. However, we have determined that altering our operating strategy for the business would not be wise at this stage of the turnaround process. We believe we have identified the primary operating levers in the business. Our aim is to significantly advance the speed and effectiveness of our execution in order to improve our financial performance in 2005."
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.
(1) Net income excluding charges and Adjusted EBITDA are non-GAAP
financial measures; reconciliations to the most directly comparable
GAAP measures are included or attached.
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 2004 and 2003
(In thousands)
2004 2003
ASSETS
Current assets:
Cash and cash equivalents $2,516 $2,148
Restricted cash and cash
equivalents 27,378 26,267
Receivables, net of allowances of
$2,156 and $3,575 in 2004
and 2003, respectively 57,309 51,990
Inventories 4,649 4,983
Deferred income taxes 4,632 21,014
Prepayments and other current
assets 12,414 15,645
Total current assets 108,898 122,047
Property and equipment, net 135,635 155,573
Goodwill, net 83,977 90,203
Other assets:
Restricted cash and cash equivalents 55,502 55,817
Other noncurrent assets 37,520 36,423
Total other assets 93,022 92,240
Total assets $421,532 $460,063
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities:
Current maturities of long-term
debt $13,500 $16,374
Borrowings under revolving credit
facility 2,972 -
Accounts and notes payable 34,690 37,499
Accrued liabilities 85,463 81,237
Total current liabilities 136,625 135,110
Long-term debt, less current
maturities 234,766 230,126
Postretirement benefits other than
pensions 5,082 5,302
Deferred income taxes 16,164 21,014
Other long-term liabilities 70,444 59,697
Commitments and contingencies
Stockholders' (deficit) equity:
Preferred stock, no par value.
Authorized 5,000 shares; none
outstanding - -
Common stock, no par value.
Authorized 20,000 shares; 8,919
and 8,764 shares outstanding at
December 31, 2004 and December 31,
2003, respectively - -
Additional paid-in capital 48,421 47,511
Treasury stock, 139 shares at cost
at December 31, 2004 and 2003 (707) (707)
Accumulated deficit (88,907) (35,024)
Accumulated other comprehensive
loss, net of tax (356) (2,966)
Total stockholders'
(deficit) equity (41,549) 8,814
Total liabilities and
stockholders' (deficit)
equity $421,532 $460,063
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
For the Three Months
Ended For the Year Ended
December 31, December 31,
2004 2003 2004 2003
(unaudited)
Revenues $238,754 $224,704 $895,213 $865,463
Operating expenses:
Salaries, wages, and fringe
benefits 129,565 121,094 488,728 469,540
Operating supplies and expenses 47,336 35,404 162,266 138,512
Purchased transportation 29,648 24,972 111,214 99,604
Insurance and claims 10,616 9,074 40,821 38,168
Operating taxes and licenses 8,301 7,387 29,804 30,376
Depreciation and amortization 13,111 10,868 42,943 45,556
Rents 2,803 1,271 8,556 6,090
Communications and utilities 1,582 1,925 6,342 7,138
Other operating expenses 3,068 2,496 10,124 10,671
Impairment of goodwill 8,295 - 8,295 -
(Gain) loss on disposal of
operating assets, net (134) 713 (839) 1,325
Total operating expenses 254,191 215,204 908,254 846,980
Operating (loss) income (15,437) 9,500 (13,041) 18,483
Other income (expense):
Interest expense (7,656) (7,018) (31,355) (29,138)
Investment income 381 237 1,136 3,172
Foreign exchange gains, net 1,315 783 1,929 3,169
Other, net - - (191) 1,976
(5,960) (5,998) (28,481) (20,821)
Income (loss) before income taxes (21,397) 3,502 (41,522) (2,338)
Income tax expense (12,051) (7,839) (12,361) (6,266)
Net loss $(33,448) $(4,337) $(53,883) $(8,604)
Loss per common share:
Basic and diluted $(3.75) $(0.51) $(6.15) $(1.02)
Weighted average common shares
outstanding:
Basic and diluted 8,910 8,533 8,757 8,475
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the Three
Months Ended For the Year Ended
December 31, December 31,
2004 2003 2004 2003
(unaudited)
Cash flows from operating
activities:
Net loss $(33,448) $(4,337) $(53,883) $(8,604)
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Interest expense paid in kind - - - 1,065
Amortization of deferred
financing costs 703 690 2,797 3,697
Depreciation and amortization 13,111 10,868 42,943 45,556
Impairment of goodwill 8,295 - 8,295 -
(Gain) loss on disposal of
assets and other, net (134) 713 (839) 1,325
Foreign exchange gain, net (1,315) (783) (1,929) (3,169)
Deferred income taxes 11,275 10,316 11,275 6,914
Compensation expense related to
stock options and grants (154) (30) 321 260
Amortization of Teamsters Union
contract costs - - - 1,000
Change in operating assets and
liabilities:
Receivables, net of allowance
for doubtful accounts (4,491) 1,907 (4,727) 8,378
Inventories 441 (64) 414 272
Prepayments and other assets (675) (2,126) (3,272) (158)
Accounts and notes payable 4,258 6,164 (1,747) (3,512)
Accrued liabilities 3,065 (12,031) 13,860 (16,186)
Net cash provided by
operating activities 931 11,287 13,508 36,838
Cash flows from investing activities:
Purchases of property and
equipment (4,488) (7,008) (22,542) (18,555)
Proceeds from sales of property
and equipment 923 398 3,040 685
(Increase) decrease in restricted
cash and cash equivalents (214) (114) (796) (81,279)
Decrease in restricted investments - - - 60,732
Funds deposited with insurance
carriers (48) - (32,072) (22,680)
Funds returned from insurance
carriers 1,252 1,502 34,995 19,560
(Increase) decrease in the cash
surrender value of life insurance (174) - (27) 2
Net cash used in investing
activities (2,749) (5,222) (17,402) (41,535)
Cash flows from financing
activities:
Additions to (repayments of)
revolving credit facility, net (15,254) (4,355) 2,972 (24,635)
Additions to long-term debt 20,000 - 20,000 99,875
Repayment of long-term debt (3,442) (3,375) (18,234) (78,280)
Payment of deferred financing
costs (475) (7) (475) (3,038)
Proceeds from insurance financing
arrangements 2,644 4,085 31,252 19,313
Repayments of insurance financing
arrangements (6,409) (2,347) (32,634) (17,634)
Proceeds from issuance of common
stock 63 168 589 450
Other, net - (65) - -
Net cash provided by (used
in) financing activities (2,873) (5,896) 3,470 (3,949)
Effect of exchange rate changes on
cash and cash equivalents 305 600 792 1,346
Net change in cash and cash
equivalents (4,386) 769 368 (7,300)
Cash and cash equivalents at
beginning of period 6,902 1,379 2,148 9,448
Cash and cash equivalents at end of
year $2,516 $2,148 $2,516 $2,148
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
SUMMARY OPERATING DATA
(Unaudited)
For the Three Months Ended For the Year Ended
December 31, December 31,
2004 2003 2004 2003
Allied Automotive
Group and
Corporate:
Revenues $231,989,000 $217,003,000 $869,507,000 $836,835,000
Operating (loss)
income $(8,884,000) $7,574,000 $(7,631,000) $14,007,000
Operating Ratio 103.83% 96.51% 100.88% 98.33%
Vehicles delivered 2,201,781 2,264,581 8,827,253 8,867,249
Loads delivered 285,792 293,876 1,146,268 1,151,737
Vehicles per load 7.70 7.71 7.70 7.70
Revenue per
vehicle delivered $105.36 $95.82 $98.50 $94.37
Percent damage
free delivery 99.80% 99.70% 99.76% 99.71%
Axis Group:
Revenues $6,765,000 $7,701,000 $25,706,000 $28,628,000
Operating income $(6,553,000) $1,926,000 $(5,410,000) $4,476,000
ALLIED HOLDINGS, INC. AND SUBSIDIARIES
2004 FOURTH QUARTER EARNINGS RELEASE
NON-GAAP FINANCIAL INFORMATION
(In thousands)
(Unaudited)
For the Three
Months Ended For the Year Ended
December 31, December 31,
2004 2003 2004 2003
Reconciliation of net loss to
Adjusted EBITDA:
Net loss $(33,448) $(4,337) $(53,883) $(8,604)
Adjustments to reconcile net loss
to Adjusted EBITDA :
Income tax expense 12,051 7,839 12,361 6,266
Interest expense 7,656 7,018 31,355 29,138
Investment income (381) (237) (1,136) (3,172)
Foreign exchange gains (1,315) (783) (1,929) (3,169)
Other, net - - 191 (1,976)
Depreciation and amortization 13,111 10,868 42,943 45,556
Tire expense related to idled fleet
equipment 1,087 - 1,087 -
Reversal of discounting on insurance
reserves 10,959 - 10,959 -
Impairment of goodwill 8,295 - 8,295 -
Loss (gain) on disposal of operating
assets (134) 713 (839) 1,325
Adjusted EBITDA $17,881 $21,081 $49,404 $65,364
Reconciliation of cash provided by
operating activities to Adjusted
EBITDA:
Net cash provided by operating
activities $931 $11,287 $13,508 $36,838
Adjustments to reconcile net cash
provided by operating activities to
Adjusted EBITDA :
Interest expense 7,656 7,018 31,355 29,138
Interest paid in-kind - - - (1,065)
Investment income (381) (237) (1,136) (3,172)
Amortization of deferred financing
costs (703) (690) (2,797) (3,697)
Income tax expense 12,051 7,839 12,361 6,266
Deferred income taxes (11,275) (10,316) (11,275) (6,914)
Amortization of Teamster Union
contract costs - - - (1,000)
Compensation income (expense)
related to stock options and
grants 154 30 (321) (260)
Other - - 191 (1,976)
Net change in operating assets and
liabilities (excluding the impact
of the tire expense related to
idled equipment and the
discounting adjustment related to
insurance reserves) 9,448 6,150 7,518 11,206
Adjusted EBITDA $17,881 $21,081 $49,404 $65,364
The attached press release includes a presentation of net loss, excluding
certain non-cash charges, and Adjusted EBITDA, for the fourth quarter and
year ended December 31, 2004. Such measures are not measures of financial
performance under Generally Accepted Accounting Principles ("GAAP") and
should not be considered as alternatives to comparable GAAP measures.
The Company uses Adjusted EBITDA as a measure of liquidity and
operating performance. The Company believes that this measure provides
useful information to investors regarding the Company's ability to
generate cash flows that can be used to service debt and invest in capital
expenditures and also provides useful information to investors in regard
to operating performance. Management uses net loss, excluding certain
non-cash charges, and Adjusted EBITDA as earnings measures adjusted to
exclude such items as part of its evaluation of the performance of the
Company. The Company believes that these measures provide useful
information to investors because the items excluded are related to unusual
items that resulted in a significant impact and are not likely to recur
regularly or in predictable amounts. Consequently, presenting net loss,
excluding certain non-cash charges, and Adjusted EBITDA, which excludes
such unusual items, is meaningful supplemental information to investors.
Adjusted EBITDA, with certain additional modifications, is also a
component of certain financial covenants in the Company's debt agreements.
The Company considers net loss to be the most directly comparable measure
of operating performance in the Company's consolidated financial
statements prepared in conformity with GAAP and net cash provided by
operating activities in the consolidated statements of cash flows to be
the most directly comparable measure of liquidity. The Company has
presented reconciling information in the press release in the table above
or in the narrative.