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 JUNE 30, 1998

[ ] 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.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)

GEORGIA 58-0360550
- ---------------------------------------------------------------------------------------------------------------------

(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)

Suite 200, 160 Clairemont Avenue, Decatur, Georgia 30030
- --------------------------------------------------------------------------------
(Address of principal executive offices)

(404) 373-4285
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)

- --------------------------------------------------------------------------------
(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 August 1, 1998...............7,877,547

TOTAL NUMBER OF PAGES INCLUDED IN THIS REPORT: 13

INDEX

PART I

FINANCIAL INFORMATION

PAGE
ITEM 1: FINANCIAL STATEMENTS

Consolidated Balance Sheets as of June 30, 1998 and
December 31, 1997. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Consolidated Statements of Operations for the Three and Six
Month Periods Ended June 30, 1998 and 1997 . . . . . . . . . . . . . . . . . . . . 4

Consolidated Statements of Cash Flows for the Six
Month Periods Ended June 30, 1998 and 1997 . . . . . . . . . . . . . . . . . . . . 5

Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . 6

ITEM 2
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . 8

PART II

OTHER INFORMATION

ITEM 4
Submission of Matters to a Vote of Security Holder. . . . . . . . . . . . . . . . . . 11

ITEM 6

Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Signature Page . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

2
3

PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS

ALLIED HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

JUNE 30 DECEMBER 31
1998 1997
------------------- -------------------
(UNAUDITED)

ASSETS

CURRENT ASSETS:

Cash and cash equivalents $ 11,318 $ 10,530
Short-term investments 17,687 19,540
Receivables, net of allowance for doubtful accounts 79,569 74,881
Inventories 7,089 5,391
Deferred tax assets 18,212 17,812
Prepayments and other current assets 21,314 21,519
------------------ ------------------
Total current assets 155,189 149,673
------------------ ------------------

PROPERTY AND EQUIPMENT, NET 285,145 286,214
------------------ ------------------

OTHER ASSETS:

Goodwill, net 99,020 99,310
Notes receivable due from related parties 0 573
Other 35,113 23,169
------------------ ------------------
Total other assets 134,133 123,052
------------------ ------------------
Total assets $ 574,467 $ 558,939
================== ==================

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

Current maturities of long-term debt $ 2,974 $ 2,980
Trade accounts payable 31,803 36,263
Accrued liabilities 108,030 118,436
------------------ ------------------
Total current liabilities 142,807 157,679
------------------ ------------------

LONG-TERM DEBT, LESS CURRENT MATURITIES 248,891 228,003
------------------ ------------------

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS 11,320 11,355
------------------ ------------------

DEFERRED INCOME TAXES 38,133 35,062
------------------ ------------------

OTHER LONG-TERM LIABILITIES 68,770 69,512
------------------ ------------------

STOCKHOLDERS' EQUITY:

Common stock, no par value; 20,000 shares authorized, 7,878 and 7,819
shares outstanding at June 30, 1998
and December 31,1997, respectively 0 0
Additional paid-in capital 44,830 43,758
Retained earnings 25,264 16,877
Foreign currency translation adjustment, net of tax (4,145) (2,826)
Unearned compensation (1,403) (481)
------------------ ------------------
Total stockholders' equity 64,546 57,328
------------------ ------------------
Total liabilities and stockholders' equity $ 574,467 $ 558,939
================== ==================

The accompanying notes are an integral part of these consolidated balance
sheets.

ALLIED HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------------------ ----------------------------
1998 1997 1998 1997
---- ---- ---- ----

REVENUES $280,641 $112,576 $534,031 $208,969
-------- -------- -------- --------
OPERATING EXPENSES:
Salaries, wages and fringe benefits 149,877 57,692 293,853 109,634
Operating supplies and expenses 48,660 17,307 93,286 32,563
Purchased transportation 25,717 10,220 46,531 19,170
Insurance and claims 10,550 4,289 19,683 8,098
Operating taxes and licenses 6,982 4,332 15,645 8,190
Depreciation and amortization 13,015 6,939 25,940 13,786
Rents 2,868 1,239 5,897 2,470
Communications and utilities 2,072 764 3,985 1,534
Other operating expenses 1,576 1,150 3,100 2,074
-------- -------- -------- --------
Total operating expenses 261,317 103,932 507,920 197,519
-------- -------- -------- --------
Operating income 19,324 8,644 26,111 11,450
-------- -------- -------- --------

OTHER INCOME (EXPENSE):
Interest expense (6,260) (2,792) (12,282) (5,408)
Interest income 565 205 1,021 357
-------- -------- -------- --------
(5,695) (2,587) (11,261) (5,051)
-------- -------- -------- --------

INCOME BEFORE INCOME TAXES 13,629 6,057 14,850 6,399

INCOME TAX PROVISION (5,932) (2,544) (6,463) (2,688)
-------- -------- -------- --------

NET INCOME $ 7,697 $ 3,513 $ 8,387 $ 3,711
======== ======== ======== ========

PER COMMON SHARE:
BASIC $ 0.99 $ 0.45 $ 1.08 $ 0.48
======== ======== ======== ========
DILUTED $ 0.98 $ 0.45 $ 1.07 $ 0.48
======== ======== ======== ========

COMMON SHARES OUTSTANDING:

BASIC 7,748 7,725 7,747 7,725
======== ======== ======== ========
DILUTED 7,861 7,725 7,860 7,725
======== ======== ======== ========

The accompanying notes are an integral part of these consolidated statements.

ALLIED HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)

FOR THE SIX MONTHS ENDED
JUNE 30
------------------------------------
1998 1997
----------------- ----------------
(UNAUDITED) (UNAUDITED)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income $ 8,387 $ 3,711
---------------- ----------------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 25,940 13,786
Loss on sale of property and equipment 212 27
Deferred income taxes 3,497 1,405
Change in operating assets and liabilities:

Receivables, net of allowance for doubtful accounts (5,150) (5,699)
Inventories (1,739) (128)
Prepayments and other current assets 128 (2,333)
Trade accounts payable (4,297) (2,934)
Accrued liabilities (10,946) 6,685
---------------- ----------------
Total adjustments 7,645 10,809
---------------- ----------------
Net cash provided by operating activities 16,032 14,520
---------------- ----------------

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property and equipment (25,149) (6,910)
Proceeds from sale of property and equipment 501 114
Purchase of businesses, net of cash acquired (11,920) (12,898)
Decrease (increase) in short-term investments 1,853 (301)
Increase in the cash surrender value of life insurance (1,190) (1,283)
---------------- ----------------
Net cash used in investing activities (35,905) (21,278)
---------------- ----------------

CASH FLOWS FROM FINANCING ACTIVITIES:

Repayments of long-term debt (1,233) (11,404)
Proceeds from issuance of long-term debt 22,139 20,655
Other, net (348) 0
---------------- ----------------
Net cash provided by financing activities 20,558 9,251
---------------- ----------------

EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS 103 (57)

NET INCREASE IN CASH AND CASH EQUIVALENTS 788 2,436

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 10,530 1,973
---------------- ----------------

CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 11,318 $ 4,409
================ ================

The accompanying notes are an integral part of these consolidated statements.

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 generally accepted accounting
principles 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 and six month periods ended June 30, 1998 are
not necessarily indicative of the results that may be expected for
the year ended December 31, 1998. 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 1997 Annual Report on Form 10-K.

Note 2. Long-Term Debt

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 "Guarantors"). Separate financial statements of the
Guarantors are not provided herein as (i) the Guarantors are jointly
and severally liable for the Company's obligations under the Notes,
(ii) the subsidiaries which are not Guarantors are inconsequential to
the consolidated operations of the Company and its subsidiaries and
(iii) the net assets and earnings of the Guarantors are substantially
equivalent to the net assets and earnings of the consolidated entity
as reflected in these consolidated financial statements. There are no
restrictions on the ability of the Guarantors to make distributions
to the Company.

Note 3. Acquisition of Ryder Automotive Carrier Services, Inc. and RC
Management Corp.

On September 30, 1997, the Company completed the acquisition of Ryder
Automotive Carrier Services, Inc. and RC Management Corp. from Ryder
System, Inc. ( the "Acquisition" ) for approximately $114.5 million
in cash, subject to post-closing adjustments. The subsidiaries of
Ryder Automotive Carrier Services are engaged in car hauling, vehicle
processing and dealer prep, rail unloading and loading services of
vehicle railcars, and rail and port yard management. RC Management
Corp. is principally involved in providing logistics services to the
new retail used car superstores. The

6
7

operating results of Ryder's Automotive Carrier Group have been
included with Allied's since the date of acquisition.

Note 4. Investment in Axis do Brasil

In February of 1998, the Company's wholly-owned subsidiary, Axis
Group, Inc. completed the formation of a 50 percent owned venture in
Brazil. The Brazilian venture, Axis do Brasil, is a partnership with
Coimex Trading Company of Vitoria, Brazil, which is one of the
largest trading companies in South America. Axis do Brasil is an
equity partner in a newly formed Brazilian firm, Axis Sinimbu
Logistica ("ASL"). ASL will provide supply chain logistics services
for the automotive industry in the Mercosur countries. The Company
accounts for its investment in ASL under the equity method of
accounting.

Note 5. Comprehensive Income

Comprehensive income was $ 6.4 million for the second quarter 1998
versus $3.2 million for the second quarter of 1997, and $7.1 million
for the first six months of 1998 versus $3.4 million for the first
six months of 1997. The difference between comprehensive income and
net income is changes in the foreign currency translation adjustment,
net of income taxes.

Note 6. Earnings per Share

In February 1997, the Financial Accounting Standards Board issued
SFAS No. 128, "Earnings per Share." This new statement did not result
in changes to the Company's earnings per share for the first two
quarters of 1997.

7
8

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Revenues were $280.6 million for the second quarter of 1998 versus
revenues of $112.6 million for the second quarter of 1997, an increase
of 149 %. For the six-month period ended June 30, 1998, revenues were
$534.0 million, versus revenues of $209.0 million reported for the same
period last year, a 156 % increase. The significant increase in the
Company's revenues was primarily attributable to the acquisition of
Ryder's Automotive Carrier Group which was completed on September 30,
1997. The results of Ryder's Automotive Carrier Group have been
included with Allied's since the date of acquisition. The combined
companies had a 7 % increase in the number of vehicles delivered during
the second quarter of 1998 versus the second quarter of 1997 and a 6 %
increase for the first six months of 1998 versus the first six months
of 1997 due to increases in new vehicle production and sales.

Net income was $7.7 million in the second quarter of 1998 versus $3.5
million in the second quarter of 1997, a 120 % increase. Basic earnings
per share for the second quarter of 1998 were $0.99 and diluted
earnings per share were $0.98, versus basic and diluted earnings per
share of $0.45 in the second quarter of 1997. For the six-month period
ended June 30, 1998, net income was $8.4 million, compared with net
income of $3.7 million for the comparable six-month period a year ago,
an increase of 127 %. Basic earnings per share for the first six months
of 1998 were $1.08 and diluted earnings per share were $1.07, versus
basic and diluted earnings per share of $0.48 during the first six
months of 1997.

The Company's second quarter earnings were the highest quarterly
earnings in the Company's sixty-four year history, even though the work
stoppages at most General Motors manufacturing plants reduced the
Company's 1998 second quarter earnings by approximately $0.10 per
share. Additionally, the work stoppages have had a continuing adverse
impact on the Company. The Company estimates that the work stoppages
will reduce third quarter revenues by $25 million. The record earnings
were attributable to increased vehicle deliveries from the Ryder
Automotive Carrier Group acquisition, increased new vehicle production
and sales, and an improved performance by the Axis Group, Inc., Allied
Holdings' logistics subsidiary. The Axis Group, Inc. recorded an
operating profit of approximately $700,000 led by strong
port-processing and carrier management activities during the quarter,
together with contributions from Axis' recent venture in Brazil. This
was the first quarter the Axis Group posted an operating profit since
its inception in April 1996.

Salaries, wages and fringe benefits increased from 51.3 % of revenues
in the second quarter of 1997 to 53.4 % of revenues for the second
quarter of 1998, and from 52.5 % of revenues

8
9

for the first six months of 1997 to 55.0 % of revenues for the first
six months of 1998. The increase was primarily due to annual salary and
benefit increases together with additional acquisition related terminal
consolidations and computer conversion costs offset by continued
productivity and efficiency improvements.

Operating supplies and expenses increased from 15.4 % of revenues in
the second quarter of 1997 to 17.3 % of revenues for the second quarter
of 1998, and from 15.6 % of revenues for the first six months of 1997
to 17.5 % of revenues for the first six month of 1998. The increase was
primarily the result of the acquisition of Ryder's Automotive Carrier
Group as its operating costs as a percentage of revenues were higher
than the Company's.

Purchased transportation expense increased slightly from 9.1 % of
revenues in the second quarter of 1997 to 9.2 % of revenues for the
second quarter of 1998. However, for the six-month period ended June
30, 1998, purchased transportation was 8.7 % of revenues compared to
9.2 % of revenues for the same period last year. The decrease was
primarily due to the decrease in the mix of owner operators to company
drivers and the ability to haul more vehicles with Company drivers thus
reducing the number of vehicles delivered by other carriers for the
Company. All costs for owner-operators are included in purchased
transportation.

Insurance and claims expense as a percentage of revenues remained
approximately unchanged during the second quarter of 1998 compared to
the second quarter of 1997. However, for the six-month period ended
June 30, 1998, insurance and claims expense decreased to 3.7 % of
revenues from 3.9 % of revenues for the first six months of 1997. The
decrease was primarily due to lower cargo claims costs resulting from
the continuation of quality programs instituted in 1997.

Depreciation and amortization expense decreased from 6.2 % of revenues
in the second quarter of 1997 to 4.6 % for the second quarter of 1998,
and from 6.6 % for the six months of 1997 to 4.9 % of revenues for
comparable six-month period a year ago. The decrease was primarily the
result of depreciation expense on the rigs acquired through the
acquisition of Ryder's Automotive Carrier Group representing a lower
percentage of revenues than the Company's due to the age and useful
lives of the rigs.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operating activities totaled $16.0 million for the
six months ended June 30, 1998 versus $14.5 million for the first six
months ended June 30, 1997. The increase in cash provided by operating
activities was primarily due to changes in working capital due to the
seasonality of the Company's revenues.

Net cash used in investing activities totaled $35.9 million for the six
months ended June 30, 1998 versus $21.3 million for the same period in
1997. The increase was primarily

9
10

due to an increase in capital expenditures, from $6.9 million for the
first six months of 1997 to $25.1 million for the first six months of
1998. This increase was due to the increase in the number of new
tractors and trailers purchased by the Company together with an
increase in modifications to existing tractors and trailers due to an
increase in the fleet size as a result of the Ryder Automotive Carrier
Group acquisition. In addition, net cash used in investing activity
increased because the Company invested $11.9 million to form Axis do
Brasil in February 1998.

Net cash provided by financing activities totaled $20.6 million for the
six months ended June 30, 1998 versus $9.3 million for the six months
ended June 30, 1997. The increase was primarily due to borrowings made
in the first quarter of 1998 to finance the Company's investment in
Brazil. Also, the Company had net borrowings in the second quarter of
1998 due to the payment of certain liabilities resulting from the Ryder
Automotive Carrier Group acquisition. The liabilities had been accrued
at the acquisition date and relate to litigation, severance,
relocation, and other acquisition related costs.

Seasonality and Inflation

The Company's revenues are seasonal, with the second and fourth
quarters generally experiencing higher revenues than the first and
third quarters. The volume of vehicles shipped during the second and
fourth quarters is generally higher due to the introduction of new
models which are shipped to dealers during those periods and the higher
spring and early summer sales of automobiles and light trucks. During
the first and third quarters, vehicle shipments typically decline due
to lower sales volume during those periods and scheduled plant shut
downs. Inflation has not significantly affected the Company's results
of operations.

Cautionary notice regarding Forward-Looking Statements

Statements in this quarterly report on Form 10-Q that are not strictly
historical are "forward-looking" statements. Investors are cautioned
that such statements are subject to certain risks and uncertainties
that could cause actual results to differ materially. Without
limitation, these risks and uncertainties include economic recessions
or downturns in new vehicle production or sales, labor disputes
involving the Company or its significant customers, risks associated
with conducting business in foreign countries and the ability to
integrate the acquisition of Ryder's Automotive Carrier Group.
Investors are urged to carefully review and consider the various
disclosures made by the Company in this quarterly report and in the
Company's other reports filed with the Securities and Exchange
Commission.

10
11

PART II

OTHER INFORMATION

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On May 27, 1998 the Annual Meeting of Shareholders was held. The
following Directors were elected for terms which will expire on the
date of the annual meeting in the year indicated below. The number of
shares voted for, against and abstentions are also indicated.

- -----------------------------------------------------------------------------------------------------------------
FOR AGAINST ABSTAIN TERM
- -----------------------------------------------------------------------------------------------------------------

Joseph W. Collier 5,511,283 0 305 2001
- -----------------------------------------------------------------------------------------------------------------
Guy W. Rutland, IV 5,511,283 0 305 2001
- -----------------------------------------------------------------------------------------------------------------
Randall E. West 5,511,278 0 310 2001
- -----------------------------------------------------------------------------------------------------------------
Berner F. Wilson 5,511,283 0 305 2001
- -----------------------------------------------------------------------------------------------------------------
William P. Benton 5,511,280 0 308 2000
- -----------------------------------------------------------------------------------------------------------------

The following Directors' terms will continue as indicated.

David G. Bannister 2000
A. Mitchell Poole, Jr. 2000
Robert J. Rutland 2000
Bernard O. De Wulf 1999
Guy W. Rutland, III 1999
Robert R. Woodson 1999

11
12

Item 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) Exhibits: Ex 27.1 Financial Data Schedule (For SEC use only).

(b) Reports on Form 8-K: There were no reports filed on Form 8-K
for the quarter ended June 30, 1998.

12
13

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.

August 13, 1998 /s/A. Mitchell Poole, Jr.
- --------------- -------------------------------------
(Date) A. Mitchell Poole, Jr.
on behalf of Registrant as
President, Chief Operating Officer,
Chief Financial Officer and
Assistant Secretary