UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 —

For the quarterly period ended March 31, 2007

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 —

For the transition period from                      to                     

ALLIED SYSTEMS HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

DELAWARE		58-0360550
(State or other jurisdiction of		(I.R.S. Employer Identification
incorporation or organization)		Number)

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

(404) 373-4285

www.alliedholdings.com
(Web Page)

     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.

o Yes þ No

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act of 1934).

Large Accelerated Filer o      Accelerated Filer o      Non-Accelerated Filer þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes þ No

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. o Yes þ No

Outstanding common stock, no par value at September 28, 2007 ........ 7,035,101

 

 

ALLIED HOLDINGS, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

		PAGE
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 2007 and December 31, 2006 (unaudited)			1
Consolidated Statements of Operations - Three Months Ended March 31, 2007 and 2006 (unaudited)			2
Consolidated Statements of Cash Flows - Three Months Ended March 31, 2007 and 2006 (unaudited)			3
Notes to the Consolidated Financial Statements (unaudited)			4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			32
Item 3. Quantitative and Qualitative Disclosures About Market Risk			43
Item 4. Controls and Procedures			43
PART II — OTHER INFORMATION
Item 1. Legal Proceedings			43
Item 1A. Risk Factors			43
Item 5. Other Information			48
Item 6. Exhibits			49
SIGNATURES			50
EX-10.20(B) CONTRACT CARRIAGE AGREEMENT DATED APRIL 1, 2007
EX-10.22(A) SECOND AMENDMENT TO MOTOR TRANSPORTATION CONTRACT
EX-10.25 AMENDED AND RESTATED EMPLOYMENT AGREEMENT / KEITH RENTZEL
EX-10.26 AMENDED AND RESTATED EMPLOYMENT AGREEMENT / ROBERT FERRELL
EX-10.27 SEVERANCE AGREEMENT / JOE MARINELLI
EX-31.1 SECTION 302 CERTIFICATION OF THE CEO
EX-31.2 SECTION 302 CERTIFICATION OF THE CFO
EX-32.1 SECTION 906 CERTIFICATION OF THE CEO
EX-32.2 SECTION 906 CERTIFICATION OF THE CFO

PART I — FINANCIAL INFORMATION

ITEM 1 — Financial Statements

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)

CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)

		March 31,				December 31,
		2007				2006
ASSETS
Current assets:
Cash and cash equivalents		$	28,172			$	2,314
Restricted cash, cash equivalents and other time deposits			32,278				32,436
Receivables, net of allowances of $1,460 and $1,701 as of March 31, 2007 and December 31, 2006, respectively			49,041				52,427
Inventories			4,766				4,916
Deferred income taxes			2,982				1,907
Prepayments and other current assets			19,665				21,463
Total current assets			136,904				115,463
Property and equipment, net of accumulated depreciation			134,787				129,231
Goodwill, net			3,545				3,545
Other assets:
Restricted cash, cash equivalents and other time deposits			65,534				65,857
Other noncurrent assets			33,119				24,672
Total other assets			98,653				90,529
Total assets		$	373,889			$	338,768
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities not subject to compromise:
Debtor-in-possession credit facility		$	—			$	161,357
Canadian revolving credit facility			372				—
Accounts and notes payable			30,090				26,364
Accrued liabilities			75,950				74,439
Deferred income taxes			106				106
Total current liabilities			106,518				262,266
Long-term liabilities not subject to compromise:
Debtor-in-possession credit facility			205,000				—
Postretirement benefits other than pensions			14,202				14,227
Deferred income taxes			3,003				1,926
Other long-term liabilities			63,552				65,269
Total long-term liabilities			285,757				81,422
Liabilities subject to compromise			199,351				199,212
Commitments and contingencies			—				—
Stockholders’ deficit:
Preferred stock, no par value. Authorized 5,000 shares; none outstanding			—				—
Common stock, no par value. Authorized 20,000 shares; 8,980 shares outstanding at March 31, 2007 and December 31, 2006			—				—
Additional paid-in capital			49,138				49,081
Treasury stock, 139 shares at cost			(707	)			(707	)
Accumulated deficit			(242,193	)			(228,432	)
Accumulated other comprehensive loss, net of tax			(23,975	)			(24,074	)
Total stockholders’ deficit			(217,737	)			(204,132	)
Total liabilities and stockholders’ deficit		$	373,889			$	338,768

See accompanying notes to these consolidated financial statements.

CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)

		Three Months Ended March 31,
		2007				2006
Revenues		$	193,121			$	240,828
Operating expenses:
Salaries, wages and fringe benefits			100,535				125,613
Operating supplies and expenses			43,113				48,662
Purchased transportation			22,907				30,908
Insurance and claims			8,905				10,933
Operating taxes and licenses			6,696				7,698
Depreciation and amortization			7,779				7,216
Rents			1,896				1,753
Communications and utilities			1,841				1,937
Other operating expenses			2,105				2,065
Loss (gain) on disposal of operating assets, net			30				(54	)
Total operating expenses			195,807				236,731
Operating (loss) income			(2,686	)			4,097
Other income (expense):
Interest expense (excludes contractual interest of $3,234 in 2007 and 2006)			(7,592	)			(9,541	)
Investment income			1,202				1,036
Foreign exchange gains (losses), net			343				(170	)
Total other income (expense)			(6,047	)			(8,675	)
Loss before reorganization items and income taxes			(8,733	)			(4,578	)
Reorganization items			(3,668	)			(3,583	)
Loss before income taxes			(12,401	)			(8,161	)
Income tax expense			(195	)			(127	)
Net loss		$	(12,596	)		$	(8,288	)
Basic and diluted loss per common share:
Net loss:
Basic and diluted		$	(1.40	)		$	(0.92	)
Weighted-average common shares outstanding:
Basic and diluted			8,980				8,980

See accompanying notes to these consolidated financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except per share data)
(Unaudited)

		Three Months Ended March 31,
		2007				2006
Cash flows from operating activities:
Net loss		$	(12,596	)		$	(8,288	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization			7,779				7,216
Loss (gain) on disposal of operating assets, net			30				(54	)
Write-off and amortization of deferred financing costs			124				3,631
Interest expense paid in kind			3,444				—
Foreign exchange (gain) losses, net			(343	)			170
Reorganization items			3,668				3,583
Deferred income taxes			2				1
Stock-based compensation expense			57				93
Change in operating assets and liabilities:
Receivables, net of allowances			3,474				2,011
Inventories			161				(19	)
Prepayments and other assets			1,187				3,697
Accounts and notes payable			2,413				(247	)
Accrued liabilities			(1,219	)			4,213
Net cash provided by operating activities before payment of reorganization items			8,181				16,007
Reorganization items paid			(2,589	)			(2,936	)
Net cash provided by operating activities			5,592				13,071
Cash flows from investing activities:
Purchases of property and equipment			(11,589	)			(6,216	)
Proceeds from sales of property and equipment			152				149
Decrease in restricted cash, cash equivalents and other time deposits			481				9
Funds deposited with insurance carriers			(504	)			(574	)
Funds returned from insurance carriers			964				1,908
Net cash used in investing activities			(10,496	)			(4,724	)
Cash flows from financing activities:
Net repayments of original debtor-in-possession revolving credit facility			(45,005	)			(1,501	)
Net borrowings under Canadian revolving credit facility			372				—
Proceeds from new debtor-in-possession facility term borrowings			205,000				—
Proceeds from original debtor-in-possession facility term borrowings			2,000				—
Repayment of original debtor-in-possession facility term borrowings			(121,796	)			—
Payment of financing costs			(8,121	)			—
Proceeds from insurance financing arrangements			—				178
Repayments of insurance financing arrangements			(1,611	)			(8,182	)
Net cash provided by (used in) financing activities			30,839				(9,505	)
Effect of exchange rate changes on cash and cash equivalents			(77	)			(77	)
Net change in cash and cash equivalents			25,858				(1,235	)
Cash and cash equivalents at beginning of period			2,314				4,117
Cash and cash equivalents at end of period		$	28,172			$	2,882
Supplemental cash flow information:
Cash paid during the year for:
Interest		$	4,339			$	5,223
Income taxes, net			321				150
Supplemental disclosure of noncash financing activity:
Interest paid in kind via addition to term debt		$	3,444			$	—

See accompanying notes to these consolidated financial statements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(Throughout this Quarterly Report on Form 10-Q, we will use the terms “we,” “our,” “us” and “Allied” to refer to Allied Holdings, Inc. (a Georgia corporation) or its successor, Allied Systems Holdings, Inc. (a Delaware Corporation) and its subsidiaries on a consolidated basis and, as the context requires, to Allied Holdings, Inc. and its subsidiaries that filed for Chapter 11 protection pursuant to the U.S. Bankruptcy Code.)

(1) Organization and Operations

Company Overview

We are a vehicle-hauling company providing a range of logistics and other support services to the automotive industry. Our principal operating divisions are Allied Automotive Group, Inc. (collectively with its subsidiaries referred to as “Allied Automotive” or the/our “Automotive Group”) and Axis Group, Inc. (“Axis” or the “Axis Group”). Allied Automotive Group, through its subsidiaries, is engaged in the business of transporting automobiles, light trucks, and sports-utility vehicles (“SUVs”) from manufacturing plants, ports, auctions, and railway distribution points to automobile dealerships. Axis Group, through its subsidiaries, is engaged in the business of securing and managing vehicle distribution services, automobile inspections, auction and yard management services, vehicle tracking, vehicle accessorization, and dealer preparatory services for the automotive industry.

Chapter 11 Overview

On July 31, 2005 (“the Petition Date”), Allied Holdings, Inc. and substantially all of its subsidiaries (the “Debtors”) filed voluntary petitions with the U.S. Bankruptcy Court for the Northern District of Georgia (the “Bankruptcy Court”) seeking protection under Chapter 11 of the U.S. Bankruptcy Code (“Chapter 11”). Our captive insurance subsidiary, Haul Insurance Limited, as well as our subsidiaries in Mexico and Bermuda (the “Non-debtors”) were not included in the Chapter 11 filings. Our Canadian subsidiaries obtained approval for creditor protection under the Companies Creditors’ Arrangement Act in Canada and are included among the subsidiaries that filed voluntary petitions seeking bankruptcy protection. Like Chapter 11, the Companies Creditors Arrangement Act in Canada allows for reorganization under the protection of the court system.

On May 18, 2007, the Bankruptcy Court entered an order confirming the Debtors’ Modified Second Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, dated April 6, 2007 (the “Joint Plan”). On May 29, 2007, the effective date of the Joint Plan (the “Effective Date”), the Debtors emerged from Chapter 11.

As of the Effective Date and pursuant to the Joint Plan, all equity interests in Allied were cancelled and a certificate of merger was filed with the Delaware Secretary of State effecting the merger of Allied Holdings, Inc. into its wholly owned subsidiary, Allied Systems Holdings, Inc., a Delaware corporation, with Allied Systems Holdings, Inc. as the surviving corporation. Also as of the Effective Date, the authorized capital stock of Allied Systems Holdings, Inc. became one hundred million (100,000,000) shares of common stock, par value $0.01 per share, and ten million (10,000,000) shares of preferred stock, par value $0.01 per share.

We continue to operate in substantially our previous form, and the outstanding claims against and interests in the Debtors are being resolved pursuant to the Joint Plan. As of the Effective Date, our debtor-in-possession credit facilities were converted to exit financing facilities (“Secured Credit Facilities”). The implementation of the Joint Plan includes, among other things, the consummation of the following transactions:

	i)		Payment in cash, reinstatement, return of collateral or other treatment of other secured claims, as agreed to with the holder of each such claim;
	ii)		Distribution of new common stock of Allied Systems Holdings, Inc. on a pro rata basis to the holders of allowed general unsecured claims;
	iii)		Cancellation of the existing common stock interests in Allied Holdings, Inc. (holders of equity interests receive nothing under the Joint Plan); and
	iv)		Assumption of selected contracts.

Upon our emergence from Chapter 11, Yucaipa American Alliance Fund I, LP and Yucaipa American Alliance (Parallel) Fund I, LP became owners of the majority of our common stock. Yucaipa American Alliance Fund I, LP and Yucaipa American Alliance (Parallel) Fund I, LP along with their related legal entities will be referred to as “Yucaipa” hereafter. Two of Yucaipa’s employees now serve as members of our Board of Directors. Upon our successful emergence from Chapter 11, the Bankruptcy Court approved fees of approximately $6.6 million payable to Yucaipa for its substantial contribution in the development of the Joint Plan, which fees were paid in May 2007.

We have also entered into a management agreement with Yucaipa under which Yucaipa will provide various services for our company for a fee of $1.5 million per year.

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

Proceedings between the Petition Date and the Effective Date will be referred to as the Chapter 11 Proceedings. See Note 3 for other disclosures required by entities in reorganization under the Bankruptcy Code and Note 11 for additional disclosures on the New DIP Facility and the Secured Credit Facilities.

(2) Accounting and Reporting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States for interim financial statements and are based on the Security and Exchange Commission’s (“SEC”) Regulation S-X and its instructions to Form 10-Q. They do not include all of the information and notes required by generally accepted accounting principles (“GAAP”) for complete financial statements. However, except as disclosed in this report, management believes that there have been no material changes in the information that we disclosed in the notes to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2006. In the opinion of management, the accompanying unaudited consolidated financial statements reflect all adjustments, consisting of normal recurring items, necessary to present fairly the financial condition, results of operations and cash flows for the interim periods presented. These interim financial statements should be read in conjunction with the financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2006. As a result of our Chapter 11 filings, we have applied the guidance in the American Institute of Certified Public Accountants’ Statement of Position 90-7 (“SOP 90-7”), Financial Reporting by Entities in Reorganization Under the Bankruptcy Code.

The accompanying unaudited consolidated financial statements have been prepared on the going concern basis, which assumes that we will continue in operation for the foreseeable future and will realize our assets and discharge our post-petition liabilities in the ordinary course of business.

On the Effective Date, we emerged from Chapter 11 with a redesigned capital structure, lower debt, improved customer contracts and improved contract terms with the International Brotherhood of Teamsters (the “Teamsters” or “IBT”) regarding our employees in the U.S. represented by the Teamsters. We believe that the factors that precipitated our need to file for protection under Chapter 11 have been adequately addressed and that we are positioned to improve our operating performance and profitability. However, our ability to achieve the necessary improvements is dependent upon several factors including the timely and successful implementation of the Joint Plan, the economy, the dynamics of the automotive transportation industry including actions by our major customers, our ability to retain our existing business, our ability to develop and implement successful business strategies, our ability to maintain effective relationships with our employees including those represented by the Teamsters, our ability to maintain effective relationships with our suppliers and customers, the price and availability of fuel and our ability to successfully manage other operational challenges. If we fail to improve our performance, it could continue to have an adverse effect on our financial condition, cash flow, liquidity and business prospects and our operations would not likely be profitable in the ensuing years.

The accompanying unaudited consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets and liabilities that might be necessary should we be unable to continue as a going concern, nor do they include (1) any adjustments to the carrying values of assets and liabilities that will be required as a result of the Joint Plan, or (2) the adjustments required as a result of the implementation of fresh-start reporting, which adjustments are more fully discussed in Note 3. Further, asset and liability carrying amounts contained in this Quarterly Report on Form 10-Q do not purport to represent the realizable or settlement values pursuant to the Joint Plan.

Use of Estimates and Seasonality

The preparation of financial statements in accordance with GAAP requires that management make a number of estimates and assumptions relating to the reported amount of assets and liabilities and disclosures about contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the period. Significant items subject to estimates and assumptions include the carrying amounts of property

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

and equipment and goodwill; valuation allowances for receivables and deferred income tax assets; uncertain tax positions; self-insurance liabilities; assets and obligations related to employee benefits; liabilities subject to compromise; and reorganization items. Actual results could differ from those estimates.

Our revenues are seasonal, with the second and fourth quarters generally experiencing higher revenues than the first and third quarters as a result of the higher volume of vehicles shipped. The volume of vehicles shipped is generally higher during the second quarter as North American light vehicle production has historically been at its highest level during this quarter due to higher consumer sales of automobiles, light trucks and SUVs in the spring and early summer. The introduction of new models in the fall of each year, combined with the manufacturers’ motivation to ship vehicles before calendar year-end, increase shipments to dealers through the fourth quarter. During the first and third quarters, vehicle shipments typically decline due to lower production volume during those periods. The third quarter volume does benefit from the introduction of new models, but the net volume for the quarter is typically lower than the second and fourth quarters due to the scheduled original-equipment manufacturer (“OEM”) plant shutdowns, which generally occur early in the third quarter. The first quarter volume is negatively impacted by the holiday shutdowns in December of each year and the relatively low inventory of vehicles to ship as a result of maximizing shipments at the end of the year. However, given the unpredictable nature of consumer sentiment and our customers’ emphasis on more effective use of plant capacity, particularly those of General Motors Corporation, Ford Motor Company and Chrysler Corporation (the “Big Three”), there can be no assurance that historical revenue patterns or manufacturer production levels will be an accurate indicator of future OEM shipment activity. Delivery activity at the Automotive Group and the Axis Group can also be impacted by the availability of rail cars, rail transportation schedules or changes in customer service demands. As a result of these and other factors, our operating results for the three months ended March 31, 2007 are not necessarily indicative of the results that may be expected for the year ending December 31, 2007.

(3) Accounting for Reorganization

As a result of our Chapter 11 filings, we have applied the guidance in SOP 90-7 in the preparation of the accompanying unaudited consolidated financial statements. SOP 90-7 does not change the application of GAAP in the preparation of financial statements. However, SOP 90-7 does require that financial statements, for periods including and subsequent to the filing of a Chapter 11 petition, distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business and also that liabilities subject to compromise be segregated from those not subject to compromise. In accordance with SOP 90-7 we have:

	•		separated liabilities that are subject to compromise from liabilities that are not subject to compromise;
	•		distinguished transactions and events that are directly associated with the reorganization from the ongoing operations of the business; and
	•		ceased accruing interest on the 85/8% senior notes (“Senior Notes”) as of the Petition Date.

In addition, SOP 90-7 requires the implementation of fresh-start reporting if (1) the reorganization value of the assets of the entity that emerges from Chapter 11 is less than the sum of the postpetition liabilities and allowed claims and (2) holders of voting shares immediately before confirmation of the plan of reorganization receive less than 50 percent of the voting shares of the emerging entity. We will implement fresh-start reporting as of May 31, 2007 (the “fresh-start reporting date”), pursuant to SOP 90-7 since, based on the Joint Plan, the reorganization value of our assets post-emergence is less than the sum of the postpetition liabilities and allowed claims and holders of voting shares immediately before confirmation of the Joint Plan are entitled to less than 50 percent of our voting shares post-emergence.

Liabilities Subject to Compromise

Liabilities subject to compromise include certain known liabilities incurred by the Debtors prior to the Petition Date. Liabilities subject to compromise exclude pre-petition claims for which the Debtors received the Bankruptcy Court’s approval to pay, such as claims related to active employees and retirees, maintenance of insurance programs, cargo damage claims and claims related to certain critical service vendors. Liabilities subject to compromise are included at amounts that were expected to be allowed by the Bankruptcy Court and are subject to future adjustments that may

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

result from negotiations, actions by the Bankruptcy Court, developments with respect to disputed claims or matters arising out of the proof of claims process whereby a creditor may prove that the amount of a claim differs from the amount that we have recorded.

We ceased the recording of interest on liabilities subject to compromise, primarily the Senior Notes, as of the Petition Date. Contractual interest on the Senior Notes in excess of reported interest was approximately $3.2 million for the three months ended March 31, 2007 and 2006. As of March 31, 2007, contractual interest not accrued since the Petition Date was approximately $21.6 million, excluding any potential compound or default interest arising from events of default related to the Chapter 11 Proceedings.

Liabilities subject to compromise were as follows at March 31, 2007 and December 31, 2006 (in thousands):

		March 31,				December 31,
		2007				2006
Accounts payable		$	25,326			$	25,156
Senior Notes			150,000				150,000
Accrued interest on Senior Notes			4,313				4,313
Multiemployer pension withdrawal liabilities			15,847				15,847
Accrued claims and insurance reserves			2,969				3,000
Other accrued liabilities			896				896
		$	199,351			$	199,212

Reorganization Items

Reorganization items are presented separately in the accompanying unaudited consolidated statements of operations and represent expenses that we have identified as directly relating to the Chapter 11 Proceedings. These items for the three months ended March 31, 2007 and 2006 are summarized as follows (in thousands):

		Three Months Ended March 31,
		2007				2006
Legal and professional fees		$	3,204			$	2,678
Employee retention plan			360				817
Other reorganization items			104				88
		$	3,668			$	3,583

Condensed Financial Statement Information of the Debtors and Non-debtors

As disclosed above, the Non-debtors were not among the subsidiaries that filed for Chapter 11. Presented below are unaudited condensed consolidating financial statement information of the Debtors and the Non-debtors:

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

Condensed Consolidating Balance Sheet Information
March 31, 2007
(In thousands)

		Debtors				Non-Debtors				Eliminations				Consolidated
Current assets		$	100,936			$	36,704			$	(736	)		$	136,904
Intercompany receivables (payables)			19,808				(19,808	)			—				—
Property and equipment, net			128,933				5,854				—				134,787
Goodwill, net			3,545				—				—				3,545
Investment in subsidiaries			20,059				6,220				(26,279	)			—
Other assets			32,883				65,770				—				98,653
Total assets		$	306,164			$	94,740			$	(27,015	)		$	373,889
Liabilities not subject to compromise:
Current liabilities		$	84,794			$	24,525			$	(2,801	)		$	106,518
Other noncurrent liabilities			238,815				46,942				—				285,757
Liabilities subject to compromise			199,351				—				—				199,351
Stockholders’ (deficit) equity			(216,796	)			23,273				(24,214	)			(217,737	)
Total liabilities and stockholders’ (deficit) equity		$	306,164			$	94,740			$	(27,015	)		$	373,889

Condensed Consolidating Balance Sheet Information
December 31, 2006
(In thousands)

		Debtors				Non-Debtors				Eliminations				Consolidated
Current assets		$	78,646			$	36,796			$	21			$	115,463
Intercompany receivables (payables)			16,953				(16,953	)			—				—
Property and equipment, net			125,236				3,995				—				129,231
Goodwill, net			3,545				—				—				3,545
Investment in subsidiaries			18,931				6,220				(25,151	)			—
Other assets			24,402				66,127				—				90,529
Total assets		$	267,713			$	96,185			$	(25,130	)		$	338,768
Liabilities not subject to compromise:
Current liabilities		$	237,603			$	26,273			$	(1,610	)		$	262,266
Other noncurrent liabilities			34,092				47,330				—				81,422
Liabilities subject to compromise			199,212				—				—				199,212
Stockholders’ (deficit) equity			(203,194	)			22,582				(23,520	)			(204,132	)
Total liabilities and stockholders’ (deficit) equity		$	267,713			$	96,185			$	(25,130	)		$	338,768

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

Condensed Consolidating Statement of Operations Information
For the Three Months Ended March 31, 2007
(In thousands)

		Debtors				Non-Debtors				Eliminations				Consolidated
Revenues		$	191,574			$	1,836			$	(289	)		$	193,121
Operating expenses			194,478				1,618				(289	)			195,807
Operating (loss) income			(2,904	)			218				—				(2,686	)
Other (expense) income, net			(5,944	)			1,232				(1,335	)			(6,047	)
(Loss) income before reorganization items and income taxes			(8,848	)			1,450				(1,335	)			(8,733	)
Reorganization items			(3,668	)			—				—				(3,668	)
(Loss) income before income taxes			(12,516	)			1,450				(1,335	)			(12,401	)
Income tax expense			(80	)			(549	)			434				(195	)
Net (loss) income		$	(12,596	)		$	901			$	(901	)		$	(12,596	)

Condensed Consolidating Statement of Operations Information
For the Three Months Ended March 31, 2006
(In thousands)

		Debtors				Non-Debtors				Eliminations				Consolidated
Revenues		$	239,770			$	1,398			$	(340	)		$	240,828
Operating expenses			236,007				1,064				(340	)			236,731
Operating income			3,763				334				—				4,097
Other (expense) income, net			(8,449	)			960				(1,186	)			(8,675	)
(Loss) income before reorganization items and income taxes			(4,686	)			1,294				(1,186	)			(4,578	)
Reorganization items			(3,583	)			—				—				(3,583	)
(Loss) income before income taxes			(8,269	)			1,294				(1,186	)			(8,161	)
Income tax expense			(19	)			(342	)			234				(127	)
Net (loss) income		$	(8,288	)		$	952			$	(952	)		$	(8,288	)

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

Condensed Consolidating Statement of Cash Flows Information
For the Three Months Ended March 31, 2007
(In thousands)

		Debtors				Non-Debtors				Eliminations				Consolidated
Net cash provided by (used in):
Operating activities		$	4,020			$	1,572			$	—			$	5,592
Investing activities			(8,627	)			(1,869	)			—				(10,496	)
Financing activities			30,839				—				—				30,839
Effect of exchange rate changes on cash and cash equivalents			(143	)			66				—				(77	)
Net change in cash and cash equivalents			26,089				(231	)			—				25,858
Cash and cash equivalents at beginning of period			189				2,125				—				2,314
Cash and cash equivalents at end of period		$	26,278			$	1,894			$	—			$	28,172

Condensed Consolidating Statement of Cash Flows Information
For the Three Months Ended March 31, 2006
(In thousands)

		Debtors				Non-Debtors				Eliminations				Consolidated
Net cash provided by (used in):
Operating activities		$	13,895			$	(824	)		$	—			$	13,071
Investing activities			(4,710	)			(14	)			—				(4,724	)
Financing activities			(9,505	)			—				—				(9,505	)
Effect of exchange rate changes on cash and cash equivalents			(77	)			—				—				(77	)
Net change in cash and cash equivalents			(397	)			(838	)			—				(1,235	)
Cash and cash equivalents at beginning of period			730				3,387				—				4,117
Cash and cash equivalents at end of period		$	333			$	2,549			$	—			$	2,882

Pro Forma Fresh-Start Balance Sheet

As noted above, in connection with our emergence from Chapter 11, we will adopt fresh-start reporting pursuant to SOP 90-7. Upon emergence, a new reporting entity (the “Successor Company”) was created and the recorded amounts of assets and liabilities will be adjusted to reflect estimated fair values. The financial statements of the Successor Company will not be comparable, in various material respects, to any of our previously issued financial statements.

Fresh-start reporting will reflect the value of the Successor Company as determined in the confirmed Joint Plan. Presented below is a pro forma fresh-start balance sheet reflecting the estimated effects of the Joint Plan, including settlement of liabilities subject to compromise, cancellation of existing stock of Allied Holdings, Inc. and issuance of new common stock of Allied Systems Holdings, Inc. Also included are the estimated fresh-start adjustments, such as the restatement of assets and liabilities to fair values. The pro forma balance sheet was prepared as if the adoption of fresh-start reporting had occurred as of March 31, 2007.

Appraisals of our tangible and intangible assets have not been completed and various data to determine the fair value of liabilities are still being compiled. Therefore the pro forma balance sheet does not reflect the final allocation of the reorganization value to individual assets and liabilities. Accordingly, the amounts shown are subject to changes and revisions.

In addition, in accordance with SOP 90-7, upon implementation of fresh-start reporting we will be required to adopt any changes in accounting principles that would otherwise be required within twelve months of the fresh-start

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

reporting date. We have not yet completed our assessment of the impact of adopting such new pronouncements and the following condensed consolidated pro forma balance sheet does not include the impact, if any, of such new pronouncements.

		March 31, 2007				Plan				Fresh Start				March 31, 2007
		As Reported				Effects				Adjustments				Pro forma
						(In thousands)
Current assets		$	136,904			$	(987	)(f)		$	(1,793	)(i)		$	134,124
Property and equipment, net			134,787				14,699	(h)			31,407	(i)			180,893
Goodwill, net			3,545				—				(3,545	)(e)			—
Intangibles			—				—				22,500	(k)			22,500
Unallocated reorganization value			—				—				63,989	(g)			63,989
Other assets			98,653				—				(7,573	)(a),(i)			91,080
Total assets		$	373,889			$	13,712			$	104,985			$	492,586
Liabilities not subject to compromise:
Current		$	106,518			$	3,729	(c),(f)		$	(147	)(j)		$	110,100
Long-term			285,757				—				(1,271	)(j)			284,486
Liabilities subject to compromise			199,351				(199,351	)(c),(f)			—				—
Stockholders’ (deficit) equity			(217,737	)			209,334	(b)			106,403	(d)			98,000
Total liabilities and stockholders’ (deficit) equity		$	373,889			$	13,712			$	104,985			$	492,586

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

(4) Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measurements. SFAS No. 157 establishes a single authoritative definition of fair value, sets out a framework for measuring fair value and requires expanded disclosures about fair-value measurements. SFAS No. 157 applies only to fair-value measurements that are already required or permitted by other accounting standards and is expected to increase the consistency of those measurements. SFAS No. 157 clarifies the definition of fair value. Specifically, this Statement clarifies that the exchange price is the price in an orderly transaction between market participants to sell the asset or transfer the liability in the market in which the reporting entity would transact for the asset or liability, that is, the principal or most advantageous market for the asset or liability. This Statement also emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair-value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. SFAS No. 157 expands disclosures about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. The disclosures focus on the inputs used to measure fair value and, for recurring fair-value measurements using significant unobservable inputs, the effect of the measurements on earnings for the period. This Statement encourages entities to combine the fair value information disclosed under this Statement with the fair value information disclosed under other accounting pronouncements, including SFAS No. 107, Disclosures about Fair Value of Financial Instruments, where practicable. SFAS No. 157 would otherwise be effective for our financial statements for the year ending December 31, 2008, and interim periods within 2008. However, we expect to implement SFAS No. 157 at the fresh-start reporting date, pursuant to SOP 90-7. The provisions of this Statement should be applied prospectively, except for limited exceptions, in which case, it should be applied retrospectively. We have not determined whether the provisions of SFAS No. 157 will require any changes to our fair-value measurements after the effective date of the Statement. However, expanded disclosures of fair value will be required.

Effective December 31, 2006, we adopted the recognition and disclosure provisions of SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106 and 132(R), which required, as of December 31, 2006, the initial recognition of the funded status of our defined benefit pension and other postretirement benefit plans and also certain additional disclosures. SFAS No. 158 also requires the measurement of defined benefit plan assets and obligations as of the date of the employer’s fiscal year-end balance sheet for the year ending December 31, 2008. However, we expect to implement this provision as of the fresh-start reporting date pursuant to SOP 90-7. We utilize a measurement date of December 31 for the postretirement benefit plans and for the Allied Defined Benefit Pension Plan. With respect to the other two defined benefit pension plans, we utilize a measurement date of September 30.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option For Financial Assets and Financial Liabilities, including an Amendment of SFAS No. 115. SFAS No. 159 permits entities to choose, at specified election dates, to measure eligible items at fair value (the “fair value option”). A business entity is required to report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

reporting date. Upfront costs and fees related to items for which the fair value option is elected are to be recognized in earnings as incurred and not deferred. SFAS No. 159 is effective at the beginning of fiscal years beginning on or after November 15, 2007. We have not yet decided whether we will elect the fair value option in 2008 nor have we determined the associated impact if we make this election.

(5) Prepayments and Other Current Assets

Prepayments and other current assets as of March 31, 2007 and December 31, 2006 are presented below (in thousands):

		March 31,				December 31,
		2007				2006
Prepaid insurance		$	10,547			$	14,689
Tires on tractors and trailers			2,325				2,360
Prepaid licenses			3,773				1,285
Other			3,020				3,129
		$	19,665			$	21,463

(6) Property and Equipment

Property and equipment and the related accumulated depreciation are presented below as of March 31, 2007 and December 31, 2006 (in thousands):

		March 31,				December 31,
		2007				2006
Cost		$	536,847			$	527,844
Accumulated depreciation			(402,060	)			(398,613	)
		$	134,787			$	129,231

As more fully discussed in Note 11, in the second quarter of 2007, we entered into an agreement with Yucaipa pursuant to which Yucaipa would purchase certain specialized tractors and car-haul trailers (“Rigs”) from the bankruptcy auction of Blue Thunder Auto Transport, Inc. (the “Blue Thunder Rigs”). The Blue Thunder Rigs would then be sold to us at cost. We financed these Rigs with purchase money financing provided to us by Yucaipa. See Note 11 for a discussion of this financing arrangement. Pursuant to this agreement, we purchased 170 Rigs from Yucaipa during the second quarter of 2007 at a cost of $13.5 million. The Blue Thunder Rigs range between three to five years in age.

(7) Other Noncurrent Assets

Other noncurrent assets as of March 31, 2007 and December 31, 2006 are presented below (in thousands):

		March 31,				December 31,
		2007				2006
Deposits with insurance companies		$	10,547			$	10,547
Deferred financing costs			8,121				124
Interest in split-dollar life insurance policies			5,973				5,973
Tires on tractors and trailers			2,906				2,950
Overfunded pension plans			2,793				2,473
Other deposits			2,544				2,336
Other			235				269
		$	33,119			$	24,672

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)

The deferred financing costs and the related accumulated amortization as of March 31, 2007 and December 31, 2006 are presented below (in thousands):

		March 31,				December 31,
		2007				2006
Cost		$	8,121			$	345
Accumulated amortization			—				(221	)
		$	8,121			$	124

The deferred financing costs at March 31, 2007 represent costs related to the new DIP facility (see note 11). The deferred financing costs at December 31, 2006 represent costs related to the Original DIP Facility, which were fully amortized during the first quarter of 2007. See Note 11 for a discussion of these facilities. The amortization of deferred financing costs was $124,000 and $3.6 million for the three months ended March 31, 2007 and 2006, respectively.

(8) Accounts and Notes Payable and Accrued Liabilities

We enter into notes payable with third parties for insurance financing arrangements. Outstanding notes payable for insurance financing arrangements as of March 31, 2007 and December 31, 2006 were $3.8 million and $5.4 million, respectively, and are included in accounts and notes payable in the accompanying unaudited consolidated balance sheets. These notes bear interest at rates ranging between 7.99% and 8.38% and are due in monthly installments, generally over a period of less than a year. The weighted-average interest rate on amounts outstanding at March 31, 2007 was 8.17%.

Accrued liabilities as of March 31, 2007 and December 31, 2006 are presented below (in thousands):

		March 31,				December 31,
		2007				2006
Insurance and claims		$	37,095			$	38,786
Wages and benefits			28,917				27,272
Accrued taxes			5,647				3,797
Accrued interest			157				738
Purchased transportation			3,051				2,723
Other			1,083				1,123
		$	75,950			$	74,439

(9) Insurance and Claims

We retain losses for specified risks subject to limits through high deductibles or self-insured retentions. For specified risks, coverage for losses is provided by primary and reinsurance companies unrelated to our company. Haul Insurance Limited, our captive insurance subsidiary, provides reinsurance coverage to certain of our licensed insurance carriers for selected losses and years within our insurance program, primarily insured workers’ compensation, automobile and general liability risks. In states where we are insured for workers’ compensation claims, the majority of our risk in 2006 and 2007 is covered by a fully insured program with no deductible.

Claims and insurance liabilities are adjusted periodically, as claims develop, to reflect changes in actuarial estimates based on actual experience. During the quarter ended March 31, 2007, the estimated ultimate amount of claims from prior years decreased approximately $1.4 million or $0.16 per share.

The amounts recognized in the accompanying unaudited consolidated balance sheets as of March 31, 2007 and December 31, 2006 represent the undiscounted estimated ultimate amount of claims. These amounts are presented below (in thousands):

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)

		March 31,				December 31,
		2007				2006
Accrued liabilities — current		$	37,095			$	38,786
Other long-term liabilities — noncurrent			60,571				64,307
			97,666				103,093
Liabilities subject to compromise			2,969				3,000
Total liability included in the consolidated balance sheets		$	100,635			$	106,093

The majority of our pre-petition liabilities related to insurance and claims are not classified as liabilities subject to compromise since we have received the Bankruptcy Court’s approval to maintain our existing insurance programs. Pre-petition liabilities classified as subject to compromise represent liabilities for product liability claims.

We believe that adequate provision has been made for all incurred claims including those not reported. However, favorable or unfavorable developments subsequent to the date of our estimates could have a material impact on our consolidated financial statements.

(10) Employee Benefit Plans

(a) Pension and Postretirement Benefit Plans

The following tables present the components of our net periodic benefit cost for the pension and postretirement benefit plans for the three months ended March 31, 2007 and 2006 (in thousands):

		Defined Benefit								Postretirement Benefit
		Pension Plans								Plans
		Three Months Ended March 31,
		2007				2006				2007				2006
Service cost		$	18			$	23			$	17			$	14
Interest cost			773				762				185				164
Expected return on plan assets			(1,112	)			(1,014	)			—				—
Amortization of:
Unrecognized net actuarial loss			325				524				184				169
Prior service cost (credits)			12				12				(76	)			(82	)
Net periodic benefit cost		$	16			$	307			$	310			$	265

A substantial number of our employees are covered by union-sponsored, collectively bargained, multiemployer pension plans. In the event we reduce the level of our participation in any of these plans, we could incur a withdrawal liability for a portion of the unfunded benefit obligation of the plan, if any. If a withdrawal were to occur, the liability would be the actuarially determined unfunded obligation based on factors at the time of withdrawal.

A number of proofs of claim related to pre-petition liabilities under the multiemployer pension plans to which we contribute were filed on or before the bar date established by the Bankruptcy Court. The majority of the claims were filed on a contingent basis, which means that no plan withdrawal liability was asserted, but should a withdrawal occur, we would have an obligation related to the withdrawal. Currently, we have no intention of withdrawing our participation in these plans.

Two such claims, totaling $15.8 million, assert general unsecured claims for withdrawal liability on a noncontingent basis. We have determined that it is probable that a withdrawal had occurred in each case prior to the Petition Date and that the claim amounts asserted are reasonable estimates of the withdrawal liability. Accordingly, the amount of $15.8 million is included in liabilities subject to compromise as of March 31, 2007 and December 31, 2006.

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)

(b) Employee Retention Plan

The Allied Holdings, Inc. Amended Severance Pay and Retention and Emergence Bonus Plan for Key Employees (the “employee retention plan”) was approved by the Bankruptcy Court on January 6, 2006. The employee retention plan includes three components: a severance component, a stay bonus component and a discretionary bonus component. During the three months ended March 31, 2007 and 2006, we recognized reorganization expenses of $360,000 and $817,000, respectively, related to the stay and discretionary bonus components. No expense was recognized during the three months ended March 31, 2007 and 2006 related to the severance portion of the employee retention plan. The liabilities related to the employee retention plan were $1.6 million and $1.7 million at March 31, 2007 and December 31, 2006, respectively, and are included in “other accrued liabilities” in the accompanying unaudited consolidated balance sheets. We paid $1.0 million of the retention amount in May 2007 in connection with the Bankruptcy Court’s confirmation of the Joint Plan and the final retention payment of $1.0 million was made in July 2007, 60 days after the Effective Date.

On April 30, 2007, the Board of Directors notified our Chief Executive Officer that his employment would be terminated on or about May 31, 2007. In connection therewith, we paid $1.1 million to him, the severance amount due to him under the employee retention plan. This amount will be recognized as an expense during the three months ending June 30, 2007 on or prior to the fresh-start reporting date.

(11) Debt

Our debt at March 31, 2007 and December 31, 2006 consisted of the following (in thousands):

		March 31,				December 31,
		2007				2006
Current liabilities not subject to compromise:
Original DIP Revolver		$	—			$	45,005
Original DIP Facility — Term Loan A			—				20,000
Original DIP Facility — Term Loan B			—				85,709
Original DIP Facility — Term Loan C			—				10,643
Canadian revolving credit facility			372				—
		$	372			$	161,357
Noncurrent liabilities not subject to compromise:
New DIP Facility		$	205,000			$	—
Liabilities subject to compromise:
Senior Notes		$	150,000			$	150,000

Original DIP Facility

In connection with the Chapter 11 Proceedings, on August 1, 2005, we obtained debtor-in-possession financing of up to $230 million (the “Original DIP Facility”). General Electric Capital Corporation and Morgan Stanley Senior Funding, Inc. served as agents for the lenders. The Original DIP Facility initially provided for aggregate financing of up to $230 million comprised of (i) a $130 million revolving credit facility (“Original DIP Revolver”), which included a swing-line credit commitment of $10 million and up to $75 million in letters of credit, (ii) a $20 million term loan (“Original DIP Facility Term Loan A”) and (iii) an $80 million term loan (“Original DIP Facility Term Loan B”). The Original DIP Revolver bore interest at an annual rate, at our option, of either an annual index rate (based on the greater of the base rate on corporate loans as published from time to time in The Wall Street Journal or the federal funds rate plus 0.50%) plus 2.00%, or the London Inter-Bank Offer Rate (“LIBOR”) plus 3.00%. In addition, we were charged a letter of credit fee under the Original DIP Revolver payable monthly at a rate per annum equal to 2.75% times the amount of all outstanding letters of credit under the Original DIP Revolver. There was also a fee of 0.5% on the unused portion of the Original DIP Revolver.

On June 30, 2006, we entered into a fifth amendment (the “Fifth Amendment”) to the Original DIP Facility to provide $30 million of additional availability through a new term loan (“Original DIP Facility Term Loan C”). The

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)

Original DIP Facility Term Loan C bore interest at an annual rate of LIBOR plus 9.5%, payable at our option in cash each month or in kind by addition to principal on a monthly basis, with interest compounded on a monthly basis. The Fifth Amendment provided us with additional availability by allowing the payment of interest in kind on Original DIP Facility Term Loan B by addition to principal on a monthly basis. Accordingly, subsequent to the Fifth Amendment, the Original DIP Facility provided for debtor-in-possession financing of up to $260 million plus interest paid in kind. Further, the Fifth Amendment reduced the interest rate on Original DIP Facility Term Loan B from LIBOR plus 9.5% to LIBOR plus 8.5%. The interest rate on Original DIP Facility Term Loan A remained unchanged at an annual rate of LIBOR plus 5.5%. During the first quarter of 2007, we paid interest in kind by addition to principal of approximately $3.4 million. During 2006, we paid interest in kind by addition to principal of approximately $6.3 million. The deferred financing fees relating to the Original DIP Facility were expensed during the first quarter of 2007 as part of the extinguishment of the debt.

New DIP Facility

The New DIP Facility, which was arranged by an affiliate of Goldman Sachs & Co., was entered into on March 30, 2007 and amended in April 2007, provided financing of up to $315 million and replaced the Original DIP Facility. Subject to the satisfaction of certain conditions, the New DIP Facility provided us with the option to convert to exit financing upon our emergence from Chapter 11, which we exercised, as described below under “Secured Credit Facilities”. The New DIP Facility included a $230 million secured term loan facility, a $50 million synthetic senior letter of credit facility and a $35 million senior secured revolving credit facility (“New DIP Revolver”), which included a swing-line credit commitment of $10 million. Proceeds from the New DIP Facility of $205 million at March 30, 2007 were used to repay all amounts outstanding under the Original DIP Facility and associated fees, and to provide additional liquidity for working capital needs. Excess cash received in connection with the funding of the New DIP Facility was invested in overnight repurchase agreements (“REPOs”). In connection with the repayment of the Original DIP Facility and the funding of the New DIP Facility, we paid fees of approximately $9.4 million, $1.3 million of which related to the early repayment of the Original DIP Facility and $8.1 million of which related to the New DIP Facility. The fees related to the early repayment of the Original DIP Facility are included in interest expense for the quarter ended March 31, 2007 and include a prepayment penalty of $1.1 million.

The interest rates on the term loans in the New DIP Facility were based on either the Base Rate plus 2.50%, or Adjusted Eurodollar Rate plus 3.50%. The interest rate on the New DIP Revolver was based on either the Base Rate plus 1% or Adjusted Eurodollar Rate plus 2%. The swing line loans bore interest at the Base Rate plus 2.5%. Base Rate means, for any day, a rate per annum equal to the greater of (i) the Prime Rate in effect on such day and (ii) the Federal Funds Effective Rate in effect on such day plus ¹/2 of 1%. The Adjusted Eurodollar Rate is generally LIBOR, but the rate could be affected if the Board of Governors of the Federal Reserve System regulated a reserve requirement. In addition, we were charged a participation fee pursuant to the letter of credit facility equal to approximately 3.80% per annum of the amount of the synthetic letter of credit facility plus a fronting fee of 0.55% of the average daily maximum amount available to be drawn under letters of credit issued under the synthetic letter of credit facility. We were also obligated to pay a commitment fee equal to 0.375% per annum times the daily average undrawn portion of the New DIP Revolver and a commitment fee of 1.75% per annum times the daily average undrawn portion of the term loan facility. As of March 31, 2007, $205 million was outstanding under the term loans and we had not drawn on the New DIP Revolver. On May 11, 2007, the remaining $25 million was drawn under the term loans and the excess cash was invested in REPOs.

On May 15, 2007, we restructured the New DIP Facility resulting in (1) an amended and restated $265 million first lien credit facility (the “First Lien Facility”) with Goldman Sachs Credit Partners L.P., as lead Arranger and Syndication Agent, and The CIT Group/Business Credit, Inc., as Administrative Agent and Collateral Agent and (2) a $50 million second lien term loan facility with Goldman Sachs Credit Partners L.P., as lead Arranger, Syndication Agent, Administrative Agent and Collateral Agent (the “Second Lien Facility”). As amended and restated, the First Lien Facility provided for aggregate financing of $265 million comprised of a $180 million secured term loan facility (the “First Lien Term Facility”), a $50 million synthetic letter of credit facility (the “Letter of Credit Facility”) and a $35 million senior secured revolving credit facility (the “First Lien Revolver”), which included a swing-line credit commitment of $10 million. The Second Lien Facility provided for a $50 million secured term loan. The interest rate on the First Lien Term Facility was based on the Base Rate plus 3.0%, or the Adjusted Eurodollar Rate plus 4.0%. The interest rate on the Second Lien Facility was based on the Base Rate plus

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)

6.5%, or the Adjusted Eurodollar Rate plus 7.5%. The interest rate on the New DIP Revolver was based on the Base Rate plus 1% or the Adjusted Eurodollar Rate plus 2%. The swing line loans in the New DIP Revolver bore interest at the Base Rate plus 1%.

The REPOs discussed above are readily convertible to known amounts of cash and are so near to maturity that they present insignificant risk of changes in value because of changes in interest rates. In addition, the REPOs have original maturities of three months or less. Accordingly, these securities qualify to be treated as cash and cash equivalents.

Secured Credit Facilities

As a condition precedent to our emergence from Chapter 11, on May 29, 2007, the First Lien Facility and the Second Lien Facility were converted to Secured Credit Facilities. As a result of the conversion, the First Lien Facility will mature five years after the Effective Date and the Second Lien Facility will mature five and a half years after the Effective Date.

Amounts outstanding under the Secured Credit Facilities will bear interest at the following annual rates:

•

First Lien Term Loan Facility — At our option, either the Base Rate (which is equal to the greater of the prime rate as published from time to time in The Wall Street Journal or the federal funds rate plus one-half of 1% ) plus 3.0%, or the Adjusted Eurodollar Rate plus 4.0%;

•

Second Lien Term Loan Facility — At our option, either the Base Rate plus 6.5%, or the Adjusted Eurodollar Rate plus 7.5%;

•

First Lien Revolver — At our option, either the Base Rate plus 1.0%, or the Adjusted Eurodollar Rate plus 2.0%.

To mitigate the risk of rising interest rates, in August 2007 we entered into floating-to-fixed interest rate swap agreements with an aggregate notional value of $180 million. These interest rate swap agreements have three-year terms and fix the LIBOR component to a weighted-average fixed rate of 5.13% during the terms. Our Secured Credit Facilities require us to hedge a minimum of 50% of the aggregate principal amount of the total indebtedness under those facilities at the date of the conversion. Future results of operations could be impacted by unrealized gains or losses related to these interest rate swap agreements.

In addition, the following are among the fees we will be charged under the Secured Credit Facilities: (A) a credit fee pursuant to the Letter of Credit Facility equal to the Adjusted Eurodollar Rate plus 4.15% per annum times the average daily amount deposited by the lenders under the Letter of Credit Facility; (B) a commitment fee of 1.75% per annum times the daily average undrawn portion of the First Lien Term Loan Facility; (C) a commitment fee of 0.375% per annum times the daily average undrawn portion of the First Lien Revolver; and (D) a fronting fee under the Letter of Credit Facility of 0.55% of the average daily maximum amount available to be drawn under letters of credit issued under the Letter of Credit Facility.

The Secured Credit Facilities include customary affirmative, negative, and financial covenants binding on us, including delivery of financial statements and other reports and maintenance of corporate existence. The negative covenants limit our ability to, among other things, incur debt, incur liens, make investments, sell assets, or declare or pay any dividends on capital stock. The financial covenants included in the Secured Credit Facilities limit the amount of annual capital expenditures and set forth a maximum total leverage ratio and minimum interest coverage ratio. In addition, the Secured Credit Facilities require mandatory prepayment with the net cash proceeds from certain asset sales, equity offerings, and any insurance proceeds that we receive.

The Secured Credit Facilities include customary events of default including events of default related to (i) failure to make payments when due under the Secured Credit Facilities, (ii) failure to comply with the financial covenants set forth in the Secured Credit Facilities, (iii) defaults under other agreements or instruments of indebtedness, (iv) the granting of certain other super-priority administrative expense claims or non-permitted liens or the invalidity of liens securing the Secured Credit Facilities, (v) the stay, amendment or reversal of the bankruptcy court orders approving the New DIP Facilities, or (vi) the granting of relief from the automatic stay to holders of security interests in our

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)

assets with a book value in excess of $1 million that would have a material adverse effect on us or (vii) a change in control, except as contemplated by the Joint Plan.

Obligations under the First Lien Facility are secured by a first priority lien on 100% of the capital stock of our domestic and Canadian subsidiaries, 65% of the capital stock of our direct foreign subsidiaries, all of our current and after-acquired personal and real property and all intercompany debt. Obligations under the Second Lien Facility are secured by a second priority lien on 100% of the capital stock of our domestic and Canadian subsidiaries, 65% of the capital stock of our direct foreign subsidiaries, all of our current and after-acquired personal and real property and all intercompany debt. The liens securing the Second Lien Facility have been subordinated to the liens securing the First Lien Facility.

As of September 28, 2007, we had drawn $3 million on the First Lien Revolver and as a result, $32 million was available as of that date.

Debt Classification

If the New DIP Facility had not been converted to the Secured Credit Facilities, it would have matured no later than September 30, 2007. We intended to refinance the short-term obligation on a long-term basis, and we subsequently converted it to the long-term Secured Credit Facilities. We believe that it is not probable that we will be in noncompliance with the provisions of the Secured Credit Facilities within one-year from the balance sheet date. Therefore, we have excluded the New DIP Facility from current liabilities and have classified it as noncurrent, pursuant to SFAS No. 6, Classification of Short-Term Obligations Expected To Be Refinanced.

Canadian Revolving Credit Facility

The Canadian revolving credit facility represents the amount drawn down by our subsidiary, Allied Systems (Canada) Company, from a $2.5 million revolving credit facility with a bank in Canada (the “Canadian Revolver”). The Canadian Revolver bears interest at the bank’s prime lending rate plus 0.5% and is secured by a letter of credit of $2.6 million, which is included in the $40.0 million of outstanding letters of credit discussed in Note 13(b).

Rig Financing

As discussed in Note 6 above, in the second quarter of 2007, we entered into an agreement with Yucaipa pursuant to which Yucaipa would purchase the Blue Thunder Rigs, which would then be sold to us at cost. We financed the purchase of these Rigs with purchase money financing provided to us by Yucaipa (the “Rig Financing”), which Rig Financing was approved by the Bankruptcy Court on April 6, 2007. The Rig Financing of $15 million was completed prior to the Effective Date and included funds to retrofit and make any necessary repairs to the Blue Thunder Rigs, and to pay certain costs and expenses associated with the purchase, such as registration expenses. The notes under the Rig Financing bore interest at the three-month LIBOR rate plus 4%, payable in-kind quarterly by addition to principal. Pursuant to this agreement, upon our emergence from Chapter 11, the $15.1 million related to the Rig Financing was converted to equity of Allied Systems Holdings, Inc. Of the $15.1 million, $13.5 million represents the purchase cost of the Rigs, $0.3 million was used to pay certain costs associated with the purchase, $0.1 million represents interest, and the reminder was received by us to retrofit and make any necessary repairs to the Blue Thunder Rigs. As stipulated in the Rig Financing agreement, upon conversion, Yucaipa was to receive a percentage of the new equity of Allied Systems Holdings, Inc., with the numerator equal to the amount owed under the Rig Financing, including interest, and the denominator equal to $285 million minus debt, exclusive of the Rig Financing, plus cash on the Effective Date, after giving effect to the Joint Plan. Such percentage was estimated to be approximately 22% of which Yucaipa’s portion was approximately 18% and the other participants in the Rig Financing were to receive the remaining 4%. The conversion will be effected as of the fresh-start reporting date. The excess of the equity value received by Yucaipa and the other participants over the carrying amount of the Rig Financing will be recognized as an expense as of the conversion date.

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)

Senior Notes

On September 30, 1997, we issued the $150 million 8⁵/8% Senior Notes through a private placement. The Senior Notes were subsequently registered with the SEC. As holders of allowed general unsecured claims, holders of the Senior Notes received new common stock of Allied Systems Holdings, Inc. on a pro rata basis in exchange for the cancellation of the debt pursuant to the Joint Plan.

(12) Income Taxes

For the three months ended March 31, 2007 and 2006, the income tax (expense) benefit differed from the amounts computed by applying statutory rates to the reported loss before income taxes since we did not meet the more likely than not criteria to recognize the tax benefits of losses in most of our jurisdictions. The loss before income taxes generated deferred tax assets for which we increased the valuation allowance. For both periods presented, we recognized tax expenses related to foreign jurisdictions where no valuation allowance is recorded.

In June 2006, the FASB issued Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes.” FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes,” and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The evaluation of a tax position in accordance with FIN 48 is a two-step process. The first step is recognition: The enterprise determines whether it is more likely than not that a tax position will be sustained upon examination based on the technical merits of the position. The second step is measurement: A tax position that meets the more-likely-than-not recognition threshold is measured to determine the amount of the benefit to recognize in the financial statements. The tax position is measured at the largest amount of benefit that is greater than a 50 percent likelihood of being realized. FIN 48 requires the evaluation of tax positions to be completed prior to assessing the need for a valuation allowance for deferred tax assets.

We adopted the provisions of FIN 48 on January 1, 2007. The cumulative-effect of applying the provisions of this Interpretation of $1.2 million was reported as an adjustment to the January 1, 2007, balance of accumulated deficit. The total amount of unrecognized tax benefits as of January 1, 2007 after applying the provisions of FIN 48 were $7.0 million. Included in the total unrecognized benefits at January 1, 2007, are $1.4 million of tax benefits that, if recognized, would favorably affect the effective income tax rates in future periods. At January 1, 2007, we had $643,000 of accrued interest and $233,000 of accrued penalties. It is our policy to classify interest and penalties recognized on the potential underpayment of income taxes as interest expense and other operating expenses, respectively, in the unaudited consolidated statement of operations.

The amount of unrecognized tax benefits did not materially change from January 1, 2007 to March 31, 2007. For certain uncertain tax positions it is reasonably possible that the total amounts of unrecognized tax benefits will change significantly within the next twelve months as a result of the effects of our emergence from Chapter 11 or the settlement of audits that may be initiated. The range of the change that is reasonably possible is not currently determinable.

We file income tax returns in the U.S. federal jurisdiction, Canada, Mexico and in various state and provincial jurisdictions. Tax years 2001 through 2006 remain subject to examination for federal, state and provincial jurisdictions. We have recently been notified that the Canada Revenue Agency intends to audit the Canadian federal income tax returns for the years 2005 and 2006 for activity after the Petition Date.

(13) Commitments and Contingencies

(a) Chapter 11 Filing and Emergence

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)

As discussed in Note 1, on July 31, 2005 Allied Holdings, Inc. and substantially all of its subsidiaries filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code. Our Canadian subsidiaries are included among the subsidiaries that filed voluntary petitions seeking bankruptcy protection in the Bankruptcy Court, and they also filed applications for creditor protection under the Companies Creditors’ Arrangement Act in Canada, which, like Chapter 11, allows for reorganization under the protection of the court system. Our captive insurance company, Haul Insurance Limited, as well as our subsidiaries in Mexico and Bermuda were not included in the Chapter 11 filings.

On May 18, 2007, the Bankruptcy Court entered an order confirming the Joint Plan and on the Effective Date, the Debtors emerged from Chapter 11.

As debtors-in-possession, we were authorized under Chapter 11 to continue to operate as an ongoing business, but could not engage in transactions outside the ordinary course of business without the prior approval of the Bankruptcy Court. As of the Petition Date, most pending litigation and pre-petition liabilities were stayed, and absent further order of the Bankruptcy Court, no party, subject to certain exceptions, could take any action, again subject to certain exceptions, to recover pre-petition claims against us. One exception to this stay of litigation was any action or proceeding by a governmental agency to enforce its police or regulatory power. The claims asserted in litigation and proceedings to which the stay applied could be fully and finally resolved in connection with the administration of the Chapter 11 Proceedings and, to the extent not resolved, will need to be addressed in the context of the Joint Plan.

(b) Letters of Credit

At March 31, 2007, we had issued $139.8 million of outstanding letters of credit to third parties related primarily to the settlement of claims and insurance liabilities and support for a line of credit at one of our foreign subsidiaries. Of the $139.8 million outstanding at March 31, 2007, $42.0 million of these letters of credit were secured by availability under the New DIP Revolver and $97.8 million were issued by our wholly owned captive insurance subsidiary, Haul Insurance Limited, and were collateralized by $97.8 million of restricted cash, cash equivalents and other time deposits held by this subsidiary. We renew these letters of credit annually. See Note 11 for a discussion of the current letter of credit facilities under the Secured Credit Facilities

(c) Litigation, Claims, Assessments

We are involved in various litigation and environmental matters relating to employment practices, damages, and other matters arising from operations in the ordinary course of business. In our opinion, the ultimate disposition of these matters will not have a material adverse effect on our financial position but could have a material adverse effect on our results of operations in a future period.

As part of the previously disclosed settlement agreement with Ryder System, Inc. (“Ryder”), we issued a letter of credit in favor of Ryder and agreed to certain scheduled increases in the amount of the letter of credit. At March 31, 2007, the letter of credit totaled $7.5 million and is included in the $42.0 million of outstanding letters of credit noted in (b) above. Ryder may only draw on the letter of credit if we fail to pay workers’ compensation and liability claims assumed by us in the Ryder Automotive Carrier Group acquisition. We have provided the letter of credit in favor of Ryder because Ryder has issued a letter of credit to its insurance carrier relating to the workers’ compensation and liability claims assumed by us. Under the agreement with Ryder, an actuarial valuation will be performed periodically to determine the remaining amount outstanding of the workers’ compensation and liability claims that we assumed. Based on the results of the actuarial valuation, the letter of credit will be adjusted, as appropriate. The letter of credit totals $7.5 million as of September 28, 2007.

(d) Purchase and Service Contract Commitments

We have a ten-year agreement with IBM, which commenced in February 2004, whereby IBM provides our mainframe computer processing services, manages those applications relating to our electronic data interchange, network services and technical services and provides us with applications development and support services. Our Chapter 11 filing has not affected the services pursuant to this contract. The purchase commitment for the remaining life of the agreement was approximately $75.0 million as of March 31, 2007.

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)

(e) Leases

We lease Rigs, office space, computer equipment, and certain terminal facilities under noncancelable operating lease agreements. Included in these noncancelable leases are operating lease commitments for approximately 315 Rigs. Original lease terms range between five and seven years. However, during 2006 and 2005, we amended certain of these lease agreements to extend them for an additional year. These operating leases expire between 2007 and 2010 and contain residual guarantees of up to 25% of the original cost of the Rigs. We included these residual value guarantees in the calculations that we performed in determining the proper classification of these leases. No accruals for these guarantees were considered necessary at March 31, 2007.

(f) Collective Bargaining Agreements

Employees of our subsidiary, Allied Systems Ltd., which represents approximately 80% of our U.S. employees, are covered by the National Master Automobile Transporters Agreement (“Master Agreement’) with the Teamsters in the U.S. The Master Agreement with these employees commenced on June 1, 2003 and is scheduled to expire on May 31, 2008.

The Joint Plan incorporates modifications to the Master Agreement with the Teamsters. The modifications were ratified by the affected employees and took effect upon the Effective Date. These modifications will remain in effect through May 28, 2010 as a part of any new collective bargaining agreement that we enter into with the Teamsters in the U.S. Significant provisions of the modifications include:

	•		Total U.S. wage concessions of 15%, limited to $35 million per year during the three-year duration of the agreement;
	•		The elimination of future Teamster wage increases;
	•		A wage freeze relating to the salaries of management and other nonbargaining employees during the three-year duration of the agreement, subject to certain exceptions;
	•		The right of Teamsters in the U.S. to receive a portion of earnings before interest, taxes, depreciation and amortization (“EBITDA”) in excess of the projections included in the Disclosure Statement for the Joint Plan;
	•		A requirement that a new Chief Executive Officer be appointed by the Effective Date; and
	•		A requirement that within ninety days of the Effective Date, Allied and the IBT reach an agreement regarding the potential to have the employees of the Axis Group who perform carhaul work be represented by the IBT and have all carhaul work controlled by the Axis Group assigned by right of first refusal to our Automotive Group or another carhaul company subject to the Master Agreement. Allied and the IBT have extended the date to October 26, 2007 to reach an agreement on this matter. If Allied and the IBT can not reach a mutual agreement on this matter by October 26, 2007, we will have four months to sell those operations within the Axis Group.

Our collective bargaining agreement with the Teamsters Union in Eastern Canada was to expire on October 31, 2006. The negotiations regarding a new agreement were postponed during the Chapter 11 Proceedings and further negotiations subsequent to our emergence from Chapter 11 resulted in an extension of the expiration date through June 28, 2007. On June 24, 2007, our Teamster-represented employees in Eastern Canada ratified a new, three-year agreement that provides for certain wage and benefit increases retroactive to November 1, 2006, with additional increases scheduled to occur on November 1, 2007 and November 1, 2008. The effect of the retroactive payments of approximately $1.2 million will be reflected in the statement of operations for the three-month period ending June 30, 2007. This agreement covers those drivers, mechanics and yard personnel that are represented by the Teamsters Union in the provinces of Ontario and Quebec, which represent approximately 70% of our Canadian bargaining employees.

We can provide no assurance that our future union contracts which are negotiated as current contracts expire will not result in increased labor costs, labor disruptions and/or work stoppages, increased employee turnover or higher risk

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)

management costs, which could in turn materially and adversely affect our financial condition, results of operations or customer relationships.

(g) Employee Agreements with Certain Executive Officers

As of the Effective Date, we entered into amended and restated employment agreements with certain executive officers of our company. The agreements provide for compensation to the officers in the form of annual base salaries and are for one-year terms which renew automatically unless either party gives the required notice before the end of the current term. In addition, we entered into an employment agreement with our new President and Chief Executive Officer, which became effective on June 1, 2007. This agreement includes provisions for a sign-on bonus, annual base salary, a performance-based bonus and reimbursement of relocation expenses, among other provisions. Each of the employment agreements provide for severance benefits based upon the occurrence of certain events as defined in the agreement. These employment agreements supersede any severance that would otherwise be payable under the employee retention plan.

During July 2007, the employment agreement with one of the above executive officers was terminated, and we paid $225,000 in severance as required by the terms of that agreement. This amount will be recognized as an expense during the three months ending September 30, 2007.

As disclosed in note 10 above, our Chief Executive Officer was terminated on or about May 31, 2007 and in connection therewith, we paid $1.1 million to him, the severance amount due to him under the employee retention plan. Also, in May 2007, we rejected the employment agreement dated February 23, 2000 as amended on January 21, 2005 with our then Chairman of the Board of Directors. As allowed by the provisions of the Bankruptcy Code, he is entitled to a claim for damages, based on the termination provisions of the employment agreement. The claim for approximately $429,000 will be allowed as a general unsecured claim. These amounts will be recognized as an expense during the quarter ended June 30, 2007, on or prior to the fresh-start reporting date.

(14) Earnings (Loss) Per Common Share

SFAS No. 128, Earnings Per Share, requires the presentation of basic and diluted earnings (loss) per share. Basic earnings (loss) per share is computed by dividing net income or loss available to common stockholders by the weighted-average number of common shares outstanding for the periods presented. Diluted earnings (loss) per share reflects the potential dilution that could occur if securities and other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that would then share in the earnings (loss) of the entity. For the three months ended March 31, 2007 and 2006, we excluded options to acquire approximately 1,532,000 and 1,573,000 shares of common stock, respectively, from the calculation of diluted earnings (loss) per share as the impact would have been antidilutive. Pursuant to the Joint Plan, new common stock of Allied Systems Holdings, Inc. was issued as of the Effective Date and all interests in Allied Holdings, Inc. common stock prior to the Effective Date, including options to acquire the common stock, were cancelled.

As of August 1, 2007, we had issued 7,035,101 shares of Allied Systems Holdings, Inc. common stock. However, we are still reviewing creditor claims of pre-petition liabilities and certain of those claims are not yet liquidated. In addition, the number of shares issued to new shareholders may be revised based upon resolution of the final claims. Therefore, upon resolution of these matters we could issue additional shares, which we currently estimate would result in no more than 10,000,000 shares in total.

(15) Stock-Based Compensation

In prior years we awarded nonqualified and incentive stock options under our long-term incentive plan that was approved by our stockholders. On the Effective Date, the long-term incentive plan and all interests in Allied Holdings, Inc. common stock, including options to acquire the common stock, were cancelled.

During the three months ended March 31, 2007 and 2006, we recorded stock-based compensation expense of approximately $57,000 and $93,000, respectively. The expense recorded represented compensation expense related

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)

to stock options that were unvested at the date of adoption of SFAS No. 123 (revised 2004), Share-Based Payment (“SFAS No. 123(R)”). No new stock options were granted during the three months ended March 31, 2007 or the three months ended March 31, 2006. The stock-based compensation expense recorded during the three months ended March 31, 2007 and 2006 is included in salaries, wages and fringe benefits in the accompanying unaudited consolidated statements of operations. At March 31, 2007, unrecognized compensation expense associated with unvested stock options was approximately $225,000, all of which will be recognized as expense during the second quarter of 2007, due in part to the cancellation of these options on the Effective Date.

(16) Other Comprehensive Income (Loss)

Total comprehensive loss for the three months ended March 31, 2007 and 2006 are presented below (in thousands):

		Three Months Ended
		March 31,
		2007				2006
Net loss		$	(12,596	)		$	(8,288	)
Reclassification adjustment of amounts recognized as components of net periodic benefit cost, net of taxes of $0			444				—
Foreign currency translation adjustments, net of taxes of $0			(345	)			56
		$	(12,497	)		$	(8,232	)

Accumulated other comprehensive loss, net of income tax benefits of $1.9 million as of March 31, 2007 and December 31, 2006, consisted of the following (in thousands):

		March 31,				December 31,
		2007				2006
Foreign currency translation adjustments		$	(189	)		$	156
Pension and other postretirement benefit plan adjustments			(23,786	)			(24,230	)
		$	(23,975	)		$	(24,074	)

(17) Industry Segment and Geographic Information

In accordance with the requirements of SFAS No. 131, Disclosure About Segments of an Enterprise and Related Information, we have identified two reportable industry segments through which we conduct our operating activities, Allied Automotive Group and the Axis Group. These two segments reflect the internal reporting that we use to assess performance and allocate resources. Allied Automotive Group is engaged in the business of transporting automobiles, light trucks and SUVs from manufacturing plants, ports, auctions, and railway distribution points to automobile dealerships. The Axis Group is engaged in the business of securing and managing vehicle distribution services, automobile inspections, auction and yard management services, vehicle tracking, vehicle accessorization, and dealer preparatory services for the automotive industry.

Presented below is certain financial information related to these two segments and corporate/other for the three months ended March 31, 2007 and 2006 (in thousands):

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)

		Three Months Ended March 31,
		2007				2006
Revenues — unaffiliated customers:
Allied Automotive Group		$	185,521			$	233,412
Axis Group			7,600				7,416
Total		$	193,121			$	240,828
Operating (loss) income:
Allied Automotive Group		$	(2,942	)		$	3,454
Axis Group			1,472				1,561
Corporate/other			(1,216	)			(918	)
Total			(2,686	)			4,097
Reconciling items:
Interest expense			(7,592	)			(9,541	)
Investment income			1,202				1,036
Foreign exchange gains (losses), net			343				(170	)
Loss before reorganization items and income taxes			(8,733	)			(4,578	)
Reorganization items			(3,668	)			(3,583	)
Loss before income taxes		$	(12,401	)		$	(8,161	)

Total assets of these two segments and corporate/other as of March 31, 2007 and December 31, 2006 are presented below (in thousands):

		March 31,				December 31,
		2007				2006
Total assets:
Allied Automotive Group		$	202,750			$	201,040
Axis Group			22,495				23,532
Corporate/other			148,644				114,196
Total		$	373,889			$	338,768

Geographic financial information for the three months ended March 31, 2007 and 2006 and as of March 31, 2007 and December 31, 2006, respectively, are presented below (in thousands):

		Three Months Ended March 31,
		2007				2006
Revenues:
United States		$	147,194			$	191,040
Canada			44,380				48,730
Other foreign operations			1,547				1,058
Total		$	193,121			$	240,828

		March 31,				December 31,
		2007				2006
Long-lived assets:
United States		$	96,134			$	93,805
Canada			32,799				31,431
Other foreign operations			5,854				3,995
Total		$	134,787			$	129,231

Revenues are attributed to the respective countries based on the terminal that provides the service and long-lived assets consist of property and equipment.

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)

Our Automotive Group’s three largest customers are General Motors, Ford and Chrysler.  During the three months ended March 31, 2007, these customers accounted for 36%, 21% and 14%, respectively, of our Automotive Group’s revenues. A significant reduction in production, changes in product mix, plant closings, changes in production schedules, changes in our Automotive Group’s customers’ distribution strategies or the imposition of vendor price reductions by these manufacturers, the loss of General Motors, Ford, Chrysler or our two next largest customers, Toyota or Honda as a customer, or a significant reduction in the services provided to any of these customers by the Automotive Group would have a material adverse effect on our operations. General Motors, Ford and Chrysler, in particular, have each publicly announced plans to significantly reduce vendor costs including those associated with transportation services. In addition, our two largest customers, General Motors Corporation and Ford Motor Company, have recently announced plans regarding their intent to close certain production facilities, some of which we serve. A loss of volume would negatively impact our financial results.

(18) Supplemental Guarantor Information

As more fully discussed in our Annual Report on Form 10-K for the year ended December 31, 2006, substantially all of our subsidiaries, the Guarantor Subsidiaries, guarantee our obligations under the Senior Notes. The guarantees are full and unconditional. The Guarantors are jointly and severally liable for our obligations under the Senior Notes and there are no restrictions on the ability of the Guarantors to make distributions to the parent company, Allied Holdings, Inc. who owns 100% of the Guarantor Subsidiaries.

The following consolidating balance sheet information, statement of operations information, and statement of cash flows information present the financial statement information of our parent company and the combined financial statement information of the Guarantor Subsidiaries and the subsidiaries that do not guarantee the obligations under the Senior Notes (the “Nonguarantor Subsidiaries”):

ALLIED HOLDINGS, INC. AND SUBSIDIARIES
(Debtor-in-Possession since July 31, 2005)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)

SUPPLEMENTAL CONSOLIDATING BALANCE SHEET INFORMATION
March 31, 2007
(In thousands)

		Allied				Guarantor				Nonguarantor
		Holdings				Subsidiaries				Subsidiaries				Eliminations				Consolidated
Current assets:
Cash and cash equivalents		$	25,821			$	457			$	1,894			$	—			$	28,172
Restricted cash, cash equivalents and other time deposits			—				—				32,278				—				32,278
Receivables, net of allowances			—				46,914				2,127								49,041
Inventories			—				4,766				—				—				4,766
Deferred income taxes			2,982				—				(27	)			27				2,982
Prepayments and other current assets			1,128				18,867				433				(763	)			19,665
Total current assets			29,931				71,004				36,705				(736	)			136,904
Property and equipment, net of accumulated depreciation			3,079				125,854				5,854				—				134,787
Goodwill, net			—				3,545				—				—				3,545
Other assets:
Restricted cash, cash equivalents and other time deposits			—				—				65,534				—				65,534
Other noncurrent assets			16,671				16,211				237				—				33,119
Intercompany receivables (payables)			77,326				(77,326	)			—				—				—
Investment in subsidiaries			(107,001	)			5,910				—				101,091				—
Total other assets			(13,004	)			(55,205	)			65,771				101,091				98,653
Total assets		$	20,006			$	145,198			$	108,330			$	100,355			$	373,889
Current liabilities not subject to compromise:
Canadian revolving credit facility		$	—			$	372			$	—			$	—			$	372
Accounts and notes payable			4,677				25,279				897				(763	)			30,090
Intercompany (receivables) payables			(138,287	)			117,419				20,868				—				—
Accrued liabilities			5,372				49,105				23,511				(2,038	)			75,950
Deferred income taxes			—				—				106				—				106
Total current liabilities			(128,238	)			192,175				45,382				(2,801	)			106,518
Long-term liabilities not subject to compromise:
Debtor-in-possession credit facility			205,000				—				—				—				205,000
Postretirement benefits other than pensions			—				14,202				—				—				14,202
Deferred income taxes			3,003				—				—				—				3,003
Other long-term liabilities			296				16,313				46,943				—				63,552
Total long-term liabilities			208,299				30,515				46,943				—				285,757
Liabilities subject to compromise			157,682				41,669				—				—				199,351
Commitments and contingencies			—				—				—				—				—
Stockholders’ (deficit) equity :
Preferred stock, no par value			—				—				—				—				—
Common stock, no par value			—				—				—				—				—
Additional paid-in capital			49,138				166,130				2,488				(168,618	)			49,138
Treasury stock			(707	)			—				—				—				(707	)
(Accumulated deficit) retained earnings			(242,193	)			(262,173	)			13,940				248,233				(242,193	)
Accumulated other comprehensive loss, net of tax			(23,975	)			(23,118	)			(423	)			23,541				(23,975	)
Total stockholders’ (deficit) equity			(217,737	)			(119,161	)			16,005				103,156				(217,737	)
Total liabilities and stockholders’ (deficit) equity		$	20,006			$	145,198			$	108,330			$	100,355			$	373,889