NORTH AMERICAN VAN LINES INC /DE - 10-Q Quarterly Report

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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2003

Commission file number 333-96233

NORTH AMERICAN VAN LINES, INC.
(Exact name of registrant as specified in its charter)

DELAWARE
(State or other jurisdiction of
incorporation or organization)

52-1840893
(I.R.S. Employer
Identification Number)

5001 U.S. Highway 30 West
P.O. Box 988
Fort Wayne, Indiana 46801-0988
(Address of principal executive offices)(Zip Code)

Registrant's telephone number, including area code: (260) 429-2511

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. Yes o No ý

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

When we refer to "North American Van Lines", "NAVL", "our company", "our", "we" or "us", we are referring to North American Van Lines, Inc., a Delaware corporation, together with its subsidiaries and their predecessors, except where the context otherwise requires. When we refer to "SIRVA," we are referring to our parent, SIRVA, Inc., a Delaware corporation, formerly known as Allied Worldwide, Inc.

PART I.

ITEM 1. FINANCIAL STATEMENTS

NORTH AMERICAN VAN LINES, INC.

Condensed Consolidated Balance Sheets

At March 31, 2003 and December 31, 2002

(Dollars in thousands except share data)
(Unaudited)

		March 31, 2003			December 31, 2002
Assets
Current assets:
	Cash and cash equivalents	$	49,168		$	42,266
	Accounts and notes receivable, net of allowance for doubtful accounts of $25,015 and $24,920, respectively		286,131			305,191
	Other current assets		47,354			61,681
	Deferred and recoverable income taxes		38,092			37,641

Total current assets			420,745			446,779

Property and equipment, net			165,565			170,489
Goodwill and intangible assets, net			539,314			541,071
Receivable from SIRVA, Inc.			30,441			28,879
Other assets			120,424			113,576

Total long-term assets			855,744			854,015

Total assets		$	1,276,489		$	1,300,794

Liabilities and Stockholder's Equity
Current liabilities:
	Current portion of long-term debt	$	22,457		$	22,412
	Current portion of capital lease obligations		3,543			4,849
	Short-term debt		906			1,074
	Accounts and mortgages payable		113,960			119,629
	Other current liabilities		279,862			293,922
	Accrued income taxes		5,074			5,996

Total current liabilities			425,802			447,882

Long-term debt			501,827			501,132
Capital lease obligations			12,714			14,122
Due to SIRVA, Inc.			17,891			17,891
Other liabilities			65,369			65,964
Deferred income taxes			35,261			32,979

Total long-term liabilities			633,062			632,088

Total liabilities			1,058,864			1,079,970

Commitments and contingencies
Stockholder's equity:
	Common stock, $.01 par value, 1,000 shares authorized, issued and outstanding at March 31, 2003 and December 31, 2002, respectively		—			—
	Additional paid-in-capital		271,987			271,987
	Accumulated other comprehensive loss		(32,532	)		(29,111	)
	Accumulated deficit		(21,830	)		(22,052	)

Total stockholder's equity			217,625			220,824

Total liabilities and stockholder's equity		$	1,276,489		$	1,300,794

See accompanying notes to condensed consolidated financial statements.

NORTH AMERICAN VAN LINES, INC.

Consolidated Statements of Operations

For the three months ended March 31, 2003 and 2002

(Dollars in thousands)
(Unaudited)

			Three Months Ended
			March 31, 2003			March 31, 2002
Operating revenues			$	470,986		$	429,654
Operating expenses:
	Purchased transportation expense			255,912			254,902
	Other direct expense			109,883			83,782

Total direct expenses				365,795			338,684
Gross margin				105,191			90,970
	Insurance and claims			12,223			10,827
	Other indirect expense			2,119			2,552

Total indirect expenses				14,342			13,379
	General and administrative expense			76,979			72,098
	Intangibles amortization			1,320			—
	Restructuring credit			—			(731	)

		Income from operations		12,550			6,224
Non-operating income (expense)				(22	)		365

		Income before interest and taxes		12,528			6,589
Interest expense				12,503			12,576

		Income (loss) before income taxes		25			(5,987	)
Income tax benefit				(197	)		(2,680	)

		Net income (loss)	$	222		$	(3,307	)

See accompanying notes to condensed consolidated financial statements.

NORTH AMERICAN VAN LINES, INC.

Consolidated Statement of Changes in Stockholder's Equity

For the three months ended March 31, 2003

(Dollars in thousands)
(Unaudited)

		Total			Accumulated deficit			Accumulated other comprehensive income (loss)			Common stock		Additional paid-in- capital
Balance at December 31, 2002		$	220,824		$	(22,052	)	$	(29,111	)	$	—	$	271,987
Comprehensive income (loss):
	Net income		222			222
	Unrealized hedging loss, net of tax benefit of $(821)		(1,610	)					(1,610	)
	Net change in unrealized holding gain on available-for-sale securities, net of tax of $109		8						8
	Minimum pension liability, net of tax of $2,232		(2,232	)					(2,232	)
	Foreign currency translation adjustment, net of tax of $355		413						413

	Total comprehensive loss		(3,199	)

Balance at March 31, 2003		$	217,625		$	(21,830	)	$	(32,532	)	$	—	$	271,987

See accompanying notes to condensed consolidated financial statements.

NORTH AMERICAN VAN LINES, INC.

Condensed Consolidated Statements of Cash Flows

For the three months ended March 31, 2003 and 2002

(Dollars in thousands)
(Unaudited)

		Three Months Ended
		March 31, 2003			March 31, 2002
Cash flows from operating activities:
	Net income (loss)	$	222		$	(3,307	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
	Depreciation		9,902			7,780
	Amortization		3,048			1,457
	Provision for losses on accounts and notes receivable		574			2,055
	Deferred income taxes		2,235			(3,452	)
	Loss on sale of assets, net		382			141
Change in operating assets and liabilities:
	Accounts and notes receivable		18,381			39,227
	Other current assets		8,886			(7,509	)
	Accounts and mortgages payable		(6,139	)		(7,338	)
	Other current liabilities		(18,858	)		(20,607	)
	Accrued income taxes		(944	)		929
	Other long-term assets and liabilities		(3,902	)		6,682

Net cash provided by operating activities			13,787			16,058

Cash flows from investing activities:
	Additions of property and equipment		(3,908	)		(8,585	)
	Proceeds from sale of property and equipment		215			233
	Purchases of investments		(21,738	)		(20,114	)
	Proceeds from maturity or sale of investments		16,627			27,301
	Other investing activities		(995	)		(333	)

Net cash used for investing activities			(9,799	)		(1,498	)

Cash flows from financing activities:
	Borrowings on short-term debt and revolving credit facility, net		5,769			11,235
	Change in balance of outstanding checks		4,112			(9,585	)
	Principal payments on long-term debt		(5,603	)		(21,968	)
	Principal payments on capital lease obligations		(2,571	)		(914	)
	Other financing activities		159			403

Net cash provided by (used for) financing activities			1,866			(20,829	)
	Effect of translation adjustments on cash		1,048			(204	)

Net increase (decrease) in cash and cash equivalents			6,902			(6,473	)
Cash and cash equivalents at beginning of period			42,266			32,119

Cash and cash equivalents at end of period		$	49,168		$	25,646

See accompanying notes to condensed consolidated financial statements.

NORTH AMERICAN VAN LINES, INC.

Notes to Condensed Consolidated Financial Statements

March 31, 2003

(Dollars in thousands)
(Unaudited)

(1) Basis of Presentation

This report covers North American Van Lines, Inc. and its subsidiaries (the "Company").

The accompanying unaudited condensed consolidated financial statements should be read together with the Company's audited consolidated financial statements for the year ended December 31, 2002. Certain information and footnote disclosures normally included in the aforementioned financial statements prepared in accordance with generally accepted accounting principles are condensed or omitted. Management of the Company believes the interim financial statements include all adjustments, including normal recurring adjustments, necessary for a fair presentation of the financial condition and results of operations for the interim periods presented.

In December 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 148, "Accounting for Stock-Based Compensation—Transition and Disclosure" ("SFAS 148"), an amendment of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). This statement amends SFAS 123 to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation and amends the disclosure requirements to require prominent disclosure in both annual and interim financial statements about the method of accounting for stock- based employee compensation and the effect of the method used on reported results. The Company has adopted only the disclosure requirements of SFAS 148.

Had our parent elected to apply the provisions of SFAS 123 and SFAS 148 regarding recognition of compensation expense to the extent of the calculated fair value of stock options granted, net income (loss) would have changed as follows:

	March 31, 2003			March 31, 2002
Net income (loss) as reported	$	222		$	(3,307	)
Pro forma compensation cost under fair value method		(104	)		(71	)

Adjusted net income (loss)	$	118		$	(3,378	)

Certain reclassifications have been made to the condensed consolidated financial statements for the prior periods presented to conform with the March 31, 2003 presentation.

(2) Income Taxes

The Company's estimated provision for income taxes differs from the amount computed by applying the U.S. federal and state statutory rates. This difference is primarily due to (1) differences in the statutory rates between the U.S. and countries where the Company has permanently reinvested earnings and (2) tax incentive programs which the Company has qualified for under the laws of certain jurisdictions.

(3) Cash and Cash Equivalents

Cash and cash equivalents included $27,095 and $22,069 at March 31, 2003 and December 31, 2002, respectively, primarily relating to the Company's wholly owned insurance subsidiaries that require regulatory agency approval prior to being used for non-insurance related purposes.

(4) Long-term Debt

Long-term debt consisted of the following:

	March 31, 2003		December 31, 2002
Revolving credit facility	$	33,000	$	27,000
Note payable—Tranche A		115,013		120,000
Note payable—Tranche B		209,346		209,887
Senior Subordinated Notes		150,000		150,000
Other		16,925		16,657

Total debt		524,284		523,544
Less current maturities		22,457		22,412

Total long-term debt	$	501,827	$	501,132

(5) Commitments and Contingencies

(a) Litigation

The Company was a defendant in a personal injury suit resulting from a 1996 accident involving one of its agent's drivers. The case was tried in 1998, and the Company was found liable. After appeals, a final judgment of $15,229 was rendered in 2002 and fully paid by the Company and two of its insurers. After certain insurance payments and reimbursements, the Company has paid $7,637, which the Company believes is fully reimbursable by insurance; however, one of the Company's several co-insurers of this case has filed suit, contesting its coverage obligations. If the co-insurer prevails, there is the possibility that some or all of the payment made by the Company will not be reimbursed. The Company has a reserve that it considers appropriate in the circumstances.

The Company and certain subsidiaries are defendants in numerous lawsuits relating principally to motor carrier operations. In the opinion of management, after consulting with its legal counsel, the amount of the Company's ultimate liability resulting from these matters will not materially affect the Company's financial position, results of operations or liquidity, although such liability may be material to any given quarter.

(b) Environmental Matters

The Company has been named as a potentially responsible party ("PRP") in two environmental cleanup proceedings by federal or state authorities. The suits are brought under the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended, or other federal or state statutes. Based on all known information, it is estimated that the settlement cost of each PRP site would

not be materially or significantly larger than the reserves established for these proceedings, which totaled $35 as of March 31, 2003 and December 31, 2002, respectively. It is possible that additional claims or lawsuits involving now unidentified environmental sites may arise in the future.

The Company owns or has owned and leases or has leased facilities at which underground storage tanks for diesel fuel are located and operated. Management believes that the Company has taken the appropriate and necessary action with regard to releases of diesel fuel that have occurred. Based on its assessment of the facts and circumstances now known and after consulting with its legal counsel, management believes that it has recorded appropriate estimates of liability for those environmental matters of which the Company is aware. Further, management believes it is unlikely that any identified matters, either individually or in aggregate, will have a material effect on the Company's financial position, results of operations or liquidity. As conditions may exist on these properties related to environmental problems that are latent or undisclosed, there can be no assurance that the Company will not incur liabilities or costs, the amount of which cannot be estimated reliably at this time.

(c) Purchase Commitments

Purchase commitments consisted of the following:

	March 31, 2003		December 31, 2002
Outsourcing agreements	$	176,843	$	176,382
Software licenses		3,597		4,297
Transportation equipment		897		1,608
Other		—		358

	$	181,337	$	182,645

On January 1, 2003, the Company entered into a three-year agreement totaling $5,256 with a third party to provide outsourcing services for the Company's credit and collection functions. The agreement is subject to certain performance considerations.

On July 1, 2002, the Company entered into a ten-year purchase commitment with Covansys Corporation and Affiliated Computer Services, Inc. to provide selected outsourcing services for the Company's domestic information systems infrastructure, including data center operations and telecommunications and certain application software development. As of March 31, 2003, the remaining purchase commitment was $172,025. Covansys Corporation is a related party, as approximately 24% of its outstanding common stock is owned by Clayton, Dubilier & Rice Fund VI Limited Partnership, a Cayman Islands exempted limited partnership ("Fund VI"). As of May 6, 2003, Fund VI held approximately 23.7% of the capital stock of our parent, SIRVA. Fund VI is managed by Clayton, Dubilier & Rice, Inc., a private investment firm that is organized as a Delaware corporation, and is an affiliate of our controlling shareholder, Clayton, Dubilier & Rice Fund V Limited Partnership, a Cayman Islands exempted limited partnership.

(6) Operating Segments

The tables below represent information about revenues, income (loss) from operations and total assets by segment used by the chief decision-makers of the Company:

		Three Months Ended
		March 31, 2003			March 31, 2002
Revenues
	Moving Services—North America	$	208,082		$	205,570
	Moving Services—Europe and Asia Pacific		83,829			79,037
	Relocation Services		28,923			1,183

	Global Relocation Services		320,834			285,790
	Insurance Services		24,849			12,918
	Logistics Services		125,303			130,946

Consolidated revenues		$	470,986		$	429,654

Income (loss) from operations
	Moving Services—North America	$	716		$	(2,234	)
	Moving Services—Europe and Asia Pacific		3,717			2,316
	Relocation Services		1,837			(132	)

	Global Relocation Services		6,270			(50	)
	Insurance Services		7,251			5,380
	Logistics Services		(971	)		894

Consolidated income from operations		$	12,550		$	6,224

		As of
		March 31, 2003		December 31, 2002
Total assets
	Moving Services—North America	$	386,829	$	403,534
	Moving Services—Europe and Asia Pacific		333,142		344,732
	Relocation Services		155,434		158,342

	Global Relocation Services		875,405		906,608
	Insurance Services		221,972		212,360
	Logistics Services		179,112		181,826

Consolidated total assets		$	1,276,489	$	1,300,794

(7) Subsequent Event

On July 29, 2002, RS Acquisition Holding, LLC, a wholly owned subsidiary of SIRVA, the Company's parent, acquired The Rowan Group PLC and Rowan Simmons Conveyancing Limited (together, "Rowan Simmons"), a U.K. based provider of relocation services, including home sale and purchase assistance, management of tenant responsibilities and other services to corporations that assist employees in their relocation needs, for approximately $14,000. The purchase price was funded from the proceeds of a bank loan. Under the terms of a purchase agreement between RS Acquisition Holding, LLC and the Company, the Company acquired Rowan Simmons from RS Acquisition Holding, LLC on April 24, 2003 for approximately $14,000. Since the transaction was between entities under common control, the transaction will be accounted for in a manner similar to a pooling-of-interests, with inclusion of operations, cash flows and financial position as of July 29, 2002.

(8) Supplemental Information

The following summarized consolidating balance sheets, statements of operations and statements of cash flows were prepared to segregate such financial statements between those entities that have guaranteed the Company's senior subordinated notes ("Guarantor" entities) and those entities that did not guarantee such debt ("Non-Guarantor" entities).

Consolidated condensed balance sheet data as of March 31, 2003 and December 31, 2002 is summarized as follows:

		March 31, 2003
		(1) Parent		(2) Total Guarantors		Non- guarantors		Eliminations			NAVL Consolidated
Current assets:
	Accounts and notes receivable, net	$	92,117	$	135,952	$	70,619	$	(12,557	)	$	286,131
	Other current assets		38,551		49,926		46,208		(71	)		134,614

Total current assets			130,668		185,878		116,827		(12,628	)		420,745

Property and equipment, net			50,252		23,703		91,610		—			165,565
Goodwill and intangible assets, net			536,079		3,235		—		—			539,314
Other assets			288,927		196,330		337,322		(671,714	)		150,865

Total assets		$	1,005,926	$	409,146	$	545,759	$	(684,342	)	$	1,276,489

Current liabilities		$	85,789	$	202,116	$	148,828	$	(10,931	)	$	425,802
Long-term debt and capital lease obligations			505,733		221		8,587		—			514,541
Other liabilities			196,779		27,668		—		(105,926	)		118,521

Total liabilities			788,301		230,005		157,415		(116,857	)		1,058,864
Stockholder's equity			217,625		179,141		388,344		(567,485	)		217,625

Total liabilities and stockholder's equity		$	1,005,926	$	409,146	$	545,759	$	(684,342	)	$	1,276,489

		December 31, 2002
		(1) Parent		(2) Total Guarantors		Non- guarantors		Eliminations			NAVL Consolidated
Current assets:
	Accounts and notes receivable, net	$	100,220	$	140,764	$	77,396	$	(13,189	)	$	305,191
	Other current assets		35,993		51,739		53,927		(71	)		141,588

Total current assets			136,213		192,503		131,323		(13,260	)		446,779

Property and equipment, net			54,187		22,163		94,139		—			170,489
Goodwill and intangible assets, net			537,836		3,235		—		—			541,071
Other assets			289,424		195,438		265,540		(607,947	)		142,455

Total assets		$	1,017,660	$	413,339	$	491,002	$	(621,207	)	$	1,300,794

Current liabilities		$	92,696	$	210,489	$	155,865	$	(11,168	)	$	447,882
Long-term debt and capital lease obligations			505,846		221		9,187		—			515,254
Other liabilities			198,294		25,307		618		(107,385	)		116,834

Total liabilities			796,836		236,017		165,670		(118,553	)		1,079,970
Stockholder's equity			220,824		177,322		325,332		(502,654	)		220,824

Total liabilities and stockholder's equity		$	1,017,660	$	413,339	$	491,002	$	(621,207	)	$	1,300,794

Consolidated condensed statements of operations data for the three months ended March 31, 2003 and 2002 are summarized as follows:

	Three months ended March 31, 2003
	(1) Parent			(2) Total Guarantors		Non- guarantors			Eliminations			NAVL Consolidated
Operating revenues	$	151,926		$	176,039	$	154,735		$	(11,714	)	$	470,986
Total operating expenses		152,602			172,598		144,950			(11,714	)		458,436

Income (loss) from operations		(676	)		3,441		9,785			—			12,550
Non-operating (expense) income		740			—		(762	)		—			(22	)

Income before interest and income taxes		64			3,441		9,023			—			12,528
Interest expense		11,444			889		170			—			12,503

Income (loss) before income taxes		(11,380	)		2,552		8,853			—			25
Provision (benefit) for income taxes		(3,901	)		194		3,510			—			(197	)

Net income (loss)	$	(7,479	)	$	2,358	$	5,343		$	—		$	222

	Three months ended March 31, 2002
	(1) Parent			(2) Total Guarantors			Non- guarantors			Eliminations			NAVL Consolidated
Operating revenues	$	151,574		$	30,910		$	265,002		$	(17,832	)	$	429,654
Total operating expenses		151,637			32,107			257,518			(17,832	)		423,430

Income (loss) from operations		(63	)		(1,197	)		7,484			—			6,224
Non-operating income (expense) and minority interest		1,101			—			(736	)		—			365

Income (loss) before interest, income taxes and accounting change		1,038			(1,197	)		6,748			—			6,589
Interest expense (income)		11,675			36			(9,635	)		10,500			12,576

Income (loss) before income taxes and accounting change		(10,637	)		(1,233	)		16,383			(10,500	)		(5,987	)
Provision (benefit) for income taxes		(5,721	)		171			2,870			—			(2,680	)

Net income (loss)	$	(4,916	)	$	(1,404	)	$	13,513		$	(10,500	)	$	(3,307	)

Consolidated condensed statements of cash flows data for the three months ended March 31, 2003 and 2002 are summarized as follows:

		Three months ended March 31, 2003
		(1) Parent			(2) Total Guarantors			Non- guarantors			NAVL Consolidated
Net cash provided by operating activities		$	1,464		$	7,392		$	4,931		$	13,787

Cash flows from investing activities:
	Additions of property and equipment		804			(2,882	)		(1,830	)		(3,908	)
	Proceeds from sale of property and equipment		69			25			121			215
	Purchases of investments		—			—			(21,738	)		(21,738	)
	Proceeds from maturity or sale of investments		—			—			16,627			16,627
	Other investing activities		(385	)		(610	)		—			(995	)

Net cash provided by (used for) investing activities			488			(3,467	)		(6,820	)		(9,799	)

Cash flows from financing activities:
	Borrowings (repayments on) revolving credit facility, net		6,000			—			(231	)		5,769
	Change in balance of outstanding checks		2,796			437			879			4,112
	Principal payments on long-term debt		(5,603	)		—			—			(5,603	)
	Other financing activities		(1,971	)		—			(441	)		(2,412	)

Net cash provided by financing activities			1,222			437			207			1,866

Effect of translation adjustment on cash			—			—			1,048			1,048

Net increase (decrease) in cash and cash equivalents			3,174			4,362			(634	)		6,902
Cash and cash equivalents at beginning of period			4,281			11,102			26,883			42,266

Cash and cash equivalents at end of period		$	7,455		$	15,464		$	26,249		$	49,168

		Three months ended March 31, 2002
		(1) Parent			(2) Total Guarantors			Non- guarantors			NAVL Consolidated
Net cash provided by (used for) operating activities		$	13,296		$	5,371		$	(2,609	)	$	16,058

Cash flows from investing activities:
	Additions of property and equipment		(2,326	)		(1,909	)		(4,350	)		(8,585	)
	Proceeds from sale of property and equipment		65			147			21			233
	Purchases of investments		—			—			(20,114	)		(20,114	)
	Proceeds from maturity or sale of investments		—			—			27,301			27,301
	Other investing activites		(134	)		(199	)		—			(333	)

Net cash provided by (used for) investing activities			(2,395	)		(1,961	)		2,858			(1,498	)

Cash flows from financing activities:
	Borrowings (repayments) on revolving credit facility, net		11,600			—			(365	)		11,235
	Change in balance of outstanding checks		(3,874	)		(2,802	)		(2,909	)		(9,585	)
	Principal payments on long-term debt		(21,968	)		—			—			(21,968	)
	Other financing activities		(269	)		—			(242	)		(511	)

Net cash used for financing activities			(14,511	)		(2,802	)		(3,516	)		(20,829	)

Effect of translation adjustment on cash			—			—			(204	)		(204	)

Net increase (decrease) in cash and cash equivalents			(3,610	)		608			(3,471	)		(6,473	)
Cash and cash equivalents at beginning of period			5,687			4,054			22,378			32,119

Cash and cash equivalents at end of period		$	2,077		$	4,662		$	18,907		$	25,646

(1): Parent includes the accounts of the Company, a Delaware corporation and the issuer of the debt.
(2): Total Guarantors include the accounts of the following direct or indirect subsidiaries of the Company or its subsidiary, Allied Van Lines, Inc.:

Name		Incorporated
A Relocation Solutions Management Company		Delaware
Allied Freight Forwarding, Inc.		Delaware
Allied International N.A., Inc.		Delaware
Allied Transportation Forwarding, Inc.		Delaware
Allied Van Lines, Inc.		Delaware
Allied Van Lines Terminal Company.		Delaware
CRS Acquisition Corp.		Delaware
Federal Traffic Service, Inc.		Indiana
Fleet Insurance Management, Inc.		Indiana
Frontrunner Worldwide, Inc.		Delaware
Global Van Lines, Inc.		Indiana
Great Falls North American, Inc.		Montana
Meridian Mobility Resources, Inc.		Delaware
NACAL, Inc.		California
National Association of Independent Truckers, LLC		Delaware
North American Logistics, Ltd.		Indiana
North American Van Lines of Texas, Inc.		Texas
ProSource Properties, Ltd.		Ohio
Relocation Management Systems, Inc.		Delaware
SIRVA Freight Forwarding, Inc.		Indiana
SIRVA Global Relocation, Inc.		Delaware
SIRVA Relocation LLC		Delaware
SIRVA Title Agency, Inc.		Ohio
StorEverything, Inc.		Delaware
U.S. Relocation Services, Inc.		Delaware
Vanguard Insurance Agency, Inc.		Illinois

Each Guarantor is a wholly owned subsidiary of the Company or its subsidiary, Allied Van Lines, Inc. and jointly and severally, irrevocably and fully and unconditionally guarantees the punctual payment of such debt issued under the Company's senior credit facility and senior subordinated notes.

ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

Overview

Our operating revenues are derived from the following five business segments: (1) our moving services—North America segment, (2) our moving services—Europe and Asia Pacific segment, (3) our relocation services segment, (4) our insurance services segment, and (5) our logistics services segment. Segments (1) through (3) comprise global relocation services.

Our moving services—North America segment operates under the northAmerican, Allied and Global brand names and provides two types of moving services: (1) domestic, which provides residential moving services in the United States and Canada through a network of exclusive agents who provide the sales, packing, loading, transportation, delivery and warehousing services and (2) international, which primarily markets to multi-national companies most often based in the United States and provides or coordinates moving services for residential shipments destined to or originating in foreign countries using our exclusive agent network in North America and authorized representatives around the world to complete the service offering.

Our moving services—Europe and Asia Pacific segment operates in the United Kingdom, Europe, Australia and Asia Pacific through a network of company-owned branches that utilize the Pickfords or Allied Pickfords brand names among others. This segment provides complete domestic and international residential moving services, including sales, packing, loading, transportation, delivery and warehousing. It also provides records management and office relocation services.

Our relocation services segment is comprised of SIRVA Relocation LLC, a Delaware limited liability company, and its wholly owned subsidiaries, which operate as global providers of domestic and international relocation services to corporate clients and their employees, including home sale services, relocation coordination services, expense management and transaction reporting.

Our insurance services segment provides coverage against loss from certain risks, primarily cargo warehousing, commercial auto physical damage, commercial auto liability and general liability to agents, owner-operators affiliated with us and various other parties in the transportation industry. It is comprised of Transguard Insurance Company of America, Inc., an Illinois stock insurance corporation, a multiple-line property and casualty insurance company, and TransGuard General Agency, Inc., an Oklahoma corporation and a leading provider of insurance services to independent contract truck drivers.

Our logistics services segment consists of (1) logistics solutions, which includes finished goods distribution, order fulfillment, project-specific delivery management and the tracking of products through the supply chain, with a focus on high-value products; (2) specialized transportation services, which facilitates the movement of computers, electronics, telecommunications and medical equipment, trade show exhibition materials, fine art and other products that require specialized transportation, distribution or delivery solutions; (3) network services, which provides freight forwarding and brokerage services to customers, as well as vehicle and driver services to agents and owner-operators; and (4) European operations, which handle logistics solutions and specialized transportation of high-value products to and from major cities in the United Kingdom and Europe.

Business Trends and Initiatives

In 2002, we established the strategic objective of dramatically expanding our presence in the corporate relocation market. In May 2002, we acquired the business ("CRS") of Cooperative Resource Services Ltd., a U.S. based relocation services provider that was approximately the third largest provider of such services in the U.S. market. We also acquired Prime Relocation in Australia, establishing a Pacific relocation center, which was supplemented by the opening in Hong Kong of an Asia relocation center in early 2003. In connection with the CRS acquisition, our parent, SIRVA, acquired CMS Holding, the mortgage lending arm of the CRS group, adding mortgage services to our relocation offering. In July of 2002, SIRVA

acquired Rowan Simmons, the largest local provider of relocation services in the U.K. In April 2003, under the terms of a purchase agreement, we acquired Rowan Simmons from SIRVA. These acquisitions have established for us a worldwide footprint from which to provide global relocation services. The strategy has been enhanced by the recent combination of the relocation and moving sales forces so that our marketing approach can incorporate our expansive list of moving clients and begin to offer a broader platform of services to our clients' human resource function.

Our moving services group continues to expand through acquisitions. After completing the acquisition of NFC Moving Services Group from Exel plc in 1999, which substantially expanded our scope of operations in the U.S., the U.K., Europe and the Asia Pacific region, we acquired Global Van Lines in the U.S. and Allied Movers in New Zealand in 2000. In 2002, we acquired Prime International in Australia, Total Recall in the U.K. and Maison Huet in France.

Our insurance segment operates in specific niche markets related to transportation and moving and storage. In 2002, our insurance operations nearly doubled their base of written premiums with the acquisition of the business of each of VCW, Inc. and the National Association of Independent Truckers (collectively, "NAIT"), which focus on servicing the substantial community of owner/operator drivers with professional and support services, including insurance.

We have been successful at smoothly integrating these acquisitions and will continue to pursue additional transactions around the world that we believe would further strengthen our global presence or would advance our strategic position in the markets that we serve.

We have also pursued a number of long-term initiatives designed to improve productivity and profitability. We have invested significant amounts in information technology solutions in order to enhance operational and administrative efficiencies. We have also initiated several restructuring projects over the last few years to streamline management structures, integrate acquired businesses, reshape service delivery operations, reduce general and administrative headcount and exit under-performing business units. We believe that these efforts have been instrumental in reducing our costs and positioning us well for continued profitable growth, although no assurance can be given in this regard.

Results of Operations

Our operating revenues are derived from our moving services—North America, moving services—Europe and Asia Pacific, relocation services, insurance services and logistics services segments. Gross margin is a result of operating revenues less direct expenses associated with the movement of goods or the completion of services. Direct expenses are defined as follows for each segment.

Moving services—North America's transportation expenses are comprised of payments to:

•: owner/operators or agents based on a predetermined rate schedule to provide equipment and haul shipments;
•: owner/operators or agent crews for services such as packing, crating, loading and unloading;
•: agents for booking (sales activity), estimating and customer service; and
•: other third parties such as ocean freight carriers for other transportation services.

Moving services—Europe and Asia Pacific's transportation expenses are similar to those of moving services—North America, except that expenses incurred to provide moving and storage services are largely in the form of direct labor and equipment expenses rather than in the form of agent or owner/operator expenses.

Relocation services direct expenses are primarily comprised of commissions paid to realtors, home closing costs and staff expenses associated with providing relocation coordination services.

Insurance services direct expenses are primarily comprised of underwriting policies, payments of loss recovery to policy holders and loss adjustment expense.

Logistics services transportation expenses are comprised of:

•: payments to owner/operators, employee or agent drivers on a predetermined rate schedule to provide equipment and haul shipments;
•: payments to owner/operators, employee or agent crews for services such as pick-up, delivery and installation;
•: facility and equipment costs, including lease expense and labor costs associated with running the transportation network and our equipment;
•: payments to agents for booking (sales activity) and customer service; and
•: sub-contracted transportation expenses in providing supply chain management services.

Operating expenses include our insurance and claims, bad debt and general and administrative expenses. Employee compensation and benefits account for over 50% of general and administrative expenses. Other significant components of general and administrative expenses are communication costs, rent, supplies and other purchased services.

Three Months Ended March 31, 2003 Compared to Three Months Ended March 31, 2002.

The following table sets forth certain figures regarding our results of operations for the three months ended March 31, 2003, compared to the three months ended March 31, 2002.

		Three Months Ended March 31, 2003			Three Months Ended March 31, 2002			% Increase (Decrease) from Prior Period(a)
		(Dollars in millions)
Operating revenues:
	Moving Services—North America	$	208.1		$	205.6		1.2	%
	Moving Services—Europe and Asia Pacific		83.8			79.0		6.1	%
	Relocation Services		28.9			1.2		f

	Global Relocation Services		320.8			285.8		12.2	%
	Insurance Services		24.9			12.9		93.0	%
	Logistics Services		125.3			131.0		(4.4	)%

Operating revenues		$	471.0		$	429.7		9.6	%

Gross margin		$	105.2			91.0		15.6	%
	Operating expenses		92.6			85.5		8.3	%
	Restructuring		—			(0.7	)	u

Income from operations		$	12.6		$	6.2		f

Income (loss) from operations:
	Moving Services—North America	$	0.7		$	(2.3	)	f
	Moving Services—Europe and Asia Pacific		3.7			2.3		60.9	%
	Relocation Services		1.9			(0.1	)	f

	Global Relocation Services		6.3			(0.1	)	f
	Insurance Services		7.3			5.4		35.2	%
	Logistics Services		(1.0	)		0.9		u

Income from operations		$	12.6		$	6.2		f

(a): Percentages are reflected except when greater than 100%, in which case an "f" for favorable or a "u" for unfavorable is shown.

Operating revenues for the three months ended March 31, 2003 were $471.0 million, an increase of $41.3 million compared to the three months ended March 31, 2002, primarily due to a $27.7 million increase in relocation services revenues attributable to the May 2002 acquisition of CRS, a $9.3 million increase in insurance services revenue attributable to the April 2002 acquisition of the business of NAIT and $14.8 million of favorable currency impact, partially offset by a $6.9 million decrease in revenues in our moving services—Europe and Asia Pacific segment resulting from the sale of our U.K. industrial moving business in December 2002.

Revenue in moving services—North America for the three months ended March 31, 2003 increased $2.5 million as compared to the three months ended March 31, 2002. Revenue per shipment was up approximately 9% both in the North American line and in the international business due to increased weight per shipment, which more than offset a 1% decrease in shipments year-over-year. The mix of accessorials, which are supplemental items sold in the moving transaction, also increased over the prior year. The industry-wide fuel surcharge resulted in $2.9 million of additional revenue. In times of rising fuel costs, tariff regulations allow for a supplemental charge to defray higher fuel costs and provide further protection against the negative impact of such increases.

Revenue in moving services—Europe and Asia Pacific increased $4.8 million in the three months ended March 31, 2003 as compared to the three months ended March 31, 2002. The increase was primarily due to a favorable currency impact of $11.8 milion. This was partially offset by $6.9 million lower revenues than in the three months ended March 31, 2002 resulting from the sale of our U.K. industrial moving business in December 2002. For the three months ended March 31, 2003, the British pound sterling, the Australian dollar and the Euro were stronger as compared to the three months ended March 31, 2002 by approximately 11%, 13% and 18%, respectively.

Revenue in relocation services for the three months ended March 31, 2003 was $27.7 million higher as compared to the three months ended March 31, 2002. The increase was due to the CRS acquisition in May 2002.

Revenue in insurance services for the three months ended March 31, 2003 was $12.0 million higher as compared to the three months ended March 31, 2002. The increase was due to $9.3 million from the April 2002 acquisition of the business of NAIT and additional market penetration for its range of insurance products.

Revenue in logistics services decreased $5.7 million in the three months ended March 31, 2003 as compared to the three months ended March 31, 2002 due primarily to reduced shipments totaling 4% in specialized transportation and reduced activity levels in freight forwarding due to the continuation of the general economic slowdown, particularly in the technology and telecommunication sectors. This was partially offset by a favorable currency impact of $2.5 million and increased business in our European operations, especially in Germany.

Gross Margin. Gross margin for the three months ended March 31, 2003 was $105.2 million, an increase of $14.2 million compared to the three months ended March 31, 2002. The increase was due primarily to $13.3 million of higher margins from our acquisitions and $5.0 million of currency impact, partially offset by $2.9 million lower margins in logistics services due to reduced shipment and activity volume. The gross margin (as a percentage of sales) was 22.3% for the three months ended March 31, 2003 and was 21.2% for the three months ended March 31, 2002.

Operating Expenses. Operating expenses for the three months ended March 31, 2003 were $92.6 million, an increase of $7.1 million compared to the three months ended March 31, 2002. The increase was primarily due to $5.4 million of expenses associated with the incremental effect of our acquisitions made after March 31, 2002, $4.6 million due to currency impact and $1.3 million of intangibles amortization. The increase was also due to a year-over-year decrease in derivative income of $2.1 million. These items were partially offset by the effect of $4.9 million of continuing cost containment programs, whereby we have reduced discretionary expenses, and the effects of prior year restructuring programs, in which headcount was reduced. As a percentage of revenue, operating expenses were 19.7% for the three months ended March 31, 2003, compared to 19.9% for the three months ended March 31, 2002.

Restructuring. In the three months ended March 31, 2002, we released $0.7 million of restructuring reserves pertaining to the logistics parts centers restructuring, which was established in 2001, as we were able to sublease certain parts centers facilities earlier than originally estimated.

Income (Loss) from Operations. Income from operations for the three months ended March 31, 2003 was $12.6 million, an increase of $6.4 million from the same period last year. The increase was primarily due to a net increase of $4.7 million from our acquisitions and divestiture, $4.9 million from cost containment and benefit plan changes, partially offset by $2.1 million of a year-over-year decrease in derivative income and reduced volume in our logistics services segment.

Income from operations in moving services—North America for the three months ended March 31, 2003 as compared to the three months ended March 31, 2002 increased $3.0 million primarily due to reduced general and administrative expenses as a result of continued cost containment, as salary and benefits are lower by $2.7 million primarily due to reduced headcount and other benefit plan changes.

Income from operations in moving services—Europe and Asia Pacific increased $1.4 million in the three months ended March 31, 2003 as compared to the three months ended March 31, 2002. This was primarily due to $0.6 million of losses incurred in the three months ended March 31, 2002 by the U.K. industrial moving business that we sold in December 2002, a favorable currency impact of $0.3 million and a year-over-year hedging gain of $0.3 million.

Income from operations in relocation services for the three months ended March 31, 2003 as compared to the three months ended March 31, 2002 increased $2.0 million primarily due to higher margins which more than offset incremental expenses associated with the CRS acquisition.

Income from operations in insurance services for the three months ended March 31, 2003 as compared to the three months ended March 31, 2002 increased $1.9 million primarily due to higher margins due to increased revenue and the acquisition of the business of NAIT. This was partially offset by a year-over-year derivative loss of $1.9 million.

Loss from operations in logistics services for the three months ended March 31, 2003 was $1.0 million, as compared to income from operations of $0.9 million in the three months ended March 31, 2002. Margins were lower by $2.9 million due to the unfavorable variance in volume. Insurance claims expense increased $0.4 million year-over-year. These items were partially offset by $2.2 million of lower general and administrative expenses, due to general cost containment, reduced headcount due to prior years' restructuring efforts and other benefit plan changes. There was also $0.7 million of restructuring credit in the three months ended March 31, 2002.

Interest Expense. Interest expense for the three months ended March 31, 2003 was $12.5 million compared to $12.6 million in the three months ended March 31, 2002. This decrease is due primarily to lower interest rates partially offset by higher average borrowings related to our 2002 acquisitions.

Provision for Income Taxes. For the three months ended March 31, 2003, the income tax benefit was $0.2 million based on pre-tax income of $0.03 million. For the three months ended March 31, 2002, the income tax benefit was $2.7 million based on a pre-tax loss of $6.0 million. Our estimated provision for income taxes differs from the amount computed by applying the U.S. federal and state statutory rates. This difference is primarily due to (1) differences in the statutory rates between the U.S. and countries where we have permanently reinvested earnings and (2) tax incentive programs for which we have qualified under the laws of certain jurisdictions.

Financial Condition

The information provided below about our cash flows, debt, credit facilities, capital and operating lease obligations and future commitments is included here to facilitate a review of our liquidity.

Liquidity and Capital Resources

We broadly define liquidity as our ability to generate sufficient cash flow from operating activities to meet our obligations and commitments. In addition, liquidity includes the ability to obtain appropriate debt and equity financing and to convert into cash those assets that are no longer required to meet existing strategic and financial objectives. Therefore, liquidity cannot be considered separately from capital resources that consist of current or potentially available funds for use in achieving long-range business objectives and meeting debt service commitments.

Our short-term and long-term liquidity needs will arise primarily from:

•: interest expense, which was $52.2 million in 2002, and is expected to be approximately $53.0 million in 2003 due to an increased average debt level, partially offset by lower interest rates;
•: principal repayments of debt and capital leases, which will total $28.3 million in 2003, $26.7 million in 2004, $40.7 million in 2005, $155.5 million in 2006, $141.8 million in 2007 and $152.6 million thereafter;

•: operating lease payments, which were $58.9 million in 2002 and will total $49.0 million in 2003, $39.2 million in 2004, $36.3 million in 2005, $27.0 million in 2006, $24.4 million in 2007 and $102.9 million thereafter;
•: unconditional purchase commitments which will total $17.3 million in 2003, $21.7 million in 2004, $21.0 million in 2005, $19.2 million in 2006, $18.6 million in 2007 and $83.5 million thereafter;
•: capital expenditures, which were $33.3 million in 2002, and are expected to range between $30.0 million and $35.0 million in 2003; and
•: working capital requirements as may be needed to support business growth.

The seasonal nature of the moving business results in increased short-term working capital requirements in the summer months. This will result in an increase in receivables which are typically collected, and revolving credit borrowings which are typically repaid, by late fall. Due to this seasonality, we can operate with negative working capital due to the turnover of our accounts receivable and access to our revolving credit facility.

Debt Service. Principal and interest payments under our senior credit facility and interest payments on the notes represent significant liquidity requirements for us. Our senior credit facility is comprised of note payable—Tranche A, note payable—Tranche B and a revolving credit facility. As of March 31, 2003, we had $541.4 million of indebtedness for borrowed money and capital leases consisting of:

•: $150.0 million principal amount of our 13³/8% senior subordinated notes;
•: $324.3 million outstanding under our term loans (consisting of a note payable—tranche A and a note payable—tranche B amounting to $115.0 million and $209.3 million, respectively);
•: $33.0 million outstanding under our $150.0 million revolving credit facility;
•: $16.3 million of capital leases; and
•: $17.8 million of other debt.

As a result, we are required to devote a substantial amount of our cash flow to service this indebtedness. We are required to repay our note payable—tranche A in quarterly principal payments over seven years and our note payable—tranche B in quarterly principal payments over eight years. We are required to repay any amounts borrowed under the revolving credit facility forming part of our senior credit facility by the seventh anniversary of the initial borrowings under the senior credit facility. All borrowings under the senior credit facility bear interest at floating rates based upon the interest rate option elected by us.

Covenant Restrictions. The senior credit facility imposes restrictions on our ability to make capital expenditures. Additionally, the senior credit facility, the indenture governing the notes and the agreements governing our parent company's senior discount debt, which at March 31, 2003 had accreted to $58.8 million, limit our ability to incur additional indebtedness. Such restrictions could limit our ability to:

•: respond to certain market conditions;
•: complete our capital spending program;
•: provide for unanticipated capital investments; or
•: take advantage of business opportunities.

The covenants in the senior credit facility also, among other things, limit our ability to

•: dispose of assets;
•: incur guarantee obligations;
•: prepay other indebtedness;

•: make restricted payments;
•: create liens;
•: make equity or debt investments;
•: make acquisitions;
•: modify terms of the indenture;
•: engage in mergers or consolidations;
•: change the business conducted by us;
•: make capital expenditures; or
•: engage in certain transactions with affiliates.

The indenture governing our senior subordinated notes and the agreements governing our parent company's senior discount debt contain a number of similar restrictions.

Cash Flows from Operating Sources. We believe that cash generated from operations, which was $84.0 million for the year ended December 31, 2002 and $13.8 million for the three months ended March 31, 2003, together with amounts available under the revolving credit facility and any other available source of liquidity, will be adequate to permit us to meet our debt service obligations, capital expenditure program requirements, ongoing operating costs and working capital needs for at least the next twelve months.

Cash Flows from Investing Sources. Capital expenditures for 2003 are expected to range between $30.0 million and $35.0 million for computer equipment, software development and transportation and warehouse equipment. We will continue to pursue acquisitions around the world that we believe would further strengthen our global presence or would advance our strategic position in the markets that we serve.

Cash Flows from Financing Sources. Our future operating performance and ability to service or refinance the notes and to repay, extend or refinance our senior credit facility will be subject to, among other things, future economic conditions and to financial, business and other factors, many of which are beyond our control.

Commitments and Contingencies

Purchase commitments consisted of the following at March 31, 2003:

Outsourcing agreements	$	176.8
Software lincenses		3.6
Transportation equipment		0.9

	$	181.3

On January 1, 2003, we entered into a three-year purchase agreement totaling $5.3 million with a third party to provide outsourcing services for our credit and collection functions. The agreement is subject to certain performance considerations.

Litigation

September 12, 2002, contesting TIG's and other insurers' coverage obligations and seeking declaratory judgment. NAVL filed a counterclaim and cross-claim against TIG and National Union Fire Insurance Company, seeking reimbursement for all remaining amounts that we paid in satisfaction of the judgment and associated costs and expenses. If TIG prevails, there is the possibility that some or all of the unreimbursed portion of the payment we made may not be reimbursed. We have a reserve that we consider appropriate in the circumstances.

Seasonality

Our operations are subject to seasonal trends common to the moving and relocation industries. Results of our operations for the quarters ending in December and March are typically lower than the quarters ending in June and September due to reduced shipments in the winter months. With respect to moving services—North America, over half of its revenue is typically generated from May through September. For logistics services, shipping requirements of the customer base result in higher shipment volumes at the end of each quarter. Moving services—Europe and Asia Pacific experiences seasonality with respect to residential moves; however, this is somewhat diminished by the geographic diversity of our moving activities and involvement with other non-seasonal business services such as records management and office moving.

Recent Accounting Pronouncements

In January 2003, the FASB issued Statement of Financial Accounting Standards Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46"). FIN 46 addresses consolidation by business enterprises of variable interest entities. The adoption of FIN 46 did not have a material effect on our operating results or financial condition.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to various market risks, including changes in interest rates and foreign currency exchange rates.

We are exposed to various interest rate risks that arise in the normal course of business. We finance our operations with borrowings comprised primarily of variable rate indebtedness. Significant increases in interest rates could adversely affect our operating margins, results of operations and our ability to service indebtedness. A 1% rate increase would increase our gross interest expense by $3.6 million. The interest rate swap instruments described below would reduce the annual impact of a 1% change by $1.8 million in 2003. An increase of 1% in interest rates payable on our variable rate indebtedness would increase our annual interest rate expense by approximately $1.8 million in the next year.

We utilize interest rate agreements and foreign exchange contracts to manage interest rate and foreign currency exposures. The principal objective of such contracts is to minimize the risks and/or costs associated with financial and international operating activities. We do not utilize financial instruments for trading purposes. The counterparties to these contractual arrangements are financial institutions with which we also have other financial relationships. We are exposed to credit loss in the event of nonperformance by these counterparties, but we have no reason to anticipate nonperformance by the other parties.

We had five open interest rate swap agreements as of March 31, 2003. The intent of these agreements is to reduce interest rate risk by swapping an unknown variable interest rate for a fixed rate. These

agreements qualify for hedge accounting treatment, therefore, market rate changes are reported in accumulated other comprehensive income. The following is a recap of each agreement.

Notional amount	$20.0 million	$60.0 million	$60.0 million	$40.0 million	$20.0 million
Fixed rate paid	4.785%	3.10%	2.89%	2.43%	2.44%
Variable rate received	1 month LIBOR	1 month LIBOR	1 month LIBOR	1 month LIBOR	1 month LIBOR
Effective date	May 2001	January 2003	March 2003	April 2003	April 2003
Expiration date	April 2003	January 2007	March 2006	April 2005	April 2005

Assets, liabilities and commitments that are to be settled in cash and are denominated in foreign currencies for transaction purposes are sensitive to changes in currency exchange rates. All material trade receivable balances are denominated in the host currency of the local operation. For the three months ended March 31, 2003 and 2002, we recognized a currency loss of $0.1 million and a gain of $0.6 million, respectively, for transactional related items.

From time to time, we utilize foreign currency forward contracts in the regular course of business to manage our exposure against foreign currency fluctuations. The forward contracts establish the exchange rates at which we will purchase or sell the contracted amount of U.S. Dollars for specified foreign currencies at a future date. We utilize forward contracts which are short-term in duration (less than one year). The major currency exposures hedged by us are the Australian dollar, the British pound sterling and the Euro. The contract amounts of foreign currency forwards at March 31, 2003 and 2002 were $53.3 million and $4.0 million, respectively. A hypothetical 10% adverse movement in foreign exchange rates applied to our foreign currency exchange rate sensitive instruments held as of March 31, 2003 would result in a hypothetical loss of approximately $3.3 million. Because these derivatives do not qualify for hedge accounting treatment, changes in fair value relating to these derivatives are recognized in current period earnings. For the three months ended March 31, 2003 and 2002 we recognized losses of $0.2 million and $0.003 million, respectively, resulting from changes in the fair value of foreign currency derivatives.

We hold various convertible bonds in the investment portfolio of our insurance operations. The value of the conversion feature is bifurcated from the value of the underlying bond. Changes in fair value are recorded in current period earnings. For the three months ended March 31, 2003 and 2002, we recognized a loss of $0.5 million and gain of $1.4 million, respectively. The insurance investment portfolio also included marketable equity securities which are classified as available-for-sale and are recorded at fair value. Unrealized holding gains and losses, net of the related tax effect, on available- for-sale securities are excluded from earnings and are reported as a separate component of other comprehensive income until realized.

Other assets at March 31, 2003, included marketable equity securities which are classified as available-for-sale and are recorded at fair value. Unrealized holding gains and losses, net of the related tax effect, on available-for-sale securities are excluded from earnings and are reported as a separate component of other comprehensive income until realized.

Restructuring

In June 2001, our logistics services operating segment established a program to exit the parts center business. The charges included severance and employee benefit costs for 293 employees, lease and asset impairment costs to shut down and exit the parts center business by the end of 2001. Due to lease terms and severance agreements, certain facility lease payments will continue through September 2005. During the three months ended March 31, 2002, $0.7 million of restructuring credit occurred when we were able to sublease certain parts center facilities earlier than originally estimated.

Forward Looking Statements

This Form 10-Q may contain forward-looking statements which include assumptions about future market conditions, operations and results. These statements are based on current expectations and are subject to risks and uncertainties. They are made pursuant to safe harbor provisions of the Private

Securities Litigation Reform Act of 1995. Among the many factors that could cause actual results to differ materially from any forward-looking statements are:

•: changes in the market for our services, including declining demand for those services in the logistics market and lower than anticipated growth in the relocation market, could adversely affect our profitability;
•: we may have difficulty integrating future acquisitions;
•: competition in each of the segments of our business could intensify;
•: we are subject to certain risks attendant to our foreign operations, including regulatory restrictions or prohibitions on the provision of our services, potentially adverse tax consequences of operating in multiple jurisdictions and foreign currency exchange risk;
•: latent environmental liabilities, the cost of which cannot be reliably estimated at this time, may arise, or the settlement cost for each site for which we have been identified as a PRP may be significantly higher than our present estimates;
•: the scope of our exemption from antitrust laws may significantly decrease or be eliminated;
•: our insurance services segment is subject to extensive regulation and such regulation could limit our ability to draw on our insurance subsidiaries' assets to repay our indebtedness;
•: we are subject to a number of regulatory authorities and the violation of laws or regulations promulgated by such authorities, or the failure to maintain required permits and licenses, including environmental permits and licenses, could subject us to fines or, in the event of a serious violation, suspension or revocation of operating authority or criminal penalties;
•: we may not realize anticipated deferred tax assets;
•: our indebtedness may prevent us from responding to certain market conditions, meeting our capital spending program, providing for unanticipated capital investment and taking advantage of business opportunities;
•: our owner/operators are currently not considered to be employees by taxing and other regulatory authorities but should these authorities change their position, our costs could increase significantly;
•: we depend on highly trained executive officers and employees and any difficulty in maintaining our current employees would adversely affect our ability to operate our business; and
•: other factors discussed in our prior Securities and Exchange Commission filings.

We assume no obligation to update these forward-looking statements or advise of changes in the assumptions on which they were based.

ITEM 4. CONTROLS AND PROCEDURES

Under the supervision and with the participation of management, our chief executive officer, chief financial officer and former chief financial officer have evaluated the effectiveness of the design and operation of our disclosure controls and procedures within 90 days of the filing date of this quarterly report, and, based on their evaluation, the chief executive officer, chief financial officer and former chief financial officer have concluded that these controls and procedures are effective. There were no significant changes in internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation. Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures are also designed to ensure that information is accumulated and communicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We were a defendant in a personal injury suit resulting from a 1996 accident involving one of our agent's drivers. The case was tried in 1998, and we were found liable. After appeals, a final judgment of $15.2 million was rendered in 2002 and was fully paid by us and two of our insurers. After these insurance payments and reimbursements, we have paid $7.6 million which we believe is fully reimbursable by insurance. TIG Insurance Co. ("TIG"), one of our several co-insurers, filed suit against us, one of our subsidiaries and several other parties in the 191^st Judicial District Court of Dallas County, Texas, on September 12, 2002, contesting TIG's and other insurers' coverage obligations and seeking declaratory judgment. NAVL filed a counterclaim and cross-claim against TIG and National Union Fire Insurance Company, seeking reimbursement for all remaining amounts that we paid in satisfaction of the judgment and associated costs and expenses. If TIG prevails, there is the possibility that some or all of the unreimbursed portion of the payment we made may not be reimbursed. We have a reserve that we consider appropriate in the circumstances.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

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

None

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a): Exhibits

None

(b): Reports on Form 8-K

Report on Form 8-K filed on March 19, 2003 reporting certifications pursuant to 18 United States Code, Section 1350.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	NORTH AMERICAN VAN LINES, INC.
Date May 9, 2003		/s/ JOAN E. RYAN Joan E. Ryan Chief Financial Officer
Date May 9, 2003		/s/ DENNIS M. THOMPSON Dennis M. Thompson Controller

CERTIFICATION

I, Brian P. Kelley, certify that:

1. I have reviewed this quarterly report on Form 10-Q of North American Van Lines, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date May 9, 2003

/s/ BRIAN P. KELLEY

Brian P. Kelley
Chief Executive Officer

CERTIFICATION

I, Joan E. Ryan, certify that:

1. I have reviewed this quarterly report on Form 10-Q of North American Van Lines, Inc.;

b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

Date May 9, 2003

/s/ JOAN E. RYAN

Joan E. Ryan
Chief Financial Officer

CERTIFICATION

I, Ronald L. Milewski, certify that:

1. I have reviewed this quarterly report on Form 10-Q of North American Van Lines, Inc.;

b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

Date May 9, 2003

/s/ RONALD L. MILEWSKI

Ronald L. Milewski
Vice President, Finance
(Chief Financial Officer prior to
February 12, 2003)

QuickLinks

PART I.

ITEM 1. FINANCIAL STATEMENTS

NORTH AMERICAN VAN LINES, INC. Condensed Consolidated Balance Sheets At March 31, 2003 and December 31, 2002 (Dollars in thousands except share data) (Unaudited)
NORTH AMERICAN VAN LINES, INC. Consolidated Statements of Operations For the three months ended March 31, 2003 and 2002 (Dollars in thousands) (Unaudited)
NORTH AMERICAN VAN LINES, INC. Consolidated Statement of Changes in Stockholder's Equity For the three months ended March 31, 2003 (Dollars in thousands) (Unaudited)
NORTH AMERICAN VAN LINES, INC. Condensed Consolidated Statements of Cash Flows For the three months ended March 31, 2003 and 2002 (Dollars in thousands) (Unaudited)
NORTH AMERICAN VAN LINES, INC. Notes to Condensed Consolidated Financial Statements March 31, 2003 (Dollars in thousands) (Unaudited)
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 4. CONTROLS AND PROCEDURES

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

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

ITEM 5. OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

SIGNATURES
CERTIFICATION
CERTIFICATION
CERTIFICATION