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 June 30, 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.

PART I.

ITEM 1. FINANCIAL STATEMENTS

NORTH AMERICAN VAN LINES, INC.

Condensed Consolidated Balance Sheets

At June 30, 2003 and December 31, 2002

(Dollars in thousands except share data)
(Unaudited)

		June 30, 2003			December 31, 2002
Assets
Current assets:
	Cash and cash equivalents	$	53,655		$	42,920
	Accounts and notes receivable, net of allowance for doubtful accounts of $25,536 and $24,922, respectively		381,945			308,313
	Relocation properties held for resale, net		51,584			39,115
	Other current assets		35,706			38,145
	Deferred and recoverable income taxes		38,555			37,641

Total current assets			561,445			466,134

Property and equipment, net			166,886			170,830
Goodwill and intangible assets, net			576,515			556,543
Receivable from SIRVA, Inc.			31,724			28,879
Other assets			120,497			113,577

Total long-term assets			895,622			869,829

Total assets		$	1,457,067		$	1,335,963

Liabilities and Stockholder's Equity
Current liabilities:
	Current portion of long-term debt and capital lease obligations	$	26,049		$	27,261
	Relocation financing facilities		31,613			15,432
	Other short-term debt		7,875			1,073
	Accounts payable		135,574			122,359
	Accrued transportation expense		93,860			63,691
	Other current liabilities		243,728			230,607
	Accrued income taxes		3,820			6,116

Total current liabilities			542,519			466,539

Long-term debt and capital lease obligations			559,262			515,254
Due to SIRVA, Inc.			20,978			32,133
Other liabilities			62,781			66,610
Deferred income taxes			41,803			34,479

Total long-term liabilities			684,824			648,476

Total liabilities			1,227,343			1,115,015

Commitments and contingencies
Stockholder's equity:
	Common stock, $.01 par value, 1,000 shares authorized, issued and outstanding at June 30, 2003 and December 31, 2002, respectively		—			—
	Additional paid-in-capital		271,987			271,987
	Accumulated other comprehensive loss		(29,396	)		(29,075	)
	Accumulated deficit		(12,867	)		(21,964	)

Total stockholder's equity			229,724			220,948

Total liabilities and stockholder's equity		$	1,457,067		$	1,335,963

See accompanying notes to condensed consolidated financial statements.

NORTH AMERICAN VAN LINES, INC.

Consolidated Income Statements

For the three and six months ended June 30, 2003 and 2002

(Dollars in thousands)
(Unaudited)

		Three Months Ended					Six Months Ended
		June 30, 2003		June 30, 2002			June 30, 2003		June 30, 2002
Operating revenues		$	577,499	$	537,144		$	1,049,862	$	966,798
Operating expenses:
	Purchased transportation expense		320,072		319,687			575,985		574,589
	Other direct expense		143,551		115,639			266,035		210,249

Total direct expenses			463,623		435,326			842,020		784,838
Gross margin			113,876		101,818			207,842		181,960
	General and administrative expenses		87,684		77,770			169,228		152,420
	Restructuring credit		—		(111	)		—		(842	)

Income from operations			26,192		24,159			38,614		30,382
	Non-operating expense		120		674			142		308
	Interest expense		12,615		12,268			25,126		24,844

Income before income taxes			13,457		11,217			13,346		5,230
	Provision for income taxes		4,490		4,208			4,249		1,528

Net income		$	8,967	$	7,009		$	9,097	$	3,702

See accompanying notes to condensed consolidated financial statements.

NORTH AMERICAN VAN LINES, INC.

Consolidated Statement of Changes in Stockholder's Equity

For the six months ended June 30, 2003

(Dollars in thousands)
(Unaudited)

		Total			Accumulated deficit			Accumulated other comprehensive income (loss)			Common stock		Additional paid-in-capital
Balance at December 31, 2002		$	220,948		$	(21,964	)	$	(29,075	)	$	—	$	271,987
Comprehensive income (loss):
	Net income		9,097			9,097
	Unrealized hedging loss, net of tax benefit of $(1,463)		(2,804	)					(2,804	)
	Net change in unrealized holding gain on available-for-sale securities, net of tax of $597		916						916
	Minimum pension liability, net of tax of $2,232		(2,232	)					(2,232	)
	Foreign currency translation adjustment, net of tax of $2,189		3,799						3,799

Total comprehensive income			8,776

Balance at June 30, 2003		$	229,724		$	(12,867	)	$	(29,396	)	$	—	$	271,987

See accompanying notes to condensed consolidated financial statements.

NORTH AMERICAN VAN LINES, INC.

Condensed Consolidated Statements of Cash Flows

For the six months ended June 30, 2003 and 2002

(Dollars in thousands)
(Unaudited)

		Six Months Ended
		June 30, 2003			June 30, 2002
Cash flows from operating activities:
	Net income	$	9,097		$	3,702
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
	Depreciation		18,606			16,289
	Amortization		6,220			3,300
	Change in provision for losses on accounts and notes receivable		1,649			(565	)
	Deferred and recoverable income taxes		6,858			2,994
	Loss on sale of assets, net		443			176
Change in operating assets and liabilities:
	Accounts and notes receivable		(56,516	)		(21,489	)
	Relocation properties held for resale, net		(16,969	)		8,008
	Other current assets		5,426			(5,779	)
	Accounts payable		3,591			158
	Other current liabilities		29,708			24,208
	Accrued income taxes		(2,448	)		(817	)
	SIRVA intercompany accounts		(14,001	)		(482	)
	Other long-term assets and liabilities		(4,289	)		2,630

Net cash provided by (used for) operating activities			(12,625	)		32,333

Cash flows from investing activities:
	Additions of property and equipment		(9,694	)		(17,414	)
	Proceeds from sale of property and equipment		910			2,573
	Purchases of investments		(44,876	)		(28,054	)
	Proceeds from maturity or sale of investments		39,251			35,237
	Acquisitions, net of cash acquired		(30,736	)		(82,867	)
	Other investing activities		(1,868	)		(854	)

Net cash used for investing activities			(47,013	)		(91,379	)

Cash flows from financing activities:
	Borrowings on revolving credit facility and other short-term debt		243,740			139,300
	Repayments on revolving credit facility and other short-term debt		(180,225	)		(144,300	)
	Borrowings on relocation financing facilities		34,489			—
	Repayments on relocation financing facilities		(19,072	)		—
	Change in balance of outstanding checks		4,338			(7,078	)
	Borrowings on long-term debt		163			50,403
	Repayments on long-term debt and capital lease obligations		(15,055	)		(24,458	)
	Capital contributions from SIRVA		—			56,500

Net cash provided by financing activities			68,378			70,367
	Effect of translation adjustments on cash		1,995			436

Net increase in cash and cash equivalents			10,735			11,757
Cash and cash equivalents at beginning of period			42,920			32,119

Cash and cash equivalents at end of period		$	53,655		$	43,876

See accompanying notes to condensed consolidated financial statements.

NORTH AMERICAN VAN LINES, INC.

Notes to Condensed Consolidated Financial Statements

June 30, 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 ("FASB") 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.

In accordance with the provisions of SFAS 123, as amended SFAS 148, our parent, SIRVA, Inc. ("SIRVA"), has elected to continue to account for stock-based compensation under the intrinsic value based method of accounting described by Accounting Principles Board Opinion 25, "Accounting for Stock Issued to Employees" ("APB 25"). Under APB 25, generally no cost is recorded for stock options issued to employees unless the option price is below market at the time options are granted.

Had the Company elected to apply the provisions of SFAS 148 regarding recognition of compensation expense to the extent of the calculated fair value of stock options granted, net income would have changed as follows:

	Three Months Ended						Six Months Ended
	June 30, 2003			June 30, 2002			June 30, 2003			June 30, 2002
Net income as reported	$	8,967		$	7,009		$	9,097		$	3,702
Pro forma compensation cost under fair value method, net of tax		(100	)		(78	)		(204	)		(149	)

Adjusted net income	$	8,867		$	6,931		$	8,893		$	3,553

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46"). FIN 46 addresses consolidation by business enterprises of variable interest entities. The Company believes the adoption of FIN 46 will not have a material effect on operating results or financial condition. As of June 30, 2003, the Company had no variable interest entities.

contracts (collectively, referred to as derivatives) and for hedging activities under SFAS 133. This statement is effective for contracts entered into or modified after June 30, 2003, and for hedging relationships designated after June 30, 2003. The Company has not yet determined the effect of the adoption of SFAS 149 on operating results or financial condition.

In May 2003, the FASB issued Statement No. 150 "Accounting For Certain Financial Instruments with Characteristics of both Liabilities and Equity" ("SFAS 150"). SFAS 150 establishes standards for how a company classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that a company classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). Many of those instruments were previously classified as equity. This statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective for the first fiscal period beginning after December 15, 2003. The Company believes the adoption of SFAS 150 will not have a material effect on operating results or financial condition.

Certain reclassifications have been made to the condensed consolidated financial statements for the prior periods presented to conform with the June 30, 2003 presentation. For the three and six months ending June 30, 2003 and 2002, insurance and claims expense has been classified as a component of other direct expense. Other indirect expense has been classified as a component of general and administrative expenses. The changes were made to be more reflective of the Company's current business operations. The changes result in a different determination of gross margin than previously shown.

(2) Acquisitions

On July 29, 2002, RS Acquisition Holding, LLC, a wholly owned subsidiary of SIRVA, 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 $14,242. 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 23, 2003 for $14,242. Since the transaction was between entities under common control, the transaction was 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.

On June 6, 2003, the Company purchased Scanvan, a Scandinavian-based moving services company, for approximately $24,700, net of acquired cash. The cost of Scanvan in excess of the net assets acquired has been preliminarily allocated to goodwill and is subject to adjustment when additional information concerning asset and liability valuations is finalized.

(3) 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 that the Company has qualified for under the laws of certain jurisdictions.

(4) Cash and Cash Equivalents

Cash and cash equivalents included $29,183 and $22,069 at June 30, 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.

(5) Long-term Debt and Capital Lease Obligations

Long-term debt consisted of the following:

	June 30, 2003		December 31, 2002
Revolving credit facility	$	84,000	$	27,000
Note payable—Tranche A		110,025		120,000
Note payable—Tranche B		208,805		209,887
Senior Subordinated Notes		150,000		150,000
Capital lease obligations		15,469		18,971
Other		17,012		16,657

Total debt and capital lease obligations		585,311		542,515
Less current maturities		26,049		27,261

Total long-term debt and capital lease obligations	$	559,262	$	515,254

(6) 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 has produced and is producing records in response to two grand jury subpoenas issued in connection with an investigation being conducted by attorneys in the Department of Justice Antitrust Division through a grand jury in the Eastern District of Virginia. The Company is cooperating with the investigation and understands that numerous other companies have received similar subpoenas.

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 June 30, 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:

	June 30, 2003		December 31, 2002
Outsourcing agreements	$	172,048	$	176,382
Software licenses		3,169		4,297
Transportation equipment		—		1,608
Other		—		358

	$	175,217	$	182,645

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 June 30, 2003, the remaining purchase commitment was $167,668. 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 June 30, 2003, Fund VI held approximately 24% of the capital stock of 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 SIRVA's controlling shareholder, Clayton, Dubilier & Rice Fund V Limited Partnership, a Cayman Islands exempted limited partnership.

(7) Operating Segments

Due to the acquisitions in 2002 and a desire to organize the business along new service lines, the Company has realigned certain businesses within its segment structure. Certain reclassifications have been made for the prior periods presented to conform with the June 30, 2003 presentation. As of June 30, 2003 the Company has four reportable segments—1) Relocation Solutions-North America, 2) Relocation Solutions-Europe and Asia Pacific, together forming Global Relocation Solutions, 3) Network Services, and 4) Transportation Solutions. Intersegment transactions, principally relating to international operations, are recorded at market rates as determined by management. The consolidation process results in the appropriate elimination of intercompany transactions, with revenues reflected in the segment responsible for billing the end customer.

Global Relocation Solutions

The Company's Global Relocation Solutions business provides a combination of relocation services, global mobility services and moving and storage services that we tailor by geographic region to the specific needs of our customers. Global Relocation Solutions is comprised of the Relocation Solutions-North America and Relocation Solution-Europe and Asia Pacific reportable segments. This business provides the following services:

•

Relocation Services: Relocation services include realtor services for home sales and purchases, tax and expense management and closing and destination services.

•

Global Mobility Services: These services include assignment management programs, destination services to identify housing, schools, and other critical client needs, as well as expatriate tax and expense management services.

•

Moving and Storage Services:

•: Household Goods: The Company provides worldwide household goods moving and storage services, including sales, packing, loading, transportation, delivery and warehousing. In the U.S. and Canada, moving and storage services are provided through a network of exclusive agents. Outside of the U.S. and Canada, the Company provides these services through a network of company owned branches throughout the U.K., Europe and the Asia Pacific region.
•: Commercial Customers: The Company provides a broad portfolio of services to commercial customers, including office relocations and records management.
•: Transportation of High-Value Products: The Company provides customized solutions to facilitate the movement of high-value products that require specialized transport and handling such as electronics, telecommunications, medical equipment and fine art.

Network Services

The Company is an industry leading provider of a unique combination of value-added services to moving and storage agents, owner-operator drivers and small corporate fleets, including targeted insurance coverages, a broad array of vehicle and supply purchase programs as well as vehicle repair and over the road services.

Transportation Solutions

The Company provides a unique combination of third party logistics transportation solutions designed to benefit a select market niche of customers that require transportation management, inventory visibility at the serialized level, and delivery solutions that are coordinated at the item level to deliver commercial goods that require specialized handling in a timely manner, and with the proper equipment to fit the situation.

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

		Three Months Ended				Six Months Ended
		June 30, 2003		June 30, 2002		June 30, 2003		June 30, 2002
Operating Revenues
Relocation Solutions—North America		$	408,492	$	387,619	$	722,173	$	676,226
Relocation Solutions—Europe and Asia Pacific			105,174		89,440		206,463		181,154

	Global Relocation Solutions		513,666		477,059		928,636		857,380
Network Services			39,060		31,682		74,566		54,066
Transportation Solutions			24,773		28,403		46,660		55,352

Consolidated operating revenues		$	577,499	$	537,144	$	1,049,862	$	966,798

Income from operations
Relocation Solutions—North America		$	12,660	$	14,920	$	13,892	$	10,232
Relocation Solutions—Europe and Asia Pacific			3,016		2,424		6,627		4,964

	Global Relocation Solutions		15,676		17,344		20,519		15,196
Network Services			9,673		5,432		17,732		11,454
Transportation Solutions			843		1,383		363		3,732

Consolidated income from operations		$	26,192	$	24,159	$	38,614	$	30,382

		As of
		June 30, 2003		December 31, 2002
Total assets
Relocation Solutions—North America		$	774,331	$	717,422
Relocation Solutions—Europe and Asia Pacific			425,316		374,794

	Global Relocation Solutions		1,199,647		1,092,216
Network Services			236,649		223,465
Transportation Solutions			20,771		20,282

Consolidated total assets		$	1,457,067	$	1,335,963

(8) Restructuring

In June 2001, the transportation solutions 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 and six months ended June 30, 2002, $0.1 million and $0.8 million, respectively, of restructuring credit occurred when the Company was able to sublease certain parts center facilities earlier than originally estimated.

(9) Related Party

The receivable from SIRVA at June 30, 2003 and December 31, 2002 of $31,724 and $28,879, respectively, consists of amounts that the Company has paid on behalf of SIRVA for treasury stock and various transaction fees.

The payable to SIRVA at June 30, 2003 and December 31, 2002 of $20,978 and $32,133, respectively, consists of amounts that the Company has received from the sale of SIRVA redeemable common stock and common stock.

(10) 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 June 30, 2003 and December 31, 2002 is summarized as follows:

		June 30, 2003
		(1) Parent		(2) Total Guarantors		Non- guarantors		Eliminations			NAVL Consolidated
Current assets:
	Accounts and notes receivable, net	$	105,038	$	200,206	$	89,925	$	(13,224	)	$	381,945
	Other current assets		39,690		54,869		85,012		(71	)		179,500

Total current assets			144,728		255,075		174,937		(13,295	)		561,445

Property and equipment, net			48,363		19,353		99,170		—			166,886
Goodwill and intangible assets, net			573,279		3,236		—		—			576,515
Other assets			199,596		210,384		467,831		(725,590	)		152,221

Total assets		$	965,966	$	488,048	$	741,938	$	(738,885	)	$	1,457,067

Current liabilities		$	103,012	$	252,057	$	198,583	$	(11,133	)	$	542,519
Long-term debt and capital lease obligations			551,092		216		7,954		—			559,262
Other liabilities			82,138		52,817		—		(9,393	)		125,562

Total liabilities			736,242		305,090		206,537		(20,526	)		1,227,343
Stockholder's equity			229,724		182,958		535,401		(718,359	)		229,724

Total liabilities and stockholder's equity		$	965,966	$	488,048	$	741,938	$	(738,885	)	$	1,457,067

		December 31, 2002
		(1) Parent		(2) Total Guarantors		Non- guarantors		Eliminations			NAVL Consolidated
Current assets:
	Accounts and notes receivable, net	$	100,220	$	140,764	$	80,518	$	(13,189	)	$	308,313
	Other current assets		35,993		51,739		70,160		(71	)		157,821

Total current assets			136,213		192,503		150,678		(13,260	)		466,134

Property and equipment, net			54,187		22,163		94,480		—			170,830
Goodwill and intangible assets, net			537,836		3,235		15,472		—			556,543
Other assets			289,548		195,438		265,417		(607,947	)		142,456

Total assets		$	1,017,784	$	413,339	$	526,047	$	(621,207	)	$	1,335,963

Current liabilities		$	92,696	$	210,489	$	174,522	$	(11,168	)	$	466,539
Long-term debt and capital lease obligations			505,846		221		9,187		—			515,254
Other liabilities			198,294		25,307		17,006		(107,385	)		133,222

Total liabilities			796,836		236,017		200,715		(118,553	)		1,115,015
Stockholder's equity			220,948		177,322		325,332		(502,654	)		220,948

Total liabilities and stockholder's equity		$	1,017,784	$	413,339	$	526,047	$	(621,207	)	$	1,335,963

NORTH AMERICAN VAN LINES, INC.

Notes to Condensed Consolidated Financial Statements (Continued)

June 30, 2003

(Dollars in thousands)
(Unaudited)

(10) Supplemental Information (continued)

Consolidated condensed statements of operations data for the three and six months ended June 30, 2003 and 2002 are summarized as follows:

	Three months ended June 30, 2003
	(1) Parent			(2) Total Guarantors		Non- guarantors			Eliminations			NAVL Consolidated
Operating revenues	$	190,963		$	231,428	$	166,804		$	(11,696	)	$	577,499
Total operating expenses		189,440			218,526		155,037			(11,696	)		551,307

Income from operations		1,523			12,902		11,767			—			26,192
Non-operating income (expense)		823			—		(943	)		—			(120	)
Interest expense (income)		11,538			873		(887	)		1,091			12,615

Income (loss) before income taxes		(9,192	)		12,029		11,711			(1,091	)		13,457
Provision for income taxes		519			322		3,649			—			4,490

Net income (loss)	$	(9,711	)	$	11,707	$	8,062		$	(1,091	)	$	8,967

	Three months ended June 30, 2002
	(1) Parent			(2) Total Guarantors		Non- guarantors			Eliminations			NAVL Consolidated
Operating revenues	$	193,179		$	216,881	$	134,458		$	(7,374	)	$	537,144
Total operating expenses		185,644			207,958		126,757			(7,374	)		512,985

Income from operations		7,535			8,923		7,701			—			24,159
Non-operating income (expense)		626			—		(1,300	)		—			(674	)
Interest expense (income)		11,615			975		(2,517	)		2,195			12,268

Income (loss) before income taxes		(3,454	)		7,948		8,918			(2,195	)		11,217
Provision for income taxes		852			1,104		2,252			—			4,208

Net income (loss)	$	(4,306	)	$	6,844	$	6,666		$	(2,195	)	$	7,009

NORTH AMERICAN VAN LINES, INC.

Notes to Condensed Consolidated Financial Statements (Continued)

June 30, 2003

(Dollars in thousands)
(Unaudited)

(10) Supplemental Information (continued)

	Six months ended June 30, 2003
	(1) Parent			(2) Total Guarantors		Non- guarantors			Eliminations			NAVL Consolidated
Operating revenues	$	347,246		$	407,467	$	314,202		$	(19,053	)	$	1,049,862
Total operating expenses		346,377			389,534		294,390			(19,053	)		1,011,248

Income from operations		869			17,933		19,812			—			38,614
Non-operating income (expense)		1,562			—		(1,704	)		—			(142	)
Interest expense (income)		22,981			1,746		(692	)		1,091			25,126

Income (loss) before income taxes		(20,550	)		16,187		18,800			(1,091	)		13,346
Provision (benefit) for income taxes		(3,382	)		516		7,115			—			4,249

Net income (loss)	$	(17,168	)	$	15,671	$	11,685		$	(1,091	)	$	9,097

	Six months ended June 30, 2002
	(1) Parent			(2) Total Guarantors			Non- guarantors			Eliminations			NAVL Consolidated
Operating revenues	$	344,815		$	373,540		$	274,603		$	(26,160	)	$	966,798
Total operating expenses		336,200			365,557			260,819			(26,160	)		936,416

Income from operations		8,615			7,983			13,784			—			30,382
Non-operating income (expense)		1,728			—			(2,036	)		—			(308	)
Interest expense (income)		23,310			(8,554	)		(2,607	)		12,695			24,844

Income (loss) before income taxes		(12,967	)		16,537			14,355			(12,695	)		5,230
Provision (benefit) for income taxes		(4,329	)		1,271			4,586			—			1,528

Net income (loss)	$	(8,638	)	$	15,266		$	9,769		$	(12,695	)	$	3,702

NORTH AMERICAN VAN LINES, INC.

Notes to Condensed Consolidated Financial Statements (Continued)

June 30, 2003

(Dollars in thousands)
(Unaudited)

(10) Supplemental Information (continued)

Consolidated condensed statements of cash flows data for the six months ended June 30, 2003 and 2002 are summarized as follows:

		Six months ended June 30, 2003
		(1) Parent			(2) Total Guarantors			Non- guarantors			NAVL Consolidated
Net cash provided by (used for) operating activities		$	(33,616	)	$	9,744		$	11,247		$	(12,625	)

Cash flows from investing activities:
	Additions of property and equipment		(786	)		(3,426	)		(5,482	)		(9,694	)
	Proceeds from sale of property and equipment		394			76			440			910
	Purchases of investments		—			—			(44,876	)		(44,876	)
	Proceeds from maturity or sale of investments		—			—			39,251			39,251
	Acquisitions, net of cash acquired		(7,263	)		1,362			(24,835	)		(30,736	)
	Other investing activities		(637	)		(1,231	)		—			(1,868	)

Net cash used for investing activities			(8,292	)		(3,219	)		(35,502	)		(47,013	)

Cash flows from financing activities:
	Borrowings on revolving credit facilities and relocation financing facilities, net		57,000			—			21,932			78,932
	Change in balance of outstanding checks		4,348			485			(495	)		4,338
	Borrowings on long-term debt		163			—			—			163
	Repayments on long-term debt and capital lease obligations		(13,678	)		—			(1,377	)		(15,055	)

Net cash provided by financing activities			47,833			485			20,060			68,378

Effect of translation adjustment on cash						—			1,995			1,995

Net increase (decrease) in cash and cash equivalents			5,925			7,010			(2,200	)		10,735
Cash and cash equivalents at beginning of period			4,280			10,849			27,791			42,920

Cash and cash equivalents at end of period		$	10,205		$	17,859		$	25,591		$	53,655

NORTH AMERICAN VAN LINES, INC.

Notes to Condensed Consolidated Financial Statements

June 30, 2003

(Dollars in thousands)
(Unaudited)

(10) Supplemental Information (continued)

		Six months ended June 30, 2002
		(1) Parent			(2) Total Guarantors			Non- guarantors			NAVL Consolidated
Net cash provided by operating activities		$	14,044		$	16,073		$	2,216		$	32,333

Cash flows from investing activities:
	Additions of property and equipment		(2,360	)		(5,516	)		(9,538	)		(17,414	)
	Proceeds from sale of property and equipment		763			1,161			649			2,573
	Purchases of investments		—			—			(28,054	)		(28,054	)
	Proceeds from maturity or sale of investments		—			—			35,237			35,237
	Acquisitions, net of cash acquired		(82,867	)		—			—			(82,867	)
	Other investing activities		(854	)								(854	)

Net cash used for investing activities			(85,318	)		(4,355	)		(1,706	)		(91,379	)

Cash flows from financing activities:
	Repayments on revolving credit facility, net		(5,000	)		—			—			(5,000	)
	Change in balance of outstanding checks		(1,399	)		(3,142	)		(2,537	)		(7,078	)
	Borrowings on long-term debt		50,403			—			—			50,403
	Repayments on long-term debt and capital lease obligations		(23,413	)		—			(1,045	)		(24,458	)
	Capital contribution from SIRVA		56,500			—			—			56,500

Net cash provided by (used for) financing activities			77,091			(3,142	)		(3,582	)		70,367

Effect of translation adjustment on cash			—			—			436			436

Net increase (decrease) in cash and cash equivalents			5,817			8,576			(2,636	)		11,757
Cash and cash equivalents at beginning of period			5,687			4,054			22,378			32,119

Cash and cash equivalents at end of period		$	11,504		$	12,630		$	19,742		$	43,876

(10) Supplemental Information (continued)

(1): Parent includes the accounts of North American Van Lines, Inc., a Delaware corporation and the issuer of the debt.
(2): Total Guarantors include the accounts of the following direct or indirect subsidiaries of North American Van Lines, Inc. 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
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
SIRVA Freight Forwarding, Inc.		Indiana
SIRVA Global Relocation, Inc.		Delaware
SIRVA Imaging Solutions, Inc. (formerly known as Relocation Management Systems, Inc.)		Delaware
SIRVA Relocation LLC		Delaware
SIRVA Title Agency, Inc.		Ohio
StorEverything, Inc.		Delaware
Vanguard Insurance Agency, Inc.		Illinois

Each Guarantor is a wholly owned subsidiary of North American Van Lines, Inc. 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 North American Van Lines, Inc.'s senior credit facility and senior subordinated notes.

ITEM 2.

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

Overview

Due to the acquisitions in 2002 and a desire to organize the business along new service lines, the Company has realigned certain businesses within its segment structure.

Our operating revenues are derived from the following four business segments: (1) our relocation solutions—North America segment, (2) our relocation solutions—Europe and Asia Pacific segment, combining to form global relocation solutions, (3) our network services segment, and (4) our transportation solutions segment.

We are an industry leading provider of a unique combination of global relocation solutions to corporate clients, the government and military and consumer markets. We deliver these relocation services through a number of well recognized brands, using on extensive global network of corporate locations, agent facilities, licensed affiliates, owner-operators, and over 7,000 employees and service coordinators located in 40 countries across four continents. We are also a market leading provider of network solutions, such as insurance and fleet programs, to the extensive network of agents and owner operators who are affiliated with us, as well as to independent third parties in need of the same services. We are also a leading provider of unique transportation management solutions, utilizing our extensive logistics software capabilities, to the third party logistics market which requires sensitive handling, serialized inventory and in-transit merge services.

Global Relocation Solutions—We are an industry leading provider of a unique combination of global relocation solutions to corporate clients, the government and military and consumer markets.

Through SIRVA Relocation, we offer our customers one point connectivity to service their relocation needs. SIRVA Relocation has five offices in the U.S., as well as service centers in the U.K., Australia and Hong Kong. Each regional center offers solutions tailored to its local markets, including realtor services for home sale and purchase, tax and expense management, closing and destination services, as well as household goods moving services, 24x7 web communication interface, and comprehensive, single source reporting packages for the client as well as the person relocating.

SIRVA Relocation also offers global mobility services, utilizing our company's relocation centers in each regional theater along with qualified local representatives to provide global service capability. We offer assignment management programs, moving and storage services, destination services to identify housing, schools, and other critical client needs, as well as expatriot tax and expense management services.

Global relocation solutions also provides worldwide household goods moving and storage services, utilizing distinctive and well known local brand names that include Allied Van Lines, northAmerican Van Lines and Global Van Lines in the U.S. and Canada, Pickfords, Hoult, Maison Huet, Arthur Pierre, Adam, Kungsholms, and Varekamp in the U.K. & Europe as well as Allied Pickford, Allied International and Trans-International in the Asia/Pacific region.

In the U.S. and Canada, we provide domestic moving and storage services through a network of exclusive agents who provide elements of the sales, packing, loading, transportation, delivery and warehousing services. Utilizing our fleet of specialized equipment and highly trained drivers and owner-operators, we also operate a specialized transportation services division that provides configurable transportation capabilities to customers, such as those in the high-tech, medical equipment and telecommunications markets, that need specialized handling of sensitive, high-value commodities.

This same agent based network, along with our corporate sales and marketing group, also markets to multi-national companies, most often based in the U.S., a range of international moving and storage services as well as coordination for residential shipments destined to or returning from foreign countries.

We utilize our branded network, or a group of qualified and authorized affiliate representatives around the world to complete the service delivery process.

In the U.K. and Europe as well as the Asia/Pacific region, we primarily provide moving and storage services through a network of company owned branches operating under one of the recognized local brand names. These owned and operated facilities provide complete domestic and international residential moving services, including sales, packing, loading, transportation, delivery and warehousing. The operations in these regions also provide various types of office relocation services as well as records management storage and services in their local markets. We also operate a specialized transportations services network in the U.K. and Europe region.

Network Services—We are an industry leading provider of a unique combination of network solutions to moving and storage agents, owner-operator drivers and small corporate fleets.

Through the companies comprising our SIRVA Insurance unit, we offer the moving and storage business and operators of small trucking fleets, one point connectivity to service their varying insurance needs. We offer a range of products which includes auto liability, occupational accident, physical damage, cargo and warehouse insurance coverages. We reinsure certain coverages with other insurance carriers to optimize our spread of product risk.

Through Transguard General Agency, Inc., we offer the members of the National Association of Independent Truckers ("NAIT"), the largest association of independent truck drivers in the country, a similar package of insurance products and other services that assist the drivers in conducting their daily business.

Through SIRVA Fleet Services, we offer a broad array of vehicle and supply purchase programs as well as vehicle repair and over-the-road services. We combine the purchasing power of our affiliated agent and driver network and offer our clients coordinated programs at a cost advantage.

Transportation Solutions—We are an industry leading provider of a unique combination of third party logistics transportation management solutions designed to benefit a select market niche of customers that requires transportation management, inventory visibility at the serialized level and delivery solutions that are coordinated at the item level to deliver commercial goods that require specialized handling in a timely manner, and with the proper equipment to fit the situation. Our SIRVA Logistics unit utilizes specialized software solutions to provide the range of services that our clients require.

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 relocation services 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, SIRVA acquired CMS Holding, the mortgage lending arm of the CRS group, adding mortgage services to our relocation offering. In July of 2002, we acquired Rowan Simmons, the largest local provider of relocation services in the U.K. 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.

We have continued to expand our household goods moving and storage services operations through acquisitions around the world. 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. In June 2003, we acquired Scanvan, the leading moving services company in the Scandinavian market.

Our network services 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 NAIT, which focuses 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.

For the three and six months ending June 30, 2003 and 2002 insurance and claims expense has been reclassified as a component of other direct expense. Other indirect expense has been reclassified as a component of general and administrative expenses. The changes were made to be more reflective of the Company's current business operations. The changes result in a different determination of gross margin than previously shown.

Results of Operations

Operating Revenues: Our operating revenues are derived from our global relocation solutions, network services and transportation solutions operations.

Operating revenues of our global relocation solutions segments are comprised of amounts billed to our customers, both corporate and consumers, upon the completion of transportation or relocation services. These include the provision of relocation and global mobility services such as home sale and purchase, realty and mortgage assistance, as well as comprehensive moving and storage services both at origin and destination. In addition we earn revenues from the provision of specialized transportation services for high value products that require unique handling capabilities for our corporate clients.

Operating revenues from our network services segment include premiums received for the provision of insurance coverage such as auto liability, occupational accident, physical damage, and cargo and warehouse insurance coverage. Our revenues also include fees charged to the independent drivers in our association for access to a suite of services that includes fuel, cell phone, tire services, legal assistance and retirement programs, and the provision of maintenance and repair services.

In our transportation solutions segment our revenue represents charges for the provision of inventory management expertise to coordinate a variety of services such as purchased transportation, order fulfillment, project-specific delivery management, and the tracing of products through the customer's supply chains.

Purchased Transportation Expenses: Purchased transportation expenses ("PTE") represent amounts paid by us to independent third parties, such as agents and owner operators, for providing capabilities for the fulfillment of our customer moving and transportation needs.

In our relocation services—North America operations, PTE consists of amounts paid in respect of owner/operator transportation services; packing and loading service fees as well as associated assessorial

services; agent commissions associated with in-home estimates, customer service, storage services, and other third party transportation services.

In our Relocation Services—Europe & Asia Pacific, PTE consists of amounts paid to third parties for supplemental transportation, packing and loading services associated with providing comprehensive moving and transportation services.

In our transportation solutions segment, PTE consists of amounts paid in respect of owner/operator transportation services as well as providing specialized handling and delivery capabilities.

Given the structure of our model in North America, which utilizes independent agents and owner/operators to provide transportation capabilities, including trucks and trailers, as well as warehouse facilities for storage and delivery programs, a higher proportion of overall costs are represented by PTE when compared to our operations in Europe and Asia Pacific.

Other Direct Expenses: Other direct expenses comprise facility and equipment costs, employee labor costs, commissions paid to realtors, home closing costs and other relocation service fees in addition to claims expenses associated with cargo loss and damage as well as claims associated with our other various insurance offerings.

General and Administrative Expenses: General and administrative expenses comprise employee compensation and benefit costs, which account for over 50% of general and administrative expenses, as well as communication costs, rent, supplies and other purchased services. In addition, general and administrative expenses include amortization expense in respect of certain intangible assets.

Three Months Ended June 30, 2003 Compared to Three Months Ended June 30, 2002.

The following table sets forth certain figures regarding our results of operations for the three months ended June 30, 2003, compared to the three months ended June 30, 2002.

		Three Months Ended June 30, 2003		Three Months Ended June 30, 2002			% Increase (Decrease) from Prior Period(a)
		(Dollars in millions)
Operating revenues:
	Relocation Solutions—North America	$	408.5	$	387.6		5.4	%
	Relocation Solutions—Europe and Asia Pacific		105.1		89.4		17.6	%

	Global Relocation Solutions		513.6		477.0		7.7	%
	Network Services		39.1		31.7		23.3	%
	Transportation Solutions		24.8		28.4		(12.7	)%

Operating revenues		$	577.5	$	537.1		7.5	%

Gross margin		$	113.9		101.8		11.9	%
	General and administrative expenses		87.7		77.7		12.8	%
	Restructuring credit		—		(0.1	)	u

Income from operations		$	26.2	$	24.2		8.3	%

Income from operations:
	Relocation Solutions—North America	$	12.7	$	14.9		(14.8	)%
	Relocation Solutions—Europe and Asia Pacific		3.0		2.4		25.0	%

	Global Relocation Solutions		15.7		17.3		(9.2	)%
	Network Services		9.7		5.5		76.4	%
	Transportation Solutions		0.8		1.4		(42.9)	%

Income from operations		$	26.2	$	24.2		8.3	%

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

Operating revenues for the three months ended June 30, 2003 were $577.5 million, an increase of $40.4 million compared to the three months ended June 30, 2002, primarily due to revenue of $16.2 million generated by our acquisitions net of divestiture, $9.3 million of favorable currency impact and $14.9 million of net growth in our other businesses.

Revenue in global relocation solutions for the three months ended June 30, 2003 increased $36.6 million as compared to the three months ended June 30, 2002, due to acquisitions net of divestitures of $16.2 million, currency impact of $9.3 million and an increase in our other businesses of $11.1 million.

Within global relocation solutions, revenue from acquisitions net of divestitures was $16.2 million, consisting of $12.2 million from the CRS acquisition, $8.6 million from the Maison Huet, Scanvan and Rowan Simmons acquisitions, partially reduced by $4.6 million resulting from the sale of our U.K. industrial moving business in December 2002.

Revenue in global relocation solutions also increased $9.3 million due to favorable currency impacts. For the three months ended June 30, 2003, the British pound sterling, the Australian dollar and the Euro were stronger as compared to the U.S. dollar for the three months ended June 30, 2002 by approximately 10%, 14% and 19%, respectively.

In addition, revenue increased $11.1 million primarily due to gains in the northAmerican and SIRVA Relocation brands and our Canadian business of $4.8 million, $10.4 million and $2.4 million, respectively, partially offset by a decline in specialized transportation of $2.8 million and lower revenue in the Allied brand of $3.7 million. Revenue per shipment was higher by 9% in northAmerican due to increased weight per shipment. The improvement in SIRVA Relocation reflects the success of integrating the CRS acquisition into our service offerings. Revenue per shipment in specialized transportation was lower by 11.3% due to a customer mix shift. Shipments were lower by 5% in Allied due to a decrease in national account business.

Revenue in network services for the three months ended June 30, 2003 was $7.4 million higher as compared to the three months ended June 30, 2002. The increase was primarily due to $2.4 million incremental growth from the success of integrating the NAIT acquisition and additional market penetration for the insurance services unit's range of insurance products.

Revenue in transportation solutions decreased $3.6 million for the three months ended June 30, 2003 as compared to the three months ended June 30, 2002, due primarily to a decrease in business, as compared to 2002 levels, with its largest customer.

Gross Margin. Gross margin for the three months ended June 30, 2003 was $113.9 million, an increase of $12.1 million compared to the three months ended June 30, 2002. The increase was due primarily to $6.3 million of higher margins from our acquisitions, $2.8 million of currency impact and $5.3 million of net growth in our other businesses. The gross margin (as a percentage of sales) was 19.7% for the three months ended June 30, 2003 and was 19.0% for the three months ended June 30, 2002. The higher gross margin as a percent of sales is in part due to a greater mix of higher margin relocation services in the six months ended June 30, 2003 as compared to the six months ended June 30, 2002.

General and Administrative Expenses. General and administrative expenses for the three months ended June 30, 2003 were $87.7 million, an increase of $10.0 million compared to the three months ended June 30, 2002. The increase was primarily due to $3.7 million of expenses associated with the incremental effect of our acquisitions made after June 30, 2002, $2.8 million due to currency impact and $1.3 million of intangibles amortization. The increase was also due to a year-over-year decrease in income from derivatives of $2.2 million. As a percentage of revenue, general and administrative expenses were 15.2% for the three months ended June 30, 2003, compared to 14.5% for the three months ended June 30, 2002.

Restructuring. In the three months ended June 30, 2002, we reversed into income $0.1 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 June 30, 2003 was $26.2 million, an increase of $2.0 million from the same period last year. The increase was primarily due to a net increase of $2.0 million from our acquisitions, net of divestiture.

Income from operations in global relocation solutions for the three months ended June 30, 2003 as compared to the three months ended June 30, 2002 decreased $1.6 million primarily due to a year-over-year decrease in income from derivatives of $2.2 million and $3.2 million decrease from specialized transportation, partially offset by $3.7 million additional income from operations from our acquisitions net of divestiture, primarily SIRVA Relocation.

Income from operations in network services for the three months ended June 30, 2003 was $4.2 million higher, primarily due to insurance services' higher margins due to increased revenue and the incremental income from operations from the NAIT acquisition.

Income from operations of $0.8 million for transportation solutions for the three months ended June 30, 2003 was $0.6 million less than the same period last year primarily due to lower margins due to reduced business, as compared to 2002 levels, with its largest customer.

Interest Expense. Interest expense for the three months ended June 30, 2003 was $12.6 million compared to $12.3 million in the three months ended June 30, 2002. This increase is due primarily to higher average borrowings related to our 2002 acquisitions, partially offset by lower interest rates.

Provision for Income Taxes. For the three months ended June 30, 2003, the provision for income taxes was $4.5 million based on pre-tax income of $13.5 million for an average tax rate of 33.3%. For the three months ended June 30, 2002, provision for income taxes was $4.2 million based on a pre-tax income of $11.2 million for an average tax rate of 37.5%. 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.

Six Months Ended June 30, 2003 Compared to Six Months Ended June 30, 2002.

The following table sets forth certain figures regarding our results of operations for the six months ended June 30, 2003, compared to the six months ended June 30, 2002.

		Six Months Ended June 30, 2003		Six Months Ended June 30, 2002			% Increase (Decrease) from Prior Period(a)
		(Dollars in millions)
Operating revenues:
	Relocation Solutions—North America	$	722.2	$	676.2		6.8	%
	Relocation Solutions—Europe and Asia Pacific		206.5		181.1		14.0	%

	Global Relocation Solutions		928.7		857.3		8.3	%
	Network Services		74.6		54.1		37.9	%
	Transportation Solutions		46.6		55.4		(15.9	)%

Operating revenues		$	1,049.9	$	966.8		8.6	%

Gross margin		$	207.8		182.0		14.2	%
	General and administrative expenses		169.2		152.4		11.0	%
	Restructuring credit		—		(0.8	)	u

Income from operations		$	38.6	$	30.4		27.0	%

Income from operations:
	Relocation Solutions—North America	$	13.9	$	10.2		36.3	%
	Relocation Solutions—Europe and Asia Pacific		6.6		5.0		32.0	%

	Global Relocation Solutions		20.5		15.2		34.9	%
	Network Services		17.7		11.5		53.9	%
	Transportation Solutions		0.4		3.7		(89.2	)%

Income from operations		$	38.6	$	30.4		27.0	%

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

Operating revenues for the six months ended June 30, 2003 were $1,049.9 million, an increase of $83.1 million compared to the six months ended June 30, 2002, primarily due to revenue of $50.7 million generated by our acquisitions net of divestiture, $24.1 million of favorable currency impact and $8.3 million of net growth in our other businesses.

Revenue in global relocation solutions for the six months ended June 30, 2003 increased $71.4 million as compared to the six months ended June 30, 2002, due to acquisitions net of divestitures of $41.4 million, currency impact of $24.1 million and an increase in our other business of $5.9 million.

Within global relocation solutions, revenue from acquisitions net of divestitures was $41.4 million, consisting of $41.0 million from the CRS acquisition, $11.1 million from the Maison Huet, Scanvan and Rowan Simmons acquisitions, partially reduced by $10.7 million resulting from the sale of our U.K. industrial moving business in December 2002.

Revenue in global relocation solutions also increased $24.1 million due to favorable currency impacts. For the six months ended June 30, 2003, the British pound sterling, the Australian dollar and the Euro were stronger as compared to the U.S. dollar for the six months ended June 30, 2002 by approximately 10%, 13% and 19%, respectively.

In addition, revenue increased $5.9 million primarily due to gains in the northAmerican and SIRVA Relocation brands and our Canadian business of $9.4 million, $9.3 million and $2.6 million, respectively,

partially offset by a decline in specialized transportation of $7.4 million and lower revenue in the Allied brand of $6.5 million. Revenue per shipment was higher by 9% in northAmerican due to increased weight per shipment. The improvement in SIRVA Relocation reflects the success of integrating the CRS acquisition into our service offerings. Revenue per shipment was lower by 11.3% in specialized transportation primarily due to customer mix. Shipments were lower 4% in Allied due to a decrease in national account business.

Revenue in network services for the six months ended June 30, 2003 was $20.5 million higher as compared to the six months ended June 30, 2002. The increase was primarily due to $13.5 million from the April 2002 acquisition of the business of NAIT and additional market penetration for the insurance services unit's range of insurance products.

Revenue in transportation solutions decreased $8.8 million for the six months ended June 30, 2003 as compared to the six months ended June 30, 2002, due primarily to a decrease in business from its largest customer, as compared to 2002 levels which was higher than normal.

Gross Margin. Gross margin for the six months ended June 30, 2003 was $207.8 million, an increase of $25.8 million compared to the six months ended June 30, 2002. The increase was due primarily to $25.7 million of higher margins from our acquisitions and $7.9 million of currency impact, partially offset by a decrease of $6.0 million in specialized transportation. The gross margin (as a percentage of sales) was 19.8% for the six months ended June 30, 2003 and was 18.8% for the six months ended June 30, 2002.

General and Administrative Expenses. General and administrative expenses for the six months ended June 30, 2003 were $169.2 million, an increase of $16.8 million compared to the six months ended June 30, 2002. The increase was primarily due to $11.0 million of expenses associated with our acquisitions and $7.4 million due to currency impact. The increase was also due to $2.7 million of intangibles amortization and a year-over-year $2.0 million decrease in income from derivatives. These items were partially offset by $2.1 million of lower general and administrative expenses as a result 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, general and administrative expenses were 16.1% for the six months ended June 30, 2003, compared to 15.8% for the six months ended June 30, 2002.

Restructuring. In the six months ended June 30, 2002, we reversed into income $0.8 million of restructuring reserves pertaining to the parts centers restructuring, which was established in 2001, as we were able to sublease certain parts centers facilities earlier than originally estimated.

Income from Operations. Income from operations for the six months ended June 30, 2003 was $38.6 million, an increase of $8.2 million from the same period last year. The increase was primarily due to a net increase of $7.4 million from our acquisitions net of divestiture.

Income from operations in global relocation solutions for the six months ended June 30, 2003 increased $5.3 million as compared to the six months ended June 30, 2002, primarily due to $4.1 million from our acquisitions, $1.5 million incremental income from operations from the SIRVA Relocation acquisition, $4.4 million from our other operations and $0.4 million currency impact, partially offset by $2.6 million reduction in specialized transportation due to reduced margins, $2.0 million of intangibles amortization and $1.7 million of year-over-year decrease in income from derivatives.

Income from operations in network services for the six months ended June 30, 2003 was $17.7 million, $6.2 million higher than for the same period last year. The increase was primarily due to accretive income from operations from the NAIT acquisition of $3.3 million and incremental income from operations of $2.1 million, reflecting the sucess of integrating the NAIT operations. This was partially offset by a year-over-year derivative loss of $0.9 million related to marking the insurance unit's investment portfolio to market.

Income from operations in transportation solutions decreased $3.3 million for the six months ended June 30, 2003 as compared to the six months ended June 30, 2002, primarily due to reduced margins associated with the revenue from the reduced business of transportation solution's largest customer partially offset by the reversal into income of $0.8 million of restructuring reserves pertaining to the parts center restructuring, which was established in 2001, as we were able to sublease certain parts centers earlier than originally estimated.

Interest Expense. Interest expense for the six months ended June 30, 2003 was $25.1 million compared to $24.8 million in the six months ended June 30, 2002. The increase is due primarily to higher average borrowings related to our 2002 acquisitions, partially offset by lower interest rates.

Provision for Income Taxes. For the six months ended June 30, 2003, income tax expense was $4.2 million based on pre-tax income of $13.3 million for a tax rate of 31.6%. For the six months ended June 30, 2002, income tax expense was $1.5 million based on pre-tax income of $5.2 million for a tax rate of 28.8%. Our estimated provision of 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.

Consolidated Cash Flow Information

The following table presents certain cash flow information for the periods indicated. You should read this information about cash flow in conjunction with our consolidated financial statements and the accompanying notes to those financial statements appearing elsewhere in this filing.

	Six Months Ended June 30,
	2003			2002
Cash and cash equivalents at January 1,	$	42.9		$	32.1
Cash flow provided by (used for) operating activities		(12.6	)		32.3
Cash flow used for investing activities		(47.0	)		(91.4	)
Cash flow provided by financing activities		68.4			70.4
Effect of translation		2.0			0.5

Cash and cash equivalents at period end	$	53.7		$	43.9

Cash flows from operating activities.

For the six months ended June 30, 2003 and 2002, net cash used by operating activities was $12.6 million and net cash provided by operating activities was $32.3 million, respectively.

The following table presents certain additional information regarding cash flow provided by (used for) operating activities, which provides a more complete understanding of the key drivers of our cash flow performance.

	Six Months Ended June 30,
	2003			2002
Net income	$	9.1		$	3.7
Adjustments to reconcile net income to cash flow provided by (used for) operating activities		33.8			22.2
Other changes in working capital(1)		(38.5	)		(1.6	)

		4.4			24.3
Changes in relocation properties held for sale		(17.0	)		8.0

Cash flow provided by (used for) operating activities	$	(12.6	)	$	32.3

(1): Represents "changes in operating assets and liabilities" as disclosed in our consolidated and condensed consolidated statements of cash flow, excluding changes in relocation properties held for resale, net

In May 2002, we acquired SIRVA Relocation, which added a new dimension to our business. As part of our relocation product offering, we provide equity advances to relocating client employees, and occasionally take possession of the home (and the related mortgage) under buy-out programs arranged with our corporate client. These advances and properties are classified as current assets in our consolidated balance sheets. These assets, net of associated mortgages or client funding, are financed in large part by our relocation financing facilities. In accordance with generally accepted accounting principles, movements in our relocation assets and corresponding payables are classified within cash flows from operations, while the corresponding funding movements are classified within cash flows from financing operations. For internal management purposes, we exclude the impact of movements in these relocation assets from both operating and financing cash flow, as we believe that they are of a cash-neutral nature.

For the six months ended June 30, 2003 and 2002, net cash used for operating activities was $12.6 million and net cash provided by operating activities was $32.3 million, respectively. Excluding the impact of our relocation assets, cash flow provided by operating activities for the six months ended June 30, 2003 was $4.4 million as compared to $24.3 million in the comparable period of 2002. We measure a large component of working capital by tracking a calculation of average daily sales outstanding in receivables ("DSO"). DSO stood at 48 days at June 30, 2003, in line with the position at December 31, 2002. DSO stood at 50 days at June 30, 2002 as compared to 52 days at December 31, 2001. This movement, and lower revenues, resulted in a positive working capital cash flow effect in 2002 while increased revenues with consistent DSO in 2003 has resulted in a use of cash to support growth in the business.

Since our acquisition of SIRVA Relocation in May 2002, we have experienced significant growth in client relocations. This significant growth has resulted in an increase in equity advances and homes held in inventory. Consequently current assets relating to advances and relocation properties held for resale increased by $17.0 million in the first half of 2003 compared to a decrease of $8.0 million in the first half of 2002. The 2003 increase has resulted in decreased reported cash flows from operating activities, but has not materially impacted the availability under our other credit facilities.

We believe that cash generated from 2003 operations, 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 used for investing activities.

For the six months ended June 30, 2003 and 2002, net cash used for investing activities was $47.0 million and $91.4 million, respectively. Total cash used for acquisitions was $30.7 million and $82.9 million in the six months ended June 30, 2003 and 2002 respectively. Cash flows for acquisitions in these two interim periods represent our acquisition of Scanvan in 2003 and NAIT, SIRVA Relocation and Maison Huet in 2002. Our capital expenditures, which we use for computer equipment, software development and transportation and warehouse equipment, totaled $9.7 million and $17.4 million for the six months ended June 30, 2003 and 2002, respectively. Capital expenditures for 2003 are expected to range between $25.0 million and $35.0 million, and we expect to fund these capital expenditures from our cash flows from operations. 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 activities.

The following table presents certain additional information regarding cash flow provided by (used in) financing activities, which provides a more complete understanding of the key drivers of our cash flow performance.

	Six Months Ended June 30,
	2003			2002
Changes in revolving credit facility	$	63.5		$	(5.0	)
Changes in long-term debt and capital lease obligations		(14.9	)		26.0
Capital contribution from SIRVA		—			56.5
Other		4.4			(7.1	)

		53.0			70.4
Changes in relocation financing facilities		15.4			—

Cash flow provided by financing activities	$	68.4		$	70.4

Cash flows from financing activities consist primarily of bank borrowings and repayments and proceeds from the issuance of common stock by our parent that were contributed to us.

In the six months ended June 30, 2002, we acquired businesses for a total consideration of $82.9 million, which were financed through the issuance of $56.5 million of SIRVA common stock and $50.0 million in new bank debt. In addition, our Tranche debt was reduced by $21.9 million as the result of a required excess cash flow payment. In the six months ended June 30, 2003, we acquired businesses for a total consideration of $30.7 million, which were financed by our revolving credit facility.

Following our acquisition of Rowan Simmons in August 2002, we began to provide relocation related financing services to our clients in the U.K. These operations resulted in cash inflows from our relocation financing facilities of $15.4 million in the six months ended June 30, 2003.

In the six months ended June 30, 2003 and 2002, cash flows provided by financing activities totaled $68.4 million and $70.4 million, respectively. In each instance, the financing activities supported our strategic acquisition program, our capital expenditures and the increase in working capital in 2003 associated with our growth.

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 $50.0 million in 2003 primarily due to lower interest rates. For the six months ended June 30, 2003, interest expense was $25.1 million;
•: principal repayments of debt and capital leases, which are scheduled to 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. For the six months ended June 30, 2003, principal repayments of debt and capital leases were $15.1 million;
•: operating lease payments, which were $58.9 million in 2002 and are scheduled to 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 are scheduled to total $17.2 million in 2003, $21.7 million in 2004, $21.0 million in 2005, $19.3 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. For the six months ended June 30, 2003, capital expenditures were $9.7 million; 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 June 30, 2003, we had $624.8 million of indebtedness for borrowed money and capital leases consisting of:

•: $150.0 million principal amount of our 13³/8% senior subordinated notes;
•: $318.8 million outstanding under our term loans (consisting of a note payable—tranche A and a note payable—tranche B amounting to $110.0 million and $208.8 million, respectively);
•: $84.0 million outstanding under our $150.0 million revolving credit facility;
•: $15.5 million of capital leases;
•: $39.5 million of short-term debt, consisting of a $31.6 million mortgage revolving credit facility and $7.9 million of foreign subsidiaries operating lines of credit; and
•: $17.0 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.

As of June 30, 2003, the Company had available $54.6 million under the revolving credit facility forming part of our senior credit facility to meet our future working capital and other business needs.

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 June 30, 2003 had accreted to $61.1 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.

Commitments and Contingencies

Purchase commitments consisted of the following at June 30, 2003:

Outsourcing agreements through June 30, 2012	$	172.0
Software licenses		3.2

	$	175.2

Litigation

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.

We have produced and are producing records in response to two grand jury subpoenas issued in connection with an investigation being conducted by attorneys in the Department of Justice Antitrust Division through a grand jury in the Eastern District of Virginia. We are cooperating with the investigation and understand that numerous other companies have received similar subpoenas.

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 relocation solutions—North America, over half of its revenue is typically generated from May through September. For movement of specialized transportation products, shipping requirements of the customer base result in higher shipment volumes at the end of each quarter. Relocation solutions—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 Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46"). FIN 46 addresses consolidation by business enterprises of variable interest entities. We believe the adoption of FIN 46 will not have a material effect on our operating results or financial condition. As of June 30, 2003, we had no variable interest entities.

In April 2003, the FASB issued Statement No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities" ("SFAS 149"). SFAS 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively, referred to as derivatives) and for hedging activities under SFAS 133. This statement is effective for contracts entered into or modified after June 30, 2003, and for hedging relationships designated after June 30, 2003. We have not yet determined the effect of the adoption of SFAS 149 on our operating results or financial condition.

is effective for the first fiscal period beginning after December 15, 2003. We believe the adoption of SFAS 150 will not have a material effect on operating results or financial condition.

Restructuring

In June 2001, our transportation solutions 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 and six months ended June 30, 2002, $0.1 million and $0.8 million, respectively, 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 network 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 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 $3.7 million. The interest rate swap instruments described below would reduce the annual impact of a 1% change by $1.9 million in 2003. An increase of 1% in interest rates payable on our variable rate indebtedness would increase our net annual interest rate expense by approximately $1.9 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 four open interest rate swap agreements as of June 30, 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, for the effective position of these derivatives, market rate changes are reported in accumulated other comprehensive income. The following is a recap of each agreement.

Notional amount	$60.0 million	$60.0 million	$40.0 million	$20.0 million
Fixed rate paid	3.10%	2.89%	2.43%	2.44%
Variable rate received	1 month LIBOR	1 month LIBOR	1 month LIBOR	1 month LIBOR
Effective date	January 2003	March 2003	April 2003	April 2003
Expiration date	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 six months ended June 30, 2003 and 2002, we recognized a currency loss of $0.5 million and an insignificant gain, 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 maturity (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 June 30, 2003 and 2002 were $52.2 million and $3.6 million, respectively. A hypothetical 10% adverse movement in foreign exchange rates applied to our foreign currency exchange rate sensitive instruments held as of June 30, 2003 would result in a hypothetical loss of approximately $3.1 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 six months ended June 30, 2003 and 2002 we recognized a loss of $1.9 million and a gain of $0.1 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 six months ended June 30, 2003 and 2002, we recognized a loss of $0.1 million and gain of $0.8 million, respectively. The insurance investment portfolio also included marketable equity securities which are classified as available-for-sale and are recorded at fair value within other assets on our balance sheet. 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.

ITEM 4. CONTROLS AND PROCEDURES

Under the supervision and with the participation of management, our chief executive officer and 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 and 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

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

(a) Due to the acquisitions in 2002 and a desire to organize the business along new lines, the Company has realigned certain businesses within its segment structure. Segment information as of and for the years ended December 31, 2002, 2001 and 2000, presented in realigned format.

December 31, 2002:	Revenues		Depreciation and Amortization(1)		Income (Loss) from Operations		Total Assets(2)
Relocation Solutions—North America	$	1,538,725	$	22,428	$	39,614	$	717,422
Relocation Solutions—Europe and Asia Pacific		407,972		17,058		24,840		374,794

Global Relocation Solutions		1,946,697		39,486		64,454		1,092,216
Network Services		125,042		3,118		26,453		223,465
Transportation Solutions		108,194		1,174		3,275		20,282

Consolidated Totals	$	2,179,933	$	43,778	$	94,182	$	1,335,963

December 31, 2001:	Revenues		Depreciation and Amortization(1)		Income (Loss) from Operations			Total Assets(2)
Relocation Solutions—North America	$	1,652,135	$	25,872	$	15,142		$	609,451
Relocation Solutions—Europe and Asia Pacific		387,081		20,104		25,976			312,768

Global Relocation Solutions		2,039,216		45,976		41,118			922,219
Network Services		84,210		659		18,478			149,609
Transportation Solutions		125,877		2,107		(6,294	)		23,986

Consolidated Totals	$	2,249,303	$	48,742	$	53,302		$	1,095,814

December 31, 2000:	Revenues		Depreciation and Amortization(1)		Income (Loss) from Operations
Relocation Solutions—North America	$	1,791,803	$	29,053	$	8,424
Relocation Solutions—Europe and Asia Pacific		372,745		21,834		23,730

Global Relocation Solutions		2,164,548		50,887		32,154
Network Services		75,812		704		17,365
Transportation Solutions		138,334		2,289		326

Consolidated Totals	$	2,378,694	$	53,880	$	49,845

(1): Depreciation and amortization are comprised of depreciation, goodwill amortization (prior to January 1, 2002), intangibles amortization in 2002 and deferred agent contract amortization.
(2): Total assets by segment are specific assets such as trade receivables and property and equipment. Assets also include allocated assets such as computer hardware and software, contracts receivable associated with equipment sales, deferred taxes, goodwill and intangible assets.

Specified items related to segment assets:

	Year Ended December 31, 2002 Capital Expenditures		Year Ended December 31, 2001 Capital Expenditures		Year Ended December 31, 2000 Capital Expenditures
Relocation Solutions—North America	$	13,296	$	27,195	$	38,134
Relocation Solutions—Europe Asia Pacific		18,335		20,840		16,943

Global Relocation Solutions		31,631		48,035		55,077
Network Services		1,648		44		7
Transportation Solutions		51		269		293

Consolidated Totals	$	33,330	$	48,348	$	55,377

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)

Exhibits

31: Certifications required by Rule 13a-14(a).
32: Certifications required by Section 1350 of Chapter 63 of Title 18 of the United States Code.

(b)

Reports on Form 8-K

Report on Form 8-K filed on May 9, 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 August 14, 2003		/s/ JOAN E. RYAN Joan E. Ryan Chief Financial Officer
Date August 14, 2003		/s/ DENNIS M. THOMPSON Dennis M. Thompson Controller

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PART I.

ITEM 1. FINANCIAL STATEMENTS

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