Back to GetFilings.com

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

FORM 10-Q

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

For the quarterly period ended March 31, 2003

Commission file number 333-96233

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

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

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

        Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o    No ý

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

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

PART I.

ITEM 1.    FINANCIAL STATEMENTS

NORTH AMERICAN VAN LINES, INC.

Condensed Consolidated Balance Sheets

At March 31, 2003 and December 31, 2002

(Dollars in thousands except share data)
(Unaudited)

See accompanying notes to condensed consolidated financial statements.

1

NORTH AMERICAN VAN LINES, INC.

Consolidated Statements of Operations

For the three months ended March 31, 2003 and 2002

(Dollars in thousands)
(Unaudited)

See accompanying notes to condensed consolidated financial statements.

2

NORTH AMERICAN VAN LINES, INC.

Consolidated Statement of Changes in Stockholder's Equity

For the three months ended March 31, 2003

(Dollars in thousands)
(Unaudited)

See accompanying notes to condensed consolidated financial statements.

3

NORTH AMERICAN VAN LINES, INC.

Condensed Consolidated Statements of Cash Flows

For the three months ended March 31, 2003 and 2002

(Dollars in thousands)
(Unaudited)

See accompanying notes to condensed consolidated financial statements.

4

NORTH AMERICAN VAN LINES, INC.

Notes to Condensed Consolidated Financial Statements

March 31, 2003

(Dollars in thousands)
(Unaudited)

(1)  Basis of Presentation

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

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

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

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

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

(2)  Income Taxes

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

5

(3)  Cash and Cash Equivalents

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

(4)  Long-term Debt

        Long-term debt consisted of the following:

(5)  Commitments and Contingencies

(a) Litigation

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

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

(b) Environmental Matters

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

6

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

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

(c) Purchase Commitments

        Purchase commitments consisted of the following:

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

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

7

(6)  Operating Segments

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

8

(7)  Subsequent Event

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

(8)  Supplemental Information

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

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