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 $4.4 million over the next year. The interest rate swap instruments described below would reduce the annual impact of a 1% change by $1.8 million. An increase of 1% in interest rates payable on our variable rate indebtedness would increase our annual interest rate expense by approximately $2.6 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 non-performance by the other parties.

        We had four open interest rate swap agreements as of March 31, 2004. The intent of these agreements is to reduce interest rate risk by swapping an unknown variable interest rate for a fixed rate. These agreements qualify for hedge accounting treatment, therefore, market rate changes in the effective portion of these derivatives are reported in accumulated other comprehensive income. The following is a recap of each agreement.

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        Assets, liabilities and commitments that are to be settled in cash and are denominated in foreign currencies for transaction purposes are sensitive to changes in currency exchange rates. All material trade receivable balances are denominated in the host currency of the local operation. For the three months ended March 31, 2004 and 2003, we recognized a currency loss of $0.5 million and a gain of an immaterial amount, respectively, for transactional related items.

        From time to time, we utilize foreign currency forward contracts in the regular course of business to manage our exposure against foreign currency fluctuations. The forward contracts establish the exchange rates at which we will purchase or sell the contracted amount of U.S. dollars for specified foreign currencies at a future date. We utilize forward contracts which are short-term in duration (less than one year). The major currency exposures hedged by us are the Australian dollar, the British pound sterling and the euro. The contract amounts of foreign currency forwards at March 31, 2004 was $33.1 million. A hypothetical 10% adverse movement in foreign exchange rates applied to our foreign currency exchange rate sensitive instruments held as of March 31, 2004 would result in a hypothetical loss of approximately $1.4 million. Because these derivatives do not qualify for hedge accounting treatment, changes in fair value relating to these derivatives are recognized in current period earnings. For the three months ended March 31, 2004 and 2003, we recognized gains of $0.2 million, resulting from changes in the fair value of foreign currency derivatives.

        We hold various convertible bonds in the investment portfolio of our insurance operations. The value of the conversion feature is bifurcated from the value of the underlying bond. Changes in fair value are recorded in current period earnings. For the three months ended March 31, 2004 and 2003, we recognized losses of $0.3 million and $0.5 million, respectively. The insurance investment portfolio also included marketable debt and 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.

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THE RELOCATION INDUSTRY

        The global relocation industry provides a variety of services that support the relocation of households for:

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Corporations that pay for the relocation of their employees;



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Governments that pay for the relocation of their military and civilian personnel; and



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Individual households that pay for their own relocation.

        The size, scope and type of relocation services offered to these distinct market segments differs by country and by customer, but they generally include the services listed in the table below:

        While there is no comprehensive study of the total spending on relocation services, according to the Employee Relocation Council, U.S. corporations relocate over 1.0 million employees on an annual basis, both domestically and internationally and the U.S. military relocates 800,000 personnel annually. These numbers are in addition to the millions of individual households that move each year. We estimate the global addressable market for outsourced relocation service providers and household goods moving companies to be at least $50 billion.

Corporate

        A corporate sponsored relocation typically includes a variety of relocation services and may include some or all of the following: the movement of household goods; assistance with the sale of the employee's home; the purchase of the employee's home; temporary living assistance; assistance with the purchase of a new home, including mortgage and title services; destination services and tracking and processing of all related claims and expenses. For employees relocating outside their home country, many companies cover the costs of tax and visa planning, assistance with home finding, and other related services. As illustrated by the following chart, a corporation's total spending on these services may be up to $60,000 for a domestic relocation within the United States, and significantly in excess of that for an international relocation.

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Illustrative Breakdown of Corporate Spending on a $60,000 Domestic Relocation

        We believe that the global relocation services market is being driven by the growing size, globalization and complexity of corporations around the world, and the trend toward the outsourcing of non-core administrative activities, including human resources activities. International Data Corporation projects U.S. human resources spending on outside services will grow at a 12.5% compound annual growth rate over the next five years. Because the cost of relocating employees is a component of human resources expenditures, we believe that we will benefit from this growth. According to the Global 500 List for the Year 2002 published by Fortune Magazine, Global 500 corporations employed more than 47 million people in 2001, and the median number of employees for a Global 500 corporation was approximately 63,000, in multiple locations and countries. An employee base of this magnitude presents logistical complexities and a need for efficient relocation services. Many corporations believe relocation service providers offer a lower cost, higher quality solution to both corporations and their transferring employees than can be provided by in-house alternatives.

Military/Government

        The range of services offered to the military includes the movement of a transferee's household goods and administration of transferee relocation programs, which is referred to as program administration. For the government sector, the industry offers a similar suite of services as are offered to the corporate market. We estimate that the average cost for a military relocation is $10,000 and the average cost for a government service agency relocation is $40,000. The military and government businesses are driven primarily by changes in government and military activity, rather than changes in economic conditions.

Consumer

        According to the latest study of the National Association of Realtors, 17 million households relocate each year in the United States. In most cases, a household whose relocation is not being sponsored by an employer or the government will purchase needed relocation services from a variety of different providers including independent real estate agents, mortgage service companies and professional moving services companies. Of these 17 million household relocations, we estimate that at least 25% or 4.3 million use a moving services company for the movement of their household goods.

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Relocations Services Competition

        A variety of industry competitors have emerged to serve the relocation services market. The services these firms provide have evolved from services around their various core competencies to an attempt at providing a complete relocation service offering. Companies that compete in the marketplace include real estate brokers, financial services firms that provide home mortgages, accounting firms that entered the relocation services business through providing tax and accounting services to transferring employees, moving companies and a number of smaller industry competitors who have created businesses specifically to address the corporate relocation market.

Moving and Storage Industry

        The moving and storage industry is a significant industry within the broader relocation services industry. Typical services provided to a household include: packing and unpacking; loading and unloading; transporting; and storage of goods, if necessary. The main participants in the North American professional residential moving services industry are:

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a number of large national moving companies operating through agency networks;



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several hundred independent carriers, which are companies that provide full moving services without affiliation with one of the large national moving companies;



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several thousand agents, which are independently owned companies affiliated with one of the large national moving companies; and



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tens of thousands of owner/operators, which are independent contractors that are retained by large moving companies, independent carriers or agents and who own and drive tractors and are responsible for transporting, loading and unloading shipments.

        The moving and storage industry in Europe and the Asia Pacific regions is fragmented, with a few large suppliers providing the full range of moving and relocation services, and a considerable number of smaller, low-cost operators.

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