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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K - Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended March 31, 2000
-----------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ______________________ to _______________________
Commission Registrant, State of Incorporation I.R.S. Employer
File Number Address and Telephone Number Identification No.
- ----------- ----------------------------------- ------------------
1-11255 AMERCO 88-0106815
(A Nevada Corporation)
1325 Airmotive Way, Suite 100
Reno, Nevada 89502-3239
Telephone (775) 688-6300
2-38498 U-Haul International, Inc. 86-0663060
(A Nevada Corporation)
2727 N. Central Avenue
Phoenix, Arizona 85004
Telephone (602) 263-6645
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Registrant Title of Class on Which Registered
- ---------- -------------- ----------------------
AMERCO Series A 8 1/2% New York Stock Exchange
Preferred Stock
U-Haul International, Inc. None
Securities registered pursuant to Section 12(g) of the Act:
Registrant Title of Class
---------- --------------
AMERCO Common
U-Haul International, Inc. None
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 X No
---- ----
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
22,379,787 shares of AMERCO common stock, $0.25 par value, were
outstanding at June 29, 2000. The aggregate market value of AMERCO
common stock held by non-affiliates (i.e., stock held by persons other than
officers, directors and 5% shareholders of AMERCO) was $152,957,730.
The aggregate market value was computed using the closing price for the
common stock trading on NASDAQ on June 26, 2000.
5,385 shares of U-Haul International, Inc. common stock, $0.01 par
value, were outstanding at June 29, 2000. None of these shares were held by
non-affiliates. U-Haul International, Inc. meets the conditions set forth
in General Instructions (I)(1)(a) and (b) of Form 10-K and is therefore filing
this Form with the reduced disclosure format.
Portions of AMERCO's Proxy Statement relating to its Annual Meeting of
Stockholders to be held on September 8, 2000, are incorporated by reference in
Part III hereof.
2
TABLE OF CONTENTS
PAGE NO.
PART I
ITEM 1. BUSINESS...................................... 3
A. AMERCO................................... 3
B. HISTORY.................................. 3
C. MOVING AND STORAGE OPERATIONS............ 4
D. REAL ESTATE OPERATIONS................... 5
E. INSURANCE OPERATIONS..................... 6
ITEM 2. PROPERTIES.................................... 9
ITEM 3. LEGAL PROCEEDINGS............................. 9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS.............................. 9
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS............... 10
ITEM 6. SELECTED FINANCIAL DATA....................... 11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.................................... 13
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK............................. 23
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA.......................................... 23
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE ................................... 23
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF
THE REGISTRANTS............................... 24
ITEM 11. EXECUTIVE COMPENSATION........................ 24
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT......................... 24
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS.................................. 24
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES AND REPORTS ON FORM 8-K............. 25
3
PART I
ITEM 1. BUSINESS
A. AMERCO
AMERCO, a Nevada corporation (AMERCO), is the holding company for
U-Haul International, Inc. (U-Haul), Amerco Real Estate Company (Real
Estate), Republic Western Insurance Company (Republic) and Oxford Life
Insurance Company (Oxford). Throughout this Form 10-K, unless the
context otherwise requires, the term "AMERCO" includes all of its
subsidiaries. AMERCO's executive offices are located at 1325 Airmotive
Way, Suite 100, Reno, Nevada 89502-3239, and the telephone number is
(775) 688-6300. As used in this Form 10-K, all references to a fiscal
year refer to AMERCO's fiscal year ended March 31 of that year. Republic
and Oxford are consolidated on the basis of calendar years ended
December 31. Accordingly, all references to the years 1999, 1998 and 1997
correspond to AMERCO's fiscal years 2000, 1999 and 1998, respectively.
AMERCO has four industry segments represented by Moving and Storage
Operations (U-Haul), Real Estate, Property and Casualty Insurance
(Republic) and Life Insurance (Oxford). See Note 21 of Notes to
Consolidated Financial Statements in Item 8 for financial information
regarding the industry segments.
Moving and Storage Operations
Moving and self-storage operations consist of the rental of trucks
and trailers, sale of moving aids such as boxes and the rental of self-
storage spaces to the do-it-yourself mover. Operations are conducted
using the registered tradename U-Haul throughout
the United States and Canada.
Real Estate Operations
Real Estate owns approximately 90% of U-Haul's real estate assets,
including U-Haul Center and Storage locations. The remainder of the real
estate assets are owned by various U-Haul entities. Real Estate is
responsible for managing all of the properties including the
environmental risks of the properties. Real Estate is responsible for
the purchase of all properties used by AMERCO or any of its subsidiaries.
Real Estate also handles all the dispositions (sale or lease) of unused
real estate.
Property and Casualty Insurance
Republic originates and reinsures property and casualty-type
insurance products for various market participants, including independent
third parties, U-Haul's customers, independent dealers and AMERCO.
Life Insurance
Oxford originates and reinsures annuities, life, credit life and
disability, health and Medicare supplement insurance. Oxford also
administers the self-insured employee health and dental plans for AMERCO.
On November 21, 1997, Oxford purchased all of the issued and
outstanding shares of Encore Financial, Inc. and its subsidiaries
(Encore). Encore's primary subsidiary is North American Insurance
Company (NAI). NAI's premium volume is primarily from the sale of credit
life and disability products, and Medicare supplement insurance. NAI
owns all of the issued and outstanding common shares of North American
Fire & Casualty Insurance Company (NAFCIC), a property and casualty
company. In December 1998, NAFCIC was sold to Republic.
On November 24, 1997, Oxford purchased all of the issued and
outstanding shares of Safe Mate Life Insurance Company (Safe Mate). As
of November 1, 1998, Safe Mate merged into Oxford. Safe Mate's business
was the sale of credit life and disability products.
B. HISTORY
U-Haul was founded in 1945 under the name "U-Haul Trailer Rental
Company". From 1945 to 1974, U-Haul rented trailers and, starting in
1959, trucks on a one-way and In-Town basis through
independent dealers. Since 1974, U-Haul has developed a network of owned
rental centers (U-Haul Centers) through which U-Haul rents its trucks and
trailers and provides related products and services (e.g., the sale and
installation of hitches, as well as the sale of boxes and moving supplies).
At March 31, 2000, U-Haul's distribution network included 1,200 U-Haul
Centers and 14,500 independent dealers.
4
C. MOVING AND STORAGE OPERATIONS
Business Strategies
The U-Haul business strategy remains focused on do-it-yourself
moving and self-storage customers. U-Haul believes that customer access,
in terms of truck or trailer availability and proximity of rental
locations, is critical to its success. Under the U-Haul name, our
strategy is to offer, in an integrated manner over an extensive and
geographically diverse network of 15,700 Company-owned Centers and
independent dealers, a wide range of products and services to do-it-
yourself moving and self-storage customers.
Moving Operations
U-Haul has a variety of product offerings. Rental trucks are
designed with do-it-yourself customers in mind. U-Haul trailers are
suited to the low profile of many newly manufactured automobiles. As of
March 31, 2000, the U-Haul rental equipment fleet consisted of 97,000
trucks, 80,300 trailers and 19,200 tow dollies. Additionally, U-Haul
provides support rental items such as furniture pads and bumper hitches.
Approximately 90% of U-Haul's rental revenue is from do-it-yourself
movers. Moving rentals include:
(i) In-Town rentals, where the equipment is
returned to the originating U-Haul location and
(ii) one-way rentals, where the equipment is returned to a U-Haul
location in another city.
U-Haul's truck and trailer rental business tends to be seasonal,
with proportionally more transactions and revenues generated in the
spring and summer months than during the balance of the year.
U-Haul also sells a wide selection of moving supplies that include
boxes, tape and packaging materials. U-Haul Centers also sell and
install hitches and towing systems, and sell propane.
U-Haul offers protection packages such as:
(i) Safemove - which provides moving customers
with a damage waiver, cargo protection and medical and life
coverage and
(ii) Safestor - which provides self-storage
rental customers with various types of protection for their goods
in storage.
Independent dealers receive U-Haul equipment on a consignment basis
and are paid a commission on gross revenues generated from their rentals.
U-Haul maintains contracts with its independent dealers that may typically
be terminated upon 30 days written notice by either party.
U-Haul designs and manufactures its truck van boxes, trailers and
various other support rental equipment items. Truck chassis are
manufactured by both foreign and domestic truck manufacturers. These
chassis receive certain post-delivery modifications and are joined with
van boxes at strategically located Company-owned manufacturing and
assembly facilities in the United States.
U-Haul services and maintains its trucks and trailers through an
extensive preventive-maintenance program, generally performed at Company-
owned facilities located at or near U-Haul Centers. Major repairs are
performed either by the chassis manufacturers' dealers or by Company-
owned repair shops, and U-Haul takes advantage of manufacturers'
warranties.
Competition
The moving truck and trailer rental market is highly competitive
and dominated by national operators in both the In-Town
and one-way markets. Recently two major competitors combined.
Budget Rent-A-Car acquired Ryder TRS (Ryder Truck Rentals). Management
believes that this merger will not have a material adverse effect on AMERCO's
financial position or operating results. Management believes that there are
two distinct users of rental trucks: commercial users and do-it-yourself users.
U-Haul focuses on the do-it-yourself mover. U-Haul believes that the principal
competitive factors are convenience of rental locations, availability of
quality rental equipment and price.
5
Self-Storage Business
U-Haul entered the self-storage business in 1974 and since then has
increased the rentable square footage of its storage locations through
the acquisition of existing facilities and new construction. Ten percent
of U-Haul's rental revenue is generated from storage. In addition, U-Haul
has entered into management agreements to manage self-storage properties
owned by others. U-Haul has also entered into a strategic and financial
partnership with Private Mini Storage Realty, L.P., a Texas-based operator
of self-storage properties.
Through over 900 owned or managed storage locations in the United
States and Canada, U-Haul offers for rent more than 29.1 million square
feet of self-storage space. U-Haul's self-storage facility locations
range in sizes up to 152,000 square feet of storage space, with
individual storage units in sizes from 15 square feet to 400 square feet.
The primary market for storage rooms is the storage of household
goods. With the addition of over 20,000 storage rooms during fiscal year
2000, the average occupancy rate of facilities operating over one year
was 84.1%, with modest seasonal variations. During fiscal year 2000,
delinquent rentals as a percentage of total storage rentals were
approximately 6.8%. U-Haul considers this rate to be satisfactory.
Competition
The primary competition for a U-Haul self-storage location is other
storage facilities within a trade area offering a comparable level of
convenience to the customer.
Employees
As of March 31, 2000, U-Haul's non-seasonal work force consisted of
15,800 full and part-time employees.
D. REAL ESTATE OPERATIONS
Real Estate Operations
Real Estate has responsibility for actively marketing properties
available for sale or lease. Real Estate is also responsible for
managing any environmental risks associated with AMERCO's real estate.
Environmental Matters
Compliance with environmental requirements of federal, state and
local governments significantly affects Real Estate's business
operations. Among other things, these requirements regulate the
discharge of materials into the water, air and land and govern the use
and disposal of hazardous substances. Real Estate is aware of issues
regarding hazardous substances on the properties. Real Estate regularly
makes capital and operating expenditures to stay in compliance with
environmental laws. Since 1988, Real Estate has managed a testing and
removal program for underground storage tanks. Under this program, over
3,000 tanks have been removed at a cost of $40.0 million.
A subsidiary of U-Haul, INW Company (INW), owns one property located
within two different state hazardous substance sites in the State of
Washington. The sites are referred to as the "Yakima Valley Spray Site" and
the "Yakima Railroad Area." INW has been named as a "potentially liable
party" (PLP) under state law with respect to this property as it relates to
both sites.
Based upon the information currently available to Real Estate,
compliance with the environmental laws and its share of the costs of
investigation and cleanup of known hazardous waste sites are not
expected to have a material adverse effect on AMERCO's financial
position or operating results.
6
E. INSURANCE OPERATIONS
Business Strategies
Republic's principal business strategy is to provide specialty
insurance for personal, commercial and reinsurance markets. Republic
focuses on selected regional and under-served customers through managing
general agents, independent agents and brokers.
Oxford's business strategy is long-term capital growth through
direct writing of annuity, credit life and disability, universal life and
Medicare supplement insurance. Currently, Oxford is pursuing this growth
strategy of increased direct writing via acquisitions of small insurance
companies, expanded distribution channels and product enhancement and
diversity. The acquisitions of North American Insurance Company and Safe
Mate Life Insurance Company in 1997 represent a significant movement
toward this long-term goal. Oxford has significantly expanded its
distribution channels and administrative capabilities through these
acquisitions.
Investments
Republic and Oxford investments must comply with the insurance laws
of the state of domicile. These laws prescribe the type, quality and
concentration of investments that may be made. Moreover, in order to be
considered an acceptable reinsurer by cedents and intermediaries, a
reinsurer must offer financial security. The quality and liquidity of
invested assets are important considerations in determining such
security.
The investment philosophies of Republic and Oxford emphasize
protection of principal through the purchase of investment grade fixed-
income securities. Approximately 88.0% of Republic's and 88.2% of
Oxford's fixed-income securities consist of investment grade securities
(NAIC-2 or greater). The maturity distributions are designed to provide
sufficient liquidity to meet future cash needs.
Reinsurance
Republic and Oxford assume and cede insurance from and to other
insurers and members of various reinsurance pools and associations.
Reinsurance arrangements are utilized to provide greater diversification
of risk and to minimize exposure to large risks. However, the original
insurer retains primary liability to the policyholder should the assuming
insurer not be able to meet its obligations under the reinsurance
agreements.
Regulation
Republic and Oxford are subject to regulation throughout the United
States. The regulation extends to such matters as licensing companies
and agents, restricting the types, quality or quantity of investments,
regulating capital and surplus and actuarial reserve maintenance, setting
solvency standards, filing of annual and other reports on financial
position, and regulating trade practices. State laws also regulate
transactions and dividends between an insurance company and its parent or
affiliates, and generally require prior approval or notification for any
change in control of the insurance subsidiary. Republic's unpaid loss and
loss expenses are certified annually by an independent actuarial
consulting firm as required by state regulation.
In the past few years, the insurance and reinsurance regulatory
framework has been subjected to increased scrutiny by the National
Association of Insurance Commissioners (NAIC), federal and state
legislatures and insurance regulators. These regulators are considering
increased regulations, with an emphasis on insurance company investment
and solvency issues. It is not possible to predict the future impact of
changing state and federal regulations on the operations of Republic and
Oxford.
Republic and Oxford are in compliance with NAIC minimum risk-based
capitalization requirements for insurance companies as of December 31, 1999.
Competition
The highly competitive insurance industry includes a large number
of property and casualty insurance companies and life insurance
companies. In addition, the marketplace now includes financial service
firms offering both insurance and financial products. Many competitors
have been in business for a longer period of time or possess
substantially greater financial resources. Competition in the insurance
business is based upon price, product design and services rendered to
producers and policyholders.
7
Employees
Republic's non-seasonal work force consists of 386 full and part-
time employees.
Oxford's non-seasonal work force consists of 160 full and part-time
employees.
Life Insurance
Oxford offers annuities, life, credit life and disability, and
Medicare supplement insurance products, both as a direct writer and as an
assuming reinsurer. In addition, Oxford administers self-insured group
health and dental plans for AMERCO. Reinsurance arrangements are entered
into with unaffiliated reinsurers. Oxford's subsidiary, North American
Insurance Company underwrites credit life and disability and Medicare
supplement insurance.
Property and Casualty
Republic's business activities consist of three basic areas: U-Haul,
direct and assumed reinsurance underwriting. U-Haul underwritings include
coverage for U-Haul customers, independent dealers and employees of AMERCO.
For the year ended December 31, 1999, approximately 18.3% of Republic's
written premiums resulted from U-Haul underwriting activities. Republic's
direct underwriting is done through company-employed underwriters and
selected general agents. The products provided include liability coverage
for rental vehicle lessees, storage rental properties, coverage for commercial
multiple peril, nonstandard auto, mobile homes and excess workers' compensation.
Republic's assumed reinsurance underwriting is done via broker markets. In an
effort to decrease risk, Republic has entered into various catastrophe cover
policies to limit its exposure.
The liability for reported and unreported losses is based on both
Republic's historical and industry averages. Unpaid loss adjustment expenses
are based on historical ratios of loss adjustment expenses paid to losses paid.
The liability for unpaid claims and unpaid claims expenses is based on estimates
of the amount necessary to settle all claims as of the statement date. Both
reported and unreported losses are included in the liability. Republic updates
the liability estimate as additional facts regarding claim costs become
available. These estimates are subject to uncertainty and variation due to
numerous factors. In estimating reserves, no attempt is made to isolate
inflation from the combined effect of other factors including inflation. Unpaid
losses and unpaid loss expenses are not discounted.
Activity in the liability for unpaid claims and claim adjustment
expenses is summarized as follows:
1999 1998 1997
---------------------------
(in thousands)
Balance at January 1 $ 344,748 384,816 332,674
Less reinsurance recoverable 68,135 75,286 60,319
---------------------------
Net balance at January 1 276,613 309,530 272,355
Incurred related to:
Current year 135,382 116,069 132,291
Prior years 8,468 (8,827) 23,192
---------------------------
Total incurred 143,850 107,242 155,483
Paid related to:
Current year 55,136 36,407 28,972
Prior years 94,606 103,752 89,336
---------------------------
Total paid 149,742 140,159 118,308
Net balance at December 31 270,721 276,613 309,530
Plus reinsurance recoverable 64,137 68,135 75,286
---------------------------
Balance at December 31 $ 334,858 344,748 384,816
===========================
As a result of changes in estimates of insured events in prior
years, the provision for unpaid loss and loss adjustment expenses (net of
reinsurance recoveries of $27.9 million) increased by $8.4 million in 1999.
The table on page 8 illustrates the change in unpaid loss and loss
adjustment expenses. First line - reserves as originally reported at the
end of the stated year. Second section, reading down, - cumulative
amounts paid as of the end of successive years with respect to that
reserve. Third section, reading down, - revised estimates of the
original recorded reserve as of the end of successive years. Last
section - compares the latest revised estimated reserve amount to the
reserve amount as originally established. This last section is
cumulative and should not be summed.
8
Unpaid Loss and Loss Adjustment Expenses
December 31
- --------------------------------------------------------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
- --------------------------------------------------------------------------------------------------------------------------
(in thousands)
Unpaid Loss and Loss
Adjustment Expenses: $207,939 226,324 236,019 238,762 314,482 329,741 341,981 332,674 384,816 344,748 334,858
Paid (Cumulative)
as of:
One year later 50,992 55,128 65,532 83,923 70,382 86,796 89,041 89,336 103,752 94,606
Two years later 87,850 97,014 105,432 123,310 115,467 139,247 150,001 161,613 178,455
Three years later 116,043 120,994 126,390 153,030 146,640 173,787 195,855 208,168
Four years later 132,703 133,338 143,433 173,841 166,068 198,434 226,815
Five years later 142,159 144,764 153,730 181,677 181,174 219,425
Six years later 151,227 152,424 160,875 191,938 194,652
Seven years later 158,043 157,979 168,975 200,281
Eight years later 162,038 163,860 175,364
Nine years later 167,122 169,681
Ten years later 171,744
Reserve Reestimated
as of:
One year later 206,701 229,447 231,779 251,450 321,058 338,033 353,508 354,776 357,733 339,602
Two years later 206,219 221,450 224,783 254,532 323,368 340,732 369,852 342,164 364,894
Three years later 199,925 211,998 223,403 253,844 309,936 349,459 328,445 346,578
Four years later 198,986 207,642 214,854 231,536 317,687 302,808 331,897
Five years later 197,890 200,629 198,320 239,888 267,005 300,180
Six years later 194,601 189,601 210,872 263,843 262,517
Seven years later 189,175 200,556 231,407 259,798
Eight years later 199,075 217,005 227,603
Nine years later 212,331 213,981
Ten years later 209,693
Cumulative Redundancy
(Deficiency) $ (1,754) 12,343 8,416 (21,036) 51,965 29,561 10,084 (13,904) 19,922 5,146
Retro Premium
Recoverable $ 10,277 7,241 2,329 (1,206) 6,044 4,430 10,803 7,956 4,918 6,797
Reestimated Reserve:
Amount (Cumulative) $ 8,523 19,584 10,745 (22,242) 58,009 33,991 20,887 (5,948) 24,840 11,943
9
ITEM 2. PROPERTIES
AMERCO subsidiaries own property, plant and equipment that are utilized
in the manufacture, repair and rental of U-Haul equipment and that provide
office space for the Company. Such facilities exist throughout the United
States and Canada. The majority of land and buildings used by U-Haul is owned
in fee and is substantially unencumbered. U-Haul also manages storage
facilities owned by others. In addition, U-Haul owns certain real estate not
currently used in its operations. U-Haul operates 1,200 U-Haul Centers
(including Company-owned storage locations), manages 206 storage centers and
operates 12 manufacturing and assembly facilities. U-Haul also operates 100
repair facilities located at or near a U-Haul Center.
ITEM 3. LEGAL PROCEEDINGS
In the normal course of business, AMERCO is a defendant in a number of
suits and claims. AMERCO is also a party to several administrative
proceedings arising from state and local provisions that regulate the
removal and/or cleanup of underground fuel storage tanks. It is the opinion
of management that none of the suits, claims or proceedings involving
AMERCO, individually or in the aggregate, are expected to result in a
material loss. See "Item 1. Business - Environmental Matters".
Reference is made to Note 15 in Notes to Consolidated Financial
Statements for a discussion of stockholder litigation and California overtime
litigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the security holders during the
fourth quarter of the fiscal year covered by this report, through the
solicitation of proxies or otherwise.
10
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
As of June 29, 2000, there were approximately 3,400 holders of record
of AMERCO's common stock.
AMERCO's common stock has been traded on NASDAQ National Market
(NASDAQ) since November 1994 under the symbol "UHAL". The following table
sets forth the high and low closing prices of the common stock of AMERCO
trading on NASDAQ for the periods indicated.
For the Years Ended March 31,
--------------------------------------------
2000 1999
--------------------------------------------
High Low High Low
--------------------------------------------
First quarter 25 1/2 20 3/8 33 9/16 28 5/8
Second quarter 28 9/16 22 1/4 29 1/2 21 1/8
Third quarter 29 3/4 23 3/8 29 20 1/8
Fourth quarter 26 63/64 16 1/2 29 20 11/16
AMERCO has not declared any cash dividends to common stockholders for
the two most recent fiscal years.
AMERCO does not have a formal dividend policy. AMERCO's Board of
Directors periodically considers the advisability of declaring and paying
dividends in light of existing circumstances. AMERCO does not intend to pay
dividends in the foreseeable future. See Note 20 of Notes to Consolidated
Financial Statements in Item 8 for a discussion of certain statutory
restrictions on the ability of the insurance subsidiaries to pay dividends
to AMERCO.
See Note 16 of Notes to Consolidated Financial Statements in Item 8
for a discussion of AMERCO's non-cash dividends. See Note 6 of Notes to
Consolidated Financial Statements in Item 8 for a discussion of changes to
common shares outstanding.
The common stock of U-Haul is wholly-owned by AMERCO. As a result, no
active trading market exists for the purchase and sale of such common stock.
No cash dividends were declared to AMERCO by U-Haul during the two most
recent fiscal years.
11
ITEM 6. SELECTED FINANCIAL DATA
AMERCO AND CONSOLIDATED SUBSIDIARIES
For the Years Ended March 31,
-------------------------------------------------------------------
2000 1999 1998 1997 1996
-------------------------------------------------------------------
(in thousands, except share, per share data and ratios)
Summary of Operations:
Rental revenue and net sales $ 1,339,348 1,255,493 1,194,948 1,146,751 1,107,782
Premiums, net investment and interest income 344,022 299,286 230,308 238,628 217,309
--------- --------- --------- --------- ---------
1,683,370 1,554,779 1,425,256 1,385,379 1,325,091
--------- --------- --------- --------- ---------
Operating expenses
and cost of sales (5) 1,030,821 983,422 920,284 882,472 853,427
Benefits, losses and amortization of
deferred acquisition costs 244,579 208,281 189,770 190,623 154,795
Lease expense 136,044 118,742 89,879 85,973 69,097
Depreciation, net (3) 87,647 73,066 69,655 66,742 83,989
--------- --------- --------- --------- ---------
1,499,091 1,383,511 1,269,588 1,225,810 1,161,308
--------- --------- --------- --------- ---------
Earnings 184,279 171,268 155,668 159,569 163,783
Interest expense 81,532 73,658 79,369 76,041 67,557
--------- --------- --------- --------- ---------
Pretax earnings 102,747 97,610 76,299 83,528 96,226
Income tax expense (36,922) (35,101) (27,643) (29,344) (35,832)
--------- --------- --------- --------- ---------
Earnings from operations before
extraordinary loss on early
extinguishment of debt 65,825 62,509 48,656 54,184 60,394
Extraordinary loss on early extinguishment
of debt, net (8) (9) (10) (11) (334) - (13,672) (2,319) -
--------- --------- --------- --------- ---------
Net earnings $ 65,491 62,509 34,984 51,865 60,394
========= ========= ========= ========= =========
Earnings per common share
(both basic and diluted):
Earnings from operations before
extraordinary loss on early
extinguishment of debt per
common share (2) (4) $ 2.39 2.07 1.28 1.44 1.33
Net earnings (2) (4) (8) (9) (10) (11) 2.37 2.07 .66 1.35 1.33
Weighted average common shares
outstanding (4) 21,934,390 21,937,686 21,896,101 25,479,651 35,736,335
Cash dividends declared:
Preferred stock $ 13,641 17,414 20,766 16,875 12,964
Common stock - - - - -
Ratio of earnings to fixed charges (1) 1.71 1.73 1.56 1.64 1.90
12
ITEM 6. SELECTED FINANCIAL DATA, continued
AMERCO AND CONSOLIDATED SUBSIDIARIES
For the Years Ended March 31,
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2000 1999 1998 1997 1996
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(in thousands, except share, per share data and ratios)
Balance Sheet Data:
Property, plant and
equipment, net $ 1,382,662 1,294,824 1,275,756 1,247,066 1,316,715
Total assets 3,125,225 3,087,503 2,913,277 2,718,994 2,823,407
Notes and loans payable 1,137,840 1,114,748 1,025,323 983,550 998,220
Stockholders' equity (4) (11) 585,294 616,025 595,059 602,320 649,548
Other information:
EBITDAR (6) 455,804 404,112 359,369 339,906 335,307
Operating profit margin (7) 13.6% 13.6% 13.0% 13.6% 14.1%
(1) For purposes of computing the ratio of earnings to fixed charges, "earnings" consists of pretax earnings from operations
plus total fixed charges excluding interest capitalized during the period and "fixed charges" consists of interest expense,
preferred stock dividends, capitalized interest, amortization of debt expense and discounts and one-third of the Company's
annual rental expense (which AMERCO believes is a reasonable approximation of the interest factor of such rentals).
(2) Earnings and net earnings per common share were computed after giving effect to the dividends on the Company's Series B
floating rate stock for the years ended March 31, 2000, 1999, 1998 and 1997.
(3) Reflects the change in estimated residual value during the years ended March 31, 1998 and 1996.
(4) Reflects the acquisition of treasury shares acquired pursuant to the Shoen Litigation as discussed in
"Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Stockholder Litigation".
(5) Reflects the adoption of Statement of Position 98-1, "Accounting for the Costs of Computer Software Developed or Obtained
for Internal Use" during the year ended March 31, 1998.
(6) EBITDAR is defined as earnings before interest expense, taxes, depreciation, amortization and lease expense (100%).
EBITDAR is presented because the Company believes it is a widely accepted financial indicator of an entity's ability to
incur and service debt.
(7) Operating profit margin - Earnings from operations plus 1/3 lease expense divided by total revenues.
(8) Reflects the early extinguishment of debt with notional amounts totaling $76.0 million and $255.0 million during
fiscal year 1998.
(9) Reflects the early extinguishment of debt and long-term notes with notional amounts totaling $76.3 million and
$86.2 million, respectively, during fiscal year 1997.
(10) Reflects the early extinguishment of Medium-Term Notes and Bond Backed Asset Trust certificates with notional amounts
totaling $50.0 million and $100.0 million, respectively, during fiscal year 2000.
(11) Reflects the redemption of $25 million, $50 million and $25 million of Series B Preferred Stock in fiscal years 2000, 1999
and 1998, respectively.
13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
This report contains forward-looking statements. Additional
written or oral forward-looking statements may be made by AMERCO from
time to time in filings with the Securities and Exchange Commission or
otherwise. Management believes such forward-looking statements are
within the meaning of the safe-harbor provisions. Such statements may
include, but not be limited to, projections of revenues, income or loss,
estimates of capital expenditures, plans for future operations, products
or services and financing needs or plans, as well as assumptions relating
to the foregoing. The words "believe", "expect", "anticipate",
"estimate", "project" and similar expressions identify forward-looking
statements, which speak only as of the date the statement was made.
Forward-looking statements are inherently subject to risks and
uncertainties, some of which cannot be predicted or quantified. Future
events and actual results could differ materially from those set forth
in, contemplated by or underlying the forward-looking statements. The
following disclosures, as well as other statements in this report
and in the Notes to AMERCO's Consolidated Financial Statements, describe
factors, among others, that could contribute to or cause such
differences, or that could affect AMERCO's stock price.
General
Information on fiscal year and industry segments is incorporated by
reference to "Item 8. Financial Statements and Supplementary Data - Notes
1, 20 and 21 of Notes to Consolidated Financial Statements". The notes
discuss the principles of consolidation, summarized consolidated
financial information and industry segment and geographic area data,
respectively. In consolidation, all intersegment premiums are eliminated
and the benefits, losses and expenses are retained by the insurance
companies.
Liquidity and Capital Resources
Net Cash Provided by Operating Activities
Net cash provided by operating activities was $237.7 million,
$159.5 million and $180.6 million in fiscal years 2000, 1999 and 1998,
respectively. Details by material segment follows:
Moving and Storage Operations
Cash provided by operating activities was $147.5 million, $128.5
million and $109.8 million in fiscal years 2000, 1999 and 1998,
respectively. The increase from fiscal year 1999 to fiscal year 2000 is
partially due to an increase in net income. The increase from fiscal
year 1998 to fiscal year 1999 is also partially due to increased net
income.
Real Estate Operations
Cash provided by operating activities was $24.8 million,
$38.0 million and $92.5 million in fiscal years 2000, 1999 and 1998,
respectively. The decrease in fiscal year 2000, is due to a decrease in
the intercompany payable. In fiscal year 1999, proceeds received from
the sale of real estate was used to pay down the intercompany payable.
Property and Casualty
Cash provided (used) by operating activities was $(11.1) million,
$(21.7) million and $23.8 million for the years ended December 31, 1999,
1998 and 1997, respectively. The 1999 to 1998 change resulted mainly
from the increased funds withheld liability, decreased paid losses
recoverable and a smaller decrease in loss and loss adjustment expense
reserves. This was offset by increased premiums and agent's balances
and the intercompany receivable due from affiliates. The 1998 to 1997
change resulted mainly from an increase in paid losses recoverable and
the change in loss and loss expense reserves partially offset by increased
net income and decreased accounts receivable.
Republic's cash and cash equivalents and short-term investment
portfolio were $6.0 million, $6.1 million and $16.3 million at December
31, 1999, 1998 and 1997, respectively. This balance reflects funds in
transition from maturity proceeds to long-term investments. This level
of liquid assets, combined with budgeted cash flow, is adequate to meet
periodic needs. Capital and operating budgets allow Republic to schedule
cash needs in accordance with investment and underwriting proceeds.
14
Life Insurance
Cash provided by operating activities was $22.2 million, $34.6
million and $8.2 million for the years ended December 31, 1999, 1998 and
1997, respectively. The decrease in cash flows from operating activities
in 1999 relates to paid loss experience. The increase in cash flows from
operating activities in 1998 relates to the increased premium production
in the credit insurance and Medicare supplement areas.
Oxford's primary sources of cash are premiums, receipts from
interest-sensitive products and investment income. The primary uses of
cash are operating costs and benefit payments to policyholders. Matching
the investment portfolio to the cash flow demands of the types of
insurance being written is an important consideration. Benefit and claim
statistics are continually monitored to provide projections of future
cash requirements.
In addition to cash flows from operating and financing activities,
a substantial amount of liquid funds is available through Oxford's short-
term portfolio. Short-term investments aggregated $30.7 million, $63.4
million and $13.4 million at December 31, 1999, 1998 and 1997,
respectively. Management believes that the overall sources of liquidity
will continue to meet foreseeable cash needs.
Consolidated Group
To meet the needs of its customers, U-Haul must maintain a large
inventory of fixed asset rental items. At March 31, 2000, net property,
plant and equipment represented approximately 66.6% of total assets from
non-insurance operations and approximately 44.2% of consolidated assets.
In fiscal year 2000, gross capital expenditures for property, plant and
equipment were $417.6 million, as compared to $298.5 million and
$392.3 million in fiscal years 1999 and 1998, respectively. These
expenditures primarily reflect the replacement of certain rental trucks and
trailers. The capital needs required to fund these acquisitions were funded
with internally generated funds from operations and lease financings.
During each of the fiscal years ending March 31, 2001, 2002 and
2003, U-Haul estimates gross capital expenditures will average
approximately $325 million primarily reflecting rental fleet rotation.
This level of capital expenditures, combined with a potential range of
$30-$115 million in annual long-term debt maturities, are expected to
create annual average funding needs of approximately $355-$440 million.
Management estimates that U-Haul will fund 100% of these requirements
with leases and internally generated funds, including proceeds from the
disposition of older trucks and other asset sales.
Moving and Storage Operations
U-Haul's stockholder's equity was $435.4 million, $384.7 million
and $342.9 million in fiscal years 2000, 1999 and 1998, respectively. The
increase in fiscal year 2000 was due to earnings. The increase in fiscal
year 1999 was due to earnings and to the sale of property to a related party
recorded in the Consolidated Statements of Changes in Stockholders' Equity.
The increase in fiscal year 1998 was due to increased earnings.
Real Estate Operations
Real Estate stockholder's equity was $95.6 million, $79.5 million
and $45.5 million in fiscal years 2000, 1999 and 1998, respectively. The
increase in fiscal year 2000 was due to earnings. The increase in fiscal
year 1999 was due to earnings and to the sale of property to a related
party recorded in the Consolidated Statements of Changes in Stockholders'
Equity. The increase in fiscal year 1998 was due to increased earnings.
15
Property and Casualty
Republic maintains a diversified securities investment portfolio,
primarily in bonds at varying maturity levels with 88.0% of the fixed-
income securities consisting of investment grade securities. The
maturity distribution is designed to provide sufficient liquidity to meet
future cash needs. Current liquidity remains strong, with current
invested assets equal to 92.9% of total liabilities.
The liability for reported and unreported losses are based upon
both Republic's historical and industry averages. Unpaid loss adjustment
expenses are based on historical ratios of loss adjustment expenses paid
to losses paid. Unpaid loss and loss expenses are not discounted.
Republic's stockholder's equity was $208.5 million, $211.4 million
and $195.4 million at December 31, 1999, 1998 and 1997, respectively.
Republic considers current stockholder's equity to be adequate to support
future growth and absorb unforeseen risk events. Republic does not use
debt or equity issues to increase capital and therefore has no exposure
to capital market conditions.
Life Insurance
Oxford's stockholder's equity was $88.1 million, $93.6 million and
$85.8 million in 1999, 1998 and 1997, respectively. Oxford did not pay
dividends to its parent during 1999, 1998 or 1997.
Applicable laws and regulations of the State of Arizona require
Republic and Oxford to maintain minimum capital determined in accordance
with statutory accounting practices. Such amount is $1.0 million and
$0.4 million, for Republic and Oxford, respectively. In addition, the amount
of dividends that can be paid to stockholders by insurance companies domiciled
in the State of Arizona is limited. Any dividend in excess of the limit
requires prior regulatory approval. Statutory surplus which can be distributed
as dividends without regulatory approval at December 31, 1999 is $16.1 million
and $1.4 million for Republic and Oxford, respectively at December 31, 1999.
These restrictions are not expected to have a material adverse effect on
the ability of the Company to meet its cash obligations. Oxford issued a
surplus note to AMERCO on December 31, 1998 for $10.0 million.
Approval by the Arizona Department of Insurance is required prior to
payment of principal and interest.
Credit Agreements
AMERCO's operations are funded by various credit and financing
arrangements, including unsecured long-term borrowings, unsecured medium-
term notes and revolving lines of credit with domestic and foreign banks.
To finance its fleet of trucks and trailers, U-Haul routinely enters into
sale and leaseback transactions. As of March 31, 2000, AMERCO had
$1,137.8 million in total notes and loans outstanding and unutilized
committed lines of credit of approximately $241.0 million.
Certain of AMERCO's credit agreements contain restrictive financial
and other covenants, including, among others, covenants with respect to
incurring additional indebtedness, issuing mandatory repayment preferred
stock, maintaining certain financial ratios and placing certain
additional liens on its properties and assets. At March 31, 2000, AMERCO
was in compliance with these covenants.
Reference is made to Note 5 of Notes to Consolidated Financial Statements.
Results of Operations - Consolidated
Rental Revenue
Rental revenue, net of commission expense was $1,150.5 million,
$1,074.2 million and $1,018.7 million in fiscal years 2000, 1999 and
1998, respectively. Details by material segment follow:
Moving and Storage Operations
Rental revenue was $1,148.2 million, $1,072.1 million and $1,016.2
million in fiscal years 2000, 1999 and 1998, respectively. The increase
from fiscal year 1999 to fiscal year 2000 was primarily due to the growth
in truck rental revenues which benefited from transactional growth and
reflects a higher average revenue per transaction. The increase from
fiscal year 1998 to fiscal year 1999 also reflects a growth in truck
rental revenues benefiting from transactional growth reflecting increased
utilization.
16
Real Estate Operations
Rental revenue, before intercompany eliminations, were $73.4 million,
$74.0 million and $69.9 million in fiscal years 2000, 1999 and 1998,
respectively. Intercompany rental revenue was $71.0 million, $71.9
million and $67.4 million in fiscal years 2000, 1999 and 1998,
respectively. The decrease from fiscal year 1999 to fiscal year 2000
was $0.6 million. Rental revenue was consistent between fiscal year 1999 and
fiscal year 2000. The increase from 1998 to 1999 reflects the addition
of new system operating companies.
Net Sales
Net sales revenues were $188.8 million, $181.3 million and $176.2
million in fiscal years 2000, 1999 and 1998, respectively. Revenue
growth from the sale of moving support items (i.e. boxes, etc.) and
propane resulted in the increase for each year.
Premiums
Premium revenues, after intercompany eliminations, were $262.1
million, $226.8 million and $164.6 million in fiscal years 2000, 1999 and
1998, respectively. Details by material segment follow:
Property and Casualty
Premium revenues, before intercompany eliminations, were $173.8
million, $145.3 million and $155.9 million for the years ended December
31, 1999, 1998 and 1997, respectively. The 1999 premium increase
resulted from assumed treaty reinsurance which increased to $80.7
million, $51.2 million and $49.1 million in the years ended December 31,
1999, 1998 and 1997, respectively. Republic underwrites professional
reinsurance via broker markets and premiums in this area increased due to
the agricultural reinsurance business. Direct multiple peril and general agency
premium increased to $25.0 million and $17.8 million in 1999 compared to
$21.0 million and $6.5 million in 1998, and $16.5 million and $5.8 million
in 1997, respectively. This increase was reduced by rental industry earnings,
which decreased to $50.3 million in 1999 from $66.6 million in 1998 and
$84.5 million in 1997, respectively. This decrease results from the
restructuring of the U-Haul Business Auto General Liability policy.
The deductible was changed at April 1, 1999 from a flat deductible to a 95%
deductible. This reduced premium by $19.6 million in 1999 as compared to 1998.
This resulted in a savings of $0.6 million in premium taxes for policy year
1999.
Life Insurance
Premium revenues, before intercompany eliminations, were $96.4
million, $94.5 million and $29.7 million for the years ended December 31,
1999, 1998 and 1997, respectively. During 1999, Oxford realized premium
increases from 1998 and 1997 in the areas of Medicare supplement, credit
life and disability, and single premium whole life insurance products.
Oxford increased Medicare supplement premium through the reinsurance of a
block of policies and by adding direct premium from the acquisition of
NAI in 1997, increasing premiums by $6.7 million from 1998 and $35.4
million from 1997. Oxford's single premium whole life product accounts
for an additional $2.9 million of premiums in 1999 over 1998 and $5.5
million over 1997. In the area of credit insurance, Oxford increased
direct writings as well as reduced the amount ceded to outside
reinsurers. These factors contributed to a $3.5 million increase in
premium from 1998 and $28.4 million from 1997. As expected, premium
decreases resulted from the termination of non-essential NAI lines,
fewer annuitizations and from the sale of NAFCIC. These changes accounted
for an $11.2 million decrease in premiums in 1999 from 1998 and $2.6 million
decrease from 1997.
Net Investment and Interest Income
Net investment and interest income was $82.0 million, $72.4 million
and $65.7 million in fiscal years 2000, 1999 and 1998, respectively. Details
by material segment follow:
Moving and Storage Operations
Interest income was $19.5 million, $12.9 million and $13.1 million
in fiscal years 2000, 1999 and 1998, respectively. The increase during
fiscal year 2000 in interest reflects higher average note receivable
balances.
Real Estate Operations
Net investment and interest income was $7.0 million, $4.5 million
and $0.6 million in fiscal years 2000, 1999 and 1998, respectively. The
increase in fiscal year 2000 is due to interest income received on notes
receivable. The increase in fiscal year 1999 was due to the realized gain
on the sale of property acquired through foreclosure.
17
Property and Casualty
Net investment income was $33.0 million, $35.9 million and $31.9
million for the years ended December 31, 1999, 1998 and 1997, respectively.
The decrease in 1999 from 1998 is attributable to a decrease in invested
assets and a lower yield on reinvested funds. The increase in 1998 over 1997
resulted from enhanced yield provided by an increased investment in preferred
stock.
Life Insurance
Net investment income was $21.3 million, $19.1 million and $17.8
million for the years ended December 31, 1999, 1998 and 1997,
respectively. The increase is due to improved interest rate spreads on
the retirement savings products. This improvement was realized as a
result of better returns on the investment portfolio.
Operating Expenses
Operating expenses were $918.8 million, $876.6 million and $818.6
million in fiscal years 2000, 1999 and 1998, respectively. Details by
material segment follow:
Moving and Storage Operations
Operating expenses, before intercompany eliminations, were $931.1
million, $893.0 million and $857.9 million in fiscal years 2000, 1999 and
1998, respectively. The increased expense is due to increased personnel
cost and other administrative costs. Increased liability insurance, due
to transactional growth, continued for fiscal year 2000 from fiscal years
1999 and 1998.
Real Estate Operations
Operating expenses, before intercompany eliminations, were $4.0
million, $6.2 million and $7.7 million in fiscal years 2000, 1999 and
1998, respectively. Real Estate benefited from a reduction in
intercompany management fees charged by an affiliated segment company
during fiscal year 2000 compared to the prior two years.
Property and Casualty
Operating expenses, before intercompany eliminations, were $35.0
million, $35.6 million and $12.6 million for the years ended December 31,
1999, 1998 and 1997, respectively. The 1998 to 1999 decrease resulted
from a $2.9 million write off of a commission in 1997 on an
excess of loss reinsurance contract. Lease expenses increased to $1.9
million for 1999 as compared to $1.3 million and $0.3 million for 1998
and 1997 respectively. All other underwriting expenses consisted of
$13.9 million, $15.5 million and $8.2 million for 1999, 1998 and 1997,
respectively.
Life Insurance
Operating expenses, before intercompany eliminations, were $22.8
million, $19.5 million and $6.9 million for the years ended December 31,
1999, 1998 and 1997, respectively. Commissions increased $1.8 million in
1999 in proportion to the increase in new premium. Operating expenses,
still within budgeted expectations, have increased in 1999 due to the
expansion of business volume. The increase from 1997 to 1998 is due to the
commissions and operating expenses related to the acquisition of NAI and
SML.
Cost of Sales
Cost of sales was $112.0 million, $106.8 million and $101.7 million
in fiscal years 2000, 1999 and 1998, respectively. Increased material
costs and a higher sales volume related to moving support items
contributed to the fiscal year 2000 increase over fiscal years 1999
and 1998.
Benefits and Losses
Benefits and losses were $209.6 million, $176.6 million and $175.6
million in fiscal years 2000, 1999 and 1998, respectively. Details by
material segment follow:
Property and Casualty
Benefits and losses incurred were $150.5 million, $118.9 million
and $165.9 million for the years ended December 31, 1999, 1998 and 1997,
respectively. The increase from 1998 to 1999 resulted from the increase
in assumed treaty reinsurance claims. The decrease from 1997 to 1998 is due
mainly to the reduction in insurance transactions with U-Haul. This
corresponds to the decrease in the liabilities for unpaid claims and
estimated future losses for current and prior policies for those transactions.
18
Life Insurance
Benefits incurred were $59.1 million, $57.7 million and $24.4
million for the years ended December 31, 1999, 1998 and 1997,
respectively. This increase is primarily due to Medicare supplement,
which accounts for $4.4 million of benefit increase from 1998 and
$27.0 million from 1997. However, in relation to premium, the percentage
of Medicare supplement benefits dropped by two percentage points in 1999
from 1998. Increases in policyholder reserves for the new whole life product
increased benefits $2.1 million from 1998 and $3.8 million from 1997.
Credit insurance benefits increased from 1998 by $0.8 million and from
1997 by $6.2 million due to increased volume written and retained; loss
ratios for this line have decreased from 1998 and 1997. Annuity benefits
combined with the elimination of non-focused NAI health lines and NAFCIC
reduced benefits from 1998 by $6.0 million and 1997 by $2.4 million.
Amortization of Deferred Acquisition Costs
Amortization of deferred acquisition costs (DAC) and the value of
business acquired (VOBA) was $35.0 million, $31.7 million and $14.2
million in fiscal years 2000, 1999 and 1998, respectively. DAC consists
of commissions and other policy acquisition costs, which vary with and
are primarily related to the production of new business. The prior year
end commissions and other related expenses are recognized ratably over
the remainder of the policy year. The VOBA asset relates to the future
profits of the credit insurance policies in force when Oxford acquired
NAI. Details by material segment follow:
Property and Casualty
The amortization of DAC for December 31, 1999, 1998 and 1997 was
$13.4 million, $7.4 million and $8.6 million, respectively. The increase
from 1998 to 1999 is due mainly to NAFCIC related DAC expense following
Republic's purchase of NAFCIC from Oxford in December 1998, which increased
to $3.8 million from $0.2 million in 1998. Also contributing was a
$1.9 million increase in the nonaffiliated agents' expense. Field underwriting
expenses increased due to an increase in 1998 written and unearned premiums.
Excess worker's compensation program increased due to 1998 commission expenses
relating to a settlement agreement with the previous general agent. The
decrease from 1997 to 1998 is due to the assumed reinsurance DAC expense and
relates to the decrease in unearned premiums.
Life Insurance
Amortization of DAC and VOBA was $21.6 million, $24.3 million and
$5.6 million for the years ended December 31, 1999, 1998 and 1997,
respectively. Oxford defers commissions and other policy acquisition
costs on single premium business. These costs are amortized as the
premium is earned over the term of the policy. Oxford continues to
increase its single premium credit business in force, thus increasing
both the deferred costs on the balance sheet and the subsequent
amortization. After Oxford purchased NAI in 1997, Oxford began
amortizing the VOBA asset recognized at purchase. In 1999, Oxford did
not have DAC amortization charges related to NAFCIC that were present in 1998;
1998 amortization was $3.0 million. The increase from 1997 was due primarily
to the credit insurance assumed after the purchase of NAI.
Lease Expense
Lease expense was $135.7 million, $118.7 million and $89.9 million
in fiscal years 2000, 1999 and 1998, respectively. Details by material
segment follow:
Moving and Storage Operations
Lease expense was $132.0 million, $118.4 million and $89.9 million
in fiscal years 2000, 1999 and 1998, respectively. The continued
increase reflects additional leasing activity.
Real Estate Operations
Lease expense for real estate operations was $3.0 million, $0.1
million and $0.1 million for fiscal years 2000, 1999 and 1998,
respectively. The increase in fiscal year 2000 over the prior years
reflects payments under an operating lease facility with a number of financial
institutions whereby the Company is both lessee and construction agent
developing storage properties.
19
Depreciation Expense, net
Depreciation expense, net was $88.3 million, $73.1 million and $69.7
million in fiscal years 2000, 1999 and 1998, respectively. Details by
material segment follow:
Moving and Storage Operations
Depreciation expense, net before intercompany elimination was
$79.0 million, $61.0 million and $64.6 million in fiscal years 2000, 1999
and 1998, respectively. The increase in fiscal year 2000 reflects an increase
in depreciation expense on the rental truck fleet. The decrease in fiscal
year 1999 reflects an increase in the gains from the disposition of property,
plant and equipment. During fiscal year 1999, based on an in-depth market
analysis, the estimated salvage value and useful lives of certain rental
equipment was increased. The effect of the change decreased depreciation
expense by $11.1 million in fiscal year 1998. The adjustment reflects
management's best estimate, based on information currently available, of
the estimated salvage value and useful lives of this rental equipment.
Real Estate Operations
Depreciation expense, net before intercompany elimination was
$9.3 million, $12.0 million and $6.4 million in fiscal years 2000, 1999
and 1998, respectively. The decrease in fiscal year 2000 reflects an increase
in gains from the disposition of property, plant and equipment and a decrease
in depreciation on buildings and non-rental equipment. The increase in fiscal
year 1999 reflects a decrease in the gains from the disposition of property,
plant and equipment as well as the increased depreciation expense relating to
the addition of new facilities for operating system companies.
Earnings from Operations
Earnings from operations were $183.9 million, $171.3 million and
$155.7 million in fiscal years 2000, 1999 and 1998, respectively.
Details by material segment follow:
Moving and Storage Operations
Earnings from operations were $102.4 million, $87.0 million and
$78.7 million in fiscal years 2000, 1999 and 1998, respectively.
Increased rental transactions, partially offset by corresponding expenses,
contributed to the earnings gain for the past two fiscal years.
Real Estate Operations
Earnings from operations before intercompany elimination were
$64.0 million, $60.3 million and $58.1 million in fiscal years 2000, 1999
and 1998, respectively. A decrease in intercompany management fees charged
contributed to the earnings increase for fiscal year 2000 compared to the
prior two fiscal years.
Property and Casualty
Earnings from operations were $7.9 million, $19.1 million and $0.7
million for the years ended December 31, 1999, 1998 and 1997, respectively.
The 1998 to 1999 decrease resulted mainly from Republic's writing off the
1995 American Bonding receivable, lower than forecasted premium volume in
1999 and higher than expected losses on the agricultural business. The
1997 to 1998 increase is due to decreased underwriting expenses and
increased realized gains.
Life Insurance
Earnings from operations were $14.2 million, $12.2 million and
$10.6 million for the years ended December 31, 1999, 1998 and 1997,
respectively. The increase over prior years reflects improved investment
returns, improving loss ratios in the Medicare supplement business and
better than expected loss experience for the credit business.
Interest Expense
Interest expense was $81.5 million, $73.7 million and $79.4 million
in fiscal years 2000, 1999 and 1998, respectively. The increase can be
attributed to an increase in the average cost of debt in fiscal year 2000
over the past two fiscal years. The average debt level outstanding
increased in fiscal year 2000 compared to fiscal year 1999, and
decreased in fiscal year 1999 compared to fiscal year 1998.
20
Extraordinary Loss on the Extinguishment of Debt
During fiscal year 2000, AMERCO extinguished $100.0 million of
6.65% Bond Backed Asset Trust certificates (BATs) originally due in
fiscal year 2030 and $50.0 million of 7.05% to 7.10% Medium-Term notes
originally due in fiscal year 2007. This resulted in an extraordinary
loss of $0.3 million, net of tax of $0.2 million ($0.02 per share).
During fiscal year 1998, AMERCO extinguished $76.0 million of
10.27% interest-bearing notes originally due in fiscal year 1999 through
fiscal year 2002. This resulted in an extraordinary loss of $4.0
million, net of tax of $2.4 million ($0.18 per share). AMERCO also
extinguished $255.0 million of 6.43% to 8.13% interest-bearing notes
originally due in fiscal year 1999 through fiscal year 2010. This
resulted in an extraordinary loss of $9.7 million, net of tax of $5.6
million ($0.44 per share).
Earnings of the Consolidated Group
As a result of the foregoing, pretax earnings totaled $102.7
million, $97.6 million and $76.3 million in fiscal years 2000, 1999 and
1998, respectively. After providing for income taxes, earnings from
operations were $65.8 million, $62.5 million and $48.7 million in fiscal
years 2000, 1999 and 1998, respectively. Following deductions for an
extraordinary loss from the early extinguishment of debt, net earnings
were $65.5 million, $62.5 million and $35.0 million in fiscal years 2000,
1999 and 1998, respectively.
Quarterly Results
The table on page 21 presents unaudited quarterly results
for the eight quarters in the period beginning April 1, 1998 and ending
March 31, 2000. AMERCO believes that all necessary adjustments have been
included in the amounts stated below to present fairly, and in accordance
with generally accepted accounting principles, the selected quarterly
information when read in conjunction with the consolidated financial
statements incorporated herein by reference. U-Haul moving and storage
operations are seasonal and proportionally more of AMERCO's revenues and
net earnings from its U-Haul moving and storage operations are generated
in the first and second quarters of each fiscal year (April through
September). The operating results for the periods presented are not
necessarily indicative of results for any future period.
21
Quarter Ended
----------------------------------------------
Jun 30 Sep 30 Dec 31 Mar 31
1999 1999 1999 2000
----------------------------------------------
(in thousands, except share and per share data)
Total revenues $ 439,640 462,696 382,496 398,538
Earnings from operations
before extraordinary loss
on early extinguishment
of debt (2) $ 42,307 42,127 (9,325) (9,284)
Net earnings (loss) $ 42,307 42,127 (9,325) (9,618)
Weighted average common
shares outstanding
Basic 21,953,199 21,964,452 21,975,889 21,844,020
Diluted 22,953,199 22,131,119 - -
Earnings (loss) from operations
before extraordinary loss
on early extinguishment
of debt per common
share (1) (2) (3) $ 1.77 1.77 (0.57) (0.58)
Earnings (loss) per common
share
Basic $ 1.77 1.77 (0.57) (0.60)
Diluted $ 1.70 1.76 - -
Quarter Ended
----------------------------------------------
Jun 30 Sep 30 Dec 31 Mar 31
1998 1998 1998 1999
----------------------------------------------
(in thousands, except share and per share data)
Total revenues $ 393,744 444,233 373,119 343,683
Net earnings (loss) $ 31,230 42,171 2,478 (13,370)
Weighted average common
shares outstanding 21,924,749 21,935,854 21,942,190 21,947,951
Net earnings (loss) per
common share (both basic
and diluted) (1) (3) $ 1.21 1.71 (0.07) (0.78)
_______________
(1) Net earnings (loss) per common share amounts were computed after
giving effect to the dividends on AMERCO's Preferred Stock.
(2) During fiscal year 2000, AMERCO extinguished $100.0 million of 6.65%
BATs originally due in fiscal year 2030 and $50.0 million of 7.05% to
7.10% Medium-Term Notes originally due in fiscal year 2007. This resulted
in an extraordinary loss of $0.3 million, net of tax of $0.2 million
($0.02 per share).
(3) Reflects the redemption of $25 million and $50 million shares of Series B
preferred stock in fiscal years 2000 and 1999, respectively.
22
Year 2000 Disclosure
In preparation for any potential Year 2000 processing problems,
AMERCO worked since 1997 to identify any changes necessary to its
existing computerized business systems to make these systems compliant
for Year 2000 processing. AMERCO has spent approximately $2.8 million to
date in its Year 2000 compliance efforts. Since January 1, 2000, AMERCO
has been assessing its information technology systems and has found no
major Year 2000 processing problems.
Stockholder Litigation
AMERCO has deducted for income tax purposes approximately
$372.0 million of the payments made to former shareholders in a stockholder
lawsuit. While AMERCO believes that such income tax deductions are
appropriate, there can be no assurance that such deductions ultimately
will be allowed in full. Reference is made to Note 15 in Notes to
Consolidated Financial Statements for a discussion of the stockholder
litigation.
Other
New pronouncements issued by the Financial Accounting Standards
Board adopted during the year are not material to the consolidated
financial statements of AMERCO. Further, pronouncements with future
effective dates are either not applicable or not material to the
consolidated financial statements of AMERCO.
23
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
In the normal course of business, AMERCO is exposed to fluctuations
in interest rates. AMERCO manages such exposure by the use of a variety
of derivative financial instruments when deemed prudent. AMERCO does not
enter into leveraged financial transactions or use derivative financial
instruments for trading purposes. The exposure to market risk for
changes in interest rates relates primarily to debt obligations.
AMERCO's objective is to mitigate the impact of changes in interest rates
on its variable rate debt. AMERCO uses interest rate swap agreements to
provide for matching the gain or loss recognition on the hedging
instrument with the recognition of the changes in the fair value of
hedged asset or liability attributable to the hedged risk or the earnings
effect of the hedged forecasted transaction. See Note 5 of Notes to
Consolidated Financial Statements. A fluctuation of the interest rate by
100 basis points would change AMERCO's interest expense by $1.1 million.
Foreign Currency Exchange Rate Risk
AMERCO's earnings are affected by fluctuations in the value of
foreign currency exchange rates. Approximately 2.0% of AMERCO's revenue
is generated in Canada. The result of a uniform 10% change in the value
of the U.S. dollar relative to the Canadian dollar would not be material.
AMERCO does not typically hedge any foreign currency risk since the
exposure is not considered material.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Report of Independent Accountants and Consolidated Financial
Statements of AMERCO, including the notes to such statements and the
related schedules, are set forth on pages 28 through 77 and are thereby
incorporated herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Registrants have had no disagreements with their independent
accountants in regard to accounting and financial disclosure matters and
have not changed their independent accountants during the two most recent
fiscal years.
24
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS
Information regarding (i) directors and executive officers of AMERCO
is set forth under the captions "Election of Directors", "Executive Officers
of AMERCO", and "Shoen Litigation" and (ii) compliance with Section 16(a)
is set forth under the caption "Section 16(a) Beneficial Ownership Reporting
Compliance" in AMERCO's Proxy Statement relating to the 2000 Annual Meeting
of Stockholders (the "2000 Proxy Statement") portions of which are incorporated
by reference into this Form 10-K Report, which will be filed with the
Securities and Exchange Commission in accordance with Rule 14a-6 promulgated
under the Securities Exchange Act of 1934, as amended. With the exception of
the foregoing information and other information specifically incorporated by
reference into this report, the 2000 Proxy Statement is not being filed as a
part hereof.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding executive compensation is set forth under the
caption "Executive Compensation" in the 2000 Proxy Statement, which information
is incorporated herein by reference; provided, however, that the "Board Report
on Executive Compensation" and the "Performance Graph" contained in the 2000
Proxy Statement are not incorporated by reference herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
Information regarding security ownership of certain beneficial owners and
management is set forth under the caption "Security Ownership of Certain
Beneficial Owners and Management" in the 2000 Proxy Statement, which information
is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions of
management is set forth under the captions "Certain Relationships and Related
Transactions" and "Shoen Litigation" in the 2000 Proxy Statement, which
information is incorporated herein by reference.
25
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report:
Page No.
--------
1. Financial Statements
Report of Independent Accountants 28
Consolidated Balance Sheets -
March 31, 2000 and 1999 29
Consolidated Statements of Earnings -
Years ended March 31, 2000, 1999 and 1998 31
Consolidated Statements of Changes in Stockholders'
Equity - Years ended March 31, 2000, 1999 and 1998 33
Consolidated Statements of Comprehensive Income -
Years ended March 31, 2000, 1999 and 1998 35
Consolidated Statements of Cash Flows - Years ended
March 31, 2000, 1999 and 1998 36
Notes to Consolidated Financial Statements 38
2. Additional Information
Summary of Earnings of Independent Trailer Fleets 70
Notes to Summary of Earnings of Independent
Trailer Fleets 71
3. Financial Statement Schedules required to be filed
by Item 8 and Paragraph (d) of this Item 14
Condensed Financial Information of Registrant --
Schedule I 73
Supplemental Information (For Property-Casualty
Insurance Underwriters) -- Schedule V 77
All other schedules are omitted as the required information is not
applicable or the information is presented in the financial statements
or related notes thereto.
(b) A report on Form 8-K dated February 4, 2000 was filed in connection with
the Company's issuance of $200,000,000 of 8.80% Senior Notes due 2005.
26
(c) Exhibits
Exhibit No. Description
----------- -----------
2.1 Order Confirming Plan (1)
2.2 Second Amended and Restated Debtor's Plan of
Reorganization Proposed by Edward J. Shoen (1)
3.1 Restated Articles of Incorporation (2)
3.2 Restated By-Laws of AMERCO as of August 27, 1996 (3)
4.1 Debt Securities Indenture dated May 1, 1996 (1)
4.2 First Supplemental Indenture, dated as of May 6, 1996 (4)
4.3 Rights Agreement, dated as of August 7, 1998 (13)
4.5 Second Supplemental Indenture, dated as of October 22, 1997 (11)
4.6 Calculation Agency Agreement (11)
4.7 6.65%-AMERCO Series 1997 A Bond Backed Asset Trust Certificates
("BATs") due October 15, 1999 (11)
4.8 Indenture dated September 10, 1996 (9)
4.9 First Supplemental Indenture dated September 10, 1996 (9)
4.10 Senior Indenture dated April 1, 1999 (14)
4.11 First Supplemental Indenture dated April 5, 1999 (14)
4.12 Second Supplemental Indenture dated February 4, 2000 (15)
10.1* AMERCO Employee Savings, Profit Sharing and
Employee Stock Ownership Plan
10.1A* First Amendment to the AMERCO Employee Savings, Profit Sharing
and Employee Stock Ownership Plan
10.2 U-Haul Dealership Contract (5)
10.3 Share Repurchase and Registration Rights Agreement with
Paul F. Shoen (5)
10.4 AMERCO Stock Option and Incentive Plan (5)
10.5 ESOP Loan Credit Agreement (6)
10.6 ESOP Loan Agreement (6)
10.7 Trust Agreement for the AMERCO Employee Savings,
Profit Sharing and Employee Stock Ownership Plan (6)
10.8 Amended Indemnification Agreement (6)
10.9 Indemnification Trust Agreement (6)
10.10 Promissory Note between SAC Holding Corporation
and a subsidiary of AMERCO (12)
10.11 Promissory Notes between Four SAC Self-Storage Corporation
and a subsidiary of AMERCO (12)
10.12 Management Agreement between Three SAC Self-Storage
Corporation and a subsidiary of AMERCO (12)
10.13 Management Agreement between Four SAC Self-Storage Corporation
and a subsidiary of AMERCO (12)
10.14 Agreement, dated October 17, 1995, among AMERCO, Edward J.
Shoen, James P. Shoen, Aubrey K. Johnson, John M. Dodds
and William E. Carty (8)
10.15 Directors' Release, dated October 17, 1995, executed by
Edward J. Shoen, James P. Shoen, Aubrey K. Johnson,
John M. Dodds and William E. Carty in favor of AMERCO (8)
10.16 AMERCO Release, dated October 17, 1995, executed by AMERCO in
favor of Edward J. Shoen, James P. Shoen, Aubrey K.
Johnson, John M. Dodds and William E. Carty (8)
10.21 Management Agreement between Five SAC Self-Storage
Corporation and a subsidiary of AMERCO (16)
10.22 Management Agreement between Eight SAC Self-Storage
Corporation and a subsidiary of AMERCO (16)
10.23 Management Agreement between Nine SAC Self-Storage
Corporation and a subsidiary of AMERCO (16)
10.24 Management Agreement between Ten SAC Self-Storage Corporation
and a subsidiary of AMERCO (16)
10.25 Management Agreement between Six-A SAC Self-Storage Corporation
and a subsidiary of AMERCO
10.26 Management Agreement between Six-B SAC Self-Storage Corporation
and a subsidiary of AMERCO
* Indicates compensatory plan arrangement
27
(c) Exhibits, continued
10.27 Management Agreement between Six-C SAC Self-Storage Corporation
and a subsidiary of AMERCO
10.28 Management Agreement between Eleven SAC Self-Storage
Corporation and a subsidiary of AMERCO
12 Statements Re: Computation of Ratios
21 Subsidiaries of AMERCO
23 Consent of Independent Accountants
27 Financial Data Schedule
________________
(1) Incorporated by reference to AMERCO's Registration Statement on Form
S-3, Registration no. 333-1195.
(2) Incorporated by reference to AMERCO's Quarterly Report on Form 10-Q
for the quarter ended December 31, 1992, file no. 1-11255.
(3) Incorporated by reference to AMERCO's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1996, file no. 1-11255.
(4) Incorporated by reference to AMERCO's Current Report on Form 8-K,
dated May 6, 1996, file no. 1-11255.
(5) Incorporated by reference to AMERCO's Annual Report on Form 10-K for
the year ended March 31, 1993, file no. 1-11255.
(6) Incorporated by reference to AMERCO's Annual Report on Form 10-K for
the year ended March 31, 1990, file no. 1-11255.
(7) Incorporated by reference to AMERCO's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1994, file no. 1-11255.
(8) Incorporated by reference to AMERCO's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1995, file no. 1-11255.
(9) Incorporated by reference to AMERCO's Current Report on Form 8-K
dated September 6, 1996, file no. 1-11255.
(10) Incorporated by reference to AMERCO's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1997, file no. 1-11255.
(11) Incorporated by reference to AMERCO's Quarterly Report on Form 10-Q
for the quarter ended December 31, 1997, file no. 1-11255.
(12) Incorporated by reference to AMERCO's Annual Report on Form 10-K for
the year ended March 31, 1997, file no. 1-11255.
(13) Incorporated by reference to AMERCO's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1998, file no. 1-11255.
(14) Incorporated by reference to AMERCO's Current Report on Form 8-K
dated April 5, 1999, file no. 1-11255.
(15) Incorporated by reference to AMERCO's Current Report on Form 8-K
dated February 4, 2000, file no. 1-11255.
(16) Incorporated by reference to AMERCO's Annual Report on Form 10-K for
the year ended March 31, 1999, file no. 1-11255.
28
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors
and Stockholders of AMERCO
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) on page 25 present fairly, in all material
respects, the financial position of AMERCO and its subsidiaries at March 31,
2000 and 1999, and the results of their operations and their cash flows for
each of the three years in the period ended March 31, 2000, in conformity
with accounting principles generally accepted in the United States. In
addition, in our opinion, the financial statement schedules listed in the
index appearing under Item 14(a)(3) on page 25 present fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements. These financial
statements and financial statement schedules are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements and financial statement schedules based on our audits.
We conducted our audits of these statements in accordance with auditing
standards generally accepted in the United States, which require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
As discussed in Note 1 to the consolidated financial statements, the Company
implemented Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities" in fiscal 1999.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The Summary of Earnings of
Independent Trailer Fleets included on pages 70 through 72 of this Form 10-K
is presented for purposes of additional analysis and is not a required part
of the basic financial statements. Such information has been subjected to
the auditing procedures applied in the audits of the basic financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic financial statements taken as a whole.
PricewaterhouseCoopers LLP
Phoenix, Arizona
June 26, 2000
29
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Balance Sheets
March 31,
Assets 2000 1999
-------------------------
(in thousands)
Cash and cash equivalents $ 48,435 44,505
Trade receivables, net 197,992 173,050
Notes and mortgage receivables, net 204,394 217,910
Inventories, net 84,614 80,159
Prepaid expenses 17,822 16,363
Investments, fixed maturities 884,824 900,995
Investments, other 166,167 181,892
Deferred policy acquisition costs 88,402 81,689
Other assets 49,913 96,116
-------------------------
Property, plant and equipment, at cost:
Land 197,956 196,960
Buildings and improvements 853,403 806,421
Furniture and equipment 263,694 234,894
Rental trailers and other rental equipment 210,472 186,660
Rental trucks 1,035,585 992,418
-------------------------
2,561,110 2,417,353
Less accumulated depreciation 1,178,448 1,122,529
-------------------------
Total property, plant and equipment 1,382,662 1,294,824
-------------------------
Total Assets $ 3,125,225 3,087,503
=========================
The accompanying notes are an integral part of these consolidated financial
statements.
30
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Balance Sheets, continued
March 31,
Liabilities and Stockholders' Equity 2000 1999
-------------------------
(in thousands, except
share and per share data)
Liabilities:
Accounts payable and accrued expenses $ 152,654 169,185
Notes and loans payable 1,137,840 1,114,748
Policy benefits and losses, claims and
loss expenses payable 548,043 546,599
Liabilities from premium deposits 461,673 457,759
Cash overdraft 30,460 28,169
Other policyholders' funds and liabilities 70,207 48,889
Deferred income 29,641 41,549
Deferred income taxes 109,413 64,580
-------------------------
Stockholders' equity:
Serial preferred stock, with or without par
value, 50,000,000 shares authorized -
Series A preferred stock, with no par
value, 6,100,000 shares authorized;
6,100,000 shares issued and
outstanding as of March 31, 2000
and 1999 - -
Series B preferred stock, with no par
value, 100,000 shares authorized;
none and 25,000 shares issued and
outstanding as of March 31, 2000 and
1999, respectively - -
Serial common stock, with or without par
value, 150,000,000 shares authorized -
Series A common stock of $0.25 par
value, 10,000,000 shares authorized;
5,762,495 shares issued as of
March 31, 2000 and 1999 1,441 1,441
Common stock of $0.25 par value,
150,000,000 shares authorized;
36,487,505 issued as of
March 31, 2000 and 1999 9,122 9,122
Additional paid-in capital 275,242 299,905
Accumulated other comprehensive income (42,317) (17,740)
Retained earnings 755,172 703,322
-------------------------
998,660 996,050
Less:
Cost of common shares in treasury, net
(19,840,613 and 19,635,913 shares as of
March 31, 2000 and 1999, respectively) 397,000 363,533
Unearned employee stock ownership
plan shares 16,366 16,492
-------------------------
Total stockholders' equity 585,294 616,025
Contingent liabilities and commitments
-------------------------
Total Liabilities and Stockholders' Equity $ 3,125,225 3,087,503
=========================
The accompanying notes are an integral part of these consolidated financial
statements.
31
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Earnings
Years ended March 31,
2000 1999 1998
------------------------------------
(in thousands, except
share and per share data)
Revenues
Rental revenue $ 1,150,532 1,074,220 1,018,699
Net sales 188,816 181,273 176,249
Premiums 262,057 226,847 164,613
Net investment and interest income 81,965 72,439 65,695
------------------------------------
Total revenues 1,683,370 1,554,779 1,425,256
Costs and expenses
Operating expenses 918,846 876,633 818,585
Cost of sales 111,975 106,789 101,699
Benefits and losses 209,592 176,560 175,576
Amortization of deferred
acquisition costs 34,987 31,721 14,194
Lease expense 136,044 118,742 89,879
Depreciation, net 87,647 73,066 69,655
------------------------------------
Total costs and expenses 1,499,091 1,383,511 1,269,588
Earnings from operations 184,279 171,268 155,668
Interest expense 81,532 73,658 79,369
------------------------------------
Pretax earnings 102,747 97,610 76,299
Income tax expense (36,922) (35,101) (27,643)
------------------------------------
Earnings from operations before
extraordinary loss on early
extinguishment of debt 65,825 62,509 48,656
Extraordinary loss on early
extinguishment of debt, net (334) - (13,672)
------------------------------------
Net earnings $ 65,491 62,509 34,984
====================================
The accompanying notes are an integral part of these consolidated financial
statements.
32
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Earnings, continued
Years ended March 31,
2000 1999 1998
-------------------------------------
(in thousands, except
share and per share data)
Basic earnings per common share:
Earnings from operations before
extraordinary loss on early
extinguishment of debt $ 2.39 2.07 1.28
Extraordinary loss on early
extinguishment of debt, net (0.02) - (0.62)
------------------------------------
Net earnings $ 2.37 2.07 0.66
====================================
Diluted earnings per common share:
Earnings from operations before
extraordinary loss on early
extinguishment of debt $ 2.38 2.07 1.28
Extraordinary loss on early
extinguishment of debt, net (0.02) - (0.62)
------------------------------------
Net earnings $ 2.36 2.07 0.66
====================================
Weighted average common shares
outstanding:
Basic 21,934,390 21,937,686 21,896,101
====================================
Diluted 22,226,057 23,940,623 21,896,101
====================================
The accompanying notes are an integral part of these consolidated financial
statements.
33
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
Years ended March 31,
2000 1999 1998
---------------------------------
(in thousands, except
share and per share data)
Series A common stock of $0.25 par value:
10,000,000 shares authorized; 5,762,495
shares issued in 2000, 1999 and 1998
Beginning and end of year $ 1,441 1,441 1,441
---------------------------------
Common stock of $0.25 par value:
150,000,000 shares authorized;
36,487,505 shares issued in
2000, 1999 and 1998
Beginning and end of year 9,122 9,122 9,122
---------------------------------
Additional paid-in capital:
Beginning of year 299,905 313,444 337,933
Repurchase of preferred stock (25,000) (50,000) (25,000)
Gain on sale of property to
related party, net - 35,996 -
Issuance of common shares under
leveraged employee stock
ownership plan 337 465 511
---------------------------------
End of year 275,242 299,905 313,444
---------------------------------
Accumulated other comprehensive income:
Beginning of year (17,740) (9,384) (9,722)
Foreign currency translation (2,899) (6,736) (4,542)
Fair market value of cash
flow hedge 2,192 (3,631) -
Unrealized gain (loss) on
investments (23,870) 2,011 4,880
---------------------------------
End of year (42,317) (17,740) (9,384)
---------------------------------
The accompanying notes are an integral part of these consolidated financial
statements.
34
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity, continued
Years ended March 31,
2000 1999 1998
---------------------------------
(in thousands, except
share and per share data)
Retained earnings:
Beginning of year 703,322 658,227 644,009
Net earnings 65,491 62,509 34,984
Preferred stock dividends paid:
Series A ($2.13 per share for
2000, 1999 and 1998) (12,964) (12,964) (12,964)
Series B ($27.14, $97.44 and
$81.04 per share for 2000,
1999 and 1998, respectively) (677) (4,450) (7,802)
---------------------------------
End of year 755,172 703,322 658,227
---------------------------------
Less Treasury stock:
Beginning of year 363,533 359,723 359,723
Net increase 33,467 3,810 -
---------------------------------
End of year 397,000 363,533 359,723
---------------------------------
Less Unearned employee stock
ownership plan shares:
Beginning of year 16,492 18,068 20,740
Purchase of shares 1,002 401 5
Repayments from loan (1,128) (1,977) (2,677)
---------------------------------
End of year 16,366 16,492 18,068
---------------------------------
Total stockholders' equity $ 585,294 616,025 595,059
=================================
The accompanying notes are an integral part of these consolidated financial
statements.
35
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Comprehensive Income
Years ended March 31,
2000 1999 1998
--------------------------
(in thousands)
Comprehensive income:
Net earnings $ 65,491 62,509 34,984
Other comprehensive income
Foreign currency translation (2,899) (6,736) (4,542)
Fair market value of cash flow hedges 2,192 (3,631) -
Unrealized gain (loss) on investments (23,870) 2,011 4,880
--------------------------
Total comprehensive income $ 40,914 54,153 35,322
==========================
The accompanying notes are an integral part of these consolidated financial
statements.
36
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended March 31,
2000 1999 1998
---------------------------
(in thousands)
Cash flows from operating activities:
Net earnings $ 65,491 62,509 34,984
Depreciation and amortization 135,481 114,102 113,822
Provision for losses on accounts
receivable 4,601 4,648 4,108
Net gain on sale of real and
personal property (8,705) (524) (1,776)
Gain on sale of investments (873) (3,372) (944)
Changes in policy liabilities
and accruals 15,326 (23,448) 37,021
Additions to deferred policy
acquisition costs (31,804) (40,859) (10,010)
Net change in other operating
assets and liabilities 58,140 46,493 3,410
---------------------------
Net cash provided by operating activities 237,657 159,549 180,615
Cash flows from investing activities:
Purchases of investments:
Property, plant and equipment (417,647) (298,495) (392,298)
Fixed maturities (158,304) (213,107) (123,832)
Common stock - (2,553) (8,573)
Preferred stock (369) (21,700) (4,054)
Other asset investment - - (24,500)
Real estate (70) (334) -
Mortgage loans (27,367) (93,243) (42,125)
Proceeds from sales of investments:
Property, plant and equipment 242,699 205,211 291,321
Fixed maturities 133,915 223,114 131,334
Common stock - 2,571 -
Preferred stock 968 3,538 1,015
Real estate 1,672 5,622 1,331
Mortgage loans 11,555 21,826 25,576
Changes in other investments 31,269 (37,232) (16,699)
---------------------------
Net cash used by investing activities (181,679) (204,782) (161,504)
The accompanying notes are an integral part of these consolidated financial
statements.
37
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Cash Flows, continued
Years ended March 31,
2000 1999 1998
----------------------------
(in thousands)
Cash flows from financing activities:
Net change in short-term borrowings (146,836) 135,836 122,500
Proceeds from notes 350,000 - 300,000
Debt issuance costs (8,285) (415) (2,956)
Leveraged Employee Stock Ownership Plan:
Purchase of shares (1,002) (401) (5)
Repayments from loan 1,128 1,977 2,677
Principal payments on notes (180,072) (46,411) (380,727)
Repurchase of preferred stock (25,000) (50,000) (25,000)
Extraordinary loss on early
extinguishment of debt, net (334) - (13,672)
Net change in cash overdraft 2,291 6,755 (2,192)
Preferred stock dividends paid (13,641) (17,414) (20,766)
Treasury stock acquisitions, net (33,467) (3,810) -
Investment contract deposits 63,978 93,688 51,943
Investment contract withdrawals (60,808) (61,673) (61,059)
----------------------------
Net cash provided (used) by
financing activities (52,048) 58,132 (29,257)
----------------------------
Increase (decrease) in cash
and cash equivalents 3,930 12,899 (10,146)
Cash and cash equivalents at
beginning of year 44,505 31,606 41,752
----------------------------
Cash and cash equivalents at
end of year $ 48,435 44,505 31,606
============================
The accompanying notes are an integral part of these consolidated financial
statements.
38
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
AMERCO, a Nevada corporation (AMERCO), is the holding company for
U-Haul International, Inc. (U-Haul), Amerco Real Estate Company (Real
Estate), Republic Western Insurance Company (Republic) and Oxford Life
Insurance Company (Oxford). All references to a fiscal year refer to
AMERCO's fiscal year ended March 31 of that year.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
parent corporation, AMERCO, and its wholly-owned subsidiaries. All material
intercompany accounts and transactions of AMERCO and its subsidiaries have
been eliminated.
Republic and Oxford have been consolidated on the basis of calendar
years ended December 31. Accordingly, all references to the years 1999, 1998
and 1997 correspond to AMERCO's fiscal years 2000, 1999 and 1998,
respectively.
The operating results and financial position of AMERCO's consolidated
insurance operations are determined as of December 31 of each year. There
were no effects related to intervening events between January 1 and March 31
of 2000, 1999 or 1998 that would materially affect the consolidated
financial position or results of operations for the financial statements
presented herein. See Note 20 of Notes to Consolidated Financial Statements
for additional information regarding the insurance subsidiaries.
DESCRIPTION OF BUSINESS
Moving and self-storage operations consist of the rental of trucks and
trailers, sale of moving supplies such as boxes and the rental of self-
storage spaces to the do-it-yourself mover. Operations are under the
registered tradename U-Haul throughout the United States
and Canada.
Real Estate owns approximately 90% of AMERCO's real estate assets,
including U-Haul's Center and Storage locations. The remainder of the
properties are owned by various U-Haul entities. Real Estate is responsible
for managing all of the properties including the environmental risks of the
properties. Real Estate is responsible for the purchase of all properties
used by AMERCO or any of its subsidiaries. Real Estate also handles all of
the dispositions (sale and lease) of unused real estate.
Republic originates and reinsures property and casualty type insurance
products for various market participants, including independent third
parties, U-Haul's customers, independent dealers and AMERCO.
Oxford originates and reinsures annuities, credit life and disability,
critical illness insurance, single premium whole life, group life and
disability coverage, and Medicare supplement insurance. Oxford also
administers the self-insured employee health and dental plans for AMERCO.
FOREIGN CURRENCY
The consolidated financial statements include the accounts of U-Haul
Co. (Canada) Ltd., a subsidiary of U-Haul. The assets and liabilities,
denominated in foreign currency, are translated into U.S. dollars at the
exchange rate as of the balance sheet date. Revenue and expense amounts are
translated at average monthly exchange rates. The related translation gains
or losses are included in the Consolidated Statements of Changes in
Stockholders' Equity and Consolidated Statements of Comprehensive Income.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts in the financial statements and
accompanying notes. Actual results could differ from those estimates.
39
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
CASH AND CASH EQUIVALENTS
AMERCO considers liquid investments with an original maturity of three
months or less to be cash equivalents (zero and $1,000,000 as of March 31,
2000 and 1999, respectively).
RECEIVABLES
Accounts receivable include trade accounts from customers and dealers.
Republic and Oxford receivables include premiums and agents' balances due,
net of commissions payable and amounts due from ceding reinsurers.
Accounts receivable are reduced by amounts considered by management to be
uncollectible based on historical collection loss exper