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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, 2001
--------------------------------------------------
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. [ ]
21,892,737 shares of AMERCO common stock, $0.25 par value, were
outstanding at June 29, 2001. 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 $141,937,624. The aggregate market
value was computed using the closing price for the common stock trading on
NASDAQ on June 28, 2001.
5,385 shares of U-Haul International, Inc. common stock, $0.01 par value,
were outstanding at June 29, 2001. 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 August 31, 2001, 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 (RepWest) 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.
RepWest and Oxford are consolidated on the basis of calendar years ended
December 31. Accordingly, all references to the years 2000, 1999 and 1998
correspond to AMERCO's fiscal years 2001, 2000 and 1999, respectively. AMERCO
has four industry segments represented by Moving and Storage Operations
(U-Haul), Real Estate, Property and Casualty Insurance (RepWest) 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, the 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 REGISTERED TRADEMARK 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
RepWest 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, credit life and disability, life
insurance and supplemental health products. Oxford also administers the self-
insured employee health and dental plans for AMERCO.
On November 13, 2000, Oxford acquired all of the issued and outstanding
shares of Christian Fidelity Life Insurance Company (CFLIC) in an exchange of
cash for stock. CFLIC is a Texas-based insurance company specializing in
providing supplemental health insurance and is licensed in 31 states. The
acquisition was accounted for using the purchase method of accounting and,
accordingly, CFLIC's results of operations have been included in the
consolidated financial statements since the date of acquisition. Oxford
funded the acquisition from available cash and short-term funds.
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 REGISTERD TRADEMARK basis through independent dealers.
Since 1974, U-Haul has developed a network of Company 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, 2001,
U-Haul's distribution network included 1,380 U-Haul Centers and 15,300
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 16,680 Company
operated 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, 2001, the U-Haul rental
equipment fleet consisted of 100,400 trucks, 85,300 trailers and 20,400 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 REGISTERD TRADEMARK 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 REGISTERED TRADEMARK - which provides moving customers with
a damage waiver, cargo protection and medical and life coverage; and,
(ii) Safestor REGISTERED TRADEMARK - 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 REGISTERED TRADEMARK 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. 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 1,000 owned or managed storage locations in the United States
and Canada, U-Haul offers for rent more than 32.5 million square feet of self-
storage space. U-Haul's self-storage facility locations range in sizes up to
152,600 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 32,784 storage rooms during fiscal year 2001, the average
occupancy rate of facilities operating over one year was 83.19%, with modest
seasonal variations. During fiscal year 2001, delinquent rentals as a
percentage of total storage rentals were approximately 7.7%. 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, 2001, U-Haul's non-seasonal work force consisted of 16,800
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 $42.6 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. As a result of the
cleanup costs of approximately $3.0 to $9.0 million required by the State of
Washington, INW filed for reorganization under the federal bankruptcy laws in
May of 2001.
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
RepWest's principal business strategy is to provide specialty insurance for
personal, commercial and reinsurance markets. RepWest focuses on selected
regional and under-served customers through managing general agents, independent
agents, brokers and direct sales.
Oxford's business strategy is long-term capital growth through direct
writing and reinsuring of annuity, credit life and disability and supplemental
health insurance. Oxford is pursuing this growth strategy of increased direct
writing via acquisitions of insurance companies, expanded distribution channels
and product development. The acquisitions of North American Insurance Company
and Safe Mate Life Insurance Company in 1997 and Christian Fidelity Life
Insurance Company in 2000 represent a significant movement toward this long-term
goal. Oxford has significantly expanded product offerings, distribution
channels and administrative capabilities through these acquisitions.
Investments
RepWest 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 RepWest and Oxford emphasize protection of
principal through the purchase of investment grade fixed-income securities.
Approximately 88.0% of RepWest's and 93.2% 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
RepWest 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
RepWest and Oxford are subject to regulation and supervision 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. RepWest's unpaid losses 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 RepWest and Oxford.
In 1998, the NAIC adopted the Codification of Statutory Accounting
Principles guidance, which will replace the current Accounting Practices and
Procedures manual as the NAIC's primary guidance for statutory accounting as of
January 1, 2001. The Codification provides guidance for areas where statutory
accounting has been silent and changes current statutory accounting in some
areas. The Insurance Departments of the State of Arizona and Louisiana has
adopted the Codification guidance, effective January 1, 2001. The effect of
adoption on RepWest's statutory surplus are increases of approximately
$11,301,000 respectively, as filed in the entities' March 31, 2001 quarterly
statements as a result of a recording of a net deferred tax asset.
RepWest and Oxford are in compliance with NAIC minimum risk-based
capitalization requirements for insurance companies as of December 31, 2000.
7
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. Some of the insurance companies are owned by
stockholders and others are owned by policyholders (mutual). 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.
Employees
RepWest's non-seasonal work force consists of 394 full and part-time
employees.
Oxford's non-seasonal work force consists of 227 full and part-time
employees.
Life Insurance
Oxford offers annuities, credit life and disability, life insurance and
supplemental health 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.
Property and Casualty
RepWest'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, 2000, approximately 11.4% of RepWest's written premiums
resulted from U-Haul underwriting activities. RepWest'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, commercial auto,
mobile homes and excess workers' compensation. RepWest's assumed reinsurance
underwriting is done via broker markets. In an effort to decrease risk, RepWest
has entered into various catastrophe cover policies to limit its exposure.
The liability for reported and unreported losses is based on both RepWest'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 losses and loss adjustment 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. RepWest 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 adjustment expense are not discounted.
Activity in the liability for unpaid losses and loss adjustment expenses
is summarized as follows:
2000 1999 1998
---------------------------
(in thousands)
Balance at January 1 $ 334,857 344,748 384,816
Less reinsurance recoverable 58,403 68,135 75,286
---------------------------
Net balance at January 1 276,454 276,613 309,530
Incurred related to:
Current year 155,073 121,861 116,069
Prior years 35,387 16,052 (8,827)
---------------------------
Total incurred 190,460 137,913 107,242
Paid related to:
Current year 61,196 55,136 36,407
Prior years 117,025 82,936 103,752
---------------------------
Total paid 178,221 138,072 140,159
Net balance at December 31 288,693 276,454 276,613
Plus reinsurance recoverable 80,599 58,403 68,135
---------------------------
Balance at December 31 $ 369,292 334,857 344,748
===========================
As a result of changes in estimates of insured events in prior years, the
provision for unpaid losses and loss adjustment expenses (net of reinsurance
recoveries of $36.5 million) increased by $35.3 million in 2000.
8
The table on page 9 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.
9
Unpaid Loss and Loss Adjustment Expenses
December 31
- --------------------------------------------------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
- --------------------------------------------------------------------------------------------------------------------------
(in thousands)
Unpaid Loss and Loss
Adjustment Expenses: $226,324 236,019 238,762 314,482 329,741 341,981 332,674 384,816 344,748 334,857 369,292
Paid (Cumulative)
as of:
One year later 55,128 65,532 83,923 70,382 86,796 89,041 89,336 103,752 82,936 117,025
Two years later 97,014 105,432 123,310 115,467 139,247 150,001 161,613 174,867 164,318
Three years later 120,994 126,390 153,030 146,640 173,787 195,855 208,168 216,966
Four years later 133,338 143,433 173,841 166,068 198,434 226,815 232,726
Five years later 144,764 153,730 181,677 181,174 219,425 243,855
Six years later 152,424 160,875 191,938 194,652 231,447
Seven years later 157,979 168,975 200,281 203,535
Eight years later 163,860 175,364 207,719
Nine years later 169,681 182,235
Ten years later 175,696
Reserve Reestimated
as of:
One year later 229,447 231,779 251,450 321,058 338,033 353,508 354,776 357,733 339,602 377,096
Two years later 221,450 224,783 254,532 323,368 340,732 369,852 342,164 361,306 371,431
Three years later 211,998 223,403 253,844 309,936 349,459 328,445 346,578 369,598
Four years later 207,642 214,854 231,536 317,687 302,808 331,897 349,810
Five years later 200,629 198,320 239,888 267,005 300,180 339,665
Six years later 189,601 210,872 263,843 262,517 307,306
Seven years later 200,556 231,407 259,798 267,948
Eight years later 217,005 227,603 265,285
Nine years later 213,981 230,851
Ten years later 215,801
Cumulative Redundancy
(Deficiency) $ 10,523 5,168 (26,523) 46,534 22,435 2,316 (17,136) 15,218 (26,686) (42,239)
Retro Premium
Recoverable $ 7,427 2,549 (988) 6,061 5,458 10,183 10,645 10,532 6,797 12,411
Reestimated Reserve:
Amount (Cumulative) $ 17,950 7,717 (27,511) 52,595 27,893 12,499 (6,491) 25,750 (19,889) (29,828)
10
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 owns or operates 1,380 U-Haul Centers (including Company-
owned storage locations), and operates 12 manufacturing and assembly facilities.
U-Haul also operates 102 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
in Item 8 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.
11
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
As of June 29, 2001, there were approximately 1,283 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,
----------------------------------------------
2001 2000
----------------------------------------------
High Low High Low
-----------------------------------------------
First quarter 20 16 1/4 25 1/2 20 3/8
Second quarter 21 1/8 18 5/16 28 9/16 22 1/4
Third quarter 24 3/8 18 9/16 29 3/4 23 3/8
Fourth quarter 22 3/8 17 7/32 26 63/64 16 1/2
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.
12
ITEM 6. SELECTED FINANCIAL DATA
AMERCO AND CONSOLIDATED SUBSIDIARIES
For the Years Ended March 31,
-------------------------------------------------------------------
2001 2000 1999 1998 1997
-------------------------------------------------------------------
(in thousands, except share, per share data and ratios)
Summary of Operations:
Rental revenue and net sales $ 1,399,279 1,339,348 1,255,493 1,194,948 1,146,751
Premiums, net investment and interest income 414,359 344,269 300,219 231,430 239,081
--------- --------- --------- --------- ---------
1,813,638 1,683,617 1,555,712 1,426,378 1,385,832
--------- --------- --------- --------- ---------
Operating expenses
and cost of sales (4) 1,116,006 1,031,068 984,355 921,406 882,925
Benefits, losses and amortization of
deferred acquisition costs 319,312 244,579 208,281 189,770 190,623
Lease expense 178,458 136,044 118,742 89,879 85,973
Depreciation, net (3) 88,091 87,647 73,066 69,655 66,742
--------- --------- --------- --------- ---------
1,701,867 1,499,338 1,384,444 1,270,710 1,226,263
--------- --------- --------- --------- ---------
Earnings 111,771 184,279 171,268 155,668 159,569
Interest expense 87,773 81,532 73,658 79,369 76,041
--------- --------- --------- --------- ---------
Pretax earnings 23,998 102,747 97,610 76,299 83,528
Income tax expense (8,912) (36,922) (35,101) (27,643) (29,344)
--------- --------- --------- --------- ---------
Earnings from operations before
extraordinary loss on early
extinguishment of debt 15,086 65,825 62,509 48,656 54,184
Extraordinary loss on early
extinguishment of debt, net
(7) (8) (9) (10) (11) (2,121) (334) - (13,672) (2,319)
--------- --------- --------- --------- ---------
Net earnings $ 12,965 65,491 62,509 34,984 51,865
========= ========= ========= ========= =========
Earnings per common share
(both basic and diluted):
Earnings from operations before
extraordinary loss on early
extinguishment of debt per
common share (2) $ 0.10 2.39 2.07 1.28 1.44
Net earnings (2) (7) (8) (9) (10) (11) 0.00 2.37 2.07 0.66 1.35
Weighted average common shares
outstanding 21,486,370 21,934,390 21,937,686 21,896,101 25,479,651
Cash dividends declared:
Preferred stock $ 12,963 13,641 17,414 20,766 16,875
Common stock - - - - -
Ratio of earnings to fixed charges (1) 1.13 1.71 1.73 1.56 1.64
13
ITEM 6. SELECTED FINANCIAL DATA, continued
AMERCO AND CONSOLIDATED SUBSIDIARIES
For the Years Ended March 31,
-------------------------------------------------------------------
2001 2000 1999 1998 1997
-------------------------------------------------------------------
(in thousands, except share, per share data and ratios)
Balance Sheet Data:
Property, plant and
equipment, net $ 1,362,644 1,382,662 1,294,824 1,275,756 1,247,066
Total assets 3,384,064 3,125,225 3,087,503 2,913,277 2,718,994
Notes and loans payable 1,156,848 1,137,840 1,114,748 1,025,323 983,550
Stockholder's equity (10) 615,366 585,294 616,025 595,059 602,320
Other information:
EBITDAR (5) 434,414 455,804 404,112 359,369 339,906
Operating profit margin (6) 9.4% 13.6% 13.6% 13.0% 13.6%
(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 all years presented.
(3) Reflects the change in estimated residual values during the year ended March 31, 1998.
(4) 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.
(5) 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.
(6) Operating profit margin - Earnings from operations plus 1/3 lease expense divided by total revenues.
(7) 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.
(8) Reflects the early extinguishment of debt and long-term notes with notional amounts totaling $76.0 million and $255.0
million, respectively, during fiscal year 1998.
(9) 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.
(10) Reflects the redemption of $25 million, $50 million and $25 million of Series B Preferred Stock in fiscal years 2000, 1999
and 1998, respectively.
(11) Reflects the early extinguishment of Medium-Term Notes and Bond Backed Asset Trust certificates with notional amounts
totaling $25.0 million and $100.0 million, respectively, during fiscal year 2001.
14
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
- -------------------------------
Consolidated Group
To meet the needs of its customers, U-Haul must maintain a large inventory
of fixed asset rental items. At March 31, 2001, net property, plant and
equipment represented approximately 63.1% of total assets from non-insurance
operations and approximately 40.2% of consolidated assets. In fiscal year
2001, gross capital expenditures for property, plant and equipment were $358.9
million, as compared to $417.6 million and $298.5 million in fiscal years 2000
and 1999, 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, 2002, 2003 and 2004,
U-Haul estimates gross capital expenditures will average approximately $232
million primarily reflecting rental fleet rotation. This level of capital
expenditures, combined with a potential range of $77.5-$175 million in annual
long-term debt maturities, are expected to create annual average funding needs
of approximately $333-$408 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.
Consolidated Net Cash Provided by Operating Activities
Net cash provided by operating activities was $126.1 million, $237.7
million and $159.5 million in fiscal years 2001, 2000 and 1999, respectively.
Details by material segment follows:
Moving and Storage Operations
Cash provided by operating activities was $39.7 million, $147.5 million and
$128.5 million in fiscal years 2001, 2000 and 1999, respectively. The decrease
from fiscal year 2000 to fiscal year 2001 is mainly due to a decrease in
intercompany payable. The increase from fiscal year 1999 to fiscal year 2000 is
partially due to an increase in net income.
15
Real Estate Operations
Cash provided by operating activities was $50.5 million, $24.8 million and
$38.0 million in fiscal years 2001, 2000 and 1999, respectively. The increase
in fiscal year 2001, is due to an increase in intercompany payable. This is
due to dividends paid related to the sale of property. The decrease in
fiscal year 2000, is due to a decrease in the intercompany payable.
Property and Casualty
Cash provided (used) by operating activities was $21.1 million, $(11.1)
million and $(21.7) million for the years ended December 31, 2000, 1999 and
1998, respectively. The 2000 to 1999 change resulted from increased premium
collections and funds withheld, offset by increased loss and loss adjustment
expense payments and policy acquisition costs associated with new business
production. The 1999 to 1998 change resulted 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
agents' balances and the intercompany receivable due from affiliates.
RepWest's cash and cash equivalents and short-term investment portfolio
were $17.0 million, $6.0 million and $6.1 million at December 31, 2000, 1999 and
1998, 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 RepWest to schedule cash needs in accordance with investment and
underwriting proceeds.
16
LIFE INSURANCE
Cash provided by operating activities was $8.7 million, $22.2 million and
$34.6 million for the years ended December 31, 2000, 1999 and 1998,
respectively. The decrease in cash flows from operating activities in 2000 and
1999 relates to paid loss experience. In 2000, cash flows provided by financing
activities were $14.7 million, $3.2 million and $32.0 million for the years
ended December 31, 2000, 1999 and 1998, respectively. Cash flows from deferred
annuity sales increase investment contract deposits, which are a component of
financing activities, as well as the purchase of fixed maturities, which are a
component of investing activities. The increase in 2000 from 1999 is due to a
higher ratio of annuity deposits versus withdrawals, the opposite occurred in
1999 compared to 1998.
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 amounted to $45.0 million, $30.7 million and
$63.4 million at December 31, 2000, 1999 and 1998, respectively. Management
believes that the overall sources of liquidity will continue to meet foreseeable
cash needs.
Consolidated Stockholder's Equity
Consolidated stockholder's equity was $615.4, $585.3 and $616.0 million for
the fiscal years 2001, 2000 and 1999, respectively. Details by material segment
follow:
Moving and Storage Operations
U-Haul's stockholder's equity was $522.9 million, $435.2 million and $384.7
million for the fiscal years 2001, 2000 and 1999, respectively. The increase
in fiscal year 2001 is mainly the result of increased additional paid in capital
due to the sale of property to a related party. The increase in fiscal year
2000 was due to earnings.
Real Estate Operations
Real Estate stockholder's equity was $89.1 million, $96.1 million and $79.5
million in fiscal years 2001, 2000 and 1999, respectively. The decrease in
fiscal year 2001 relates to the payment of a dividend to U-Haul partially
offset by increased earnings. The increase in fiscal year 2000 was due to
earnings.
17
Property and Casualty
RepWest 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 81.8% of total
liabilities.
The liability for reported and unreported losses are based upon both
RepWest'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.
RepWest's stockholder's equity was $192.1 million, $208.5 million and
$211.4 million at December 31, 2000, 1999 and 1998, respectively. The decrease
from 1999 to 2000 is a result of an operating loss and a change in market value
for the available for sale investment portfolio. RepWest considers current
stockholder's equity to be adequate to support future growth and absorb
unforeseen risk events. RepWest 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 $99.8 million, $88.1 million and $93.6
million in 2000, 1999 and 1998, respectively. The increase from 1999 to 2000 is
a result of earnings and change in market value for the available for sale
investment portfolio. The decrease from 1998 to 1999 was due to the change in
market value for the available for sale investment portfolio offset by earnings.
Oxford did not pay dividends to its parent during 2000, 1999 or 1998.
Insurance Operations
- --------------------
Applicable laws and regulations of the State of Arizona require RepWest and
Oxford to maintain minimum capital determined in accordance with statutory
accounting practices. Such amount is $1.0 million and $0.4 million, for RepWest
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 is $11.7 million and $0.7 million for RepWest and Oxford,
respectively at December 31, 2000. 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, 2001, AMERCO had $1,156.8 million in
total notes and loans outstanding and unutilized committed lines of credit of
approximately $94.9 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, 2001, AMERCO was in compliance with these
covenants.
Reference is made to Note 5 in Item 8 of Notes to Consolidated Financial
Statements.
Results of Operations - Consolidated
- ------------------------------------
Consolidated Rental Revenue
Rental revenue, net of commission expense was $1,205.0 million, $1,150.5
million, and $1,074.2 million in fiscal years 2001, 2000 and 1999, respectively.
Details by material segment follow:
18
Moving and Storage Operations
Rental revenue was $1,202.4 million, $1,148.2 million and $1,072.1 million
in fiscal years 2001, 2000 and 1999, respectively. The increase from fiscal
year 2000 to fiscal year 2001 is due to an increase in one way transactions with
an improved average dollar per transaction on one way rentals as well as growth
in transactions in trailer rentals and support rental items. 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.
Real Estate Operations
Rental revenue, before intercompany eliminations, were $71.9 million, $73.4
million and $74.0 million in fiscal years 2001, 2000 and 1999, respectively.
Intercompany rental revenue was $71.1 million, $71.0 million and $71.9 million
in fiscal years 2001, 2000 and 1999, respectively. The decrease in fiscal year
2001 is related to the sale of properties to a related party while rental
revenue was consistent between fiscal year 1999 and fiscal year 2000.
Consolidated Net Sales
Net sales revenues were $194.3 million, $188.8 million and $181.3 million
in fiscal years 2001, 2000 and 1999, respectively. Revenue growth from the sale
of moving support items (i.e. boxes, etc.) and propane resulted in the increase
for each year.
Consolidated Premiums
Premium revenues, after intercompany eliminations, were $323.2 million,
$262.1 million and $226.8 million in fiscal years 2001, 2000 and 1999,
respectively. Details by material segment follow:
Property and Casualty
Premium revenues, before intercompany eliminations, were $218.1 million,
$173.8 million and $145.3 million for the years ended December 31, 2000, 1999
and 1998, respectively. General agency premiums were $64.3 million, $17.8
million and $6.5 million for the years ended December 31, 2000, 1999 and 1998,
respectively. The increase from 1999 to 2000 was the result of two new agency
programs. Assumed treaty reinsurance premiums were $83.2 million, $80.7 million
and $51.2 million for the years ended December 31, 2000, 1999 and 1998,
respectively. Rental industry revenues were $43.3 million, $50.3 million and
$66.6 million for the years ended December 31, 2000, 1999 and 1998,
respectively. This decline was caused by cost measures implemented on the
U-Haul rental industry Business Auto General Liability Policy.
Life Insurance
Premium revenues, before intercompany eliminations, were $112.6 million,
$96.4 million and $94.5 million for the years ended December 31, 2000, 1999 and
1998, respectively. Oxford increased Medicare supplement premiums through
direct writings and the acquisition of Christian Fidelity Life Insurance Company
(CFLIC); these actions increased premiums by $12.5 million and $19.1 million
in 2000 and 1999, respectively. Premiums from Oxford's life insurance lines
decreased $1.7 million and increased $1.1 million from 2000 and 1999,
respectively due to production fluctuations from year to year. 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 $3.3 million and $6.7 million increase in premium from 2000 and 1999,
respectively. Annuitizations increased by $1.1 million and decreased $3.0
million in 2000 and 1999, respectively. Premiums decreased $5.3 million in
1999 due to the sale of NAFCIC. Other health insurance premiums increased
$1.0 million in 2000 due to a higher reinsurance retention level and decreased
$0.5 million in 1999 due to the elimination of certain NAI health lines.
Consolidated Net Investment and Interest Income
Net investment and interest income was $91.2 million, $82.2 million and
$73.4 million in fiscal years 2001, 2000 and 1999, respectively. Details by
material segment follow:
Moving and Storage Operations
Interest income was $27.9 million, $19.5 million and $12.9 million in
fiscal years 2001, 2000 and 1999, respectively. The increase in fiscal year
2001 is mainly related to increased storage loan activity. The increase in
interest during fiscal year 2000 reflects higher average note receivable
balances.
19
Real Estate Operations
Net investment and interest income was $11.0 million, $7.0 million and $4.5
million in fiscal years 2001, 2000 and 1999, respectively. The increase in
fiscal year 2001 is related to increased investments. The increase in fiscal
year 2000 is due to interest income received on notes receivable.
Property and Casualty
Net investment income was $29.1 million, $33.0 million and $35.8 million
for the years ended December 31, 2000, 1999 and 1998, respectively. The
reductions are attributable to decreased gains and lower annual average invested
assets, as well as the write down of $3.0 million of fixed maturity investments
during 2000.
Life Insurance
Net investment income was $22.2 million, $21.5 million and $20.1 million
for the years ended December 31, 2000, 1999 and 1998, respectively. This
increase is due to improved interest rate spreads on the retirement savings
products offset by write downs of $3.5 million of fixed maturity investments
during 2000.
Consolidated Operating Expenses
Operating expenses were $998.8 million, $919.1 million and $877.6 million
in fiscal years 2001, 2000 and 1999, respectively. Details by material segment
follow:
Moving and Storage Operations
Operating expenses, before intercompany eliminations, were $986.5 million,
$931.1 million and $893.0 million in fiscal years 2001, 2000 and 1999,
respectively. The increased expense in fiscal year 2001 is due to increased
personnel cost, higher repair expense, a substantial lawsuit settlement and
other administrative costs. Also, the addition of storage rooms will initially
cause an increase in operating expenses without corresponding increases in
earnings until the properties reach a stabilized level of occupancy. The
increase in fiscal year 2000 is due to the increased cost of liability
insurance, due to transactional growth, increased personnel costs and other
administrative costs.
Real Estate Operations
Operating expenses, before intercompany eliminations, were $0.4 million,
$4.0 million and $6.2 million in fiscal years 2001, 2000 and 1999, respectively.
The decrease in fiscal year 2001 is due to an increase in intercompany lease
payments which lowers their operating expense. 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 $56.7 million,
$35.0 million and $35.6 million for the years ended December 31, 2000, 1999 and
1998, respectively. The increase is due to commission expenses associated with
the growth in written premium and a $4.6 million decrease in the capitalization
of deferred acquisition costs for the year ended December 2000 as well as
general and administrative expenses required to support the new business
expansion. Commission expenses were $33.1 million, $19.1 million and $18.8
million for the years ended December 2000, 1999 and 1998, respectively.
Lease expenses increased to $2.1 million, $1.9 million and $1.3 million for the
years ended December 2000, 1999 and 1998, respectively. All other underwriting
expenses consisted of $21.4 million, $13.9 million and $15.5 million for the
years ended December 2000, 1999 and 1998, respectively.
Life Insurance
Operating expenses, before intercompany eliminations, were $29.0 million,
$23.1 million and $20.4 million for the years ended December 31, 2000, 1999 and
1998, respectively. Commissions have increased $7.3 million and $9.1 million
in 2000 and 1999, respectively, primarily due to the increase in Medicare
supplement premiums. General and administrative expenses net of fees collected
decreased $1.4 million and $0.5 million in 2000 and 1999, respectively.
Consolidated Cost of Sales
Cost of sales was $117.2 million, $112.0 million and $106.8 million in
fiscal years 2001, 2000 and 1999, respectively. Increased material costs and a
higher sales volume related to moving support items contributed to the increases
in both fiscal years 2001 and 2000.
20
Consolidated Benefits and Losses
Benefits and losses were $283.4 million, $209.6 million and $176.6 million
in fiscal years 2001, 2000 and 1999, respectively. Details by material segment
follow:
Property and Casualty
Benefits and losses incurred were $204.1 million, $150.5 million and $118.9
million for the years ended December 31, 2000, 1999 and 1998, respectively. The
increase from 1999 to 2000 resulted from two new general agency programs and
reserve strengthening in existing rental industry, assumed treaty reinsurance
and general agency programs. The increase from 1998 to 1999 resulted from the
increased assumed treaty reinsurance claims as well as an arbitration loss. The
arbitration loss caused $6.3 million of previously ceded reserves to be brought
back into RepWest's retention.
21
Life Insurance
Benefits incurred were $79.2 million, $59.0 million and $57.7 million for
the years ended December 31, 2000, 1999 and 1998, respectively. The increase
is primarily due to Medicare supplement benefits incurred, which accounts for
$16.7 million and $21.2 million of benefit increases in 2000 and 1999,
respectively. These increases are due to larger volumes of business and poor
experience on blocks no longer actively marketed. Credit insurance
benefits increased from $2.1 million and $2.8 million in 2000 and 1999,
respectively due to the increase in volume written and retained. Benefits from
other health lines increased $2.5 million and $0.5 million in 2000 and 1999,
respectively as volume increased and loss experience worsened. Annuity and life
benefits decreased $1.1 million and $2.1 million in 2000 and 1999,
respectively. The sale of NAFCIC reduced benefits $0.9 million from 1998.
Consolidated Amortization of Deferred Acquisition Costs
Amortization of deferred acquisition costs (DAC) and the value of business
acquired (VOBA) was $35.9 million, $35.0 million and $31.7 million in fiscal
years 2001, 2000 and 1999, 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. Details
by material segment follow:
Property and Casualty
The prior year-end commissions and other related expenses are amortized
over the following year. The amortization expense was $16.3 million, $13.4
million and $7.4 million for the years ended December 31, 2000, 1999 and 1998,
respectively. The increase from 1999 to 2000 is mainly due to the amortization
of Assumed Treaty expenses that were deferred in the 1999 year. The increase
from 1998 to 1999 is due mainly to RepWest's subsidiary company's DAC expense,
which increased to $3.8 million from $0.2 million in 1998. This was due to a
change in classification of the amortization expense of the subsidiary to
RepWest capitalization.
Life Insurance
The VOBA asset relates to the future profits of insurance policies in
force at the date of the NAI and CFLIC acquisitions. Amortization of DAC and
VOBA was $19.6 million, $21.6 million and $24.3 million for the years ended
December 31, 2000, 1999 and 1998, respectively. These costs are amortized as
the premium is earned over the term of the policy. Amortization decreased $2.0
million from 1999 due to the annuity and credit segments and decreased $3.0
million from 1998 due to the sale of NAFCIC.
Consolidated Lease Expense
Lease expense was $178.5 million, $136.0 million and $118.7 million in
fiscal years 2001, 2000 and 1999, respectively. Details by material segment
follow:
Moving and Storage Operations
Lease expense was $166.2 million, $132.4 million and $118.4 million in
fiscal years 2001, 2000 and 1999, respectively. The continued increase reflects
additional leasing activity of rental equipment.
Real Estate Operations
Lease expense before intercompany eliminations, for real estate
operations was $11.6 million, $3.0 million and $0.1 million for the fiscal
years 2001, 2000 and 1999, respectively. The continued increase in fiscal
year 2001 and 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.
22
Consolidated Depreciation Expense, net
Depreciation expense, net was $88.1 million, $87.6 million and $73.1
million in fiscal years 2001, 2000 and 1999, respectively. Details by material
segment follow:
Moving and Storage Operations
Depreciation expense, net was $82.7 million, $79.0 million and $61.0
million in fiscal years 2001, 2000 and 1999, respectively. The increase
in fiscal years 2001 and 2000 reflects an increase in depreciation expense
on the rental truck fleet.
Real Estate Operations
Depreciation expense, net was $5.3 million, $8.6 million and $12.0 million
in fiscal years 2001, 2000 and 1999, respectively. The decrease in fiscal year
2001 reflects an increase in gains from the disposition of property, plant and
equipment. 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.
Consolidated Earnings from Operations
Earnings from operations were $111.8 million, $184.3 million and $171.3
million in fiscal years 2001, 2000 and 1999, respectively. Details by material
segment follow:
Moving and Storage Operations
Earnings from operations, before intercompany eliminations, were $73.7
million, $102.0 million and $87.0 million in fiscal years 2001, 2000 and 1999,
respectively. The decrease in fiscal year 2001 is due to increased
transactions, offset by increased operating and lease expenses. In fiscal year
2000, increased rental transactions, offset by corresponding expenses,
contributed to the earnings gain.
Real Estate Operations
Earnings from operations, before intercompany eliminations, were $65.8
million, $64.7 million and $60.3 million in fiscal years 2001, 2000 and 1999,
respectively. The increase in fiscal year 2001 is mainly related to higher net
investment interest income. A decrease in intercompany management fees charged
contributed to the earnings increase for fiscal year 2000.
Property and Casualty
Earnings (loss) from operations were $(29.9) million, $7.9 million and
$19.1 million for the years ended December 31, 2000, 1999 and 1998,
respectively. The decrease in 2000 was due to reserve strengthening and
losses on two new general agency programs as well as the write downs of fixed
maturity investments whose declines in value were determined to be other than
temporary. The 1998 to 1999 decrease resulted mainly from RepWest's writing
off the 1995 American Bonding receivable, lower than forecasted premium volume
in 1999 and higher than expected losses on the agricultural business.
Life Insurance
Earnings from operations were $7.0 million, $14.2 million and $12.2 million
for the years ended December 31, 2000, 1999 and 1998, respectively. The
decrease in 2000 from both 1999 and 1998 was due to write downs of fixed
maturity investments whose declines in value were determined to be other than
temporary and poor Medicare supplement loss experience. The increase in
earnings from 1998 to 1999 was due to improved investment returns and improved
loss experience on the credit insurance business.
Consolidated Interest Expense
Interest expense was $87.8 million, $81.5 million and $73.7 million in
fiscal years 2001, 2000 and 1999, respectively. The increase can be attributed
to an increase in the average cost of debt in fiscal year 2001 over the past two
fiscal years. The average debt level outstanding continued to increase in
fiscal year 2001 compared to fiscal years 2000 and 1999.
23
Consolidated Extraordinary Loss on the Extinguishment of Debt
During fiscal year 2001, AMERCO extinguished $100.0 million of 6.89% Bond
Backed Asset Trust certificates (BATs) originally due in fiscal year 2011 and
$25.0 million of 6.7% Medium-Term notes originally due in fiscal year 2009.
This resulted in an extraordinary loss of $2.1 million, net of tax of $1.2
million ($0.10 per share).
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).
Consolidated Earnings
As a result of the foregoing, pretax earnings totaled $24.0 million, $102.7
million and $97.6 million in fiscal years 2001, 2000 and 1999, respectively.
After providing for income taxes, earnings from operations were $15.1 million,
$65.8 million and $62.5 million in fiscal years 2001, 2000 and 1999,
respectively. Following deductions for an extraordinary loss from the early
extinguishment of debt, net earnings were $13.0 million, $65.5 million and $62.5
million in fiscal years 2001, 2000 and 1999, respectively.
Quarterly Results
The table on page 24 presents unaudited quarterly results for the eight
quarters in the period beginning April 1, 1999 and ending March 31, 2001.
The Income Statement amounts for the quarter ended December 31, 2000 have
been restated to increase the net loss by $.10 per share due to necessary
revisions of certain fixed asset transactions. The restated loss per share
was $1.05 for the third quarter fiscal year 2001 as compared to $.95 as
reported. 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.
24
Quarter Ended
----------------------------------------------
Jun 30 Sep 30 Dec 31 Mar 31
2000 2000 2000 2001
(Restated)
----------------------------------------------
(in thousands, except share and per share data)
Total revenues $ 459,437 502,906 425,977 425,318
Earnings from operations
before extraordinary loss
on early extinguishment
of debt (4) $ 37,612 41,233 (17,109) (46,650)
Net earnings (loss) $ 37,612 41,233 (19,230) (46,650)
Weighted average common
shares outstanding
Basic 21,718,988 21,489,970 21,406,688 21,326,015
Earnings (loss) from operations
before extraordinary loss
on early extinguishment
of debt per common
share (1) (4) $ 1.58 1.77 (0.95) (2.34)
Earnings (loss) per common
share
Basic $ 1.58 1.77 (1.05) (2.34)
Quarter Ended
----------------------------------------------
Jun 30 Sep 30 Dec 31 Mar 31
1999 1999 1999 2000
----------------------------------------------
(in thousands, except share and per share data)
Total revenues $ 439,513 462,926 382,597 398,581
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 - -
(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 shares of Series B preferred stock
in fiscal year 2000.
(4) During fiscal year 2001, AMERCO extinguished $100.0 million of 6.89% BATs
originally due in fiscal year 2011 and $25.0 million of 6.71% Medium-Term
Notes originally due in fiscal year 2009. This resulted in an
extraordinary loss of $2.1 million, net of tax of $1.2 million ($0.10 per
share).
25
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 in Item 8 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.
26
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 in Item 8. A fluctuation of the interest rate
by 100 basis points would change AMERCO's interest expense by $1.0 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 31 through 80 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.
27
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" and "Executive Officers of
the Company", 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 2001 Annual Meeting of Stockholders (the "2001
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 2001 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 2001 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 2001 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 2001 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" in the 2001 Proxy Statement, which information is incorporated
herein by reference.
28
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 31
Consolidated Balance Sheets -
March 31, 2001 and 2000 32
Consolidated Statements of Earnings -
Years ended March 31, 2001, 2000 and 1999 34
Consolidated Statements of Changes in Stockholders'
Equity - Years ended March 31, 2001, 2000 and 1999 36
Consolidated Statements of Comprehensive Income -
Years ended March 31, 2001, 2000 and 1999 38
Consolidated Statements of Cash Flows - Years ended
March 31, 2001, 2000 and 1999 39
Notes to Consolidated Financial Statements 41
2. Additional Information
Summary of Earnings of Independent Trailer Fleets 73
Notes to Summary of Earnings of Independent
Trailer Fleets 74
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 76
Supplemental Information (For Property-Casualty
Insurance Underwriters) -- Schedule V 80
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) No reports on Form 8-K were filed during the last quarter of the period
covered by this report.
29
(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 (17)
10.26 Management Agreement between Six-B SAC Self-Storage
Corporation and a subsidiary of AMERCO (17)
* Indicates compensatory plan arrangement
30
(c) Exhibits, continued
10.27 Management Agreement between Six-C SAC Self-Storage
Corporation and a subsidiary of AMERCO (17)
10.28 Management Agreement between Eleven SAC Self-Storage
Corporation and a subsidiary of AMERCO (17)
10.29 Management Agreement between Twelve SAC Self-Storage
Corporation and a subsidiary of AMERCO (18)
10.30 Management Agreement between Thirteen SAC Self-Storage
Corporation and a subsidiary of AMERCO (18)
10.31 Management Agreement between Fourteen SAC Self-Storage
Corporation and a subsidiary of AMERCO (18)
10.32 Management Agreement between Fifteen SAC Self-Storage
Corporation and a subsidiary of AMERCO (19)
10.33 Management Agreement between Sixteen SAC Self-Storage
Corporation and a subsidiary of AMERCO (19)
10.34 Management Agreement between Seventeen SAC Self-Storage
Corporation and a subsidiary of AMERCO
12 Statements Re: Computation of Ratios
21 Subsidiaries of AMERCO
23 Consent of Independent Accountants
________________
(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.
(17) Incorporated by reference to AMERCO's Annual Report on Form 10-K for the
year ended March 31, 2000, file no. 1-11255.
(18) Incorporated by reference to AMERCO's Quarterly Report on Form 10-Q for
the quarter ended September 30, 2000, file no. 1-11255.
(19) Incorporated by reference to AMERCO's Quarterly Report on Form 10-Q for
the quarter ended December 31, 2000, file no. 1-11255.
31
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 28 of this Form 10-K present fairly,
in all material respects, the financial position of AMERCO and its subsidiaries
at March 31, 2001 and 2000, and the results of their operations and their cash
flows for each of the three years in the period ended March 31, 2001, in
conformity with accounting principles generally accepted in the United States
of America. In addition, in our opinion, the financial statement schedules
listed in the index appearing under Item 14(a)(3) on page 28 present fairly,
in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. These
consolidated financial statements and financial statement schedules are the
responsibility of the Company's management; our responsibility is to express
an opinion on these consolidated 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 of
America, 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 consolidated 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 72 through 73 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 29, 2001
32
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Balance Sheets
March 31,
Assets 2001 2000
--------------------------
(in thousands)
Cash and cash equivalents $ 52,778 48,435
Trade receivables, net 252,890 197,992
Notes and mortgage receivables, net 65,531 49,866
Inventories, net 84,005 84,614
Prepaid expenses 14,416 17,822
Investments, fixed maturities 952,482 890,629
Investments, other 464,958 314,890
Deferred policy acquisition costs 99,807 88,402
Other assets 34,553 49,913
-------------------------
Property, plant and equipment, at cost:
Land 197,281 197,956
Buildings and improvements 832,372 853,403
Furniture and equipment 282,362 263,694
Rental trailers and other rental equipment 181,159 210,472
Rental trucks 1,037,653 1,035,585
-------------------------
2,530,827 2,561,110
Less accumulated depreciation 1,168,183 1,178,448
-------------------------
Total property, plant and equipment 1,362,644 1,382,662
-------------------------
Total Assets $ 3,384,064 3,125,225
=========================
The accompanying notes are an integral part of these consolidated financial
statements.
33
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Balance Sheets, continued
March 31,
Liabilities and Stockholders' Equity 2001 2000
-------------------------
(in thousands, except
share and per share data)
Liabilities:
Accounts payable and accrued expenses $ 151,192 152,654
Notes and loans payable 1,156,848 1,137,840
Policy benefits and losses, claims and
loss expenses payable 668,830 548,043
Liabilities from premium deposits 522,207 461,673
Cash overdraft 26,484 30,460
Other policyholders' funds and liabilities 79,172 70,207
Deferred income 24,546 29,641
Deferred income taxes 139,419 109,413
-------------------------
Total liabilities 2,768,698 2,539,931
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, 2001
and 2000 - -
Series B preferred stock, with no par
value, 100,000 shares authorized;
none issued and outstanding as of
March 31, 2001 and 2000 - -
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, 2001 and 2000 1,441 1,441
Common stock of $0.25 par value,
150,000,000 shares authorized;
36,487,505 issued as of
March 31, 2001 and 2000 9,122 9,122
Additional paid-in capital 312,128 275,242
Accumulated other comprehensive income (40,709) (42,317)
Retained earnings 755,174 755,172
Cost of common shares in treasury, net
(20,321,363 and 19,840,613 shares as of
March 31, 2001 and 2000, respectively) (406,617) (397,000)
Unearned employee stock ownership
plan shares (15,173) (16,366)
-------------------------
Total stockholders' equity 615,366 585,294
Contingent liabilities and commitments _________________________
Total Liabilities and Stockholders' Equity $ 3,384,064 3,125,225
=========================
The accompanying notes are an integral part of these consolidated financial
statements.
34
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Earnings
Years ended March 31,
2001 2000 1999
----------------------------------------
(in thousands)
Revenues
Rental revenue $ 1,204,959 1,150,532 1,074,220
Net sales 194,320 188,816 181,273
Premiums 323,198 262,057 226,847
Net investment and interest income 91,161 82,212 73,372
-----------------------------------
Total revenues 1,813,638 1,683,617 1,555,712
Costs and expenses
Operating expenses 998,794 919,093 877,566
Cost of sales 117,212 111,975 106,789
Benefits and losses 283,366 209,592 176,560
Amortization of deferred
acquisition costs 35,946 34,987 31,721
Lease expense 178,458 136,044 118,742
Depreciation, net 88,091 87,647 73,066
-----------------------------------
Total costs and expenses 1,701,867 1,499,338 1,384,444
Earnings from operations 111,771 184,279 171,268
Interest expense 87,773 81,532 73,658
-----------------------------------
Pretax earnings 23,998 102,747 97,610
Income tax expense (8,912) (36,922) (35,101)
-----------------------------------
Earnings from operations before
extraordinary loss on early
extinguishment of debt 15,086 65,825 62,509
Extraordinary loss on early
extinguishment of debt, net (2,121) (334) -
-----------------------------------
Net earnings $ 12,965 65,491 62,509
===================================
The accompanying notes are an integral part of these consolidated financial
statements.
35
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Earnings, continued
Years ended March 31,
2001 2000 1999
----------------------------------------
(in thousands, except
share and per share data)
Basic earnings per common share:
Earnings from operations before
extraordinary loss on early
extinguishment of debt $ 0.10 2.39 2.07
Extraordinary loss on early
extinguishment of debt, net (0.10) (0.02) -
----------------------------------
Net earnings $ 0.00 2.37 2.07
==================================
Diluted earnings per common share:
Earnings from operations before
extraordinary loss on early
extinguishment of debt $ 0.10 2.38 2.07
Extraordinary loss on early
extinguishment of debt, net (0.10) (0.02) -
----------------------------------
Net earnings $ 0.00 2.36 2.07
==================================
Weighted average common shares
outstanding:
Basic 21,486,370 21,934,390 21,937,686
====================================
Diluted 21,486,370 22,226,057 23,940,623
====================================
The accompanying notes are an integral part of these consolidated financial
statements.
36
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
Years ended March 31,
2001 2000 1999
---------------------------------------
(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 2001, 2000 and 1999
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
2001, 2000 and 1999
Beginning and end of year 9,122 9,122 9,122
---------------------------------
Additional paid-in capital:
Beginning of year 275,242 299,905 313,444
Repurchase of preferred stock - (25,000) (50,000)
Gain on sale of property to
related party, net 36,790 - 35,996
Issuance of common shares under
leveraged employee stock
ownership plan 96 337 465
---------------------------------
End of year 312,128 275,242 299,905
---------------------------------
Accumulated other comprehensive income:
Beginning of year (42,317) (17,740) (9,384)
Foreign currency translation (7,252) (2,899) (6,736)
Fair market value of cash
flow hedge (1,185) 2,192 (3,631)
Unrealized gain (loss) on
investments 10,045 (23,870) 2,011
---------------------------------
End of year (40,709) (42,317) (17,740)
---------------------------------
The accompanying notes are an integral part of these consolidated financial
statements.
37
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity, continued
Years ended March 31,
2001 2000 1999
---------------------------------------
(in thousands, except
share and per share data)
Retained earnings:
Beginning of year 755,172 703,322 658,227
Net earnings 12,965 65,491 62,509
Preferred stock dividends paid:
Series A ($2.13 per share for
2001, 2000 and 1999) (12,963) (12,964) (12,964)
Series B ($27.14 and $97.44
per share for 2000 and
1999, respectively) - (677) (4,450)
---------------------------------
End of year 755,174 755,172 703,322
---------------------------------
Less Treasury stock:
Beginning of year 397,000 363,533 359,723
Net increase 9,617 33,467 3,810
---------------------------------
End of year 406,617 397,000 363,533
---------------------------------
Less Unearned employee stock
ownership plan shares:
Beginning of year 16,366 16,492 18,068
Purchase of shares 46 1,002 401
Repayments from loan (1,239) (1,128) (1,977)
---------------------------------
End of year 15,173 16,366 16,492
---------------------------------
Total stockholders' equity $ 615,366 585,294 616,025
=================================
The accompanying notes are an integral part of these consolidated financial
statements.
38
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Comprehensive Income
Years ended March 31,
2001 2000 1999
--------------------------
(in thousands)
Comprehensive income:
Net earnings $ 12,965 65,491 62,509
Other comprehensive income
Foreign currency translation (7,252) (2,899) (6,736)
Fair market value of cash flow hedges (1,185) 2,192 (3,631)
Unrealized gain (loss) on investments 10,045 (23,870) 2,011
--------------------------
Total comprehensive income $ 14,573 40,914 54,153
==========================
The accompanying notes are an integral part of these consolidated financial
statements.
39
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended March 31,
2001 2000 1999
----------------------------
(in thousands)
Cash flows from operating activities:
Net earnings $ 12,965 65,491 62,509
Depreciation and amortization 144,185 135,481 114,102
Provision for losses on accounts
receivable 3,286 4,601 4,648
Net gain on sale of real and
personal property (16,776) (8,705) (524)
Gain on sale of investments 12,931 (873) (3,372)
Changes in policy liabilities
and accruals 54,921 15,326 (23,448)
Additions to deferred policy
acquisition costs (42,535) (31,804) (40,859)
Net change in other operating
assets and liabilities (42,924) 58,140 46,493
---------------------------
Net cash provided by operating activities 126,053 237,657 159,549
Cash flows from investing activities:
Purchases of investments:
Property, plant and equipment (358,917) (417,647) (298,495)
Fixed maturities (122,863) (158,304) (213,107)
Common stock (31,773) - (2,553)
Preferred stock - (369) (21,700)
Other asset investment (5,915) - -
Real estate (5,938) (70) (334)
Mortgage loans (24,084) (27,367) (93,243)
Proceeds from sales of investments:
Property, plant and equipment 157,091 242,699 105,526
Fixed maturities 152,761 133,915 223,114
Common stock - - 2,571
Preferred stock 372 968 3,538
Real estate 1,557 1,672 5,622
Mortgage loans 22,463 11,555 21,826
Changes in other investments 88,506 31,269 62,453
---------------------------
Net cash used by investing activities (126,740) (181,679) (204,782)
The accompanying notes are an integral part of these consolidated financial
statements.
40
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Cash Flows, continued
Years ended March 31,
2001 2000 1999
----------------------------
(in thousands)
Cash flows from financing activities:
Net change in short-term borrowings 156,070 (146,836) 135,836
Proceeds from notes - 350,000 -
Debt issuance costs (1,228) (8,285) (415)
Leveraged Employee Stock Ownership Plan:
Purchase of shares (46) (1,002) (401)
Repayments from loan 1,239 1,128 1,977
Principal payments on notes (137,062) (180,072) (46,411)
Repurchase of preferred stock - (25,000) (50,000)
Extraordinary loss on early
extinguishment of debt, net (2,121) (334) -
Net change in cash overdraft (3,976) 2,291 6,755
Preferred stock dividends paid (12,963) (13,641) (17,414)
Treasury stock acquisitions, net (9,617) (33,467) (3,810)
Investment contract deposits 87,687 63,978 93,688
Investment contract withdrawals (72,953) (60,808) (61,673)
----------------------------
Net cash provided (used) by
financing activities 5,030 (52,048) 58,132
----------------------------
Increase (decrease) in cash
and cash equivalents 4,343 3,930 12,899
Cash and cash equivalents at
beginning of year 48,435 44,505 31,606
----------------------------
Cash and cash equivalents at
end of year $ 52,778 48,435 44,505
============================
Summary of Non-cash investing and financing
activity: An investment was received in
exchange for the sale of storage properties
from a related party. $ 98,530 - $ 99,685
The accompanying notes are an integral part of these consolidated financial
statements.
41
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 (RepWest) 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.
RepWest and Oxford have been consolidated on the basis of calendar years
ended December 31. Accordingly, all references to the years 2000, 1999, and
1998 and correspond to AMERCO's fiscal years 2001, 2000, and 1999, 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
2001, 2000, or 1999 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, trailer hitches and propane and the rental
of self-storage spaces to the do-it-yourself mover. Operations are under the
registered tradename U-Haul REGISTERED TRADEMARK 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
propert