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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, 2002
-------------------------------------------------------
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. [ ]
21,375,037 shares of AMERCO common stock, $0.25 par value, were
outstanding at July 12, 2002. 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 $93,315,111. The aggregate market
value was computed using the closing price for the common stock trading on
NASDAQ on July 12, 2002.
5,385 shares of U-Haul International, Inc. common stock, $0.01 par
value, were outstanding at July 12, 2002. None of these shares were held by
non-affiliates. U-Haul International, Inc. meets the conditions set forth in
General Instruction 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 30, 2002, are incorporated by reference in
Part III hereof.
TABLE OF CONTENTS
PAGE NO.
PART I
ITEM 1. BUSINESS...................................... 3
A. AMERCO AND SAC HOLDINGS.................. 3
B. HISTORY.................................. 4
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.............................. 10
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............................. 26
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA.......................................... 26
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE ................................... 27
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF
THE REGISTRANTS............................... 27
ITEM 11. EXECUTIVE COMPENSATION........................ 27
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT......................... 27
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS.................................. 27
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES AND REPORTS ON FORM 8-K............. 28
2
PART I
ITEM 1. BUSINESS
A. AMERCO AND CONSOLIDATED SUBSIDIARIES AND SAC HOLDING CORPORATION
AND CONSOLIDATED SUBSIDIARIES
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 2001, 2000 and 1999 correspond to
AMERCO's fiscal years 2002, 2001 and 2000, 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.
SAC Holding Corporations, Nevada corporations (SAC Holdings), are the
holding companies for several individual corporations that own storage
properties. SAC Holdings is owned by Mark V. Shoen. Mark V. Shoen is the
beneficial owner of 15.6% of AMERCO's common stock and is an executive of
AMERCO. AMERCO has no (and has never had any) equity ownership interest in SAC
Holdings or any of SAC Holdings' subsidiaries. U-Haul currently manages the
properties owned by SAC Holdings under management agreements and receives a
management fee. SAC Holdings has one business segment - moving and storage
operations.
The accounts of AMERCO and SAC Holdings are presented as consolidated
due to a revised interpretation of EITF 90-15 by AMERCO's independent public
accountants. AMERCO agrees with this interpretation. The accompanying
consolidated financial statements as of and for the periods ending March 31,
2001 and 2000 have been restated to reflect such consolidation. The following
table presents the impact of such consolidation at March 31, 2001:
March 31, 2001 March 31, 2000
---------------------------- ----------------------------
As reported(1) As restated As reported(1) As restated
(in thousands) (in thousands)
Assets $3,384,064 3,638,439 $3,125,225 3,291,292
Liabilities $2,768,698 3,126,175 $2,539,931 2,758,838
Stockholders' equity $ 615,366 512,264 $ 585,294 532,454
Net income $ 12,965 1,012 $ 65,491 63,184
(1) As reported in the Company's March 31, 2001 form 10-K, filed on
July 2, 2001 prior to the consolidation of SAC Holdings described above.
The reduction in stockholders' equity is due to the elimination of
gains previously recorded in connection with sales of properties from AMERCO to
SAC Holdings. Such gains had been previously recognized as a component of
stockholders' equity in the AMERCO financial statements. The reduction in net
income is primarily due to the recognition of SAC Holdings' losses for the
periods presented.
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(R) throughout the United States and Canada.
REAL ESTATE OPERATIONS
Real Estate owns approximately 90% of AMERCO'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.
3
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.
As of December 31, 2001, RepWest has recognized $2.6 million of assumed
incurred losses from the events of September 11, 2001. Republic Western's
maximum retention level of $2.0 million has been met and the company will not
incur any additional losses.
LIFE INSURANCE
Oxford originates and reinsures annuities, credit life and disability,
single premium whole life, group life and disability coverage, and Medicare
supplement insurance. Oxford also administers the self-insured employee health
and dental plans for AMERCO.
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(R) basis through independent dealers. Since
1974, U-Haul has developed a network of Company managed 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, 2002, U-Haul's distribution
network included 1,345 Company operated centers and 14,905 independent dealers.
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 16,250 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, 2002, the U-Haul
rental equipment fleet consisted of 97,000 trucks, 87,000 trailers and 21,000
tow dollies. Additionally, U-Haul provides support rental items such as
furniture pads, utility dollies and handtrucks.
Approximately 90% of U-Haul's rental revenue is from do-it-yourself
movers. Moving rentals include:
(i) In-Town(R) 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 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(R) - which provides moving customers with a damage
waiver, cargo protection and medical and life coverage; and,
(ii) Safestor(R) - which provides self-storage rental customers
with various types of protection for their goods in storage.
4
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.
COMPETITION
A highly competitive industry exists within the moving truck and
trailer rental market. U-Haul believes that the principal competitive factors
are convenience of rental locations, availability of quality rental equipment
and price. U-Haul's major competitors in the rental market are Budget and
Penske.
There are two distinct users of rental trucks: commercial users and
do-it-yourself users. U-Haul focuses on the do-it-yourself mover.
SELF-STORAGE BUSINESS
U-Haul entered the self-storage business in 1974 and continues to
increase its presence in the industry 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, including SAC
Holdings. 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 1,023 owned, managed or participating self-storage locations in
the United States and Canada, U-Haul offers for rent more than 361,600
self-storage spaces at March 31, 2002. This is an increase of 1,955,688 square
feet over the prior year. 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 18,833 storage rooms during fiscal year 2002, the average
occupancy rate of same store facilities operating over one year was 82.85%, with
modest seasonal variations. During fiscal years 2002 and 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, 2002, U-Haul's non-seasonal work force consisted of
16,100 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 some of its
properties. Real Estate regularly makes capital and operating expenditures to
stay in compliance with environmental laws and has put in place a remedial plan
at each site where it believes such a plan is necessary. 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 $43.7 million. See
also Item 3. Legal Proceedings.
5
E. INSURANCE OPERATIONS
BUSINESS STRATEGIES
RepWest's principal business strategy is to provide insurance for
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 Medicare
supplement products. Oxford is pursuing a 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.
RepWest and Oxford are in compliance with NAIC minimum risk-based
capitalization requirements for insurance companies as of December 31, 2001.
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. Many competitors have been
in business for a longer period of time or possess substantially greater
financial resources. RepWest and Oxford compete in the insurance business based
upon price, product design and services rendered to producers and policyholders.
6
EMPLOYEES
RepWest's non-seasonal work force consists of 397 full and part-time
employees.
Oxford's non-seasonal work force consists of 159 full and part-time
employees.
LIFE INSURANCE
Oxford offers annuities, credit life and disability, critical illness
insurance, single premium whole life, group life and disability coverage, and
Medicare supplement insurance. Oxford also administers the self-insured 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, fleet owners and employees
of AMERCO. For the year ended December 31, 2001, approximately 19.6% 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 loss adjustment expense are not discounted.
Activity in the liability for unpaid losses and loss adjustment
expenses is summarized as follows:
2001 2000 1999
---------------------------
(in thousands)
Balance at January 1 $ 369,292 334,857 344,748
Less reinsurance recoverable 80,599 58,403 68,135
---------------------------
Net balance at January 1 288,693 276,454 276,613
Incurred related to:
Current year 232,984 155,073 121,861
Prior years 36,132 35,387 16,052
---------------------------
Total incurred 269,116 190,460 137,913
Paid related to:
Current year 106,395 61,196 55,136
Prior years 130,471 117,025 82,936
---------------------------
Total paid 236,866 178,221 138,072
Net balance at December 31 320,943 288,693 276,454
Plus reinsurance recoverable 128,041 80,599 58,403
---------------------------
Balance at December 31 $ 448,984 369,292 334,857
===========================
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 $53.1 million) increased by $36.1 million in 2001.
The following table 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.
7
Unpaid Loss and Loss Adjustment Expenses
December 31
- -------------------------------------------------------------------------------------------------------------------------
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
- -------------------------------------------------------------------------------------------------------------------------
(in thousands)
Unpaid Loss and Loss
Adjustment Expenses: $236,019 238,762 314,482 329,741 341,981 332,674 384,816 344,748 334,857 369,292 448,984
Paid (Cumulative)
as of:
One year later 65,532 83,923 70,382 86,796 89,041 89,336 103,752 82,936 117,025 130,471
Two years later 105,432 123,310 115,467 139,247 150,001 161,613 174,867 164,318 186,193
Three years later 126,390 153,030 146,640 173,787 195,855 208,168 216,966 218,819
Four years later 143,433 173,841 166,068 198,434 226,815 232,726 246,819
Five years later 153,730 181,677 181,174 219,425 243,855 250,312
Six years later 160,875 191,938 194,652 231,447 254,204
Seven years later 168,975 200,281 203,535 237,118
Eight years later 175,364 207,719 207,834
Nine years later 182,235 211,075
Ten years later 184,822
Reserve Reestimated
as of:
One year later 231,779 251,450 321,058 338,033 353,508 354,776 357,733 339,602 377,096 433,222
Two years later 224,783 254,532 323,368 340,732 369,852 342,164 361,306 371,431 419,268
Three years later 223,403 253,844 309,936 349,459 328,445 346,578 369,598 407,285
Four years later 214,854 231,536 317,687 302,808 331,897 349,810 397,046
Five years later 198,320 239,888 267,005 300,180 339,665 362,049
Six years later 210,872 263,843 262,517 307,306 341,207
Seven years later 231,407 259,798 267,948 310,005
Eight years later 227,603 265,285 269,874
Nine years later 230,851 265,423
Ten years later 229,325
Cumulative Redundancy
(Deficiency) $ 6,694 (26,661) 44,608 19,736 774 (29,375) (12,230) (62,537) (84,411) (63,930)
Retro Premium
Recoverable $ 3,175 (66) 6,983 6,632 11,147 12,754 12,390 21,488 27,231 33,471
Reestimated Reserve:
Amount (Cumulative) $ 9,869 (26,727) 51,591 26,368 11,921 (16,621) 160 (41,049) (57,180) (30,459)
8
ITEM 2. PROPERTIES
AMERCO's 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. U-Haul also manages storage facilities owned by
others. In addition, U-Haul owns certain real estate not currently used in its
operations. U-Haul operates 1,345 U-Haul Centers (including Company-owned
storage locations), and operates 10 manufacturing and assembly facilities.
U-Haul also operates 102 repair facilities located at or near a U-Haul Center.
SAC Holdings owns property, plant and equipment that is utilized in the
rental of self-storage rooms and U-Haul equipment. Such facilities exist
throughout the United States and Canada. The majority of land and buildings are
encumbered by note debt. The debt is held by unrelated third parties or by
AMERCO subsidiaries in the normal course of business. U-Haul manages the storage
facilities under management agreements whereby the fees are consistent with fees
received by U-Haul for other properties owned by unrelated parties and managed
by U-Haul.
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".
In the normal course of business, SAC Holding is a defendant in a
number of suits and claims. It is the opinion of management that none of the
suits, claims or proceedings involving SAC Holding, individually or in the
aggregate, are expected to result in a material loss.
On July 20, 2000, Charles Kocher ("Kocher") filed suit in Wetzel
County, West Virginia, Civil Action No. 00-C-51-K, entitled Charles Kocher v.
Oxford Life Insurance Co. ("Oxford") seeking compensatory and punitive damages
for breach of contract, bad faith and unfair claims settlement practices arising
from an alleged failure of Oxford to properly and timely pay a claim under a
disability and dismemberment policy. Kocher purchased the policy in conjunction
with the purchase of a $7,800 used pick-up truck. Although Oxford violated no
pretrial discovery order and had never been on notice of the possibility of
sanctions for its pretrial conduct, immediately prior to trial, the court
sanctioned Oxford by directing a verdict against Oxford on liability for
compensatory and punitive damages. Therefore, the only issue presented to the
jury was the amount of compensatory and punitive damages. On March 22, 2002, the
jury returned a verdict of $5 million in compensatory damages and $34 million in
punitive damages. On June 10, 2002, the trial court heard argument on Oxford's
"Motion for New Trial Or, in The Alternative, Remittitur." On June 28, 2002 the
parties submitted proposed draft orders from which the trial court will fashion
its Final Judgment. Management does not believe that the sanction imposed
against Oxford is sustainable and expects the sanction to be overturned.
Accordingly, no amounts have been recorded with respect to this matter.
Moreover, Management does not believe that the jury award has any reasonable
nexus to the actual harm suffered by Kocher and, therefore, is not sustainable.
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" under state
law with respect to this property as it relates to both sites. As a result of
the cleanup costs of approximately $5.5 to $10.0 million required by the State
of Washington, INW filed for reorganization under the federal bankruptcy laws in
May of 2001. Although it is not probable that a loss has occurred the potential
liability to INW could be in the range of $2.0 million to $5.5 million.
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.
Reference is made to Note 15 in Notes to Consolidated Financial
Statements in Item 8 for a discussion of the final payments made in connection
with stockholder litigation and California overtime litigation.
9
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.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
As of July 12, 2002, there were approximately 1,150 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,
--------------------------------------------
2002 2001
--------------------------------------------
High Low High Low
--------------------------------------------
First quarter 22.30 16.98 20.00 16.25
Second quarter 22.50 17.90 21.13 18.31
Third quarter 19.70 17.00 24.38 18.56
Fourth quarter 19.10 14.75 22.38 17.22
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.
U-Haul has not declared cash dividends to AMERCO during the two most recent
fiscal years.
10
ITEM 6. SELECTED FINANCIAL DATA AS RESTATED
AMERCO AND CONSOLIDATED SUBSIDIARIES AND SAC HOLDING CORPORATIONS AND
CONSOLIDATED SUBSIDIARIES
For the Years Ended March 31,
-------------------------------------------------------------------------------
2002 2001 2000 1999(11) 1998(11)
-------------------------------------------------------------------------------
(in thousands, except share, per share data and ratios)
Summary of Operations:
Rental revenue and net sales $ 1,566,838 1,497,774 1,410,121 1,299,956 1,225,196
Premiums, net investment and interest income 501,172 390,268 325,750 291,811 225,721
----------------------------------------------------------------------------
2,068,010 1,888,042 1,735,871 1,591,767 1,450,917
----------------------------------------------------------------------------
Operating expenses
and cost of sales (4) 1,232,306 1,173,735 1,064,699 1,006,991 934,574
Benefits, losses and amortization of
deferred acquisition costs 430,196 319,312 244,579 208,281 189,770
Lease expense 175,501 173,078 130,951 118,742 89,879
Depreciation, net (3) 108,683 101,508 96,090 77,429 72,404
----------------------------------------------------------------------------
1,946,686 1,767,632 1,536,319 1,411,443 1,286,627
----------------------------------------------------------------------------
121,324 120,410 199,552 180,324 164,290
Interest expense 116,345 114,576 99,859 85,611 89,333
----------------------------------------------------------------------------
Pretax earnings 4,979 5,834 99,693 94,713 74,957
Income tax expense (2,258) (2,701) (36,175) (35,542) (26,550)
----------------------------------------------------------------------------
Earnings from operations before
extraordinary loss on early
extinguishment of debt 2,721 3,133 63,518 59,171 48,407
Extraordinary loss on early
extinguishment of debt, net -- (2,121) (334) -- (13,672)
----------------------------------------------------------------------------
(2)(7)(8)(9)(10)
Net earnings $ 2,721 1,012 63,184 59,171 34,735
============================================================================
Earnings per common share (both basic and diluted):
Earnings from operations before
extraordinary loss on early
extinguishment of debt per
common share (2) $ (0.49) (0.46) 2.27 1.90 1.26
Net earnings (2)(7)(8)(9)(10) (0.49) (0.56) 2.26 1.90 0.64
Weighted average common shares
outstanding 21,022,712 21,486,370 21,934,390 21,937,686 21,896,101
Cash dividends declared:
Preferred stock $ 12,961 12,963 13,641 17,414 20,766
Common stock -- -- -- -- --
Ratio of earnings to fixed charges (1) 1.29 1.19 1.83 1.80 1.62
11
ITEM 6. SELECTED FINANCIAL DATA AS RESTATED, CONTINUED
AMERCO AND CONSOLIDATED SUBSIDIARIES AND SAC HOLDING CORPORATIONS AND
CONSOLIDATED SUBSIDIARIES
For the Years Ended March 31,
------------------------------------------------------------------------------
2002 2001 2000(11) 1999(11) 1998(11)
------------------------------------------------------------------------------
(in thousands, except share, per share data and ratios)
Balance Sheet Data:
Property, plant and
equipment, net $1,914,903 1,898,627 1,704,483 1,532,239 1,424,042
Total assets 3,773,455 3,638,439 3,291,292 3,142,609 2,992,261
AMERCO's notes and loans payable 1,045,802 1,170,041 1,137,840 1,114,748 1,025,323
SAC Holdings' notes and loans payable 557,761 373,326 230,776 115,609 76,934
Stockholders' equity (9) 499,106 512,264 532,454 565,068 583,241
Other information:
EBITDAR (5) 446,182 430,941 461,580 408,216 340,767
Operating profit margin (6) 8.7% 9.4% 14.0% 13.8% 13.4%
(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 AMERCO'S stand alone 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 with notional amounts
totaling $76.0 million and $255.0 million during fiscal year 1998.
(8) 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.
(9) Reflects the redemption of $25 million, $50 million and $25 million of
Series B Preferred Stock in fiscal years 2000, 1999 and 1998,
respectively.
(10) 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.
(11) The accounts of AMERCO and SAC Holding Corporations are presented as
consolidated due to a revised interpretation of EITF 90-15 during
fiscal year 2002. The balance sheet at March 31, 2000, and the income
statement for the two years ended March 31, 1999 were restated to
conform with the current year's presentation, but were not audited. The
amounts include the audited AMERCO information as well as unaudited SAC
Holdings information. Such unaudited SAC Holdings information was not
material to the financial position or results of operations of the
consolidated financial statements for such periods.
12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CAUTIONARY STATEMENTS REGARDING 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 are not 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. Some of the important factors
that could cause our actual results, performance or financial condition to
differ materially from our expectations are: fluctuations in our costs to
maintain and update our fleet and facilities; changes in government regulations,
particularly environmental regulations; our credit ratings; changes in demand
for our products; changes in the general domestic economy; degree and nature of
our competition; changes in accounting standards and other factors described in
this report or the other documents we file with the Securities and Exchange
Commission. The above factors, the following disclosures, as well as other
statements in this report and in the Notes to AMERCO's Consolidated Financial
Statements, could contribute to or cause such differences, or could cause
AMERCO's stock price to fluctuate dramatically.
GENERAL
Information on fiscal year, industry segments and AMERCO and SAC
Holdings 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. In consolidation, all intersegment premiums are eliminated and the
benefits, losses and expenses are retained by the insurance companies.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Management's discussion and analysis of financial condition and results
of operations are based upon the consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires the use of
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and
liabilities. On an ongoing basis, estimates are revalued, including those
related to areas that require a significant level of judgment or are otherwise
subject to an inherent degree of uncertainty. These areas include allowances for
doubtful accounts, revenue earning vehicles and buildings, self-insured
liabilities, income taxes and commitments and contingencies. The estimates are
based on historical experience, observance of trends in particular areas,
information and/or valuations available from outside sources and on various
other assumptions that are believed to be reasonable under the circumstances and
which form the basis for making judgments about the carrying values of assets
and liabilities that are not readily apparent from other sources. Actual amounts
may differ from these estimates under different assumptions and conditions.
Accounting policies are considered critical when they are significant
and involve difficult, subjective or complex judgments or estimates. Of the
accounting policies discussed in "Item 8. Financial Statements and Supplementary
Data - Note 1 of Notes to Consolidated Financial Statements", the following are
considered to be critical accounting policies:
Principles of consolidation - The consolidated financial statements
include the accounts of AMERCO and its wholly-owned subsidiaries and SAC
Holdings and its wholly-owned subsidiaries. All material intercompany accounts
and transactions have been eliminated in consolidation. AMERCO has not had any
equity ownership interest in SAC Holdings or any of SAC Holdings' subsidiaries.
Revenue earning vehicles and buildings - Depreciation is recognized in
amounts expected to result in the recovery of estimated residual values upon
disposal (i.e. no gains or losses). In determining the depreciation rate,
historical disposal experience
13
and holding periods, and trends in the market for vehicles are reviewed. Due to
longer holding periods on trucks and the resulting increased possibility of
changes in the economic environment and market conditions, these estimates are
subject to a greater degree of risk.
Long-lived assets and intangible assets - The carrying value is
reviewed whenever events or circumstances indicate the carrying values may not
be recoverable through projected undiscounted future cash flows. The events
could include significant underperformance relative to expected, historical or
projected future operating results, significant changes in the manner of using
the assets, overall business strategy, significant negative industry or economic
trends and an unexpected non-compliance with significant debt agreements.
Investments - In determining if and when a decline in market value
below amortized cost is other than temporary, quoted market prices, dealer
quotes or discounted cash flows are reviewed. Permanent declines in value are
recognized in the current period operating results to the extent of the decline.
Insurance Revenue and Expense Recognition - Premiums are recognized as
revenue when due. Benefits and expenses are matched with recognized premiums to
result in recognition over the life of the contracts. This match is accomplished
by recording a provision for future policy benefits and unpaid claims and claim
adjustment expenses and by amortizing deferred policy acquisition costs. Charges
related to services to be performed are deferred until earned. The amounts
received in excess of premiums and fees are included in other policyholder funds
in the consolidated balance sheets.
Unearned premiums represent the portion of premiums written which
relates to the unexpired term of policies. Liabilities for health and disability
and other policy claims and benefits payable represent estimates of payments to
be made on insurance claims for reported losses and estimates of losses incurred
but not yet reported. These estimates are based on past claims experience and
current claim trends as well as social and economic conditions such as changes
in legal theories and inflation. Due to the nature of underlying risks and the
high degree of uncertainty associated with the determination of the liability
for future policy benefits and claims, the amounts to be ultimately paid to
settle liabilities cannot be precisely determined and may vary significantly
from the estimated liability.
Acquisition costs related to insurance contracts have been deferred to
accomplish matching against future premium revenue. The costs are charged to
current earnings to the extent it is determined that future premiums are not
adequate to cover amounts deferred.
DISCLOSURES ABOUT CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
Payments due by Period
Contractual Obligations Total Less than 1-3 4-5 After 5
1 year years years years
---------------------------------------------------
AMERCO's notes and loans $1,045,802 240,642 600,057 30,248 174,855
payable
SAC Holdings' notes and
loans payable
including lease
financings $ 557,761 137,313 128,185 13,040 279,223
Leases obligations $ 464,296 152,816 115,090 162,176 34,214
--------------------------------------------------
Total Contractual
Obligations $2,067,859 530,771 843,332 205,464 488,292
==================================================
LIQUIDITY AND CAPITAL RESOURCES
AMERCO'S MOVING AND STORAGE OPERATIONS
To meet the needs of its customers, U-Haul must maintain a large
inventory of fixed asset rental items. In fiscal year 2002, capital expenditures
were $275.8 million, as compared to $448.2 million and $476.8 million in fiscal
years 2001 and 2000, respectively. These expenditures primarily reflect the
renewal of the rental truck fleet. The capital required to fund these
acquisitions was obtained through internally generated funds from operations and
lease financings.
14
During each of the fiscal years ending March 31, 2003, 2004 and 2005,
U-Haul estimates gross capital expenditures will average approximately $289.0
million primarily reflecting rental fleet rotation. This level of capital
expenditures, combined with a potential range of $150-$205 million in annual
long-term debt maturities, are expected to create annual average funding needs
of approximately $466.0 million. Management estimates that U-Haul will fund
these requirements with leases, internally generated funds, including the
proceeds from the disposition of older trucks and other asset sales, and to a
lesser extent refinance of a portion of existing indebtedness. The sale of
assets is dependent upon economic conditions, the amount and nature of
sale-leaseback transactions, and AMERCO's fleet rotation program. Operating
leases on rental equipment were the result of sale-lease back transactions,
whereby as part of the agreement residual value guarantees were provided. AMERCO
believes the market value of the trucks upon the lease maturity will be greater
than the residual value guarantees. In many cases, a decline in asset sales is
accompanied by a decrease in capital expenditures. Depending on the results of
our operations and general economic and competitive conditions, many of which we
cannot control, we may take certain actions, including delaying or reducing
capital expenditures.
Real Estate has sold storage properties, from time to time, to SAC
Holdings. These sales have in the past provided significant cash flows to
AMERCO. The ability of Real Estate to engage in similar transactions in the
future is dependent to a large degree on the ability of SAC Holdings to obtain
third-party financing for its acquisitions of properties from Real Estate and in
general, its willingness to engage in such transactions. Also, Real Estate
continues to sell surplus properties to third parties primarily for cash at
current levels.
At March 31, 2002, total outstanding notes and mortgages payable for
AMERCO and consolidated subsidiaries was $1,045.8 million compared to $1,170.0
million at March 31, 2001. On June 28, 2002, AMERCO entered into an agreement
replacing an existing revolver agreement with a 3 year revolver for $205.0
million.
At March 31, 2002, total outstanding notes and mortgages payable for
SAC Holdings and consolidated subsidiaries, before intercompany eliminations of
$399.6 million was $957.4 million compared to $504.2 million at March 31, 2001.
SAC Holdings' creditors have no recourse to AMERCO. AMERCO is not liable for the
debts of SAC Holdings. Further, there are no cross default provisions on
indebtedness between AMERCO and SAC Holdings. Lease financing included in the
above totals approximated $117.1 million and $114.0 million at March 31, 2002
and March 31, 2001, respectively.
AMERCO has no (and has never had any) ownership interest in SAC
Holdings or its subsidiaries. The presentation of the consolidated statements
has no bearing or consideration to the credit agreements or the operations of
each company. The accounts of AMERCO and SAC Holdings are presented as
consolidated due to a revised interpretation of EITF 90-15 by the Company's
independent public accountants. The company agrees with the revised
interpretations.
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, 2002, AMERCO had $1,045.8 million in
total notes and loans outstanding. We believe there are enough leasing
companies, banks and other forms of financing to meet our needs.
Certain of AMERCO's credit agreements contain restrictive financial and
other covenants, including, among others, covenants with respect to incurring
additional indebtedness, making third party guarantees, entering into contingent
obligations, maintaining certain financial ratios and placing certain additional
liens on its properties and assets and restricting the issuance of certain types
of preferred stock. At March 31, 2002, AMERCO was in compliance with these
covenants. AMERCO's various credit and financing arrangements are affected by
its credit ratings such that if AMERCO experiences a credit downgrade, the
interest rates that it is charged might be increased, which would result in an
increase in AMERCO's interest expense and hinder its ability to obtain
additional financing on terms acceptable to it, if at all.
Subsequent to year-end, the Company executed a $205 million revolver
credit agreement and an existing agreement expired.
15
SAC HOLDINGS
SAC Holdings intends to meet its current debt obligations through cash
flows, generated from its operating activities. SAC Holdings intends to continue
to purchase storage properties during the next year using financing
arrangements.
Reference is made to "Item 8 - Note 5 of Notes to Consolidated
Financial Statements".
CONSOLIDATED NET CASH PROVIDED BY OPERATING ACTIVITIES Net cash provided by
operating activities was $130.5 million, $280.5 million and $224.1
million in fiscal years 2002, 2001 and 2000, respectively. Details by material
segment follows:
AMERCO MOVING AND STORAGE OPERATIONS
Cash provided by operating activities was $185.3 million, $39.7 million
and $147.5 million in fiscal years 2002, 2001 and 2000, respectively. The
increase in the current year is due to an increase in earnings and an increase
in intercompany payable with Real Estate operations. The decrease from fiscal
year 2000 to fiscal year 2001 is mainly due to a decrease in intercompany
payable.
REAL ESTATE OPERATIONS
Cash provided (used) by operating activities was $(227.9) million,
$50.5 million and $24.8 million in fiscal years 2002, 2001 and 2000,
respectively. The decrease in fiscal year 2002 is due to a decrease in the
intercompany payable with AMERCO Moving and Storage operations. 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.
PROPERTY AND CASUALTY
Cash provided (used) by operating activities was $(54.9) million, $21.1
million and $(11.1) million for the years ended December 31, 2001, 2000 and
1999, respectively. The 2000 to 2001 change resulted from decreased unearned
premiums, increased premium receivables and intercompany due from affiliates,
and an increase in federal income tax recoverable. The 1999 to 2000 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.
RepWest's cash and cash equivalents and short-term investment portfolio
were $18.3 million, $17.0 million and $6.0 million at December 31, 2001, 2000
and 1999, respectively. This balance reflects funds in transition from maturity
proceeds to long-term investments. This level of liquid assets, combined with
anticipated operating 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.
During fiscal 2002, RepWest realized a write-down of investments due to
other than temporary declines approximating $4.3 million.
LIFE INSURANCE
Cash provided (used) by operating activities was $(3.1) million, $3.7
million and $22.2 million for the years ended December 31, 2001, 2000 and 1999,
respectively. The decrease in cash flows from operating activities in 2000
relates to paid loss experience. Cash flows provided by financing activities
were $58.1 million, $13.9 million and $3.2 million for the years ended December
31, 2001, 2000 and 1999, 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 is a component of
investing activities. The increase in investment contract deposits in 2001 over
2000 is due to growth in new deposits offset by withdrawals and terminations of
existing deposits.
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 $53.5 million, $45.0 million and
$30.7 million at December 31,
16
2001, 2000 and 1999, respectively. Oxford believes that the overall sources of
liquidity will continue to meet foreseeable cash needs.
During fiscal 2002, Oxford realized a write-down of investments due to
other than temporary declines approximating $2.3 million.
SAC HOLDINGS
Cash provided by operating activities was $6.7 million, $2.8 million
and $0.7 million in fiscal years 2002, 2001 and 2000, respectively.
At March 31, 2002, total outstanding notes and mortgages payable before
intercompany eliminations of $399.6 million were $957.4 million compared to
$504.2 million at March 31, 2001.
CONSOLIDATED STOCKHOLDERS' EQUITY
Consolidated stockholders' equity was $499.1 million, $512.3 million
and $532.5 million as of March 31, 2002, 2001 and 2000, respectively. Details by
material segment follow:
AMERCO'S MOVING AND STORAGE OPERATIONS
U-Haul's stockholders' equity was $538.9 million, $495.7 million and
$420.7 million as of March 31, 2002, 2001 and 2000, respectively. The increase
in fiscal year 2002 is mainly the result of increased additional paid in capital
due to the sale of property to a related party. Such amounts are eliminated in
consolidation. The increase in fiscal year 2001 was due to earnings.
REAL ESTATE OPERATIONS
Real Estate stockholders' equity was $198.4 million, $89.1 million and
$96.1 million as of March 31, 2002, 2001 and 2000, respectively. The increase in
fiscal year 2002 is due to the sale of storage properties. The decrease in
fiscal year 2001 relates to the payment of a dividend to U-Haul partially offset
by increased earnings.
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. Liquidity
remains strong, with invested assets equal to 75.3% 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 $214.0 million, $192.1 million and
$208.5 million at December 31, 2001, 2000 and 1999, respectively. The increase
from 2000 to 2001 was the result of a $60.2 million capital contribution from
the RepWest's parent AMERCO, offset by operating losses in 2001. The decrease
from 1999 to 2000 is a result of operating losses 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. RepWest did
not pay dividends to its parent during 2001, 2000 or 1999.
LIFE INSURANCE
Oxford's stockholder's equity was $128.8 million, $99.8 million and
$88.1 million as of December 31, 2001, 2000 and 1999, respectively. The increase
from 2000 to 2001 is a result of earnings and changes in market value for the
available for sale investment portfolio and a $15.4 million contribution from
AMERCO. Oxford did not pay dividends to its parent during 2001, 2000 or 1999.
SAC HOLDINGS
SAC Holdings' stockholders' deficit was $(19.5) million, $(31.7)
million and $(11.5) million as of March 31, 2002, 2001 and 2000, respectively.
Stockholder's deficit for fiscal 2002 decreased due to a $27.0 million
contribution of stock by the owner recorded to additional paid-in capital,
offset by a net loss of $14.8 million.
17
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 $15.2 million and $0.1 million for RepWest and Oxford, respectively
at December 31, 2001. 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.
The Regulatory authorities impose minimum risk-based capital ("RBC")
requirements that were developed by the NAIC, on insurance enterprises. The
formulas for determining the amount of RBC specify various weighting factors
that are applied to financial balances or various levels of activity based on
perceived degree of risk. Regulatory compliance is determined by a ratio of the
enterprise's regulatory total adjusted capital, as defined by the NAIC, to its
authorized control level RBC, as defined by the NAIC. Enterprises below specific
trigger points or ratios are classified within certain levels, each of which
requires specified corrective action. The RBC measures of the Company, NAI and
CFLIC as of December 31, 2001 were all above the minimum standards.
RESULTS OF OPERATIONS - CONSOLIDATED
CONSOLIDATED RENTAL REVENUE
Rental revenue, net of commission expense was $1,344.0 million,
$1,285.5 million, and $1,208.8 million in fiscal years 2002, 2001 and 2000,
respectively. Details by material segment follow:
AMERCO'S MOVING AND STORAGE OPERATIONS
Rental revenue was $1,243.4 million, $1,202.4 million and $1,148.2
million fiscal years 2002, 2001 and 2000, respectively. The increase from fiscal
year 2001 to fiscal year 2002 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 2000 to fiscal year 2001 was primarily due to the growth in truck
rental revenues, which benefited from transactional growth and reflects higher
average revenue per transaction.
REAL ESTATE OPERATIONS
Rental revenue, before intercompany eliminations, were $78.7 million,
$71.9 million and $73.4 million in fiscal years 2002, 2001 and 2000,
respectively. Intercompany rental revenue was $75.0 million, $71.1 million and
$71.0 million in fiscal years 2002, 2001 and 2000, respectively. The decrease in
fiscal year 2002 is related to the sale of properties to a related party while
rental revenue was consistent between fiscal year 2000 and fiscal year 2001.
SAC HOLDINGS
Rental revenue was $111.1 million, $88.6 million and $64.9 million in
fiscal years 2002, 2001 and 2000, respectively. Increased facility capacity
through the acquisition of new locations and increased storage rates accounted
for the increase. The occupancy of existing storage locations has remained
stable.
CONSOLIDATED NET SALES
Net sales revenues were $222.8 million, $212.2 million and $201.4
million in fiscal years 2002, 2001 and 2000, respectively. Revenue growth from
the sale of moving support items (i.e. boxes, etc.) and propane resulted in the
increase for each year.
AMERCO'S MOVING AND STORAGE OPERATIONS
Net sales revenues were $198.3 million, $194.3 million and $188.8
million in fiscal years 2002, 2001 and 2000, respectively. Revenue growth from
the sale of moving support items (i.e. boxes, etc.) and propane resulted in the
increase for each year.
18
SAC HOLDINGS
Net sales revenues were $24.4 million, $17.9 million and $12.5 million
in fiscal years 2002, 2001 and 2000, respectively. Revenue growth was due to the
addition of new locations.
CONSOLIDATED PREMIUMS
Premium revenues, after intercompany eliminations, were $433.6 million,
$323.2 million and $262.1 million in fiscal years 2002, 2001 and 2000,
respectively. Details by material segment follow:
PROPERTY AND CASUALTY
Premium revenues, before intercompany eliminations, were $274.0
million, $218.1 million and $173.8 million for the years ended December 31,
2001, 2000 and 1999, respectively. General agency premiums were $107.4 million,
$64.3 million and $17.8 million for the years ended December 31, 2001, 2000 and
1999, respectively. The increase from 2000 to 2001 was the result of trucking,
commercial lines business, and the non-standard auto program. Assumed treaty
reinsurance premiums were $73.0 million, $83.2 million and $80.7 million for the
years ended December 31, 2001, 2000 and 1999, respectively. Rental industry
revenues were $59.6 million, $43.3 million and $50.3 million for the years ended
December 31, 2001, 2000 and 1999, respectively. The increase from 2000 was the
result of an increase in premiums of a retrospectively rated policy on the
U-Haul industry liability policy.
LIFE INSURANCE
Premium revenues, before intercompany eliminations, were $160.1
million, $112.6 million and $96.4 million for the years ended December 31, 2001,
2000 and 1999, respectively. Oxford increased Medicare supplement premiums
through direct writings and the acquisition of Christian Fidelity Life Insurance
Company (CFLIC); these actions increased premiums by $49.6 million from 2000 and
$61.8 million from 1999. Premiums from Oxford's life insurance lines increased
$1.2 million from 2000 and decreased $0.4 million from 1999 due to production
fluctuations from year to year. In the area of credit insurance, Oxford had
cancelled accounts in specific states and has experienced an industry-wide
reduction in new premium production. These factors contributed to a $3.7 million
decrease in premium from 2000 and a $0.4 million decrease from 1999.
Annuitizations decreased by $1.9 million from 2000 and $0.8 million from 1999.
Other health insurance premiums increased $2.3 million from 2000 and $3.5
million from 1999 due to a higher reinsurance retention level.
CONSOLIDATED NET INVESTMENT AND INTEREST INCOME
Net investment and interest income was $67.6 million, $67.1 million and
$63.7 million in fiscal years 2002, 2001 and 2000, respectively. Details by
material segment follow:
AMERCO MOVING AND STORAGE OPERATIONS
Interest income, before consolidating entries, was $24.2 million, $27.9
million and $19.5 million in fiscal years 2002, 2001 and 2000, respectively. The
decrease in fiscal year 2002 is mainly related to decrease average investment
balance. The increase in interest during fiscal year 2001 reflects higher
average storage note receivable balances.
REAL ESTATE OPERATIONS
Net investment and interest income was $8.7 million, $11.0 million and
$7.0 million in fiscal years 2002, 2001 and 2000, respectively. The increase in
fiscal 2002 is related to increased investments. The increase in fiscal 2001 is
due to interest income received on notes receivable.
PROPERTY AND CASUALTY
Net investment income was $27.6 million, $29.1 million and $33.0
million for the years ended December 31, 2001, 2000 and 1999, respectively. The
reductions are attributable to lower invested asset balance, lower interest
rates, as well as the write down of $4.1 million of fixed maturity investments
during 2001.
LIFE INSURANCE
Net investment income was $27.0 million, $22.2 million and $21.5
million for the years ended December 31, 2001, 2000 and 1999, respectively. This
increase is due to a larger invested asset base in 2001 and net realized capital
gains in 2001.
19
CONSOLIDATED OPERATING EXPENSES
Operating expenses were $1,109.4 million, $1,047.2 million and $949.3
million in fiscal years 2002, 2001 and 2000, respectively. Details by material
segment follow:
AMERCO'S MOVING AND STORAGE OPERATIONS
Operating expenses, before intercompany eliminations, were $1,001.8
million, $986.5 million and $931.1 million in fiscal years 2002, 2001 and 2000,
respectively. The increase in fiscal year 2002 is due to increased personnel
costs and higher repair expense. The increased expense in fiscal year 2001 is
due to increased personnel costs, 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.
REAL ESTATE OPERATIONS
Operating expenses, before intercompany eliminations, were $6.0
million, $0.4 million and $4.0 million in fiscal years 2002, 2001 and 2000,
respectively. The increase in fiscal year 2002 is due to an increase in the
maintenance costs, including insurance and property taxes. Real Estate benefited
from a reduction in intercompany management fees charged by an affiliated
segment company during fiscal year 2001 compared to the prior two years.
PROPERTY AND CASUALTY
Operating expenses, before intercompany eliminations, were $78.7
million, $56.7 million and $35.0 million for the years ended December 31, 2001,
2000 and 1999, respectively. The increase is due to a change in estimate on an
aggregate stop loss treaty in which RepWest had originally recorded the treaty
as if it would be commuted. Estimates in 2001 have changed and the treaty will
not be commuted. The original amount was a reduction to commissions of $17.7
million of which RepWest had to recognize back through commissions in 2001.
Commission expenses were $51.2 million, $33.1 million and $19.1 million for the
years ended December 2001, 2000 and 1999, respectively. Lease expenses were $1.7
million, $2.1 million and $1.9 million for the years ended December 2001, 2000
and 1999, respectively. All other underwriting expenses consisted of $22.8
million, $21.4 million and $13.9 million for the years ended December 2001, 2000
and 1999, respectively.
LIFE INSURANCE
Operating expenses, before intercompany eliminations, were $37.0
million, $29.0 million and $23.1 million for the years ended December 31, 2001,
2000 and 1999, respectively. Commissions have increased $3.9 million and $11.2
million from 2000 and 1999, respectively, primarily due to the increases in
Medicare supplement premiums. General and administrative expenses net of fees
collected increased $4.1 million and $2.8 million from 2000 and 1999,
respectively. Increases due to the acquisition of CFLIC were $3.3 million and
$3.9 million from 2000 and 1999, respectively. The remaining increases are due
to increases in the volume of business and the expenses associated with the
administration.
SAC HOLDINGS
Operating expenses, before intercompany eliminations, were $62.2
million, $51.5 million and $34.2 million in fiscal years 2002, 2001 and 2000,
respectively. Reimbursed personnel expenses, liability insurance, property taxes
and utility expenses all increased proportionately in relation to the increased
revenues from the acquisition of new locations.
CONSOLIDATED COST OF SALES
Cost of sales was $122.9 million, $126.6 million and $115.4 million in
fiscal years 2002, 2001 and 2000, respectively. Increased material costs and a
higher sales volume related to moving support items contributed to the increases
in both fiscal years 2002 and 2001.
AMERCO'S MOVING AND STORAGE
Cost of sales was $111.6 million, $116.7 million and $110.6 million in
fiscal years 2002, 2001 and 2000, respectively. The decrease in fiscal year 2002
is due to the lower costs associated with the sale of propane and other
materials. The increase in fiscal year 2001 is due to increased material costs
and a higher sales volume related to moving support items.
20
SAC HOLDINGS
Cost of sales was $11.3 million, $9.9 million and $4.8 million in
fiscal years 2002, 2001 and 2000, respectively. Increased material costs and a
higher sales volume related to moving support items contributed to the increases
in both fiscal years 2002 and 2001.
CONSOLIDATED BENEFITS AND LOSSES
Benefits and losses were $389.5 million, $283.4 million and $209.6
million in fiscal years 2002, 2001 and 2000, respectively. Details by material
segment follow:
PROPERTY AND CASUALTY
Benefits and losses incurred were $269.1 million, $204.1 million and
$150.5 million for the years ended December 31, 2001, 2000 and 1999,
respectively. The increase from 2000 to 2001 resulted from increased earned
premium in three general agency programs and continued reserve strengthening in
assumed reinsurance treaty segment. 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.
LIFE INSURANCE
Benefits incurred were $120.4 million, $79.2 million and $59.0 million
for the years ended December 31, 2001, 2000 and 1999, respectively. The increase
is primarily due to Medicare supplement benefits incurred, which accounts for
$38.8 million and $55.5 million of benefit increases from 2000 and 1999,
respectively. These increases are due to the acquisition of CFLIC and poor
experience on legacy blocks, which are no longer actively marketed. Credit
insurance benefits increased $0.8 million and $2.9 million from 2000 and 1999,
respectively, due to increased mortality and morbidity experience. Benefits from
other health lines increased $3.1 million and $5.6 million from 2000 and 1999,
respectively, as retained volume increased and loss experience worsened. These
lines have been terminated. Annuity and life benefits decreased $1.5 million and
$2.6 million from 2000 and 1999, respectively, due to fluctuations in life
insurance production and annuitizations of annuity contracts.
CONSOLIDATED AMORTIZATION OF DEFERRED ACQUISITION COSTS AND OTHER
Amortization of deferred acquisition costs (DAC) and the value of
business acquired (VOBA) was $40.7 million, $35.9 million and $35.0 million in
fiscal years 2002, 2001 and 2000, 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
Amortization expense was $22.1 million, $16.3 million and $13.4 million
for the years ended December 31, 2001, 2000 and 1999, respectively. The increase
from 2000 to 2001 is due to the amortization of higher commissions deferred in
the 2000 year. The increase from 1999 to 2000 is mainly due to the amortization
of Assumed Treaty expenses that were deferred in the 2000 year.
LIFE INSURANCE
The VOBA asset relates to the future profits of insurance policies in
force at the date of the North American Insurance and CFLIC acquisitions.
Amortization of DAC and VOBA was $18.6 million, $19.6 million and $21.6 million
for the years ended December 31, 2001, 2000 and 1999, respectively. These costs
are amortized as the premium is earned over the term of the policy. Amortization
decreased $1.0 million and $3.0 million from 2000 and 1999, respectively, due to
the annuity and credit segments.
CONSOLIDATED LEASE EXPENSE
Lease expense was $175.5 million, $173.1 million and $131.0 million in
fiscal years 2002, 2001 and 2000, respectively. Details by material segment
follow:
AMERCO'S MOVING AND STORAGE OPERATIONS
Lease expense before intercompany elimination was $170.8 million,
$166.2 million and $132.4 million in fiscal years 2002, 2001 and 2000,
respectively. The increase in 2002 is due property leases, with a decrease in
rental equipment lease expense.
21
REAL ESTATE OPERATIONS
Lease expense before intercompany eliminations, for real estate
operations was $11.2 million, $11.6 million and $3.0 million for the fiscal
years 2002, 2001 and 2000, respectively. The lease expense in fiscal year 2002
was virtually unchanged over the fiscal year 2001. The continued increase in
fiscal year 2001 over 2000 reflects payments under an operating lease facility
with a number of financial institutions.
CONSOLIDATED DEPRECIATION EXPENSE, NET
Depreciation expense, net was $108.7 million, $101.5 million and $96.1
million in fiscal years 2002, 2001 and 2000, respectively. Details by material
segment follow:
AMERCO'S MOVING AND STORAGE OPERATIONS
Depreciation expense, net was $97.3 million, $82.7 million and $79.0
million in fiscal years 2002, 2001 and 2000, respectively. The increase in
fiscal years 2002 and 2001 reflects an increase in depreciation expense on the
rental truck fleet.
REAL ESTATE OPERATIONS
Depreciation expense, net was $(2.0) million, $5.3 million and $8.6
million in fiscal years 2002, 2001 and 2000, respectively. The decrease in
fiscal years 2002 reflects an increase in gains from the disposition of
property, plant and equipment. The decrease in fiscal year 2001 reflects an
increase in gains from the disposition of property, plant and equipment and a
decrease in depreciation on buildings and non-rental equipment.
SAC HOLDINGS
Depreciation expense, net was $14.2 million, $11.7 million and $7.9
million in fiscal years 2002, 2001 and 2000, respectively. The increase is
attributed to the acquisition of new locations.
CONSOLIDATED EARNINGS FROM OPERATIONS
Earnings from operations were $121.3 million, $120.4 million and $199.6
million in fiscal years 2002, 2001 and 2000, respectively. Details by material
segment follow:
AMERCO'S MOVING AND STORAGE OPERATIONS
Earnings from operations, before intercompany eliminations, were $69.5
million, $54.5 million and $96.0 million in fiscal years 2002, 2001 and 2000,
respectively. The increase in fiscal year 2002 is due to increased revenue from
rental operations offset by the slight increase in operating expenses and a
decrease in lease expense. The decrease in fiscal year 2001 is due to increased
transactions, offset by increased operating and lease expenses.
REAL ESTATE OPERATIONS
Earnings from operations, before intercompany eliminations, were $72.3
million, $65.8 million and $64.7 million in fiscal years 2002, 2001 and 2000,
respectively. The increase in fiscal year 2002 is mainly related to higher net
investment interest income. A decrease in intercompany management fees charged
contributed to the earnings increase for fiscal year 2001.
PROPERTY AND CASUALTY
Earnings (loss) from operations were $(68.2) million, $(29.9) million
and $7.9 million for the years ended December 31, 2001, 2000 and 1999,
respectively. The decrease in 2001 was due to the increase in commissions due to
the commutation write-off, reserve strengthening, and development in older years
on the assumed treaty reinsurance business. The 1999 to 2000 decrease 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.
LIFE INSURANCE
Earnings from operations were $11.1 million, $6.9 million and $14.2
million for the years ended December 31, 2001, 2000 and 1999, respectively. The
increase from 2000 is due primarily to improved net investment income, while the
decrease from 1999 is primarily due to poor experience in the Other Health and
Credit insurance lines.
22
SAC HOLDING
Earnings from operations were $47.8 million, $33.4 million and $30.5
million for the years ended March 31, 2002, 2001 and 2000, respectively. The
increase is due to the addition of storage locations.
CONSOLIDATED INTEREST EXPENSE
Interest expense was $116.3 million, $114.6 million and $99.9 million
in fiscal years 2002, 2001 and 2000, respectively. Details by material segment
follow:
AMERCO'S MOVING AND STORAGE OPERATIONS
Interest expense was $76.1 million, $87.8 million and $81.5 million in
fiscal years 2002, 2001 and 2000, respectively. The decrease in fiscal year 2002
can be attributed to interest rate reductions. The increase in fiscal year 2001
over fiscal year 2000 can be attributed to an increase in the average cost of
debt.
SAC HOLDING
Interest expense before intercompany elimination was $61.1 million,
$51.3 million and $36.8 million in fiscal years 2002, 2001 and 2000,
respectively The average debt level outstanding continued to increase due to the
acquisition of storage properties in fiscal year 2002 compared to fiscal years
2001 and 2000.
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 6.71% 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).
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 $5.0 million,
$5.8 million and $99.7 million in fiscal years 2002, 2001 and 2000,
respectively. After providing for income taxes, earnings from operations were
$2.7 million, $3.1 million and $63.5 million in fiscal years 2002, 2001 and
2000, respectively. Following deductions for an extraordinary loss from the
early extinguishment of debt and the elimination of SAC Holdings, net earnings
were $2.7 million, $1.0 million and $63.2 million in fiscal years 2002, 2001 and
2000, respectively.
QUARTERLY RESULTS
The table on the following page presents unaudited quarterly results
for the eight quarters in the period beginning April 1, 2000 and ending March
31, 2002. The quarters presented reflect the restatements due to the
consolidation of SAC Holding Corporations. 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.
23
Quarter Ended
-------------------------------------------------------------------------------------------------------
Jun 30 Sep 30 Dec 31 Mar 31
2001 2001 2001 2002
As reported As adjusted As reported As adjusted As reported As adjusted
------------------------------------------------------------------------------------
(in thousands, except share and per share data)
Total revenues $ 542,553 533,403 572,379 563,229 467,410 458,260 513,118
Earnings from operations
net of tax $ 25,324 20,901 41,131 36,593 (22,389) (23,926) (30,847)
Net earnings (loss) $ 25,003 20,901 41,686 36,593 (20,212) (23,926) (30,847)
Weighted average common
shares outstanding
basic and diluted 21,280,361 21,280,361 21,106,343 21,106,343 20,892,342 20,892,342 21,022,712
Earnings (loss) from
operations before
extraordinary loss
on early extinguishment
of debt per common
share (1) $ 1.02 .83 1.82 1.58 (1.12) (1.30) (1.60)
Earnings (loss) per common
share
basic and diluted $ 1.02 .83 1.82 1.58 (1.12) (1.30) (1.60)
Quarter Ended
------------------------------------------------------------------------------
Jun 30 Sep 30 Dec 31
2000 2000 2000
As reported As adjusted As reported As adjusted As reported As adjusted
------------------------------------------------------------------------------
(in thousands, except share and per share data)
Total revenues $ 472,350 464,331 520,132 512,113 444,620 436,601
Earnings from operations
before extraordinary loss
on early extinguishment
of debt net of tax (2) $ 35,876 36,238 38,006 39,171 (24,739) (23,574)
Net earnings (loss) $ 37,612 36,238 41,233 39,171 (21,292) (25,695)
Weighted average common
shares outstanding
Basic 21,718,988 21,718,988 21,489,970 21,489,970 21,406,688 21,406,688
Earnings (loss) from
operations before minority
interest and extraordinary loss
on early extinguishment of debt
per common share (1) (2) $ 1.58 1.52 1.77 1.67 (1.05) (1.25)
Earnings (loss) per common
share
basic and diluted $ 1.58 1.52 1.77 1.67 (1.15) (1.35)
Quarter Ended
-------------------------
Mar 31
2001
As reported As adjusted
-------------------------
(in thousands, except
share and per share data)
Total revenues 425,318 474,997
Earnings from operations
before extraordinary loss
on early extinguishment
of debt net of tax (2) (46,650) (48,702)
Net earnings (loss) (46,650) (48,702)
Weighted average common
shares outstanding
Basic 21,326,015 21,326,015
Earnings (loss) from
operations before minority
interest and extraordinary loss
on early extinguishment of debt
per common share (1) (2) (2.34) (2.40)
Earnings (loss) per common
share
basic and diluted (2.34) (2.40)
24
(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 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).
IRS EXAMINATION
In connection with the resolution of the stockholder litigation, AMERCO
had 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.
The Company is currently under IRS examination for the years 1996-1997.
The IRS has proposed adjustments to the 03/31/97 and 03/31/96 tax returns in the
amount of $233,093,000 and $99,021,000, respectively, resulting in tax
delinquencies of $9,332,000 for 1997 and $5,497,000 for 1996. Nearly all of the
adjustments are attributable to denials of deductions claimed by the Company for
certain payments made in resolution of the litigation with certain members of
the Shoen family and their corporations. An unfavorable result could result in
substantial cash payments, but is expected to have minimal, if any, impact on
consolidated results of operations. The Company plans to vigorously contest the
IRS adjustments.
OTHER
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statements of Financial Accounting Standards No. 141 (SFAS 141), "Business
Combinations", and No. 142 (SFAS 142), "Goodwill and Other Intangible Assets".
SFAS 141 supercedes Accounting Principles Board Opinion No. 16 (APB
16), "Business Combinations". The most significant changes made by SFAS 141 are:
(1) requiring that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001, (2) establishing specific criteria
for the recognition of intangible assets separately from goodwill, and (3)
requiring unallocated negative goodwill to be written off immediately as an
extraordinary gain (instead of being deferred and amortized).
SFAS 142 supercedes APB 17, "Intangible Assets". SFAS 142 primarily
addresses the accounting for goodwill and intangible assets subsequent to their
acquisition (i.e., the post-acquisition accounting). The provisions of SFAS 142
will be effective for fiscal years beginning after December 15, 2001. The most
significant changes made by SFAS 142 are: (1) goodwill and indefinite lived
intangible assets will no longer be amortized, (2) goodwill will be tested for
impairment at least annually at the reporting unit level, (3) intangible assets
deemed to have an indefinite life will be tested for impairment at least
annually, and (4) the amortization period of intangible assets with finite lives
will no longer be limited to forty years.
SFAS No. 141 and 142 are not expected to affect the consolidated
financial position or results of operations.
SFAS No. 143, Accounting for Asset Retirement Obligations, requires
recognition of the fair value of liabilities associated with the retirement of
long-lived assets when a legal obligation to incur such costs arises as a result
of the acquisition, construction, development and/or the normal operation of a
long-lived asset. Upon recognition of the liability, a corresponding asset is
recorded at present value and accreted over the life of the asset and
depreciated over the remaining life of the long-lived asset. The Statement
defines a legal obligation as one that a party is required to settle as a result
of an existing or enacted law, statute, ordinance, or written or oral contract
or by legal construction of a contract under the doctrine of promissory
estoppel. SFAS 143 is effective for fiscal years beginning after June 15, 2002.
Management has not yet determined the effects of adopting this Statement on the
financial position or results of operations.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets", which addresses issues relating to
the implementation of FASB Statement No. 121 (FAS 121), "Accounting for the
Impairment of Long-Lived Assets and
25
for Long-Lived Assets to Be Disposed Of", and develops a single accounting
model, based on the framework established in FAS 121, for long-lived assets to
be disposed of by sale, whether previously held and used or newly acquired. The
Company is in the process of determining the extent to which this statement will
impact its results of operations or financial position.
SFAS No. 145, Rescission of FAS Nos. 4, 44, and 64, Amendment of FAS
13, and Technical Corrections as of April 2002, rescinds FASB Statement No. 4,
Reporting Gains and Losses from Extinguishment of Debt, and an amendment of that
Statement, FASB Statement No. 64, Extinguishments of Debt Made to Satisfy
Sinking-Fund Requirements. This Statement also rescinds FASB Statement No. 44,
Accounting for Intangible Assets of Motor Carriers. This Statement amends FASB
Statement No. 13, Accounting for Leases, to eliminate an inconsistency between
the required accounting for sale-leaseback transactions and the required
accounting for certain lease modifications that have economic effects that are
similar to sale-leaseback transactions. This Statement also amends other
existing authoritative pronouncements to make various technical corrections,
clarify meanings, or describe their applicability under changed conditions.
Management has not yet determined the effects of adopting this Statement on the
financial position or results of operations, except for the need to reclassify
debt extinguishments previously reported as extraordinary.
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 $2.5 million.
SAC Holdings debt is primarily fixed rate. Fluctuations in interest
rates for new operations could have an impact on operations. SAC Holdings does
not enter into leveraged financial transactions or use derivative financial
instruments for trading purposes.
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.
SAC Holdings earnings are affected by fluctuations in the value of
foreign currency exchange rates. Approximately 9.8% of SAC Holdings revenue is
generated in Canada. SAC Holding 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 and SAC Holdings, including the notes to such statements
and the related schedules, are set forth on pages 31 through 86 and are thereby
incorporated herein.
26
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.
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 2002 Annual Meeting of Stockholders (the "2002
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 2002
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" and "Other Information Regarding the Board of
Directors" in the 2002 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 2002 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 captions "Security Ownership of Certain
Beneficial Owners and Management" and "Equity Compensation Plan Information" in
the 2002 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 2002 Proxy Statement, which information is incorporated
herein by reference.
27
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, 2002 and 2001 32
Consolidated Statements of Earnings -
Years ended March 31, 2002, 2001 and 2000 34
Consolidated Statements of Changes in Stockholders'
Equity - Years ended March 31, 2002, 2001 and 2000 36
Consolidated Statements of Comprehensive Income -
Years ended March 31, 2002, 2001 and 2000 38
Consolidated Statements of Cash Flows - Years ended
March 31, 2002, 2001 and 2000 39
Notes to Consolidated Financial Statements 41
2. Additional Information
Summary of Earnings of Independent Trailer Fleets 76
Notes to Summary of Earnings of Independent
Trailer Fleets 77
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 79
Supplemental Information (For Property-Casualty
Insurance Underwriters) -- Schedule V 83
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.
28
(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, 2000 (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, 2000 (14)
4.11 First Supplemental Indenture dated April 5, 2000 (14)
4.12 Second Supplemental Indenture dated February 4, 2001 (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
29
(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<