1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from __________________ to __________________
Commission Registrant, State of Incorporation I.R.S. Employer
File Number Address and Telephone Number Identification No.
________________________________________________________________________________
1-11255 AMERCO 88-0106815
(A Nevada Corporation)
1325 Airmotive Way, Ste. 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
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 [ ].
22,163,287 shares of AMERCO Common Stock, $0.25 par value were outstanding at
August 10, 2000.
5,385 shares of U-Haul International, Inc. Common Stock, $0.01 par value, were
outstanding at August 10, 2000. U-Haul International, Inc. meets the conditions
set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore
filing this form with the reduced disclosure format.
2
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
a) Consolidated Balance Sheets as of June 30, 2000 (unaudited)
and March 31, 2000.......................................... 4
b) Consolidated Statements of Earnings for the Quarters
ended June 30, 2000 and 1999 (unaudited).................... 6
c) Consolidated Statements of Changes in Stockholders' Equity
for the Quarter ended June 30, 2000 (unaudited)............. 7
d) Consolidated Statements of Comprehensive Income for the
Quarters ended June 30, 2000 and 1999 (unaudited)........... 8
e) Consolidated Statements of Cash Flows for the Quarters
ended June 30, 2000 and 1999 (unaudited).................... 9
f) Notes to Consolidated Financial Statements -
June 30, 2000 (unaudited), March 31, 2000 and
June 30, 1999 (unaudited)................................... 10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations....................................... 19
Item 3. Quantitative and Qualitative Disclosures About Market Risk...... 25
PART II. OTHER INFORMATION
Item 1. Legal Proceedings............................................... 26
Item 6. Exhibits and Reports on Form 8-K................................ 27
3
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INTENTIONALLY BLANK
4
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Balance Sheets
June 30, March 31,
Assets 2000 2000
--------------------------
(Unaudited)
(in thousands)
Cash and cash equivalents $ 9,056 48,435
Trade receivables, net 205,715 197,992
Notes and mortgage receivables, net 317,957 204,394
Inventories, net 87,531 84,614
Prepaid expenses 16,875 17,822
Investments, fixed maturities 881,979 884,824
Investments, other 200,368 166,167
Deferred policy acquisition costs 92,165 88,402
Other assets 50,108 49,913
------------------------
Property, plant and equipment, at cost:
Land 189,128 197,956
Buildings and improvements 804,479 853,403
Furniture and equipment 267,864 263,694
Rental trailers and other rental
equipment 221,277 210,472
Rental trucks 1,042,726 1,035,585
------------------------
2,525,474 2,561,110
Less accumulated depreciation 1,173,547 1,178,448
------------------------
Total property, plant and equipment 1,351,927 1,382,662
------------------------
Total Assets $ 3,213,681 3,125,225
========================
The accompanying notes are an integral part of these consolidated financial
statements.
5
June 30, March 31,
Liabilities and Stockholders' Equity 2000 2000
--------------------------
(Unaudited)
(in thousands, except
share and per share data)
Liabilities:
Accounts payable and accrued expenses $ 151,376 152,654
Notes and loans payable 1,123,562 1,137,840
Policy benefits and losses, claims and
loss expenses payable 555,291 548,043
Liabilities from premium deposits 464,179 461,673
Cash overdraft 28,586 30,460
Other policyholders' funds and liabilities 53,111 70,207
Deferred income 34,248 29,641
Deferred income taxes 150,497 109,413
------------------------
Total liabilities 2,560,850 2,539,931
Stockholders' equity:
Serial preferred stock -
Series A preferred stock - -
Series B preferred stock - -
Serial common stock -
Series A common stock 1,441 1,441
Common stock 9,122 9,122
Additional paid-in capital 311,708 275,242
Accumulated other comprehensive income (45,016) (42,317)
Retained earnings 789,543 755,172
Cost of common shares in treasury, net (397,785) (397,000)
Unearned ESOP shares (16,182) (16,366)
------------------------
Total stockholders' equity 652,831 585,294
Contingent liabilities and commitments
------------------------
Total Liabilities and Stockholders' Equity $ 3,213,681 3,125,225
========================
The accompanying notes are an integral part of these consolidated financial
statements.
6
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Earnings
Quarters ended June 30,
(Unaudited)
2000 1999
--------------------------
(in thousands, except
share and per share data)
Revenues
Rental revenue $ 322,748 305,566
Net sales 60,146 57,640
Premiums 54,987 56,076
Net investment and interest income 21,681 20,358
-----------------------
Total revenues 459,562 439,640
Costs and expenses
Operating expenses 231,775 221,043
Cost of sales 33,197 31,374
Benefits and losses 42,235 43,709
Amortization of deferred acquisition costs 7,869 7,777
Lease expense 40,434 31,396
Depreciation, net 22,810 18,779
-----------------------
Total costs and expenses 378,320 354,078
Earnings from operations 81,242 85,562
Interest expense 22,810 20,198
-----------------------
Pretax earnings 58,432 65,364
Income tax expense (20,820) (23,057)
-----------------------
Net earnings $ 37,612 42,307
=======================
Earnings per common share:
Basic $ 1.58 1.77
Diluted $ - 1.70
=======================
Weighted average common shares outstanding:
Basic 21,718,988 21,953,199
Diluted - 22,953,199
=======================
The accompanying notes are an integral part of these consolidated financial
statements.
7
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
Quarter ended June 30,
(Unaudited)
2000
--------------------------
(in thousands, except
share and per share data)
Series A common stock of $0.25 par value:
10,000,000 shares authorized, 5,762,495
shares issued as of June 30, 2000
Beginning and end of period $ 1,441
-------
Common stock of $0.25 par value:
150,000,000 shares authorized, 36,487,505
shares issued as of June 30, 2000
Beginning and end of period 9,122
-------
Additional paid-in capital:
Beginning of period 275,242
Gain on sale of property to
related party, net 36,466
-------
End of period 311,708
-------
Accumulated other comprehensive income:
Beginning of period (42,317)
Foreign currency translation (465)
Fair market value of cash flow hedge 24
Unrealized loss on investments (2,258)
-------
End of period (45,016)
-------
Retained earnings:
Beginning of period 755,172
Net earnings 37,612
Preferred stock dividends paid:
Series A ($0.53 per share) (3,241)
-------
End of period 789,543
-------
Less Treasury stock:
Beginning of period 397,000
Net increase 785
-------
End of period 397,785
-------
Less Unearned employee stock
ownership plan shares:
Beginning of period 16,366
Purchase of shares 44
Repayments from loan (228)
-------
End of period 16,182
-------
Total stockholders' equity $ 652,831
=======
The accompanying notes are an integral part of these consolidated financial
statements.
8
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Comprehensive Income
Quarters ended June 30,
(Unaudited)
2000 1999
-------------------
(in thousands)
Comprehensive income:
Net earnings $ 37,612 42,307
Changes in other comprehensive income:
Foreign currency translation (465) (363)
Fair market value of cash flow hedge 24 975
Unrealized gain (loss) on investments (2,258) (4,452)
-------------------
Total comprehensive income $ 34,913 38,467
===================
The accompanying notes are an integral part of these consolidated financial
statements.
9
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Cash Flows
Quarters ended June 30,
(Unaudited)
2000 1999
-------------------
(in thousands)
Cash flows from operating activities:
Net earnings $ 37,612 42,307
Depreciation and amortization 35,584 29,547
Provision for losses on accounts receivable 882 959
Net gain on sale of real and personal property (3,855) (2,396)
(Gain) loss on sale of investments 58 229
Changes in policy liabilities and accruals (4,403) (4,785)
Additions to deferred policy acquisition costs (13,251) (10,265)
Net change in other operating assets
and liabilities (14,055) 12,732
-------------------
Net cash provided by operating activities 38,572 68,328
-------------------
Cash flows from investing activities:
Purchases of investments:
Property, plant and equipment (149,758) (108,724)
Fixed maturities (23,504) (46,771)
Mortgage loans (4,055) (2,441)
Proceeds from sale of investments:
Property, plant and equipment 122,035 47,654
Fixed maturities 24,341 41,258
Real estate 227 42
Mortgage loans 6,215 3,887
Changes in other investments (36,444) (14,877)
-------------------
Net cash used by investing activities (60,943) (79,972)
-------------------
Cash flows from financing activities:
Net change in short-term borrowings (14,258) (125,963)
Proceeds from notes - 150,000
Debt issuance costs (141) (1,085)
Leveraged Employee Stock Ownership Plan:
Purchase of shares (44) (1)
Repayments from loan 228 210
Principal payments on notes (20) (22)
Net change in cash overdraft (1,874) (6,173)
Preferred stock dividends paid (3,241) (3,706)
Treasury stock acquisitions, net (785) -
Investment contract deposits 20,495 21,048
Investment contract withdrawals (17,368) (15,675)
-------------------
Net cash provided (used) by financing activities (17,008) 18,633
-------------------
Increase (decrease) in cash and cash equivalents (39,379) 6,989
Cash and cash equivalents at beginning of period 48,435 44,505
-------------------
Cash and cash equivalents at end of period $ 9,056 51,494
===================
The accompanying notes are an integral part of these consolidated financial
statements.
10
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000, March 31, 2000 and June 30, 1999
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
AMERCO, a Nevada corporation (AMERCO), is the holding company for U-Haul
International, Inc. (U-Haul), Amerco Real Estate Company (Real Estate), Republic
Western Insurance Company (RepWest) and Oxford Life Insurance Company (Oxford).
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the parent
corporation, AMERCO, and its wholly-owned subsidiaries. All material
intercompany accounts and transactions of AMERCO and its subsidiaries have been
eliminated. The financial statements and notes are presented as permitted by
Form 10-Q and do not contain certain information included in AMERCO's annual
financial statements and notes.
The consolidated balance sheet as of June 30, 2000 and the related
consolidated statements of earnings for the quarters ended June 30, 2000 and
1999, and the related consolidated statements of changes in stockholders' equity
for the quarter ended June 30, 2000 and the consolidated statements of
comprehensive income and cash flows for the quarters ended June 30, 2000 and
1999 are unaudited. In the opinion of management, all adjustments necessary for
a fair presentation of such financial statements have been included. Such
adjustments consisted only of normal recurring items. Interim results are not
necessarily indicative of results for a full year.
The operating results and financial position of AMERCO's consolidated
insurance operations are determined on a one quarter lag. There were no effects
related to intervening events which would materially affect the consolidated
financial position or results of operations for the financial statements
presented herein.
Certain reclassifications have been made to the financial statements for
the quarter ended June 30, 1999 to conform with the current year's presentation.
11
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Unaudited)
2. INVESTMENTS
A comparison of amortized cost to market for fixed maturities is as
follows:
March 31, 2000
-------------- Par Value Gross Gross Estimated
Consolidated or number Amortized unrealized unrealized market
Held-to-Maturity of shares cost gains losses value
------------------------------------------------------
(in thousands)
U.S. treasury
securities
and government
obligations $ 19,238 $ 18,495 112 (397) 18,210
U.S. government
agency mortgage-
backed securities $ 17,589 17,503 35 (365) 17,173
Corporate
securities $ 71,001 71,831 205 (3,772) 68,264
Mortgage-backed
securities $ 35,302 34,742 275 (506) 34,511
Redeemable preferred
stocks 4,561 115,253 235 (20,742) 94,746
----------------------------------------
257,824 862 (25,782) 232,904
----------------------------------------
March 31, 2000
-------------- Par Value Gross Gross Estimated
Consolidated or number Amortized unrealized unrealized market
Available-for-Sale of shares cost gains losses value
------------------------------------------------------
(in thousands)
U.S. treasury
securities
and government
obligations $ 43,670 $ 44,294 909 (994) 44,209
U.S. government
agency mortgage-
backed securities $ 36,588 36,299 219 (580) 35,938
Obligations of
states and
political
subdivisions $ 15,045 15,295 286 (147) 15,434
Corporate
securities $ 481,828 481,693 2,583 (19,357) 464,919
Mortgage-backed
securities $ 36,194 35,940 269 (482) 35,727
Redeemable preferred
stocks 1,311 32,675 66 (4,813) 27,928
----------------------------------------
646,196 4,332 (26,373) 624,155
----------------------------------------
Total $ 904,020 5,194 (52,155) 857,059
========================================
12
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Unaudited)
3. SUMMARIZED CONSOLIDATED FINANCIAL INFORMATION OF INSURANCE SUBSIDIARIES
A summarized consolidated balance sheet for RepWest is presented below:
March 31,
-------------------
2000 1999
-------------------
(in thousands)
Investments, fixed maturities $ 398,274 413,574
Investments, other 30,968 25,451
Receivables 162,398 118,266
Deferred policy acquisition costs 18,254 12,075
Due from affiliate 22,559 17,465
Deferred federal income taxes 12,061 13,495
Other assets 14,752 21,244
-------------------
Total assets $ 659,266 621,570
===================
Policy liabilities and accruals $ 338,443 341,781
Unearned premiums 69,713 48,236
Other policyholders' funds and liabilities 40,951 20,660
-------------------
Total liabilities 449,107 410,677
Stockholder's equity 210,159 210,893
-------------------
Total liabilities and
stockholder's equity $ 659,266 621,570
===================
A summarized consolidated income statement for RepWest is presented below:
Quarters ended
March 31,
-------------------
2000 1999
-------------------
(in thousands)
Premiums $ 30,407 33,793
Net investment income 8,008 8,382
-------------------
Total revenue 38,415 42,175
Benefits and losses 24,582 28,285
Amortization of deferred
policy acquisition costs 3,174 3,210
Operating expenses 8,318 8,689
-------------------
Total expenses 36,074 40,184
Income from operations 2,341 1,991
Income tax expense (863) (627)
-------------------
Net income $ 1,478 1,364
===================
13
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Unaudited)
3. SUMMARIZED CONSOLIDATED FINANCIAL INFORMATION OF INSURANCE SUBSIDIARIES,
continued
A summarized consolidated balance sheet for Oxford is presented below:
March 31,
-------------------
2000 1999
-------------------
(in thousands)
Investments, fixed maturities $ 483,705 483,325
Investments, other 154,124 151,678
Receivables 15,283 39,497
Deferred policy acquisition costs 73,911 75,159
Due from affiliate (10,909) (10,155)
Other assets 5,084 9,224
-------------------
Total assets $ 721,198 748,728
===================
Policy liabilities and accruals $ 145,290 145,124
Premium deposits 464,179 461,948
Other policyholders' funds and liabilities 12,880 26,316
Deferred federal income taxes 11,006 21,653
-------------------
Total liabilities 633,355 655,041
Stockholder's equity 87,843 93,687
-------------------
Total liabilities and
stockholder's equity $ 721,198 748,728
===================
A summarized consolidated income statement for Oxford is presented below:
Quarters ended
March 31,
-------------------
2000 1999
-------------------
(in thousands)
Premiums $ 25,504 25,112
Net investment income 5,829 5,514
-------------------
Total revenue 31,333 30,626
Benefits 17,653 15,424
Amortization of deferred
policy acquisition costs 4,695 4,567
Operating expenses 5,730 6,775
-------------------
Total expenses 28,078 26,766
Income from operations 3,255 3,860
Income tax expense (1,069) (1,261)
-------------------
Net income $ 2,186 2,599
===================
14
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Unaudited)
4. ACCUMULATED OTHER COMPREHENSIVE INCOME
A summary of accumulated comprehensive income components follows:
Unrealized Fair market Accumulated
Foreign gain (loss) value of other
currency on cash flow comprehensive
translation investments hedge income
-------------------------------------------------
(in thousands)
Balance at March 31, 2000 $ (28,310) (12,568) (1,439) (42,317)
Foreign currency
translation (465) - - (465)
Fair market value of
cash flow hedge,
net of taxes of $13 - - 24 24
Unrealized gain (loss)
on investments,
net of taxes of $223 - (2,258) - (2,258)
------- ------- ------ -------
Balance at June 30, 2000 $ (28,775) (14,826) (1,415) (45,016)
======= ======= ====== =======
Balance at March 31, 1999 $ (25,411) 11,302 (3,631) (17,740)
Foreign currency
translation (363) - - (363)
Fair market value of
cash flow hedge,
net of taxes of $525 - - 975 975
Unrealized gain (loss)
on investments,
net of taxes of $2,298 - (4,452) - (4,452)
------- ------- ------ -------
Balance at June 30, 1999 $ (25,774) 6,850 (2,656) (21,580)
======= ======= ====== =======
15
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Unaudited)
5. CONTINGENT LIABILITIES AND COMMITMENTS
During the quarter ended June 30, 2000, a subsidiary of U-Haul entered into
thirteen transactions and has subsequently entered into nine transactions,
whereby the subsidiary sold rental trucks, which were subsequently leased back.
AMERCO has guaranteed $29,241,000 of residual values at June 30, 2000 and an
additional $7,043,000 subsequent to June 30, 2000 for these assets at the end of
the respective lease terms. U-Haul also entered into one transaction where it
leased computer equipment. Following are the lease commitments for the leases
executed during the quarter ended June 30, 2000, and subsequently which have a
term of more than one year (in thousands):
Net activity
Year ended Lease subsequent to
March 31, Commitments period end Total
--------------------------------------------------------
2001 $ 16,071 4,090 20,161
2002 19,427 6,090 25,517
2003 19,415 6,090 25,505
2004 19,116 6,090 25,206
2005 19,116 6,089 25,205
Thereafter 29,745 14,178 43,923
------------------------------------
$ 122,890 42,627 165,517
====================================
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 clean-
up of underground fuel storage tanks. It is the opinion of management that
none of such suits, claims or proceedings involving AMERCO, individually or in
the aggregate are expected to result in a material loss.
6. SUPPLEMENTAL CASH FLOWS INFORMATION
The (increase) decrease in receivables, inventories and accounts payable
and accrued liabilities net of other operating and investing activities follows:
Quarters ended
June 30,
2000 1999
-----------------------
(in thousands)
Receivables $ (46) (21,627)
=======================
Receivables from the sale of property
to SAC Holdings $ (98,351) -
=======================
Inventories $ (2,917) 6,707
=======================
Accounts payable and accrued expenses $ (2,038) (7,752)
=======================
Income taxes paid in cash amounted to $218,000 and $154,000 for the
quarters ended June 30, 2000 and 1999, respectively.
Interest paid in cash amounted to $24,127,000 and $20,229,000 for the
quarters ended June 30, 2000 and 1999, respectively.
16
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Unaudited)
7. EARNINGS PER SHARE
The following table reflects the calculation of the earnings per share:
Weighted Average
Common Shares
Income Outstanding Per Share
(Numerator) (Denominator) Amount
----------------------------------------
(in thousands, except
share and per share data)
Quarter ended June 30, 2000:
Earnings from operations $ 37,612
Less: preferred stock dividends 3,241
------
Basic and diluted earnings
per common share 34,371 21,718,988 $ 1.58
====== ========== ====
Quarter ended June 30, 1999:
Earnings from operations $ 42,307
Less: preferred stock dividends 3,392
------
Basic earnings per common share 38,915 21,953,199 $ 1.77
Effects of dilutive securities -
preferred stock conversion 151 1,000,000
------ ----------
Diluted earnings per common share 39,066 22,953,199 $ 1.70
====== ========== ====
8. RELATED PARTIES
During the quarter ended June 30, 2000, subsidiaries of AMERCO held various
senior and junior notes with SAC Holding Corporation and its subsidiaries (SAC
Holdings). The voting common stock of SAC Holdings is held by Mark V. Shoen, a
major stockholder of AMERCO. AMERCO's subsidiaries received interest payments
of $5,418,000 and principal payments of $47,000 from SAC Holdings during the
quarter ended June 30, 2000. The terms of the notes receivable with SAC
Holdings are consistent with the terms of notes receivable held by U-Haul for
other properties owned by unrelated parties and managed by U-Haul.
During the quarter ended June 30, 2000, a subsidiary of AMERCO funded
through a note receivable the purchase of properties and construction costs for
SAC Holdings of approximately $107,829,000.
U-Haul currently manages the properties owned by SAC Holdings pursuant to a
management agreement, under which U-Haul receives a management fee equal to 6%
of the gross receipts from the properties. Management fees of $1,104,000 and
$1,035,000 were received during the quarters ended June 30, 2000 and 1999,
respectively. The management fee percentage is consistent with the fees
received by U-Haul for other properties owned by unrelated parties and managed
by U-Haul.
In June 2000, Real Estate completed the sale of twenty-four storage
properties to Twelve SAC Self-Storage Corporation, Thirteen SAC Self-Storage
Corporation and Fourteen SAC Self-Storage Corporation, subsidiaries of SAC
Holding Corporation, for $98,351,000. Real Estate received cash and notes from
the sale. The gain is reflected in the Consolidated Statement of Changes in
Stockholders' Equity.
Management believes that the foregoing transactions were consummated on
terms equivalent to those that prevail in arm's-length transactions.
17
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Unaudited)
9. NEW ACCOUNTING STANDARDS
During the quarter ended June 30, 2000, AMERCO adopted Staff Accounting
Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial Statements",
which provides guidance on the recognition, presentation and disclosure of
revenue in the financial statements filed with the Securities and Exchange
Commission. The adoption of SAB 101 was not material to AMERCO's consolidated
financial statements.
10. INDUSTRY SEGMENT AND GEOGRAPHIC AREA DATA
Industry Segment Data - AMERCO has four industry segments represented by
Moving and Storage Operations (U-Haul), Real Estate (AREC), Property and
Casualty Insurance (RepWest) and Life Insurance (Oxford).
Information concerning operations by industry segment follows:
Moving and Property/ Adjustments
Storage Real Casualty Life and
Operations Estate Insurance Insurance Eliminations Consolidated
----------------------------------------------------------------
(in thousands)
Quarter ended
June 30, 2000
-------------
Revenues:
Outside $ 388,222 2,516 37,828 30,996 - 459,562
Intersegment - 17,743 587 337 (18,667) -
--------- ------- ------- ------- -------- ---------
Total
revenues $ 388,222 20,259 38,415 31,333 (18,667) 459,562
Depreciation/
amortization $ 24,306 2,752 3,457 5,069 - 35,584
Interest
expense $ 22,810 11,333 - - (11,333) 22,810
Pretax
earnings $ 48,926 3,910 2,341 3,255 - 58,432
Income tax $ (17,512) (1,376) (863) (1,069) - (20,820)
Identifiable
assets $1,420,411 744,519 659,266 721,198 (331,713) 3,213,681
Quarter ended
June 30, 1999
-------------
Revenues:
Outside $ 366,711 2,957 39,652 30,320 - 439,640
Intersegment - 17,610 2,523 306 (20,439) -
--------- ------- ------- ------- -------- ---------
Total
revenues $ 366,711 20,567 42,175 30,626 (20,439) 439,640
Depreciation/
amortization $ 19,144 2,475 3,359 4,569 - 29,547
Interest
expense $ 20,198 10,238 - - (10,238) 20,198
Pretax
earnings $ 51,735 7,778 1,991 3,860 - 65,364
Income tax $ (18,447) (2,722) (627) (1,261) - (23,057)
Identifiable
assets $1,423,617 703,393 621,570 748,728 (335,412) 3,161,896
18
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Unaudited)
10. INDUSTRY SEGMENT AND GEOGRAPHIC AREA DATA, continued
Geographic Area Data United
(All amounts are in U.S. $'s) States Canada Consolidated
-----------------------------
(in thousands)
Quarter ended
June 30, 2000
-------------
Total revenues $ 448,975 10,587 459,562
Depreciation/amortization $ 34,516 1,068 35,584
Interest expense $ 22,804 6 22,810
Pretax earnings $ 56,131 2,301 58,432
Income tax $ (20,820) - (20,820)
Identifiable assets $ 3,164,500 49,181 3,213,681
Quarter ended
June 30, 1999
-------------
Total revenues $ 430,355 9,285 439,640
Depreciation/amortization $ 28,752 795 29,547
Interest expense $ 20,190 8 20,198
Pretax earnings $ 64,048 1,316 65,364
Income tax $ (23,057) - (23,057)
Identifiable assets $ 3,117,181 44,715 3,161,896
11. SUBSEQUENT EVENTS
On August 8, 2000, AMERCO declared a cash dividend of $3,241,000 ($0.53125
per preferred share) to preferred stockholders of record as of August 18, 2000.
19
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements. Additional written or
oral forward-looking statements may be made by AMERCO from time to time in
filings with the Securities and Exchange Commission or otherwise. Management
believes such forward-looking statements are within the meaning of the safe-
harbor provisions. Such statements may include, but not be limited to,
projections of revenues, income or loss, estimates of capital expenditures,
plans for future operations, products or services and financing needs or plans,
as well as assumptions relating to the foregoing. The words "believe",
"expect", "anticipate", "estimate", "project" and similar expressions identify
forward-looking statements, which speak only as of the date the statement was
made. Forward-looking statements are inherently subject to risks and
uncertainties, some of which cannot be predicted or quantified. Future events
and actual results could differ materially from those set forth in, contemplated
by or underlying the forward-looking statements. The following disclosures, as
well as other statements in AMERCO's report and in the Notes to AMERCO's
Consolidated Financial Statements, describe factors, among others, that could
contribute to or cause such differences, or that could affect AMERCO's stock
price.
GENERAL
Information on industry segments is incorporated by reference from "Item 1.
Financial Statements - Notes 1, 3 and 10 of Notes to Consolidated Financial
Statements". The notes discuss the principles of consolidation, summarized
consolidated financial information and industry segment and geographical area
data, respectively. In consolidation, all intersegment premiums are eliminated
and the benefits, losses and expenses are retained by the insurance companies.
RESULTS OF OPERATIONS
QUARTER ENDED JUNE 30, 2000 VERSUS QUARTER ENDED JUNE 30, 1999
Moving and Storage Operations
Revenues consist of rental revenues and net sales. Total rental revenue
was $322.3 million and $305.0 million for the quarters ended June 30, 2000 and
1999, respectively. Net revenues from the rental of moving related equipment
increased by $13.3 million. This increase is primarily attributable to higher
truck rental revenues. The growth in truck rental revenue primarily reflects
higher truck rental inventory. Storage revenues increased $4.2 million due to
increases in rates and in the number of storage rooms rented.
Net sales revenues were $60.1 million and $57.6 million for the quarters
ended June 30, 2000 and 1999, respectively. Revenue growth resulted from a 7.4%
increase in the sale of moving support items and a 3.4% increase in the sale of
hitches.
Cost of sales was $33.2 million and $31.4 million for the quarters ended
June 30, 2000 and 1999, respectively. A higher sales volume contributed to the
increase.
Operating expenses before intercompany eliminations were $235.6 million and
$224.2 million for the quarters ended June 30, 2000 and 1999, respectively.
Increased expenditure levels for personnel and rental equipment maintenance, due
to an increase in truck rental transactions and in fleet size, were primarily
responsible.
Lease expense was $37.7 million and $31.2 million for the quarters ended
June 30, 2000 and 1999, respectively. This increase reflects additional leasing
activity over the past twelve months.
Net depreciation expense was $20.1 million and $16.7 million for the
quarters ended June 30, 2000 and 1999, respectively. The increase reflects an
increase in depreciation recognized on the rental truck fleet.
Operating profit before tax and intercompany elimination was $61.3 million
and $63.2 million for the quarters ended June 30, 2000 and 1999, respectively.
The decrease reflects increases in operating expenses over increases in
revenues.
20
Real Estate Operations
Rental revenue before intercompany eliminations was $18.2 million for the
quarters ended June 30, 2000 and 1999. Intercompany revenue was $17.7 million
and $17.6 million for the quarters ended June 30, 2000 and 1999, respectively.
Net investment and interest income was $2.1 million and $2.4 million for
the quarters ended June 30, 2000 and 1999, respectively. This decrease
correlates to a reduction in Real Estate's average note and mortgage receivables
balance outstanding.
Lease expense was $2.6 million and a negligible amount for the quarters
ended June 30, 2000 and 1999, respectively. The increase reflects payments
under a synthetic lease facility being utilized to develop storage properties.
These expenses had been charged to Moving and Storage Operations during the
first quarter of fiscal year 2000.
Net depreciation expense was $2.6 million and $2.1 million for the quarters
ended June 30, 2000 and 1999, respectively. The increase primarily reflects a
$0.4 million decrease in gains from the disposition of property.
Operating profit before tax and intercompany elimination was $15.2 million
and $18.0 million for the quarters ended June 30, 2000 and 1999, respectively.
The decrease reflects increases in lease expenses.
Property and Casualty
RepWest's premiums were $30.4 million and $33.8 million for the quarters
ended March 31, 2000 and 1999, respectively. The decrease is largely a
result of a restructuring of the U-Haul Business Auto General Liability policy.
This reduced premiums by $5.2 million for the quarter ended March 31, 2000 as
compared to 1999. General agency premium increased to $7.6 million for the
quarter ended March 31, 2000 from $4.0 million for the quarter ended
March 31, 1999. Direct multiple peril and assumed treaty reinsurance premium
remained constant at $15.4 million and $15.3 million for the quarters ended
March 31, 2000 and 1999, respectively.
Net investment income declined to $8.0 million from $8.4 million for the
quarters ended March 31, 2000 and 1999, respectively. The reduction is
attributable to decreased gains and accrued interest.
Benefits and losses declined to $24.6 million from $28.3 million for the
quarters ended March 31, 2000 and 1999, respectively. This decrease is due to
the restructuring on the U-Haul Business Auto General Liability policy, as noted
above.
The amortization of deferred acquisition costs (DAC) remained constant
at $3.2 million for the quarters ended March 31, 2000 and 1999.
Operating expenses were $8.3 million and $8.7 million for the quarters
ended March 31, 2000 and 1999, respectively. This was the result of a decrease
in commissions on credit life business written by RepWest's subsidiary North
American Fire and Casualty. Other underwriting expenses remained constant.
Operating profit before tax and intercompany elimination was $2.3 million
and $2.0 million for the quarters ended March 31, 2000 and 1999, respectively.
The increase of $0.3 million represents a decrease in incurred losses and loss
adjusting expenses over a decrease in earned premiums of $0.6 million and a
decrease in realized gains of $0.2 million.
21
Life Insurance
Net premiums increased to $25.5 million from $25.1 million for the quarters
ended March 31, 2000 and 1999, respectively, primarily due to premium increases
in its Medicare supplement business.
Net investment income before intercompany eliminations increased to
$5.8 million from $5.5 million for the quarters ended March 31, 2000 and 1999,
respectively, due to improved interest rate spreads on the retirement savings
products.
Benefits increased to $17.7 million from $15.4 million for the quarters
ended March 31, 2000 and 1999, respectively. This increase is primarily due to
higher loss ratios in both Medicare supplement and credit insurance. Medicare
supplement benefits are up 24% from 1999 in relation to the amount of insurance
in force, which is also up 24%. Credit insurance loss ratios have increased
from 1999 when Oxford had better than expected loss experience.
Amortization of DAC was $4.7 million and $4.6 million for the quarters
ended March 31, 2000 and 1999, respectively.
Operating expenses decreased $1.1 million to $5.7 million from $6.8 million
for the quarters ended March 31, 2000 and 1999, respectively. Reductions in
general administrative expenses and commissions account for this difference.
Operating profit before tax and intercompany eliminations was $3.3 million
and $3.9 million for the quarters ended March 31, 2000 and 1999, respectively.
The decrease from 1999 reflects increased loss ratios in the credit insurance
and Medicare supplement lines offset by improved investment returns and lower
operating expenses.
Interest Expense
Interest expense was $22.8 million and $20.2 million for the quarters ended
June 30, 2000 and 1999, respectively. The increase can be attributed to
increases in the average debt outstanding and in the average cost of debt.
Consolidated Group
As a result of the foregoing, pretax earnings totaled $58.4 million and
$65.4 million for the quarters ended June 30, 2000 and 1999, respectively.
After providing for income taxes, net earnings were $37.6 million and $42.3
million for the quarters ended June 30, 2000 and 1999, respectively.
22
QUARTERLY RESULTS
The following table presents unaudited quarterly results for the nine
quarters in the period beginning April 1, 1998 and ending June 30, 2000. AMERCO
believes that all necessary adjustments have been included in the amounts stated
below to present fairly, and in accordance with generally accepted accounting
principles, its results. 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.
Quarter Ended
---------------
Jun 30
2000
---------------
(in thousands, except
share and per share data)
Total revenues $ 459,562
Net earnings 37,612
Weighted average common
shares outstanding 21,718,988
Net earnings per common
share (1) 1.58
Quarter Ended
----------------------------------------------
Jun 30 Sep 30 Dec 31 Mar 31
1999 1999 1999 2000
----------------------------------------------
(in thousands, except share and per share data)
Total revenues $ 439,640 462,696 382,496 398,538
Earnings (loss) from operations
before extraordinary loss
on early extinguishment
of debt (2) 42,307 42,127 (9,325) (9,284)
Net earnings (loss) 42,307 42,127 (9,325) (9,618)
Weighted average common
shares outstanding
Basic 21,953,199 21,964,452 21,975,889 21,844,020
Diluted 22,953,199 22,131,119 - -
Earnings (loss) from operations
before extraordinary loss
on early extinguishment
of debt per common
share (1) (2) (3) 1.77 1.77 (0.57) (0.58)
Net earnings (loss) per common
share
Basic 1.77 1.77 (0.57) (0.60)
Diluted 1.70 1.76 - -
Quarter Ended
----------------------------------------------
Jun 30 Sep 30 Dec 31 Mar 31
1998 1998 1998 1999
----------------------------------------------
(in thousands, except share and per share data)
Total revenues $ 393,744 444,233 373,119 343,683
Net earnings (loss) 31,230 42,171 2,478 (13,370)
Weighted average common
shares outstanding 21,924,749 21,935,854 21,942,190 21,947,951
Net earnings (loss) per
common share (both basic
and diluted) (1) (3) 1.21 1.71 (0.07) (0.78)
_______________
(1) Net earnings (loss) per common share amounts were computed after giving
effect to the dividends on AMERCO's Preferred Stock.
(2) During fiscal year 2000, AMERCO extinguished $100.0 million of 6.65% Bond
Backed Asset Trust certificates originally due in fiscal year 2030 and
$50.0 million of 7.05% to 7.10% Medium-Term Notes originally due in fiscal
year 2007. This resulted in an extraordinary loss of $0.3 million, net of
tax of $0.2 million ($0.02 per share).
(3) Reflects the redemption of $25 million and $50 million shares of Series B
preferred stock in fiscal years 2000 and 1999, respectively.
23
LIQUIDITY AND CAPITAL RESOURCES
Moving and Storage Operations
To meet the needs of its customers, U-Haul must maintain a large inventory
of fixed asset rental items. At June 30, 2000, net property, plant and
equipment represented approximately 62.4% of total assets from non-insurance
operations and approximately 42.1% of consolidated assets. In the quarters
ended June 30, 2000 and 1999, capital expenditures were $143.0 million and
$107.1 million, respectively. These expenditures primarily reflect the
expansion of the rental truck fleet. The capital required to fund these
acquisitions was obtained through internally generated funds from operations and
through lease financings.
Cash provided by operating activities was $21.1 million and $74.1 million
for the quarters ended June 30, 2000 and 1999, respectively. The decrease
resulted primarily from decreases in the accounts payable and intercompany
payable balances along with decreased earnings.
At June 30, 2000, total outstanding notes and loans payable was $1,123.6
million as compared to $1,137.8 million at March 31, 2000.
Real Estate Operations
Cash provided by operating activities was $3.2 million and $0.4
million for the quarters ended June 30, 2000 and 1999, respectively. The
increase resulted from a combination of an increase in the intercompany payable
balance, offset by decreased earnings.
Property and Casualty
Cash used by operating activities was $(5.8) million and $(3.8) million for
quarters ended March 31, 2000 and 1999, respectively. This change resulted from
decreased other liabilities and a larger decrease in loss and loss adjustment
expense reserves. Intercompany receivables due from affiliates and unearned
premium reserves decreased.
RepWest's cash and cash equivalents and short-term investment portfolio
were $1.2 million and $7.0 million at March 31, 2000 and 1999, respectively.
Short-term assets increased $5.5 million from March 31, 1999 to March 31, 2000,
while cash on deposit decreased $11.3 million. This $5.8 million net decrease
resulted from increased receivables, claim settlements and incurred commissions.
RepWest maintains a diversified securities investment portfolio, primarily
in bonds, at varying maturity levels with 88.0% of the fixed-income securities
consisting of investment grade securities. The maturity distribution is
designed to provide sufficient liquidity to meet future cash needs. Current
liquidity remains strong with current invested assets equal to 95.6% of total
liabilities.
The liability for reported and unreported losses are based upon company
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.
24
Life Insurance
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.
Cash provided (used) by operating activities was $1.5 million and $(1.2)
million for the quarters ended March 31, 2000 and 1999, respectively. The
increase in cash flows from operating activities relates to better ratio of
collected premium to paid claims. Cash provided by financing activities were
$3.1 million and $5.4 million for the quarters ended March 31, 2000 and 1999,
respectively. The decrease in cash flows provided by financing activities for
the first quarter of 2000 compared to the first quarter of 1999 is due to a
lower ratio of annuity deposits to withdrawals.
In addition to cash flows from operating and financing activities, a
substantial amount of liquid funds is available through Oxford's short-term
portfolio. At March 31, 2000 and 1999, short-term investments were $65.1
million and $77.2 million, respectively. Management believes that the overall
sources of liquidity will continue to meet foreseeable cash needs.
Consolidated Group
During each of the fiscal years ended March 31, 2001, 2002 and 2003, AMERCO
estimates gross capital expenditures will average approximately $380 million
primarily reflecting rental fleet rotation. This level of capital expenditures,
combined with an average of approximately $72 million in annual long-term
debt maturities during this same period, are expected to create annual average
funding needs of approximately $452 million. Management estimates that
the Company will fund 100% of these requirements with internally generated
funds.
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.
Principally to finance its fleet of trucks and trailers, AMERCO routinely enters
into sale and leaseback transactions. As of June 30, 2000, AMERCO had $1,123.6
million in total notes and loans payable outstanding and unutilized lines of
credit of approximately $365.0 million.
Certain of AMERCO's credit agreements contain restrictive financial and
other covenants, including, among others, covenants with respect to incurring
additional indebtedness, maintaining certain financial ratios and placing
certain additional liens on its properties and assets. At June 30, 2000, AMERCO
was in compliance with these covenants.
AMERCO is further restricted in the issuance of certain types of preferred
stock. AMERCO is prohibited from issuing shares of preferred stock that provide
for any mandatory redemption, sinking fund payment, or mandatory prepayment, or
that allow the holders thereof to require AMERCO or any subsidiary of AMERCO to
repurchase such preferred stock at the option of such holders or upon the
occurrence of any event or events without the consent of its lenders.
Reference is made to Note 5 of Notes to Consolidated Financial Statements
in AMERCO's Annual Report on Form 10-K for the fiscal year ended March 31, 2000
for additional information about AMERCO's credit agreements.
25
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Reference is made to Part II, Item 7A, Quantitative and Qualitative
Disclosure About Market Risk, in AMERCO's Annual Report on Form 10-K for the
fiscal year ended March 31, 2000.
26
PART II. OTHER INFORMATION
ITEM 1. 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.
Reference is made to Part I, Item 1, Business, in AMERCO's Annual Report on
Form 10-K for the fiscal year ended March 31, 2000 for a discussion of certain
environmental proceedings and to Note 15 of Notes to Consolidated Financial
Statements in AMERCO's Annual Report on Form 10-K for the fiscal year ended
March 31, 2000 for a discussion of the California overtime litigation.
27
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. Description
----------- -----------
3.1 Restated Articles of Incorporation (1)
3.2 Restated By-Laws of AMERCO as of August 27, 1997 (2)
27 Financial Data Schedule
(b) Reports on Form 8-K.
No report on Form 8-K was filed during the quarter ended
June 30, 2000.
_________________
(1) Incorporated by reference to AMERCO's Quarterly Report on Form 10-Q
for the quarter ended December 31, 1992, file no. 1-11255.
(2) Incorporated by reference to AMERCO's Quarterly Report on Form 10-Q
for the quarter ended December 31, 1997, file no. 1-11255.
28
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMERCO
____________________________________
(Registrant)
Dated: August 11, 2000 By: /S/ GARY B. HORTON
____________________________________
Gary B. Horton, Treasurer
(Principal Financial Officer)