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 December 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from __________________ to __________________
Commission Registrant, State of Incorporation, I.R.S. Employer
File Number Address and Telephone Number Identification No.
________________________________________________________________________________
1-11255 AMERCO 88-0106815
(A Nevada Corporation)
1325 Airmotive Way, 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 [ ].
21,417,837 shares of AMERCO Common Stock, $0.25 par value were outstanding at
February 12, 2002.
5,385 shares of U-Haul International, Inc. Common Stock, $0.01 par value, were
outstanding at February 12, 2002. 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) Condensed Consolidated Balance Sheets as of December 31, 2001
(unaudited) and March 31, 2001.............................. 4
b) Condensed Consolidated Statements of Earnings for the Nine
months ended December 31, 2001 and 2000 (unaudited).......... 6
c) Condensed Consolidated Statements of Comprehensive Income
for the Nine months ended December 31, 2001 and 2000
(unaudited).................................................. 7
d) Condensed Consolidated Statements of Earnings for the Quarters
ended December 31, 2001 and 2000 (unaudited).................. 8
e) Condensed Consolidated Statements of Comprehensive Income for
the Quarters ended December 31, 2001 and 2000 (unaudited).... 9
f) Condensed Consolidated Statements of Cash Flows for the Nine
months ended December 31, 2001 and 2000 (unaudited).......... 10
g) Notes to Condensed Consolidated Financial Statements -
December 31, 2001 (unaudited), March 31, 2001 and
December 31, 2000 (unaudited)................................ 11
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................ 22
Item 3. Quantitative and Qualitative Disclosures About Market Risk....... 30
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................ 31
Item 6. Exhibits and Reports on Form 8-K................................. 32
3
PART I. FINANCIAL INFORMATION
A review of the Condensed Consolidated Financial Statements herein was not
completed by the Company's independent public accountant prior to the
deadline for filing this Form 10-Q, as required by Rule 10-01(d) of
Regulation S-X promulgated under the Securities Exchange Act of 1934,
as amended.
4
ITEM 1. FINANCIAL STATEMENTS
AMERCO AND CONSOLIDATED SUBSIDIARIES
Condensed Consolidated Balance Sheets
December 31, March 31,
Assets 2001 2001
------------------------
(Unaudited)
(in thousands)
Cash and cash equivalents $ 35,716 52,778
Inventories, net 79,941 84,005
Prepaid expenses 18,324 14,416
Investments, fixed maturities 986,698 952,482
Investments, other 545,919 464,958
Other assets 485,785 452,781
------------------------
Property, plant and equipment, at cost:
Buildings and improvements 826,126 832,372
Rental trucks 1,069,769 1,037,653
Other property, plant, and equipment 661,294 660,802
------------------------
2,557,189 2,530,827
Less accumulated depreciation 1,218,226 1,168,183
------------------------
Total property, plant and equipment 1,338,963 1,362,644
------------------------
Total Assets $ 3,491,346 3,384,064
========================
The accompanying notes are an integral part of these consolidated financial
statements.
5
December 31, March 31,
Liabilities and Stockholders' Equity 2001 2001
------------------------
(Unaudited)
(in thousands)
Liabilities:
Notes and loans payable $ 1,132,612 1,156,848
Policy benefits and losses, claims and
loss expenses payable 705,745 668,830
Liabilities from premium deposits 548,948 522,207
Deferred income 15,424 24,546
Deferred income taxes 187,413 139,419
Other liabilities 238,437 256,848
------------------------
Total liabilities 2,828,579 2,768,698
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 321,031 312,128
Accumulated other comprehensive income (30,681) (40,709)
Retained earnings 791,930 755,174
Cost of common shares in treasury, net (415,924) (406,617)
Unearned ESOP shares (14,152) (15,173)
------------------------
Total stockholders' equity 662,767 615,366
Contingent liabilities and commitments
------------------------
Total Liabilities and Stockholders' Equity $ 3,491,346 3,384,064
========================
The accompanying notes are an integral part of these consolidated financial
statements.
6
AMERCO AND CONSOLIDATED SUBSIDIARIES
Condensed Consolidated Statements of Earnings
Nine months ended December 31,
(Unaudited)
2001 2000
-----------------------
(in thousands, except
share and per share data)
Revenues
Rental revenue $ 980,095 951,058
Net sales 158,556 155,078
Premiums 308,261 210,102
Net investment and interest income 68,101 72,082
-----------------------
Total revenues 1,515,013 1,388,320
Costs and expenses
Operating expenses 783,219 745,039
Cost of sales 89,116 87,600
Benefits and losses 276,260 170,678
Amortization of deferred policy
acquisition costs 32,346 25,112
Lease expense 133,130 132,395
Depreciation, net 68,754 69,552
-----------------------
Total costs and expenses 1,382,825 1,230,376
Earnings from operations 132,188 157,944
Interest expense 58,842 65,287
-----------------------
Pretax earnings 73,346 92,657
Income tax expense (26,869) (32,983)
-----------------------
Earnings from operations before extraordinary
loss on early extinguishment of debt 46,477 59,674
Extraordinary loss on early extinguishment
of debt, net of tax of $1,160 - (2,121)
-----------------------
Net earnings $ 46,477 57,553
=======================
Basic and diluted earnings per common share:
Earnings from operations before extraordinary
loss on early extinguishment of debt 1.74 2.32
Extraordinary loss on early extinguishment
of debt, net - (0.10)
-----------------------
Net earnings $ 1.74 2.22
=======================
Basic and diluted average common shares
outstanding: 21,092,225 21,539,821
=======================
The accompanying notes are an integral part of these consolidated financial
statements.
7
AMERCO AND CONSOLIDATED SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income
Nine months ended December 31,
(Unaudited)
2001 2000
-------------------
(in thousands)
Comprehensive income:
Net earnings $ 46,477 57,553
Changes in other comprehensive income:
Foreign currency translation (3,647) (4,683)
Fair market value of cash flow hedge 153 (861)
Unrealized gain on investments 13,522 3,033
-------------------
Total comprehensive income $ 56,505 55,042
===================
The accompanying notes are an integral part of these consolidated financial
statements.
8
AMERCO AND CONSOLIDATED SUBSIDIARIES
Condensed Consolidated Statements of Earnings
Quarters ended December 31,
(Unaudited)
2001 2000
---------------------------
(in thousands, except
share and per share data)
Revenues
Rental revenue $ 279,114 270,775
Net sales 40,284 41,117
Premiums 105,381 88,607
Net investment and interest income 21,142 25,478
-----------------------
Total revenues 445,921 425,977
Costs and expenses
Operating expense 256,496 258,200
Cost of sales 23,950 21,626
Benefits and losses 95,487 74,863
Amortization of deferred policy
acquisition costs 11,413 8,554
Lease expense 42,905 45,859
Depreciation, net 27,923 25,067
-----------------------
Total costs and expenses 458,174 434,169
Loss from operations (12,253) (8,192)
Interest expense 17,986 21,235
-----------------------
Pretax loss (30,239) (29,427)
Income tax benefit 10,027 10,256
-----------------------
Loss from operations before extraordinary
loss on early extinguishment of debt (20,212) (19,171)
Extraordinary loss on early extinguishment
of debt, net of tax of $1,160 - (2,121)
-----------------------
Net loss $ (20,212) (21,292)
=======================
Basic and diluted loss per common share:
Loss from operations before extraordinary
loss on early extinguishment of debt $ (1.12) (1.05)
Extraordinary loss on early extinguishment
of debt, net - (0.10)
-----------------------
Net loss $ (1.12) (1.15)
=======================
Basic and diluted average common shares
outstanding: 20,892,342 21,406,688
=======================
The accompanying notes are an integral part of these consolidated financial
statements.
9
AMERCO AND CONSOLIDATED SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income
Quarters ended December 31,
(Unaudited)
2001 2000
-------------------
(in thousands)
Comprehensive income:
Net loss $ (20,212) (21,292)
Changes in other comprehensive income:
Foreign currency translation (527) (1,098)
Fair market value of cash flow hedge 443 (679)
Unrealized gain on investments 9,107 7,074
-------------------
Total comprehensive loss $ (11,189) (15,995)
===================
The accompanying notes are an integral part of these consolidated financial
statements.
10
AMERCO AND CONSOLIDATED SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Nine months ended December 31,
(Unaudited)
2001 2000
-------------------
(in thousands)
Net cash provided by operating activities 131,125 100,900
-------------------
Cash flows from investing activities:
Purchases of investments:
Property, plant and equipment (144,103) (280,271)
Fixed maturities (140,695) (84,808)
Real estate (65,436) -
Mortgage loans (561) (21,654)
Proceeds from sale of investments:
Property, plant and equipment 101,049 240,140
Fixed maturities 117,356 89,583
Mortgage loans 10,039 19,187
Changes in other investments (18,359) (120,313)
-------------------
Net cash used by investing activities (140,710) (158,136)
-------------------
Cash flows from financing activities:
Net change in short-term borrowings 81,743 169,281
Principal payments on notes (102,530) (125,048)
Investment contract deposits 107,855 62,947
Investment contract withdrawals (83,224) (55,763)
Changes in other financing activities (11,321) (17,569)
-------------------
Net cash provided (used) by financing activities (7,477) 33,848
-------------------
Decrease in cash and cash equivalents (17,062) (23,388)
Cash and cash equivalents at beginning of period 52,778 48,435
-------------------
Cash and cash equivalents at end of period $ 35,716 25,047
===================
Summary of non-cash investing and financing
activity:
A note and other receivables were reduced
in exchange for the purchase of storage
properties from a related party. $ 35,196 -
An investment was received in
exchange for the sale of storage
properties to a related party. $ 44,312 98,351
The accompanying notes are an integral part of these consolidated financial
statements.
11
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
December 31, 2001, March 31, 2001 and December 31, 2000
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
AMERCO, a Nevada corporation (AMERCO), is the parent company for U-Haul
International, Inc. (U-Haul), which conducts moving and storage operations,
Amerco Real Estate Company (Real Estate), which conducts real estate operations,
Republic Western Insurance Company (RepWest), which conducts property and
casualty insurance operations, and Oxford Life Insurance Company (Oxford), which
conducts life insurance operations.
PRINCIPLES OF CONSOLIDATION
The condensed consolidated financial statements include the accounts of
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 condensed consolidated balance sheet as of December 31, 2001 and the
related condensed consolidated statements of earnings and the condensed
consolidated statements of comprehensive income for the three and nine months
ended December 31, 2001 and 2000 and the condensed consolidated cash flows for
the nine months ended December 31, 2001 and 2000 are unaudited. In the opinion
of management, all adjustments necessary for a fair presentation of such
condensed 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, except for as described in Note 9.
Certain reclassifications have been made to the financial statements for
the three and nine months ended December 31, 2000 to conform with the current
year's presentation.
12
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements, Continued
(Unaudited)
2. INVESTMENTS
A comparison of amortized cost to market for fixed maturities is as
follows:
September 30, 2001
------------------ 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 $ 4,100 $ 3,626 252 - 3,878
U.S. government
agency mortgage-
backed securities $ 10,048 10,005 432 - 10,437
Corporate
securities $ 44,522 42,758 1,791 (164) 44,385
Mortgage-backed
securities $ 30,334 29,831 1,379 (35) 31,175
Redeemable preferred
stocks 114,784 114,674 373 (2,988) 112,059
----------------------------------------
200,894 4,227 (3,187) 201,934
----------------------------------------
September 30, 2001
------------------ 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 $ 42,260 $ 42,737 2,610 - 45,347
U.S. government
agency mortgage-
backed securities $ 27,531 27,324 1,209 (2) 28,531
Obligations of
states and
political
subdivisions $ 15,910 16,039 698 (26) 16,711
Corporate
securities $ 630,723 622,584 19,629 (17,162) 625,051
Mortgage-backed
securities $ 31,300 31,238 1,205 (364) 32,079
Redeemable preferred
stocks 1,228 31,022 304 (565) 30,761
Redeemable common
stocks 657 8,625 - (1,301) 7,324
----------------------------------------
779,569 25,655 (19,420) 785,804
----------------------------------------
Total $ 980,463 29,882 (22,607) 987,738
========================================
13
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements, Continued
(Unaudited)
3. SUMMARIZED CONSOLIDATED FINANCIAL INFORMATION OF INSURANCE SUBSIDIARIES
A summarized condensed consolidated balance sheet for RepWest is presented
below:
September 30,
--------------------
2001 2000
--------------------
(in thousands)
Investments, fixed maturities $ 391,507 413,149
Investments, other 84,379 27,823
Receivables 223,740 147,143
Due from affiliate 53,042 28,905
Other assets 54,277 48,528
-------------------
Total assets $ 806,945 665,548
===================
Policy liabilities and accruals $ 406,072 309,887
Unearned premiums 105,120 81,679
Other policyholders' funds and liabilities 57,713 61,908
-------------------
Total liabilities 568,905 453,474
Stockholder's equity 238,040 212,074
-------------------
Total liabilities and
stockholder's equity $ 806,945 665,548
===================
A summarized condensed consolidated income statement for RepWest is
presented below:
Quarter ended Nine months ended
September 30, September 30,
-----------------------------------------
2001 2000 2001 2000
-----------------------------------------
(in thousands)
Premiums $ 64,717 63,386 192,982 135,718
Net investment income 8,102 7,966 23,967 23,718
---------------- -----------------
Total revenue 72,819 71,352 216,949 159,436
Benefits and losses 65,618 56,331 188,256 116,432
Amortization of deferred
policy acquisition costs 6,207 3,770 17,837 10,130
Operating expenses 13,782 18,055 42,556 37,783
---------------- -----------------
Total expenses 85,607 78,156 248,649 164,345
Loss from operations (12,788) (6,804) (31,700) (4,909)
Income tax benefit 4,522 2,379 11,209 1,789
---------------- -----------------
Net loss $ (8,266) (4,425) (20,491) (3,120)
================ =================
14
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements, Continued
(Unaudited)
3. SUMMARIZED CONSOLIDATED FINANCIAL INFORMATION OF INSURANCE SUBSIDIARIES,
continued
A summarized condensed consolidated balance sheet for Oxford is presented
below:
September 30,
-------------------
2001 2000
-------------------
(in thousands)
Investments, fixed maturities $ 595,191 470,772
Investments, other 198,668 167,208
Receivables 31,123 19,564
Other assets 89,865 84,626
-------------------
Total assets $ 914,847 742,170
===================
Policy liabilities and accruals $ 191,104 152,358
Premium deposits 548,948 469,393
Other policyholders' funds and liabilities 50,739 30,501
-------------------
Total liabilities 790,791 652,252
Stockholder's equity 124,056 89,918
-------------------
Total liabilities and
stockholder's equity $ 914,847 742,170
===================
A summarized condensed consolidated income statement for Oxford is
presented below:
Quarter ended Nine months ended
September 30, September 30,
----------------------------------------
2001 2000 2001 2000
----------------------------------------
(in thousands)
Premiums $ 42,198 26,750 119,736 78,274
Net investment income 5,791 5,807 18,975 18,170
---------------- -----------------
Total revenue 47,989 32,557 138,711 96,444
Benefits and losses 29,869 18,532 88,004 54,246
Amortization of deferred
policy acquisition costs 5,217 4,784 14,509 14,982
Operating expenses 10,771 6,626 30,207 19,857
---------------- -----------------
Total expenses 45,857 29,942 132,720 89,085
Income from operations 2,132 2,615 5,991 7,359
Income tax expense (555) (753) (1,787) (1,878)
---------------- -----------------
Net income $ 1,577 1,862 4,204 5,481
================ =================
15
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements, Continued
(Unaudited)
4. CONTINGENT LIABILITIES AND COMMITMENTS
During the nine months ended December 31, 2001, a subsidiary of U-Haul
entered into five transactions whereby the subsidiary sold rental trucks, which
were subsequently leased back. AMERCO has guaranteed $13,571,000 of residual
values at December 31, 2001 for these assets at the end of the respective lease
terms. Following are the lease commitments for the leases executed during the
nine months ended December 31, 2001, 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
--------------------------------------------------------
2002 $ 657 - 657
2003 2,625 - 2,625
2004 2,625 - 2,625
2005 2,300 - 2,300
2006 2,192 - 2,192
Thereafter 7,305 - 7,305
------------------------------------
$ 17,704 - 17,704
====================================
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.
5. SUPPLEMENTAL CASH FLOWS INFORMATION
The (increase) decrease in receivables, inventories, investment, other and
accounts payable and accrued liabilities net of other operating and investing
activities follows:
Nine months ended
December 31,
2001 2000
----------------------
(in thousands)
Receivables $ (14,911) 9,686
======================
Inventories $ 4,064 3,221
======================
Accounts payable and accrued expenses $ (20,730) (30,618)
======================
16
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements, Continued
(Unaudited)
6. 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 December 31, 2001:
Loss from operations $ (20,212)
Less: preferred stock dividends 3,241
------
Basic and diluted loss
per common share (23,453) 20,892,342 $ (1.12)
====== ========== ====
Quarter ended December 31, 2000:
Loss from operations before
extraordinary loss on early
extinguishment of debt $ (19,171)
Less: preferred stock dividends 3,241
------
Loss from operations before
extraordinary loss on early
extinguishment of debt available
to common stockholders (22,412) 21,406,688 $ (1.05)
Extraordinary loss on early
extinguishment of debt, net (2,121) (0.10)
------ ----
Basic and diluted loss
per common share (24,533) 21,406,688 $ (1.15)
====== ========== ====
Nine months ended December 31, 2001:
Earnings from operations $ 46,477
Less: preferred stock dividends 9,722
------
Basic and diluted earnings
per common share 36,755 21,092,225 $ 1.74
====== ========== ====
Nine months ended December 31, 2000:
Earnings from operations before
extraordinary loss on early
extinguishment of debt $ 59,674
Less: preferred stock dividends 9,722
-----
Earnings from operations before
extraordinary loss on early
extinguishment of debt available
to common stockholders 49,952 21,539,821 $ 2.32
Extraordinary loss on early
extinguishment of debt, net (2,121) (0.10)
------ ----
Basic and diluted earnings
per common share 47,831 21,539,821 $ 2.22
====== ========== ====
17
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements, Continued
(Unaudited)
7. RELATED PARTIES
During the nine months ended December 31, 2001, 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 $20,899,000 and principal payments of $33,952,000 from SAC
Holdings during the nine months ended December 31, 2001. The terms of the notes
with SAC Holdings are similar to the terms of notes held by U-Haul for other
properties owned by unrelated parties and managed by U-Haul. These amounts are
reflected in Investments, other of the condensed consolidated balance sheet.
During the nine months ended December 31, 2001, a subsidiary of AMERCO
funded through a note the purchase of properties and construction costs for SAC
Holdings of approximately $33,279,000. This amount is reflected in Investments,
other of the condensed consolidated balance sheet.
U-Haul currently manages the self-storage 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
$5,495,000 and $4,523,000 were received during the nine months ended December
31, 2001 and 2000, 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 December 2001, Real Estate completed the sale of fourteen storage
properties to Eighteen SAC Self-Storage Corporation, subsidiary of SAC Holding
Corporation, for $43,782,000. Real Estate received cash and notes from the
sale. The gain is reflected in the equity section of the condensed consolidated
balance sheet.
In August 2001, Real Estate completed the sale of one storage property to
SAC Holdings, for $530,000. Real Estate received notes from the sale.
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 equity section of the condensed
consolidated balance sheet.
In September 2001, the Company purchased nine storage properties from Five
SAC Self-Storage Corporation, a subsidiary of SAC Holdings at a purchase price
of $35.2 million for fair value. These properties were not previously owned by
the consolidated company.
Management believes that the foregoing transactions were consummated on
terms equivalent to those that prevail in arm's-length transactions.
During September 2001 the Company consummated a legal transfer of cash in
the amount of $7.5 million and real estate properties in the amount of $65.5
million from Real Estate and other subsidiaries to Oxford and RepWest. The
transferred assets were recorded by RepWest and Oxford at their original book
value and no gain or loss was recorded. See Note 9 for additional discussion.
18
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(Unaudited)
8. NEW ACCOUNTING STANDARDS
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 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
December 15, 2002. Management has not yet determined the total likely 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 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.
19
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements, Continued
(Unaudited)
9. 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
December 31, 2001
-----------------
Revenues:
Outside $ 319,027 7,619 71,692 47,583 - 445,921
Intersegment - 11,947 1,127 406 (13,480) -
--------- ------- ------- ------- -------- ---------
Total revenues $ 319,027 19,566 72,819 47,989 (13,480) 445,921
Depreciation/
amortization $ 26,404 2,985 6,322 5,241 - 40,952
Interest expense $ 17,986 8,229 - - (8,229) 17,986
Pretax earnings
(loss) $ (28,010) 8,427 (12,788) 2,132 - (30,239)
Income tax
benefit
(expense) $ 9,009 (2,949) 4,522 (555) - 10,027
Identifiable
assets $1,493,042 714,819 806,945 904,547 (428,007) 3,491,346
Quarter ended
December 31, 2000
-----------------
Revenues:
Outside $ 320,572 3,025 70,191 32,189 - 425,977
Intersegment - 17,754 1,161 368 (19,283) -
--------- ------- ------- ------- -------- ---------
Total revenues $ 320,572 20,779 71,352 32,557 (19,283) 425,977
Depreciation/
amortization $ 29,034 2,760 3,453 4,824 - 40,071
Interest expense $ 21,235 10,626 - - (10,626) 21,235
Pretax
earnings
(loss) $ (27,593) 2,355 (6,804) 2,615 - (29,427)
Income tax
benefit
(expense) $ 9,454 (824) 2,379 (753) - 10,256
Extraordinary
loss on early
extinguishment
of debt, net $ (2,121) - - - - (2,121)
Identifiable
assets $1,451,906 761,149 665,548 731,627 (338,700) 3,271,530
20
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements, Continued
(Unaudited)
9. INDUSTRY SEGMENT AND GEOGRAPHIC AREA DATA, continued
Moving Property/ Adjustments
and Storage Real Casualty Life and
Operations Estate Insurance Insurance Eliminations Consolidated
-----------------------------------------------------------------------
(in thousands)
Nine months ended
December 31, 2001
-----------------
Revenues:
Outside $1,152,824 10,986 213,677 137,526 - 1,515,013
Intersegment - 48,264 3,272 1,185 (52,721) -
---------- ------- ------- ------- -------- ---------
Total
revenues $1,152,824 59,250 216,949 138,711 (52,721) 1,515,013
Depreciation/
amortization $ 78,824 8,535 18,584 14,652 - 120,595
Interest
expense $ 58,842 27,953 - - (27,953) 58,842
Pretax
earnings
(loss) $ 67,935 31,120 (31,700) 5,991 - 73,346
Income tax
benefit
(expense) $ (25,399) (10,892) 11,209 (1,787) - (26,869)
Identifiable
assets $1,493,042 714,819 806,945 904,547 (428,007) 3,491,346
Nine months ended
December 31, 2000
-----------------
Revenues:
Outside $1,126,987 9,343 156,609 95,381 - 1,388,320
Intersegment - 52,599 2,827 1,063 (56,489) -
---------- ------- ------- ------- -------- ---------
Total
revenues $1,126,987 61,942 159,436 96,444 (56,489) 1,388,320
Depreciation/
amortization $ 77,721 8,144 10,208 15,449 - 111,522
Interest
expense $ 65,287 32,870 - - (32,870) 65,287
Pretax
earnings
(loss) $ 79,752 10,455 (4,909) 7,359 - 92,657
Income tax
benefit
(expense) $ (29,235) (3,659) 1,789 (1,878) - (32,983)
Extraordinary
loss on early
extinguishment
of debt, net $ (2,121) - - - - (2,121)
Identifiable
assets $1,451,906 761,149 665,548 731,627 (338,700) 3,271,530
21
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements, Continued
(Unaudited)
9. INDUSTRY SEGMENT AND GEOGRAPHIC AREA DATA, continued
Geographic Area Data - United United
(All amounts are in States Canada Consolidated States Canada Consolidated
U.S. $'s) ------------------------------------------------------------------
Quarter ended Nine months ended
------------------------------------------------------------------
(in thousands)
December 31, 2001
-----------------
Total revenues $ 437,993 7,928 445,921 1,483,503 31,510 1,515,013
Depreciation/
amortization $ 40,010 942 40,952 117,904 2,691 120,595
Interest expense $ 18,066 (80) 17,986 58,883 (41) 58,842
Pretax earnings
(loss) $ (29,603) (636) (30,239) 68,164 5,182 73,346
Income tax
benefit (expense) $ 10,027 - 10,027 (26,869) - (26,869)
Identifiable assets $3,432,399 58,947 3,491,346 3,432,399 58,947 3,491,346
December 31, 2000
-----------------
Total revenues $ 418,421 7,556 425,977 1,357,483 30,837 1,388,320
Depreciation/
amortization $ 38,963 1,108 40,071 108,244 3,278 111,522
Interest expense $ 21,229 6 21,235 65,274 13 65,287
Pretax earnings
(loss) $ (28,439) (988) (29,427) 88,430 4,227 92,657
Income tax
benefit (expense) $ 10,256 - 10,256 (32,977) (6) (32,983)
Extraordinary
loss, net $ (2,121) - (2,121) (2,121) - (2,121)
Identifiable assets $3,220,947 50,583 3,271,530 3,220,947 50,583 3,271,530
During September 2001 the Company consummated a legal transfer of cash in the
amount of $7.5 million and real estate properties in the amount of $65.5 million
from its subsidiaries and Real Estate to Oxford and RepWest. The transferred
assets were recorded by the RepWest and Oxford at their original book value;
however, because the operating results and financial position of Oxford and
RepWest are reflected on a one-quarter lag, the amounts have not been reflected
within the identifiable assets line of the Property/Casualty or Life Insurance
segments above. Since the Moving and Storage and Real Estate operations are
not reported on a one-quarter lag, the assets have been removed from the
Real Estate industry segment identifiable assets and are reflected as an
adjustment and elimination within the above table.
10. SUBSEQUENT EVENTS
In January 2002, Real Estate completed the sale of thirty-seven storage
properties to Twenty SAC Self-Storage Corporation, Twenty-One SAC Self-Storage
Corporation, Twenty-Two SAC Self-Storage Corporation and Twenty-Three SAC Self-
Storage Corporation, subsidiaries of SAC Holding Corporation, for $93,679,000.
Real Estate received cash and notes from the sale.
On February 6, 2002, AMERCO declared a cash dividend of $3,241,000
($0.53125 per preferred share) to preferred stockholders of record as of
February 18, 2002.
22
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This Quarterly report on Form 10-Q 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, the anticipated results of legal proceedings against the Company,
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; and other factors described in this Quarterly Report on Form
10-Q or the other documents we file with the Securities and Exchange Commission.
As a result of these factors AMERCO's stock price may fluctuate dramatically.
GENERAL
Information on industry segments is incorporated by reference from "Item 1.
Financial Statements - Notes 1, 3 and 9 of Notes to Condensed 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.
For a discussion of new accounting standards please refer to Note 8 of the
Consolidated Financial Statements.
RESULTS OF OPERATIONS
NINE MONTHS ENDED DECEMBER 31, 2001 VERSUS NINE MONTHS ENDED DECEMBER 31, 2000
Moving and Storage Operations
Revenues consist of rental revenues and net sales. Total rental revenue
was $976.1 million and $949.6 million for the nine months ended December 31,
2001 and 2000, respectively. Net revenues from the rental of moving equipment
increased by $18.9 million. The increase was primarily attributable to higher
truck and trailer rental revenues and storage revenues, caused by increases in
prices and improvements in fleet utilization and storage occupancy.
Net sales revenues were $158.5 million and $155.0 million for the nine
months ended December 31, 2001 and 2000, respectively. Revenue growth resulted
from an increase in the sale of moving support items and an increase in the sale
of propane.
Cost of sales was $89.1 million and $87.6 million for the nine months ended
December 31, 2001 and 2000, respectively.
Operating expenses before intercompany eliminations were $768.0 million and
$743.8 million for the nine months ended December 31, 2001 and 2000,
respectively. Increased expenditure levels for personnel and rental equipment
maintenance, due to an increase in truck rental transactions, were primarily
responsible.
Net depreciation expense was $73.1 million and $59.8 million for the nine
months ended December 31, 2001 and 2000, respectively. The increase reflects
depreciation on the rental truck fleet.
Operating profit before tax and intercompany elimination was $94.2 million
and $102.5 million for the nine months ended December 31, 2001 and 2000,
respectively.
23
Real Estate Operations
Rental revenue before intercompany eliminations was $52.3 million and $54.1
million for the nine months ended December 31, 2001 and 2000, respectively.
Intercompany revenue was $48.3 million and $52.6 million for the nine months
ended December 31, 2001 and 2000, respectively.
Net investment and interest income was $6.9 million and $7.8 million for
the nine months ended December 31, 2001 and 2000, respectively.
Net depreciation expense (income) was $(4.3) million and $9.7 million for
the nine months ended December 31, 2001 and 2000, respectively. The decrease is
due to an increase in the gain from the sale of property plant and equipment.
Operating profit before tax and intercompany elimination was $31.1 million
and $10.5 million for the nine months ended December 31, 2001 and 2000,
respectively. The increase mainly reflects a gain of $12.5 million on sales of
property plant and equipment and a decrease in net lease cost.
Property and Casualty
RepWest's premiums were $193.0 million and $135.7 million for the nine
months ended September 30, 2001 and 2000, respectively. General agency premiums
were $86.5 million and $37.5 million for the nine months ended September 30,
2001 and 2000, respectively. The change from 2000 to 2001 was the result of two
agency programs, Non-Standard Auto and Transportation, which are responsible for
$35.7 million of the increase. In addition, commercial agency business
increased by $11.7 million for the same period. Assumed treaty reinsurance
premium was $52.0 million and $50.5 million for the nine months ended September
30, 2001 and 2000, respectively. Of this increase, $8.1 million is associated
with two Non-Standard Auto treaties, offset by a $5.1 million decrease in Crop
Hail Premiums along with an additional $1.4 million decrease resulting from the
non-renewal of numerous treaties in 2001. Direct Multiple Peril premiums were
$26.0 million and $19.5 million for the nine months ended September 30, 2001 and
2000, respectively. The change from 2000 is a result of rate increases across
the entire book of business. Rental industry revenue was $28.5 million and
$28.2 million for the nine months ended September 30, 2001 and 2000,
respectively.
Net investment income was $24.0 million and $23.7 million for the nine
months ended September 30, 2001 and 2000, respectively.
Benefits and losses were $188.3 million and $116.4 million for the nine
months ended September 30, 2001 and 2000, respectively. This increase is due to
the Non-Standard Auto, Transportation and commercial agency programs, as well as
to the assumed treaty reinsurance and Direct Multiple Peril business.
The amortization of deferred acquisition costs (DAC) was $17.8 million and
$10.1 million for the nine months ended September 30, 2001 and 2000,
respectively. The increase is mainly due to the premium growth and resultant
deferral of acquisition expenses in 2000 for the assumed treaty and general
agency programs.
Operating expenses were $42.6 million and $37.8 million for the nine months
ended September 30, 2001 and 2000, respectively. The increase is a result of
commissions on new agency business premium and premium taxes resulting from
increased premium writings.
Operating loss before tax and intercompany elimination was $31.7 million
and $4.9 million for the nine months ended September 30, 2001 and 2000,
respectively. The decrease is mainly attributable to a significant increase in
incurred losses associated with Direct Multiple Peril, assumed treaty business
and increased operating expense, offset by an increase in earned premiums.
24
Life Insurance
Net premiums were $119.7 million and $78.3 million for the nine months
ended September 30, 2001 and 2000, respectively. Medicare Supplement premiums
increased by $41.3 million; driven by new business, rate increases, and the
acquisition of Christian Fidelity Life Insurance Company (CFLIC).
Net investment income before intercompany eliminations was $19.0 million
and $18.2 million for the nine months ended September 30, 2001 and 2000,
respectively. The increase was primarily due to realized gains, offset by
decreasing market interest rates.
Benefits incurred were $88.0 million and $54.2 million for the nine months
ended September 30, 2001 and 2000, respectively. This increase is primarily due
to a greater volume of Medicare supplement business in force from the
acquisition of CFLIC and new business, which accounts for $27.2 million and $6.2
million, respectively.
Amortization of DAC and the value of business acquired (VOBA) was $14.5
million and $15.0 million for the nine months ended September 30, 2001 and 2000,
respectively. The decrease is primarily due to a smaller volume of credit
insurance written.
Operating expenses were $30.2 million and $19.9 million for the nine months
ended September 30, 2001 and 2000, respectively. Commissions and premium taxes
have increased $7.0 million and personnel and other operating expenses, net of
fees collected, increased by $2.8 million primarily due to the increase in
Medicare supplement business, of which the acquisition of CFLIC accounts for the
majority of the increase.
Operating profit before tax and intercompany eliminations was $6.0 million
and $7.4 million for the nine months ended September 30, 2001 and 2000,
respectively. The decrease is primarily due to smaller spreads from the
deferred annuity business and higher loss ratios for the credit insurance
business; offset by loss ratio improvements in Medicare supplement.
Interest Expense
Interest expense was $58.8 million and $65.3 million for the nine months
ended December 31, 2001 and 2000, respectively. The decrease can be attributed
to lower cost of funds on borrowed money.
Consolidated Group
As a result of the foregoing, pretax earnings totaled $73.3 million and
$92.7 million for the nine months ended December 31, 2001 and 2000,
respectively. After providing for income taxes, net earnings were $46.5 million
and $59.7 million for the nine months ended December 31, 2001 and 2000,
respectively. Following deductions for an extraordinary loss from the early
extinguishment of debt, net earnings were $46.5 million and $57.6 million for
the nine months ended December 31, 2001 and 2000, respectively.
25
QUARTER ENDED DECEMBER 31, 2001 VERSUS QUARTER ENDED DECEMBER 31, 2000
Moving and Storage Operations
Revenues consist of rental revenues and net sales. Total rental revenue
was $273.7 million and $270.5 million for the quarters ended December 31, 2001
and 2000, respectively. Net revenues from the rental of moving related equipment
increased by $2.8 million. This increase is primarily attributable to higher
truck and trailer rental revenues and storage revenues, caused by increases in
prices and improvements in fleet utilization and storage occupancy.
Net sales revenues were $40.3 million and $41.0 million for the quarters
ended December 31, 2001 and 2000, respectively.
Cost of sales was $23.9 million and $21.6 million for the quarters ended
December 31, 2001 and 2000, respectively.
Operating expenses before intercompany elimination were $247.0 million and
$252.0 million for the quarters ended December 31, 2001 and 2000, respectively.
The decrease reflects lower rental equipment and building maintenance
expenditures.
Net depreciation expense was $26.2 million and $20.7 million for the
quarters ended December 31, 2001 and 2000, respectively. The increase reflects
an increase in depreciation recognized on the rental truck fleet.
Operating loss before tax and intercompany elimination was $18.0 million
and $19.1 million for the quarters ended December 31, 2001 and 2000,
respectively. The increase reflects increases in revenues over increases in
operating expenses.
Real Estate Operations
Rental revenue before intercompany eliminations was $17.4 million and $18.0
million for the quarters ended December 31, 2001 and 2000, respectively.
Intercompany revenue was $12.0 million and $17.8 million for the quarters ended
December 31, 2001 and 2000, respectively.
Net investment and interest income was $2.1 million and $2.7 million for
the quarters ended December 31, 2001 and 2000, respectively.
Net depreciation expense was $1.7 million and $4.4 million for the quarters
ended December 31, 2001 and 2000, respectively. The decrease reflects the gain
realized from the sale of property plant and equipment.
Operating profit before tax and intercompany elimination was $8.4 million
and $2.4 million for the quarters ended December 31, 2001 and 2000,
respectively. The increase reflects increases in the sale of property plant and
equipment and a decrease in net lease cost.
26
Property and Casualty
RepWest's premiums were $64.7 million and $63.4 million for the quarters
ended September 30, 2001 and 2000, respectively. General agency premiums were
$23.7 million and $17.3 million for the quarters ended September 30, 2001 and
2000, respectively. The change from 2000 to 2001 was the result of Non-Standard
Auto, Transportation and commercial agency programs, which are responsible for
$6.0 million of the increase. Assumed treaty reinsurance premium were $20.3
million and $27.5 million for the quarters ended September 30, 2001 and 2000,
respectively. This decrease is mainly attributable to a $4.4 million decrease
in Crop Hail premiums from 2000 to 2001. Direct Multiple Peril Premiums were
$10.0 million and $7.4 million for the quarters ended September 30, 2001 and
2000, respectively. This increase is a result of rate increases that took
effect in the third quarter of 2001.
Net investment income was $8.1 million and $8.0 million for the quarters
ended September 30, 2001 and 2000, respectively.
Benefits and losses incurred were $65.6 million and $56.3 million for the
quarters ended September 30, 2001 and 2000, respectively. The increase is a
result of Non-Standard Auto and Transportation general agency and Direct
Multiple Peril programs, offset by a decrease in Crop Hail business.
The amortization of DAC was $6.2 million and $3.8 million for the quarters
ended September 30, 2001 and 2000, respectively. The increase is due to the
increase in premium writings.
Operating expenses were $13.8 million and $18.0 million for the quarters
ended September 30, 2001 and 2000, respectively. The change is due to decreased
commission expense resulting from a commission cap that was reached on Non-
Standard Auto business, the non-renewal of numerous assumed reinsurance treaties
and a decrease in DAC, offset by an increase in general and administrative
expenses resulting from taxes associated with increased premium writings.
Operating loss before tax and intercompany elimination was $12.8 million
and $6.8 million for the quarters ended September 30, 2001 and 2000,
respectively. The decrease is mainly attributable to an increase in incurred
losses associated with Direct Multiple Peril business, along with a decrease in
the capitalization of DAC, offset by an increase in earned premiums and a
decrease in operating expenses.
27
Life Insurance
Net premiums were $42.2 million and $26.8 million for the quarters ended
September 30, 2001 and 2000, respectively. Medicare Supplement premiums
increased by $15.0 million from new business, rate increases and the acquisition
of CFLIC.
Net investment income before intercompany eliminations was $5.8 million for
the quarters ended September 30, 2001 and 2000.
Benefits were $29.9 million and $18.5 million for the quarters ended
September 30, 2001 and 2000, respectively. $11.7 million of the increase is due
to a greater volume of Medicare supplement business in force, of which the
acquisition of CFLIC accounts for the majority.
Amortization of DAC and VOBA was $5.2 million and $4.8 million for the
quarters ended September 30, 2001 and 2000, respectively. The increase is due
primarily to annuity DAC amortization.
Operating expenses were $10.8 million and $6.6 million for the quarters
ended September 30, 2001 and 2000, respectively. Commissions and premium taxes
have increased by $2.4 million primarily due to the increase in Medicare
supplement premiums. Personnel and other operating expenses, net of fees
collected, increased by $1.2 million primarily from the acquisition of CFLIC.
Operating profit before tax and intercompany eliminations was $2.1 million
and $2.6 million for the quarters ended September 30, 2001 and 2000,
respectively. The decrease is primarily due to smaller spreads on the deferred
annuity business and higher loss ratios on the credit disability business offset
by improved loss ratios for the Medicare supplement business.
Interest Expense
Interest expense was $18.0 million and $21.2 million for the quarters ended
December 31, 2001 and 2000, respectively. The decrease can be attributed to
lower cost of funds on borrowed money.
Consolidated Group
As a result of the foregoing, pretax loss was $30.2 million and $29.4
million for the quarters ended December 31, 2001 and 2000, respectively. After
providing for income taxes, net loss was $20.2 million and $19.2 million for the
quarters ended December 31, 2001 and 2000, respectively. Following deductions
for an extraordinary loss from the early extinguishment of debt, net loss was
$20.2 million and $21.3 million for the quarters ended December 31, 2001 and
2000, respectively.
28
LIQUIDITY AND CAPITAL RESOURCES
Moving and Storage Operations
To meet the needs of its customers, U-Haul maintains a large inventory of
rental items. In the nine months ended December 31, 2001 and 2000, capital
expenditures were $144.1 million and $280.3 million, respectively (See note 7
for additional discussion). 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 through lease
financings.
Cash provided by operating activities was $82.3 million and $27.5 million
for the nine months ended December 31, 2001 and 2000, respectively. The
increase resulted primarily from a decrease in accounts receivable and an
increase in accrued liabilities.
At December 31, 2001, total outstanding notes and loans payable was
$1,132.6 million as compared to $1,156.8 million at March 31, 2001.
Real Estate Operations
Cash provided (used) by operating activities was $(36.4) million and $77.6
million for the nine months ended December 31, 2001 and 2000, respectively. The
decrease resulted from a decrease in accrued liabilities.
Property and Casualty
Cash provided (used) by operating activities was $(32.0) million and $20.3
million for nine months ended September 30, 2001 and 2000, respectively. This
change resulted from increased accounts receivable, other assets, unearned
premium reserve and decreased net income from December 2000 to September 2001,
offset by an increase in loss and loss adjusting expense reserves and
reinsurance payables from December 2000 to September 2001.
RepWest's cash and cash equivalents and short-term investment portfolio
were $6.3 million and $12.0 million at September 30, 2001 and 2000,
respectively. The decrease is a result of an increase in claim payments.
RepWest maintains a diversified securities investment portfolio, primarily
in bonds, at varying maturity levels with 87.0% 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 83.7% of total
liabilities.
The liability for reported and unreported losses is 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.
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. Benefit and claim statistics are continually monitored
to provide projections of future cash requirements.
Cash provided (used) by operating activities was $4.8 million and $(0.3)
million for the nine months ended September 30, 2001 and 2000, respectively.
The increase in cash flows from operating activities relates to increased
premium writings and the timing of a settlement offset by higher claim payments.
Cash provided by financing activities was $32.1 million and $7.2 million for the
nine months ended September 30, 2001 and 2000, respectively. Cash flows from
deferred annuity sales increase investment contract deposits, which are a
component of financing activities. The increase in investment contract deposits
over 2000 is due to growth in new deposits offset by withdrawals and
terminations of existing deposits.
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 were $74.0 million and $59.7 million for the
nine months ended September 30, 2001 and 2000, respectively. Management
believes that the overall sources of liquidity will continue to meet foreseeable
cash needs.
29
Consolidated Group
During each of the fiscal years ended March 31, 2002, 2003 and 2004, AMERCO
estimates gross capital expenditures will average approximately $200 million
primarily reflecting rental fleet rotation. This level of capital expenditures,
combined with a potential range of $150 - $300 million in annual long-term debt
maturities during this same period, are expected to create annual average
funding needs of approximately $350 - $500 million. The Company plans to meet
these needs through the cash flows, asset sales and various current and future
sources of credit (See Credit Agreements discussion below). AMERCO has
historically enjoyed a substantial and predictable level of cashflow (EBITDAR)
from its non-insurance subsidiaries. These cashflows are dependent on revenues
and expenses that can be impacted by economic trends. In the past, the Company
has not been as affected by these economic trends as other businesses. Cashflow
(defined as EBITDAR) is anticipated to range approximately from $400 million to
$425 million annually. The sale of assets is less predictable and substantially
lower than the cashflows. The sale of assets is dependant upon economic
conditions, the amount and nature of sale and leaseback transactions and
AMERCO's fleet rotation program. In many cases, a decline in asset sales is
accompanied by a decrease in capital expenditures.
The Company intends to meet these needs through cash flows, existing lines
of credit, additional borrowings and sale of assets. We may be unable to
secure such additional borrowings on satisfactory terms or in a timely manner.
Depending on the results of our operations, and general and economic
competitive conditions, many of which we cannot control, we may take certain
actions, including delaying or reducing capital expenditures.
From time to time, Real Estate sells storage properties to SAC Holdings.
These sales have in the past provided significant cash flows to the Company.
The ability of the Company 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 acquisition of the properties from Real Estate and in general,
its willingness to engage in such transactions.
Credit Agreements
AMERCO's operations are funded by various credit and financing
arrangements, including unsecured long-term borrowings, unsecured medium-term
notes, revolving lines of credit with banks and operating leases. The operating
leases are primarily used to finance Company's fleet of trucks and trailers. As
of December 31, 2001, AMERCO had $1,132.6 million in total notes and loans
payable outstanding and total unutilized lines of credit of approximately $95.0
million. The Company is in the process of refinancing its' $400 million
revolving credit facility. The Company is also in the process of completing a
private unsecured debt placement. In addition to the economic pressures, there
has been a reduction in leasing companies and banks, which has had a negative
impact on the financial markets. This has led to less availability and higher
prices. Management of AMERCO believes there are enough leasing companies and
banks to meet Company's financing 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, assets and restricting the issuance of certain types of
preferred stock. At December 31, 2001, AMERCO was in compliance with these
covenants. AMERCO's various credit and financing arrangements are affected by
its credit ratings such that were AMERCO to experience a credit downgrade, the
interest rates that it is charged might be increased, which would result in an
increase in the Company's interest expense and its ability to obtain addtional
financing.
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, 2001
for additional information about AMERCO's credit agreements.
30
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, 2001.
31
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.
32
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. Description
----------- -----------
3.1 Restated Articles of Incorporation
3.2 Restated By-Laws of AMERCO as of August 27, 1997 (1)
10.1 Management Agreement between Eighteen SAC Self Storage
Corporation and subsidiaries of AMERCO
10.2 Management Agreement between Twenty SAC Self Storage
Corporation and subsidiaries of AMERCO
10.3 Management Agreement between Twenty-One SAC Self Storage
Corporation and subsidiaries of AMERCO
10.4 Management Agreement between Twenty-Two SAC Self Storage
Corporation and subsidiaries of AMERCO
10.5 Management Agreement between Twenty-Three SAC Self Storage
Corporation and subsidiaries of AMERCO
(b) Reports on Form 8-K.
No report on Form 8-K was filed during the quarter ended
December 31, 2001.
_________________
(1) Incorporated by reference to AMERCO's Quarterly Report on Form 10-Q
for the quarter ended December 31, 1997, file no. 1-11255.
33
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: February 15, 2002 By: /S/ GARY B. HORTON
____________________________________
Gary B. Horton, Treasurer
(Principal Financial Officer)