ITEM 1. BUSINESS
A. AMERCO
AMERCO, a Nevada corporation (AMERCO), is the holding company for U-Haul International, Inc. (U-Haul), Amerco Real Estate Company (Real Estate), Republic Western Insurance Company (RepWest) and Oxford Life Insurance Company (Oxford). Throughout this Form 10-K, unless the context otherwise requires, the term "AMERCO" includes all of its subsidiaries. AMERCO's executive offices are located at 1325 Airmotive Way, Suite 100, Reno, Nevada 89502-3239, and the telephone number is (775) 688-6300. As used in this Form 10-K, all references to a fiscal year refer to AMERCO's fiscal year ended March 31 of that year. RepWest and Oxford are consolidated on the basis of calendar years ended December 31. Accordingly, all references to the years 2000, 1999 and 1998 correspond to AMERCO's fiscal years 2001, 2000 and 1999, respectively. AMERCO has four industry segments represented by Moving and Storage Operations (U-Haul), Real Estate, Property and Casualty Insurance (RepWest) and Life Insurance (Oxford). See Note 21 of Notes to Consolidated Financial Statements in Item 8 for financial information regarding the industry segments.
Moving and Storage Operations Moving and self-storage operations consist of the rental of trucks and trailers, the sale of moving aids such as boxes and the rental of self-storage spaces to the do-it-yourself mover. Operations are conducted using the registered tradename U-Haul REGISTERED TRADEMARK throughout the United States and Canada.
Real Estate Operations Real Estate owns approximately 90% of U-Haul's real estate assets, including U-Haul Center and Storage locations. The remainder of the real estate assets are owned by various U-Haul entities. Real Estate is responsible for managing all of the properties including the environmental risks of the properties. Real Estate is responsible for the purchase of all properties used by AMERCO or any of its subsidiaries. Real Estate also handles all the dispositions (sale or lease) of unused real estate.
Property and Casualty Insurance RepWest originates and reinsures property and casualty-type insurance products for various market participants, including independent third parties, U-Haul's customers, independent dealers and AMERCO.
Life Insurance Oxford originates and reinsures annuities, credit life and disability, life insurance and supplemental health products. Oxford also administers the self- insured employee health and dental plans for AMERCO.
On November 13, 2000, Oxford acquired all of the issued and outstanding shares of Christian Fidelity Life Insurance Company (CFLIC) in an exchange of cash for stock. CFLIC is a Texas-based insurance company specializing in providing supplemental health insurance and is licensed in 31 states. The acquisition was accounted for using the purchase method of accounting and, accordingly, CFLIC's results of operations have been included in the consolidated financial statements since the date of acquisition. Oxford funded the acquisition from available cash and short-term funds.
B. HISTORY
U-Haul was founded in 1945 under the name "U-Haul Trailer Rental Company". From 1945 to 1974, U-Haul rented trailers and, starting in 1959, trucks on a one-way and In-Town REGISTERD TRADEMARK basis through independent dealers. Since 1974, U-Haul has developed a network of Company owned rental centers (U-Haul Centers) through which U-Haul rents its trucks and trailers and provides related products and services (e.g., the sale and installation of hitches, as well as the sale of boxes and moving supplies). At March 31, 2001, U-Haul's distribution network included 1,380 U-Haul Centers and 15,300 independent dealers. C. MOVING AND STORAGE OPERATIONS
Business Strategies The U-Haul business strategy remains focused on do-it-yourself moving and self-storage customers. U-Haul believes that customer access, in terms of truck or trailer availability and proximity of rental locations, is critical to its success. Under the U-Haul name, our strategy is to offer, in an integrated manner over an extensive and geographically diverse network of 16,680 Company operated Centers and independent dealers, a wide range of products and services to do-it-yourself moving and self-storage customers.
Moving Operations U-Haul has a variety of product offerings. Rental trucks are designed with do-it-yourself customers in mind. U-Haul trailers are suited to the low profile of many newly manufactured automobiles. As of March 31, 2001, the U-Haul rental equipment fleet consisted of 100,400 trucks, 85,300 trailers and 20,400 tow dollies. Additionally, U-Haul provides support rental items such as furniture pads and bumper hitches.
Approximately 90% of U-Haul's rental revenue is from do-it-yourself movers. Moving rentals include: (i) In-Town REGISTERD TRADEMARK rentals, where the equipment is returned to the originating U-Haul location and (ii) one-way rentals, where the equipment is returned to a U-Haul location in another city.
U-Haul's truck and trailer rental business tends to be seasonal, with proportionally more transactions and revenues generated in the spring and summer months than during the balance of the year.
U-Haul also sells a wide selection of moving supplies that include boxes, tape and packaging materials. U-Haul Centers also sell and install hitches and towing systems, and sell propane.
U-Haul offers protection packages such as: (i) Safemove REGISTERED TRADEMARK - which provides moving customers with a damage waiver, cargo protection and medical and life coverage; and, (ii) Safestor REGISTERED TRADEMARK - which provides self-storage rental customers with various types of protection for their goods in storage.
Independent dealers receive U-Haul equipment on a consignment basis and are paid a commission on gross revenues generated from their rentals. U-Haul maintains contracts with its independent dealers that may typically be terminated upon 30 days written notice by either party.
U-Haul designs and manufactures its truck van boxes, trailers and various other support rental equipment items. Truck chassis are manufactured by both foreign and domestic truck manufacturers. These chassis receive certain post- delivery modifications and are joined with van boxes at strategically located Company-owned manufacturing and assembly facilities in the United States.
U-Haul services and maintains its trucks and trailers through an extensive preventive-maintenance program, generally performed at Company-owned facilities located at or near U-Haul Centers. Major repairs are performed either by the chassis manufacturers' dealers or by Company-owned repair shops, and U-Haul takes advantage of manufacturers' warranties.
Competition The moving truck and trailer rental market is highly competitive and dominated by national operators in both the In-Town REGISTERED TRADEMARK and one-way markets. Recently two major competitors combined. Budget Rent-A-Car acquired Ryder TRS (Ryder Truck Rentals). Management believes that this merger will not have a material adverse effect on AMERCO's financial position or operating results. Management believes that there are two distinct users of rental trucks: commercial users and do-it-yourself users. U-Haul focuses on the do-it-yourself mover. U-Haul believes that the principal competitive factors are convenience of rental locations, availability of quality rental equipment and price.
Self-Storage Business U-Haul entered the self-storage business in 1974 and since then has increased the rentable square footage of its storage locations through the acquisition of existing facilities and new construction. In addition, U-Haul has entered into management agreements to manage self-storage properties owned by others. U-Haul has also entered into a strategic and financial partnership with Private Mini Storage Realty, L.P., a Texas-based operator of self-storage properties.
Through over 1,000 owned or managed storage locations in the United States and Canada, U-Haul offers for rent more than 32.5 million square feet of self- storage space. U-Haul's self-storage facility locations range in sizes up to 152,600 square feet of storage space, with individual storage units in sizes from 15 square feet to 400 square feet.
The primary market for storage rooms is the storage of household goods. With the addition of 32,784 storage rooms during fiscal year 2001, the average occupancy rate of facilities operating over one year was 83.19%, with modest seasonal variations. During fiscal year 2001, delinquent rentals as a percentage of total storage rentals were approximately 7.7%. U-Haul considers this rate to be satisfactory.
Competition The primary competition for a U-Haul self-storage location is other storage facilities within a trade area offering a comparable level of convenience to the customer.
Employees As of March 31, 2001, U-Haul's non-seasonal work force consisted of 16,800 full and part-time employees.
D. REAL ESTATE OPERATIONS
Real Estate Operations Real Estate has responsibility for actively marketing properties available for sale or lease. Real Estate is also responsible for managing any environmental risks associated with AMERCO's real estate.
Environmental Matters Compliance with environmental requirements of federal, state and local governments significantly affects Real Estate's business operations. Among other things, these requirements regulate the discharge of materials into the water, air and land and govern the use and disposal of hazardous substances. Real Estate is aware of issues regarding hazardous substances on the properties. Real Estate regularly makes capital and operating expenditures to stay in compliance with environmental laws. Since 1988, Real Estate has managed a testing and removal program for underground storage tanks. Under this program, over 3,000 tanks have been removed at a cost of $42.6 million.
A subsidiary of U-Haul, INW Company (INW), owns one property located within two different state hazardous substance sites in the State of Washington. The sites are referred to as the "Yakima Valley Spray Site" and the "Yakima Railroad Area." INW has been named as a "potentially liable party" (PLP) under state law with respect to this property as it relates to both sites. As a result of the cleanup costs of approximately $3.0 to $9.0 million required by the State of Washington, INW filed for reorganization under the federal bankruptcy laws in May of 2001.
Based upon the information currently available to Real Estate, compliance with the environmental laws and its share of the costs of investigation and cleanup of known hazardous waste sites are not expected to have a material adverse effect on AMERCO's financial position or operating results.
E. INSURANCE OPERATIONS
Business Strategies RepWest's principal business strategy is to provide specialty insurance for personal, commercial and reinsurance markets. RepWest focuses on selected regional and under-served customers through managing general agents, independent agents, brokers and direct sales.
Oxford's business strategy is long-term capital growth through direct writing and reinsuring of annuity, credit life and disability and supplemental health insurance. Oxford is pursuing this growth strategy of increased direct writing via acquisitions of insurance companies, expanded distribution channels and product development. The acquisitions of North American Insurance Company and Safe Mate Life Insurance Company in 1997 and Christian Fidelity Life Insurance Company in 2000 represent a significant movement toward this long-term goal. Oxford has significantly expanded product offerings, distribution channels and administrative capabilities through these acquisitions.
Investments RepWest and Oxford investments must comply with the insurance laws of the state of domicile. These laws prescribe the type, quality and concentration of investments that may be made. Moreover, in order to be considered an acceptable reinsurer by cedents and intermediaries, a reinsurer must offer financial security. The quality and liquidity of invested assets are important considerations in determining such security.
The investment philosophies of RepWest and Oxford emphasize protection of principal through the purchase of investment grade fixed-income securities. Approximately 88.0% of RepWest's and 93.2% of Oxford's fixed-income securities consist of investment grade securities (NAIC-2 or greater). The maturity distributions are designed to provide sufficient liquidity to meet future cash needs.
Reinsurance RepWest and Oxford assume and cede insurance from and to other insurers and members of various reinsurance pools and associations. Reinsurance arrangements are utilized to provide greater diversification of risk and to minimize exposure to large risks. However, the original insurer retains primary liability to the policyholder should the assuming insurer not be able to meet its obligations under the reinsurance agreements.
Regulation RepWest and Oxford are subject to regulation and supervision throughout the United States. The regulation extends to such matters as licensing companies and agents, restricting the types, quality or quantity of investments, regulating capital and surplus and actuarial reserve maintenance, setting solvency standards, filing of annual and other reports on financial position, and regulating trade practices. State laws also regulate transactions and dividends between an insurance company and its parent or affiliates, and generally require prior approval or notification for any change in control of the insurance subsidiary. RepWest's unpaid losses and loss expenses are certified annually by an independent actuarial consulting firm as required by state regulation.
In the past few years, the insurance and reinsurance regulatory framework has been subjected to increased scrutiny by the National Association of Insurance Commissioners (NAIC), federal and state legislatures and insurance regulators. These regulators are considering increased regulations, with an emphasis on insurance company investment and solvency issues. It is not possible to predict the future impact of changing state and federal regulations on the operations of RepWest and Oxford.
In 1998, the NAIC adopted the Codification of Statutory Accounting Principles guidance, which will replace the current Accounting Practices and Procedures manual as the NAIC's primary guidance for statutory accounting as of January 1, 2001. The Codification provides guidance for areas where statutory accounting has been silent and changes current statutory accounting in some areas. The Insurance Departments of the State of Arizona and Louisiana has adopted the Codification guidance, effective January 1, 2001. The effect of adoption on RepWest's statutory surplus are increases of approximately $11,301,000 respectively, as filed in the entities' March 31, 2001 quarterly statements as a result of a recording of a net deferred tax asset.
RepWest and Oxford are in compliance with NAIC minimum risk-based capitalization requirements for insurance companies as of December 31, 2000.
Competition The highly competitive insurance industry includes a large number of property and casualty insurance companies and life insurance companies. In addition, the marketplace now includes financial service firms offering both insurance and financial products. Some of the insurance companies are owned by stockholders and others are owned by policyholders (mutual). Many competitors have been in business for a longer period of time or possess substantially greater financial resources. Competition in the insurance business is based upon price, product design and services rendered to producers and policyholders.
Employees RepWest's non-seasonal work force consists of 394 full and part-time employees.
Oxford's non-seasonal work force consists of 227 full and part-time employees.
Life Insurance Oxford offers annuities, credit life and disability, life insurance and supplemental health insurance products, both as a direct writer and as an assuming reinsurer. In addition, Oxford administers self-insured group health and dental plans for AMERCO. Reinsurance arrangements are entered into with unaffiliated reinsurers.
Property and Casualty RepWest's business activities consist of three basic areas: U-Haul, direct and assumed reinsurance underwriting. U-Haul underwritings include coverage for U-Haul customers, independent dealers and employees of AMERCO. For the year ended December 31, 2000, approximately 11.4% of RepWest's written premiums resulted from U-Haul underwriting activities. RepWest's direct underwriting is done through company-employed underwriters and selected general agents. The products provided include liability coverage for rental vehicle lessees, storage rental properties, coverage for commercial multiple peril, commercial auto, mobile homes and excess workers' compensation. RepWest's assumed reinsurance underwriting is done via broker markets. In an effort to decrease risk, RepWest has entered into various catastrophe cover policies to limit its exposure.
The liability for reported and unreported losses is based on both RepWest's historical and industry averages. Unpaid loss adjustment expenses are based on historical ratios of loss adjustment expenses paid to losses paid. The liability for unpaid losses and loss adjustment expenses is based on estimates of the amount necessary to settle all claims as of the statement date. Both reported and unreported losses are included in the liability. RepWest updates the liability estimate as additional facts regarding claim costs become available. These estimates are subject to uncertainty and variation due to numerous factors. In estimating reserves, no attempt is made to isolate inflation from the combined effect of other factors including inflation. Unpaid losses and unpaid loss adjustment expense are not discounted.
Activity in the liability for unpaid losses and loss adjustment expenses is summarized as follows:
2000 1999 1998 --------------------------- (in thousands) Balance at January 1 $ 334,857 344,748 384,816 Less reinsurance recoverable 58,403 68,135 75,286 --------------------------- Net balance at January 1 276,454 276,613 309,530 Incurred related to: Current year 155,073 121,861 116,069 Prior years 35,387 16,052 (8,827) --------------------------- Total incurred 190,460 137,913 107,242 Paid related to: Current year 61,196 55,136 36,407 Prior years 117,025 82,936 103,752 --------------------------- Total paid 178,221 138,072 140,159 Net balance at December 31 288,693 276,454 276,613 Plus reinsurance recoverable 80,599 58,403 68,135 --------------------------- Balance at December 31 $ 369,292 334,857 344,748 ===========================
As a result of changes in estimates of insured events in prior years, the provision for unpaid losses and loss adjustment expenses (net of reinsurance recoveries of $36.5 million) increased by $35.3 million in 2000. The table on page 9 illustrates the change in unpaid loss and loss adjustment expenses. First line - reserves as originally reported at the end of the stated year. Second section, reading down, - cumulative amounts paid as of the end of successive years with respect to that reserve. Third section, reading down, - revised estimates of the original recorded reserve as of the end of successive years. Last section - compares the latest revised estimated reserve amount to the reserve amount as originally established. This last section is cumulative and should not be summed.
ITEM 2.
ITEM 2. PROPERTIES
AMERCO subsidiaries own property, plant and equipment that are utilized in the manufacture, repair and rental of U-Haul equipment and that provide office space for the Company. Such facilities exist throughout the United States and Canada. The majority of land and buildings used by U-Haul is owned in fee and is substantially unencumbered. U-Haul also manages storage facilities owned by others. In addition, U-Haul owns certain real estate not currently used in its operations. U-Haul owns or operates 1,380 U-Haul Centers (including Company- owned storage locations), and operates 12 manufacturing and assembly facilities. U-Haul also operates 102 repair facilities located at or near a U-Haul Center.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
In the normal course of business, AMERCO is a defendant in a number of suits and claims. AMERCO is also a party to several administrative proceedings arising from state and local provisions that regulate the removal and/or cleanup of underground fuel storage tanks. It is the opinion of management that none of the suits, claims or proceedings involving AMERCO, individually or in the aggregate, are expected to result in a material loss. See "Item 1. Business - Environmental Matters".
Reference is made to Note 15 in Notes to Consolidated Financial Statements in Item 8 for a discussion of stockholder litigation and California overtime litigation.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the security holders during the fourth quarter of the fiscal year covered by this report, through the solicitation of proxies or otherwise.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
As of June 29, 2001, there were approximately 1,283 holders of record of AMERCO's common stock.
AMERCO's common stock has been traded on NASDAQ National Market (NASDAQ) since November 1994 under the symbol "UHAL". The following table sets forth the high and low closing prices of the common stock of AMERCO trading on NASDAQ for the periods indicated.
For the Years Ended March 31, ---------------------------------------------- 2001 2000 ---------------------------------------------- High Low High Low ----------------------------------------------- First quarter 20 16 1/4 25 1/2 20 3/8 Second quarter 21 1/8 18 5/16 28 9/16 22 1/4 Third quarter 24 3/8 18 9/16 29 3/4 23 3/8 Fourth quarter 22 3/8 17 7/32 26 63/64 16 1/2
AMERCO has not declared any cash dividends to common stockholders for the two most recent fiscal years.
AMERCO does not have a formal dividend policy. AMERCO's Board of Directors periodically considers the advisability of declaring and paying dividends in light of existing circumstances. AMERCO does not intend to pay dividends in the foreseeable future. See Note 20 of Notes to Consolidated Financial Statements in Item 8 for a discussion of certain statutory restrictions on the ability of the insurance subsidiaries to pay dividends to AMERCO.
See Note 16 of Notes to Consolidated Financial Statements in Item 8 for a discussion of AMERCO's non-cash dividends. See Note 6 of Notes to Consolidated Financial Statements in Item 8 for a discussion of changes to common shares outstanding.
The common stock of U-Haul is wholly-owned by AMERCO. As a result, no active trading market exists for the purchase and sale of such common stock. No cash dividends were declared to AMERCO by U-Haul during the two most recent fiscal years.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements - -------------------------- This report contains forward-looking statements. Additional written or oral forward-looking statements may be made by AMERCO from time to time in filings with the Securities and Exchange Commission or otherwise. Management believes such forward-looking statements are within the meaning of the safe- harbor provisions. Such statements may include, but not be limited to, projections of revenues, income or loss, estimates of capital expenditures, plans for future operations, products or services and financing needs or plans, as well as assumptions relating to the foregoing. The words "believe", "expect", "anticipate", "estimate", "project" and similar expressions identify forward-looking statements, which speak only as of the date the statement was made. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Future events and actual results could differ materially from those set forth in, contemplated by or underlying the forward-looking statements. The following disclosures, as well as other statements in this report and in the Notes to AMERCO's Consolidated Financial Statements, describe factors, among others, that could contribute to or cause such differences, or that could affect AMERCO's stock price.
General - ------- Information on fiscal year and industry segments is incorporated by reference to "Item 8. Financial Statements and Supplementary Data - Notes 1, 20 and 21 of Notes to Consolidated Financial Statements". The notes discuss the principles of consolidation, summarized consolidated financial information and industry segment and geographic area data, respectively. In consolidation, all intersegment premiums are eliminated and the benefits, losses and expenses are retained by the insurance companies.
Liquidity and Capital Resources - -------------------------------
Consolidated Group To meet the needs of its customers, U-Haul must maintain a large inventory of fixed asset rental items. At March 31, 2001, net property, plant and equipment represented approximately 63.1% of total assets from non-insurance operations and approximately 40.2% of consolidated assets. In fiscal year 2001, gross capital expenditures for property, plant and equipment were $358.9 million, as compared to $417.6 million and $298.5 million in fiscal years 2000 and 1999, respectively. These expenditures primarily reflect the replacement of certain rental trucks and trailers. The capital needs required to fund these acquisitions were funded with internally generated funds from operations and lease financings.
During each of the fiscal years ending March 31, 2002, 2003 and 2004, U-Haul estimates gross capital expenditures will average approximately $232 million primarily reflecting rental fleet rotation. This level of capital expenditures, combined with a potential range of $77.5-$175 million in annual long-term debt maturities, are expected to create annual average funding needs of approximately $333-$408 million. Management estimates that U-Haul will fund 100% of these requirements with leases and internally generated funds, including proceeds from the disposition of older trucks and other asset sales.
Consolidated Net Cash Provided by Operating Activities Net cash provided by operating activities was $126.1 million, $237.7 million and $159.5 million in fiscal years 2001, 2000 and 1999, respectively. Details by material segment follows:
Moving and Storage Operations Cash provided by operating activities was $39.7 million, $147.5 million and $128.5 million in fiscal years 2001, 2000 and 1999, respectively. The decrease from fiscal year 2000 to fiscal year 2001 is mainly due to a decrease in intercompany payable. The increase from fiscal year 1999 to fiscal year 2000 is partially due to an increase in net income.
Real Estate Operations Cash provided by operating activities was $50.5 million, $24.8 million and $38.0 million in fiscal years 2001, 2000 and 1999, respectively. The increase in fiscal year 2001, is due to an increase in intercompany payable. This is due to dividends paid related to the sale of property. The decrease in fiscal year 2000, is due to a decrease in the intercompany payable.
Property and Casualty Cash provided (used) by operating activities was $21.1 million, $(11.1) million and $(21.7) million for the years ended December 31, 2000, 1999 and 1998, respectively. The 2000 to 1999 change resulted from increased premium collections and funds withheld, offset by increased loss and loss adjustment expense payments and policy acquisition costs associated with new business production. The 1999 to 1998 change resulted from the increased funds withheld liability, decreased paid losses recoverable and a smaller decrease in loss and loss adjustment expense reserves. This was offset by increased premiums and agents' balances and the intercompany receivable due from affiliates.
RepWest's cash and cash equivalents and short-term investment portfolio were $17.0 million, $6.0 million and $6.1 million at December 31, 2000, 1999 and 1998, respectively. This balance reflects funds in transition from maturity proceeds to long-term investments. This level of liquid assets, combined with budgeted cash flow, is adequate to meet periodic needs. Capital and operating budgets allow RepWest to schedule cash needs in accordance with investment and underwriting proceeds. LIFE INSURANCE Cash provided by operating activities was $8.7 million, $22.2 million and $34.6 million for the years ended December 31, 2000, 1999 and 1998, respectively. The decrease in cash flows from operating activities in 2000 and 1999 relates to paid loss experience. In 2000, cash flows provided by financing activities were $14.7 million, $3.2 million and $32.0 million for the years ended December 31, 2000, 1999 and 1998, respectively. Cash flows from deferred annuity sales increase investment contract deposits, which are a component of financing activities, as well as the purchase of fixed maturities, which are a component of investing activities. The increase in 2000 from 1999 is due to a higher ratio of annuity deposits versus withdrawals, the opposite occurred in 1999 compared to 1998.
Oxford's primary sources of cash are premiums, receipts from interest- sensitive products and investment income. The primary uses of cash are operating costs and benefit payments to policyholders. Matching the investment portfolio to the cash flow demands of the types of insurance being written is an important consideration. Benefit and claim statistics are continually monitored to provide projections of future cash requirements.
In addition to cash flows from operating and financing activities, a substantial amount of liquid funds is available through Oxford's short-term portfolio. Short-term investments amounted to $45.0 million, $30.7 million and $63.4 million at December 31, 2000, 1999 and 1998, respectively. Management believes that the overall sources of liquidity will continue to meet foreseeable cash needs.
Consolidated Stockholder's Equity Consolidated stockholder's equity was $615.4, $585.3 and $616.0 million for the fiscal years 2001, 2000 and 1999, respectively. Details by material segment follow:
Moving and Storage Operations U-Haul's stockholder's equity was $522.9 million, $435.2 million and $384.7 million for the fiscal years 2001, 2000 and 1999, respectively. The increase in fiscal year 2001 is mainly the result of increased additional paid in capital due to the sale of property to a related party. The increase in fiscal year 2000 was due to earnings.
Real Estate Operations Real Estate stockholder's equity was $89.1 million, $96.1 million and $79.5 million in fiscal years 2001, 2000 and 1999, respectively. The decrease in fiscal year 2001 relates to the payment of a dividend to U-Haul partially offset by increased earnings. The increase in fiscal year 2000 was due to earnings.
Property and Casualty RepWest maintains a diversified securities investment portfolio, primarily in bonds at varying maturity levels with 88.0% of the fixed-income securities consisting of investment grade securities. The maturity distribution is designed to provide sufficient liquidity to meet future cash needs. Current liquidity remains strong, with current invested assets equal to 81.8% of total liabilities.
The liability for reported and unreported losses are based upon both RepWest's historical and industry averages. Unpaid loss adjustment expenses are based on historical ratios of loss adjustment expenses paid to losses paid. Unpaid loss and loss expenses are not discounted.
RepWest's stockholder's equity was $192.1 million, $208.5 million and $211.4 million at December 31, 2000, 1999 and 1998, respectively. The decrease from 1999 to 2000 is a result of an operating loss and a change in market value for the available for sale investment portfolio. RepWest considers current stockholder's equity to be adequate to support future growth and absorb unforeseen risk events. RepWest does not use debt or equity issues to increase capital and therefore has no exposure to capital market conditions.
Life Insurance Oxford's stockholder's equity was $99.8 million, $88.1 million and $93.6 million in 2000, 1999 and 1998, respectively. The increase from 1999 to 2000 is a result of earnings and change in market value for the available for sale investment portfolio. The decrease from 1998 to 1999 was due to the change in market value for the available for sale investment portfolio offset by earnings. Oxford did not pay dividends to its parent during 2000, 1999 or 1998.
Insurance Operations - -------------------- Applicable laws and regulations of the State of Arizona require RepWest and Oxford to maintain minimum capital determined in accordance with statutory accounting practices. Such amount is $1.0 million and $0.4 million, for RepWest and Oxford, respectively. In addition, the amount of dividends that can be paid to stockholders by insurance companies domiciled in the State of Arizona is limited. Any dividend in excess of the limit requires prior regulatory approval. Statutory surplus which can be distributed as dividends without regulatory approval is $11.7 million and $0.7 million for RepWest and Oxford, respectively at December 31, 2000. These restrictions are not expected to have a material adverse effect on the ability of the Company to meet its cash obligations. Oxford issued a surplus note to AMERCO on December 31, 1998 for $10.0 million. Approval by the Arizona Department of Insurance is required prior to payment of principal and interest.
Credit Agreements - ----------------- AMERCO's operations are funded by various credit and financing arrangements, including unsecured long-term borrowings, unsecured medium-term notes and revolving lines of credit with domestic and foreign banks. To finance its fleet of trucks and trailers, U-Haul routinely enters into sale and leaseback transactions. As of March 31, 2001, AMERCO had $1,156.8 million in total notes and loans outstanding and unutilized committed lines of credit of approximately $94.9 million.
Certain of AMERCO's credit agreements contain restrictive financial and other covenants, including, among others, covenants with respect to incurring additional indebtedness, issuing mandatory repayment preferred stock, maintaining certain financial ratios and placing certain additional liens on its properties and assets. At March 31, 2001, AMERCO was in compliance with these covenants.
Reference is made to Note 5 in Item 8 of Notes to Consolidated Financial Statements.
Results of Operations - Consolidated - ------------------------------------
Consolidated Rental Revenue Rental revenue, net of commission expense was $1,205.0 million, $1,150.5 million, and $1,074.2 million in fiscal years 2001, 2000 and 1999, respectively. Details by material segment follow:
Moving and Storage Operations Rental revenue was $1,202.4 million, $1,148.2 million and $1,072.1 million in fiscal years 2001, 2000 and 1999, respectively. The increase from fiscal year 2000 to fiscal year 2001 is due to an increase in one way transactions with an improved average dollar per transaction on one way rentals as well as growth in transactions in trailer rentals and support rental items. The increase from fiscal year 1999 to fiscal year 2000 was primarily due to the growth in truck rental revenues which benefited from transactional growth and reflects a higher average revenue per transaction.
Real Estate Operations Rental revenue, before intercompany eliminations, were $71.9 million, $73.4 million and $74.0 million in fiscal years 2001, 2000 and 1999, respectively. Intercompany rental revenue was $71.1 million, $71.0 million and $71.9 million in fiscal years 2001, 2000 and 1999, respectively. The decrease in fiscal year 2001 is related to the sale of properties to a related party while rental revenue was consistent between fiscal year 1999 and fiscal year 2000.
Consolidated Net Sales Net sales revenues were $194.3 million, $188.8 million and $181.3 million in fiscal years 2001, 2000 and 1999, respectively. Revenue growth from the sale of moving support items (i.e. boxes, etc.) and propane resulted in the increase for each year.
Consolidated Premiums Premium revenues, after intercompany eliminations, were $323.2 million, $262.1 million and $226.8 million in fiscal years 2001, 2000 and 1999, respectively. Details by material segment follow:
Property and Casualty Premium revenues, before intercompany eliminations, were $218.1 million, $173.8 million and $145.3 million for the years ended December 31, 2000, 1999 and 1998, respectively. General agency premiums were $64.3 million, $17.8 million and $6.5 million for the years ended December 31, 2000, 1999 and 1998, respectively. The increase from 1999 to 2000 was the result of two new agency programs. Assumed treaty reinsurance premiums were $83.2 million, $80.7 million and $51.2 million for the years ended December 31, 2000, 1999 and 1998, respectively. Rental industry revenues were $43.3 million, $50.3 million and $66.6 million for the years ended December 31, 2000, 1999 and 1998, respectively. This decline was caused by cost measures implemented on the U-Haul rental industry Business Auto General Liability Policy.
Life Insurance Premium revenues, before intercompany eliminations, were $112.6 million, $96.4 million and $94.5 million for the years ended December 31, 2000, 1999 and 1998, respectively. Oxford increased Medicare supplement premiums through direct writings and the acquisition of Christian Fidelity Life Insurance Company (CFLIC); these actions increased premiums by $12.5 million and $19.1 million in 2000 and 1999, respectively. Premiums from Oxford's life insurance lines decreased $1.7 million and increased $1.1 million from 2000 and 1999, respectively due to production fluctuations from year to year. In the area of credit insurance, Oxford increased direct writings as well as reduced the amount ceded to outside reinsurers. These factors contributed to a $3.3 million and $6.7 million increase in premium from 2000 and 1999, respectively. Annuitizations increased by $1.1 million and decreased $3.0 million in 2000 and 1999, respectively. Premiums decreased $5.3 million in 1999 due to the sale of NAFCIC. Other health insurance premiums increased $1.0 million in 2000 due to a higher reinsurance retention level and decreased $0.5 million in 1999 due to the elimination of certain NAI health lines.
Consolidated Net Investment and Interest Income Net investment and interest income was $91.2 million, $82.2 million and $73.4 million in fiscal years 2001, 2000 and 1999, respectively. Details by material segment follow:
Moving and Storage Operations Interest income was $27.9 million, $19.5 million and $12.9 million in fiscal years 2001, 2000 and 1999, respectively. The increase in fiscal year 2001 is mainly related to increased storage loan activity. The increase in interest during fiscal year 2000 reflects higher average note receivable balances.
Real Estate Operations Net investment and interest income was $11.0 million, $7.0 million and $4.5 million in fiscal years 2001, 2000 and 1999, respectively. The increase in fiscal year 2001 is related to increased investments. The increase in fiscal year 2000 is due to interest income received on notes receivable.
Property and Casualty Net investment income was $29.1 million, $33.0 million and $35.8 million for the years ended December 31, 2000, 1999 and 1998, respectively. The reductions are attributable to decreased gains and lower annual average invested assets, as well as the write down of $3.0 million of fixed maturity investments during 2000.
Life Insurance Net investment income was $22.2 million, $21.5 million and $20.1 million for the years ended December 31, 2000, 1999 and 1998, respectively. This increase is due to improved interest rate spreads on the retirement savings products offset by write downs of $3.5 million of fixed maturity investments during 2000.
Consolidated Operating Expenses Operating expenses were $998.8 million, $919.1 million and $877.6 million in fiscal years 2001, 2000 and 1999, respectively. Details by material segment follow:
Moving and Storage Operations Operating expenses, before intercompany eliminations, were $986.5 million, $931.1 million and $893.0 million in fiscal years 2001, 2000 and 1999, respectively. The increased expense in fiscal year 2001 is due to increased personnel cost, higher repair expense, a substantial lawsuit settlement and other administrative costs. Also, the addition of storage rooms will initially cause an increase in operating expenses without corresponding increases in earnings until the properties reach a stabilized level of occupancy. The increase in fiscal year 2000 is due to the increased cost of liability insurance, due to transactional growth, increased personnel costs and other administrative costs.
Real Estate Operations Operating expenses, before intercompany eliminations, were $0.4 million, $4.0 million and $6.2 million in fiscal years 2001, 2000 and 1999, respectively. The decrease in fiscal year 2001 is due to an increase in intercompany lease payments which lowers their operating expense. Real Estate benefited from a reduction in intercompany management fees charged by an affiliated segment company during fiscal year 2000 compared to the prior two years.
Property and Casualty Operating expenses, before intercompany eliminations, were $56.7 million, $35.0 million and $35.6 million for the years ended December 31, 2000, 1999 and 1998, respectively. The increase is due to commission expenses associated with the growth in written premium and a $4.6 million decrease in the capitalization of deferred acquisition costs for the year ended December 2000 as well as general and administrative expenses required to support the new business expansion. Commission expenses were $33.1 million, $19.1 million and $18.8 million for the years ended December 2000, 1999 and 1998, respectively. Lease expenses increased to $2.1 million, $1.9 million and $1.3 million for the years ended December 2000, 1999 and 1998, respectively. All other underwriting expenses consisted of $21.4 million, $13.9 million and $15.5 million for the years ended December 2000, 1999 and 1998, respectively.
Life Insurance Operating expenses, before intercompany eliminations, were $29.0 million, $23.1 million and $20.4 million for the years ended December 31, 2000, 1999 and 1998, respectively. Commissions have increased $7.3 million and $9.1 million in 2000 and 1999, respectively, primarily due to the increase in Medicare supplement premiums. General and administrative expenses net of fees collected decreased $1.4 million and $0.5 million in 2000 and 1999, respectively.
Consolidated Cost of Sales Cost of sales was $117.2 million, $112.0 million and $106.8 million in fiscal years 2001, 2000 and 1999, respectively. Increased material costs and a higher sales volume related to moving support items contributed to the increases in both fiscal years 2001 and 2000.
Consolidated Benefits and Losses Benefits and losses were $283.4 million, $209.6 million and $176.6 million in fiscal years 2001, 2000 and 1999, respectively. Details by material segment follow:
Property and Casualty Benefits and losses incurred were $204.1 million, $150.5 million and $118.9 million for the years ended December 31, 2000, 1999 and 1998, respectively. The increase from 1999 to 2000 resulted from two new general agency programs and reserve strengthening in existing rental industry, assumed treaty reinsurance and general agency programs. The increase from 1998 to 1999 resulted from the increased assumed treaty reinsurance claims as well as an arbitration loss. The arbitration loss caused $6.3 million of previously ceded reserves to be brought back into RepWest's retention.
Life Insurance Benefits incurred were $79.2 million, $59.0 million and $57.7 million for the years ended December 31, 2000, 1999 and 1998, respectively. The increase is primarily due to Medicare supplement benefits incurred, which accounts for $16.7 million and $21.2 million of benefit increases in 2000 and 1999, respectively. These increases are due to larger volumes of business and poor experience on blocks no longer actively marketed. Credit insurance benefits increased from $2.1 million and $2.8 million in 2000 and 1999, respectively due to the increase in volume written and retained. Benefits from other health lines increased $2.5 million and $0.5 million in 2000 and 1999, respectively as volume increased and loss experience worsened. Annuity and life benefits decreased $1.1 million and $2.1 million in 2000 and 1999, respectively. The sale of NAFCIC reduced benefits $0.9 million from 1998.
Consolidated Amortization of Deferred Acquisition Costs Amortization of deferred acquisition costs (DAC) and the value of business acquired (VOBA) was $35.9 million, $35.0 million and $31.7 million in fiscal years 2001, 2000 and 1999, respectively. DAC consists of commissions and other policy acquisition costs, which vary with and are primarily related to the production of new business. The prior year end commissions and other related expenses are recognized ratably over the remainder of the policy year. Details by material segment follow:
Property and Casualty The prior year-end commissions and other related expenses are amortized over the following year. The amortization expense was $16.3 million, $13.4 million and $7.4 million for the years ended December 31, 2000, 1999 and 1998, respectively. The increase from 1999 to 2000 is mainly due to the amortization of Assumed Treaty expenses that were deferred in the 1999 year. The increase from 1998 to 1999 is due mainly to RepWest's subsidiary company's DAC expense, which increased to $3.8 million from $0.2 million in 1998. This was due to a change in classification of the amortization expense of the subsidiary to RepWest capitalization.
Life Insurance The VOBA asset relates to the future profits of insurance policies in force at the date of the NAI and CFLIC acquisitions. Amortization of DAC and VOBA was $19.6 million, $21.6 million and $24.3 million for the years ended December 31, 2000, 1999 and 1998, respectively. These costs are amortized as the premium is earned over the term of the policy. Amortization decreased $2.0 million from 1999 due to the annuity and credit segments and decreased $3.0 million from 1998 due to the sale of NAFCIC.
Consolidated Lease Expense Lease expense was $178.5 million, $136.0 million and $118.7 million in fiscal years 2001, 2000 and 1999, respectively. Details by material segment follow:
Moving and Storage Operations Lease expense was $166.2 million, $132.4 million and $118.4 million in fiscal years 2001, 2000 and 1999, respectively. The continued increase reflects additional leasing activity of rental equipment.
Real Estate Operations Lease expense before intercompany eliminations, for real estate operations was $11.6 million, $3.0 million and $0.1 million for the fiscal years 2001, 2000 and 1999, respectively. The continued increase in fiscal year 2001 and fiscal year 2000 over the prior years reflects payments under an operating lease facility with a number of financial institutions whereby the Company is both lessee and construction agent developing storage properties.
Consolidated Depreciation Expense, net Depreciation expense, net was $88.1 million, $87.6 million and $73.1 million in fiscal years 2001, 2000 and 1999, respectively. Details by material segment follow:
Moving and Storage Operations Depreciation expense, net was $82.7 million, $79.0 million and $61.0 million in fiscal years 2001, 2000 and 1999, respectively. The increase in fiscal years 2001 and 2000 reflects an increase in depreciation expense on the rental truck fleet.
Real Estate Operations Depreciation expense, net was $5.3 million, $8.6 million and $12.0 million in fiscal years 2001, 2000 and 1999, respectively. The decrease in fiscal year 2001 reflects an increase in gains from the disposition of property, plant and equipment. The decrease in fiscal year 2000 reflects an increase in gains from the disposition of property, plant and equipment and a decrease in depreciation on buildings and non-rental equipment.
Consolidated Earnings from Operations Earnings from operations were $111.8 million, $184.3 million and $171.3 million in fiscal years 2001, 2000 and 1999, respectively. Details by material segment follow:
Moving and Storage Operations Earnings from operations, before intercompany eliminations, were $73.7 million, $102.0 million and $87.0 million in fiscal years 2001, 2000 and 1999, respectively. The decrease in fiscal year 2001 is due to increased transactions, offset by increased operating and lease expenses. In fiscal year 2000, increased rental transactions, offset by corresponding expenses, contributed to the earnings gain.
Real Estate Operations Earnings from operations, before intercompany eliminations, were $65.8 million, $64.7 million and $60.3 million in fiscal years 2001, 2000 and 1999, respectively. The increase in fiscal year 2001 is mainly related to higher net investment interest income. A decrease in intercompany management fees charged contributed to the earnings increase for fiscal year 2000.
Property and Casualty Earnings (loss) from operations were $(29.9) million, $7.9 million and $19.1 million for the years ended December 31, 2000, 1999 and 1998, respectively. The decrease in 2000 was due to reserve strengthening and losses on two new general agency programs as well as the write downs of fixed maturity investments whose declines in value were determined to be other than temporary. The 1998 to 1999 decrease resulted mainly from RepWest's writing off the 1995 American Bonding receivable, lower than forecasted premium volume in 1999 and higher than expected losses on the agricultural business.
Life Insurance Earnings from operations were $7.0 million, $14.2 million and $12.2 million for the years ended December 31, 2000, 1999 and 1998, respectively. The decrease in 2000 from both 1999 and 1998 was due to write downs of fixed maturity investments whose declines in value were determined to be other than temporary and poor Medicare supplement loss experience. The increase in earnings from 1998 to 1999 was due to improved investment returns and improved loss experience on the credit insurance business.
Consolidated Interest Expense Interest expense was $87.8 million, $81.5 million and $73.7 million in fiscal years 2001, 2000 and 1999, respectively. The increase can be attributed to an increase in the average cost of debt in fiscal year 2001 over the past two fiscal years. The average debt level outstanding continued to increase in fiscal year 2001 compared to fiscal years 2000 and 1999.
Consolidated Extraordinary Loss on the Extinguishment of Debt
During fiscal year 2001, AMERCO extinguished $100.0 million of 6.89% Bond Backed Asset Trust certificates (BATs) originally due in fiscal year 2011 and $25.0 million of 6.7% Medium-Term notes originally due in fiscal year 2009. This resulted in an extraordinary loss of $2.1 million, net of tax of $1.2 million ($0.10 per share).
During fiscal year 2000, AMERCO extinguished $100.0 million of 6.65% Bond Backed Asset Trust certificates (BATs) originally due in fiscal year 2030 and $50.0 million of 7.05% to 7.10% Medium-Term notes originally due in fiscal year 2007. This resulted in an extraordinary loss of $0.3 million, net of tax of $0.2 million ($0.02 per share).
Consolidated Earnings As a result of the foregoing, pretax earnings totaled $24.0 million, $102.7 million and $97.6 million in fiscal years 2001, 2000 and 1999, respectively. After providing for income taxes, earnings from operations were $15.1 million, $65.8 million and $62.5 million in fiscal years 2001, 2000 and 1999, respectively. Following deductions for an extraordinary loss from the early extinguishment of debt, net earnings were $13.0 million, $65.5 million and $62.5 million in fiscal years 2001, 2000 and 1999, respectively.
Quarterly Results The table on page 24 presents unaudited quarterly results for the eight quarters in the period beginning April 1, 1999 and ending March 31, 2001. The Income Statement amounts for the quarter ended December 31, 2000 have been restated to increase the net loss by $.10 per share due to necessary revisions of certain fixed asset transactions. The restated loss per share was $1.05 for the third quarter fiscal year 2001 as compared to $.95 as reported. AMERCO believes that all necessary adjustments have been included in the amounts stated below to present fairly, and in accordance with generally accepted accounting principles, the selected quarterly information when read in conjunction with the consolidated financial statements incorporated herein by reference. U-Haul moving and storage operations are seasonal and proportionally more of AMERCO's revenues and net earnings from its U-Haul moving and storage operations are generated in the first and second quarters of each fiscal year (April through September). The operating results for the periods presented are not necessarily indicative of results for any future period.
Quarter Ended ---------------------------------------------- Jun 30 Sep 30 Dec 31 Mar 31 2000 2000 2000 2001 (Restated) ---------------------------------------------- (in thousands, except share and per share data) Total revenues $ 459,437 502,906 425,977 425,318 Earnings from operations before extraordinary loss on early extinguishment of debt (4) $ 37,612 41,233 (17,109) (46,650) Net earnings (loss) $ 37,612 41,233 (19,230) (46,650) Weighted average common shares outstanding Basic 21,718,988 21,489,970 21,406,688 21,326,015 Earnings (loss) from operations before extraordinary loss on early extinguishment of debt per common share (1) (4) $ 1.58 1.77 (0.95) (2.34) Earnings (loss) per common share Basic $ 1.58 1.77 (1.05) (2.34)
Quarter Ended ---------------------------------------------- Jun 30 Sep 30 Dec 31 Mar 31 1999 1999 1999 2000 ---------------------------------------------- (in thousands, except share and per share data) Total revenues $ 439,513 462,926 382,597 398,581 Earnings from operations before extraordinary loss on early extinguishment of debt (2) $ 42,307 42,127 (9,325) (9,284) Net earnings (loss) $ 42,307 42,127 (9,325) (9,618) Weighted average common shares outstanding Basic 21,953,199 21,964,452 21,975,889 21,844,020 Diluted 22,953,199 22,131,119 - - Earnings (loss) from operations before extraordinary loss on early extinguishment of debt per common share (1) (2) (3) $ 1.77 1.77 (0.57) (0.58) Earnings (loss) per common share Basic $ 1.77 1.77 (0.57) (0.60) Diluted $ 1.70 1.76 - -
(1) Net earnings (loss) per common share amounts were computed after giving effect to the dividends on AMERCO's Preferred Stock.
(2) During fiscal year 2000, AMERCO extinguished $100.0 million of 6.65% BATs originally due in fiscal year 2030 and $50.0 million of 7.05% to 7.10% Medium-Term Notes originally due in fiscal year 2007. This resulted in an extraordinary loss of $0.3 million, net of tax of $0.2 million ($0.02 per share).
(3) Reflects the redemption of $25 million shares of Series B preferred stock in fiscal year 2000.
(4) During fiscal year 2001, AMERCO extinguished $100.0 million of 6.89% BATs originally due in fiscal year 2011 and $25.0 million of 6.71% Medium-Term Notes originally due in fiscal year 2009. This resulted in an extraordinary loss of $2.1 million, net of tax of $1.2 million ($0.10 per share).
Stockholder Litigation AMERCO has deducted for income tax purposes approximately $372.0 million of the payments made to former shareholders in a stockholder lawsuit. While AMERCO believes that such income tax deductions are appropriate, there can be no assurance that such deductions ultimately will be allowed in full. Reference is made to Note 15 in Notes to Consolidated Financial Statements in Item 8 for a discussion of the stockholder litigation.
Other New pronouncements issued by the Financial Accounting Standards Board adopted during the year are not material to the consolidated financial statements of AMERCO. Further, pronouncements with future effective dates are either not applicable or not material to the consolidated financial statements of AMERCO.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk In the normal course of business, AMERCO is exposed to fluctuations in interest rates. AMERCO manages such exposure by the use of a variety of derivative financial instruments when deemed prudent. AMERCO does not enter into leveraged financial transactions or use derivative financial instruments for trading purposes. The exposure to market risk for changes in interest rates relates primarily to debt obligations. AMERCO's objective is to mitigate the impact of changes in interest rates on its variable rate debt. AMERCO uses interest rate swap agreements to provide for matching the gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of hedged asset or liability attributable to the hedged risk or the earnings effect of the hedged forecasted transaction. See Note 5 of Notes to Consolidated Financial Statements in Item 8. A fluctuation of the interest rate by 100 basis points would change AMERCO's interest expense by $1.0 million.
Foreign Currency Exchange Rate Risk AMERCO's earnings are affected by fluctuations in the value of foreign currency exchange rates. Approximately 2.0% of AMERCO's revenue is generated in Canada. The result of a uniform 10% change in the value of the U.S. dollar relative to the Canadian dollar would not be material. AMERCO does not typically hedge any foreign currency risk since the exposure is not considered material.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Report of Independent Accountants and Consolidated Financial Statements of AMERCO, including the notes to such statements and the related schedules, are set forth on pages 31 through 80 and are thereby incorporated herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
The Registrants have had no disagreements with their independent accountants in regard to accounting and financial disclosure matters and have not changed their independent accountants during the two most recent fiscal years.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS
Information regarding (i) directors and executive officers of AMERCO is set forth under the captions "Election of Directors" and "Executive Officers of the Company", and (ii) compliance with Section 16(a) is set forth under the caption "Section 16(a) Beneficial Ownership Reporting Compliance" in AMERCO's Proxy Statement relating to the 2001 Annual Meeting of Stockholders (the "2001 Proxy Statement") portions of which are incorporated by reference into this Form 10-K Report, which will be filed with the Securities and Exchange Commission in accordance with Rule 14a-6 promulgated under the Securities Exchange Act of 1934, as amended. With the exception of the foregoing information and other information specifically incorporated by reference into this report, the 2001 Proxy Statement is not being filed as a part hereof.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding executive compensation is set forth under the caption "Executive Compensation" in the 2001 Proxy Statement, which information is incorporated herein by reference; provided, however, that the "Board Report on Executive Compensation" and the "Performance Graph" contained in the 2001 Proxy Statement are not incorporated by reference herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding security ownership of certain beneficial owners and management is set forth under the caption "Security Ownership of Certain Beneficial Owners and Management" in the 2001 Proxy Statement, which information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions of management is set forth under the captions "Certain Relationships and Related Transactions" in the 2001 Proxy Statement, which information is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report: Page No. ------- 1. Financial Statements
Report of Independent Accountants 31 Consolidated Balance Sheets - March 31, 2001 and 2000 32 Consolidated Statements of Earnings - Years ended March 31, 2001, 2000 and 1999 34 Consolidated Statements of Changes in Stockholders' Equity - Years ended March 31, 2001, 2000 and 1999 36 Consolidated Statements of Comprehensive Income - Years ended March 31, 2001, 2000 and 1999 38 Consolidated Statements of Cash Flows - Years ended March 31, 2001, 2000 and 1999 39 Notes to Consolidated Financial Statements 41
2. Additional Information
Summary of Earnings of Independent Trailer Fleets 73 Notes to Summary of Earnings of Independent Trailer Fleets 74
3. Financial Statement Schedules required to be filed by Item 8 and Paragraph (d) of this Item 14
Condensed Financial Information of Registrant -- Schedule I 76 Supplemental Information (For Property-Casualty Insurance Underwriters) -- Schedule V 80
All other schedules are omitted as the required information is not applicable or the information is presented in the financial statements or related notes thereto.
(b) No reports on Form 8-K were filed during the last quarter of the period covered by this report.
(c) Exhibits
Exhibit No. Description ----------- -----------
2.1 Order Confirming Plan (1) 2.2 Second Amended and Restated Debtor's Plan of Reorganization Proposed by Edward J. Shoen (1) 3.1 Restated Articles of Incorporation (2) 3.2 Restated By-Laws of AMERCO as of August 27, 1996 (3) 4.1 Debt Securities Indenture dated May 1, 1996 (1) 4.2 First Supplemental Indenture, dated as of May 6, 1996 (4) 4.3 Rights Agreement, dated as of August 7, 1998 (13) 4.5 Second Supplemental Indenture, dated as of October 22, 1997 (11) 4.6 Calculation Agency Agreement (11) 4.7 6.65%-AMERCO Series 1997 A Bond Backed Asset Trust Certificates ("BATs") due October 15, 1999 (11) 4.8 Indenture dated September 10, 1996 (9) 4.9 First Supplemental Indenture dated September 10, 1996 (9) 4.10 Senior Indenture dated April 1, 1999 (14) 4.11 First Supplemental Indenture dated April 5, 1999 (14) 4.12 Second Supplemental Indenture dated February 4, 2000 (15) 10.1* AMERCO Employee Savings, Profit Sharing and Employee Stock Ownership Plan 10.1A* First Amendment to the AMERCO Employee Savings, Profit Sharing and Employee Stock Ownership Plan 10.2 U-Haul Dealership Contract (5) 10.3 Share Repurchase and Registration Rights Agreement with Paul F. Shoen (5) 10.4 AMERCO Stock Option and Incentive Plan (5) 10.5 ESOP Loan Credit Agreement (6) 10.6 ESOP Loan Agreement (6) 10.7 Trust Agreement for the AMERCO Employee Savings, Profit Sharing and Employee Stock Ownership Plan (6) 10.8 Amended Indemnification Agreement (6) 10.9 Indemnification Trust Agreement (6) 10.10 Promissory Note between SAC Holding Corporation and a subsidiary of AMERCO (12) 10.11 Promissory Notes between Four SAC Self-Storage Corporation and a subsidiary of AMERCO (12) 10.12 Management Agreement between Three SAC Self-Storage Corporation and a subsidiary of AMERCO (12) 10.13 Management Agreement between Four SAC Self-Storage Corporation and a subsidiary of AMERCO (12) 10.14 Agreement, dated October 17, 1995, among AMERCO, Edward J. Shoen, James P. Shoen, Aubrey K. Johnson, John M. Dodds and William E. Carty (8) 10.15 Directors' Release, dated October 17, 1995, executed by Edward J. Shoen, James P. Shoen, Aubrey K. Johnson, John M. Dodds and William E. Carty in favor of AMERCO (8) 10.16 AMERCO Release, dated October 17, 1995, executed by AMERCO in favor of Edward J. Shoen, James P. Shoen, Aubrey K. Johnson, John M. Dodds and William E. Carty (8) 10.21 Management Agreement between Five SAC Self-Storage Corporation and a subsidiary of AMERCO (16) 10.22 Management Agreement between Eight SAC Self-Storage Corporation and a subsidiary of AMERCO (16) 10.23 Management Agreement between Nine SAC Self-Storage Corporation and a subsidiary of AMERCO (16) 10.24 Management Agreement between Ten SAC Self-Storage Corporation and a subsidiary of AMERCO (16) 10.25 Management Agreement between Six-A SAC Self-Storage Corporation and a subsidiary of AMERCO (17) 10.26 Management Agreement between Six-B SAC Self-Storage Corporation and a subsidiary of AMERCO (17)
* Indicates compensatory plan arrangement
(c) Exhibits, continued
10.27 Management Agreement between Six-C SAC Self-Storage Corporation and a subsidiary of AMERCO (17) 10.28 Management Agreement between Eleven SAC Self-Storage Corporation and a subsidiary of AMERCO (17) 10.29 Management Agreement between Twelve SAC Self-Storage Corporation and a subsidiary of AMERCO (18) 10.30 Management Agreement between Thirteen SAC Self-Storage Corporation and a subsidiary of AMERCO (18) 10.31 Management Agreement between Fourteen SAC Self-Storage Corporation and a subsidiary of AMERCO (18) 10.32 Management Agreement between Fifteen SAC Self-Storage Corporation and a subsidiary of AMERCO (19) 10.33 Management Agreement between Sixteen SAC Self-Storage Corporation and a subsidiary of AMERCO (19) 10.34 Management Agreement between Seventeen SAC Self-Storage Corporation and a subsidiary of AMERCO 12 Statements Re: Computation of Ratios 21 Subsidiaries of AMERCO 23 Consent of Independent Accountants ________________
(1) Incorporated by reference to AMERCO's Registration Statement on Form S-3, Registration no. 333-1195. (2) Incorporated by reference to AMERCO's Quarterly Report on Form 10-Q for the quarter ended December 31, 1992, file no. 1-11255. (3) Incorporated by reference to AMERCO's Quarterly Report on Form 10-Q for the quarter ended September 30, 1996, file no. 1-11255. (4) Incorporated by reference to AMERCO's Current Report on Form 8-K, dated May 6, 1996, file no. 1-11255. (5) Incorporated by reference to AMERCO's Annual Report on Form 10-K for the year ended March 31, 1993, file no. 1-11255. (6) Incorporated by reference to AMERCO's Annual Report on Form 10-K for the year ended March 31, 1990, file no. 1-11255. (7) Incorporated by reference to AMERCO's Quarterly Report on Form 10-Q for the quarter ended September 30, 1994, file no. 1-11255. (8) Incorporated by reference to AMERCO's Quarterly Report on Form 10-Q for the quarter ended September 30, 1995, file no. 1-11255. (9) Incorporated by reference to AMERCO's Current Report on Form 8-K dated September 6, 1996, file no. 1-11255. (10) Incorporated by reference to AMERCO's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997, file no. 1-11255. (11) Incorporated by reference to AMERCO's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997, file no. 1-11255. (12) Incorporated by reference to AMERCO's Annual Report on Form 10-K for the year ended March 31, 1997, file no. 1-11255. (13) Incorporated by reference to AMERCO's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998, file no. 1-11255. (14) Incorporated by reference to AMERCO's Current Report on Form 8-K dated April 5, 1999, file no. 1-11255. (15) Incorporated by reference to AMERCO's Current Report on Form 8-K dated February 4, 2000, file no. 1-11255. (16) Incorporated by reference to AMERCO's Annual Report on Form 10-K for the year ended March 31, 1999, file no. 1-11255. (17) Incorporated by reference to AMERCO's Annual Report on Form 10-K for the year ended March 31, 2000, file no. 1-11255. (18) Incorporated by reference to AMERCO's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000, file no. 1-11255. (19) Incorporated by reference to AMERCO's Quarterly Report on Form 10-Q for the quarter ended December 31, 2000, file no. 1-11255.
REPORT OF INDEPENDENT ACCOUNTANTS ---------------------------------
To the Board of Directors and Stockholders of AMERCO
In our opinion, the consolidated financial statements listed in the index appearing under Item 14(a)(1) on page 28 of this Form 10-K present fairly, in all material respects, the financial position of AMERCO and its subsidiaries at March 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 2001, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedules listed in the index appearing under Item 14(a)(3) on page 28 present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These consolidated financial statements and financial statement schedules are the responsibility of the Company's management; our responsibility is to express an opinion on these consolidated financial statements and financial statement schedules based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 1 to the consolidated financial statements, the Company implemented Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" in fiscal 1999.
Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The Summary of Earnings of Independent Trailer Fleets included on pages 72 through 73 of this Form 10-K is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
PricewaterhouseCoopers LLP
Phoenix, Arizona June 29, 2001 AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Balance Sheets
March 31,
Assets 2001 2000 -------------------------- (in thousands)
Cash and cash equivalents $ 52,778 48,435 Trade receivables, net 252,890 197,992 Notes and mortgage receivables, net 65,531 49,866 Inventories, net 84,005 84,614 Prepaid expenses 14,416 17,822 Investments, fixed maturities 952,482 890,629 Investments, other 464,958 314,890 Deferred policy acquisition costs 99,807 88,402 Other assets 34,553 49,913 -------------------------
Property, plant and equipment, at cost: Land 197,281 197,956 Buildings and improvements 832,372 853,403 Furniture and equipment 282,362 263,694 Rental trailers and other rental equipment 181,159 210,472 Rental trucks 1,037,653 1,035,585 ------------------------- 2,530,827 2,561,110 Less accumulated depreciation 1,168,183 1,178,448 -------------------------
Total property, plant and equipment 1,362,644 1,382,662 -------------------------
Total Assets $ 3,384,064 3,125,225 =========================
The accompanying notes are an integral part of these consolidated financial statements.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Balance Sheets, continued
March 31,
Liabilities and Stockholders' Equity 2001 2000 ------------------------- (in thousands, except share and per share data) Liabilities: Accounts payable and accrued expenses $ 151,192 152,654 Notes and loans payable 1,156,848 1,137,840 Policy benefits and losses, claims and loss expenses payable 668,830 548,043 Liabilities from premium deposits 522,207 461,673 Cash overdraft 26,484 30,460 Other policyholders' funds and liabilities 79,172 70,207 Deferred income 24,546 29,641 Deferred income taxes 139,419 109,413 ------------------------- Total liabilities 2,768,698 2,539,931
Stockholders' equity: Serial preferred stock, with or without par value, 50,000,000 shares authorized - Series A preferred stock, with no par value, 6,100,000 shares authorized; 6,100,000 shares issued and outstanding as of March 31, 2001 and 2000 - - Series B preferred stock, with no par value, 100,000 shares authorized; none issued and outstanding as of March 31, 2001 and 2000 - - Serial common stock, with or without par value, 150,000,000 shares authorized - Series A common stock of $0.25 par value, 10,000,000 shares authorized; 5,762,495 shares issued as of March 31, 2001 and 2000 1,441 1,441 Common stock of $0.25 par value, 150,000,000 shares authorized; 36,487,505 issued as of March 31, 2001 and 2000 9,122 9,122 Additional paid-in capital 312,128 275,242 Accumulated other comprehensive income (40,709) (42,317) Retained earnings 755,174 755,172 Cost of common shares in treasury, net (20,321,363 and 19,840,613 shares as of March 31, 2001 and 2000, respectively) (406,617) (397,000) Unearned employee stock ownership plan shares (15,173) (16,366) ------------------------- Total stockholders' equity 615,366 585,294
Contingent liabilities and commitments _________________________
Total Liabilities and Stockholders' Equity $ 3,384,064 3,125,225 =========================
The accompanying notes are an integral part of these consolidated financial statements.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Earnings
Years ended March 31,
2001 2000 1999 ---------------------------------------- (in thousands)
Revenues Rental revenue $ 1,204,959 1,150,532 1,074,220 Net sales 194,320 188,816 181,273 Premiums 323,198 262,057 226,847 Net investment and interest income 91,161 82,212 73,372 ----------------------------------- Total revenues 1,813,638 1,683,617 1,555,712
Costs and expenses Operating expenses 998,794 919,093 877,566 Cost of sales 117,212 111,975 106,789 Benefits and losses 283,366 209,592 176,560 Amortization of deferred acquisition costs 35,946 34,987 31,721 Lease expense 178,458 136,044 118,742 Depreciation, net 88,091 87,647 73,066 ----------------------------------- Total costs and expenses 1,701,867 1,499,338 1,384,444
Earnings from operations 111,771 184,279 171,268
Interest expense 87,773 81,532 73,658 -----------------------------------
Pretax earnings 23,998 102,747 97,610
Income tax expense (8,912) (36,922) (35,101) ----------------------------------- Earnings from operations before extraordinary loss on early extinguishment of debt 15,086 65,825 62,509 Extraordinary loss on early extinguishment of debt, net (2,121) (334) - ----------------------------------- Net earnings $ 12,965 65,491 62,509 ===================================
The accompanying notes are an integral part of these consolidated financial statements.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Earnings, continued
Years ended March 31,
2001 2000 1999 ---------------------------------------- (in thousands, except share and per share data) Basic earnings per common share: Earnings from operations before extraordinary loss on early extinguishment of debt $ 0.10 2.39 2.07 Extraordinary loss on early extinguishment of debt, net (0.10) (0.02) - ---------------------------------- Net earnings $ 0.00 2.37 2.07 ==================================
Diluted earnings per common share: Earnings from operations before extraordinary loss on early extinguishment of debt $ 0.10 2.38 2.07 Extraordinary loss on early extinguishment of debt, net (0.10) (0.02) - ---------------------------------- Net earnings $ 0.00 2.36 2.07 ==================================
Weighted average common shares outstanding: Basic 21,486,370 21,934,390 21,937,686 ==================================== Diluted 21,486,370 22,226,057 23,940,623 ====================================
The accompanying notes are an integral part of these consolidated financial statements.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
Years ended March 31,
2001 2000 1999 --------------------------------------- (in thousands, except share and per share data)
Series A common stock of $0.25 par value: 10,000,000 shares authorized; 5,762,495 shares issued in 2001, 2000 and 1999 Beginning and end of year $ 1,441 1,441 1,441 ---------------------------------
Common stock of $0.25 par value: 150,000,000 shares authorized; 36,487,505 shares issued in 2001, 2000 and 1999 Beginning and end of year 9,122 9,122 9,122 ---------------------------------
Additional paid-in capital: Beginning of year 275,242 299,905 313,444 Repurchase of preferred stock - (25,000) (50,000) Gain on sale of property to related party, net 36,790 - 35,996 Issuance of common shares under leveraged employee stock ownership plan 96 337 465 --------------------------------- End of year 312,128 275,242 299,905 ---------------------------------
Accumulated other comprehensive income: Beginning of year (42,317) (17,740) (9,384) Foreign currency translation (7,252) (2,899) (6,736) Fair market value of cash flow hedge (1,185) 2,192 (3,631) Unrealized gain (loss) on investments 10,045 (23,870) 2,011 ---------------------------------
End of year (40,709) (42,317) (17,740) ---------------------------------
The accompanying notes are an integral part of these consolidated financial statements.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity, continued
Years ended March 31,
2001 2000 1999 --------------------------------------- (in thousands, except share and per share data) Retained earnings: Beginning of year 755,172 703,322 658,227 Net earnings 12,965 65,491 62,509 Preferred stock dividends paid: Series A ($2.13 per share for 2001, 2000 and 1999) (12,963) (12,964) (12,964) Series B ($27.14 and $97.44 per share for 2000 and 1999, respectively) - (677) (4,450) ---------------------------------
End of year 755,174 755,172 703,322 ---------------------------------
Less Treasury stock: Beginning of year 397,000 363,533 359,723 Net increase 9,617 33,467 3,810 ---------------------------------
End of year 406,617 397,000 363,533 ---------------------------------
Less Unearned employee stock ownership plan shares: Beginning of year 16,366 16,492 18,068 Purchase of shares 46 1,002 401 Repayments from loan (1,239) (1,128) (1,977) ---------------------------------
End of year 15,173 16,366 16,492 ---------------------------------
Total stockholders' equity $ 615,366 585,294 616,025 =================================
The accompanying notes are an integral part of these consolidated financial statements.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Comprehensive Income
Years ended March 31,
2001 2000 1999 -------------------------- (in thousands) Comprehensive income: Net earnings $ 12,965 65,491 62,509 Other comprehensive income Foreign currency translation (7,252) (2,899) (6,736) Fair market value of cash flow hedges (1,185) 2,192 (3,631) Unrealized gain (loss) on investments 10,045 (23,870) 2,011 --------------------------
Total comprehensive income $ 14,573 40,914 54,153 ==========================
The accompanying notes are an integral part of these consolidated financial statements.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended March 31,
2001 2000 1999 ---------------------------- (in thousands) Cash flows from operating activities: Net earnings $ 12,965 65,491 62,509 Depreciation and amortization 144,185 135,481 114,102 Provision for losses on accounts receivable 3,286 4,601 4,648 Net gain on sale of real and personal property (16,776) (8,705) (524) Gain on sale of investments 12,931 (873) (3,372) Changes in policy liabilities and accruals 54,921 15,326 (23,448) Additions to deferred policy acquisition costs (42,535) (31,804) (40,859) Net change in other operating assets and liabilities (42,924) 58,140 46,493 --------------------------- Net cash provided by operating activities 126,053 237,657 159,549
Cash flows from investing activities: Purchases of investments: Property, plant and equipment (358,917) (417,647) (298,495) Fixed maturities (122,863) (158,304) (213,107) Common stock (31,773) - (2,553) Preferred stock - (369) (21,700) Other asset investment (5,915) - - Real estate (5,938) (70) (334) Mortgage loans (24,084) (27,367) (93,243) Proceeds from sales of investments: Property, plant and equipment 157,091 242,699 105,526 Fixed maturities 152,761 133,915 223,114 Common stock - - 2,571 Preferred stock 372 968 3,538 Real estate 1,557 1,672 5,622 Mortgage loans 22,463 11,555 21,826 Changes in other investments 88,506 31,269 62,453 --------------------------- Net cash used by investing activities (126,740) (181,679) (204,782)
The accompanying notes are an integral part of these consolidated financial statements.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Cash Flows, continued
Years ended March 31,
2001 2000 1999 ---------------------------- (in thousands) Cash flows from financing activities: Net change in short-term borrowings 156,070 (146,836) 135,836 Proceeds from notes - 350,000 - Debt issuance costs (1,228) (8,285) (415) Leveraged Employee Stock Ownership Plan: Purchase of shares (46) (1,002) (401) Repayments from loan 1,239 1,128 1,977 Principal payments on notes (137,062) (180,072) (46,411) Repurchase of preferred stock - (25,000) (50,000) Extraordinary loss on early extinguishment of debt, net (2,121) (334) - Net change in cash overdraft (3,976) 2,291 6,755 Preferred stock dividends paid (12,963) (13,641) (17,414) Treasury stock acquisitions, net (9,617) (33,467) (3,810) Investment contract deposits 87,687 63,978 93,688 Investment contract withdrawals (72,953) (60,808) (61,673) ----------------------------
Net cash provided (used) by financing activities 5,030 (52,048) 58,132 ----------------------------
Increase (decrease) in cash and cash equivalents 4,343 3,930 12,899 Cash and cash equivalents at beginning of year 48,435 44,505 31,606 ---------------------------- Cash and cash equivalents at end of year $ 52,778 48,435 44,505 ============================
Summary of Non-cash investing and financing activity: An investment was received in exchange for the sale of storage properties from a related party. $ 98,530 - $ 99,685
The accompanying notes are an integral part of these consolidated financial statements.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AMERCO, a Nevada corporation (AMERCO), is the holding company for U-Haul International, Inc. (U-Haul), Amerco Real Estate Company (Real Estate), Republic Western Insurance Company (RepWest) and Oxford Life Insurance Company (Oxford). All references to a fiscal year refer to AMERCO's fiscal year ended March 31 of that year.
PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the parent corporation, AMERCO, and its wholly-owned subsidiaries. All material intercompany accounts and transactions of AMERCO and its subsidiaries have been eliminated.
RepWest and Oxford have been consolidated on the basis of calendar years ended December 31. Accordingly, all references to the years 2000, 1999, and 1998 and correspond to AMERCO's fiscal years 2001, 2000, and 1999, respectively.
The operating results and financial position of AMERCO's consolidated insurance operations are determined as of December 31 of each year. There were no effects related to intervening events between January 1 and March 31 of 2001, 2000, or 1999 that would materially affect the consolidated financial position or results of operations for the financial statements presented herein. See Note 20 of Notes to Consolidated Financial Statements for additional information regarding the insurance subsidiaries.
DESCRIPTION OF BUSINESS Moving and self-storage operations consist of the rental of trucks and trailers, sale of moving supplies, trailer hitches and propane and the rental of self-storage spaces to the do-it-yourself mover. Operations are under the registered tradename U-Haul REGISTERED TRADEMARK throughout the United States and Canada.
Real Estate owns approximately 90% of AMERCO's real estate assets, including U-Haul's Center and Storage locations. The remainder of the properties are owned by various U-Haul entities. Real Estate is responsible for managing all of the properties including the environmental risks of the properties. Real Estate is responsible for the purchase of all properties used by AMERCO or any of its subsidiaries. Real Estate also handles all of the dispositions (sale and lease) of unused real estate.
RepWest originates and reinsures property and casualty type insurance products for various market participants, including independent third parties, U-Haul's customers, independent dealers and AMERCO.
Oxford originates and reinsures annuities, credit life and disability, life insurance, and supplemental health products. Oxford also administers the self-insured employee health and dental plans for AMERCO.
FOREIGN CURRENCY The consolidated financial statements include the accounts of U-Haul Co. (Canada) Ltd., a subsidiary of U-Haul. The assets and liabilities, denominated in foreign currency, are translated into U.S. dollars at the exchange rate as of the balance sheet date. Revenue and expense amounts are translated at average monthly exchange rates. The related translation gains or losses are included in the Consolidated Statements of Changes in Stockholders' Equity and Consolidated Statements of Comprehensive Income.
ACCOUNTING ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results could differ from those estimates.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
CASH AND CASH EQUIVALENTS AMERCO considers liquid investments with an original maturity of three months or less to be cash equivalents (zero as of March 31, 2001 and 2000, respectively).
RECEIVABLES Accounts receivable include trade accounts from customers and dealers. RepWest and Oxford receivables include premiums and agents' balances due, net of commissions payable and amounts due from ceding reinsurers. Accounts receivable are reduced by amounts considered by management to be uncollectible based on historical collection loss experience and a review of the current status of existing receivables.
Notes and mortgage receivables include accrued interest and are reduced by discounts and amounts considered by management to be uncollectible.
INVENTORIES Inventories are valued at the lower of cost or market. Cost is primarily determined using the LIFO (last-in, first-out) method.
INVESTMENTS Fixed maturities consist of bonds and redeemable preferred stocks. Fair values for investments are based on quoted market prices, dealer quotes or discounted cash flows. Fixed maturities are classified as follows:
Held-to-maturity - recorded at cost adjusted for the amortization of premiums or accretion of discounts. Available-for-sale - recorded at fair value with unrealized gains or losses reported on a net basis in the Consolidated Statements of Changes in Stockholders' Equity unless such changes are deemed to be other than temporary. Gains and losses on the sale of these securities are reported as a component of revenues using the specific identification method. Trading portfolio - AMERCO does not currently maintain a trading portfolio. Mortgage loans & notes on real estate held by AMERCO's subsidiaries - at unpaid balances, net of allowance for possible losses and any unamortized premium or discount. Real estate - at cost less accumulated depreciation. Policy loans - at their unpaid balance.
Investment income is recognized as follows: Interest on bonds and mortgage loans & notes - recognized when earned. Dividends on common and redeemable preferred stocks - recognized on ex-dividend dates. Realized gains and losses on the sale of investments - recognized at the trade date and included in revenues using the specific identification method.
Short-term investments consist of other securities scheduled to mature within one year of their acquisition date. See Note 4 of Notes to Consolidated Financial Statements.
DEFERRED POLICY ACQUISITION COSTS Commissions and other costs which vary with and are primarily related to the production of new business, have been deferred.
Oxford - costs are amortized in relation to revenue such that profits are realized as a level percentage of revenue.
RepWest - costs are amortized over the related contract period which generally do not exceed one year.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are carried at cost and are depreciated on the straight-line and accelerated methods over the estimated useful lives of the assets. Building and non-rental equipment have estimated lives ranging from three to fifty-five years, while rental equipment have estimated lives ranging from one to twenty years. Maintenance is charged to operating expenses as incurred, while renewals and betterments are capitalized. Major overhaul costs are amortized over the estimated period benefited. Gains and losses on dispositions are netted against depreciation expense when realized. Interest costs incurred as part of the initial construction of assets are capitalized. Interest expense of $2,450,000, $1,359,000 and $909,000 was capitalized during fiscal years 2001, 2000 and 1999, respectively. During fiscal year 2001, based on an in-depth market analysis, U-Haul decreased the estimated salvage value and increased the useful lives of certain service vehicles, rental trucks and engines. The effect of the change increased net earnings for fiscal year 2001 by $1,490,000 ($0.07 per share). The adjustment reflects management's best estimate, based on information available, of the estimated salvage value and useful lives of these service vehicles, rental trucks and engines.
AMERCO reviews property, plant and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable through expected undiscounted future operating cash flows.
The carrying value of AMERCO's real estate that is no longer necessary for use in its current operations, and available for sale/lease, at March 31, 2001 and 2000, was approximately $27,691,000 and $27,732,000, respectively. Such properties available for sale are carried at cost, less accumulated depreciation, which is less than fair market value.
ENVIRONMENTAL COSTS Liabilities for future remediation costs are recorded when environmental assessments and remedial efforts, if applicable, are probable and the costs can be reasonably estimated. The liability is based on AMERCO's best estimate of undiscounted future costs. Certain recoverable environmental costs related to the removal of underground storage tanks or related contamination are capitalized and depreciated over the estimated useful lives of the properties. The capitalized costs improve the safety or efficiency of the property as compared to when the property was originally acquired or are incurred in preparing the property for sale.
FINANCIAL INSTRUMENTS AMERCO enters into interest rate swap agreements to reduce its floating interest rate exposure and does not use the agreements for trading purposes. Although AMERCO is exposed to credit loss for the interest rate differential in the event of nonperformance by the counterparties to the agreements, it does not anticipate nonperformance by the counterparties.
For the years ended March 31, 2001, 2000 and 1999, AMERCO recognized $16,000 and $27,000 as interest income and $89,000 as interest expense, respectively, representing the ineffectiveness of the cash flow hedging activity.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
AMERCO has mortgage receivables which potentially expose AMERCO to credit risk. The portfolio of notes is principally collateralized by mini-warehouse storage facilities and other residential and commercial properties. AMERCO has not experienced losses related to the notes from individual notes or groups of notes in any particular industry or geographic area. The estimated fair values were determined using the discounted cash flow method, using interest rates currently offered for similar loans to borrowers with similar credit ratings.
Fair value summary of note and mortgage receivables:
March 31, 2001 March 31, 2000 ---------------------- ---------------------- Carrying Estimated Carrying Estimated value fair value value fair value ---------------------- ---------------------- (in thousands) (in thousands) $ 15,214 18,484 $ 21,230 27,268 ======================= ======================
Other financial instruments that are subject to fair value disclosure requirements are carried in the financial statements at amounts that approximate fair value, unless elsewhere disclosed. See below, as well as Notes 4 and 5 of Notes to Consolidated Financial Statements.
AMERCO's financial instruments that are exposed to concentrations of credit risk consist primarily of temporary cash investments, trade receivables and notes receivable. AMERCO places its temporary cash investments with financial institutions and limits the amount of credit exposure to any one financial institution. Concentrations of credit risk with respect to trade receivables are limited due to the large number of customers and their dispersion across many different industries and geographic areas. As discussed in Note 2 of Notes to Consolidated Financial Statements, at March 31, 2001 and 2000, notes receivable are primarily due from one related party.
POLICY BENEFITS AND LOSSES, CLAIMS AND LOSS EXPENSES PAYABLE Liabilities for policy benefits payable on traditional life and certain annuity policies are established in amounts adequate to meet estimated future obligations on policies in force. These liabilities are computed using mortality and withdrawal assumptions which are based upon recognized actuarial tables and contain margins for adverse deviation. At December 31, 2000, interest assumptions used to compute policy benefits payable range from 2.5% to 9.25%.
The liability for annuity contracts, which are accounted for as investment contract deposits, consists of contract account balances that accrue to the benefit of the policyholders, excluding surrender charges. Carrying value of investment contract deposits were $522,207,000 and $461,673,000 at December 31, 2000 and 1999, respectively.
Liabilities for health and disability and other policy claims and benefits payable represent estimates of payments to be made on insurance claims for reported losses and estimates of losses incurred but not yet reported. These estimates are based on past claims experience and consider current claim trends as well as social and economic conditions.
RepWest's liability for reported and unreported losses are based on RepWest's historical and industry averages. The liability for unpaid loss adjustment expenses is based on historical ratios of loss adjustment expenses paid to losses paid. Amounts recoverable from reinsurers on unpaid losses are estimated in a manner consistent with the claim liability associated with the reinsured policy. Adjustments to the liability for unpaid losses and loss expenses as well as amounts recoverable from reinsurers on unpaid losses are charged or credited to expense in periods in which they are made.
RENTAL REVENUE U-Haul recognizes its share of rental revenue less commission on the accrual basis pursuant to contractual arrangements between AMERCO and its fleet owners, rental dealers and customers. See Note 10 of Notes to Consolidated Financial Statements for further discussion.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
PREMIUM REVENUE Credit life and disability, Medicare supplement and property-casualty gross premiums are earned on a pro rata basis over the term of the related contracts. The portion of premiums not earned at the end of the period is recorded as unearned premiums. Traditional life and annuity premiums are recognized as revenue when due from policyholders. Revenue for annuity contracts which are accounted for as investment contracts are included in net investment income as investment margins until the contractholder annuitizes, at which time the contractholder's fund balance is recognized as premium.
REINSURANCE Reinsurance premiums, commissions and expense reimbursements, related to ceded business, are accounted for on a basis consistent with those used in accounting for the original policies issued and the terms of the reinsurance contracts. Premiums ceded to other companies have been reported as a reduction of premium income. Assets and liabilities relating to ceded contracts are reported gross of the effects of reinsurance. See also "Policy Benefits and Losses, Claims and Loss Expenses Payable" above.
INCOME TAXES AMERCO files a consolidated federal income tax return with its subsidiaries. In addition to charging income for taxes paid or payable, the provision for income taxes reflects deferred income taxes resulting from changes in temporary differences between the tax bases of assets and liabilities and their reported amounts in the financial statements. The effect on deferred income taxes of a change in tax rates is recognized in income in the period that includes the enactment date.
ADVERTISING COSTS AMERCO expenses advertising costs as incurred. Advertising expense of $36,212,000, $34,772,000 and $33,567,000 was charged to operations for fiscal years 2001, 2000 and 1999, respectively.
NEW ACCOUNTING STANDARDS New pronouncements issued by the Financial Accounting Standards Board adopted during the year are not material to the consolidated financial statements of AMERCO. Further, pronouncements with future effective dates are either not applicable or not material to the consolidated financial statements of AMERCO.
EARNINGS PER SHARE Basic earnings per common share are computed based on the weighted average number of shares outstanding for the year and quarterly periods, excluding shares of the employee stock ownership plan that have not been committed to be released. Preferred dividends include undeclared or unpaid dividends of AMERCO. Net income is reduced for preferred dividends for the purpose of the calculation. The calculation of diluted earnings per share in fiscal years 2000 and 1999 included assumed conversions of the Series B preferred stock into common stock. In fiscal year 2001, the assumed conversions are not applicable. In fiscal year 2000, the assumed conversions had a dilutive effect; in fiscal year 1999 the assumed conversions had no material effect on the calculated earnings per share amount. See Notes 6 and 8 of Notes to Consolidated Financial Statements for further discussion.
FOURTH QUARTER RESULTS For the quarter ended March 31, 2001, the Company recorded a net loss of $46,650,000, compared to a net loss of $9,618,000 for the quarter ended March 31, 2000. The increased loss in 2001 was primarily due to a $19,300,000 decline in the insurance segment due to unprofitable lines of business, a $6,500,000 write-down of investments and a $10,300,000 loss from the supplement of litigation. The remaining loss was due to weather problems and other operating expenses impacting the moving and storage segment. In addition, third quarter 2001 financial information has been restated by the Company to increase net loss $0.10 per share, respectively, due to necessary revisions related to certain fixed asset transactions. The restated loss per share was $1.05 for the third quarter fiscal year 2001 as compared to $0.95 as reported. AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
COMPREHENSIVE INCOME Comprehensive income consists of net income, foreign currency translation adjustment, unrealized gains and losses on investments and fair market value of cash flow hedges.
FINANCIAL STATEMENT PRESENTATION Certain reclassifications have been made to the financial statements for the fiscal years ended 2000 and 1999 to conform with the current year's presentation.
2. RECEIVABLES, NET
A summary of trade receivables follows: March 31, ------------------- 2001 2000 ------------------- (in thousands)
Trade accounts receivable $ 21,201 17,296 Premiums and agents' balances in course of collection 87,641 73,536 Reinsurance recoverable 109,596 80,180 Accrued investment income 16,541 14,304 Independent dealer receivable 2,344 2,551 Other receivables 17,698 12,085 ------------------- 255,021 199,952 Less allowance for doubtful accounts 2,131 1,960 -------------------
$ 252,890 197,992 ===================
A summary of notes and mortgage receivables follows: March 31, ------------------ 2001 2000 ------------------ (in thousands) Notes receivable, including accrued interest from SAC Holding Corporation and its subsidiaries $ 5,115 4,120 Notes and mortgage receivables, net of discount 60,486 45,816 ------------------ 65,601 49,936 Less allowance for doubtful accounts 70 70 ------------------
$ 65,531 49,866 ==================
During fiscal year 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 $27,592,000, $20,111,000, and $8,022,000 from SAC Holdings during fiscal years 2001, 2000, and 1999, respectively. Principal payments of $97,953,000, $105,689,000, and zero were received during fiscal years 2001, 2000, and 1999, respectively. The note receivable balance outstanding was, in the aggregate, $251,021,000 and $154,528,000 at March 31, 2001 and 2000, respectively, bearing interest rates ranging from 8.37% to 13.0%. The principal balance is due in full at maturity and interest is payable quarterly. The terms of the notes receivable 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 fiscal years 2001, 2000 and 1999, a subsidiary of AMERCO funded through notes receivable the purchase of properties and construction costs for SAC Holdings of $187,595,000, $44,934,000 and $26,116,000, respectively.
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 of consolidated statements of changes in stockholders equity. AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
2. RECEIVABLES, NET, continued
In December 1998, U-Haul and Real Estate completed the sale of twenty-six storage properties to Six SAC Self-Storage Corporation, a subsidiary of SAC Holdings, for $99,685,000. Real Estate received cash and notes from the sale. The gain is reflected of consolidated statements of changes in stockholders' equity.
U-Haul currently manages the properties owned by SAC Holdings under a management agreement, whereby U-Haul receives a management fee equal to 6% of the gross receipts from the properties. Management fees of $6,243,000, $4,482,000 and $2,483,000 were received during fiscal years 2001, 2000 and 1999, respectively. The 6% fee is consistent with the fees received by U-Haul for other properties owned by unrelated parties and managed by U-Haul.
Management believes that the foregoing transactions were consummated on terms equivalent to those that prevail in arm's-length transactions.
3. INVENTORIES, NET
A summary of inventory components follows:
March 31, ------------------- 2001 2000 ------------------- (in thousands) Truck and trailer parts and accessories $ 60,492 61,292 Hitches and towing components 14,393 14,112 Moving supplies and promotional items 9,120 9,210 -------------------
$ 84,005 84,614 ===================
Inventories are stated net of reserve for obsolescence of $3,321,000 at March 31, 2001 and 2000, respectively. Certain general and administrative expenses are allocated to ending inventories. Such costs remaining in inventory are estimated at $12,077,000 and $12,084,000 at March 31, 2001 and 2000, respectively. For fiscal years 2001, 2000 and 1999, aggregate general and administrative costs were $498,661,000, $461,722,000 and $562,745,000, respectively.
LIFO inventories, which represent approximately 96% of total inventories at March 31, 2001 and 2000, would have been $4,957,000 greater at March 31, 2001 and 2000, if the consolidated group had used the FIFO (first-in, first-out) method.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
4. INVESTMENTS
A comparison of amortized cost to estimated market value for fixed maturities is as follows:
December 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 $ 4,150 3,627 144 (2) 3,769 U.S. government agency mortgage- backed securities $ 14,246 14,178 174 (130) 14,222 Corporate securities $ 55,908 53,422 739 (333) 53,828 Mortgage-backed securities $ 40,687 40,093 650 (191) 40,552 Redeemable preferred stocks 115,251 115,174 46 (9,736) 105,484 ----------------------------------------
226,494 1,753 (10,392) 217,855 ----------------------------------------
December 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 $ 42,860 43,522 1,494 (141) 44,875 U.S. government agency mortgage- backed securities $ 33,891 33,644 557 (87) 34,114 Obligations of states and political subdivisions $ 16,505 16,678 448 (142) 16,984 Corporate securities $ 568,394 562,187 10,714 (15,127) 557,774 Mortgage-backed securities $ 33,608 33,378 761 (402) 33,737 Redeemable preferred stocks 1,308 32,969 141 (1,860) 31,250 Redeemable common stocks 633 8,166 - (912) 7,254 ---------------------------------------- 730,544 14,115 (18,671) 725,988 ----------------------------------------
Total $ 957,038 15,868 (29,063) 943,843 ========================================
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
4. INVESTMENTS, continued
December 31, 1999 - ----------------- 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 $ 4,165 3,577 71 (84) 3,564 U.S. government agency mortgage- backed securities $ 18,538 18,448 51 (398) 18,101 Corporate securities $ 80,295 80,597 5,312 (2,050) 83,859 Mortgage-backed securities $ 35,960 48,386 314 (844) 47,856 Redeemable preferred stocks 4,561 116,374 41 (19,344) 97,071 ----------------------------------------
267,382 5,789 (22,720) 250,451 ----------------------------------------
December 31, 1999 - ----------------- 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 $ 40,860 40,392 912 (1,240) 40,064 U.S. government agency mortgage- backed securities $ 36,998 39,167 342 (382) 39,127 Obligations of states and political subdivisions $ 19,320 19,585 856 (1,342) 19,099 Corporate securities $ 468,131 460,416 2,717 (17,791) 445,342 Mortgage-backed securities $ 36,834 46,923 259 (562) 46,620 Redeemable preferred stocks 1,311 32,675 49 (5,534) 27,190 Redeemable common stocks 601 6,233 - (428) 5,805 ---------------------------------------- 645,391 5,135 (27,279) 623,247 ----------------------------------------
Total $ 912,773 10,924 (49,999) 873,698 ========================================
Fixed maturities estimated market values are based on publicly quoted market prices at the close of trading on December 31, 2000 or December 31, 1999, as appropriate.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
4. INVESTMENTS, continued
The amortized cost and estimated market value of debt securities by contractual maturity are shown below. Expected maturities will differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Consolidated December 31, 2000 December 31, 1999 - ------------ --------------------- --------------------- Held-to-Maturity Amortized Estimated Amortized Estimated cost market value cost market value --------------------- --------------------- (in thousands) (in thousands)
Due in one year or less $ 4,786 4,810 18,865 18,950 Due after one year through five years 46,496 46,513 58,066 61,486 Due after five years through ten years 248 304 7,038 6,727 After ten years 5,519 5,970 205 240 --------------------- -------------------- 57,049 57,597 84,174 87,403
Mortgage-backed securities 54,271 54,774 66,834 65,957 Redeemable preferred stock 115,174 105,484 116,374 97,091 --------------------- --------------------
226,494 217,855 267,382 250,451 --------------------- --------------------
Consolidated December 31, 2000 December 31, 1999 - ------------ --------------------- --------------------- Available-for-Sale Amortized Estimated Amortized Estimated cost market value cost market value --------------------- --------------------- (in thousands) (in thousands)
Due in one year or less 34,801 34,813 42,129 40,768 Due after one year through five years 313,162 310,656 203,830 201,372 Due after five years through ten years 197,027 198,592 188,419 180,888 After ten years 77,397 75,572 86,015 81,477 --------------------- --------------------- 622,387 619,633 520,393 504,505
Mortgage-backed securities 67,022 67,851 86,090 85,747 Redeemable preferred stock 32,969 31,250 32,675 27,190 Redeemable common stock 8,166 7,254 6,233 5,805 --------------------- ---------------------
730,544 725,988 645,391 623,247 --------------------- ---------------------
Total $ 957,038 943,843 912,773 873,698 ===================== =====================
Proceeds from sales of investments in debt securities for the years ended December 31, 2000, 1999 and 1998 were $52,814,000, $29,889,000 and $53,948,000, respectively. Gross gains of $733,000, $912,000 and $1,472,000 and gross losses of $646,000, $315,000 and $164,000 were realized on those sales for the years ended December 31, 2000, 1999 and 1998, respectively. During fiscal 2001, the Company realized a write-down of investments due to other than temporary declines approximating $6,500,000.
At December 31, 2000 and 1999 fixed maturities include bonds with an amortized cost of $18,283,000 and $15,696,000, respectively, on deposit with insurance regulatory authorities to meet statutory requirements.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
4. INVESTMENTS, continued
Investments, other consists of the following: March 31, ---------------------- 2001 2000 ---------------------- (in thousands) Short-term investments $ 58,923 35,347 Mortgage loans 102,571 73,716 Equity investment 36,466 24,613 Real estate, foreclosed properties 1,023 554 Policy loans 6,763 6,594 Investments in SAC 251,021 154,528 Other 8,191 19,538 ---------------------- $ 464,958 314,890 ======================
A summary of net investment and interest income follows: Year ended March 31, ----------------------------- 2001 2000 1999 ----------------------------- (in thousands)
Fixed maturities $ 61,003 66,993 68,745 Real estate 12 58 15 Policy loans 250 285 354 Mortgage loans 7,262 5,447 6,279 Short-term, amounts held by ceding reinsurers, net and other investments 7,364 7,140 5,966 ----------------------------- Investment income 75,891 79,923 81,359
Less investment expenses 22,712 23,964 23,734 -----------------------------
Net investment income 53,180 55,959 57,625 Interest income 37,981 26,253 15,747 -----------------------------
Net investment and interest income $ 91,161 82,212 73,372 =============================
Short-term investments consist primarily of fixed maturities of three months to one year from acquisition date. Mortgage loans, representing first lien mortgages held by the insurance subsidiaries, are carried at unpaid balances, less allowance for possible losses and any unamortized premium or discount. Equity investments and real estate obtained through foreclosures and held for sale are carried at the lower of cost or fair value. U.S. government securities mutual fund is carried at cost which approximates market value. Policy loans are carried at their unpaid balance.
At December 31, 2000 and 1999, mortgage loans held as investments with a carrying value of $102,571,000 and $73,716,000, respectively, were outstanding. The estimated fair value of the mortgage loans at December 31, 2000 and 1999 aggregated $94,669,000 and $74,559,000, respectively. The estimated fair values were determined using the discounted cash flow method, using interest rates currently offered for similar loans to borrowers with similar credit ratings. Investments in mortgage loans, included as a component of investments, are reported net of allowance for possible losses of $402,000 and $225,000 in 2000 and 1999, respectively.
In February 1997, AMERCO, through its insurance subsidiaries, invested in the equity of a limited partnership in a Texas-based self-storage corporation. RepWest invested $13,500,000 and has a 38% limited partnership interest and Oxford invested $11,000,000 and has a 27% limited partnership interest. U-Haul is a 50% owner of a corporation which is a general partner in the Texas-based self-storage corporation. AMERCO has a $10,000,000 note receivable from PMSI Investors L.L.C., a 30% limited partner in the corporation. During 1997, the corporation secured a line of credit in the amount of $225,000,000 with a financing institution. Under the terms of this credit facility, AMERCO entered into a support party agreement with the corporation whereby upon default or noncompliance with debt covenants by the corporation, AMERCO assumes responsibility in fulfilling all obligations related to this credit facility.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
5. NOTES AND LOANS PAYABLE
Notes and loans payable consist of the following:
March 31, -------------------- 2001 2000 -------------------- (in thousands)
Short-term borrowings, 5.96% interest rate $ 15,000 16,500 Notes payable to banks under commercial paper agreements, unsecured, 5.00% to 6.20% interest rates 119,570 - Notes payable to banks under revolving lines of credit, unsecured, 5.31% to 5.56% interest rates 185,000 159,000 Medium-term notes payable, unsecured, 7.23% to 8.08% interest rates, due through 2027 212,000 237,000 Notes payable under Bond Backed Asset Trust, unsecured, 7.14% interest rates, due through 2032 100,000 200,000 Notes payable to public, unsecured, 7.85% interest rate, due through 2003 175,000 175,000 Senior Note, unsecured, 7.20% interest rate, due through 2002 150,000 150,000 Senior Note, unsecured, 8.80% interest rate, due through 2005 200,000 200,000 Other notes payable, secured and unsecured, 7.00% to 11.25% interest rate, due through 2005 278 340 -------------------- $ 1,156,848 1,137,840 ====================
Other notes payable are secured by land and buildings at various locations with a net carrying value of $6,473,962 and $6,504,302 at March 31, 2001 and 2000, respectively.
AMERCO has a revolving credit loan (long-term) available from participating banks under an agreement which provides for a credit line of $400,000,000 through June 30, 2002. Depending on the form of borrowing elected, interest will be based on the London Interbank Offering Rate (LIBOR), prime rate, the federal funds effective rate, or rates determined by a competitive bid. LIBOR loans include a spread based upon the senior debt rates of AMERCO. Facility fees paid are based upon the amount of credit line.
At March 31, 2001, AMERCO had borrowed $305,100,000, representing short-term borrowings, from its total committed lines of credit of $94,900,000.
As of March 31, 2001, loans outstanding under the revolving credit line totaled $185,000,000. Management intends to refinance the borrowings on a long- term basis by either replacing them with long-term obligations, renewing or extending them.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
5. NOTES AND LOANS PAYABLE, continued
AMERCO has entered into interest rate swap agreements (SWAPS) to potentially mitigate the impact of changes in interest rates on its floating rate debt. These agreements effectively change AMERCO's interest rate exposure on $45,000,000 of floating rate notes to a weighted average fixed rate of 8.45%. The SWAPS mature at the time the related notes mature. Incremental interest expense associated with SWAP activity was $1,027,000, $1,935,000 and $2,593,000 during 2001, 2000 and 1999, respectively.
At March 31, 2001, interest rate swap agreements with an aggregate notional amount of $45,000,000 were outstanding. Management estimates that at March 31, 2001 and 2000, AMERCO would be required to pay $3,696,000 and $1,888,000, respectively, to terminate the agreements. Such amounts were determined from current treasury rates combined with SWAP spreads on agreements outstanding.
During April 1999, AMERCO issued $150,000,000 of 7.20% Senior Notes due 2002. During February 2000, AMERCO issued $200,000,000 of 8.80% Senior Notes due 2005.
During fiscal year 2001, AMERCO extinguished $100,000,000 of BATs with interest of 6.89% originally due in fiscal year 2011, and $25,000,000 of 6.71% Medium-Term notes originally due in fiscal year 2009. This resulted in an extraordinary loss of $2,121,000, net of tax of $1,160,000 ($0.10 per share).
During fiscal year 2000, AMERCO extinguished $100,000,000 of BATs with interest of 6.65% originally due in fiscal year 2030, and $50,000,000 of 7.05% to 7.10% Medium-Term notes originally due in fiscal year 2007. This resulted in an extraordinary loss of $334,000, net of tax of $213,000 ($0.02 per share).
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 March 31, 2001, AMERCO was in compliance with these covenants.
The annual maturities of long-term debt for the next five years adjusted for subsequent activity (if the revolving credit lines are outstanding to maturity), are presented in the table below:
Year Ended ------------------------------------------------ 2002 2003 2004 2005 2006 ------------------------------------------------ (in thousands) Mortgages $ 21 30 32 24 26 Medium-Term and Other Notes 77,512 150,014 175,015 205,001 55,000 Revolving Credit - 185,000 - - - ------------------------------------------------ $ 77,533 335,044 175,047 205,025 55,026 ================================================
Interest paid in cash amounted to $92,622,000, $77,529,000 and $74,026,000 for fiscal years 2001, 2000 and 1999, respectively.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
6. STOCKHOLDERS' EQUITY
AMERCO has authorized capital stock consisting of 150,000,000 shares of common stock, 150,000,000 shares of Serial common stock and 50,000,000 shares of Serial preferred stock. The Board of Directors (the Board) may authorize the Serial common stock to be issued in such series and on such terms as the Board shall determine. Serial preferred stock issuance may be with or without par value.
AMERCO has issued 6,100,000 shares of 8.5% cumulative, no par, non-voting Series A preferred stock (Series A). The Series A is not convertible into, or exchangeable for, shares of any other class or classes of stock of AMERCO. Dividends are payable quarterly in arrears and have priority as to dividends over AMERCO's common stock. On or after December 1, 2000, AMERCO, at its option, may redeem all or part of the Series A, for cash at $25.00 per share plus accrued and unpaid dividends to the redemption date.
AMERCO placed funds of $48,234,000 into an escrow account pending the outcome of a dispute involving the entitlement of the plaintiffs to post- petition interest. The escrow account was transferred to the plaintiffs on February 2, 2000, after it was determined that the plaintiffs were entitled to such interest. The transfer was recorded net of tax of $18,570,000, and reflected as a component of stockholders' equity.
The plaintiffs included the father, brothers and sisters of Mark V. and Paul F. Shoen who are major stockholders of AMERCO, and Edward J. and James P. Shoen who are major stockholders and directors of AMERCO.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
7. ACCUMULATED OTHER COMPREHENSIVE INCOME
8. EARNINGS PER SHARE
The following table reflects the calculation of earnings per share:
Income Shares Per Share (Numerator) (Denominator) Amount ------------------------------------ (in thousands, except share and per share data) Year ended March 31, 2001 Earnings from operations before extraordinary loss on early extinguishment of debt $ 15,086 Less: preferred stock dividends (12,963) ------ Basic earnings per share Earnings from operations before extraordinary loss on early extinguishment of debt available to common stockholders 2,123 21,486,370 $ 0.10 Extraordinary loss on early extinguishment of debt, net (2,121) (0.10) ----- ---- Net earnings 2 0.00 Effects of dilutive securities preferred stock conversion - - ----- ---------- Diluted earnings per share Net earnings $ 2 21,486,370 $ 0.00 ===== ========== ====
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
8. EARNINGS PER SHARE, continued Income Shares Per Share (Numerator) (Denominator) Amount ------------------------------------ (in thousands, except share and per share data)
Year ended March 31, 2000 Earnings from operations before extraordinary loss on early extinguishment of debt $ 65,825 Less: preferred stock dividends (13,499) ------ Basic earnings per share Earnings from operations before extraordinary loss on early extinguishment of debt available to common stockholders 52,326 21,934,390 $ 2.39 Extraordinary loss on early extinguishment of debt, net (334) (0.02) ------ ---- Net earnings 51,992 2.37 Effects of dilutive securities Preferred stock conversion 537 291,667 ------ ---------- Diluted earnings per share Net earnings $ 52,529 22,226,057 $ 2.36 ====== ========== ====
Year ended March 31, 1999 Earnings from operations before extraordinary loss on early extinguishment of debt $ 62,509 Less: preferred stock dividends (17,077) ------ Basic earnings per share Earnings from operations before extraordinary loss on early extinguishment of debt available to common stockholders 45,432 21,937,686 $ 2.07 Extraordinary loss on early extinguishment of debt, net - - ------ ---- Net earnings 45,432 2.07 Effects of dilutive securities Preferred stock conversion 4,006 2,002,937 ------ ---------- Diluted earnings per share Net earnings $ 49,438 23,940,623 $ 2.07 ====== ========== ====
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
9. INCOME TAXES
The components of the consolidated expense for income taxes applicable to operations are as follows:
Year ended ------------------------------ 2001 2000 1999 ------------------------------ (in thousands) Current: Federal $ - 1,192 2,490 State 650 1,068 406
Deferred: Federal 8,243 32,369 29,963 State 19 2,293 2,242 ------------------------------
$ 8,912 36,922 35,101 ==============================
Income taxes paid in cash amounted to $3,450,000, $1,522,000 and $1,656,000 for fiscal years 2001, 2000 and 1999, respectively.
Actual tax expense reported on earnings from operations differs from the "expected" tax expense amount (computed by applying the United States federal corporate tax rate of 35% in 2001, 2000 and 1999) as follows:
Year ended ------------------------------ 2001 2000 1999 ------------------------------ (in thousands)
Computed "expected" tax expense $ 8,399 35,962 34,163 Increases (reductions) in taxes resulting from: Tax-exempt interest income (55) (145) (474) Dividends received deduction (1) (1) (52) Canadian subsidiary (income)loss (402) (536) 444 True-up of prior year - - - Federal tax benefit of state and local taxes (221) (1,176) (927) Other 523 (543) (701) ------------------------------ Actual federal tax expense 8,243 33,561 32,453 State and local income tax expense 669 3,361 2,648 ------------------------------
Actual tax expense of operations $ 8,912 36,922 35,101 ==============================
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
9. INCOME TAXES, continued
Deferred tax assets and liabilities are comprised as follows:
March 31, ----------------- 2001 2000 ----------------- (in thousands) Deferred tax assets ------------------- Benefit of tax net operating loss and credit carryforwards $ 62,145 84,855 Accrued expenses 9,059 6,399 Deferred revenue from sale/leaseback 9,001 7,463 Policy benefits and losses, claims and loss expenses payable, net 7,807 20,236 Other 1,550 1,838 ----------------- Total deferred tax assets 89,562 120,791 -----------------
Deferred tax liabilities ------------------------ Property, plant and equipment 221,407 224,260 Deferred policy acquisition costs 7,574 5,944 ----------------- Total deferred tax liabilities 228,981 230,204 -----------------
Net deferred tax liability $ 139,419 109,413 =================
The deferred tax asset was reduced by use of a portion of the net operating loss carryforward to offset a related party gain that increased additional paid in capital.
In light of AMERCO's history of profitable operations, management has concluded that it is more likely than not that AMERCO will ultimately realize the full benefit of its deferred tax assets. Accordingly, AMERCO believes that a valuation allowance is not required at March 31, 2001 and 2000. See also Note 15 of Notes to Consolidated Financial Statements.
Under the provisions of the Tax Reform Act of 1984 (the Act), the balance in Oxford's account designated "Policyholders' Surplus Account" is frozen at its December 31, 1983 balance of $19,251,000. Federal income taxes (Phase III) will be payable thereon at applicable current rates if amounts in this account are distributed to the stockholder or to the extent the account exceeds a prescribed maximum. Oxford did not incur a Phase III liability for the years ended December 31, 2000, 1999 and 1998.
The Internal Revenue Service is currently conducting audits on fiscal years 1996 and 1997. To date, the audits have not been completed.
At March 31, 2001, AMERCO and RepWest have non-life net operating loss carryforwards available to offset federal taxable income in future years of $119,495,000 for tax purposes. These carryforwards expire in 2011 through 2012. AMERCO has alternative minimum tax credit carryforwards of $15,489,000 which do not have an expiration date, but may only be utilized in years in which regular tax exceeds alternative minimum tax. The use of certain carryforwards may be limited or prohibited if a reorganization or other change in corporate ownership were to occur.
During 1994, Oxford distributed its investment in RepWest common stock as a dividend to its parent at its book value. As a result of such dividend, a deferred intercompany gain arose due to the difference between the book value and fair value of such common stock. However, such gain can only be triggered if certain events occur. To date, no events have occurred which would trigger such gain recognition. No deferred taxes have been provided in the accompanying consolidated financial statements as management believes that no events have occurred to trigger such gain.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
10. TRANSACTIONS WITH FLEET OWNERS AND OTHER RENTAL EQUIPMENT OWNERS
Independent rental equipment owners (fleet owners) own approximately 5% of all U-Haul rental trailers and 0.01% of certain other rental equipment. There are approximately 1,919 fleet owners, including certain officers, directors, employees and stockholders of AMERCO. All rental equipment is operated under contract with U-Haul whereby U-Haul administers the operations and marketing of such equipment and in return receives a percentage of rental fees paid by customers. Based on the terms of various contracts, rental fees are distributed to U-Haul (for services as operators), to the fleet owners (including certain subsidiaries and related parties of U-Haul) and to Rental Dealers (including Company-operated U-Haul Centers).
RepWest insures and reinsures certain risks of U-Haul customers and independent fleet owners. Premiums earned on these policies were $17,300,000, $22,700,000 and $41,000,000 during the years ended December 31, 2001, 2000 and 1999, respectively.
11. EMPLOYEE BENEFIT PLANS
AMERCO participates in the AMERCO Employee Savings, Profit Sharing and Employee Stock Ownership Plan (the Plan) which is designed to provide all eligible employees with savings for their retirement and to acquire a proprietary interest in AMERCO.
The Plan has three separate features: a profit sharing feature (the Profit Sharing Plan) under which the Employer may make contributions on behalf of participants; a savings feature (the Savings Plan) which allows participants to defer income under Section 401(k) of the Internal Revenue Code of 1986; and an employee stock ownership feature (the ESOP) under which AMERCO may make contributions of AMERCO common stock or cash to acquire such stock on behalf of participants. Generally, employees of AMERCO are eligible to participate in the Plan upon completion of a one year service requirement.
No contributions were made to the profit sharing plan in fiscal year 2001, 2000, or 1999.
AMERCO has arranged financing to fund the ESOP trust (ESOT) and to enable the ESOT to purchase shares. Below is a summary of the financing arrangements:
Amount outstanding Financing as of Interest Payments Date March 31, 2001 2001 2000 1999 --------------------------------------------------------------------- (in thousands) December 1989 $ - - - 34 May 1990 - 8 16 24 June 1991 15,173 1,129 1,192 1,364
Shares are released from collateral and allocated to active employees based on the proportion of debt service paid in the plan year. Contributions to the ESOT charged to expense were $1,627,000, $1,771,000 and $2,804,000 for fiscal years 2001, 2000 and 1999, respectively.
The shares held by ESOP as of March 31 were as follows:
Shares issued Shares issued prior to subsequent to December 31, 1992 December 31, 1992 ------------------------------------------ 2001 2000 2001 2000 ------------------------------------------ (in thousands) Allocated shares 1,467 1,551 239 196 Shares committed to be released - - 12 11 Unreleased shares 293 338 628 679
Fair value of unreleased shares $ 3,812 4,157 13,341 12,470 ==========================================
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
11. EMPLOYEE BENEFIT PLANS, continued
For purposes of the schedule, fair value of unreleased shares issued prior to December 31, 1992 is defined as the historical cost of such shares. Fair value of unreleased shares issued subsequent to December 31, 1992 is defined as the March 31 trading value of such shares for 2001 and 2000.
Oxford insures various group life and group disability insurance plans covering employees of the consolidated group. Premiums earned were $1,424,000, $1,276,000 and $1,208,000 during the years ended December 31, 2000, 1999 and 1998, respectively, and were eliminated in consolidation.
12. POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS
AMERCO provides medical and life insurance benefits to retired employees and eligible dependents over age 65 if the employee meets specified age and service requirements.
AMERCO uses the accrual method of accounting for postretirement benefits. AMERCO continues to fund medical and life insurance benefit costs as claims are incurred.
The components of net periodic postretirement benefit cost for 2001, 2000 and 1999 are as follows:
2001 2000 1999 ----------------------------- (in thousands) Service cost for benefits earned during the period $ 228 330 296 Interest cost on accumulated postretirement benefit 276 338 327 Other components (340) (239) (224) ----------------------------- Net periodic postretirement benefit cost $ 164 429 399 =============================
The 2001 and 2000 postretirement benefit liability included the following components:
2001 2000 ------------------ (in thousands)
Beginning of year $ 3,615 4,886 Service cost 228 330 Interest cost 276 338 Benefit payments and expense (86) (93) Actuarial loss 64 (1,846) ------------------ Accumulated postretirement benefit obligation 4,097 3,615 Unrecognized net gain 4,827 5,232 ------------------ $ 8,924 8,847 ==================
The discount rate assumptions in computing the information above were as follows:
2001 2000 1999 ------------------------------ Accumulated postretirement benefit obligation 7.50% 7.75% 7.00%
The year-to-year fluctuations in the discount rate assumptions primarily reflect changes in U.S. interest rates. The discount rate represents the expected yield on a portfolio of high-grade (AA-AAA rated or equivalent) fixed- income investments with cash flow streams sufficient to satisfy benefit obligations under the plans when due.
The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation was 6.00% in 2001, declining annually to an ultimate rate of 4.20% in 2015. AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
12. POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS, continued
If the health care cost trend rate assumptions were increased by 1.00%, the accumulated postretirement benefit obligation as of March 31, 2001 would be increased by approximately $180,000 and a decrease of 1.00% would reduce the accumulated postretirement benefit obligation by $198,000.
Postemployment benefits provided by AMERCO are not material.
13. REINSURANCE
In the normal course of business, RepWest and Oxford assume and cede reinsurance on both a coinsurance and risk premium basis. RepWest and Oxford obtain reinsurance for that portion of risks exceeding retention limits. The maximum amount of life insurance retained on any one life is $150,000.
A summary of reinsurance transactions by business segment follows:
Percentage Ceded Assumed of amount Direct to other from other Net assumed to amount companies companies amount net ------------------------------------------- ---------- (in thousands) Year ended December 31, 2000 - ---------------------------- Life insurance in force $ 1,736,332 923,472 1,812,548 2,625,408 69% ============================================
Premiums earned: Life $ 23,666 2,493 8,232 29,405 28% Accident and health 72,593 15,195 16,884 74,282 23% Annuity 574 - 6,932 7,506 92% Property - casualty 154,998 33,182 96,281 218,097 44% -------------------------------------------- Total $ 251,831 50,870 128,329 329,290 ============================================
Percentage Ceded Assumed of amount Direct to other from other Net assumed to amount companies companies amount net ----------------------------------------- ---------- (in thousands) Year ended December 31, 1999 - ---------------------------- Life insurance in force $ 1,508,961 932,004 1,930,832 2,507,789 77% ============================================
Premiums earned: Life $ 26,745 2,527 6,480 30,698 21% Accident and health 43,833 15,121 29,377 58,089 51% Annuity 69 3 6,269 6,335 99% Property - casualty 111,488 27,004 89,319 173,803 51% -------------------------------------------- Total $ 182,135 44,655 131,445 268,925 ============================================ AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
13. REINSURANCE, continued
Percentage Ceded Assumed of amount Direct to other from other Net assumed to amount companies companies amount net ---------------------------------------- ---------- (in thousands) Year ended December 31, 1998 - ---------------------------- Life insurance in force $ 1,254,084 809,267 2,218,772 2,663,589 83% ============================================
Premiums earned: Life $ 20,554 6,403 11,480 25,631 45% Accident and health 32,668 10,875 29,973 51,766 58% Annuity 556 - 9,944 10,500 95% Property - casualty 110,080 32,047 60,917 138,950 44% -------------------------------------------- Total $ 163,858 49,325 112,314 226,847 ============================================
RepWest is a reinsurer of municipal bond insurance through an agreement with MBIA, Inc. Premiums generated through this agreement are recognized on a pro rata basis over the contract coverage period. Unearned premiums on this coverage were $4,300,000 and $5,000,000 as of December 31, 2000 and 1999, respectively. RepWest's share of case loss reserves related to this coverage was insignificant at December 31, 2000. RepWest's aggregate exposure for Class 1 municipal bond insurance was $883,000,000 as of December 31, 2000.
To the extent that a reinsurer is unable to meet its obligation under the related reinsurance agreements, RepWest would remain liable for the unpaid losses and loss expenses. Pursuant to certain of these agreements, RepWest holds letters of credit of $13,000,000 from reinsurers. RepWest has issued letters of credit of approximately $2,700,000 in favor of certain ceding companies.
RepWest insures and reinsures general liability, auto liability and workers' compensation coverage for member companies of the consolidated group. Premiums earned by RepWest on these policies were $6,091,000, $6,878,000 and $11,734,000 during the years ended December 31, 2000, 1999 and 1998, respectively, and were eliminated in consolidation.
14. CONTINGENT LIABILITIES AND COMMITMENTS
AMERCO uses certain equipment and occupies certain facilities under operating lease commitments with terms expiring through 2079. Lease expense was $178,458,000, $136,044,000 and $118,742,000 for the years ended 2001, 2000 and 1999, respectively. During the year ended March 31, 2001, a subsidiary of U-Haul entered into thirty five transactions and has subsequently entered into one additional transaction, whereby AMERCO sold rental trucks, which were subsequently leased back. AMERCO has guaranteed $195,052,000 of residual values at March 31, 2001 and an additional $1,350,000 subsequent to March 31, 2001 for these assets at the end of the respective lease terms. Certain leases contain renewal and fair market value purchase options as well as mileage and other restrictions similar to covenants disclosed in Note 5 of Notes to Consolidated Financial Statements for notes payable and loan agreements. AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
14. CONTINGENT LIABILITIES AND COMMITMENTS, continued
Following are the lease commitments for leases having terms of more than one year:
March 31, 2001 --------------------------- Net activity Property, plant Rental subsequent to Year ended and other equipment fleet year end Total -------------------------------------------------------------------- (in thousands)
2002 $ 3,325 157,817 502 161,644 2003 2,320 144,184 602 147,106 2004 1,906 117,250 602 119,758 2005 1,688 103,521 602 105,811 2006 1,617 76,059 602 78,278 Thereafter 9,184 92,876 1,909 103,969 -------------------------------------------- $ 20,040 691,707 4,819 716,566 ============================================
The Company, at the expiration of the lease, has the option to renew the lease, purchase the units for fair market value, or sell the units to a third party on behalf of the lessor. On or before a specific date prior to the expiration date of the lease, the Company has the ability to exercise a TRAC option. Under this provision the Company has the right to purchase the units at a specified price. At March 31, 2001, U-Haul had not exercised any options to purchase units. Subsequent to March 31, 2001, the Company exercised one purchase option totaling $972,000.
In December 1996, AMERCO executed a $100,000,000 Operating Lease Facility with a number of financial institutions which was amended and restated in July 1999 to $170,000,000. In September 1999, AMERCO entered into an additional $125,000,000 Operating Lease Facility. Under these facilities, the lessor acquires land to be developed for storage locations by AMERCO, as Construction Agent, or acquires existing storage locations with advances of funds (the Advances) made by certain parties to the facilities. AMERCO will separately lease land and improvements, including completed locations capitalized by the lessor, under the facilities and the respective lease supplements. Funding under the facilities totaled $231,664,000 and $174,900,000 at March 31, 2001 and 2000, respectively.
The facilities contain certain restrictions similar to those contained in Note 5. Upon occurrence of any event of default, the lessor may rescind or terminate any or all leases and, among other things, require AMERCO to repurchase any or all of the properties. The facilities have a three year term, subject to AMERCO's option, with the consent of other parties, to renew for successive one year terms.
Upon the expiration of the facilities, AMERCO may either purchase all of the properties based on a purchase price equal to all amounts outstanding under the Advances, including the interest and yield thereon, or remarket all of the properties to a third party purchaser who may become a subsequent lessor to AMERCO.
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 such suits, claims or proceedings involving AMERCO, individually or in the aggregate, are expected to result in a material loss. Also see Notes 13 and 15 of Notes to Consolidated Financial Statements.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
15. LEGAL PROCEEDINGS
On October 1, 1996, AMERCO made the final payment of approximately $448,100,000 to the plaintiffs (non-management shareholders and their affiliates) in the full settlement of a legal dispute related to control of AMERCO. As a result, the plaintiffs that owned AMERCO stock were required to transfer all of their shares of common stock to AMERCO. The total number of shares transferred was 18,254,976.
On January 10, 2000 it was determined that the plaintiffs were entitled to post-petition interest at the rate of ten percent (10%) per year from February 21, 1995 until October 1, 1996. In 1996, AMERCO deposited approximately $48,200,000 into an escrow account to secure payment of the disputed interest, pending final resolution of this issue. The escrow account was reflected as a component of "Other assets" in AMERCO's consolidated financial statements. The amount deposited into the escrow account was transferred to the plaintiffs on February 2, 2000. The release of the escrow did not have the effect of increasing or decreasing AMERCO's net earnings, but reduced stockholders' equity.
AMERCO has deducted for income tax purposes approximately $372,000,000 of payments previously made to the former shareholders. While AMERCO believes that such income tax deductions are appropriate, there can be no assurance that such deductions ultimately will be allowed in full.
On June 24, 1997, five (5) current and/or former Moving Center General Managers (GMs) and one (1) Area Field Manager (AFM) filed suit in Marin County Superior Court, Case No. BC 203532, entitled Sarah Saunders, et al. vs. U-Haul ---------------------- ------ Company of California, Inc., claiming that they were entitled to be compensated - --------------------------- for all overtime hours worked in excess of forty (40) hours per week. In addition, these Plaintiffs sought class action status purporting to represent all persons employed in California as either a salaried GM or AFM since September 1993. On September 30, 1997, a virtually identical lawsuit was filed in Los Angeles County Superior Court, Case No. BC 178775, entitled Wyatt ----- Crandall vs. U-Haul International, Inc. and U-Haul Co. of California. This - -------- ------------------------------------------------------- action did not include AFMs, but did purport to be brought on behalf of GMs and GM trainees. These cases were consolidated by the Court in Los Angeles on October 15, 1998. On June 10, 1999, Plaintiff's motion to certify the AFMs as a class was denied and the motion to certify the GMs as a class was granted. Notice of certification was mailed on or about August 24, 1999. The class opt- out period ended on October 11, 1999. The case was bifurcated and the liability portion of the case was tried to the Court. The Court found for the Plaintiff's on January 8, 2001. The damage portion of the case was to begin on April 9, 2001. The Company settled the case for $7.5 million on April 5, 2001, and the Court approved the settlement on May 22, 2001. The class approval process will take between 60 and 120 days from the time of the Court approval.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
16. PREFERRED STOCK PURCHASE RIGHTS
AMERCO's Board of Directors adopted a stockholder-rights plan in July 1998. The rights were declared as a dividend of one preferred share purchase right for each outstanding share of AMERCO's common stock. The dividend distribution was payable on August 17, 1998 to the stockholders of record on that date. When exercisable, each right will entitle its holder to purchase from AMERCO one one-hundredth of a share of Series C Junior Participating Preferred Stock (Series C), no par value per share of AMERCO, at a price of $132.00 per one one-hundredth of a share of Series C, subject to adjustment. AMERCO has created a series of 3,000,000 shares of authorized but unissued preferred stock for the Series C stock authorized in this stockholder-rights plan.
The rights will become exercisable if a person or group of affiliated or associated persons acquire or obtain the right to acquire beneficial ownership of 10% or more of the common stock without approval of a majority of the Board of Directors of AMERCO. The rights will expire on August 7, 2008 unless earlier redeemed or exchanged by AMERCO.
In the event AMERCO is acquired in a merger or other business combination transaction after the rights become exercisable, each holder of a right would be entitled to receive that number of shares of the acquiring company's common stock equal to the result obtained by multiplying the then current Purchase Price by the number one one-hundredths of a share of Series C for which a right is then exercisable and dividing that product by 50% of the then current market price per share of the acquiring company.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
17. STOCK OPTION PLAN
AMERCO's stockholders approved a ten year incentive plan entitled the AMERCO Stock Option and Incentive Plan (the Plan) for officers and key employees in October 1992. No stock options or awards have been granted under this plan to date.
The aggregate numbers of shares of stock subject to award under the Plan may not exceed 3,000,000. The stock subject to the Plan is AMERCO common stock unless prior to the date the first award is made under the Plan, a Committee of at least two Board members determines, in its discretion, to utilize another class of AMERCO stock. The features of the Plan are:
Incentive Stock Options (ISO's) - as defined under the Internal Revenue Code and Non-qualified Stock Options under such terms and conditions as the Committee determines in its discretion. The ISO's may be granted at prices not less than one-hundred percent of the fair market value at the date of grant with a term not exceeding ten years.
Stock Appreciation Right (SAR's) - subject to certain conditions and limitations to holders of options under the Plan. SAR's permit the optionee to surrender an exercisable option for an amount equal to the excess of the market price of the common stock over the option price when the right is exercised.
Restricted Stock Award - a specified number of common shares may be granted subject to certain restrictions. Restriction violations during a specified period result in forfeiture of the stock. The Committee may, at its discretion, impose any restrictions on a Restricted Stock award.
Dividend Equivalents - in connection with options. Dividend Equivalents are rights to receive additional shares of stock at the time of exercise of the option to which such Dividend Equivalents apply.
Performance Share - deemed to be the equivalent of one share of stock and credited to a Performance Share account to be maintained for each Holder. The value of the shares at time of award or payment is the fair market value of an equivalent number of shares of stock. At the end of the award period, payment may be made subject to certain predetermined criteria and restrictions.
18. RELATED PARTY TRANSACTIONS
AMERCO has related party transactions with certain major stockholders, directors and officers of the consolidated group as disclosed in Notes 2, 6, 10 and 16 of Notes to Consolidated Financial Statements.
During the years ended 2001 and 2000, AMERCO sold $10,510,000 and $3,910,000, respectively, of remanufactured engines and small automotive parts and purchased $53,671,000 and $38,373,000, respectively, of automotive parts and tools from a company wherein a major stockholder, director and officer of AMERCO has a beneficial minority ownership interest.
During the years ended 2001 and 2000, AMERCO purchased $1,090,000 and $2,508,000, respectively, of rebuilt torque converters and other related transmission parts from a company wherein an owner is a family member of a major stockholder, director and officer of AMERCO.
During the years ended 2001, 2000 and 1999, AMERCO purchased $3,460,000, $3,371,000 and $3,070,000, respectively, of printing from a company wherein an officer is a major stockholder, director and officer of AMERCO.
Management believes that these transactions were consummated on terms equivalent to those that prevail in arm's-length transactions.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
19. SUPPLEMENTAL CASH FLOW INFORMATION
The (increase) decrease in receivables, inventories and accounts payable and accrued expenses net of other operating and investing activities follows:
Year ended --------------------------------------- 2001 2000 1999 --------------------------------------- (in thousands)
Receivables $ (32,612) (40,590) 676 =======================================
Inventories $ 609 (4,455) (11,272) =======================================
Accounts payable and accrued expenses $ (113) 20,146 12,668 =======================================
20. SUMMARIZED CONSOLIDATED FINANCIAL INFORMATION OF INSURANCE SUBSIDIARIES
A summarized consolidated balance sheet for RepWest is presented below:
December 31, ---------------------- 2000 1999 ----------------------- (in thousands)
Investments, securities $ 409,535 405,250 Investments, other 34,062 18,786 Receivables 200,651 158,413 Deferred policy acquisition costs 21,637 15,130 Due from affiliate 43,121 28,054 Deferred federal income taxes 13,167 13,384 Other assets 11,961 25,770 ------------------- Total assets $ 734,134 664,787 ===================
Policy liabilities and accruals $ 372,328 339,220 Unearned premiums 107,768 64,755 Other policyholders' funds and liabilities 61,952 52,307 ------------------- Total liabilities 542,048 456,282
Stockholder's equity 192,086 208,505 -------------------
Total liabilities and stockholder's equity $ 734,134 664,787 ===================
A summarized consolidated income statement for RepWest is presented below:
Year ended December 31, -------------------------------- 2000 1999 1998 -------------------------------- (in thousands)
Premiums $ 218,097 173,803 145,301 Net investment income 29,103 33,004 35,755 ------------------------------- Total revenue 247,200 206,807 181,056
Benefits and losses 204,133 150,543 118,870 Amortization of deferred policy acquisition costs 16,308 13,358 7,443 Operating expenses 56,653 34,972 35,637 ------------------------------- Total expenses 277,094 198,873 161,950
Income from operations (29,894) 7,934 19,106 Income tax benefit (expense) 10,494 (2,611) (5,976) ------------------------------- Net income (loss) $ (19,400) 5,323 13,130 =============================== AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
20. SUMMARIZED CONSOLIDATED FINANCIAL INFORMATION OF INSURANCE SUBSIDIARIES, continued
A summarized consolidated balance sheet for Oxford is presented below:
December 31, --------------------- 2000 1999 --------------------- (in thousands)
Investments, fixed maturities $ 542,947 485,379 Investments, other 171,684 122,038 Receivables 27,430 19,021 Deferred policy acquisition costs 78,170 73,272 Deferred federal income taxes 304 - Other assets 29,776 32,270 ------------------- Total assets $ 850,311 731,980 ===================
Policy liabilities and accruals $ 185,038 142,180 Premium deposits 522,207 461,673 Other policyholders' funds and liabilities 21,525 18,390 Due to affiliate 10,942 10,669 Deferred federal income taxes 10,793 10,975 ------------------- Total liabilities 750,505 643,887
Stockholder's equity 99,806 88,093 -------------------
Total liabilities and stockholder's equity $ 850,311 731,980 ===================
A summarized consolidated income statement for Oxford is presented below:
Year ended December 31, ------------------------------- 2000 1999 1998 ------------------------------- (in thousands)
Premiums $ 112,616 96,406 94,488 Net investment income 22,166 21,540 20,080 ------------------------------- Total revenue 134,782 117,946 114,568
Benefits and losses 79,233 59,049 57,690 Amortization of deferred policy acquisition costs 19,638 21,629 24,278 Operating expenses 28,962 23,078 20,442 ------------------------------- Total expenses 127,833 103,756 102,410
Income from operations 6,949 14,190 12,158 Income tax expense (2,298) (4,117) (3,423) ------------------------------ Net income $ 4,651 10,073 8,735 ==============================
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
20. SUMMARIZED CONSOLIDATED FINANCIAL INFORMATION OF INSURANCE SUBSIDIARIES, continued
Applicable laws and regulations of the State of Arizona require maintenance of minimum capital determined in accordance with statutory accounting practices in the amount of $450,000 for Oxford and $1,000,000 for RepWest. In addition, the amount of dividends which can be paid to stockholders by insurance companies domiciled in the State of Arizona is limited. Any dividend in excess of the limit requires prior regulatory approval. Statutory surplus which can be distributed as dividends is $700,000 for Oxford and $11,700,000 for RepWest at December 31, 2000.
Audited statutory net income(loss) for RepWest for the years ended December 31, 2000, 1999 and 1998 was $(28,116,000), $9,907,000 and $12,382,000, respectively; audited statutory capital and surplus was $117,430,000 and $154,604,000 at December 31, 2000 and 1999, respectively.
Audited statutory net income for Oxford for the years ended December 31, 2000, 1999 and 1998 was $6,626,000, $1,599,000 and $814,000, respectively; audited statutory capital and surplus was $53,473,000 and $57,689,000 at December 31, 2000 and 1999, respectively.
On November 13, 2000, Oxford acquired all of the issued and outstanding shares of Christian Fidelity Life Insurance Company (CFLIC), in an exchange of cash for stock, for $37,586,000. CFLIC's premium volume is primarily from the sale of Medicare Supplement products. AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
21. INDUSTRY SEGMENT AND GEOGRAPHIC AREA DATA
Industry Segment Data - AMERCO has four industry segments represented by Moving and Storage Operations (U-Haul), Real Estate, Property and Casualty Insurance (RepWest) and Life Insurance (Oxford). See Note 1 of Notes to Consolidated Financial Statements for a description of the industry segments.
Information concerning operations by industry segment follows:
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
21. INDUSTRY SEGMENT AND GEOGRAPHIC AREA DATA, continued
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
21. INDUSTRY SEGMENT AND GEOGRAPHIC AREA DATA, continued
Geographic Area Data - United States Canada Consolidated --------------------------------------- (All amounts are in U.S. $'s) (in thousands)
Fiscal year 2001 - ---------------- Total revenues $ 1,776,231 37,407 1,813,638 Depreciation/amortization $ 139,702 4,483 144,185 Interest expense $ 87,877 (104) 87,773 Pretax earnings $ 22,853 1,145 23,998 Income tax expense $ (8,906) (6) (8,912) Extraordinary loss $ (2,121) - (2,121) Identifiable assets at March 31, 2001 $ 3,334,728 49,336 3,384,064
Fiscal year 2000 - ---------------- Total revenues $ 1,649,136 34,481 1,683,617 Depreciation/amortization $ 131,513 3,968 135,481 Interest expense $ 81,515 17 81,532 Pretax earnings (loss) $ 101,216 1,531 102,747 Income tax expense $ 36,992 - 36,992 Extraordinary loss $ (334) - (334) Identifiable assets at March 31, 2000 $ 3,075,095 50,130 3,125,225
Fiscal year 1999 - ---------------- Total revenues $ 1,525,939 29,773 1,555,712 Depreciation/amortization $ 110,817 3,285 114,102 Interest expense $ 73,641 17 73,658 Pretax earnings $ 98,878 (1,268) 97,610 Income tax expense $ 35,101 - 35,101 Identifiable assets at March 31, 1999 $ 3,046,247 41,256 3,087,503
22. SUBSEQUENT EVENTS
On May 8, 2001, AMERCO declared a cash dividend of $3,241,000 ($0.53125 per preferred share) to the Series A preferred stockholders of record as of May 18, 2001.
See Note 14 of Notes to Consolidated Financial Statements for other subsequent event disclosures.
In April 2001, U-Haul entered into a master lease agreement that provides a leasing facility up to $47,633,000 to obtain certain self storage assets under operating leases.
Schedule I
Condensed Financial Information of Registrant AMERCO Balance Sheets March 31,
2001 2000 ---------------------- (in thousands) Assets - ------
Cash $ 114 108 Investment in subsidiaries 919,063 844,115 Due from unconsolidated subsidiaries 1,105,943 1,042,992 Other assets 15,061 28,770 ----------------------
$ 2,040,181 1,915,985 ======================
Liabilities and Stockholders' Equity - ------------------------------------
Liabilities: Notes and loans payable $ 1,156,613 1,137,553 Other liabilities 253,009 176,889 ----------------------
Stockholders' equity: Preferred stock - - Common stock 10,563 10,563 Additional paid-in capital 312,128 275,242 Accumulated other comprehensive income (40,709) (42,317)
Retained earnings: Beginning of year 755,172 703,322 Net earnings 12,965 65,491 Dividends paid (12,963) (13,641) ---------------------- 755,174 755,172
Less: Cost of common shares in treasury 406,617 397,000 Unearned employee stock ownership plan shares (20) 117 ---------------------- Total stockholders' equity 630,559 601,543 ---------------------- $ 2,040,181 1,915,985 ======================
See accompanying notes to condensed financial information and notes to consolidated financial statements incorporated herein by reference. Schedule I, continued
Condensed Financial Information of Registrant AMERCO Statements of Earnings Years Ended March 31,
2001 2000 1999 ------------------------------------ (in thousands, except share and per share data)
Revenues - -------- Net interest income from subsidiaries $ 61,509 53,504 57,500
Expenses - -------- Interest expense 86,963 77,561 73,960 Other expenses 5,750 5,823 7,394 ------------------------------------
Total expenses 92,713 83,384 81,354 ------------------------------------
Operating loss (31,204) (29,880) (23,854)
Equity in earnings of unconsolidated subsidiaries 73,959 126,878 111,782
Income tax expense (27,669) (31,173) (25,419)
Extraordinary loss on early extinguishment of debt, net (2,121) (334) - ------------------------------------
Net earnings $ 12,965 65,491 62,509 ====================================
Earnings per common share (both basic and diluted): Earnings from operations before extraordinary loss on early extinguishment of debt $ 0.10 2.39 2.07 Extraordinary loss on early extinguishment of debt, net (0.10) (0.02) - ------------------------------------ Net earnings $ (0.00) 2.37 2.07 ====================================
Weighted average common shares outstanding 21,486,370 21,934,390 21,937,686 ====================================
See accompanying notes to condensed financial information and notes to consolidated financial statements incorporated herein by reference. Schedule I, continued
Condensed Financial Information of Registrant AMERCO Statements of Cash Flows Years Ended March 31,
2001 2000 1999 --------------------------------- (in thousands)
Cash flows from operating activities: Net earnings $ 12,965 65,491 62,509 Amortization, net 826 (569) (1,730) Equity in earnings of subsidiaries 72,159 85,266 78,014 (Increase) decrease in amounts due from unconsolidated subsidiaries (62,951) 14,150 (64,062) Net change in operating assets and liabilities (19,902) (83,449) (89,921) Other, net 2,901 (27,005) (4,695) ---------------------------------
Net cash provided (used) by operating activities 5,998 53,884 (19,885) ---------------------------------
Cash flows from financing activities: Net change in short term borrowings 156,070 (146,500) 135,500 Proceeds from notes - 350,000 - Leveraged Employee Stock Ownership Plan-repayments from loan 137 118 1,017 Principal payments on notes (137,010) (180,010) (45,008) Debt issuance costs (488) (6,024) (358) Repurchase of preferred stock - (25,000) (50,000) Preferred stock dividends paid (12,963) (13,641) (17,414) Treasury stock purchase, net (9,617) (33,467) (3,810) Deferred tax-treasury stock - - - Escrow deposit - - - Extraordinary loss on early extinguishment of debt, net (2,121) (334) - ---------------------------------
Net cash provided (used) by financing activities (5,992) (54,858) 19,927 ---------------------------------
Increase (decrease) in cash and cash equivalents 6 (974) 42 Cash and cash equivalents at beginning of year 108 1,082 1,040 ---------------------------------
Cash and cash equivalents at end of year $ 114 108 1,082 =================================
Income taxes paid in cash amounted to $3,450,000, $1,522,000 and $1,656,000 for 2001, 2000 and 1999, respectively. Interest paid in cash amounted to $92,622,000, $77,529,000 and $74,026,000 for 2001, 2000 and 1999, respectively.
See accompanying notes to condensed financial information and notes to consolidated financial statements incorporated herein by reference. Schedule I, continued
Condensed Financial Information of Registrant AMERCO Notes to Condensed Financial Information March 31, 2001, 2000 and 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
AMERCO, a Nevada corporation, was incorporated in April, 1969, and is the holding company for U-Haul International, Inc., Republic Western Insurance Company, Oxford Life Insurance Company and Amerco Real Estate Company. The financial statements of the Registrant should be read in conjunction with the Consolidated Financial Statements and notes thereto included in this Form 10-K.
AMERCO is included in a consolidated Federal income tax return with all of its U.S. subsidiaries. Accordingly, the provision for income taxes has been calculated for Federal income taxes of the Registrant and subsidiaries included in the consolidated return of the Registrant. State taxes for all subsidiaries are allocated to the respective subsidiaries.
The financial statements include only the accounts of the Registrant (a Nevada corporation), which include certain of the corporate operations of AMERCO. The debt and related interest expense of the Registrant have been allocated to the consolidated subsidiaries. The intercompany interest income and expenses are eliminated in the consolidated financial statements.
2. GUARANTEES
AMERCO has guaranteed performance of certain long-term leases. See Note 14 of Notes to Consolidated Financial Statements.
3. NOTES AND LOANS PAYABLE Notes and loans payable consist of the following:
March 31, -------------------- 2001 2000 -------------------- (in thousands) Medium-term notes payable, unsecured, 7.23% to 8.08% interest rates, due through 2027 $ 212,000 237,000 Notes payable under Bond Backed Asset Trust, unsecured, 7.14% interest rates, due through 2032 100,000 200,000 Notes payable to banks under commercial paper agreements, unsecured, 5.00% to 6.20% interest rates 119,570 - Notes payable to public, unsecured, 7.85% interest rate, due through 2003 175,000 175,000 Senior Note, unsecured, 7.20% interest rate, due through 2002 150,000 150,000 Senior Note, unsecured, 8.80% interest rate, due through 2005 200,000 200,000 Other notes payable, unsecured, 9.50% interest rate, due through 2005 42 53 Notes payable to banks under revolving lines of credit, unsecured, 5.31% to 5.56% interest rates 185,000 159,000 Other short-term promissory notes, 5.96% interest rate 15,000 16,500 -------------------- $ 1,156,612 1,137,553 ====================
For additional information, see Note 5 of Notes to Consolidated Financial Statements.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By: /S/ EDWARD J. SHOEN ---------------------------------- Edward J. Shoen Chairman of the Board
Dated: June 29, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date --------- ----- ----
/S/ EDWARD J. SHOEN Chairman of the Board June 29, 2001 - -------------------------- Edward J. Shoen (Principal Executive Officer)
/S/ GARY B. HORTON Principal Financial June 29, 2001 - -------------------------- and Accounting Officer Gary B. Horton
/S/ WILLIAM E. CARTY Director June 29, 2001 - -------------------------- William E. Carty
/S/ JAMES P. SHOEN Director June 29, 2001 - -------------------------- James P. Shoen
/S/ CHARLES J. BAYER Director June 29, 2001 - -------------------------- Charles J. Bayer
/S/ JOHN M. DODDS Director June 29, 2001 - -------------------------- John M. Dodds
/S/ JAMES J. GROGEN Director June 29, 2001 - -------------------------- James J. Grogen
/S/ JOHN P. BROGAN Director June 29, 2001 - --------------------------- John P. Brogan
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements - -------------------------- This report contains forward-looking statements. Additional written or oral forward-looking statements may be made by AMERCO from time to time in filings with the Securities and Exchange Commission or otherwise. Management believes such forward-looking statements are within the meaning of the safe- harbor provisions. Such statements may include, but not be limited to, projections of revenues, income or loss, estimates of capital expenditures, plans for future operations, products or services and financing needs or plans, as well as assumptions relating to the foregoing. The words "believe", "expect", "anticipate", "estimate", "project" and similar expressions identify forward-looking statements, which speak only as of the date the statement was made. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Future events and actual results could differ materially from those set forth in, contemplated by or underlying the forward-looking statements. The following disclosures, as well as other statements in this report and in the Notes to AMERCO's Consolidated Financial Statements, describe factors, among others, that could contribute to or cause such differences, or that could affect AMERCO's stock price.
General - ------- Information on fiscal year and industry segments is incorporated by reference to "Item 8. Financial Statements and Supplementary Data - Notes 1, 20 and 21 of Notes to Consolidated Financial Statements". The notes discuss the principles of consolidation, summarized consolidated financial information and industry segment and geographic area data, respectively. In consolidation, all intersegment premiums are eliminated and the benefits, losses and expenses are retained by the insurance companies.
Liquidity and Capital Resources - -------------------------------
Consolidated Group To meet the needs of its customers, U-Haul must maintain a large inventory of fixed asset rental items. At March 31, 2001, net property, plant and equipment represented approximately 63.1% of total assets from non-insurance operations and approximately 40.2% of consolidated assets. In fiscal year 2001, gross capital expenditures for property, plant and equipment were $358.9 million, as compared to $417.6 million and $298.5 million in fiscal years 2000 and 1999, respectively. These expenditures primarily reflect the replacement of certain rental trucks and trailers. The capital needs required to fund these acquisitions were funded with internally generated funds from operations and lease financings.
During each of the fiscal years ending March 31, 2002, 2003 and 2004, U-Haul estimates gross capital expenditures will average approximately $232 million primarily reflecting rental fleet rotation. This level of capital expenditures, combined with a potential range of $77.5-$175 million in annual long-term debt maturities, are expected to create annual average funding needs of approximately $333-$408 million. Management estimates that U-Haul will fund 100% of these requirements with leases and internally generated funds, including proceeds from the disposition of older trucks and other asset sales.
Consolidated Net Cash Provided by Operating Activities Net cash provided by operating activities was $126.1 million, $237.7 million and $159.5 million in fiscal years 2001, 2000 and 1999, respectively. Details by material segment follows:
Moving and Storage Operations Cash provided by operating activities was $39.7 million, $147.5 million and $128.5 million in fiscal years 2001, 2000 and 1999, respectively. The decrease from fiscal year 2000 to fiscal year 2001 is mainly due to a decrease in intercompany payable. The increase from fiscal year 1999 to fiscal year 2000 is partially due to an increase in net income.
Real Estate Operations Cash provided by operating activities was $50.5 million, $24.8 million and $38.0 million in fiscal years 2001, 2000 and 1999, respectively. The increase in fiscal year 2001, is due to an increase in intercompany payable. This is due to dividends paid related to the sale of property. The decrease in fiscal year 2000, is due to a decrease in the intercompany payable.
Property and Casualty Cash provided (used) by operating activities was $21.1 million, $(11.1) million and $(21.7) million for the years ended December 31, 2000, 1999 and 1998, respectively. The 2000 to 1999 change resulted from increased premium collections and funds withheld, offset by increased loss and loss adjustment expense payments and policy acquisition costs associated with new business production. The 1999 to 1998 change resulted from the increased funds withheld liability, decreased paid losses recoverable and a smaller decrease in loss and loss adjustment expense reserves. This was offset by increased premiums and agents' balances and the intercompany receivable due from affiliates.
RepWest's cash and cash equivalents and short-term investment portfolio were $17.0 million, $6.0 million and $6.1 million at December 31, 2000, 1999 and 1998, respectively. This balance reflects funds in transition from maturity proceeds to long-term investments. This level of liquid assets, combined with budgeted cash flow, is adequate to meet periodic needs. Capital and operating budgets allow RepWest to schedule cash needs in accordance with investment and underwriting proceeds. LIFE INSURANCE Cash provided by operating activities was $8.7 million, $22.2 million and $34.6 million for the years ended December 31, 2000, 1999 and 1998, respectively. The decrease in cash flows from operating activities in 2000 and 1999 relates to paid loss experience. In 2000, cash flows provided by financing activities were $14.7 million, $3.2 million and $32.0 million for the years ended December 31, 2000, 1999 and 1998, respectively. Cash flows from deferred annuity sales increase investment contract deposits, which are a component of financing activities, as well as the purchase of fixed maturities, which are a component of investing activities. The increase in 2000 from 1999 is due to a higher ratio of annuity deposits versus withdrawals, the opposite occurred in 1999 compared to 1998.
Oxford's primary sources of cash are premiums, receipts from interest- sensitive products and investment income. The primary uses of cash are operating costs and benefit payments to policyholders. Matching the investment portfolio to the cash flow demands of the types of insurance being written is an important consideration. Benefit and claim statistics are continually monitored to provide projections of future cash requirements.
In addition to cash flows from operating and financing activities, a substantial amount of liquid funds is available through Oxford's short-term portfolio. Short-term investments amounted to $45.0 million, $30.7 million and $63.4 million at December 31, 2000, 1999 and 1998, respectively. Management believes that the overall sources of liquidity will continue to meet foreseeable cash needs.
Consolidated Stockholder's Equity Consolidated stockholder's equity was $615.4, $585.3 and $616.0 million for the fiscal years 2001, 2000 and 1999, respectively. Details by material segment follow:
Moving and Storage Operations U-Haul's stockholder's equity was $522.9 million, $435.2 million and $384.7 million for the fiscal years 2001, 2000 and 1999, respectively. The increase in fiscal year 2001 is mainly the result of increased additional paid in capital due to the sale of property to a related party. The increase in fiscal year 2000 was due to earnings.
Real Estate Operations Real Estate stockholder's equity was $89.1 million, $96.1 million and $79.5 million in fiscal years 2001, 2000 and 1999, respectively. The decrease in fiscal year 2001 relates to the payment of a dividend to U-Haul partially offset by increased earnings. The increase in fiscal year 2000 was due to earnings.
Property and Casualty RepWest maintains a diversified securities investment portfolio, primarily in bonds at varying maturity levels with 88.0% of the fixed-income securities consisting of investment grade securities. The maturity distribution is designed to provide sufficient liquidity to meet future cash needs. Current liquidity remains strong, with current invested assets equal to 81.8% of total liabilities.
The liability for reported and unreported losses are based upon both RepWest's historical and industry averages. Unpaid loss adjustment expenses are based on historical ratios of loss adjustment expenses paid to losses paid. Unpaid loss and loss expenses are not discounted.
RepWest's stockholder's equity was $192.1 million, $208.5 million and $211.4 million at December 31, 2000, 1999 and 1998, respectively. The decrease from 1999 to 2000 is a result of an operating loss and a change in market value for the available for sale investment portfolio. RepWest considers current stockholder's equity to be adequate to support future growth and absorb unforeseen risk events. RepWest does not use debt or equity issues to increase capital and therefore has no exposure to capital market conditions.
Life Insurance Oxford's stockholder's equity was $99.8 million, $88.1 million and $93.6 million in 2000, 1999 and 1998, respectively. The increase from 1999 to 2000 is a result of earnings and change in market value for the available for sale investment portfolio. The decrease from 1998 to 1999 was due to the change in market value for the available for sale investment portfolio offset by earnings. Oxford did not pay dividends to its parent during 2000, 1999 or 1998.
Insurance Operations - -------------------- Applicable laws and regulations of the State of Arizona require RepWest and Oxford to maintain minimum capital determined in accordance with statutory accounting practices. Such amount is $1.0 million and $0.4 million, for RepWest and Oxford, respectively. In addition, the amount of dividends that can be paid to stockholders by insurance companies domiciled in the State of Arizona is limited. Any dividend in excess of the limit requires prior regulatory approval. Statutory surplus which can be distributed as dividends without regulatory approval is $11.7 million and $0.7 million for RepWest and Oxford, respectively at December 31, 2000. These restrictions are not expected to have a material adverse effect on the ability of the Company to meet its cash obligations. Oxford issued a surplus note to AMERCO on December 31, 1998 for $10.0 million. Approval by the Arizona Department of Insurance is required prior to payment of principal and interest.
Credit Agreements - ----------------- AMERCO's operations are funded by various credit and financing arrangements, including unsecured long-term borrowings, unsecured medium-term notes and revolving lines of credit with domestic and foreign banks. To finance its fleet of trucks and trailers, U-Haul routinely enters into sale and leaseback transactions. As of March 31, 2001, AMERCO had $1,156.8 million in total notes and loans outstanding and unutilized committed lines of credit of approximately $94.9 million.
Certain of AMERCO's credit agreements contain restrictive financial and other covenants, including, among others, covenants with respect to incurring additional indebtedness, issuing mandatory repayment preferred stock, maintaining certain financial ratios and placing certain additional liens on its properties and assets. At March 31, 2001, AMERCO was in compliance with these covenants.
Reference is made to Note 5 in Item 8 of Notes to Consolidated Financial Statements.
Results of Operations - Consolidated - ------------------------------------
Consolidated Rental Revenue Rental revenue, net of commission expense was $1,205.0 million, $1,150.5 million, and $1,074.2 million in fiscal years 2001, 2000 and 1999, respectively. Details by material segment follow:
Moving and Storage Operations Rental revenue was $1,202.4 million, $1,148.2 million and $1,072.1 million in fiscal years 2001, 2000 and 1999, respectively. The increase from fiscal year 2000 to fiscal year 2001 is due to an increase in one way transactions with an improved average dollar per transaction on one way rentals as well as growth in transactions in trailer rentals and support rental items. The increase from fiscal year 1999 to fiscal year 2000 was primarily due to the growth in truck rental revenues which benefited from transactional growth and reflects a higher average revenue per transaction.
Real Estate Operations Rental revenue, before intercompany eliminations, were $71.9 million, $73.4 million and $74.0 million in fiscal years 2001, 2000 and 1999, respectively. Intercompany rental revenue was $71.1 million, $71.0 million and $71.9 million in fiscal years 2001, 2000 and 1999, respectively. The decrease in fiscal year 2001 is related to the sale of properties to a related party while rental revenue was consistent between fiscal year 1999 and fiscal year 2000.
Consolidated Net Sales Net sales revenues were $194.3 million, $188.8 million and $181.3 million in fiscal years 2001, 2000 and 1999, respectively. Revenue growth from the sale of moving support items (i.e. boxes, etc.) and propane resulted in the increase for each year.
Consolidated Premiums Premium revenues, after intercompany eliminations, were $323.2 million, $262.1 million and $226.8 million in fiscal years 2001, 2000 and 1999, respectively. Details by material segment follow:
Property and Casualty Premium revenues, before intercompany eliminations, were $218.1 million, $173.8 million and $145.3 million for the years ended December 31, 2000, 1999 and 1998, respectively. General agency premiums were $64.3 million, $17.8 million and $6.5 million for the years ended December 31, 2000, 1999 and 1998, respectively. The increase from 1999 to 2000 was the result of two new agency programs. Assumed treaty reinsurance premiums were $83.2 million, $80.7 million and $51.2 million for the years ended December 31, 2000, 1999 and 1998, respectively. Rental industry revenues were $43.3 million, $50.3 million and $66.6 million for the years ended December 31, 2000, 1999 and 1998, respectively. This decline was caused by cost measures implemented on the U-Haul rental industry Business Auto General Liability Policy.
Life Insurance Premium revenues, before intercompany eliminations, were $112.6 million, $96.4 million and $94.5 million for the years ended December 31, 2000, 1999 and 1998, respectively. Oxford increased Medicare supplement premiums through direct writings and the acquisition of Christian Fidelity Life Insurance Company (CFLIC); these actions increased premiums by $12.5 million and $19.1 million in 2000 and 1999, respectively. Premiums from Oxford's life insurance lines decreased $1.7 million and increased $1.1 million from 2000 and 1999, respectively due to production fluctuations from year to year. In the area of credit insurance, Oxford increased direct writings as well as reduced the amount ceded to outside reinsurers. These factors contributed to a $3.3 million and $6.7 million increase in premium from 2000 and 1999, respectively. Annuitizations increased by $1.1 million and decreased $3.0 million in 2000 and 1999, respectively. Premiums decreased $5.3 million in 1999 due to the sale of NAFCIC. Other health insurance premiums increased $1.0 million in 2000 due to a higher reinsurance retention level and decreased $0.5 million in 1999 due to the elimination of certain NAI health lines.
Consolidated Net Investment and Interest Income Net investment and interest income was $91.2 million, $82.2 million and $73.4 million in fiscal years 2001, 2000 and 1999, respectively. Details by material segment follow:
Moving and Storage Operations Interest income was $27.9 million, $19.5 million and $12.9 million in fiscal years 2001, 2000 and 1999, respectively. The increase in fiscal year 2001 is mainly related to increased storage loan activity. The increase in interest during fiscal year 2000 reflects higher average note receivable balances.
Real Estate Operations Net investment and interest income was $11.0 million, $7.0 million and $4.5 million in fiscal years 2001, 2000 and 1999, respectively. The increase in fiscal year 2001 is related to increased investments. The increase in fiscal year 2000 is due to interest income received on notes receivable.
Property and Casualty Net investment income was $29.1 million, $33.0 million and $35.8 million for the years ended December 31, 2000, 1999 and 1998, respectively. The reductions are attributable to decreased gains and lower annual average invested assets, as well as the write down of $3.0 million of fixed maturity investments during 2000.
Life Insurance Net investment income was $22.2 million, $21.5 million and $20.1 million for the years ended December 31, 2000, 1999 and 1998, respectively. This increase is due to improved interest rate spreads on the retirement savings products offset by write downs of $3.5 million of fixed maturity investments during 2000.
Consolidated Operating Expenses Operating expenses were $998.8 million, $919.1 million and $877.6 million in fiscal years 2001, 2000 and 1999, respectively. Details by material segment follow:
Moving and Storage Operations Operating expenses, before intercompany eliminations, were $986.5 million, $931.1 million and $893.0 million in fiscal years 2001, 2000 and 1999, respectively. The increased expense in fiscal year 2001 is due to increased personnel cost, higher repair expense, a substantial lawsuit settlement and other administrative costs. Also, the addition of storage rooms will initially cause an increase in operating expenses without corresponding increases in earnings until the properties reach a stabilized level of occupancy. The increase in fiscal year 2000 is due to the increased cost of liability insurance, due to transactional growth, increased personnel costs and other administrative costs.
Real Estate Operations Operating expenses, before intercompany eliminations, were $0.4 million, $4.0 million and $6.2 million in fiscal years 2001, 2000 and 1999, respectively. The decrease in fiscal year 2001 is due to an increase in intercompany lease payments which lowers their operating expense. Real Estate benefited from a reduction in intercompany management fees charged by an affiliated segment company during fiscal year 2000 compared to the prior two years.
Property and Casualty Operating expenses, before intercompany eliminations, were $56.7 million, $35.0 million and $35.6 million for the years ended December 31, 2000, 1999 and 1998, respectively. The increase is due to commission expenses associated with the growth in written premium and a $4.6 million decrease in the capitalization of deferred acquisition costs for the year ended December 2000 as well as general and administrative expenses required to support the new business expansion. Commission expenses were $33.1 million, $19.1 million and $18.8 million for the years ended December 2000, 1999 and 1998, respectively. Lease expenses increased to $2.1 million, $1.9 million and $1.3 million for the years ended December 2000, 1999 and 1998, respectively. All other underwriting expenses consisted of $21.4 million, $13.9 million and $15.5 million for the years ended December 2000, 1999 and 1998, respectively.
Life Insurance Operating expenses, before intercompany eliminations, were $29.0 million, $23.1 million and $20.4 million for the years ended December 31, 2000, 1999 and 1998, respectively. Commissions have increased $7.3 million and $9.1 million in 2000 and 1999, respectively, primarily due to the increase in Medicare supplement premiums. General and administrative expenses net of fees collected decreased $1.4 million and $0.5 million in 2000 and 1999, respectively.
Consolidated Cost of Sales Cost of sales was $117.2 million, $112.0 million and $106.8 million in fiscal years 2001, 2000 and 1999, respectively. Increased material costs and a higher sales volume related to moving support items contributed to the increases in both fiscal years 2001 and 2000.
Consolidated Benefits and Losses Benefits and losses were $283.4 million, $209.6 million and $176.6 million in fiscal years 2001, 2000 and 1999, respectively. Details by material segment follow:
Property and Casualty Benefits and losses incurred were $204.1 million, $150.5 million and $118.9 million for the years ended December 31, 2000, 1999 and 1998, respectively. The increase from 1999 to 2000 resulted from two new general agency programs and reserve strengthening in existing rental industry, assumed treaty reinsurance and general agency programs. The increase from 1998 to 1999 resulted from the increased assumed treaty reinsurance claims as well as an arbitration loss. The arbitration loss caused $6.3 million of previously ceded reserves to be brought back into RepWest's retention.
Life Insurance Benefits incurred were $79.2 million, $59.0 million and $57.7 million for the years ended December 31, 2000, 1999 and 1998, respectively. The increase is primarily due to Medicare supplement benefits incurred, which accounts for $16.7 million and $21.2 million of benefit increases in 2000 and 1999, respectively. These increases are due to larger volumes of business and poor experience on blocks no longer actively marketed. Credit insurance benefits increased from $2.1 million and $2.8 million in 2000 and 1999, respectively due to the increase in volume written and retained. Benefits from other health lines increased $2.5 million and $0.5 million in 2000 and 1999, respectively as volume increased and loss experience worsened. Annuity and life benefits decreased $1.1 million and $2.1 million in 2000 and 1999, respectively. The sale of NAFCIC reduced benefits $0.9 million from 1998.
Consolidated Amortization of Deferred Acquisition Costs Amortization of deferred acquisition costs (DAC) and the value of business acquired (VOBA) was $35.9 million, $35.0 million and $31.7 million in fiscal years 2001, 2000 and 1999, respectively. DAC consists of commissions and other policy acquisition costs, which vary with and are primarily related to the production of new business. The prior year end commissions and other related expenses are recognized ratably over the remainder of the policy year. Details by material segment follow:
Property and Casualty The prior year-end commissions and other related expenses are amortized over the following year. The amortization expense was $16.3 million, $13.4 million and $7.4 million for the years ended December 31, 2000, 1999 and 1998, respectively. The increase from 1999 to 2000 is mainly due to the amortization of Assumed Treaty expenses that were deferred in the 1999 year. The increase from 1998 to 1999 is due mainly to RepWest's subsidiary company's DAC expense, which increased to $3.8 million from $0.2 million in 1998. This was due to a change in classification of the amortization expense of the subsidiary to RepWest capitalization.
Life Insurance The VOBA asset relates to the future profits of insurance policies in force at the date of the NAI and CFLIC acquisitions. Amortization of DAC and VOBA was $19.6 million, $21.6 million and $24.3 million for the years ended December 31, 2000, 1999 and 1998, respectively. These costs are amortized as the premium is earned over the term of the policy. Amortization decreased $2.0 million from 1999 due to the annuity and credit segments and decreased $3.0 million from 1998 due to the sale of NAFCIC.
Consolidated Lease Expense Lease expense was $178.5 million, $136.0 million and $118.7 million in fiscal years 2001, 2000 and 1999, respectively. Details by material segment follow:
Moving and Storage Operations Lease expense was $166.2 million, $132.4 million and $118.4 million in fiscal years 2001, 2000 and 1999, respectively. The continued increase reflects additional leasing activity of rental equipment.
Real Estate Operations Lease expense before intercompany eliminations, for real estate operations was $11.6 million, $3.0 million and $0.1 million for the fiscal years 2001, 2000 and 1999, respectively. The continued increase in fiscal year 2001 and fiscal year 2000 over the prior years reflects payments under an operating lease facility with a number of financial institutions whereby the Company is both lessee and construction agent developing storage properties.
Consolidated Depreciation Expense, net Depreciation expense, net was $88.1 million, $87.6 million and $73.1 million in fiscal years 2001, 2000 and 1999, respectively. Details by material segment follow:
Moving and Storage Operations Depreciation expense, net was $82.7 million, $79.0 million and $61.0 million in fiscal years 2001, 2000 and 1999, respectively. The increase in fiscal years 2001 and 2000 reflects an increase in depreciation expense on the rental truck fleet.
Real Estate Operations Depreciation expense, net was $5.3 million, $8.6 million and $12.0 million in fiscal years 2001, 2000 and 1999, respectively. The decrease in fiscal year 2001 reflects an increase in gains from the disposition of property, plant and equipment. The decrease in fiscal year 2000 reflects an increase in gains from the disposition of property, plant and equipment and a decrease in depreciation on buildings and non-rental equipment.
Consolidated Earnings from Operations Earnings from operations were $111.8 million, $184.3 million and $171.3 million in fiscal years 2001, 2000 and 1999, respectively. Details by material segment follow:
Moving and Storage Operations Earnings from operations, before intercompany eliminations, were $73.7 million, $102.0 million and $87.0 million in fiscal years 2001, 2000 and 1999, respectively. The decrease in fiscal year 2001 is due to increased transactions, offset by increased operating and lease expenses. In fiscal year 2000, increased rental transactions, offset by corresponding expenses, contributed to the earnings gain.
Real Estate Operations Earnings from operations, before intercompany eliminations, were $65.8 million, $64.7 million and $60.3 million in fiscal years 2001, 2000 and 1999, respectively. The increase in fiscal year 2001 is mainly related to higher net investment interest income. A decrease in intercompany management fees charged contributed to the earnings increase for fiscal year 2000.
Property and Casualty Earnings (loss) from operations were $(29.9) million, $7.9 million and $19.1 million for the years ended December 31, 2000, 1999 and 1998, respectively. The decrease in 2000 was due to reserve strengthening and losses on two new general agency programs as well as the write downs of fixed maturity investments whose declines in value were determined to be other than temporary. The 1998 to 1999 decrease resulted mainly from RepWest's writing off the 1995 American Bonding receivable, lower than forecasted premium volume in 1999 and higher than expected losses on the agricultural business.
Life Insurance Earnings from operations were $7.0 million, $14.2 million and $12.2 million for the years ended December 31, 2000, 1999 and 1998, respectively. The decrease in 2000 from both 1999 and 1998 was due to write downs of fixed maturity investments whose declines in value were determined to be other than temporary and poor Medicare supplement loss experience. The increase in earnings from 1998 to 1999 was due to improved investment returns and improved loss experience on the credit insurance business.
Consolidated Interest Expense Interest expense was $87.8 million, $81.5 million and $73.7 million in fiscal years 2001, 2000 and 1999, respectively. The increase can be attributed to an increase in the average cost of debt in fiscal year 2001 over the past two fiscal years. The average debt level outstanding continued to increase in fiscal year 2001 compared to fiscal years 2000 and 1999.
Consolidated Extraordinary Loss on the Extinguishment of Debt
During fiscal year 2001, AMERCO extinguished $100.0 million of 6.89% Bond Backed Asset Trust certificates (BATs) originally due in fiscal year 2011 and $25.0 million of 6.7% Medium-Term notes originally due in fiscal year 2009. This resulted in an extraordinary loss of $2.1 million, net of tax of $1.2 million ($0.10 per share).
During fiscal year 2000, AMERCO extinguished $100.0 million of 6.65% Bond Backed Asset Trust certificates (BATs) originally due in fiscal year 2030 and $50.0 million of 7.05% to 7.10% Medium-Term notes originally due in fiscal year 2007. This resulted in an extraordinary loss of $0.3 million, net of tax of $0.2 million ($0.02 per share).
Consolidated Earnings As a result of the foregoing, pretax earnings totaled $24.0 million, $102.7 million and $97.6 million in fiscal years 2001, 2000 and 1999, respectively. After providing for income taxes, earnings from operations were $15.1 million, $65.8 million and $62.5 million in fiscal years 2001, 2000 and 1999, respectively. Following deductions for an extraordinary loss from the early extinguishment of debt, net earnings were $13.0 million, $65.5 million and $62.5 million in fiscal years 2001, 2000 and 1999, respectively.
Quarterly Results The table on page 24 presents unaudited quarterly results for the eight quarters in the period beginning April 1, 1999 and ending March 31, 2001. The Income Statement amounts for the quarter ended December 31, 2000 have been restated to increase the net loss by $.10 per share due to necessary revisions of certain fixed asset transactions. The restated loss per share was $1.05 for the third quarter fiscal year 2001 as compared to $.95 as reported. AMERCO believes that all necessary adjustments have been included in the amounts stated below to present fairly, and in accordance with generally accepted accounting principles, the selected quarterly information when read in conjunction with the consolidated financial statements incorporated herein by reference. U-Haul moving and storage operations are seasonal and proportionally more of AMERCO's revenues and net earnings from its U-Haul moving and storage operations are generated in the first and second quarters of each fiscal year (April through September). The operating results for the periods presented are not necessarily indicative of results for any future period.
Quarter Ended ---------------------------------------------- Jun 30 Sep 30 Dec 31 Mar 31 2000 2000 2000 2001 (Restated) ---------------------------------------------- (in thousands, except share and per share data) Total revenues $ 459,437 502,906 425,977 425,318 Earnings from operations before extraordinary loss on early extinguishment of debt (4) $ 37,612 41,233 (17,109) (46,650) Net earnings (loss) $ 37,612 41,233 (19,230) (46,650) Weighted average common shares outstanding Basic 21,718,988 21,489,970 21,406,688 21,326,015 Earnings (loss) from operations before extraordinary loss on early extinguishment of debt per common share (1) (4) $ 1.58 1.77 (0.95) (2.34) Earnings (loss) per common share Basic $ 1.58 1.77 (1.05) (2.34)
Quarter Ended ---------------------------------------------- Jun 30 Sep 30 Dec 31 Mar 31 1999 1999 1999 2000 ---------------------------------------------- (in thousands, except share and per share data) Total revenues $ 439,513 462,926 382,597 398,581 Earnings from operations before extraordinary loss on early extinguishment of debt (2) $ 42,307 42,127 (9,325) (9,284) Net earnings (loss) $ 42,307 42,127 (9,325) (9,618) Weighted average common shares outstanding Basic 21,953,199 21,964,452 21,975,889 21,844,020 Diluted 22,953,199 22,131,119 - - Earnings (loss) from operations before extraordinary loss on early extinguishment of debt per common share (1) (2) (3) $ 1.77 1.77 (0.57) (0.58) Earnings (loss) per common share Basic $ 1.77 1.77 (0.57) (0.60) Diluted $ 1.70 1.76 - -
(1) Net earnings (loss) per common share amounts were computed after giving effect to the dividends on AMERCO's Preferred Stock.
(2) During fiscal year 2000, AMERCO extinguished $100.0 million of 6.65% BATs originally due in fiscal year 2030 and $50.0 million of 7.05% to 7.10% Medium-Term Notes originally due in fiscal year 2007. This resulted in an extraordinary loss of $0.3 million, net of tax of $0.2 million ($0.02 per share).
(3) Reflects the redemption of $25 million shares of Series B preferred stock in fiscal year 2000.
(4) During fiscal year 2001, AMERCO extinguished $100.0 million of 6.89% BATs originally due in fiscal year 2011 and $25.0 million of 6.71% Medium-Term Notes originally due in fiscal year 2009. This resulted in an extraordinary loss of $2.1 million, net of tax of $1.2 million ($0.10 per share).
Stockholder Litigation AMERCO has deducted for income tax purposes approximately $372.0 million of the payments made to former shareholders in a stockholder lawsuit. While AMERCO believes that such income tax deductions are appropriate, there can be no assurance that such deductions ultimately will be allowed in full. Reference is made to Note 15 in Notes to Consolidated Financial Statements in Item 8 for a discussion of the stockholder litigation.
Other New pronouncements issued by the Financial Accounting Standards Board adopted during the year are not material to the consolidated financial statements of AMERCO. Further, pronouncements with future effective dates are either not applicable or not material to the consolidated financial statements of AMERCO.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk In the normal course of business, AMERCO is exposed to fluctuations in interest rates. AMERCO manages such exposure by the use of a variety of derivative financial instruments when deemed prudent. AMERCO does not enter into leveraged financial transactions or use derivative financial instruments for trading purposes. The exposure to market risk for changes in interest rates relates primarily to debt obligations. AMERCO's objective is to mitigate the impact of changes in interest rates on its variable rate debt. AMERCO uses interest rate swap agreements to provide for matching the gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of hedged asset or liability attributable to the hedged risk or the earnings effect of the hedged forecasted transaction. See Note 5 of Notes to Consolidated Financial Statements in Item 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Report of Independent Accountants and Consolidated Financial Statements of AMERCO, including the notes to such statements and the related schedules, are set forth on pages 31 through 80 and are thereby incorporated herein.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
The Registrants have had no disagreements with their independent accountants in regard to accounting and financial disclosure matters and have not changed their independent accountants during the two most recent fiscal years.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS
Information regarding (i) directors and executive officers of AMERCO is set forth under the captions "Election of Directors" and "Executive Officers of the Company", and (ii) compliance with Section 16(a) is set forth under the caption "Section 16(a) Beneficial Ownership Reporting Compliance" in AMERCO's Proxy Statement relating to the 2001 Annual Meeting of Stockholders (the "2001 Proxy Statement") portions of which are incorporated by reference into this Form 10-K Report, which will be filed with the Securities and Exchange Commission in accordance with Rule 14a-6 promulgated under the Securities Exchange Act of 1934, as amended. With the exception of the foregoing information and other information specifically incorporated by reference into this report, the 2001 Proxy Statement is not being filed as a part hereof.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding executive compensation is set forth under the caption "Executive Compensation" in the 2001 Proxy Statement, which information is incorporated herein by reference; provided, however, that the "Board Report on Executive Compensation" and the "Performance Graph" contained in the 2001 Proxy Statement are not incorporated by reference herein.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding security ownership of certain beneficial owners and management is set forth under the caption "Security Ownership of Certain Beneficial Owners and Management" in the 2001 Proxy Statement, which information is incorporated herein by reference.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions of management is set forth under the captions "Certain Relationships and Related Transactions" in the 2001 Proxy Statement, which information is incorporated herein by reference.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report: Page No. ------- 1. Financial Statements
Report of Independent Accountants 31 Consolidated Balance Sheets - March 31, 2001 and 2000 32 Consolidated Statements of Earnings - Years ended March 31, 2001, 2000 and 1999 34 Consolidated Statements of Changes in Stockholders' Equity - Years ended March 31, 2001, 2000 and 1999 36 Consolidated Statements of Comprehensive Income - Years ended March 31, 2001, 2000 and 1999 38 Consolidated Statements of Cash Flows - Years ended March 31, 2001, 2000 and 1999 39 Notes to Consolidated Financial Statements 41
2. Additional Information
Summary of Earnings of Independent Trailer Fleets 73 Notes to Summary of Earnings of Independent Trailer Fleets 74
3. Financial Statement Schedules required to be filed by Item 8 and Paragraph (d) of this Item 14
Condensed Financial Information of Registrant -- Schedule I 76 Supplemental Information (For Property-Casualty Insurance Underwriters) -- Schedule V 80
All other schedules are omitted as the required information is not applicable or the information is presented in the financial statements or related notes thereto.
(b) No reports on Form 8-K were filed during the last quarter of the period covered by this report.
(c) Exhibits
Exhibit No. Description ----------- -----------
2.1 Order Confirming Plan (1) 2.2 Second Amended and Restated Debtor's Plan of Reorganization Proposed by Edward J. Shoen (1) 3.1 Restated Articles of Incorporation (2) 3.2 Restated By-Laws of AMERCO as of August 27, 1996 (3) 4.1 Debt Securities Indenture dated May 1, 1996 (1) 4.2 First Supplemental Indenture, dated as of May 6, 1996 (4) 4.3 Rights Agreement, dated as of August 7, 1998 (13) 4.5 Second Supplemental Indenture, dated as of October 22, 1997 (11) 4.6 Calculation Agency Agreement (11) 4.7 6.65%-AMERCO Series 1997 A Bond Backed Asset Trust Certificates ("BATs") due October 15, 1999 (11) 4.8 Indenture dated September 10, 1996 (9) 4.9 First Supplemental Indenture dated September 10, 1996 (9) 4.10 Senior Indenture dated April 1, 1999 (14) 4.11 First Supplemental Indenture dated April 5, 1999 (14) 4.12 Second Supplemental Indenture dated February 4, 2000 (15) 10.1* AMERCO Employee Savings, Profit Sharing and Employee Stock Ownership Plan 10.1A* First Amendment to the AMERCO Employee Savings, Profit Sharing and Employee Stock Ownership Plan 10.2 U-Haul Dealership Contract (5) 10.3 Share Repurchase and Registration Rights Agreement with Paul F. Shoen (5) 10.4 AMERCO Stock Option and Incentive Plan (5) 10.5 ESOP Loan Credit Agreement (6) 10.6 ESOP Loan Agreement (6) 10.7 Trust Agreement for the AMERCO Employee Savings, Profit Sharing and Employee Stock Ownership Plan (6) 10.8 Amended Indemnification Agreement (6) 10.9 Indemnification Trust Agreement (6) 10.10 Promissory Note between SAC Holding Corporation and a subsidiary of AMERCO (12) 10.11 Promissory Notes between Four SAC Self-Storage Corporation and a subsidiary of AMERCO (12) 10.12 Management Agreement between Three SAC Self-Storage Corporation and a subsidiary of AMERCO (12) 10.13 Management Agreement between Four SAC Self-Storage Corporation and a subsidiary of AMERCO (12) 10.14 Agreement, dated October 17, 1995, among AMERCO, Edward J. Shoen, James P. Shoen, Aubrey K. Johnson, John M. Dodds and William E. Carty (8) 10.15 Directors' Release, dated October 17, 1995, executed by Edward J. Shoen, James P. Shoen, Aubrey K. Johnson, John M. Dodds and William E. Carty in favor of AMERCO (8) 10.16 AMERCO Release, dated October 17, 1995, executed by AMERCO in favor of Edward J. Shoen, James P. Shoen, Aubrey K. Johnson, John M. Dodds and William E. Carty (8) 10.21 Management Agreement between Five SAC Self-Storage Corporation and a subsidiary of AMERCO (16) 10.22 Management Agreement between Eight SAC Self-Storage Corporation and a subsidiary of AMERCO (16) 10.23 Management Agreement between Nine SAC Self-Storage Corporation and a subsidiary of AMERCO (16) 10.24 Management Agreement between Ten SAC Self-Storage Corporation and a subsidiary of AMERCO (16) 10.25 Management Agreement between Six-A SAC Self-Storage Corporation and a subsidiary of AMERCO (17) 10.26 Management Agreement between Six-B SAC Self-Storage Corporation and a subsidiary of AMERCO (17)
* Indicates compensatory plan arrangement
(c) Exhibits, continued
10.27 Management Agreement between Six-C SAC Self-Storage Corporation and a subsidiary of AMERCO (17) 10.28 Management Agreement between Eleven SAC Self-Storage Corporation and a subsidiary of AMERCO (17) 10.29 Management Agreement between Twelve SAC Self-Storage Corporation and a subsidiary of AMERCO (18) 10.30 Management Agreement between Thirteen SAC Self-Storage Corporation and a subsidiary of AMERCO (18) 10.31 Management Agreement between Fourteen SAC Self-Storage Corporation and a subsidiary of AMERCO (18) 10.32 Management Agreement between Fifteen SAC Self-Storage Corporation and a subsidiary of AMERCO (19) 10.33 Management Agreement between Sixteen SAC Self-Storage Corporation and a subsidiary of AMERCO (19) 10.34 Management Agreement between Seventeen SAC Self-Storage Corporation and a subsidiary of AMERCO 12 Statements Re: Computation of Ratios 21 Subsidiaries of AMERCO 23 Consent of Independent Accountants ________________
(1) Incorporated by reference to AMERCO's Registration Statement on Form S-3, Registration no. 333-1195. (2) Incorporated by reference to AMERCO's Quarterly Report on Form 10-Q for the quarter ended December 31, 1992, file no. 1-11255. (3) Incorporated by reference to AMERCO's Quarterly Report on Form 10-Q for the quarter ended September 30, 1996, file no. 1-11255. (4) Incorporated by reference to AMERCO's Current Report on Form 8-K, dated May 6, 1996, file no. 1-11255. (5) Incorporated by reference to AMERCO's Annual Report on Form 10-K for the year ended March 31, 1993, file no. 1-11255. (6) Incorporated by reference to AMERCO's Annual Report on Form 10-K for the year ended March 31, 1990, file no. 1-11255. (7) Incorporated by reference to AMERCO's Quarterly Report on Form 10-Q for the quarter ended September 30, 1994, file no. 1-11255. (8) Incorporated by reference to AMERCO's Quarterly Report on Form 10-Q for the quarter ended September 30, 1995, file no. 1-11255. (9) Incorporated by reference to AMERCO's Current Report on Form 8-K dated September 6, 1996, file no. 1-11255. (10) Incorporated by reference to AMERCO's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997, file no. 1-11255. (11) Incorporated by reference to AMERCO's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997, file no. 1-11255. (12) Incorporated by reference to AMERCO's Annual Report on Form 10-K for the year ended March 31, 1997, file no. 1-11255. (13) Incorporated by reference to AMERCO's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998, file no. 1-11255. (14) Incorporated by reference to AMERCO's Current Report on Form 8-K dated April 5, 1999, file no. 1-11255. (15) Incorporated by reference to AMERCO's Current Report on Form 8-K dated February 4, 2000, file no. 1-11255. (16) Incorporated by reference to AMERCO's Annual Report on Form 10-K for the year ended March 31, 1999, file no. 1-11255. (17) Incorporated by reference to AMERCO's Annual Report on Form 10-K for the year ended March 31, 2000, file no. 1-11255. (18) Incorporated by reference to AMERCO's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000, file no. 1-11255. (19) Incorporated by reference to AMERCO's Quarterly Report on Form 10-Q for the quarter ended December 31, 2000, file no. 1-11255.
REPORT OF INDEPENDENT ACCOUNTANTS ---------------------------------
To the Board of Directors and Stockholders of AMERCO
In our opinion, the consolidated financial statements listed in the index appearing under Item 14(a)(1) on page 28 of this Form 10-K present fairly, in all material respects, the financial position of AMERCO and its subsidiaries at March 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 2001, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedules listed in the index appearing under Item 14(a)(3) on page 28 present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These consolidated financial statements and financial statement schedules are the responsibility of the Company's management; our responsibility is to express an opinion on these consolidated financial statements and financial statement schedules based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 1 to the consolidated financial statements, the Company implemented Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" in fiscal 1999.
Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The Summary of Earnings of Independent Trailer Fleets included on pages 72 through 73 of this Form 10-K is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
PricewaterhouseCoopers LLP
Phoenix, Arizona June 29, 2001 AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Balance Sheets
March 31,
Assets 2001 2000 -------------------------- (in thousands)
Cash and cash equivalents $ 52,778 48,435 Trade receivables, net 252,890 197,992 Notes and mortgage receivables, net 65,531 49,866 Inventories, net 84,005 84,614 Prepaid expenses 14,416 17,822 Investments, fixed maturities 952,482 890,629 Investments, other 464,958 314,890 Deferred policy acquisition costs 99,807 88,402 Other assets 34,553 49,913 -------------------------
Property, plant and equipment, at cost: Land 197,281 197,956 Buildings and improvements 832,372 853,403 Furniture and equipment 282,362 263,694 Rental trailers and other rental equipment 181,159 210,472 Rental trucks 1,037,653 1,035,585 ------------------------- 2,530,827 2,561,110 Less accumulated depreciation 1,168,183 1,178,448 -------------------------
Total property, plant and equipment 1,362,644 1,382,662 -------------------------
Total Assets $ 3,384,064 3,125,225 =========================
The accompanying notes are an integral part of these consolidated financial statements.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Balance Sheets, continued
March 31,
Liabilities and Stockholders' Equity 2001 2000 ------------------------- (in thousands, except share and per share data) Liabilities: Accounts payable and accrued expenses $ 151,192 152,654 Notes and loans payable 1,156,848 1,137,840 Policy benefits and losses, claims and loss expenses payable 668,830 548,043 Liabilities from premium deposits 522,207 461,673 Cash overdraft 26,484 30,460 Other policyholders' funds and liabilities 79,172 70,207 Deferred income 24,546 29,641 Deferred income taxes 139,419 109,413 ------------------------- Total liabilities 2,768,698 2,539,931
Stockholders' equity: Serial preferred stock, with or without par value, 50,000,000 shares authorized - Series A preferred stock, with no par value, 6,100,000 shares authorized; 6,100,000 shares issued and outstanding as of March 31, 2001 and 2000 - - Series B preferred stock, with no par value, 100,000 shares authorized; none issued and outstanding as of March 31, 2001 and 2000 - - Serial common stock, with or without par value, 150,000,000 shares authorized - Series A common stock of $0.25 par value, 10,000,000 shares authorized; 5,762,495 shares issued as of March 31, 2001 and 2000 1,441 1,441 Common stock of $0.25 par value, 150,000,000 shares authorized; 36,487,505 issued as of March 31, 2001 and 2000 9,122 9,122 Additional paid-in capital 312,128 275,242 Accumulated other comprehensive income (40,709) (42,317) Retained earnings 755,174 755,172 Cost of common shares in treasury, net (20,321,363 and 19,840,613 shares as of March 31, 2001 and 2000, respectively) (406,617) (397,000) Unearned employee stock ownership plan shares (15,173) (16,366) ------------------------- Total stockholders' equity 615,366 585,294
Contingent liabilities and commitments _________________________
Total Liabilities and Stockholders' Equity $ 3,384,064 3,125,225 =========================
The accompanying notes are an integral part of these consolidated financial statements.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Earnings
Years ended March 31,
2001 2000 1999 ---------------------------------------- (in thousands)
Revenues Rental revenue $ 1,204,959 1,150,532 1,074,220 Net sales 194,320 188,816 181,273 Premiums 323,198 262,057 226,847 Net investment and interest income 91,161 82,212 73,372 ----------------------------------- Total revenues 1,813,638 1,683,617 1,555,712
Costs and expenses Operating expenses 998,794 919,093 877,566 Cost of sales 117,212 111,975 106,789 Benefits and losses 283,366 209,592 176,560 Amortization of deferred acquisition costs 35,946 34,987 31,721 Lease expense 178,458 136,044 118,742 Depreciation, net 88,091 87,647 73,066 ----------------------------------- Total costs and expenses 1,701,867 1,499,338 1,384,444
Earnings from operations 111,771 184,279 171,268
Interest expense 87,773 81,532 73,658 -----------------------------------
Pretax earnings 23,998 102,747 97,610
Income tax expense (8,912) (36,922) (35,101) ----------------------------------- Earnings from operations before extraordinary loss on early extinguishment of debt 15,086 65,825 62,509 Extraordinary loss on early extinguishment of debt, net (2,121) (334) - ----------------------------------- Net earnings $ 12,965 65,491 62,509 ===================================
The accompanying notes are an integral part of these consolidated financial statements.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Earnings, continued
Years ended March 31,
2001 2000 1999 ---------------------------------------- (in thousands, except share and per share data) Basic earnings per common share: Earnings from operations before extraordinary loss on early extinguishment of debt $ 0.10 2.39 2.07 Extraordinary loss on early extinguishment of debt, net (0.10) (0.02) - ---------------------------------- Net earnings $ 0.00 2.37 2.07 ==================================
Diluted earnings per common share: Earnings from operations before extraordinary loss on early extinguishment of debt $ 0.10 2.38 2.07 Extraordinary loss on early extinguishment of debt, net (0.10) (0.02) - ---------------------------------- Net earnings $ 0.00 2.36 2.07 ==================================
Weighted average common shares outstanding: Basic 21,486,370 21,934,390 21,937,686 ==================================== Diluted 21,486,370 22,226,057 23,940,623 ====================================
The accompanying notes are an integral part of these consolidated financial statements.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
Years ended March 31,
2001 2000 1999 --------------------------------------- (in thousands, except share and per share data)
Series A common stock of $0.25 par value: 10,000,000 shares authorized; 5,762,495 shares issued in 2001, 2000 and 1999 Beginning and end of year $ 1,441 1,441 1,441 ---------------------------------
Common stock of $0.25 par value: 150,000,000 shares authorized; 36,487,505 shares issued in 2001, 2000 and 1999 Beginning and end of year 9,122 9,122 9,122 ---------------------------------
Additional paid-in capital: Beginning of year 275,242 299,905 313,444 Repurchase of preferred stock - (25,000) (50,000) Gain on sale of property to related party, net 36,790 - 35,996 Issuance of common shares under leveraged employee stock ownership plan 96 337 465 --------------------------------- End of year 312,128 275,242 299,905 ---------------------------------
Accumulated other comprehensive income: Beginning of year (42,317) (17,740) (9,384) Foreign currency translation (7,252) (2,899) (6,736) Fair market value of cash flow hedge (1,185) 2,192 (3,631) Unrealized gain (loss) on investments 10,045 (23,870) 2,011 ---------------------------------
End of year (40,709) (42,317) (17,740) ---------------------------------
The accompanying notes are an integral part of these consolidated financial statements.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity, continued
Years ended March 31,
2001 2000 1999 --------------------------------------- (in thousands, except share and per share data) Retained earnings: Beginning of year 755,172 703,322 658,227 Net earnings 12,965 65,491 62,509 Preferred stock dividends paid: Series A ($2.13 per share for 2001, 2000 and 1999) (12,963) (12,964) (12,964) Series B ($27.14 and $97.44 per share for 2000 and 1999, respectively) - (677) (4,450) ---------------------------------
End of year 755,174 755,172 703,322 ---------------------------------
Less Treasury stock: Beginning of year 397,000 363,533 359,723 Net increase 9,617 33,467 3,810 ---------------------------------
End of year 406,617 397,000 363,533 ---------------------------------
Less Unearned employee stock ownership plan shares: Beginning of year 16,366 16,492 18,068 Purchase of shares 46 1,002 401 Repayments from loan (1,239) (1,128) (1,977) ---------------------------------
End of year 15,173 16,366 16,492 ---------------------------------
Total stockholders' equity $ 615,366 585,294 616,025 =================================
The accompanying notes are an integral part of these consolidated financial statements.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Comprehensive Income
Years ended March 31,
2001 2000 1999 -------------------------- (in thousands) Comprehensive income: Net earnings $ 12,965 65,491 62,509 Other comprehensive income Foreign currency translation (7,252) (2,899) (6,736) Fair market value of cash flow hedges (1,185) 2,192 (3,631) Unrealized gain (loss) on investments 10,045 (23,870) 2,011 --------------------------
Total comprehensive income $ 14,573 40,914 54,153 ==========================
The accompanying notes are an integral part of these consolidated financial statements.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended March 31,
2001 2000 1999 ---------------------------- (in thousands) Cash flows from operating activities: Net earnings $ 12,965 65,491 62,509 Depreciation and amortization 144,185 135,481 114,102 Provision for losses on accounts receivable 3,286 4,601 4,648 Net gain on sale of real and personal property (16,776) (8,705) (524) Gain on sale of investments 12,931 (873) (3,372) Changes in policy liabilities and accruals 54,921 15,326 (23,448) Additions to deferred policy acquisition costs (42,535) (31,804) (40,859) Net change in other operating assets and liabilities (42,924) 58,140 46,493 --------------------------- Net cash provided by operating activities 126,053 237,657 159,549
Cash flows from investing activities: Purchases of investments: Property, plant and equipment (358,917) (417,647) (298,495) Fixed maturities (122,863) (158,304) (213,107) Common stock (31,773) - (2,553) Preferred stock - (369) (21,700) Other asset investment (5,915) - - Real estate (5,938) (70) (334) Mortgage loans (24,084) (27,367) (93,243) Proceeds from sales of investments: Property, plant and equipment 157,091 242,699 105,526 Fixed maturities 152,761 133,915 223,114 Common stock - - 2,571 Preferred stock 372 968 3,538 Real estate 1,557 1,672 5,622 Mortgage loans 22,463 11,555 21,826 Changes in other investments 88,506 31,269 62,453 --------------------------- Net cash used by investing activities (126,740) (181,679) (204,782)
The accompanying notes are an integral part of these consolidated financial statements.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Cash Flows, continued
Years ended March 31,
2001 2000 1999 ---------------------------- (in thousands) Cash flows from financing activities: Net change in short-term borrowings 156,070 (146,836) 135,836 Proceeds from notes - 350,000 - Debt issuance costs (1,228) (8,285) (415) Leveraged Employee Stock Ownership Plan: Purchase of shares (46) (1,002) (401) Repayments from loan 1,239 1,128 1,977 Principal payments on notes (137,062) (180,072) (46,411) Repurchase of preferred stock - (25,000) (50,000) Extraordinary loss on early extinguishment of debt, net (2,121) (334) - Net change in cash overdraft (3,976) 2,291 6,755 Preferred stock dividends paid (12,963) (13,641) (17,414) Treasury stock acquisitions, net (9,617) (33,467) (3,810) Investment contract deposits 87,687 63,978 93,688 Investment contract withdrawals (72,953) (60,808) (61,673) ----------------------------
Net cash provided (used) by financing activities 5,030 (52,048) 58,132 ----------------------------
Increase (decrease) in cash and cash equivalents 4,343 3,930 12,899 Cash and cash equivalents at beginning of year 48,435 44,505 31,606 ---------------------------- Cash and cash equivalents at end of year $ 52,778 48,435 44,505 ============================
Summary of Non-cash investing and financing activity: An investment was received in exchange for the sale of storage properties from a related party. $ 98,530 - $ 99,685
The accompanying notes are an integral part of these consolidated financial statements.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AMERCO, a Nevada corporation (AMERCO), is the holding company for U-Haul International, Inc. (U-Haul), Amerco Real Estate Company (Real Estate), Republic Western Insurance Company (RepWest) and Oxford Life Insurance Company (Oxford). All references to a fiscal year refer to AMERCO's fiscal year ended March 31 of that year.
PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the parent corporation, AMERCO, and its wholly-owned subsidiaries. All material intercompany accounts and transactions of AMERCO and its subsidiaries have been eliminated.
RepWest and Oxford have been consolidated on the basis of calendar years ended December 31. Accordingly, all references to the years 2000, 1999, and 1998 and correspond to AMERCO's fiscal years 2001, 2000, and 1999, respectively.
The operating results and financial position of AMERCO's consolidated insurance operations are determined as of December 31 of each year. There were no effects related to intervening events between January 1 and March 31 of 2001, 2000, or 1999 that would materially affect the consolidated financial position or results of operations for the financial statements presented herein. See Note 20 of Notes to Consolidated Financial Statements for additional information regarding the insurance subsidiaries.
DESCRIPTION OF BUSINESS Moving and self-storage operations consist of the rental of trucks and trailers, sale of moving supplies, trailer hitches and propane and the rental of self-storage spaces to the do-it-yourself mover. Operations are under the registered tradename U-Haul REGISTERED TRADEMARK throughout the United States and Canada.
Real Estate owns approximately 90% of AMERCO's real estate assets, including U-Haul's Center and Storage locations. The remainder of the properties are owned by various U-Haul entities. Real Estate is responsible for managing all of the properties including the environmental risks of the properties. Real Estate is responsible for the purchase of all properties used by AMERCO or any of its subsidiaries. Real Estate also handles all of the dispositions (sale and lease) of unused real estate.
RepWest originates and reinsures property and casualty type insurance products for various market participants, including independent third parties, U-Haul's customers, independent dealers and AMERCO.
Oxford originates and reinsures annuities, credit life and disability, life insurance, and supplemental health products. Oxford also administers the self-insured employee health and dental plans for AMERCO.
FOREIGN CURRENCY The consolidated financial statements include the accounts of U-Haul Co. (Canada) Ltd., a subsidiary of U-Haul. The assets and liabilities, denominated in foreign currency, are translated into U.S. dollars at the exchange rate as of the balance sheet date. Revenue and expense amounts are translated at average monthly exchange rates. The related translation gains or losses are included in the Consolidated Statements of Changes in Stockholders' Equity and Consolidated Statements of Comprehensive Income.
ACCOUNTING ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results could differ from those estimates.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
CASH AND CASH EQUIVALENTS AMERCO considers liquid investments with an original maturity of three months or less to be cash equivalents (zero as of March 31, 2001 and 2000, respectively).
RECEIVABLES Accounts receivable include trade accounts from customers and dealers. RepWest and Oxford receivables include premiums and agents' balances due, net of commissions payable and amounts due from ceding reinsurers. Accounts receivable are reduced by amounts considered by management to be uncollectible based on historical collection loss experience and a review of the current status of existing receivables.
Notes and mortgage receivables include accrued interest and are reduced by discounts and amounts considered by management to be uncollectible.
INVENTORIES Inventories are valued at the lower of cost or market. Cost is primarily determined using the LIFO (last-in, first-out) method.
INVESTMENTS Fixed maturities consist of bonds and redeemable preferred stocks. Fair values for investments are based on quoted market prices, dealer quotes or discounted cash flows. Fixed maturities are classified as follows:
Held-to-maturity - recorded at cost adjusted for the amortization of premiums or accretion of discounts. Available-for-sale - recorded at fair value with unrealized gains or losses reported on a net basis in the Consolidated Statements of Changes in Stockholders' Equity unless such changes are deemed to be other than temporary. Gains and losses on the sale of these securities are reported as a component of revenues using the specific identification method. Trading portfolio - AMERCO does not currently maintain a trading portfolio. Mortgage loans & notes on real estate held by AMERCO's subsidiaries - at unpaid balances, net of allowance for possible losses and any unamortized premium or discount. Real estate - at cost less accumulated depreciation. Policy loans - at their unpaid balance.
Investment income is recognized as follows: Interest on bonds and mortgage loans & notes - recognized when earned. Dividends on common and redeemable preferred stocks - recognized on ex-dividend dates. Realized gains and losses on the sale of investments - recognized at the trade date and included in revenues using the specific identification method.
Short-term investments consist of other securities scheduled to mature within one year of their acquisition date. See Note 4 of Notes to Consolidated Financial Statements.
DEFERRED POLICY ACQUISITION COSTS Commissions and other costs which vary with and are primarily related to the production of new business, have been deferred.
Oxford - costs are amortized in relation to revenue such that profits are realized as a level percentage of revenue.
RepWest - costs are amortized over the related contract period which generally do not exceed one year.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are carried at cost and are depreciated on the straight-line and accelerated methods over the estimated useful lives of the assets. Building and non-rental equipment have estimated lives ranging from three to fifty-five years, while rental equipment have estimated lives ranging from one to twenty years. Maintenance is charged to operating expenses as incurred, while renewals and betterments are capitalized. Major overhaul costs are amortized over the estimated period benefited. Gains and losses on dispositions are netted against depreciation expense when realized. Interest costs incurred as part of the initial construction of assets are capitalized. Interest expense of $2,450,000, $1,359,000 and $909,000 was capitalized during fiscal years 2001, 2000 and 1999, respectively. During fiscal year 2001, based on an in-depth market analysis, U-Haul decreased the estimated salvage value and increased the useful lives of certain service vehicles, rental trucks and engines. The effect of the change increased net earnings for fiscal year 2001 by $1,490,000 ($0.07 per share). The adjustment reflects management's best estimate, based on information available, of the estimated salvage value and useful lives of these service vehicles, rental trucks and engines.
AMERCO reviews property, plant and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable through expected undiscounted future operating cash flows.
The carrying value of AMERCO's real estate that is no longer necessary for use in its current operations, and available for sale/lease, at March 31, 2001 and 2000, was approximately $27,691,000 and $27,732,000, respectively. Such properties available for sale are carried at cost, less accumulated depreciation, which is less than fair market value.
ENVIRONMENTAL COSTS Liabilities for future remediation costs are recorded when environmental assessments and remedial efforts, if applicable, are probable and the costs can be reasonably estimated. The liability is based on AMERCO's best estimate of undiscounted future costs. Certain recoverable environmental costs related to the removal of underground storage tanks or related contamination are capitalized and depreciated over the estimated useful lives of the properties. The capitalized costs improve the safety or efficiency of the property as compared to when the property was originally acquired or are incurred in preparing the property for sale.
FINANCIAL INSTRUMENTS AMERCO enters into interest rate swap agreements to reduce its floating interest rate exposure and does not use the agreements for trading purposes. Although AMERCO is exposed to credit loss for the interest rate differential in the event of nonperformance by the counterparties to the agreements, it does not anticipate nonperformance by the counterparties.
For the years ended March 31, 2001, 2000 and 1999, AMERCO recognized $16,000 and $27,000 as interest income and $89,000 as interest expense, respectively, representing the ineffectiveness of the cash flow hedging activity.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
AMERCO has mortgage receivables which potentially expose AMERCO to credit risk. The portfolio of notes is principally collateralized by mini-warehouse storage facilities and other residential and commercial properties. AMERCO has not experienced losses related to the notes from individual notes or groups of notes in any particular industry or geographic area. The estimated fair values were determined using the discounted cash flow method, using interest rates currently offered for similar loans to borrowers with similar credit ratings.
Fair value summary of note and mortgage receivables:
March 31, 2001 March 31, 2000 ---------------------- ---------------------- Carrying Estimated Carrying Estimated value fair value value fair value ---------------------- ---------------------- (in thousands) (in thousands) $ 15,214 18,484 $ 21,230 27,268 ======================= ======================
Other financial instruments that are subject to fair value disclosure requirements are carried in the financial statements at amounts that approximate fair value, unless elsewhere disclosed. See below, as well as Notes 4 and 5 of Notes to Consolidated Financial Statements.
AMERCO's financial instruments that are exposed to concentrations of credit risk consist primarily of temporary cash investments, trade receivables and notes receivable. AMERCO places its temporary cash investments with financial institutions and limits the amount of credit exposure to any one financial institution. Concentrations of credit risk with respect to trade receivables are limited due to the large number of customers and their dispersion across many different industries and geographic areas. As discussed in Note 2 of Notes to Consolidated Financial Statements, at March 31, 2001 and 2000, notes receivable are primarily due from one related party.
POLICY BENEFITS AND LOSSES, CLAIMS AND LOSS EXPENSES PAYABLE Liabilities for policy benefits payable on traditional life and certain annuity policies are established in amounts adequate to meet estimated future obligations on policies in force. These liabilities are computed using mortality and withdrawal assumptions which are based upon recognized actuarial tables and contain margins for adverse deviation. At December 31, 2000, interest assumptions used to compute policy benefits payable range from 2.5% to 9.25%.
The liability for annuity contracts, which are accounted for as investment contract deposits, consists of contract account balances that accrue to the benefit of the policyholders, excluding surrender charges. Carrying value of investment contract deposits were $522,207,000 and $461,673,000 at December 31, 2000 and 1999, respectively.
Liabilities for health and disability and other policy claims and benefits payable represent estimates of payments to be made on insurance claims for reported losses and estimates of losses incurred but not yet reported. These estimates are based on past claims experience and consider current claim trends as well as social and economic conditions.
RepWest's liability for reported and unreported losses are based on RepWest's historical and industry averages. The liability for unpaid loss adjustment expenses is based on historical ratios of loss adjustment expenses paid to losses paid. Amounts recoverable from reinsurers on unpaid losses are estimated in a manner consistent with the claim liability associated with the reinsured policy. Adjustments to the liability for unpaid losses and loss expenses as well as amounts recoverable from reinsurers on unpaid losses are charged or credited to expense in periods in which they are made.
RENTAL REVENUE U-Haul recognizes its share of rental revenue less commission on the accrual basis pursuant to contractual arrangements between AMERCO and its fleet owners, rental dealers and customers. See Note 10 of Notes to Consolidated Financial Statements for further discussion.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
PREMIUM REVENUE Credit life and disability, Medicare supplement and property-casualty gross premiums are earned on a pro rata basis over the term of the related contracts. The portion of premiums not earned at the end of the period is recorded as unearned premiums. Traditional life and annuity premiums are recognized as revenue when due from policyholders. Revenue for annuity contracts which are accounted for as investment contracts are included in net investment income as investment margins until the contractholder annuitizes, at which time the contractholder's fund balance is recognized as premium.
REINSURANCE Reinsurance premiums, commissions and expense reimbursements, related to ceded business, are accounted for on a basis consistent with those used in accounting for the original policies issued and the terms of the reinsurance contracts. Premiums ceded to other companies have been reported as a reduction of premium income. Assets and liabilities relating to ceded contracts are reported gross of the effects of reinsurance. See also "Policy Benefits and Losses, Claims and Loss Expenses Payable" above.
INCOME TAXES AMERCO files a consolidated federal income tax return with its subsidiaries. In addition to charging income for taxes paid or payable, the provision for income taxes reflects deferred income taxes resulting from changes in temporary differences between the tax bases of assets and liabilities and their reported amounts in the financial statements. The effect on deferred income taxes of a change in tax rates is recognized in income in the period that includes the enactment date.
ADVERTISING COSTS AMERCO expenses advertising costs as incurred. Advertising expense of $36,212,000, $34,772,000 and $33,567,000 was charged to operations for fiscal years 2001, 2000 and 1999, respectively.
NEW ACCOUNTING STANDARDS New pronouncements issued by the Financial Accounting Standards Board adopted during the year are not material to the consolidated financial statements of AMERCO. Further, pronouncements with future effective dates are either not applicable or not material to the consolidated financial statements of AMERCO.
EARNINGS PER SHARE Basic earnings per common share are computed based on the weighted average number of shares outstanding for the year and quarterly periods, excluding shares of the employee stock ownership plan that have not been committed to be released. Preferred dividends include undeclared or unpaid dividends of AMERCO. Net income is reduced for preferred dividends for the purpose of the calculation. The calculation of diluted earnings per share in fiscal years 2000 and 1999 included assumed conversions of the Series B preferred stock into common stock. In fiscal year 2001, the assumed conversions are not applicable. In fiscal year 2000, the assumed conversions had a dilutive effect; in fiscal year 1999 the assumed conversions had no material effect on the calculated earnings per share amount. See Notes 6 and 8 of Notes to Consolidated Financial Statements for further discussion.
FOURTH QUARTER RESULTS For the quarter ended March 31, 2001, the Company recorded a net loss of $46,650,000, compared to a net loss of $9,618,000 for the quarter ended March 31, 2000. The increased loss in 2001 was primarily due to a $19,300,000 decline in the insurance segment due to unprofitable lines of business, a $6,500,000 write-down of investments and a $10,300,000 loss from the supplement of litigation. The remaining loss was due to weather problems and other operating expenses impacting the moving and storage segment. In addition, third quarter 2001 financial information has been restated by the Company to increase net loss $0.10 per share, respectively, due to necessary revisions related to certain fixed asset transactions. The restated loss per share was $1.05 for the third quarter fiscal year 2001 as compared to $0.95 as reported. AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
COMPREHENSIVE INCOME Comprehensive income consists of net income, foreign currency translation adjustment, unrealized gains and losses on investments and fair market value of cash flow hedges.
FINANCIAL STATEMENT PRESENTATION Certain reclassifications have been made to the financial statements for the fiscal years ended 2000 and 1999 to conform with the current year's presentation.
2. RECEIVABLES, NET
A summary of trade receivables follows: March 31, ------------------- 2001 2000 ------------------- (in thousands)
Trade accounts receivable $ 21,201 17,296 Premiums and agents' balances in course of collection 87,641 73,536 Reinsurance recoverable 109,596 80,180 Accrued investment income 16,541 14,304 Independent dealer receivable 2,344 2,551 Other receivables 17,698 12,085 ------------------- 255,021 199,952 Less allowance for doubtful accounts 2,131 1,960 -------------------
$ 252,890 197,992 ===================
A summary of notes and mortgage receivables follows: March 31, ------------------ 2001 2000 ------------------ (in thousands) Notes receivable, including accrued interest from SAC Holding Corporation and its subsidiaries $ 5,115 4,120 Notes and mortgage receivables, net of discount 60,486 45,816 ------------------ 65,601 49,936 Less allowance for doubtful accounts 70 70 ------------------
$ 65,531 49,866 ==================
During fiscal year 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 $27,592,000, $20,111,000, and $8,022,000 from SAC Holdings during fiscal years 2001, 2000, and 1999, respectively. Principal payments of $97,953,000, $105,689,000, and zero were received during fiscal years 2001, 2000, and 1999, respectively. The note receivable balance outstanding was, in the aggregate, $251,021,000 and $154,528,000 at March 31, 2001 and 2000, respectively, bearing interest rates ranging from 8.37% to 13.0%. The principal balance is due in full at maturity and interest is payable quarterly. The terms of the notes receivable 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 fiscal years 2001, 2000 and 1999, a subsidiary of AMERCO funded through notes receivable the purchase of properties and construction costs for SAC Holdings of $187,595,000, $44,934,000 and $26,116,000, respectively.
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 of consolidated statements of changes in stockholders equity. AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
2. RECEIVABLES, NET, continued
In December 1998, U-Haul and Real Estate completed the sale of twenty-six storage properties to Six SAC Self-Storage Corporation, a subsidiary of SAC Holdings, for $99,685,000. Real Estate received cash and notes from the sale. The gain is reflected of consolidated statements of changes in stockholders' equity.
U-Haul currently manages the properties owned by SAC Holdings under a management agreement, whereby U-Haul receives a management fee equal to 6% of the gross receipts from the properties. Management fees of $6,243,000, $4,482,000 and $2,483,000 were received during fiscal years 2001, 2000 and 1999, respectively. The 6% fee is consistent with the fees received by U-Haul for other properties owned by unrelated parties and managed by U-Haul.
Management believes that the foregoing transactions were consummated on terms equivalent to those that prevail in arm's-length transactions.
3. INVENTORIES, NET
A summary of inventory components follows:
March 31, ------------------- 2001 2000 ------------------- (in thousands) Truck and trailer parts and accessories $ 60,492 61,292 Hitches and towing components 14,393 14,112 Moving supplies and promotional items 9,120 9,210 -------------------
$ 84,005 84,614 ===================
Inventories are stated net of reserve for obsolescence of $3,321,000 at March 31, 2001 and 2000, respectively. Certain general and administrative expenses are allocated to ending inventories. Such costs remaining in inventory are estimated at $12,077,000 and $12,084,000 at March 31, 2001 and 2000, respectively. For fiscal years 2001, 2000 and 1999, aggregate general and administrative costs were $498,661,000, $461,722,000 and $562,745,000, respectively.
LIFO inventories, which represent approximately 96% of total inventories at March 31, 2001 and 2000, would have been $4,957,000 greater at March 31, 2001 and 2000, if the consolidated group had used the FIFO (first-in, first-out) method.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
4. INVESTMENTS
A comparison of amortized cost to estimated market value for fixed maturities is as follows:
December 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 $ 4,150 3,627 144 (2) 3,769 U.S. government agency mortgage- backed securities $ 14,246 14,178 174 (130) 14,222 Corporate securities $ 55,908 53,422 739 (333) 53,828 Mortgage-backed securities $ 40,687 40,093 650 (191) 40,552 Redeemable preferred stocks 115,251 115,174 46 (9,736) 105,484 ----------------------------------------
226,494 1,753 (10,392) 217,855 ----------------------------------------
December 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 $ 42,860 43,522 1,494 (141) 44,875 U.S. government agency mortgage- backed securities $ 33,891 33,644 557 (87) 34,114 Obligations of states and political subdivisions $ 16,505 16,678 448 (142) 16,984 Corporate securities $ 568,394 562,187 10,714 (15,127) 557,774 Mortgage-backed securities $ 33,608 33,378 761 (402) 33,737 Redeemable preferred stocks 1,308 32,969 141 (1,860) 31,250 Redeemable common stocks 633 8,166 - (912) 7,254 ---------------------------------------- 730,544 14,115 (18,671) 725,988 ----------------------------------------
Total $ 957,038 15,868 (29,063) 943,843 ========================================
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
4. INVESTMENTS, continued
December 31, 1999 - ----------------- 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 $ 4,165 3,577 71 (84) 3,564 U.S. government agency mortgage- backed securities $ 18,538 18,448 51 (398) 18,101 Corporate securities $ 80,295 80,597 5,312 (2,050) 83,859 Mortgage-backed securities $ 35,960 48,386 314 (844) 47,856 Redeemable preferred stocks 4,561 116,374 41 (19,344) 97,071 ----------------------------------------
267,382 5,789 (22,720) 250,451 ----------------------------------------
December 31, 1999 - ----------------- 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 $ 40,860 40,392 912 (1,240) 40,064 U.S. government agency mortgage- backed securities $ 36,998 39,167 342 (382) 39,127 Obligations of states and political subdivisions $ 19,320 19,585 856 (1,342) 19,099 Corporate securities $ 468,131 460,416 2,717 (17,791) 445,342 Mortgage-backed securities $ 36,834 46,923 259 (562) 46,620 Redeemable preferred stocks 1,311 32,675 49 (5,534) 27,190 Redeemable common stocks 601 6,233 - (428) 5,805 ---------------------------------------- 645,391 5,135 (27,279) 623,247 ----------------------------------------
Total $ 912,773 10,924 (49,999) 873,698 ========================================
Fixed maturities estimated market values are based on publicly quoted market prices at the close of trading on December 31, 2000 or December 31, 1999, as appropriate.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
4. INVESTMENTS, continued
The amortized cost and estimated market value of debt securities by contractual maturity are shown below. Expected maturities will differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Consolidated December 31, 2000 December 31, 1999 - ------------ --------------------- --------------------- Held-to-Maturity Amortized Estimated Amortized Estimated cost market value cost market value --------------------- --------------------- (in thousands) (in thousands)
Due in one year or less $ 4,786 4,810 18,865 18,950 Due after one year through five years 46,496 46,513 58,066 61,486 Due after five years through ten years 248 304 7,038 6,727 After ten years 5,519 5,970 205 240 --------------------- -------------------- 57,049 57,597 84,174 87,403
Mortgage-backed securities 54,271 54,774 66,834 65,957 Redeemable preferred stock 115,174 105,484 116,374 97,091 --------------------- --------------------
226,494 217,855 267,382 250,451 --------------------- --------------------
Consolidated December 31, 2000 December 31, 1999 - ------------ --------------------- --------------------- Available-for-Sale Amortized Estimated Amortized Estimated cost market value cost market value --------------------- --------------------- (in thousands) (in thousands)
Due in one year or less 34,801 34,813 42,129 40,768 Due after one year through five years 313,162 310,656 203,830 201,372 Due after five years through ten years 197,027 198,592 188,419 180,888 After ten years 77,397 75,572 86,015 81,477 --------------------- --------------------- 622,387 619,633 520,393 504,505
Mortgage-backed securities 67,022 67,851 86,090 85,747 Redeemable preferred stock 32,969 31,250 32,675 27,190 Redeemable common stock 8,166 7,254 6,233 5,805 --------------------- ---------------------
730,544 725,988 645,391 623,247 --------------------- ---------------------
Total $ 957,038 943,843 912,773 873,698 ===================== =====================
Proceeds from sales of investments in debt securities for the years ended December 31, 2000, 1999 and 1998 were $52,814,000, $29,889,000 and $53,948,000, respectively. Gross gains of $733,000, $912,000 and $1,472,000 and gross losses of $646,000, $315,000 and $164,000 were realized on those sales for the years ended December 31, 2000, 1999 and 1998, respectively. During fiscal 2001, the Company realized a write-down of investments due to other than temporary declines approximating $6,500,000.
At December 31, 2000 and 1999 fixed maturities include bonds with an amortized cost of $18,283,000 and $15,696,000, respectively, on deposit with insurance regulatory authorities to meet statutory requirements.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
4. INVESTMENTS, continued
Investments, other consists of the following: March 31, ---------------------- 2001 2000 ---------------------- (in thousands) Short-term investments $ 58,923 35,347 Mortgage loans 102,571 73,716 Equity investment 36,466 24,613 Real estate, foreclosed properties 1,023 554 Policy loans 6,763 6,594 Investments in SAC 251,021 154,528 Other 8,191 19,538 ---------------------- $ 464,958 314,890 ======================
A summary of net investment and interest income follows: Year ended March 31, ----------------------------- 2001 2000 1999 ----------------------------- (in thousands)
Fixed maturities $ 61,003 66,993 68,745 Real estate 12 58 15 Policy loans 250 285 354 Mortgage loans 7,262 5,447 6,279 Short-term, amounts held by ceding reinsurers, net and other investments 7,364 7,140 5,966 ----------------------------- Investment income 75,891 79,923 81,359
Less investment expenses 22,712 23,964 23,734 -----------------------------
Net investment income 53,180 55,959 57,625 Interest income 37,981 26,253 15,747 -----------------------------
Net investment and interest income $ 91,161 82,212 73,372 =============================
Short-term investments consist primarily of fixed maturities of three months to one year from acquisition date. Mortgage loans, representing first lien mortgages held by the insurance subsidiaries, are carried at unpaid balances, less allowance for possible losses and any unamortized premium or discount. Equity investments and real estate obtained through foreclosures and held for sale are carried at the lower of cost or fair value. U.S. government securities mutual fund is carried at cost which approximates market value. Policy loans are carried at their unpaid balance.
At December 31, 2000 and 1999, mortgage loans held as investments with a carrying value of $102,571,000 and $73,716,000, respectively, were outstanding. The estimated fair value of the mortgage loans at December 31, 2000 and 1999 aggregated $94,669,000 and $74,559,000, respectively. The estimated fair values were determined using the discounted cash flow method, using interest rates currently offered for similar loans to borrowers with similar credit ratings. Investments in mortgage loans, included as a component of investments, are reported net of allowance for possible losses of $402,000 and $225,000 in 2000 and 1999, respectively.
In February 1997, AMERCO, through its insurance subsidiaries, invested in the equity of a limited partnership in a Texas-based self-storage corporation. RepWest invested $13,500,000 and has a 38% limited partnership interest and Oxford invested $11,000,000 and has a 27% limited partnership interest. U-Haul is a 50% owner of a corporation which is a general partner in the Texas-based self-storage corporation. AMERCO has a $10,000,000 note receivable from PMSI Investors L.L.C., a 30% limited partner in the corporation. During 1997, the corporation secured a line of credit in the amount of $225,000,000 with a financing institution. Under the terms of this credit facility, AMERCO entered into a support party agreement with the corporation whereby upon default or noncompliance with debt covenants by the corporation, AMERCO assumes responsibility in fulfilling all obligations related to this credit facility.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
5. NOTES AND LOANS PAYABLE
Notes and loans payable consist of the following:
March 31, -------------------- 2001 2000 -------------------- (in thousands)
Short-term borrowings, 5.96% interest rate $ 15,000 16,500 Notes payable to banks under commercial paper agreements, unsecured, 5.00% to 6.20% interest rates 119,570 - Notes payable to banks under revolving lines of credit, unsecured, 5.31% to 5.56% interest rates 185,000 159,000 Medium-term notes payable, unsecured, 7.23% to 8.08% interest rates, due through 2027 212,000 237,000 Notes payable under Bond Backed Asset Trust, unsecured, 7.14% interest rates, due through 2032 100,000 200,000 Notes payable to public, unsecured, 7.85% interest rate, due through 2003 175,000 175,000 Senior Note, unsecured, 7.20% interest rate, due through 2002 150,000 150,000 Senior Note, unsecured, 8.80% interest rate, due through 2005 200,000 200,000 Other notes payable, secured and unsecured, 7.00% to 11.25% interest rate, due through 2005 278 340 -------------------- $ 1,156,848 1,137,840 ====================
Other notes payable are secured by land and buildings at various locations with a net carrying value of $6,473,962 and $6,504,302 at March 31, 2001 and 2000, respectively.
AMERCO has a revolving credit loan (long-term) available from participating banks under an agreement which provides for a credit line of $400,000,000 through June 30, 2002. Depending on the form of borrowing elected, interest will be based on the London Interbank Offering Rate (LIBOR), prime rate, the federal funds effective rate, or rates determined by a competitive bid. LIBOR loans include a spread based upon the senior debt rates of AMERCO. Facility fees paid are based upon the amount of credit line.
At March 31, 2001, AMERCO had borrowed $305,100,000, representing short-term borrowings, from its total committed lines of credit of $94,900,000.
As of March 31, 2001, loans outstanding under the revolving credit line totaled $185,000,000. Management intends to refinance the borrowings on a long- term basis by either replacing them with long-term obligations, renewing or extending them.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
5. NOTES AND LOANS PAYABLE, continued
AMERCO has entered into interest rate swap agreements (SWAPS) to potentially mitigate the impact of changes in interest rates on its floating rate debt. These agreements effectively change AMERCO's interest rate exposure on $45,000,000 of floating rate notes to a weighted average fixed rate of 8.45%. The SWAPS mature at the time the related notes mature. Incremental interest expense associated with SWAP activity was $1,027,000, $1,935,000 and $2,593,000 during 2001, 2000 and 1999, respectively.
At March 31, 2001, interest rate swap agreements with an aggregate notional amount of $45,000,000 were outstanding. Management estimates that at March 31, 2001 and 2000, AMERCO would be required to pay $3,696,000 and $1,888,000, respectively, to terminate the agreements. Such amounts were determined from current treasury rates combined with SWAP spreads on agreements outstanding.
During April 1999, AMERCO issued $150,000,000 of 7.20% Senior Notes due 2002. During February 2000, AMERCO issued $200,000,000 of 8.80% Senior Notes due 2005.
During fiscal year 2001, AMERCO extinguished $100,000,000 of BATs with interest of 6.89% originally due in fiscal year 2011, and $25,000,000 of 6.71% Medium-Term notes originally due in fiscal year 2009. This resulted in an extraordinary loss of $2,121,000, net of tax of $1,160,000 ($0.10 per share).
During fiscal year 2000, AMERCO extinguished $100,000,000 of BATs with interest of 6.65% originally due in fiscal year 2030, and $50,000,000 of 7.05% to 7.10% Medium-Term notes originally due in fiscal year 2007. This resulted in an extraordinary loss of $334,000, net of tax of $213,000 ($0.02 per share).
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 March 31, 2001, AMERCO was in compliance with these covenants.
The annual maturities of long-term debt for the next five years adjusted for subsequent activity (if the revolving credit lines are outstanding to maturity), are presented in the table below:
Year Ended ------------------------------------------------ 2002 2003 2004 2005 2006 ------------------------------------------------ (in thousands) Mortgages $ 21 30 32 24 26 Medium-Term and Other Notes 77,512 150,014 175,015 205,001 55,000 Revolving Credit - 185,000 - - - ------------------------------------------------ $ 77,533 335,044 175,047 205,025 55,026 ================================================
Interest paid in cash amounted to $92,622,000, $77,529,000 and $74,026,000 for fiscal years 2001, 2000 and 1999, respectively.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
6. STOCKHOLDERS' EQUITY
AMERCO has authorized capital stock consisting of 150,000,000 shares of common stock, 150,000,000 shares of Serial common stock and 50,000,000 shares of Serial preferred stock. The Board of Directors (the Board) may authorize the Serial common stock to be issued in such series and on such terms as the Board shall determine. Serial preferred stock issuance may be with or without par value.
AMERCO has issued 6,100,000 shares of 8.5% cumulative, no par, non-voting Series A preferred stock (Series A). The Series A is not convertible into, or exchangeable for, shares of any other class or classes of stock of AMERCO. Dividends are payable quarterly in arrears and have priority as to dividends over AMERCO's common stock. On or after December 1, 2000, AMERCO, at its option, may redeem all or part of the Series A, for cash at $25.00 per share plus accrued and unpaid dividends to the redemption date.
AMERCO placed funds of $48,234,000 into an escrow account pending the outcome of a dispute involving the entitlement of the plaintiffs to post- petition interest. The escrow account was transferred to the plaintiffs on February 2, 2000, after it was determined that the plaintiffs were entitled to such interest. The transfer was recorded net of tax of $18,570,000, and reflected as a component of stockholders' equity.
The plaintiffs included the father, brothers and sisters of Mark V. and Paul F. Shoen who are major stockholders of AMERCO, and Edward J. and James P. Shoen who are major stockholders and directors of AMERCO.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
7. ACCUMULATED OTHER COMPREHENSIVE INCOME
8. EARNINGS PER SHARE
The following table reflects the calculation of earnings per share:
Income Shares Per Share (Numerator) (Denominator) Amount ------------------------------------ (in thousands, except share and per share data) Year ended March 31, 2001 Earnings from operations before extraordinary loss on early extinguishment of debt $ 15,086 Less: preferred stock dividends (12,963) ------ Basic earnings per share Earnings from operations before extraordinary loss on early extinguishment of debt available to common stockholders 2,123 21,486,370 $ 0.10 Extraordinary loss on early extinguishment of debt, net (2,121) (0.10) ----- ---- Net earnings 2 0.00 Effects of dilutive securities preferred stock conversion - - ----- ---------- Diluted earnings per share Net earnings $ 2 21,486,370 $ 0.00 ===== ========== ====
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
8. EARNINGS PER SHARE, continued Income Shares Per Share (Numerator) (Denominator) Amount ------------------------------------ (in thousands, except share and per share data)
Year ended March 31, 2000 Earnings from operations before extraordinary loss on early extinguishment of debt $ 65,825 Less: preferred stock dividends (13,499) ------ Basic earnings per share Earnings from operations before extraordinary loss on early extinguishment of debt available to common stockholders 52,326 21,934,390 $ 2.39 Extraordinary loss on early extinguishment of debt, net (334) (0.02) ------ ---- Net earnings 51,992 2.37 Effects of dilutive securities Preferred stock conversion 537 291,667 ------ ---------- Diluted earnings per share Net earnings $ 52,529 22,226,057 $ 2.36 ====== ========== ====
Year ended March 31, 1999 Earnings from operations before extraordinary loss on early extinguishment of debt $ 62,509 Less: preferred stock dividends (17,077) ------ Basic earnings per share Earnings from operations before extraordinary loss on early extinguishment of debt available to common stockholders 45,432 21,937,686 $ 2.07 Extraordinary loss on early extinguishment of debt, net - - ------ ---- Net earnings 45,432 2.07 Effects of dilutive securities Preferred stock conversion 4,006 2,002,937 ------ ---------- Diluted earnings per share Net earnings $ 49,438 23,940,623 $ 2.07 ====== ========== ====
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
9. INCOME TAXES
The components of the consolidated expense for income taxes applicable to operations are as follows:
Year ended ------------------------------ 2001 2000 1999 ------------------------------ (in thousands) Current: Federal $ - 1,192 2,490 State 650 1,068 406
Deferred: Federal 8,243 32,369 29,963 State 19 2,293 2,242 ------------------------------
$ 8,912 36,922 35,101 ==============================
Income taxes paid in cash amounted to $3,450,000, $1,522,000 and $1,656,000 for fiscal years 2001, 2000 and 1999, respectively.
Actual tax expense reported on earnings from operations differs from the "expected" tax expense amount (computed by applying the United States federal corporate tax rate of 35% in 2001, 2000 and 1999) as follows:
Year ended ------------------------------ 2001 2000 1999 ------------------------------ (in thousands)
Computed "expected" tax expense $ 8,399 35,962 34,163 Increases (reductions) in taxes resulting from: Tax-exempt interest income (55) (145) (474) Dividends received deduction (1) (1) (52) Canadian subsidiary (income)loss (402) (536) 444 True-up of prior year - - - Federal tax benefit of state and local taxes (221) (1,176) (927) Other 523 (543) (701) ------------------------------ Actual federal tax expense 8,243 33,561 32,453 State and local income tax expense 669 3,361 2,648 ------------------------------
Actual tax expense of operations $ 8,912 36,922 35,101 ==============================
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
9. INCOME TAXES, continued
Deferred tax assets and liabilities are comprised as follows:
March 31, ----------------- 2001 2000 ----------------- (in thousands) Deferred tax assets ------------------- Benefit of tax net operating loss and credit carryforwards $ 62,145 84,855 Accrued expenses 9,059 6,399 Deferred revenue from sale/leaseback 9,001 7,463 Policy benefits and losses, claims and loss expenses payable, net 7,807 20,236 Other 1,550 1,838 ----------------- Total deferred tax assets 89,562 120,791 -----------------
Deferred tax liabilities ------------------------ Property, plant and equipment 221,407 224,260 Deferred policy acquisition costs 7,574 5,944 ----------------- Total deferred tax liabilities 228,981 230,204 -----------------
Net deferred tax liability $ 139,419 109,413 =================
The deferred tax asset was reduced by use of a portion of the net operating loss carryforward to offset a related party gain that increased additional paid in capital.
In light of AMERCO's history of profitable operations, management has concluded that it is more likely than not that AMERCO will ultimately realize the full benefit of its deferred tax assets. Accordingly, AMERCO believes that a valuation allowance is not required at March 31, 2001 and 2000. See also Note 15 of Notes to Consolidated Financial Statements.
Under the provisions of the Tax Reform Act of 1984 (the Act), the balance in Oxford's account designated "Policyholders' Surplus Account" is frozen at its December 31, 1983 balance of $19,251,000. Federal income taxes (Phase III) will be payable thereon at applicable current rates if amounts in this account are distributed to the stockholder or to the extent the account exceeds a prescribed maximum. Oxford did not incur a Phase III liability for the years ended December 31, 2000, 1999 and 1998.
The Internal Revenue Service is currently conducting audits on fiscal years 1996 and 1997. To date, the audits have not been completed.
At March 31, 2001, AMERCO and RepWest have non-life net operating loss carryforwards available to offset federal taxable income in future years of $119,495,000 for tax purposes. These carryforwards expire in 2011 through 2012. AMERCO has alternative minimum tax credit carryforwards of $15,489,000 which do not have an expiration date, but may only be utilized in years in which regular tax exceeds alternative minimum tax. The use of certain carryforwards may be limited or prohibited if a reorganization or other change in corporate ownership were to occur.
During 1994, Oxford distributed its investment in RepWest common stock as a dividend to its parent at its book value. As a result of such dividend, a deferred intercompany gain arose due to the difference between the book value and fair value of such common stock. However, such gain can only be triggered if certain events occur. To date, no events have occurred which would trigger such gain recognition. No deferred taxes have been provided in the accompanying consolidated financial statements as management believes that no events have occurred to trigger such gain.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
10. TRANSACTIONS WITH FLEET OWNERS AND OTHER RENTAL EQUIPMENT OWNERS
Independent rental equipment owners (fleet owners) own approximately 5% of all U-Haul rental trailers and 0.01% of certain other rental equipment. There are approximately 1,919 fleet owners, including certain officers, directors, employees and stockholders of AMERCO. All rental equipment is operated under contract with U-Haul whereby U-Haul administers the operations and marketing of such equipment and in return receives a percentage of rental fees paid by customers. Based on the terms of various contracts, rental fees are distributed to U-Haul (for services as operators), to the fleet owners (including certain subsidiaries and related parties of U-Haul) and to Rental Dealers (including Company-operated U-Haul Centers).
RepWest insures and reinsures certain risks of U-Haul customers and independent fleet owners. Premiums earned on these policies were $17,300,000, $22,700,000 and $41,000,000 during the years ended December 31, 2001, 2000 and 1999, respectively.
11. EMPLOYEE BENEFIT PLANS
AMERCO participates in the AMERCO Employee Savings, Profit Sharing and Employee Stock Ownership Plan (the Plan) which is designed to provide all eligible employees with savings for their retirement and to acquire a proprietary interest in AMERCO.
The Plan has three separate features: a profit sharing feature (the Profit Sharing Plan) under which the Employer may make contributions on behalf of participants; a savings feature (the Savings Plan) which allows participants to defer income under Section 401(k) of the Internal Revenue Code of 1986; and an employee stock ownership feature (the ESOP) under which AMERCO may make contributions of AMERCO common stock or cash to acquire such stock on behalf of participants. Generally, employees of AMERCO are eligible to participate in the Plan upon completion of a one year service requirement.
No contributions were made to the profit sharing plan in fiscal year 2001, 2000, or 1999.
AMERCO has arranged financing to fund the ESOP trust (ESOT) and to enable the ESOT to purchase shares. Below is a summary of the financing arrangements:
Amount outstanding Financing as of Interest Payments Date March 31, 2001 2001 2000 1999 --------------------------------------------------------------------- (in thousands) December 1989 $ - - - 34 May 1990 - 8 16 24 June 1991 15,173 1,129 1,192 1,364
Shares are released from collateral and allocated to active employees based on the proportion of debt service paid in the plan year. Contributions to the ESOT charged to expense were $1,627,000, $1,771,000 and $2,804,000 for fiscal years 2001, 2000 and 1999, respectively.
The shares held by ESOP as of March 31 were as follows:
Shares issued Shares issued prior to subsequent to December 31, 1992 December 31, 1992 ------------------------------------------ 2001 2000 2001 2000 ------------------------------------------ (in thousands) Allocated shares 1,467 1,551 239 196 Shares committed to be released - - 12 11 Unreleased shares 293 338 628 679
Fair value of unreleased shares $ 3,812 4,157 13,341 12,470 ==========================================
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
11. EMPLOYEE BENEFIT PLANS, continued
For purposes of the schedule, fair value of unreleased shares issued prior to December 31, 1992 is defined as the historical cost of such shares. Fair value of unreleased shares issued subsequent to December 31, 1992 is defined as the March 31 trading value of such shares for 2001 and 2000.
Oxford insures various group life and group disability insurance plans covering employees of the consolidated group. Premiums earned were $1,424,000, $1,276,000 and $1,208,000 during the years ended December 31, 2000, 1999 and 1998, respectively, and were eliminated in consolidation.
12. POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS
AMERCO provides medical and life insurance benefits to retired employees and eligible dependents over age 65 if the employee meets specified age and service requirements.
AMERCO uses the accrual method of accounting for postretirement benefits. AMERCO continues to fund medical and life insurance benefit costs as claims are incurred.
The components of net periodic postretirement benefit cost for 2001, 2000 and 1999 are as follows:
2001 2000 1999 ----------------------------- (in thousands) Service cost for benefits earned during the period $ 228 330 296 Interest cost on accumulated postretirement benefit 276 338 327 Other components (340) (239) (224) ----------------------------- Net periodic postretirement benefit cost $ 164 429 399 =============================
The 2001 and 2000 postretirement benefit liability included the following components:
2001 2000 ------------------ (in thousands)
Beginning of year $ 3,615 4,886 Service cost 228 330 Interest cost 276 338 Benefit payments and expense (86) (93) Actuarial loss 64 (1,846) ------------------ Accumulated postretirement benefit obligation 4,097 3,615 Unrecognized net gain 4,827 5,232 ------------------ $ 8,924 8,847 ==================
The discount rate assumptions in computing the information above were as follows:
2001 2000 1999 ------------------------------ Accumulated postretirement benefit obligation 7.50% 7.75% 7.00%
The year-to-year fluctuations in the discount rate assumptions primarily reflect changes in U.S. interest rates. The discount rate represents the expected yield on a portfolio of high-grade (AA-AAA rated or equivalent) fixed- income investments with cash flow streams sufficient to satisfy benefit obligations under the plans when due.
The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation was 6.00% in 2001, declining annually to an ultimate rate of 4.20% in 2015. AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
12. POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS, continued
If the health care cost trend rate assumptions were increased by 1.00%, the accumulated postretirement benefit obligation as of March 31, 2001 would be increased by approximately $180,000 and a decrease of 1.00% would reduce the accumulated postretirement benefit obligation by $198,000.
Postemployment benefits provided by AMERCO are not material.
13. REINSURANCE
In the normal course of business, RepWest and Oxford assume and cede reinsurance on both a coinsurance and risk premium basis. RepWest and Oxford obtain reinsurance for that portion of risks exceeding retention limits. The maximum amount of life insurance retained on any one life is $150,000.
A summary of reinsurance transactions by business segment follows:
Percentage Ceded Assumed of amount Direct to other from other Net assumed to amount companies companies amount net ------------------------------------------- ---------- (in thousands) Year ended December 31, 2000 - ---------------------------- Life insurance in force $ 1,736,332 923,472 1,812,548 2,625,408 69% ============================================
Premiums earned: Life $ 23,666 2,493 8,232 29,405 28% Accident and health 72,593 15,195 16,884 74,282 23% Annuity 574 - 6,932 7,506 92% Property - casualty 154,998 33,182 96,281 218,097 44% -------------------------------------------- Total $ 251,831 50,870 128,329 329,290 ============================================
Percentage Ceded Assumed of amount Direct to other from other Net assumed to amount companies companies amount net ----------------------------------------- ---------- (in thousands) Year ended December 31, 1999 - ---------------------------- Life insurance in force $ 1,508,961 932,004 1,930,832 2,507,789 77% ============================================
Premiums earned: Life $ 26,745 2,527 6,480 30,698 21% Accident and health 43,833 15,121 29,377 58,089 51% Annuity 69 3 6,269 6,335 99% Property - casualty 111,488 27,004 89,319 173,803 51% -------------------------------------------- Total $ 182,135 44,655 131,445 268,925 ============================================ AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
13. REINSURANCE, continued
Percentage Ceded Assumed of amount Direct to other from other Net assumed to amount companies companies amount net ---------------------------------------- ---------- (in thousands) Year ended December 31, 1998 - ---------------------------- Life insurance in force $ 1,254,084 809,267 2,218,772 2,663,589 83% ============================================
Premiums earned: Life $ 20,554 6,403 11,480 25,631 45% Accident and health 32,668 10,875 29,973 51,766 58% Annuity 556 - 9,944 10,500 95% Property - casualty 110,080 32,047 60,917 138,950 44% -------------------------------------------- Total $ 163,858 49,325 112,314 226,847 ============================================
RepWest is a reinsurer of municipal bond insurance through an agreement with MBIA, Inc. Premiums generated through this agreement are recognized on a pro rata basis over the contract coverage period. Unearned premiums on this coverage were $4,300,000 and $5,000,000 as of December 31, 2000 and 1999, respectively. RepWest's share of case loss reserves related to this coverage was insignificant at December 31, 2000. RepWest's aggregate exposure for Class 1 municipal bond insurance was $883,000,000 as of December 31, 2000.
To the extent that a reinsurer is unable to meet its obligation under the related reinsurance agreements, RepWest would remain liable for the unpaid losses and loss expenses. Pursuant to certain of these agreements, RepWest holds letters of credit of $13,000,000 from reinsurers. RepWest has issued letters of credit of approximately $2,700,000 in favor of certain ceding companies.
RepWest insures and reinsures general liability, auto liability and workers' compensation coverage for member companies of the consolidated group. Premiums earned by RepWest on these policies were $6,091,000, $6,878,000 and $11,734,000 during the years ended December 31, 2000, 1999 and 1998, respectively, and were eliminated in consolidation.
14. CONTINGENT LIABILITIES AND COMMITMENTS
AMERCO uses certain equipment and occupies certain facilities under operating lease commitments with terms expiring through 2079. Lease expense was $178,458,000, $136,044,000 and $118,742,000 for the years ended 2001, 2000 and 1999, respectively. During the year ended March 31, 2001, a subsidiary of U-Haul entered into thirty five transactions and has subsequently entered into one additional transaction, whereby AMERCO sold rental trucks, which were subsequently leased back. AMERCO has guaranteed $195,052,000 of residual values at March 31, 2001 and an additional $1,350,000 subsequent to March 31, 2001 for these assets at the end of the respective lease terms. Certain leases contain renewal and fair market value purchase options as well as mileage and other restrictions similar to covenants disclosed in Note 5 of Notes to Consolidated Financial Statements for notes payable and loan agreements. AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
14. CONTINGENT LIABILITIES AND COMMITMENTS, continued
Following are the lease commitments for leases having terms of more than one year:
March 31, 2001 --------------------------- Net activity Property, plant Rental subsequent to Year ended and other equipment fleet year end Total -------------------------------------------------------------------- (in thousands)
2002 $ 3,325 157,817 502 161,644 2003 2,320 144,184 602 147,106 2004 1,906 117,250 602 119,758 2005 1,688 103,521 602 105,811 2006 1,617 76,059 602 78,278 Thereafter 9,184 92,876 1,909 103,969 -------------------------------------------- $ 20,040 691,707 4,819 716,566 ============================================
The Company, at the expiration of the lease, has the option to renew the lease, purchase the units for fair market value, or sell the units to a third party on behalf of the lessor. On or before a specific date prior to the expiration date of the lease, the Company has the ability to exercise a TRAC option. Under this provision the Company has the right to purchase the units at a specified price. At March 31, 2001, U-Haul had not exercised any options to purchase units. Subsequent to March 31, 2001, the Company exercised one purchase option totaling $972,000.
In December 1996, AMERCO executed a $100,000,000 Operating Lease Facility with a number of financial institutions which was amended and restated in July 1999 to $170,000,000. In September 1999, AMERCO entered into an additional $125,000,000 Operating Lease Facility. Under these facilities, the lessor acquires land to be developed for storage locations by AMERCO, as Construction Agent, or acquires existing storage locations with advances of funds (the Advances) made by certain parties to the facilities. AMERCO will separately lease land and improvements, including completed locations capitalized by the lessor, under the facilities and the respective lease supplements. Funding under the facilities totaled $231,664,000 and $174,900,000 at March 31, 2001 and 2000, respectively.
The facilities contain certain restrictions similar to those contained in Note 5. Upon occurrence of any event of default, the lessor may rescind or terminate any or all leases and, among other things, require AMERCO to repurchase any or all of the properties. The facilities have a three year term, subject to AMERCO's option, with the consent of other parties, to renew for successive one year terms.
Upon the expiration of the facilities, AMERCO may either purchase all of the properties based on a purchase price equal to all amounts outstanding under the Advances, including the interest and yield thereon, or remarket all of the properties to a third party purchaser who may become a subsequent lessor to AMERCO.
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 such suits, claims or proceedings involving AMERCO, individually or in the aggregate, are expected to result in a material loss. Also see Notes 13 and 15 of Notes to Consolidated Financial Statements.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
15. LEGAL PROCEEDINGS
On October 1, 1996, AMERCO made the final payment of approximately $448,100,000 to the plaintiffs (non-management shareholders and their affiliates) in the full settlement of a legal dispute related to control of AMERCO. As a result, the plaintiffs that owned AMERCO stock were required to transfer all of their shares of common stock to AMERCO. The total number of shares transferred was 18,254,976.
On January 10, 2000 it was determined that the plaintiffs were entitled to post-petition interest at the rate of ten percent (10%) per year from February 21, 1995 until October 1, 1996. In 1996, AMERCO deposited approximately $48,200,000 into an escrow account to secure payment of the disputed interest, pending final resolution of this issue. The escrow account was reflected as a component of "Other assets" in AMERCO's consolidated financial statements. The amount deposited into the escrow account was transferred to the plaintiffs on February 2, 2000. The release of the escrow did not have the effect of increasing or decreasing AMERCO's net earnings, but reduced stockholders' equity.
AMERCO has deducted for income tax purposes approximately $372,000,000 of payments previously made to the former shareholders. While AMERCO believes that such income tax deductions are appropriate, there can be no assurance that such deductions ultimately will be allowed in full.
On June 24, 1997, five (5) current and/or former Moving Center General Managers (GMs) and one (1) Area Field Manager (AFM) filed suit in Marin County Superior Court, Case No. BC 203532, entitled Sarah Saunders, et al. vs. U-Haul ---------------------- ------ Company of California, Inc., claiming that they were entitled to be compensated - --------------------------- for all overtime hours worked in excess of forty (40) hours per week. In addition, these Plaintiffs sought class action status purporting to represent all persons employed in California as either a salaried GM or AFM since September 1993. On September 30, 1997, a virtually identical lawsuit was filed in Los Angeles County Superior Court, Case No. BC 178775, entitled Wyatt ----- Crandall vs. U-Haul International, Inc. and U-Haul Co. of California. This - -------- ------------------------------------------------------- action did not include AFMs, but did purport to be brought on behalf of GMs and GM trainees. These cases were consolidated by the Court in Los Angeles on October 15, 1998. On June 10, 1999, Plaintiff's motion to certify the AFMs as a class was denied and the motion to certify the GMs as a class was granted. Notice of certification was mailed on or about August 24, 1999. The class opt- out period ended on October 11, 1999. The case was bifurcated and the liability portion of the case was tried to the Court. The Court found for the Plaintiff's on January 8, 2001. The damage portion of the case was to begin on April 9, 2001. The Company settled the case for $7.5 million on April 5, 2001, and the Court approved the settlement on May 22, 2001. The class approval process will take between 60 and 120 days from the time of the Court approval.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
16. PREFERRED STOCK PURCHASE RIGHTS
AMERCO's Board of Directors adopted a stockholder-rights plan in July 1998. The rights were declared as a dividend of one preferred share purchase right for each outstanding share of AMERCO's common stock. The dividend distribution was payable on August 17, 1998 to the stockholders of record on that date. When exercisable, each right will entitle its holder to purchase from AMERCO one one-hundredth of a share of Series C Junior Participating Preferred Stock (Series C), no par value per share of AMERCO, at a price of $132.00 per one one-hundredth of a share of Series C, subject to adjustment. AMERCO has created a series of 3,000,000 shares of authorized but unissued preferred stock for the Series C stock authorized in this stockholder-rights plan.
The rights will become exercisable if a person or group of affiliated or associated persons acquire or obtain the right to acquire beneficial ownership of 10% or more of the common stock without approval of a majority of the Board of Directors of AMERCO. The rights will expire on August 7, 2008 unless earlier redeemed or exchanged by AMERCO.
In the event AMERCO is acquired in a merger or other business combination transaction after the rights become exercisable, each holder of a right would be entitled to receive that number of shares of the acquiring company's common stock equal to the result obtained by multiplying the then current Purchase Price by the number one one-hundredths of a share of Series C for which a right is then exercisable and dividing that product by 50% of the then current market price per share of the acquiring company.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
17. STOCK OPTION PLAN
AMERCO's stockholders approved a ten year incentive plan entitled the AMERCO Stock Option and Incentive Plan (the Plan) for officers and key employees in October 1992. No stock options or awards have been granted under this plan to date.
The aggregate numbers of shares of stock subject to award under the Plan may not exceed 3,000,000. The stock subject to the Plan is AMERCO common stock unless prior to the date the first award is made under the Plan, a Committee of at least two Board members determines, in its discretion, to utilize another class of AMERCO stock. The features of the Plan are:
Incentive Stock Options (ISO's) - as defined under the Internal Revenue Code and Non-qualified Stock Options under such terms and conditions as the Committee determines in its discretion. The ISO's may be granted at prices not less than one-hundred percent of the fair market value at the date of grant with a term not exceeding ten years.
Stock Appreciation Right (SAR's) - subject to certain conditions and limitations to holders of options under the Plan. SAR's permit the optionee to surrender an exercisable option for an amount equal to the excess of the market price of the common stock over the option price when the right is exercised.
Restricted Stock Award - a specified number of common shares may be granted subject to certain restrictions. Restriction violations during a specified period result in forfeiture of the stock. The Committee may, at its discretion, impose any restrictions on a Restricted Stock award.
Dividend Equivalents - in connection with options. Dividend Equivalents are rights to receive additional shares of stock at the time of exercise of the option to which such Dividend Equivalents apply.
Performance Share - deemed to be the equivalent of one share of stock and credited to a Performance Share account to be maintained for each Holder. The value of the shares at time of award or payment is the fair market value of an equivalent number of shares of stock. At the end of the award period, payment may be made subject to certain predetermined criteria and restrictions.
18. RELATED PARTY TRANSACTIONS
AMERCO has related party transactions with certain major stockholders, directors and officers of the consolidated group as disclosed in Notes 2, 6, 10 and 16 of Notes to Consolidated Financial Statements.
During the years ended 2001 and 2000, AMERCO sold $10,510,000 and $3,910,000, respectively, of remanufactured engines and small automotive parts and purchased $53,671,000 and $38,373,000, respectively, of automotive parts and tools from a company wherein a major stockholder, director and officer of AMERCO has a beneficial minority ownership interest.
During the years ended 2001 and 2000, AMERCO purchased $1,090,000 and $2,508,000, respectively, of rebuilt torque converters and other related transmission parts from a company wherein an owner is a family member of a major stockholder, director and officer of AMERCO.
During the years ended 2001, 2000 and 1999, AMERCO purchased $3,460,000, $3,371,000 and $3,070,000, respectively, of printing from a company wherein an officer is a major stockholder, director and officer of AMERCO.
Management believes that these transactions were consummated on terms equivalent to those that prevail in arm's-length transactions.
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
19. SUPPLEMENTAL CASH FLOW INFORMATION
The (increase) decrease in receivables, inventories and accounts payable and accrued expenses net of other operating and investing activities follows:
Year ended --------------------------------------- 2001 2000 1999 --------------------------------------- (in thousands)
Receivables $ (32,612) (40,590) 676 =======================================
Inventories $ 609 (4,455) (11,272) =======================================
Accounts payable and accrued expenses $ (113) 20,146 12,668 =======================================
20. SUMMARIZED CONSOLIDATED FINANCIAL INFORMATION OF INSURANCE SUBSIDIARIES
A summarized consolidated balance sheet for RepWest is presented below:
December 31, ---------------------- 2000 1999 ----------------------- (in thousands)
Investments, securities $ 409,535 405,250 Investments, other 34,062 18,786 Receivables 200,651 158,413 Deferred policy acquisition costs 21,637 15,130 Due from affiliate 43,121 28,054 Deferred federal income taxes 13,167 13,384 Other assets 11,961 25,770 ------------------- Total assets $ 734,134 664,787 ===================
Policy liabilities and accruals $ 372,328 339,220 Unearned premiums 107,768 64,755 Other policyholders' funds and liabilities 61,952 52,307 ------------------- Total liabilities 542,048 456,282
Stockholder's equity 192,086 208,505 -------------------
Total liabilities and stockholder's equity $ 734,134 664,787 ===================
A summarized consolidated income statement for RepWest is presented below:
Year ended December 31, -------------------------------- 2000 1999 1998 -------------------------------- (in thousands)
Premiums $ 218,097 173,803 145,301 Net investment income 29,103 33,004 35,755 ------------------------------- Total revenue 247,200 206,807 181,056
Benefits and losses 204,133 150,543 118,870 Amortization of deferred policy acquisition costs 16,308 13,358 7,443 Operating expenses 56,653 34,972 35,637 ------------------------------- Total expenses 277,094 198,873 161,950
Income from operations (29,894) 7,934 19,106 Income tax benefit (expense) 10,494 (2,611) (5,976) ------------------------------- Net income (loss) $ (19,400) 5,323 13,130 =============================== AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
20. SUMMARIZED CONSOLIDATED FINANCIAL INFORMATION OF INSURANCE SUBSIDIARIES, continued
A summarized consolidated balance sheet for Oxford is presented below:
December 31, --------------------- 2000 1999 --------------------- (in thousands)
Investments, fixed maturities $ 542,947 485,379 Investments, other 171,684 122,038 Receivables 27,430 19,021 Deferred policy acquisition costs 78,170 73,272 Deferred federal income taxes 304 - Other assets 29,776 32,270 ------------------- Total assets $ 850,311 731,980 ===================
Policy liabilities and accruals $ 185,038 142,180 Premium deposits 522,207 461,673 Other policyholders' funds and liabilities 21,525 18,390 Due to affiliate 10,942 10,669 Deferred federal income taxes 10,793 10,975 ------------------- Total liabilities 750,505 643,887
Stockholder's equity 99,806 88,093 -------------------
Total liabilities and stockholder's equity $ 850,311 731,980 ===================
A summarized consolidated income statement for Oxford is presented below:
Year ended December 31, ------------------------------- 2000 1999 1998 ------------------------------- (in thousands)
Premiums $ 112,616 96,406 94,488 Net investment income 22,166 21,540 20,080 ------------------------------- Total revenue 134,782 117,946 114,568
Benefits and losses 79,233 59,049 57,690 Amortization of deferred policy acquisition costs 19,638 21,629 24,278 Operating expenses 28,962 23,078 20,442 ------------------------------- Total expenses 127,833 103,756 102,410
Income from operations 6,949 14,190 12,158 Income tax expense (2,298) (4,117) (3,423) ------------------------------ Net income $ 4,651 10,073 8,735 ==============================
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
20. SUMMARIZED CONSOLIDATED FINANCIAL INFORMATION OF INSURANCE SUBSIDIARIES, continued
Applicable laws and regulations of the State of Arizona require maintenance of minimum capital determined in accordance with statutory accounting practices in the amount of $450,000 for Oxford and $1,000,000 for RepWest. In addition, the amount of dividends which can be paid to stockholders by insurance companies domiciled in the State of Arizona is limited. Any dividend in excess of the limit requires prior regulatory approval. Statutory surplus which can be distributed as dividends is $700,000 for Oxford and $11,700,000 for RepWest at December 31, 2000.
Audited statutory net income(loss) for RepWest for the years ended December 31, 2000, 1999 and 1998 was $(28,116,000), $9,907,000 and $12,382,000, respectively; audited statutory capital and surplus was $117,430,000 and $154,604,000 at December 31, 2000 and 1999, respectively.
Audited statutory net income for Oxford for the years ended December 31, 2000, 1999 and 1998 was $6,626,000, $1,599,000 and $814,000, respectively; audited statutory capital and surplus was $53,473,000 and $57,689,000 at December 31, 2000 and 1999, respectively.
On November 13, 2000, Oxford acquired all of the issued and outstanding shares of Christian Fidelity Life Insurance Company (CFLIC), in an exchange of cash for stock, for $37,586,000. CFLIC's premium volume is primarily from the sale of Medicare Supplement products. AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
21. INDUSTRY SEGMENT AND GEOGRAPHIC AREA DATA
Industry Segment Data - AMERCO has four industry segments represented by Moving and Storage Operations (U-Haul), Real Estate, Property and Casualty Insurance (RepWest) and Life Insurance (Oxford). See Note 1 of Notes to Consolidated Financial Statements for a description of the industry segments.
Information concerning operations by industry segment follows:
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
21. INDUSTRY SEGMENT AND GEOGRAPHIC AREA DATA, continued
AMERCO AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements, continued
21. INDUSTRY SEGMENT AND GEOGRAPHIC AREA DATA, continued
Geographic Area Data - United States Canada Consolidated --------------------------------------- (All amounts are in U.S. $'s) (in thousands)
Fiscal year 2001 - ---------------- Total revenues $ 1,776,231 37,407 1,813,638 Depreciation/amortization $ 139,702 4,483 144,185 Interest expense $ 87,877 (104) 87,773 Pretax earnings $ 22,853 1,145 23,998 Income tax expense $ (8,906) (6) (8,912) Extraordinary loss $ (2,121) - (2,121) Identifiable assets at March 31, 2001 $ 3,334,728 49,336 3,384,064
Fiscal year 2000 - ---------------- Total revenues $ 1,649,136 34,481 1,683,617 Depreciation/amortization $ 131,513 3,968 135,481 Interest expense $ 81,515 17 81,532 Pretax earnings (loss) $ 101,216 1,531 102,747 Income tax expense $ 36,992 - 36,992 Extraordinary loss $ (334) - (334) Identifiable assets at March 31, 2000 $ 3,075,095 50,130 3,125,225
Fiscal year 1999 - ---------------- Total revenues $ 1,525,939 29,773 1,555,712 Depreciation/amortization $ 110,817 3,285 114,102 Interest expense $ 73,641 17 73,658 Pretax earnings $ 98,878 (1,268) 97,610 Income tax expense $ 35,101 - 35,101 Identifiable assets at March 31, 1999 $ 3,046,247 41,256 3,087,503
22. SUBSEQUENT EVENTS
On May 8, 2001, AMERCO declared a cash dividend of $3,241,000 ($0.53125 per preferred share) to the Series A preferred stockholders of record as of May 18, 2001.
See Note 14 of Notes to Consolidated Financial Statements for other subsequent event disclosures.
In April 2001, U-Haul entered into a master lease agreement that provides a leasing facility up to $47,633,000 to obtain certain self storage assets under operating leases.
Schedule I
Condensed Financial Information of Registrant AMERCO Balance Sheets March 31,
2001 2000 ---------------------- (in thousands) Assets - ------
Cash $ 114 108 Investment in subsidiaries 919,063 844,115 Due from unconsolidated subsidiaries 1,105,943 1,042,992 Other assets 15,061 28,770 ----------------------
$ 2,040,181 1,915,985 ======================
Liabilities and Stockholders' Equity - ------------------------------------
Liabilities: Notes and loans payable $ 1,156,613 1,137,553 Other liabilities 253,009 176,889 ----------------------
Stockholders' equity: Preferred stock - - Common stock 10,563 10,563 Additional paid-in capital 312,128 275,242 Accumulated other comprehensive income (40,709) (42,317)
Retained earnings: Beginning of year 755,172 703,322 Net earnings 12,965 65,491 Dividends paid (12,963) (13,641) ---------------------- 755,174 755,172
Less: Cost of common shares in treasury 406,617 397,000 Unearned employee stock ownership plan shares (20) 117 ---------------------- Total stockholders' equity 630,559 601,543 ---------------------- $ 2,040,181 1,915,985 ======================
See accompanying notes to condensed financial information and notes to consolidated financial statements incorporated herein by reference. Schedule I, continued
Condensed Financial Information of Registrant AMERCO Statements of Earnings Years Ended March 31,
2001 2000 1999 ------------------------------------ (in thousands, except share and per share data)
Revenues - -------- Net interest income from subsidiaries $ 61,509 53,504 57,500
Expenses - -------- Interest expense 86,963 77,561 73,960 Other expenses 5,750 5,823 7,394 ------------------------------------
Total expenses 92,713 83,384 81,354 ------------------------------------
Operating loss (31,204) (29,880) (23,854)
Equity in earnings of unconsolidated subsidiaries 73,959 126,878 111,782
Income tax expense (27,669) (31,173) (25,419)
Extraordinary loss on early extinguishment of debt, net (2,121) (334) - ------------------------------------
Net earnings $ 12,965 65,491 62,509 ====================================
Earnings per common share (both basic and diluted): Earnings from operations before extraordinary loss on early extinguishment of debt $ 0.10 2.39 2.07 Extraordinary loss on early extinguishment of debt, net (0.10) (0.02) - ------------------------------------ Net earnings $ (0.00) 2.37 2.07 ====================================
Weighted average common shares outstanding 21,486,370 21,934,390 21,937,686 ====================================
See accompanying notes to condensed financial information and notes to consolidated financial statements incorporated herein by reference. Schedule I, continued
Condensed Financial Information of Registrant AMERCO Statements of Cash Flows Years Ended March 31,
2001 2000 1999 --------------------------------- (in thousands)
Cash flows from operating activities: Net earnings $ 12,965 65,491 62,509 Amortization, net 826 (569) (1,730) Equity in earnings of subsidiaries 72,159 85,266 78,014 (Increase) decrease in amounts due from unconsolidated subsidiaries (62,951) 14,150 (64,062) Net change in operating assets and liabilities (19,902) (83,449) (89,921) Other, net 2,901 (27,005) (4,695) ---------------------------------
Net cash provided (used) by operating activities 5,998 53,884 (19,885) ---------------------------------
Cash flows from financing activities: Net change in short term borrowings 156,070 (146,500) 135,500 Proceeds from notes - 350,000 - Leveraged Employee Stock Ownership Plan-repayments from loan 137 118 1,017 Principal payments on notes (137,010) (180,010) (45,008) Debt issuance costs (488) (6,024) (358) Repurchase of preferred stock - (25,000) (50,000) Preferred stock dividends paid (12,963) (13,641) (17,414) Treasury stock purchase, net (9,617) (33,467) (3,810) Deferred tax-treasury stock - - - Escrow deposit - - - Extraordinary loss on early extinguishment of debt, net (2,121) (334) - ---------------------------------
Net cash provided (used) by financing activities (5,992) (54,858) 19,927 ---------------------------------
Increase (decrease) in cash and cash equivalents 6 (974) 42 Cash and cash equivalents at beginning of year 108 1,082 1,040 ---------------------------------
Cash and cash equivalents at end of year $ 114 108 1,082 =================================
Income taxes paid in cash amounted to $3,450,000, $1,522,000 and $1,656,000 for 2001, 2000 and 1999, respectively. Interest paid in cash amounted to $92,622,000, $77,529,000 and $74,026,000 for 2001, 2000 and 1999, respectively.
See accompanying notes to condensed financial information and notes to consolidated financial statements incorporated herein by reference. Schedule I, continued
Condensed Financial Information of Registrant AMERCO Notes to Condensed Financial Information March 31, 2001, 2000 and 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
AMERCO, a Nevada corporation, was incorporated in April, 1969, and is the holding company for U-Haul International, Inc., Republic Western Insurance Company, Oxford Life Insurance Company and Amerco Real Estate Company. The financial statements of the Registrant should be read in conjunction with the Consolidated Financial Statements and notes thereto included in this Form 10-K.
AMERCO is included in a consolidated Federal income tax return with all of its U.S. subsidiaries. Accordingly, the provision for income taxes has been calculated for Federal income taxes of the Registrant and subsidiaries included in the consolidated return of the Registrant. State taxes for all subsidiaries are allocated to the respective subsidiaries.
The financial statements include only the accounts of the Registrant (a Nevada corporation), which include certain of the corporate operations of AMERCO. The debt and related interest expense of the Registrant have been allocated to the consolidated subsidiaries. The intercompany interest income and expenses are eliminated in the consolidated financial statements.
2. GUARANTEES
AMERCO has guaranteed performance of certain long-term leases. See Note 14 of Notes to Consolidated Financial Statements.
3. NOTES AND LOANS PAYABLE Notes and loans payable consist of the following:
March 31, -------------------- 2001 2000 -------------------- (in thousands) Medium-term notes payable, unsecured, 7.23% to 8.08% interest rates, due through 2027 $ 212,000 237,000 Notes payable under Bond Backed Asset Trust, unsecured, 7.14% interest rates, due through 2032 100,000 200,000 Notes payable to banks under commercial paper agreements, unsecured, 5.00% to 6.20% interest rates 119,570 - Notes payable to public, unsecured, 7.85% interest rate, due through 2003 175,000 175,000 Senior Note, unsecured, 7.20% interest rate, due through 2002 150,000 150,000 Senior Note, unsecured, 8.80% interest rate, due through 2005 200,000 200,000 Other notes payable, unsecured, 9.50% interest rate, due through 2005 42 53 Notes payable to banks under revolving lines of credit, unsecured, 5.31% to 5.56% interest rates 185,000 159,000 Other short-term promissory notes, 5.96% interest rate 15,000 16,500 -------------------- $ 1,156,612 1,137,553 ====================
For additional information, see Note 5 of Notes to Consolidated Financial Statements.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By: /S/ EDWARD J. SHOEN ---------------------------------- Edward J. Shoen Chairman of the Board
Dated: June 29, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date --------- ----- ----
/S/ EDWARD J. SHOEN Chairman of the Board June 29, 2001 - -------------------------- Edward J. Shoen (Principal Executive Officer)
/S/ GARY B. HORTON Principal Financial June 29, 2001 - -------------------------- and Accounting Officer Gary B. Horton
/S/ WILLIAM E. CARTY Director June 29, 2001 - -------------------------- William E. Carty
/S/ JAMES P. SHOEN Director June 29, 2001 - -------------------------- James P. Shoen
/S/ CHARLES J. BAYER Director June 29, 2001 - -------------------------- Charles J. Bayer
/S/ JOHN M. DODDS Director June 29, 2001 - -------------------------- John M. Dodds
/S/ JAMES J. GROGEN Director June 29, 2001 - -------------------------- James J. Grogen
/S/ JOHN P. BROGAN Director June 29, 2001 - --------------------------- John P. Brogan