SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A (Amendment No. 1) - Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2002
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------------------- -----------------------
Commission Registrant, State of Incorporation I.R.S. Employer
File Number Address and Telephone Number Identification No.
----------- ----------------------------------- ------------------
1-11255 AMERCO 88-0106815
(A Nevada Corporation)
1325 Airmotive Way, Suite 100
Reno, Nevada 89502-3239
Telephone (775) 688-6300
2-38498 U-Haul International, Inc. 86-0663060
(A Nevada Corporation)
2727 N. Central Avenue
Phoenix, Arizona 85004
Telephone (602) 263-6645
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Registrant Title of Class on Which Registered
---------- -------------- ---------------------
AMERCO Series A 8 1/2% New York Stock Exchange
Preferred Stock
U-Haul International, Inc. None
Securities registered pursuant to Section 12(g) of the Act:
Registrant Title of Class
---------- --------------
AMERCO Common
U-Haul International, Inc. None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
21,375,037 shares of AMERCO common stock, $0.25 par value, were
outstanding at July 12, 2002. The aggregate market value of AMERCO common stock
held by non-affiliates (i.e., stock held by persons other than officers,
directors and 5% shareholders of AMERCO) was $93,315,111. The aggregate market
value was computed using the closing price for the common stock trading on
NASDAQ on July 12, 2002.
5,385 shares of U-Haul International, Inc. common stock, $0.01 par
value, were outstanding at July 12, 2002. None of these shares were held by
non-affiliates. U-Haul International, Inc. meets the conditions set forth in
General Instruction I (1)(a) and (b) of Form 10-K and is therefore filing this
Form with the reduced disclosure format.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrants' Proxy Statement for its 2002 Annual Meeting of
Stockholders held on August 30, 2002 (the "2002 Proxy Statement"), which was
filed with the Securities and Exchange Commission on July 26, 2002, are
incorporated by reference into Part III herein.
EXPLANATORY NOTE
This Amendment No. 1 to Form 10-K ("Amendment No. 1") is being filed for
the purpose of modifying certain disclosures in the Annual Report on Form 10-K
for the registrants' fiscal year ended March 31, 2002 originally filed on
July 17, 2002 (the "Original Filing"). In addition, we are refiling our audited
financial statements for the fiscal year ended March 31, 2002 to reflect that
our former independent accountants have audited the financial statements of SAC
Holding Corporation, and their subsidiaries, as of and for the year ended March
31, 2001, which were previously audited by other accountants, and to modify
certain disclosures contained therein.
This report continues to speak as of the date of the Original Filing, and
we have not updated the disclosures in this report to speak as of a later date.
All information contained in this report and the Original Filing is subject to
updating and supplementing as provided in our periodic reports filed with the
Securities and Exchange Commission.
The Items of the Original Filing which are amended and restated herein are:
Item 1 of Part I;
Item 7 of Part II;
Item 13 of Part III; and
Item 14 of Part IV
PART I, ITEM 1, BUSINESS:
A. AMERCO AND CONSOLIDATED SUBSIDIARIES, SAC HOLDING CORPORATION
AND CONSOLIDATED SUBSIDIARIES AND SAC HOLDING CORPORATION II
AND CONSOLIDATED SUBSIDIARIES
AMERCO, a Nevada corporation (AMERCO), is the holding company for
U-Haul International, Inc. (U-Haul), Amerco Real Estate Company (Real Estate),
Republic Western Insurance Company (RepWest) and Oxford Life Insurance Company
(Oxford). Throughout this Form 10-K, unless the context otherwise requires, the
term "AMERCO" includes all of its subsidiaries. AMERCO's executive offices are
located at 1325 Airmotive Way, Suite 100, Reno, Nevada 89502-3239, and the
telephone number is (775) 688-6300. As used in this Form 10-K, all references to
a fiscal year refer to AMERCO's fiscal year ended March 31 of that year. RepWest
and Oxford are consolidated on the basis of calendar years ended December 31.
Accordingly, all references to the years 2001, 2000 and 1999 correspond to
AMERCO's fiscal years 2002, 2001 and 2000, respectively. AMERCO has four
industry segments represented by Moving and Storage Operations (U-Haul), Real
Estate, Property and Casualty Insurance (RepWest) and Life Insurance (Oxford).
See Note 21 of Notes to Consolidated Financial Statements in Item 8 for
financial information regarding the industry segments.
SAC Holding Corporation and SAC Holding Corporation II, Nevada corporations
(collectively, SAC Holdings), are the holding companies for several individual
corporations that own self-storage properties managed by AMERCO subsidiaries in
the ordinary course of business. AMERCO has made significant loans to SAC
Holdings and is entitled to participate in SAC Holdings' excess cash flow (after
senior debt service). Substantially all of the equity interest of SAC Holdings
is owned by Mark V. Shoen, a significant shareholder and executive officer of
AMERCO. AMERCO does not have an equity ownership interest in SAC Holdings,
except for investments made by RepWest and Oxford in a SAC Holdings-controlled
limited partnership which holds Canadian self-storage properties. SAC Holdings
are not legal subsidiaries of AMERCO. AMERCO is not liable for the debts of SAC
Holdings and there are no default provisions in AMERCO indebtedness that
cross-default to SAC Holdings' obligations. U-Haul currently manages the
properties owned by SAC Holdings under management agreements and receives a
management fee. SAC Holdings has one business segment -- moving and storage
operations.
1
The accounts of AMERCO and SAC Holdings are presented as consolidated
due to a revised interpretation of EITF 90-15 by AMERCO's independent public
accountants. AMERCO agrees with this interpretation. The accompanying
consolidated financial statements as of and for the periods ending March 31,
2001 and 2000 have been restated to reflect such consolidation. The following
table presents the impact of such consolidation at March 31, 2001:
March 31, 2001 March 31, 2000
---------------------------- ----------------------------
As reported(1) As restated As reported(1) As restated
(in thousands) (in thousands)
Assets $3,384,064 3,638,439 $3,125,225 3,291,292
Liabilities $2,768,698 3,126,175 $2,539,931 2,758,838
Stockholders' equity $ 615,366 512,264 $ 585,294 532,454
Net income $ 12,965 1,012 $ 65,491 63,184
(1) As reported in the Company's March 31, 2001 form 10-K, filed on
July 2, 2001 prior to the consolidation of SAC Holdings described above.
The reduction in stockholders' equity is due to the elimination of
gains previously recorded in connection with sales of properties from AMERCO to
SAC Holdings. Such gains had been previously recognized as a component of
stockholders' equity in the AMERCO financial statements. The reduction in net
income is primarily due to the recognition of SAC Holdings' losses for the
periods presented.
See Note 21 of Notes to Consolidated Financial Statements in Item 8 for
financial information regarding the industry segments.
MOVING AND STORAGE OPERATIONS
Moving and self-storage operations consist of the rental of trucks and
trailers, the sale of moving aids such as boxes and the rental of self-storage
spaces to the do-it-yourself mover. Operations are conducted using the
registered tradename U-Haul(R) throughout the United States and Canada.
REAL ESTATE OPERATIONS
Real Estate owns approximately 90% of AMERCO's real estate assets,
including U-Haul Center and Storage locations. The remainder of the real estate
assets are owned by various U-Haul entities. Real Estate is responsible for
managing all of the properties including the environmental risks of the
properties. Real Estate is responsible for the purchase of all properties used
by AMERCO or any of its subsidiaries. Real Estate also handles all the
dispositions (sale or lease) of unused real estate.
2
PROPERTY AND CASUALTY INSURANCE
RepWest originates and reinsures property and casualty-type insurance
products for various market participants, including independent third parties,
U-Haul's customers, independent dealers and AMERCO.
As of December 31, 2001, RepWest has recognized $2.6 million of assumed
incurred losses from the events of September 11, 2001. RepWest's maximum
retention level of $2.0 million has been met and the company will not incur any
additional losses.
LIFE INSURANCE
Oxford originates and reinsures annuities, credit life and disability,
single premium whole life, group life and disability coverage, and Medicare
supplement insurance. Oxford also administers the self-insured employee health
and dental plans for AMERCO.
On November 13, 2000, Oxford acquired all of the issued and outstanding
shares of Christian Fidelity Life Insurance Company (CFLIC) in an exchange of
cash for stock. CFLIC is a Texas-based insurance company specializing in
providing supplemental health insurance and is licensed in 31 states. The
acquisition was accounted for using the purchase method of accounting and,
accordingly, CFLIC's results of operations have been included in the
consolidated financial statements since the date of acquisition. Oxford funded
the acquisition from available cash and short-term funds.
B. HISTORY
U-Haul was founded in 1945 under the name "U-Haul Trailer Rental
Company". From 1945 to 1974, U-Haul rented trailers and, starting in 1959,
trucks on a one-way and In-Town(R) basis through independent dealers. Since
1974, U-Haul has developed a network of Company managed rental centers (U-Haul
Centers) through which U-Haul rents its trucks and trailers and provides related
products and services (e.g., the sale and installation of hitches, as well as
the sale of boxes and moving supplies). At March 31, 2002, U-Haul's distribution
network included 1,345 Company operated centers and 14,905 independent dealers.
C. MOVING AND STORAGE OPERATIONS
BUSINESS STRATEGIES
The U-Haul business strategy remains focused on do-it-yourself moving
and self-storage customers. U-Haul believes that customer access, in terms of
truck or trailer availability and proximity of rental locations, is critical to
its success. Under the U-Haul name, our strategy is to offer, in an integrated
manner over an extensive and geographically diverse network of 16,250 Company
operated Centers and independent dealers, a wide range of products and services
to do-it-yourself moving and self-storage customers.
MOVING OPERATIONS
U-Haul has a variety of product offerings. Rental trucks are designed
with do-it-yourself customers in mind. U-Haul trailers are suited to the low
profile of many newly manufactured automobiles. As of March 31, 2002, the U-Haul
rental equipment fleet consisted of 97,000 trucks, 87,000 trailers and 21,000
tow dollies. Additionally, U-Haul provides support rental items such as
furniture pads, utility dollies and handtrucks.
Approximately 90% of U-Haul's rental revenue is from do-it-yourself
movers. Moving rentals include:
(i) In-Town(R) rentals, where the equipment is returned to the
originating U-Haul location and
(ii) one-way rentals, where the equipment is returned to a U-Haul
location in Another city.
U-Haul's truck and trailer rental business tends to be seasonal, with
proportionally more transactions and revenues generated in the spring and summer
months than during the balance of the year.
U-Haul sells a wide selection of moving supplies that include boxes,
tape and packaging materials. U-Haul Centers also sell and install hitches and
towing systems, and sell propane.
U-Haul offers protection packages such as:
(i) Safemove(R) - which provides moving customers with a damage
waiver, cargo protection and medical and life coverage; and,
(ii) Safestor(R) - which provides self-storage rental customers
with various types of protection for their goods in storage.
3
Independent dealers receive U-Haul equipment on a consignment basis and
are paid a commission on gross revenues generated from their rentals. U-Haul
maintains contracts with its independent dealers that may typically be
terminated upon 30 days written notice by either party.
U-Haul designs and manufactures its truck van boxes, trailers and
various other support rental equipment items. Truck chassis are manufactured by
both foreign and domestic truck manufacturers. These chassis receive certain
post-delivery modifications and are joined with van boxes at strategically
located Company-owned manufacturing and assembly facilities in the United
States.
U-Haul services and maintains its trucks and trailers through an
extensive preventive-maintenance program, generally performed at Company-owned
facilities located at or near U-Haul Centers. Major repairs are performed either
by the chassis manufacturers' dealers or by Company-owned repair shops.
COMPETITION
A highly competitive industry exists within the moving truck and
trailer rental market. U-Haul believes that the principal competitive factors
are convenience of rental locations, availability of quality rental equipment
and price. U-Haul's major competitors in the rental market are Budget and
Penske.
There are two distinct users of rental trucks: commercial users and
do-it-yourself users. U-Haul focuses on the do-it-yourself mover.
SELF-STORAGE BUSINESS
U-Haul entered the self-storage business in 1974 and continues to
increase its presence in the industry through the acquisition of existing
facilities and new construction. In addition, U-Haul has entered into management
agreements to manage self-storage properties owned by others, including SAC
Holdings. U-Haul has also entered into a strategic and financial partnership
with Private Mini Storage Realty, L.P., a Texas-based operator of self-storage
properties.
Through 1,023 owned, managed or participating self-storage locations in
the United States and Canada, U-Haul offers for rent more than 361,600
self-storage spaces at March 31, 2002. This is an increase of 1,955,688 square
feet over the prior year. U-Haul's self-storage facility locations range in
sizes up to 152,600 square feet of storage space, with individual storage units
in sizes from 15 square feet to 400 square feet.
The primary market for storage rooms is the storage of household goods.
With the addition of 18,833 storage rooms during fiscal year 2002, the average
occupancy rate of same store facilities operating over one year was 82.85%, with
modest seasonal variations. During fiscal years 2002 and 2001, delinquent
rentals as a percentage of total storage rentals were approximately 7.7%. U-Haul
considers this rate to be satisfactory.
COMPETITION
The primary competition for a U-Haul self-storage location is other
storage facilities within a trade area offering a comparable level of
convenience to the customer.
EMPLOYEES
As of March 31, 2002, U-Haul's non-seasonal work force consisted of
16,100 full and part-time employees.
D. REAL ESTATE OPERATIONS
REAL ESTATE OPERATIONS
Real Estate has responsibility for actively marketing properties
available for sale or lease. Real Estate is also responsible for managing any
environmental risks associated with AMERCO's real estate.
ENVIRONMENTAL MATTERS
Compliance with environmental requirements of federal, state and local
governments significantly affects Real Estate's business operations. Among other
things, these requirements regulate the discharge of materials into the water,
air and land and govern the use and disposal of hazardous substances. Real
Estate is aware of issues regarding hazardous substances on some of its
properties. Real Estate regularly makes capital and operating expenditures to
stay in compliance with environmental laws and has put in place a remedial plan
at each site where it believes such a plan is necessary. Since 1988, Real Estate
has managed a testing and removal program for underground storage tanks. Under
this program, over 3,000 tanks have been removed at a cost of $43.7 million. See
also Item 3. Legal Proceedings.
4
E. INSURANCE OPERATIONS
BUSINESS STRATEGIES
RepWest's principal business strategy is to provide insurance for
commercial and reinsurance markets. RepWest focuses on selected regional and
under-served customers through managing general agents, independent agents,
brokers and direct sales.
Oxford's business strategy is long-term capital growth through direct
writing and reinsuring of annuity, credit life and disability and Medicare
supplement products. Oxford is pursuing a growth strategy of increased direct
writing via acquisitions of insurance companies, expanded distribution channels
and product development. The acquisitions of North American Insurance Company
and Safe Mate Life Insurance Company in 1997 and Christian Fidelity Life
Insurance Company in 2000 represent a significant movement toward this long-term
goal. Oxford has significantly expanded product offerings, distribution channels
and administrative capabilities through these acquisitions.
INVESTMENTS
RepWest and Oxford investments must comply with the insurance laws of
the state of domicile. These laws prescribe the type, quality and concentration
of investments that may be made. Moreover, in order to be considered an
acceptable reinsurer by cedents and intermediaries, a reinsurer must offer
financial security. The quality and liquidity of invested assets are important
considerations in determining such security.
The investment philosophies of RepWest and Oxford emphasize protection
of principal through the purchase of investment grade fixed-income securities.
Approximately 88.0% of RepWest's and 93.2% of Oxford's fixed-income securities
consist of investment grade securities (NAIC-2 or greater). The maturity
distributions are designed to provide sufficient liquidity to meet future cash
needs.
REINSURANCE
RepWest and Oxford assume and cede insurance from and to other insurers
and members of various reinsurance pools and associations. Reinsurance
arrangements are utilized to provide greater diversification of risk and to
minimize exposure to large risks. However, the original insurer retains primary
liability to the policyholder should the assuming insurer not be able to meet
its obligations under the reinsurance agreements.
REGULATION
RepWest and Oxford are subject to regulation and supervision throughout
the United States. The regulation extends to such matters as licensing companies
and agents, restricting the types, quality or quantity of investments,
regulating capital and surplus and actuarial reserve maintenance, setting
solvency standards, filing of annual and other reports on financial position,
and regulating trade practices. State laws also regulate transactions and
dividends between an insurance company and its parent or affiliates, and
generally require prior approval or notification for any change in control of
the insurance subsidiary. RepWest's unpaid losses and loss expenses are
certified annually by an independent actuarial consulting firm as required by
state regulation.
In the past few years, the insurance and reinsurance regulatory
framework has been subjected to increased scrutiny by the National Association
of Insurance Commissioners (NAIC), federal and state legislatures and insurance
regulators. These regulators are considering increased regulations, with an
emphasis on insurance company investment and solvency issues. It is not possible
to predict the future impact of changing state and federal regulations on the
operations of RepWest and Oxford.
RepWest and Oxford are in compliance with NAIC minimum risk-based
capitalization requirements for insurance companies as of December 31, 2001.
COMPETITION
The highly competitive insurance industry includes a large number of
property and casualty insurance companies and life insurance companies. In
addition, the marketplace now includes financial service firms offering both
insurance and financial products. Some of the insurance companies are owned by
stockholders and others are owned by policyholders. Many competitors have been
in business for a longer period of time or possess substantially greater
financial resources. RepWest and Oxford compete in the insurance business based
upon price, product design and services rendered to producers and policyholders.
5
EMPLOYEES
RepWest's non-seasonal work force consists of 397 full and part-time
employees.
Oxford's non-seasonal work force consists of 159 full and part-time
employees.
LIFE INSURANCE
Oxford offers annuities, credit life and disability, critical illness
insurance, single premium whole life, group life and disability coverage, and
Medicare supplement insurance. Oxford also administers the self-insured group
health and dental plans for AMERCO. Reinsurance arrangements are entered into
with unaffiliated reinsurers.
PROPERTY AND CASUALTY
RepWest's business activities consist of three basic areas: U-Haul,
direct and assumed reinsurance underwriting. U-Haul underwritings include
coverage for U-Haul customers, independent dealers, fleet owners and employees
of AMERCO. For the year ended December 31, 2001, approximately 19.6% of
RepWest's written premiums resulted from U-Haul underwriting activities.
RepWest's direct underwriting is done through Company-employed underwriters and
selected general agents. The products provided include liability coverage for
rental vehicle lessees, storage rental properties, coverage for commercial
multiple peril, commercial auto, mobile homes and excess workers' compensation.
RepWest's assumed reinsurance underwriting is done via broker markets. In an
effort to decrease risk, RepWest has entered into various catastrophe cover
policies to limit its exposure.
The liability for reported and unreported losses is based on both
RepWest's historical and industry averages. Unpaid loss adjustment expenses are
based on historical ratios of loss adjustment expenses paid to losses paid. The
liability for unpaid losses and loss adjustment expenses is based on estimates
of the amount necessary to settle all claims as of the statement date. Both
reported and unreported losses are included in the liability. RepWest updates
the liability estimate as additional facts regarding claim costs become
available. These estimates are subject to uncertainty and variation due to
numerous factors. In estimating reserves, no attempt is made to isolate
inflation from the combined effect of other factors including inflation. Unpaid
losses and loss adjustment expense are not discounted.
Activity in the liability for unpaid losses and loss adjustment
expenses is summarized as follows:
2001 2000 1999
---------------------------
(in thousands)
Balance at January 1 $ 369,292 334,857 344,748
Less reinsurance recoverable 80,599 58,403 68,135
---------------------------
Net balance at January 1 288,693 276,454 276,613
---------------------------
Incurred related to:
Current year 232,984 155,073 121,861
Prior years 36,132 35,387 16,052
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Total incurred 269,116 190,460 137,913
---------------------------
Paid related to:
Current year 106,395 61,196 55,136
Prior years 130,471 117,025 82,936
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Total paid 236,866 178,221 138,072
---------------------------
Net balance at December 31 320,943 288,693 276,454
Plus reinsurance recoverable 128,041 80,599 58,403
---------------------------
Balance at December 31 $ 448,984 369,292 334,857
===========================
As a result of changes in estimates of insured events in prior years,
the provision for unpaid losses and loss adjustment expenses (net of reinsurance
recoveries of $53.1 million) increased by $36.1 million in 2001.
The following table illustrates the change in unpaid loss and loss
adjustment expenses. First line - reserves as originally reported at the end of
the stated year. Second section, reading down, - cumulative amounts paid as of
the end of successive years with respect to that reserve. Third section, reading
down, - revised estimates of the original recorded reserve as of the end of
successive years. Last section - compares the latest revised estimated reserve
amount to the reserve amount as originally established. This last section is
cumulative and should not be summed.
6
Unpaid Loss and Loss Adjustment Expenses
December 31
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1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
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(in thousands)
Unpaid Loss and Loss
Adjustment Expenses: $236,019 238,762 314,482 329,741 341,981 332,674 384,816 344,748 334,857 369,292 448,984
Paid (Cumulative)
as of:
One year later 65,532 83,923 70,382 86,796 89,041 89,336 103,752 82,936 117,025 130,471
Two years later 105,432 123,310 115,467 139,247 150,001 161,613 174,867 164,318 186,193
Three years later 126,390 153,030 146,640 173,787 195,855 208,168 216,966 218,819
Four years later 143,433 173,841 166,068 198,434 226,815 232,726 246,819
Five years later 153,730 181,677 181,174 219,425 243,855 250,312
Six years later 160,875 191,938 194,652 231,447 254,204
Seven years later 168,975 200,281 203,535 237,118
Eight years later 175,364 207,719 207,834
Nine years later 182,235 211,075
Ten years later 184,822
Reserve Reestimated
as of:
One year later 231,779 251,450 321,058 338,033 353,508 354,776 357,733 339,602 377,096 433,222
Two years later 224,783 254,532 323,368 340,732 369,852 342,164 361,306 371,431 419,268
Three years later 223,403 253,844 309,936 349,459 328,445 346,578 369,598 407,285
Four years later 214,854 231,536 317,687 302,808 331,897 349,810 397,046
Five years later 198,320 239,888 267,005 300,180 339,665 362,049
Six years later 210,872 263,843 262,517 307,306 341,207
Seven years later 231,407 259,798 267,948 310,005
Eight years later 227,603 265,285 269,874
Nine years later 230,851 265,423
Ten years later 229,325
Cumulative Redundancy
(Deficiency) $ 6,694 (26,661) 44,608 19,736 774 (29,375) (12,230) (62,537) (84,411) (63,930)
Retro Premium
Recoverable $ 3,175 (66) 6,983 6,632 11,147 12,754 12,390 21,488 27,231 33,471
Reestimated Reserve:
Amount (Cumulative) $ 9,869 (26,727) 51,591 26,368 11,921 (16,621) 160 (41,049) (57,180) (30,459)
7
PART II, ITEM 7, MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements. Additional written or
oral forward-looking statements may be made by AMERCO from time to time in
filings with the Securities and Exchange Commission or otherwise. Management
believes such forward-looking statements are within the meaning of the
safe-harbor provisions. Such statements may include, but are not limited to,
projections of revenues, income or loss, estimates of capital expenditures,
plans for future operations, products or services and financing needs or plans,
as well as assumptions relating to the foregoing. The words "believe", "expect",
"anticipate", "estimate", "project" and similar expressions identify
forward-looking statements, which speak only as of the date the statement was
made. Forward-looking statements are inherently subject to risks and
uncertainties, some of which cannot be predicted or quantified. Future events
and actual results could differ materially from those set forth in, contemplated
by or underlying the forward-looking statements. Some of the important factors
that could cause our actual results, performance or financial condition to
differ materially from our expectations are: fluctuations in our costs to
maintain and update our fleet and facilities; changes in government regulations,
particularly environmental regulations; our credit ratings; changes in demand
for our products; changes in the general domestic economy; degree and nature of
our competition; changes in accounting standards and other factors described in
this report or the other documents we file with the Securities and Exchange
Commission. The above factors, the following disclosures, as well as other
statements in this report and in the Notes to AMERCO's Consolidated Financial
Statements, could contribute to or cause such differences, or could cause
AMERCO's stock price to fluctuate dramatically.
GENERAL
Information on fiscal year, industry segments and AMERCO and SAC
Holdings is incorporated by reference to "Item 8. Financial Statements and
Supplementary Data - Notes 1, 20, and 21 of Notes to Consolidated Financial
Statements". The notes discuss the principles of consolidation, summarized
consolidated financial information and industry segment and geographic area
data. In consolidation, all intersegment premiums are eliminated and the
benefits, losses and expenses are retained by the insurance companies.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Management's discussion and analysis of financial condition and results
of operations are based upon the consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires the use of
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and
liabilities. On an ongoing basis, estimates are revalued, including those
related to areas that require a significant level of judgment or are otherwise
subject to an inherent degree of uncertainty. These areas include allowances for
doubtful accounts, revenue earning vehicles and buildings, self-insured
liabilities, income taxes and commitments and contingencies. The estimates are
based on historical experience, observance of trends in particular areas,
information and/or valuations available from outside sources and on various
other assumptions that are believed to be reasonable under the circumstances and
which form the basis for making judgments about the carrying values of assets
and liabilities that are not readily apparent from other sources. Actual amounts
may differ from these estimates under different assumptions and conditions.
Accounting policies are considered critical when they are significant
and involve difficult, subjective or complex judgments or estimates. Of the
accounting policies discussed in "Item 8. Financial Statements and Supplementary
Data - Note 1 of Notes to Consolidated Financial Statements", the following are
considered to be critical accounting policies:
Principles of consolidation -- The consolidated financial statements
include the accounts of AMERCO and its wholly-owned subsidiaries and SAC
Holdings and their subsidiaries. All material intercompany accounts and
transactions have been eliminated in consolidation. AMERCO has made significant
loans to SAC Holdings and is entitled to participate in SAC Holdings' excess
cash flow (after senior debt service). Substantially all of the equity interest
of SAC Holdings is owned by Mark V. Shoen, a significant shareholder and
executive officer of AMERCO. AMERCO does not have an equity ownership interest
in SAC Holdings, except for investments made by RepWest and Oxford in a SAC
Holdings-controlled limited partnership which holds Canadian self-storage
properties. SAC Holdings are not legal subsidiaries of AMERCO. AMERCO is not
liable for the debts of SAC Holdings and there are no default provisions in
AMERCO indebtedness that cross-default to SAC Holdings' obligations.
8
Revenue earning vehicles and buildings - Depreciation is recognized in
amounts expected to result in the recovery of estimated residual values upon
disposal (i.e. no gains or losses). In determining the depreciation rate,
historical disposal experience and holding periods, and trends in the market for
vehicles are reviewed. Due to longer holding periods on trucks and the resulting
increased possibility of changes in the economic environment and market
conditions, these estimates are subject to a greater degree of risk.
Long-lived assets and intangible assets - The carrying value is
reviewed whenever events or circumstances indicate the carrying values may not
be recoverable through projected undiscounted future cash flows. The events
could include significant underperformance relative to expected, historical or
projected future operating results, significant changes in the manner of using
the assets, overall business strategy, significant negative industry or economic
trends and an unexpected non-compliance with significant debt agreements.
Investments - In determining if and when a decline in market value
below amortized cost is other than temporary, quoted market prices, dealer
quotes or discounted cash flows are reviewed. Permanent declines in value are
recognized in the current period operating results to the extent of the decline.
Insurance Revenue and Expense Recognition - Premiums are recognized as
revenue when due. Benefits and expenses are matched with recognized premiums to
result in recognition over the life of the contracts. This match is accomplished
by recording a provision for future policy benefits and unpaid claims and claim
adjustment expenses and by amortizing deferred policy acquisition costs. Charges
related to services to be performed are deferred until earned. The amounts
received in excess of premiums and fees are included in other policyholder funds
in the consolidated balance sheets.
Unearned premiums represent the portion of premiums written which
relates to the unexpired term of policies. Liabilities for health and disability
and other policy claims and benefits payable represent estimates of payments to
be made on insurance claims for reported losses and estimates of losses incurred
but not yet reported. These estimates are based on past claims experience and
current claim trends as well as social and economic conditions such as changes
in legal theories and inflation. Due to the nature of underlying risks and the
high degree of uncertainty associated with the determination of the liability
for future policy benefits and claims, the amounts to be ultimately paid to
settle liabilities cannot be precisely determined and may vary significantly
from the estimated liability.
Acquisition costs related to insurance contracts have been deferred to
accomplish matching against future premium revenue. The costs are charged to
current earnings to the extent it is determined that future premiums are not
adequate to cover amounts deferred.
DISCLOSURES ABOUT CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
Payments due by Period
Contractual Obligations Total Less than 1-3 4-5 After 5
1 year years years years
---------------------------------------------------
AMERCO's notes and loans $1,045,802 240,642 600,180 30,125 174,855
payable
SAC Holdings' notes and
loans payable
including lease
financings $ 557,761 137,313 128,185 13,040 279,223
Leases obligations $ 464,296 152,816 115,090 162,176 34,214
--------------------------------------------------
Total Contractual
Obligations $2,067,859 530,771 843,455 205,341 488,292
==================================================
LIQUIDITY AND CAPITAL RESOURCES
AMERCO'S MOVING AND STORAGE OPERATIONS
To meet the needs of its customers, U-Haul must maintain a large
inventory of fixed asset rental items. In fiscal year 2002, capital expenditures
were $275.8 million, as compared to $448.2 million and $476.8 million in fiscal
years 2001 and 2000, respectively. These expenditures primarily reflect the
renewal of the rental truck fleet. The capital required to fund these
acquisitions was obtained through internally generated funds from operations and
lease financings.
9
During each of the fiscal years ending March 31, 2003, 2004 and 2005,
U-Haul estimates gross capital expenditures will average approximately $289.0
million primarily reflecting rental fleet rotation. This level of capital
expenditures, combined with a potential range of $150-$205 million in annual
long-term debt maturities, are expected to create annual average funding needs
of approximately $466.0 million. Management estimates that U-Haul will fund
these requirements with leases, internally generated funds, including the
proceeds from the disposition of older trucks and other asset sales, and to a
lesser extent refinance of a portion of existing indebtedness. The sale of
assets is dependent upon economic conditions, the amount and nature of
sale-leaseback transactions, and AMERCO's fleet rotation program. Operating
leases on rental equipment were the result of sale-lease back transactions,
whereby as part of the agreement residual value guarantees were provided. AMERCO
believes the market value of the trucks upon the lease maturity will be greater
than the residual value guarantees. In many cases, a decline in asset sales is
accompanied by a decrease in capital expenditures. Depending on the results of
our operations and general economic and competitive conditions, many of which we
cannot control, we may take certain actions, including delaying or reducing
capital expenditures.
Real Estate has sold storage properties, from time to time, to SAC
Holdings. These sales have in the past provided significant cash flows to
AMERCO. The ability of Real Estate to engage in similar transactions in the
future is dependent to a large degree on the ability of SAC Holdings to obtain
third-party financing for its acquisitions of properties from Real Estate and in
general, its willingness to engage in such transactions. Also, Real Estate
continues to sell surplus properties to third parties primarily for cash at
current levels.
At March 31, 2002, total outstanding notes and mortgages payable for
AMERCO and consolidated subsidiaries was $1,045.8 million compared to $1,170.0
million at March 31, 2001. On June 28, 2002, AMERCO entered into an agreement
replacing an existing revolver agreement with a 3 year revolver for $205.0
million.
At March 31, 2002, total outstanding notes and mortgages payable for
SAC Holdings and consolidated subsidiaries, before intercompany eliminations of
$399.6 million was $957.4 million compared to $504.2 million at March 31, 2001.
SAC Holdings' creditors have no recourse to AMERCO. AMERCO is not liable for the
debts of SAC Holdings. Further, there are no cross default provisions on
indebtedness between AMERCO and SAC Holdings. Lease financing included in the
above totals approximated $117.1 million and $114.0 million at March 31, 2002
and March 31, 2001, respectively.
10
The accounts of AMERCO and SAC Holdings are presented as consolidated due
to a revised interpretation of EITF 90-15 as applied to us by our former
independent accountants during the fiscal year ended March 31, 2002. The
presentation of the consolidated statements has no bearing on the credit
agreements or the operations of either AMERCO or SAC Holdings.
CREDIT AGREEMENTS
AMERCO's operations are funded by various credit and financing
arrangements, including unsecured long-term borrowings, unsecured medium-term
notes and revolving lines of credit with domestic and foreign banks. To finance
its fleet of trucks and trailers, U-Haul routinely enters into sale and
leaseback transactions. As of March 31, 2002, AMERCO had $1,045.8 million in
total notes and loans outstanding. We believe there are enough leasing
companies, banks and other forms of financing to meet our needs.
Certain of AMERCO's credit agreements contain restrictive financial and
other covenants, including, among others, covenants with respect to incurring
additional indebtedness, making third party guarantees, entering into contingent
obligations, maintaining certain financial ratios and placing certain additional
liens on its properties and assets and restricting the issuance of certain types
of preferred stock. At March 31, 2002, AMERCO was in compliance with these
covenants. AMERCO's various credit and financing arrangements are affected by
its credit ratings such that if AMERCO experiences a credit downgrade, the
interest rates that it is charged might be increased, which would result in an
increase in AMERCO's interest expense and hinder its ability to obtain
additional financing on terms acceptable to it, if at all.
On June 28, 2002, AMERCO entered into an agreement replacing an
existing five year $400.0 million revolving credit agreement with a three-year
$205.0 million revolving credit facility. The agreement, as amended, requires
that the Company obtain incremental net cash proceeds and/or availability from
additional financings in an aggregate amount of at least $150.0 million prior to
October 8, 2002. Such proceeds or availability may be in the form of structured
asset sales, additional loan agreements (including increases in commitments
under the revolving credit facility), issuances of bonds or other financings.
11
SAC HOLDINGS
SAC Holdings intends to meet its current debt obligations through cash
flows, generated from its operating activities. SAC Holdings intends to continue
to purchase storage properties during the next year using financing
arrangements.
Reference is made to Note 5 of Notes to Consolidated Financial
Statements.
CONSOLIDATED NET CASH PROVIDED BY OPERATING ACTIVITIES
Net cash provided by operating activities was $130.5 million, $280.5
million and $224.1 million in fiscal years 2002, 2001 and 2000, respectively.
Details by material segment follows:
AMERCO MOVING AND STORAGE OPERATIONS
Cash provided by operating activities was $185.3 million, $39.7 million
and $147.5 million in fiscal years 2002, 2001 and 2000, respectively. The
increase in the current year is due to an increase in earnings and an increase
in intercompany payable with Real Estate operations. The decrease from fiscal
year 2000 to fiscal year 2001 is mainly due to a decrease in intercompany
payable.
REAL ESTATE OPERATIONS
Cash provided (used) by operating activities was $(227.9) million,
$50.5 million and $24.8 million in fiscal years 2002, 2001 and 2000,
respectively. The decrease in fiscal year 2002 is due to a decrease in the
intercompany payable with AMERCO Moving and Storage operations. The increase in
fiscal year 2001 is due to an increase in intercompany payable. This is due to
dividends paid related to the sale of property.
PROPERTY AND CASUALTY
Cash provided (used) by operating activities was $(54.9) million, $21.1
million and $(11.1) million for the years ended December 31, 2001, 2000 and
1999, respectively. The 2000 to 2001 change resulted from decreased unearned
premiums, increased premium receivables and intercompany due from affiliates,
and an increase in federal income tax recoverable. The 1999 to 2000 change
resulted from increased premium collections and funds withheld, offset by
increased loss and loss adjustment expense payments and policy acquisition costs
associated with new business production.
RepWest's cash and cash equivalents and short-term investment portfolio
were $18.3 million, $17.0 million and $6.0 million at December 31, 2001, 2000
and 1999, respectively. This balance reflects funds in transition from maturity
proceeds to long-term investments. This level of liquid assets, combined with
anticipated operating cash flow, is adequate to meet periodic needs. Capital and
operating budgets allow RepWest to schedule cash needs in accordance with
investment and underwriting proceeds.
During fiscal 2002, RepWest realized a write-down of investments due to
other than temporary declines approximating $4.3 million.
LIFE INSURANCE
Cash provided (used) by operating activities was $(3.1) million, $3.7
million and $22.2 million for the years ended December 31, 2001, 2000 and 1999,
respectively. The decrease in cash flows from operating activities in 2000
relates to paid loss experience. Cash flows provided by financing activities
were $58.1 million, $13.9 million and $3.2 million for the years ended December
31, 2001, 2000 and 1999, respectively. Cash flows from deferred annuity sales
increase investment contract deposits, which are a component of financing
activities, as well as the purchase of fixed maturities, which is a component of
investing activities. The increase in investment contract deposits in 2001 over
2000 is due to growth in new deposits offset by withdrawals and terminations of
existing deposits.
Oxford's primary sources of cash are premiums, receipts from
interest-sensitive products and investment income. The primary uses of cash are
operating costs and benefit payments to policyholders. Matching the investment
portfolio to the cash flow demands of the types of insurance being written is an
important consideration. Benefit and claim statistics are continually monitored
to provide projections of future cash requirements.
In addition to cash flows from operating and financing activities, a
substantial amount of liquid funds is available through Oxford's short-term
portfolio. Short-term investments amounted to $53.5 million, $45.0 million and
$30.7 million at December 31,
12
2001, 2000 and 1999, respectively. Oxford believes that the overall sources of
liquidity will continue to meet foreseeable cash needs.
During fiscal 2002, Oxford realized a write-down of investments due to
other than temporary declines approximating $2.3 million.
SAC HOLDINGS
Cash provided by operating activities was $6.7 million, $2.8 million
and $0.7 million in fiscal years 2002, 2001 and 2000, respectively.
At March 31, 2002, total outstanding notes and mortgages payable before
intercompany eliminations of $399.6 million were $957.4 million compared to
$504.2 million at March 31, 2001.
CONSOLIDATED STOCKHOLDERS' EQUITY
Consolidated stockholders' equity was $499.1 million, $512.3 million
and $532.5 million as of March 31, 2002, 2001 and 2000, respectively. Details by
material segment follow:
AMERCO'S MOVING AND STORAGE OPERATIONS
U-Haul's stockholders' equity was $538.9 million, $495.7 million and
$420.7 million as of March 31, 2002, 2001 and 2000, respectively. The increase
in fiscal year 2002 is mainly the result of increased additional paid in capital
due to the sale of property to a related party. Such amounts are eliminated in
consolidation. The increase in fiscal year 2001 was due to earnings.
REAL ESTATE OPERATIONS
Real Estate stockholders' equity was $198.4 million, $89.1 million and
$96.1 million as of March 31, 2002, 2001 and 2000, respectively. The increase in
fiscal year 2002 is due to the sale of storage properties. The decrease in
fiscal year 2001 relates to the payment of a dividend to U-Haul partially offset
by increased earnings.
PROPERTY AND CASUALTY
RepWest maintains a diversified securities investment portfolio,
primarily in bonds at varying maturity levels with 88.0% of the fixed-income
securities consisting of investment grade securities. The maturity distribution
is designed to provide sufficient liquidity to meet future cash needs. Liquidity
remains strong, with invested assets equal to 75.3% of total liabilities.
The liability for reported and unreported losses are based upon both
RepWest's historical and industry averages. Unpaid loss adjustment expenses are
based on historical ratios of loss adjustment expenses paid to losses paid.
Unpaid loss and loss expenses are not discounted.
RepWest's stockholder's equity was $214.0 million, $192.1 million and
$208.5 million at December 31, 2001, 2000 and 1999, respectively. The increase
from 2000 to 2001 was the result of a $60.2 million capital contribution from
the RepWest's parent AMERCO, offset by operating losses in 2001. The decrease
from 1999 to 2000 is a result of operating losses and a change in market value
for the available for sale investment portfolio. RepWest considers current
stockholder's equity to be adequate to support future growth and absorb
unforeseen risk events. RepWest does not use debt or equity issues to increase
capital and therefore has no exposure to capital market conditions. RepWest did
not pay dividends to its parent during 2001, 2000 or 1999.
LIFE INSURANCE
Oxford's stockholder's equity was $128.8 million, $99.8 million and
$88.1 million as of December 31, 2001, 2000 and 1999, respectively. The increase
from 2000 to 2001 is a result of earnings and changes in market value for the
available for sale investment portfolio and a $15.4 million contribution from
AMERCO. Oxford did not pay dividends to its parent during 2001, 2000 or 1999.
SAC HOLDINGS
SAC Holdings' stockholders' deficit was $(19.5) million, $(31.7)
million and $(11.5) million as of March 31, 2002, 2001 and 2000, respectively.
Stockholder's deficit for fiscal 2002 decreased due to a $27.0 million
contribution of stock by the owner recorded to additional paid-in capital,
offset by a net loss of $14.8 million.
13
INSURANCE OPERATIONS
Applicable laws and regulations of the State of Arizona require RepWest
and Oxford to maintain minimum capital determined in accordance with statutory
accounting practices. Such amount is $1.0 million and $0.4 million, for RepWest
and Oxford, respectively. In addition, the amount of dividends that can be paid
to stockholders by insurance companies domiciled in the State of Arizona is
limited. Any dividend in excess of the limit requires prior regulatory approval.
Statutory surplus which can be distributed as dividends without regulatory
approval is $15.2 million and $0.1 million for RepWest and Oxford, respectively
at December 31, 2001. These restrictions are not expected to have a material
adverse effect on the ability of the Company to meet its cash obligations.
Oxford issued a surplus note to AMERCO on December 31, 1998 for $10.0 million.
Approval by the Arizona Department of Insurance is required prior to payment of
principal and interest.
The Regulatory authorities impose minimum risk-based capital ("RBC")
requirements that were developed by the NAIC, on insurance enterprises. The
formulas for determining the amount of RBC specify various weighting factors
that are applied to financial balances or various levels of activity based on
perceived degree of risk. Regulatory compliance is determined by a ratio of the
enterprise's regulatory total adjusted capital, as defined by the NAIC, to its
authorized control level RBC, as defined by the NAIC. Enterprises below specific
trigger points or ratios are classified within certain levels, each of which
requires specified corrective action. The RBC measures of the Company, NAI and
CFLIC as of December 31, 2001 were all above the minimum standards.
RESULTS OF OPERATIONS - CONSOLIDATED
CONSOLIDATED RENTAL REVENUE
Rental revenue, net of commission expense was $1,344.0 million,
$1,285.5 million, and $1,208.8 million in fiscal years 2002, 2001 and 2000,
respectively. Details by material segment follow:
AMERCO'S MOVING AND STORAGE OPERATIONS
Rental revenue was $1,243.4 million, $1,202.4 million and $1,148.2
million fiscal years 2002, 2001 and 2000, respectively. The increase from fiscal
year 2001 to fiscal year 2002 is due to an increase in one-way transactions with
an improved average dollar per transaction on one-way rentals as well as growth
in transactions in trailer rentals and support rental items. The increase from
fiscal year 2000 to fiscal year 2001 was primarily due to the growth in truck
rental revenues, which benefited from transactional growth and reflects higher
average revenue per transaction.
REAL ESTATE OPERATIONS
Rental revenue, before intercompany eliminations, were $78.7 million,
$71.9 million and $73.4 million in fiscal years 2002, 2001 and 2000,
respectively. Intercompany rental revenue was $75.0 million, $71.1 million and
$71.0 million in fiscal years 2002, 2001 and 2000, respectively. The decrease in
fiscal year 2002 is related to the sale of properties to a related party while
rental revenue was consistent between fiscal year 2000 and fiscal year 2001.
SAC HOLDINGS
Rental revenue was $111.1 million, $88.6 million and $64.9 million in
fiscal years 2002, 2001 and 2000, respectively. Increased facility capacity
through the acquisition of new locations and increased storage rates accounted
for the increase. The occupancy of existing storage locations has remained
stable.
CONSOLIDATED NET SALES
Net sales revenues were $222.8 million, $212.2 million and $201.4
million in fiscal years 2002, 2001 and 2000, respectively. Revenue growth from
the sale of moving support items (i.e. boxes, etc.) and propane resulted in the
increase for each year.
AMERCO'S MOVING AND STORAGE OPERATIONS
Net sales revenues were $198.3 million, $194.3 million and $188.8
million in fiscal years 2002, 2001 and 2000, respectively. Revenue growth from
the sale of moving support items (i.e. boxes, etc.) and propane resulted in the
increase for each year.
14
SAC HOLDINGS
Net sales revenues were $24.4 million, $17.9 million and $12.5 million
in fiscal years 2002, 2001 and 2000, respectively. Revenue growth was due to the
addition of new locations.
CONSOLIDATED PREMIUMS
Premium revenues, after intercompany eliminations, were $433.6 million,
$323.2 million and $262.1 million in fiscal years 2002, 2001 and 2000,
respectively. Details by material segment follow:
PROPERTY AND CASUALTY
Premium revenues, before intercompany eliminations, were $274.0
million, $218.1 million and $173.8 million for the years ended December 31,
2001, 2000 and 1999, respectively. General agency premiums were $107.4 million,
$64.3 million and $17.8 million for the years ended December 31, 2001, 2000 and
1999, respectively. The increase from 2000 to 2001 was the result of trucking,
commercial lines business, and the non-standard auto program. Assumed treaty
reinsurance premiums were $73.0 million, $83.2 million and $80.7 million for the
years ended December 31, 2001, 2000 and 1999, respectively. Rental industry
revenues were $59.6 million, $43.3 million and $50.3 million for the years ended
December 31, 2001, 2000 and 1999, respectively. The increase from 2000 was the
result of an increase in premiums of a retrospectively rated policy on the
U-Haul industry liability policy.
LIFE INSURANCE
Premium revenues, before intercompany eliminations, were $160.1
million, $112.6 million and $96.4 million for the years ended December 31, 2001,
2000 and 1999, respectively. Oxford increased Medicare supplement premiums
through direct writings and the acquisition of Christian Fidelity Life Insurance
Company (CFLIC); these actions increased premiums by $49.6 million from 2000 and
$61.8 million from 1999. Premiums from Oxford's life insurance lines increased
$1.2 million from 2000 and decreased $0.4 million from 1999 due to production
fluctuations from year to year. In the area of credit insurance, Oxford had
cancelled accounts in specific states and has experienced an industry-wide
reduction in new premium production. These factors contributed to a $3.7 million
decrease in premium from 2000 and a $0.4 million decrease from 1999.
Annuitizations decreased by $1.9 million from 2000 and $0.8 million from 1999.
Other health insurance premiums increased $2.3 million from 2000 and $3.5
million from 1999 due to a higher reinsurance retention level.
CONSOLIDATED NET INVESTMENT AND INTEREST INCOME
Net investment and interest income was $58.1 million, $61.5 million and
$61.0 million in fiscal years 2002, 2001 and 2000, respectively. Details by
material segment follow:
AMERCO MOVING AND STORAGE OPERATIONS
Interest income, before consolidating entries, was $24.2 million, $27.9
million and $19.5 million in fiscal years 2002, 2001 and 2000, respectively. The
decrease in fiscal year 2002 is mainly related to decrease average investment
balance. The increase in interest during fiscal year 2001 reflects higher
average storage note receivable balances.
REAL ESTATE OPERATIONS
Net investment and interest income was $8.7 million, $11.0 million and
$7.0 million in fiscal years 2002, 2001 and 2000, respectively. The increase in
fiscal 2002 is related to increased investments. The increase in fiscal 2001 is
due to interest income received on notes receivable.
PROPERTY AND CASUALTY
Net investment income was $27.6 million, $29.1 million and $33.0
million for the years ended December 31, 2001, 2000 and 1999, respectively. The
reductions are attributable to lower invested asset balance, lower interest
rates, as well as the write down of $4.1 million of fixed maturity investments
during 2001.
LIFE INSURANCE
Net investment income was $27.0 million, $22.2 million and $21.5
million for the years ended December 31, 2001, 2000 and 1999, respectively. This
increase is due to a larger invested asset base in 2001 and net realized capital
gains in 2001.
15
CONSOLIDATED OPERATING EXPENSES
Operating expenses were $1,109.4 million, $1,047.2 million and $949.3
million in fiscal years 2002, 2001 and 2000, respectively. Details by material
segment follow:
AMERCO'S MOVING AND STORAGE OPERATIONS
Operating expenses, before intercompany eliminations, were $1,001.8
million, $986.5 million and $931.1 million in fiscal years 2002, 2001 and 2000,
respectively. The increase in fiscal year 2002 is due to increased personnel
costs and higher repair expense. The increased expense in fiscal year 2001 is
due to increased personnel costs, higher repair expense, a substantial lawsuit
settlement and other administrative costs. Also, the addition of storage rooms
will initially cause an increase in operating expenses without corresponding
increases in earnings until the properties reach a stabilized level of
occupancy.
REAL ESTATE OPERATIONS
Operating expenses, before intercompany eliminations, were $6.0
million, $0.4 million and $4.0 million in fiscal years 2002, 2001 and 2000,
respectively. The increase in fiscal year 2002 is due to an increase in the
maintenance costs, including insurance and property taxes. Real Estate benefited
from a reduction in intercompany management fees charged by an affiliated
segment company during fiscal year 2001 compared to the prior two years.
PROPERTY AND CASUALTY
Operating expenses, before intercompany eliminations, were $78.7
million, $56.7 million and $35.0 million for the years ended December 31, 2001,
2000 and 1999, respectively. The increase is due to a change in estimate on an
aggregate stop loss treaty in which RepWest had originally recorded the treaty
as if it would be commuted. Estimates in 2001 have changed and the treaty will
not be commuted. The original amount was a reduction to commissions of $17.7
million of which RepWest had to recognize back through commissions in 2001.
Commission expenses were $51.2 million, $33.1 million and $19.1 million for the
years ended December 2001, 2000 and 1999, respectively. Lease expenses were $1.7
million, $2.1 million and $1.9 million for the years ended December 2001, 2000
and 1999, respectively. All other underwriting expenses consisted of $22.8
million, $21.4 million and $13.9 million for the years ended December 2001, 2000
and 1999, respectively.
LIFE INSURANCE
Operating expenses, before intercompany eliminations, were $37.0
million, $29.0 million and $23.1 million for the years ended December 31, 2001,
2000 and 1999, respectively. Commissions have increased $3.9 million and $11.2
million from 2000 and 1999, respectively, primarily due to the increases in
Medicare supplement premiums. General and administrative expenses net of fees
collected increased $4.1 million and $2.8 million from 2000 and 1999,
respectively. Increases due to the acquisition of CFLIC were $3.3 million and
$3.9 million from 2000 and 1999, respectively. The remaining increases are due
to increases in the volume of business and the expenses associated with the
administration.
SAC HOLDINGS
Operating expenses, before intercompany eliminations, were $62.2
million, $51.5 million and $34.2 million in fiscal years 2002, 2001 and 2000,
respectively. Reimbursed personnel expenses, liability insurance, property taxes
and utility expenses all increased proportionately in relation to the increased
revenues from the acquisition of new locations.
CONSOLIDATED COST OF SALES
Cost of sales was $122.9 million, $126.6 million and $115.4 million in
fiscal years 2002, 2001 and 2000, respectively. Increased material costs and a
higher sales volume related to moving support items contributed to the increases
in both fiscal years 2002 and 2001.
AMERCO'S MOVING AND STORAGE
Cost of sales was $111.6 million, $116.7 million and $110.6 million in
fiscal years 2002, 2001 and 2000, respectively. The decrease in fiscal year 2002
is due to the lower costs associated with the sale of propane and other
materials. The increase in fiscal year 2001 is due to increased material costs
and a higher sales volume related to moving support items.
16
SAC HOLDINGS
Cost of sales was $11.3 million, $9.9 million and $4.8 million in
fiscal years 2002, 2001 and 2000, respectively. Increased material costs and a
higher sales volume related to moving support items contributed to the increases
in both fiscal years 2002 and 2001.
CONSOLIDATED BENEFITS AND LOSSES
Benefits and losses were $389.5 million, $283.4 million and $209.6
million in fiscal years 2002, 2001 and 2000, respectively. Details by material
segment follow:
PROPERTY AND CASUALTY
Benefits and losses incurred were $269.1 million, $204.1 million and
$150.5 million for the years ended December 31, 2001, 2000 and 1999,
respectively. The increase from 2000 to 2001 resulted from increased earned
premium in three general agency programs and continued reserve strengthening in
assumed reinsurance treaty segment. The increase from 1999 to 2000 resulted from
two new general agency programs, and reserve strengthening in existing rental
industry, assumed treaty reinsurance, and general agency programs.
LIFE INSURANCE
Benefits incurred were $120.4 million, $79.2 million and $59.0 million
for the years ended December 31, 2001, 2000 and 1999, respectively. The increase
is primarily due to Medicare supplement benefits incurred, which accounts for
$38.8 million and $55.5 million of benefit increases from 2000 and 1999,
respectively. These increases are due to the acquisition of CFLIC and poor
experience on legacy blocks, which are no longer actively marketed. Credit
insurance benefits increased $0.8 million and $2.9 million from 2000 and 1999,
respectively, due to increased mortality and morbidity experience. Benefits from
other health lines increased $3.1 million and $5.6 million from 2000 and 1999,
respectively, as retained volume increased and loss experience worsened. These
lines have been terminated. Annuity and life benefits decreased $1.5 million and
$2.6 million from 2000 and 1999, respectively, due to fluctuations in life
insurance production and annuitizations of annuity contracts.
CONSOLIDATED AMORTIZATION OF DEFERRED ACQUISITION COSTS AND OTHER
Amortization of deferred acquisition costs (DAC) and the value of
business acquired (VOBA) was $40.7 million, $35.9 million and $35.0 million in
fiscal years 2002, 2001 and 2000, respectively. DAC consists of commissions and
other policy acquisition costs, which vary with, and are primarily related to,
the production of new business. The prior year end commissions and other related
expenses are recognized ratably over the remainder of the policy year. Details
by material segment follow:
PROPERTY AND CASUALTY
Amortization expense was $22.1 million, $16.3 million and $13.4 million
for the years ended December 31, 2001, 2000 and 1999, respectively. The increase
from 2000 to 2001 is due to the amortization of higher commissions deferred in
the 2000 year. The increase from 1999 to 2000 is mainly due to the amortization
of Assumed Treaty expenses that were deferred in the 2000 year.
LIFE INSURANCE
The VOBA asset relates to the future profits of insurance policies in
force at the date of the North American Insurance and CFLIC acquisitions.
Amortization of DAC and VOBA was $18.6 million, $19.6 million and $21.6 million
for the years ended December 31, 2001, 2000 and 1999, respectively. These costs
are amortized as the premium is earned over the term of the policy. Amortization
decreased $1.0 million and $3.0 million from 2000 and 1999, respectively, due to
the annuity and credit segments.
CONSOLIDATED LEASE EXPENSE
Lease expense was $175.5 million, $173.1 million and $131.0 million in
fiscal years 2002, 2001 and 2000, respectively. Details by material segment
follow:
AMERCO'S MOVING AND STORAGE OPERATIONS
Lease expense before intercompany elimination was $170.8 million,
$166.2 million and $132.4 million in fiscal years 2002, 2001 and 2000,
respectively. The increase in 2002 is due property leases, with a decrease in
rental equipment lease expense.
17
REAL ESTATE OPERATIONS
Lease expense before intercompany eliminations, for real estate
operations was $11.2 million, $11.6 million and $3.0 million for the fiscal
years 2002, 2001 and 2000, respectively. The lease expense in fiscal year 2002
was virtually unchanged over the fiscal year 2001. The continued increase in
fiscal year 2001 over 2000 reflects payments under an operating lease facility
with a number of financial institutions.
CONSOLIDATED DEPRECIATION EXPENSE, NET
Depreciation expense, net was $108.7 million, $101.5 million and $96.1
million in fiscal years 2002, 2001 and 2000, respectively. Details by material
segment follow:
AMERCO'S MOVING AND STORAGE OPERATIONS
Depreciation expense, net was $97.3 million, $82.7 million and $79.0
million in fiscal years 2002, 2001 and 2000, respectively. The increase in
fiscal years 2002 and 2001 reflects an increase in depreciation expense on the
rental truck fleet.
REAL ESTATE OPERATIONS
Depreciation expense, net was $(2.0) million, $5.3 million and $8.6
million in fiscal years 2002, 2001 and 2000, respectively. The decrease in
fiscal years 2002 reflects an increase in gains from the disposition of
property, plant and equipment. The decrease in fiscal year 2001 reflects an
increase in gains from the disposition of property, plant and equipment and a
decrease in depreciation on buildings and non-rental equipment.
SAC HOLDINGS
Depreciation expense, net was $14.2 million, $11.7 million and $7.9
million in fiscal years 2002, 2001 and 2000, respectively. The increase is
attributed to the acquisition of new locations.
CONSOLIDATED EARNINGS FROM OPERATIONS
Earnings from operations were $111.8 million, $114.8 million and $196.9
million in fiscal years 2002, 2001 and 2000, respectively. Details by material
segment follow:
AMERCO'S MOVING AND STORAGE OPERATIONS
Earnings from operations, before intercompany eliminations, were $69.5
million, $54.5 million and $96.0 million in fiscal years 2002, 2001 and 2000,
respectively. The increase in fiscal year 2002 is due to increased revenue from
rental operations offset by the slight increase in operating expenses and a
decrease in lease expense. The decrease in fiscal year 2001 is due to increased
transactions, offset by increased operating and lease expenses.
REAL ESTATE OPERATIONS
Earnings from operations, before intercompany eliminations, were $72.3
million, $65.8 million and $64.7 million in fiscal years 2002, 2001 and 2000,
respectively. The increase in fiscal year 2002 is mainly related to higher net
investment interest income. A decrease in intercompany management fees charged
contributed to the earnings increase for fiscal year 2001.
PROPERTY AND CASUALTY
Earnings (loss) from operations were $(68.2) million, $(29.9) million
and $7.9 million for the years ended December 31, 2001, 2000 and 1999,
respectively. The decrease in 2001 was due to the increase in commissions due to
the commutation write-off, reserve strengthening, and development in older years
on the assumed treaty reinsurance business. The 1999 to 2000 decrease was due to
reserve strengthening and losses on two new general agency programs as well as
the write downs of fixed maturity investments whose declines in value were
determined to be other than temporary.
LIFE INSURANCE
Earnings from operations were $11.1 million, $6.9 million and $14.2
million for the years ended December 31, 2001, 2000 and 1999, respectively. The
increase from 2000 is due primarily to improved net investment income, while the
decrease from 1999 is primarily due to poor experience in the Other Health and
Credit insurance lines.
18
SAC HOLDING
Earnings from operations were $47.8 million, $33.4 million and $30.5
million for the years ended March 31, 2002, 2001 and 2000, respectively. The
increase is due to the addition of storage locations.
CONSOLIDATED INTEREST EXPENSE
Interest expense was $106.8 million, $109.0 million and $97.2 million
in fiscal years 2002, 2001 and 2000, respectively. Details by material segment
follow:
AMERCO'S MOVING AND STORAGE OPERATIONS
Interest expense was $76.1 million, $87.8 million and $81.5 million in
fiscal years 2002, 2001 and 2000, respectively. The decrease in fiscal year 2002
can be attributed to interest rate reductions. The increase in fiscal year 2001
over fiscal year 2000 can be attributed to an increase in the average cost of
debt.
SAC HOLDING
Interest expense before intercompany elimination was $61.1 million,
$51.3 million and $36.8 million in fiscal years 2002, 2001 and 2000,
respectively The average debt level outstanding continued to increase due to the
acquisition of storage properties in fiscal year 2002 compared to fiscal years
2001 and 2000.
CONSOLIDATED EXTRAORDINARY LOSS ON THE EXTINGUISHMENT OF DEBT
During fiscal year 2001, AMERCO extinguished $100.0 million of 6.89%
Bond Backed Asset Trust certificates (BATs) originally due in fiscal year 2011
and $25.0 million of 6.71% Medium-Term notes originally due in fiscal year 2009.
This resulted in an extraordinary loss of $2.1 million, net of tax of $1.2
million ($0.10 per share).
During fiscal year 2000, AMERCO extinguished $100.0 million of 6.65%
Bond Backed Asset Trust certificates (BATs) originally due in fiscal year 2030
and $50.0 million of 7.05% to 7.10% Medium-Term notes originally due in fiscal
year 2007. This resulted in an extraordinary loss of $0.3 million, net of tax of
$0.2 million ($0.02 per share).
CONSOLIDATED EARNINGS
As a result of the foregoing, pretax earnings totaled $5.0 million,
$5.8 million and $99.7 million in fiscal years 2002, 2001 and 2000,
respectively. After providing for income taxes, earnings from operations were
$2.7 million, $3.1 million and $63.5 million in fiscal years 2002, 2001 and
2000, respectively. Following deductions for an extraordinary loss from the
early extinguishment of debt and the elimination of SAC Holdings, net earnings
were $2.7 million, $1.0 million and $63.2 million in fiscal years 2002, 2001 and
2000, respectively.
QUARTERLY RESULTS
The table on the following page presents unaudited quarterly results
for the eight quarters in the period beginning April 1, 2000 and ending March
31, 2002. The quarters presented reflect the restatements due to the
consolidation of SAC Holding Corporations. AMERCO believes that all necessary
adjustments have been included in the amounts stated below to present fairly,
and in accordance with generally accepted accounting principles, the selected
quarterly information when read in conjunction with the consolidated financial
statements incorporated herein by reference. U-Haul moving and storage
operations are seasonal and proportionally more of AMERCO's revenues and net
earnings from its U-Haul moving and storage operations are generated in the
first and second quarters of each fiscal year (April through September). The
operating results for the periods presented are not necessarily indicative of
results for any future period.
19
Quarter Ended
------------------------------------------------------------------------------------------------------
Jun 30 Sep 30 Dec 31 Mar 31
2001 2001 2001 2002
As reported As adjusted As reported As adjusted As reported As adjusted As reported As adjusted
(3) (3) (3) (3)
------------------------------------------------------------------------------------------------------
(in thousands, except share and per share data)
Total revenues $ 542,553 540,654 572,379 571,207 467,410 463,739 510,742 482,906
Earnings from operations
net of tax $ 25,324 20,901 41,131 35,738 (22,389) (24,576) (30,847) (29,342)
Net earnings (loss) $ 25,003 20,901 41,686 35,738 (20,212) (24,576) (30,847) (29,342)
Weighted average common
shares outstanding
basic and diluted 21,280,361 21,280,361 21,106,343 21,106,343 20,892,342 20,892,342 21,022,712 21,022,712
Earnings (loss) from
operations before
extraordinary loss
on early extinguishment
of debt per common
share (1) $ 1.02 .83 1.82 1.54 (1.12) (1.33) (1.60) (1.55)
Earnings (loss) per common
share
basic and diluted $ 1.02 .83 1.82 1.54 (1.12) (1.33) (1.60) (1.55)
Quarter Ended
-------------------------------------------------------------------------------------
Jun 30 Sep 30 Dec 31
2000 2000 2000
As reported As adjusted(3) As reported As adjusted(3) As reported As adjusted(3)
-------------------------------------------------------------------------------------
(in thousands, except share and per share data)
Total revenues $ 472,350 469,654 520,132 521,789 444,620 443,451
Earnings from operations
before extraordinary loss
on early extinguishment
of debt net of tax (2) $ 35,876 35,908 41,233 38,853 (24,739) (23,522)
Net earnings (loss) $ 37,612 35,908 41,233 38,853 (21,292) (25,643)
Weighted average common
shares outstanding
Basic 21,718,988 21,718,988 21,489,970 21,489,970 21,406,688 21,406,688
Earnings (loss) from
operations before minority
interest and extraordinary loss
on early extinguishment of debt
per common share (1) (2) $ 1.58 1.50 1.77 1.66 (1.05) (1.25)
Earnings (loss) per common
share
basic and diluted $ 1.58 1.50 1.77 1.66 (1.15) (1.35)
Quarter Ended
----------------------------
Mar 31
2001
As reported As adjusted(3)
----------------------------
(in thousands, except
share and per share data)
Total revenues 425,318 447,553
Earnings from operations
before extraordinary loss
on early extinguishment
of debt net of tax (2) (46,650) (48,106)
Net earnings (loss) (46,650) (48,106)
Weighted average common
shares outstanding
Basic 21,326,015 21,326,015
Earnings (loss) from
operations before minority
interest and extraordinary loss
on early extinguishment of debt
per common share (1) (2) (2.34) (2.37)
Earnings (loss) per common
share
basic and diluted (2.34) (2.37)
(1) Net earnings (loss) per common share amounts were computed after giving
effect to the dividends on AMERCO's Preferred Stock.
(2) During fiscal year 2001, AMERCO extinguished $100.0 million of 6.89% BATs
originally due in fiscal year 2011 and $25.0 million of 6.71% Medium-Term
Notes originally due in fiscal year 2009. This resulted in an extraordinary
loss of $2.1 million, net of tax of $1.2 million ($0.10 per share).
(3) Reflects a reclassification of interest income and expense for elimination
purposes.
20
IRS EXAMINATION
In connection with the resolution of 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.
The Company is currently under IRS examination for the years 1996-1997. The
IRS has proposed adjustments to the Company's 1997 and 1996 tax returns in the
amount of $233.1 million and $99.0 million, respectively. Nearly all of the
adjustments are attributable to denials of deductions claimed for certain
payments made in connection with the resolution of stockholder litigation with
certain members of the Shoen family and their corporations. The Company believes
these income tax deductions are appropriate and it is vigorously contesting the
IRS adjustments. The Company estimates that if it is unsuccessful in its
challenge in all respects, the Company could incur tax liabilities totaling
approximately $90.0 million plus interest. The Company believes that even though
an unfavorable result could result in substantial cash payments, there would be
minimal, if any, impact on consolidated results of operations.
OTHER
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statements of Financial Accounting Standards No. 141 (SFAS 141), "Business
Combinations", and No. 142 (SFAS 142), "Goodwill and Other Intangible Assets".
SFAS 141 supercedes Accounting Principles Board Opinion No. 16 (APB
16), "Business Combinations". The most significant changes made by SFAS 141 are:
(1) requiring that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001, (2) establishing specific criteria
for the recognition of intangible assets separately from goodwill, and (3)
requiring unallocated negative goodwill to be written off immediately as an
extraordinary gain (instead of being deferred and amortized).
SFAS 142 supercedes APB 17, "Intangible Assets". SFAS 142 primarily
addresses the accounting for goodwill and intangible assets subsequent to their
acquisition (i.e., the post-acquisition accounting). The provisions of SFAS 142
will be effective for fiscal years beginning after December 15, 2001. The most
significant changes made by SFAS 142 are: (1) goodwill and indefinite lived
intangible assets will no longer be amortized, (2) goodwill will be tested for
impairment at least annually at the reporting unit level, (3) intangible assets
deemed to have an indefinite life will be tested for impairment at least
annually, and (4) the amortization period of intangible assets with finite lives
will no longer be limited to forty years.
SFAS No. 141 and 142 are not expected to affect the consolidated
financial position or results of operations.
SFAS No. 143, Accounting for Asset Retirement Obligations, requires
recognition of the fair value of liabilities associated with the retirement of
long-lived assets when a legal obligation to incur such costs arises as a result
of the acquisition, construction, development and/or the normal operation of a
long-lived asset. Upon recognition of the liability, a corresponding asset is
recorded at present value and accreted over the life of the asset and
depreciated over the remaining life of the long-lived asset. The Statement
defines a legal obligation as one that a party is required to settle as a result
of an existing or enacted law, statute, ordinance, or written or oral contract
or by legal construction of a contract under the doctrine of promissory
estoppel. SFAS 143 is effective for fiscal years beginning after June 15, 2002.
Management has not yet determined the effects of adopting this Statement on the
financial position or results of operations.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets", which addresses issues relating to
the implementation of FASB Statement No. 121 (FAS 121), "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of",
and develops a single accounting model, based on the framework established in
FAS 121, for long-lived assets to be disposed of by sale, whether previously
held and used or newly acquired. The Company is in the process of determining
the extent to which this statement will impact its results of operations or
financial position.
SFAS No. 145, Rescission of FAS Nos. 4, 44, and 64, Amendment of FAS
13, and Technical Corrections as of April 2002, rescinds FASB Statement No. 4,
Reporting Gains and Losses from Extinguishment of Debt, and an amendment of that
Statement, FASB Statement No. 64, Extinguishments of Debt Made to Satisfy
Sinking-Fund Requirements. This Statement also rescinds FASB Statement No. 44,
Accounting for Intangible Assets of Motor Carriers. This Statement amends FASB
Statement No. 13, Accounting for Leases, to eliminate an inconsistency between
the required accounting for sale-leaseback transactions and the required
accounting for certain lease modifications that have economic effects that are
similar to sale-leaseback transactions. This Statement also amends other
existing authoritative pronouncements to make various technical corrections,
clarify meanings, or describe their applicability under changed conditions.
Management has not yet determined the effects of adopting this Statement on the
financial position or results of operations, except for the need to reclassify
debt extinguishments previously reported as extraordinary.
21
Part III, Item 13, Certain Relationships and Related Transactions
This section is amended and restated in its entirety as follows, which
supplements certain disclosures contained in the Original Filing that were
incorporated by reference from the 2002 Proxy Statement:
During fiscal 2002, U-Haul purchased $3.2 million of printing from Form
Builders, Inc. Mark V. Shoen, his daughter and Edward J. Shoen's sons are major
stockholders of Form Builders, Inc. Edward J. Shoen is Chairman of the Board of
Directors and President of AMERCO and is a significant stockholder of AMERCO.
Mark V. Shoen is President, U-Haul Phoenix Operations and is a significant
stockholder of AMERCO.
On August 1, 2001, we sold one self-storage property to a subsidiary of SAC
Holdings for $530,000 in cash and notes. The purchase price was determined by
the Treasurer of U-Haul, based on an analysis of the net operating income of the
properties.
On September 28, 2001, we purchased 9 self-storage properties from SAC
Holdings for $35.2 million in cash. These properties were not previously owned
by us. The purchase price was negotiated with SAC Holdings by the Treasurer of
U-Haul, based on an analysis of the net operating income of the properties.
On December 20, 2001, we sold 14 self-storage properties to a subsidiary of
SAC Holdings for $43.8 million in cash and notes. The purchase price was
negotiated with SAC Holdings by the Assistant Treasurer of U-Haul, based on an
analysis of the net operating income of the properties.
On January 11, 2002, we sold 37 self-storage properties to a subsidiary of
SAC Holdings for $93.7 million in cash and notes. The purchase price was
negotiated with SAC Holdings by the Assistant Treasurer of U-Haul, based on an
analysis of the net operating income of the properties.
On February 1, 2002, we sold 62 self-storage properties to a subsidiary of
SAC Holdings for $146.9 million in notes. The purchase price was negotiated with
SAC Holdings by the Assistant Treasurer of U-Haul, based on an analysis of the
net operating income of the properties. On March 28, 2002, the purchaser paid
down the notes in the amount of $75.9 million from cash proceeds obtained from a
third-party financing.
We hold various senior and junior unsecured notes of SAC Holdings.
Substantially all of the equity interest of SAC Holdings is owned by Mark V.
Shoen, a significant shareholder and executive officer of AMERCO. AMERCO does
not have an equity ownership interest in SAC Holdings, except for investments
made by RepWest and Oxford in a SAC Holdings-controlled limited partnership
which holds Canadian self-storage properties. The senior unsecured notes of SAC
Holdings that AMERCO holds rank equal in right of payment with the notes of
certain senior mortgage holders, but junior to the extent of the collateral
securing the applicable mortgages and junior to the extent of the cash flow
waterfalls that favor the senior mortgage holders. AMERCO received cash interest
payments of $27.9 million from SAC Holdings during fiscal year 2002. The notes
receivable balance outstanding at June 30, 2002 was, in the aggregate, $372.0
million. The largest aggregate amount outstanding during the fiscal year ended
March 31, 2002 was $463.1 million.
Interest on the senior and junior notes accrues at rates ranging from 8% to
13%.
Interest accrues on the outstanding principal balance of senior notes of
SAC Holdings that we hold at a fixed rate and is paid on a monthly basis.
22
Interest accrues on the outstanding principal balance of junior notes of
SAC Holdings that we hold at a stated rate of basic interest. A fixed portion of
that basic interest is paid on a monthly basis. Additional interest is paid on
the same payment date based on the difference between the amount of remaining
basic interest and an amount equal to a specified percentage of
the net cash flow before interest expense generated by the underlying
property
minus
the sum of the principal and interest due on the senior notes of SAC
Holdings relating to that property and a multiple of the fixed portion
of basic interest paid on that monthly payment date.
We refer to the latter amount as the "cash flow-based calculation."
To the extent that this cash flow-based calculation exceeds the amount of
remaining basic interest, contingent interest equal to that excess and the
amount of remaining basic interest are paid on the same monthly date as the
fixed portion of basic interest. To the extent that the cash flow-based
calculation is less than the amount of remaining basic interest, the additional
interest payable on the applicable monthly date is limited to the amount of that
cash flow-based calculation. In such a case, the excess of the remaining basic
interest over the cash flow-based calculation is deferred and all amounts so
deferred bear the stated rate of basic interest until maturity of the junior
note.
We currently manage the self-storage properties owned by SAC Holdings
pursuant to a management agreement, under which we receive a management fee
equal to 6% of the gross receipts from the properties plus certain expenses. We
received management fees of $8.3 million during fiscal year 2002. This
management fee is consistent with the fees received for other properties we
manage.
Through RepWest and Oxford, we currently hold a 46% limited partnership
interest in Securespace Limited Partnership (Securespace), a Nevada limited
partnership. A SAC Holdings subsidiary serves as the general partner of
Securespace and owns a 1% interest and another SAC Holdings subsidiary owns the
remaining 53% limited partnership interest in Securespace. Securespace was
formed by SAC Holdings to be the owner of various Canadian self-storage
properties.
During fiscal year 2002, we leased space for marketing company offices,
vehicle repair shops and hitch installation centers in 34 locations owned by
subsidiaries of SAC Holdings. Total lease payments pursuant to such leases were
$410,000 during fiscal year 2002. The terms of the leases are similar to the
terms of leases for other properties owned by unrelated parties that are leased
to us.
We believe that the foregoing transactions were consummated on terms
equivalent to those that prevail in arm's-length transactions.
23
PART IV, ITEM 14, EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K
Item 14 of Part IV which contains the Financial Statements of AMERCO and
its subsidiaries and SAC Holding Corporation and its subsidiaries and SAC
Holding Corporation II and its consolidated subsidiaries is amended and restated
in its entirety. In the Original Filing, our independent accountants' report
included a division of responsibility related to the financial statements of SAC
Holding Corporation, as of and for the year ended March 31, 2001. Since the
Original Filing, PriceWaterhouseCoopers, LLP, has audited SAC Holding
Corporation and its subsidiaries as of and for the year ended March 31, 2001
which the Report of Independent Accountants now reflects and is included herein.
In addition, we have modified certain disclosures contained herein and have
reclassified certain amounts between interest income and interest expense.
24
(a) The following documents are filed as part of this Report:
Page No.
-------
1. Financial Statements
Report of Independent Accountants F-2
Consolidated Balance Sheets -
March 31, 2002 and 2001 F-3
Consolidated Statements of Earnings -
Years ended March 31, 2002, 2001 and 2000 F-5
Consolidated Statements of Changes in Stockholders'
Equity - Years ended March 31, 2002, 2001 and 2000 F-6
Consolidated Statements of Comprehensive Income -
Years ended March 31, 2002, 2001 and 2000 F-7
Consolidated Statements of Cash Flows - Years ended
March 31, 2002, 2001 and 2000 F-8
Notes to Consolidated Financial Statements F-9
2. Additional Information
Consolidating Balance Sheets and Statements of
Earnings F-41
Summary of Earnings of Independent Trailer Fleets F-44
Notes to Summary of Earnings of Independent
Trailer Fleets F-45
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 F-47
Supplemental Information (For Property-Casualty
Insurance Underwriters) -- Schedule V F-51
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.
Offering Circular
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of AMERCO
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of earnings, changes in stockholders' equity,
comprehensive income and cash flows present fairly, in all material respects,
the financial position of AMERCO and its subsidiaries, SAC Holding Corporation
and its subsidiaries, and SAC Holding Corporation II and its subsidiaries
(collectively, the "Company") at March 31, 2002, and the results of their
operations and their cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of America.
Further, in our opinion, the accompanying consolidated balance sheet and the
related consolidated statements of earnings, changes in stockholders' equity,
comprehensive income and cash flows present fairly, in all material respects,
the financial position of AMERCO and its subsidiaries and SAC Holding
Corporation and its subsidiaries at March 31, 2001 and the results of their
operations and their cash flows for each of the two 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 appearing on
page F-1 present fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements. These financial statements and schedules are the responsibility of
the Company's management; our responsibility is to express an opinion on these
financial statements and 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 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 our opinion.
The accompanying financial statements of the Company have been restated at
March 31, 2001 and for each of the two years in the period ended March 31, 2001,
to consolidate the financial statements of SAC Holding Corporation and its
subsidiaries, an affiliated entity.
Our audit was conducted for the purpose of forming an opinion on the
consolidated financial statements taken as a whole. The Consolidating Balance
Sheets and Statements of Earnings Schedule and the Summary of Earnings of
Independent Trailer Fleets information included on pages F-41 through F-46 of
this Form 10-K is presented for purposes of additional analysis of the
consolidated financial statements rather than to present the financial position
and results of operations of the individual companies or the earnings of the
independent fleets. Accordingly, we do not express an opinion on the financial
position, results of operations of the individual companies, or on the earnings
of the independent trailer fleets. However, such information has been subjected
to the auditing procedures applied in the audit of the consolidated financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the consolidated financial statements taken as a whole.
Phoenix, Arizona
September 24, 2002
F-2
AMERCO AND CONSOLIDATED SUBSIDIARIES AND
SAC HOLDING CORPORATION, SAC HOLDING II CORPORATION
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31,
--------------------------
2002 2001
----------- -----------
(AS RESTATED)
(IN THOUSANDS)
ASSETS
Cash and cash equivalents................................... $ 47,651 $ 52,788
Trade receivables, net...................................... 279,914 252,015
Notes and mortgage receivables, net......................... 15,907 29,154
Inventories, net............................................ 76,519 84,242
Prepaid expenses............................................ 31,069 23,339
Investments, fixed maturities............................... 994,875 952,482
Investments, other.......................................... 250,458 202,879
Deferred policy acquisition costs........................... 101,308 99,807
Other assets................................................ 60,851 43,106
----------- -----------
1,858,552 1,739,812
----------- -----------
Property, plant and equipment, at cost:
Land...................................................... 425,308 370,684
Buildings and improvements................................ 1,161,918 1,221,157
Furniture and equipment................................... 290,470 282,620
Rental trailers and other rental equipment................ 176,785 181,159
Rental trucks............................................. 1,071,604 1,037,653
----------- -----------
3,126,085 3,093,273
Less accumulated depreciation............................. (1,211,182) (1,194,646)
----------- -----------
Total property, plant and equipment.................... 1,914,903 1,898,627
----------- -----------
Total assets................................................ $ 3,773,455 $ 3,638,439
=========== ===========
F-3
MARCH 31,
--------------------------
2002 2001
----------- -----------
(AS RESTATED)
(IN THOUSANDS)
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses..................... $ 149,338 167,102
AMERCO'S notes and loans payable.......................... 1,045,802 1,170,041
SAC Holdings' notes and loans payable, non-recourse to
AMERCO................................................. 557,761 373,326
Policy benefits and losses, claims and loss expenses
payable................................................ 729,343 668,830
Liabilities from investment contracts..................... 572,793 522,207
Cash overdraft............................................ 34,629 26,484
Other policyholders' funds and liabilities................ 74,048 79,172
Deferred income........................................... 7,360 36,470
Deferred income taxes..................................... 103,275 82,543
----------- -----------
Total liabilities...................................... 3,274,349 3,126,175
----------- -----------
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, 2002 and 2001............. -- --
Series B preferred stock, with no par value, 100,000
shares authorized; none issued and outstanding as of
March 31, 2002 and 2001............................... -- --
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; 5,612,495 shares issued as of March
31, 2002 and 2001..................................... 1,441 1,441
Common stock of $0.25 par value, 150,000,000 shares
authorized; 36,487,505 issued as of March 31, 2002 and
2001................................................... 9,122 9,122
Additional paid-in capital................................ 267,712 242,654
Accumulated other comprehensive income.................... (32,384) (40,709)
Retained earnings......................................... 716,614 726,854
Cost of common shares in treasury, net (20,850,763 and
20,321,363 shares as of March 31, 2002 and 2001,
respectively).......................................... (449,247) (411,925)
Unearned employee stock ownership plan shares............. (14,152) (15,173)
----------- -----------
Total stockholders' equity............................. 499,106 512,264
----------- -----------
Contingent liabilities and commitments
----------- -----------
Total liabilities and stockholders' equity.................. $ 3,773,455 3,638,439
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
AMERCO AND CONSOLIDATED SUBSIDIARIES AND
SAC HOLDING CORPORATION, SAC HOLDING II CORPORATION
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED MARCH 31,
---------------------------------------
2002 2001 2000
----------- ---------- ----------
(AS RESTATED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenues
Rental revenue...................................... $ 1,344,022 1,285,532 1,208,766
Net sales........................................... 222,816 212,242 201,355
Premiums............................................ 433,593 323,198 262,057
Net investment and interest income.................. 58,075 61,475 61,021
----------- ---------- ----------
Total revenues................................... 2,058,506 1,882,447 1,733,199
----------- ---------- ----------
Costs and expenses
Operating expenses.................................. 1,109,446 1,047,168 949,309
Cost of sales....................................... 122,860 126,567 115,390
Benefits and losses................................. 389,522 283,366 209,592
Amortization of deferred acquisition costs.......... 40,674 35,946 34,987
Lease expense....................................... 175,501 173,077 130,951
Depreciation, net................................... 108,683 101,508 96,090
----------- ---------- ----------
Total costs and expenses......................... 1,946,686 1,767,632 1,536,319
----------- ---------- ----------
Earnings from operations.............................. 111,820 114,815 196,880
Interest expense.................................... 106,841 108,981 97,187
----------- ---------- ----------
Pretax earnings....................................... 4,979 5,834 99,693
Income tax expense.................................... (2,258) (2,701) (36,175)
----------- ---------- ----------
Earnings before extraordinary loss on early
extinguishment of debt.............................. 2,721 3,133 63,518
Extraordinary loss on early extinguishment of debt,
net................................................. -- (2,121) (334)
----------- ---------- ----------
Net earnings..................................... $ 2,721 1,012 63,184
=========== ========== ==========
Basic earnings (loss) per common share:
Earnings (loss) before extraordinary loss on early
extinguishment of debt........................... $ (0.49) (0.46) 2.27
Extraordinary loss on early extinguishment of debt,
net.............................................. -- (0.10) (0.01)
----------- ---------- ----------
Net earnings (loss).............................. $ (0.49) (0.56) 2.26
=========== ========== ==========
Diluted earnings (loss) per common share:
Earnings (loss) before extraordinary loss on early
extinguishment of debt........................... $ (0.49) (0.46) 2.27
Extraordinary loss on early extinguishment of debt,
net.............................................. -- (0.10) (0.02)
----------- ---------- ----------
Net earnings (loss).............................. $ (0.49) (0.56) 2.25
=========== ========== ==========
Weighted average common shares outstanding:
Basic............................................... 21,022,712 21,486,370 21,934,390
=========== ========== ==========
Diluted............................................. 21,022,712 21,486,370 22,226,057
=========== ========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
AMERCO AND CONSOLIDATED SUBSIDIARIES AND
SAC HOLDING CORPORATION, SAC HOLDING II CORPORATION
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED MARCH 31,
---------------------------------------
2002 2001 2000
----------- ---------- ----------
(AS RESTATED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Series A common stock of $0.25 par value:
10,000,000 shares authorized; 5,612,495 shares issued in
2002, 2001 and 2000
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
2002, 2001 and 2000
Beginning and end of year.............................. 9,122 9,122 9,122
-------- ------- -------
Additional paid-in capital:
Beginning of year......................................... 242,654 242,558 267,221
Repurchase of preferred stock.......................... -- -- (25,000)
Contribution by owner.................................. 24,969 -- --
Issuance of common shares under leveraged employee
stock ownership plan................................. 89 96 337
-------- ------- -------
End of year............................................... 267,712 242,654 242,558
-------- ------- -------
Accumulated other comprehensive income:
Beginning of year......................................... (40,709) (42,317) (17,740)
Foreign currency translation........................... (4,242) (7,252) (2,899)
Fair market value of cash flow hedge................... 130 (1,185) 2,192
Unrealized gain (loss) on investments.................. 12,437 10,045 (23,870)
-------- ------- -------
End of year............................................... (32,384) (40,709) (42,317)
-------- ------- -------
Retained earnings:
Beginning of year......................................... 726,854 738,805 689,262
Net earnings........................................... 2,721 1,012 63,184
Preferred stock dividends paid:
Series A ($2.13 per share for 2002, 2001 and 2000)... (12,961) (12,963) (12,964)
Series B ($27.14 per share for 2000)................. -- -- (677)
-------- ------- -------
End of year............................................... 716,614 726,854 738,805
-------- ------- -------
Less treasury stock:
Beginning of year......................................... 411,925 400,790 367,747
Net increase........................................... 37,322 11,135 33,043
-------- ------- -------
End of year............................................... 449,247 411,925 400,790
-------- ------- -------
Less Unearned employee stock ownership plan shares:
Beginning of year......................................... 15,173 16,366 16,492
Purchase of shares..................................... 72 46 1,002
Repayments from loan................................... (1,093) (1,239) (1,128)
-------- ------- -------
End of year............................................... 14,152 15,173 16,366
-------- ------- -------
Total stockholders' equity.................................. $499,106 512,264 532,453
======== ======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
AMERCO AND CONSOLIDATED SUBSIDIARIES AND
SAC HOLDING CORPORATION, SAC HOLDING II CORPORATION
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF ACCUMULATED OTHER COMPREHENSIVE INCOME
YEARS ENDED MARCH 31,
----------------------------
2002 2001 2000
------- ------ -------
(AS RESTATED)
(IN THOUSANDS)
Comprehensive income:
Net earnings.............................................. $ 2,721 1,012 63,184
Other comprehensive income
Foreign currency translation........................... (4,242) (7,252) (2,899)
Fair market value of cash flow hedges.................. 130 (1,185) 2,192
Unrealized gain (loss) on investments, net............. 12,437 10,045 (23,870)
------- ------ -------
Total comprehensive income............................. $11,046 2,620 38,607
======= ====== =======
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
AMERCO AND CONSOLIDATED SUBSIDIARIES AND
SAC HOLDING CORPORATION, SAC HOLDING II CORPORATION
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31,
---------------------------------
2002 2001 2000
--------- -------- --------
(AS RESTATED)
(IN THOUSANDS)
Cash flows from operating activities:
Net earnings............................................... $ 2,721 1,014 63,172
Depreciation and amortization............................ 169,440 156,801 143,992
Provision for losses on accounts receivable.............. 4,729 3,286 4,601
Net gain on sale of real and personal property........... (18,833) (18,132) (11,165)
Gain on sale of investments.............................. 2,841 12,931 (873)
Changes in policy liabilities and accruals............... 7,582 54,814 15,326
Additions to deferred policy acquisition costs........... (39,252) (42,535) (31,804)
Net change in other operating assets and liabilities..... 1,265 114,442 41,221
Extraordinary loss on early extinguishment of debt,
net................................................... -- (2,121) (341)
--------- -------- --------
Net cash provided by operating activities.................. 130,493 280,500 224,129
Cash flows from investing activities:
Purchases of investments:
Property, plant and equipment......................... (275,852) (448,188) (476,781)
Fixed maturities...................................... (257,559) (122,863) (158,304)
Common stock.......................................... (418) (31,773) --
Preferred stock....................................... (2,072) -- (369)
Other asset investment................................ (2,259) (5,915) --
Real estate........................................... (35) (5,938) (70)
Mortgage loans........................................ (1,351) (24,084) (27,367)
Proceeds from sales of investments:
Property, plant and equipment......................... 194,830 104,352 211,873
Fixed maturities...................................... 233,716 152,761 133,915
Preferred stock....................................... 4,400 372 968
Real estate........................................... 1,335 1,557 1,672
Mortgage loans........................................ 18,690 22,463 11,555
Changes in other investments............................. (126,774) (155,168) 45,689
--------- -------- --------
Net cash used by investing activities...................... (213,349) (512,424) (257,219)
Cash flows from financing activities:
Net change in short-term borrowings...................... (2,500) 176,427 (146,836)
Proceeds from notes...................................... 275,879 361,608 444,239
Debt issuance costs...................................... (10,182) (3,745) (8,551)
Leveraged Employee Stock Ownership Plan:
Purchase of shares.................................... -- (46) (1,002)
Repayments from loan.................................. 1,019 1,239 1,128
Principal payments on notes.............................. (222,114) (299,666) (185,311)
Repurchase of preferred stock............................ -- -- (25,000)
Proceeds from minority interest.......................... -- 2,121 --
Net change in cash overdraft............................. 8,145 (3,976) 2,291
Preferred stock dividends paid........................... (12,961) (12,963) (13,641)
Treasury stock acquisitions, net......................... (10,154) (9,617) (33,467)
Dividends from subsidiaries.............................. -- -- --
Investment contract deposits............................. 150,432 87,687 63,978
Investment contract withdrawals.......................... (99,845) (72,953) (60,808)
Proceeds from minority interest.......................... -- 10,151 --
--------- -------- --------
Net cash provided by financing activities.................. 77,719 236,267 37,020
--------- -------- --------
Increase (decrease) in cash and cash equivalents........... (5,137) 4,343 3,930
Cash and cash equivalents at beginning of year............. 52,788 48,445 44,515
--------- -------- --------
Cash and cash equivalents at end of year................... $ 47,651 52,788 48,445
========= ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
F-8
AMERCO AND CONSOLIDATED SUBSIDIARIES AND
SAC HOLDING CORPORATION, SAC HOLDING II CORPORATION
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 (AREC), 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.
SAC Holding Corporation and SAC Holding II Corporation and their
consolidated subsidiaries (collectively referred to as SAC Holdings) are
majority owned by Mark V. Shoen. Mark V. Shoen is the beneficial owner of 15.6%
of AMERCO's common stock and is an executive officer of AMERCO.
Principles of Consolidation
The consolidated financial statements include the accounts of AMERCO and
its wholly-owned subsidiaries and SAC Holdings. All material intercompany
accounts and transactions have been eliminated in consolidation. Except for
investments made by RepWest and Oxford in a SAC Holdings-controlled limited
partnership which holds Canadian self-storage properties, AMERCO has not had any
equity ownership interest in SAC Holdings.
The accounts of AMERCO and SAC Holdings are presented as consolidated due
to a revised interpretation of EITF 90-15 as applied to AMERCO during fiscal
year 2002. The financial statements as previously presented have been restated
to reflect such consolidation. The following table presents the impact of such
consolidation on the dates presented:
MARCH 31, 2001 MARCH 31, 2000
----------------------------- -----------------------------
AS REPORTED(1) AS RESTATED AS REPORTED(1) AS RESTATED
-------------- ----------- -------------- -----------
(IN THOUSANDS) (IN THOUSANDS)
Assets........................... $3,384,064 3,638,439 $3,125,225 3,291,292
Liabilities...................... $2,768,698 3,126,175 $2,539,931 2,758,838
Stockholders' equity............. $ 615,366 512,264 $ 585,294 532,454
Net income....................... $ 12,965 1,012 $ 65,491 63,184
---------------
(1) As reported in the Company's March 31, 2001 Form 10-K, filed on July 2, 2001
prior to the consolidation of SAC Holdings described above.
The reduction in stockholders' equity is due to the elimination of gains
previously recorded in connection with sales of properties from AMERCO to SAC
Holdings. Such gains had been previously recognized as a component of
stockholders' equity.
See Note 20 of Notes to Consolidated Financial Statements for additional
information regarding the insurance subsidiaries, and Note 21 of Notes to
Consolidated Financial Statements for financial information regarding the
industry segments.
RepWest and Oxford have been consolidated on the basis of calendar years
ended December 31. Accordingly, all references to the years 2001, 2000 and 1999
correspond to AMERCO's fiscal years 2002, 2001, and 2000, respectively.
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
F-9
AMERCO AND CONSOLIDATED SUBSIDIARIES AND
SAC HOLDING CORPORATION, SAC HOLDING II CORPORATION
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
January 1 and March 31 of 2002, 2001, or 2000 that would materially affect the
consolidated financial position or results of operations for the financial
statements presented herein.
Description of Business
AMERCO's 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(R) throughout the United States and Canada.
AREC 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. AREC is responsible for managing all of the
properties including the environmental risks of the properties. AREC is
responsible for the purchase of all properties used by AMERCO or any of its
subsidiaries. AREC 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.
SAC Holdings own self-storage facilities, which are managed by U-Haul under
management agreements.
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.
Cash and Cash Equivalents
AMERCO and SAC Holdings consider liquid investments with an original
maturity of three months or less to be cash equivalents.
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.
F-10
AMERCO AND CONSOLIDATED SUBSIDIARIES AND
SAC HOLDING CORPORATION, SAC HOLDING II CORPORATION
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 then
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.
For Oxford, costs are amortized in relation to revenue such that costs are
realized as a constant percentage of revenue.
For RepWest, costs are amortized over the related contract period which
generally do not exceed one year.
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 two to twenty years. Maintenance is charged to operating expenses as
incurred, while renewals and betterments are
F-11
AMERCO AND CONSOLIDATED SUBSIDIARIES AND
SAC HOLDING CORPORATION, SAC HOLDING II CORPORATION
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 of $2,032,000, $2,450,000 and
$1,359,000 was capitalized during fiscal years 2002, 2001 and 2000,
respectively. During fiscal year 2002 based on an in-depth market analysis,
U-Haul decreased the estimated salvage value and increased the useful lives of
certain rental trucks. The effect of the change increased net earnings for
fiscal year 2002 by $3,088,000 ($0.15 per share) net of taxes. The adjustment
reflects management's best estimate, based on information available, of the
estimated salvage value and useful lives of these rental trucks.
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, 2002
and 2001, was approximately $20,278,000 and $27,691,000, 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, 2002, 2001 and 2000, AMERCO recognized
$16,000, $16,000 and $27,000 as interest income, respectively, representing the
ineffectiveness of the cash flow hedging activity.
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, 2002 MARCH 31, 2001
---------------------- ----------------------
CARRYING ESTIMATED CARRYING ESTIMATED
VALUE FAIR VALUE VALUE FAIR VALUE
-------- ---------- -------- ----------
(IN THOUSANDS) (IN THOUSANDS)
$14,629 17,889 $15,214 18,484
======= ====== ======= ======
F-12
AMERCO AND CONSOLIDATED SUBSIDIARIES AND
SAC HOLDING CORPORATION, SAC HOLDING II CORPORATION
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
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, 2001, 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 $572,793,000 and $522,207,000 at December 31,
2001 and 2000, 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.
RepWest's liability for reported and unreported losses is 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.
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. SAC Holdings file a stand-alone return. To date, a
valuation allowance has been provided for all of SAC Holdings' notes.
Advertising Costs
AMERCO expenses advertising costs as incurred. Advertising expense of
$37,807,000, $37,867,000 and $35,988,000 was charged to operations for fiscal
years 2002, 2001 and 2000, respectively.
F-13
AMERCO AND CONSOLIDATED SUBSIDIARIES AND
SAC HOLDING CORPORATION, SAC HOLDING II CORPORATION
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
New Accounting Standards
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statements of Financial Accounting Standards No. 141 (SFAS 141), "Business
Combinations," and No. 142 (SFAS 142), "Goodwill and Other Intangible Assets."
SFAS 141 supercedes Accounting Principles Board Opinion No. 16 (APB 16),
"Business Combinations." The most significant changes made by SFAS 141 are: (1)
requiring that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001, (2) establishing specific criteria
for the recognition of intangible assets separately from goodwill, and (3)
requiring unallocated negative goodwill to be written off immediately as an
extraordinary gain (instead of being deferred and amortized).
SFAS 142 supercedes APB 17, "Intangible Assets." SFAS 142 primarily
addresses the accounting for goodwill and intangible assets subsequent to their
acquisition (i.e., the post-acquisition accounting). The provisions of SFAS 142
will be effective for fiscal years beginning after December 15, 2001. The most
significant changes made by SFAS 142 are: (1) goodwill and indefinite lived
intangible assets will no longer be amortized, (2) goodwill will be tested for
impairment at least annually at the reporting unit level, (3) intangible assets
deemed to have an indefinite life will be tested for impairment at least
annually, and (4) the amortization period of intangible assets with finite lives
will no longer be limited to forty years.
SFAS No. 141 and 142 are not expected to affect the consolidated financial
position or results of operations.
SFAS No. 143, Accounting for Asset Retirement Obligations, requires
recognition of the fair value of liabilities associated with the retirement of
long-lived assets when a legal obligation to incur such costs arises as a result
of the acquisition, construction, development and/or the normal operation of a
long-lived asset. Upon recognition of the liability, a corresponding asset is
recorded at present value and accreted over the life of the asset and
depreciated over the remaining life of the long-lived asset. The Statement
defines a legal obligation as one that a party is required to settle as a result
of an existing or enacted law, statute, ordinance, or written or oral contract
or by legal construction of a contract under the doctrine of promissory
estoppel. SFAS 143 is effective for fiscal years beginning after June 15, 2002.
In October 2001, FASB issued SFAS No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets," which addresses issues relating to the
implementation of FASB Statement No. 121 (FAS 121), "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
and develops a single accounting model, based on the framework established in
FAS 121, for long-lived assets to be disposed of by sale, whether previously
held and used or newly acquired.
Management has not yet determined the effects of adopting Statements 143
and 144 on the financial position or results of operations, but believes the
pronouncements are not expected to materially affect the consolidated financial
position or results of operations.
In April 2002, FASB issued SFAS No. 145, "Rescission of FASB Statements No.
44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections,"
which updates, clarifies and simplifies existing accounting pronouncements. FASB
4, which required all gains and losses from the extinguishment of debt to be
aggregated and, if material, classified as an extraordinary item, net of related
tax effect was rescinded, as a result, FASB 64, which amended FASB 4, was
rescinded as it was no longer necessary. FASB 145 amended FASB 13 to require
certain lease modifications that have economic effects similar to sale-leaseback
transactions be accounted for in the same manner as sale-leaseback transactions.
Management
F-14
AMERCO AND CONSOLIDATED SUBSIDIARIES AND
SAC HOLDING CORPORATION, SAC HOLDING II CORPORATION
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
has not yet determined the effects of adopting this Statement on the financial
position or results of operations, except for the need to reclassify debt
extinguishments previously reported as extraordinary.
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 (i.e. contractual) 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 year 2000 included assumed conversions of the Series B preferred stock
into common stock. In fiscal years 2002 and 2001, the assumed conversions are
not applicable due to non-existence of Series B preferred stock. In fiscal year
2000, the assumed conversions had a dilutive effect. See Notes 6 and 8 of Notes
to Consolidated Financial Statements for further discussion.
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 2001 and 2000 to conform to the current year's
presentation.
2. RECEIVABLES, NET
A summary of trade receivables follows:
MARCH 31,
-------------------
2002 2001
-------- -------
(IN THOUSANDS)
Trade accounts receivable................................... $ 23,833 20,326
Premiums and agents' balances............................... 54,867 87,641
Reinsurance recoverable..................................... 155,775 109,596
Accrued investment income................................... 18,039 16,541
Independent dealer receivable............................... 1,660 2,344
Other receivables........................................... 28,036 17,698
-------- -------
282,210 254,146
Less allowance for doubtful accounts........................ 2,296 2,131
-------- -------
$279,914 252,015
======== =======
F-15
AMERCO AND CONSOLIDATED SUBSIDIARIES AND
SAC HOLDING CORPORATION, SAC HOLDING II CORPORATION
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of notes and mortgage receivables follows:
MARCH 31,
-----------------
2002 2001
------- ------
(IN THOUSANDS)
Notes, mortgage receivables and other, net of discount...... $15,977 29,224
Less allowance for doubtful accounts........................ 70 70
------- ------
$15,907 29,154
======= ======
3. INVENTORIES, NET
A summary of inventory components follows:
MARCH 31,
-----------------
2002 2001
------- ------
(IN THOUSANDS)
Truck and trailer parts and accessories..................... $51,207 59,404
Hitches and towing components............................... 14,020 14,393
Moving supplies and promotional items....................... 11,292 10,445
------- ------
$76,519 84,242
======= ======
Inventories are stated net of reserve for obsolescence of $3,396,000 and
$3,321,000 at March 31, 2002 and 2001, respectively. Certain direct and indirect
expenses are allocated to ending inventories. Such costs remaining in inventory
are estimated at $12,076,000 and $12,077,000 at March 31, 2002 and 2001,
respectively. For fiscal years 2002 and 2001, aggregate general and
administrative costs were $556,750,000 and $499,606,000, respectively.
LIFO inventories, which represent approximately 95% and 96% of total
inventories at March 31, 2002 and 2001, respectively, would have been $4,957,000
greater at March 31, 2002 and 2001, if the consolidated group had used the FIFO
(first-in, first-out) method.
F-16
AMERCO AND CONSOLIDATED SUBSIDIARIES AND
SAC HOLDING CORPORATION, SAC HOLDING II CORPORATION
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:
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
(IN THOUSANDS)
DECEMBER 31, 2001
CONSOLIDATED HELD-TO-MATURITY
U.S. treasury securities and government
obligations........................... $ 3,289 219 -- 3,508
U.S. government agency mortgage-backed
securities............................ 15,155 554 (35) 15,674
Corporate securities.................... 42,625 1,219 (97) 43,747
Mortgage-backed securities.............. 20,648 705 (1) 21,352
Redeemable preferred stocks............. 112,350 502 (2,122) 110,730
-------- ------ ------- -------
194,067 3,199 (2,255) 195,011
-------- ------ ------- -------
DECEMBER 31, 2001
CONSOLIDATED AVAILABLE-FOR-SALE
U.S. treasury securities and government
obligations........................... $ 40,656 2,223 (128) 42,751
U.S. government agency mortgage-backed
securities............................ 20,001 843 (3) 20,841
Obligations of states and political
subdivisions.......................... 10,035 344 (2) 10,377
Corporate securities.................... 657,603 24,635 (14,792) 667,446
Mortgage-backed securities.............. 26,520 2,128 (865) 27,783
Redeemable preferred stocks............. 29,976 314 (422) 29,868
Redeemable common stocks................ 2,434 -- (692) 1,742
-------- ------ ------- -------
787,225 30,487 (16,904) 800,808
-------- ------ ------- -------
Total.............................. $981,292 33,686 (19,159) 995,819
======== ====== ======= =======
DECEMBER 31, 2000
CONSOLIDATED HELD-TO-MATURITY
U.S. treasury securities and government
obligations........................... $ 3,627 144 (2) 3,769
U.S. government agency mortgage-backed
securities............................ 14,178 174 (130) 14,222
Corporate securities.................... 53,422 739 (333) 53,828
Mortgage-backed securities.............. 40,093 650 (191) 40,552
Redeemable preferred stocks............. 115,174 46 (9,736) 105,484
-------- ------ ------- -------
226,494 1,753 (10,392) 217,855
-------- ------ ------- -------
F-17
AMERCO AND CONSOLIDATED SUBSIDIARIES AND
SAC HOLDING CORPORATION, SAC HOLDING II CORPORATION
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
(IN THOUSANDS)
DECEMBER 31, 2000
CONSOLIDATED AVAILABLE-FOR-SALE
U.S. treasury securities and government
obligations........................... $ 43,522 1,494 (141) 44,875
U.S. government agency mortgage-backed
securities............................ 33,644 557 (87) 34,114
Obligations of states and political
subdivisions.......................... 16,678 448 (142) 16,984
Corporate securities.................... 562,187 10,714 (15,127) 557,774
Mortgage-backed securities.............. 33,378 761 (402) 33,737
Redeemable preferred stocks............. 32,969 141 (1,860) 31,250
Redeemable common stocks................ 8,166 -- (912) 7,254
-------- ------ ------- -------
730,544 14,115 (18,671) 725,988
-------- ------ ------- -------
Total.............................. $957,038 15,868 (29,063) 943,843
======== ====== ======= =======
Fixed maturities estimated market values are based on publicly quoted
market prices at the close of trading on December 31, 2001 or December 31, 2000,
as appropriate.
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.
F-18
AMERCO AND CONSOLIDATED SUBSIDIARIES AND
SAC HOLDING CORPORATION, SAC HOLDING II CORPORATION
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 2001 DECEMBER 31, 2000
------------------------- -------------------------
AMORTIZED ESTIMATED AMORTIZED ESTIMATED
COST MARKET VALUE COST MARKET VALUE
--------- ------------ --------- ------------
(IN THOUSANDS) (IN THOUSANDS)
CONSOLIDATED HELD-TO-MATURITY
Due in one year or less............. $ 22,428 22,979 4,786 4,810
Due after one year through five
years............................. 19,457 20,159 46,496 46,513
Due after five years through ten
years............................. 1,358 1,461 248 304
After ten years..................... 4,447 4,481 5,519 5,970
-------- ------- ------- -------
47,690 49,080 57,049 57,597
Mortgage-backed securities.......... 34,027 35,201 54,271 54,774
Redeemable preferred stock.......... 112,350 110,730 115,174 105,484
-------- ------- ------- -------
194,067 195,011 226,494 217,855
-------- ------- ------- -------
CONSOLIDATED AVAILABLE-FOR-SALE
Due in one year or less............. 58,768 59,787 34,801 34,813
Due after one year through five
years............................. 259,659 266,002 313,162 310,656
Due after five years through ten
years............................. 251,413 254,002 197,027 198,592
After ten years..................... 138,454 140,783 77,397 75,572
-------- ------- ------- -------
708,294 720,574 622,387 619,633
Mortgage-backed securities.......... 46,521 48,624 67,022 67,851
Redeemable preferred stock.......... 29,976 29,868 32,969 31,250
Redeemable common stock............. 2,434 1,742 8,166 7,254
-------- ------- ------- -------
787,225 800,808 730,544 725,988
-------- ------- ------- -------
Total.......................... $981,292 995,819 957,038 943,843
======== ======= ======= =======
Proceeds from sales of investments in debt securities for the years ended
December 31, 2001, 2000 and 1999 were $175,970,000, $52,814,000 and $29,889,000,
respectively. Gross gains of $3,821,000, $733,000 and $912,000 and gross losses
of $256,000, $646,000 and $315,000 were realized on those sales for the years
ended December 31, 2001, 2000 and 1999, respectively. During fiscal 2002, the
Company realized a write-down of investments due to other than temporary
declines approximating $6,647,000.
At December 31, 2001 and 2000 fixed maturities include bonds with an
amortized cost of $18,529,000 and $18,283,000, respectively, on deposit with
insurance regulatory authorities to meet statutory requirements.
Investments, other consists of the following:
MARCH 31,
-------------------
2002 2001
-------- -------
(IN THOUSANDS)
Short-term investments...................................... $ 65,870 58,860
Mortgage loans.............................................. 85,458 102,571
Real estate, foreclosed properties.......................... 71,900 1,023
Policy loans................................................ 6,205 6,763
Other....................................................... 21,025 33,662
-------- -------
$250,458 202,879
======== =======
F-19
AMERCO AND CONSOLIDATED SUBSIDIARIES AND
SAC HOLDING CORPORATION, SAC HOLDING II CORPORATION
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of net investment and interest income follows:
YEAR ENDED MARCH 31,
---------------------------
2002 2001 2000
------- ------ ------
(IN THOUSANDS)
Fixed maturities........................................ $58,711 55,408 64,321
Real estate............................................. 2,690 2,974 2,419
Policy loans............................................ 1,092 250 285
Mortgage loans.......................................... 8,797 7,262 5,447
Short-term, amounts held by ceding reinsurers, net and
other investments..................................... 6,804 7,364 7,140
------- ------ ------
Investment income....................................... 78,094 73,258 79,612
Less investment expenses................................ 31,823 25,673 26,325
------- ------ ------
Net investment income................................... 46,271 47,585 53,287
Interest income......................................... 11,804 13,890 7,734
------- ------ ------
Net investment and interest income...................... $58,075 61,475 61,021
======= ====== ======
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. Policy loans are
carried at their unpaid balance. Investment expenses include costs incurred in
the management of the investment portfolio and interest credited on annuity
policies.
At December 31, 2001 and 2000, mortgage loans held as investments with a
carrying value of $85,458,000 and $102,571,000, respectively, were outstanding.
The estimated fair value of the mortgage loans at December 31, 2001 and 2000
aggregated $86,433,000 and $94,669,000, 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 $323,000 and $402,000 in 2001
and 2000, respectively.
In February 1997, AMERCO, through its insurance subsidiaries, invested in
the equity of Private Mini Storage Realty, L.P. (Private Mini), a Texas-based
self-storage operator. RepWest invested $13,500,000 and has a direct 30.6%
interest and an indirect 13.2% interest. Oxford invested $11,000,000 and has a
direct 24.9% interest and an indirect 10.8% interest. U-Haul is a 50% owner of
Storage Realty L.L.C., which serves as the general partner and has a direct 1%
interest in Private Mini. AMERCO does not maintain operating control of Private
Mini and the minority holders have substantial participation rights. During
1997, Private Mini secured a line of credit in the amount of $225,000,000 with a
financing institution, which was subsequently reduced in accordance with its
terms to $125,000,000 in December 2001. Under the terms of this credit facility,
AMERCO entered into a support party agreement with Private Mini whereby upon
default or noncompliance with debt covenants by Private Mini, AMERCO assumes
responsibility in fulfilling all obligations related to this credit facility. At
March 31, 2002, there was no default or non-compliance under the terms of the
credit facility.
F-20
AMERCO AND CONSOLIDATED SUBSIDIARIES AND
SAC HOLDING CORPORATION, SAC HOLDING II CORPORATION
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. NOTES AND LOANS PAYABLE
AMERCO's notes and loans payable consist of the following:
MARCH 31,
-----------------------
2002 2001
---------- ---------
(IN THOUSANDS)
Short-term borrowings, 2.85% interest rate.................. $ 12,500 15,000
Notes payable to banks under commercial paper agreements,
unsecured,................................................ -- 119,570
Notes payable to banks under revolving lines of credit,
unsecured, 2.00% to 4.75% interest rates.................. 283,000 185,000
Medium-term notes payable, unsecured, 7.23% to 8.08%
interest rates, due through 2027.......................... 109,500 212,000
Notes payable under Bond Backed Asset Trust, unsecured,
7.14% interest rate, due through 2032..................... 100,000 100,000
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
Fair market value SWAP...................................... 775 --
Other notes payable, secured and unsecured, 7.00% to 11.25%
interest rate, due through 2005........................... 234 278
---------- ---------
1,031,009 1,156,848
Financed lease obligations.................................. 14,793 13,193
---------- ---------
$1,045,802 1,170,041
========== =========
Other notes payable are secured by land and buildings at various locations
with a net carrying value of $5,503,735 and $6,473,962 at March 31, 2002 and
2001, respectively.
At March 31, 2002, AMERCO had a revolving credit loan (long-term) available
from participating banks under an agreement, which provided 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. As of March 31,
2002, loans outstanding under the revolving credit line totaled $283,000,000.
The revolver was refinanced in June 2002. See Note 22.
At March 31, 2002, AMERCO had borrowed $12,500,000, representing short-term
borrowings, from its total uncommitted lines of credit of $59,694,000.
F-21
AMERCO AND CONSOLIDATED SUBSIDIARIES AND
SAC HOLDING CORPORATION, SAC HOLDING II CORPORATION
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
REVOLVING CREDIT ACTIVITY SHORT-TERM BORROWING
------------------------------ --------------------------
YEAR ENDED YEAR ENDED
------------------------------ --------------------------
2002 2001 2000 2002 2001 2000
-------- ------- ------- ------ ------ ------
(IN THOUSANDS, EXCEPT INTEREST RATES)
Weighted average interest
rate during the year... 3.53% 6.36% 5.90% 3.59% 6.67% 6.13%
Interest rate at year
end.................... 2.44% 5.68% 6.26% 2.63% 5.96% 6.32%
Maximum amount
outstanding during the
year................... $283,000 258,000 365,000 33,553 41,500 52,000
Average amount
outstanding during the
year................... $224,667 86,000 235,500 23,531 18,458 13,542
Facility fees............ $ 507 507 508 N/A N/A N/A
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 8.63%.
The SWAPS mature at the time the related notes mature. Incremental interest
expense associated with SWAP activity was $2,381,000, $1,027,000 and $1,935,000
during 2002, 2001 and 2000, respectively.
At March 31, 2002, interest rate swap agreements with an aggregate notional
amount of $45,000,000 were outstanding. Management estimates that at March 31,
2002 and 2001, AMERCO would be required to pay $2,872,000 and $3,696,000,
respectively, to terminate the agreements. Such amounts were determined from
current treasury rates combined with SWAP spreads on agreements outstanding.
During fiscal year 2002, AMERCO paid down $102,500,000 of 7.44% to 7.52%
Medium Term Notes.
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, 2002, AMERCO
was in compliance with these covenants.
F-22
AMERCO AND CONSOLIDATED SUBSIDIARIES AND
SAC HOLDING CORPORATION, SAC HOLDING II CORPORATION
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The annual maturities of long-term debt, excluding short-term borrowings,
of AMERCO 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
-----------------------------------------------------------------
2003 2004 2005 2006 2007 THEREAFTER
-------- ------- ------- ------- ------ ----------
(IN THOUSANDS)
Mortgages............. $ 30 32 23 26 28 65
Capital lease......... -- -- 14,793 -- -- --
Fair market value
SWAP................ 97 97 97 97 97 290
Medium-term and other
notes............... 150,015 175,015 205,000 -- 30,000 174,500
Revolving credit...... 78,000 -- -- 205,000 -- --
-------- ------- ------- ------- ------ -------
$228,142 175,144 219,913 205,123 30,125 174,855
======== ======= ======= ======= ====== =======
Interest paid in cash amounted to $77,902,000, $92,622,000 and $77,529,000
for fiscal years 2002, 2001 and 2000, respectively.
SAC Holdings' notes and loans payable, non-recourse to AMERCO consist of
the following:
MARCH 31,
-------------------
2002 2001
-------- -------
(IN THOUSANDS)
Notes payable, secured, bearing interest rates ranging from
7.50% to 8.82%, due between 2009 and 2032................. $566,243 375,533
Less discounts on notes payable............................. $ (8,482) (2,207)
-------- -------
$557,761 373,326
======== =======
Secured notes payable are secured by deeds of trusts on the collateralized
land and buildings. Principal and interest payments on notes payable to
third-party lenders are due monthly. Certain notes payable contain provisions
whereby the loans may not be prepaid at any time prior to the maturity date
without payment to the lender of a Yield Maintenance Premium, as defined in the
loan agreements. The loans on a portfolio of sixteen properties are
cross-collateralized and cross-defaulted.
At June 30, 2002, certain subsidiaries of SAC Holdings were in technical
default of certain covenants related to the failure to deliver timely, financial
statements pursuant to certain of its agreements. Such amounts have been
reflected as current in the table below. AMERCO is neither a guarantor nor a
party to the borrowings of SAC Holdings or any of its subsidiaries.
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
-----------------------------------------------------------
2003 2004 2005 2006 2007 THEREAFTER
------- ----- ------- ----- ----- ----------
(IN THOUSANDS)
Notes payable, secured...... 137,313 5,317 122,868 6,255 6,785 279,223
======= ===== ======= ===== ===== =======
Interest paid in cash amounted to $33,803,000, $23,694,000 and $17,571,000
for fiscal years 2002, 2001 and 2000, respectively.
F-23
AMERCO AND CONSOLIDATED SUBSIDIARIES AND
SAC HOLDING CORPORATION, SAC HOLDING II CORPORATION
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 1/2% 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.
7. ACCUMULATED OTHER COMPREHENSIVE INCOME
A summary of accumulated comprehensive income components follows:
UNREALIZED FAIR MARKET ACCUMULATED
FOREIGN GAIN/(LOSS) VALUE OF OTHER
CURRENCY ON CASH FLOW COMPREHENSIVE
TRANSLATION INVESTMENTS HEDGE INCOME
----------- ----------- ----------- -------------
(IN THOUSANDS)
Balance at March 31, 2001......... $(35,562) (2,523) (2,624) (40,709)
Foreign currency translation...... (4,242) -- -- (4,242)
Fair market value of cash flow
hedge, net of taxes of $(336)... -- -- 130 130
Unrealized gain on investments,
net of taxes of $8,029.......... -- 12,437 -- 12,437
-------- ------- ------ -------
Balance at March 31, 2002......... $(39,804) 9,914 (2,494) (32,384)
======== ======= ====== =======
Balance at March 31, 2000......... $(28,310) (12,568) (1,439) (42,317)
Foreign currency translation...... (7,252) -- -- (7,252)
Fair market value of cash flow
hedge, net of taxes of $(638)... -- -- (1,185) (1,185)
Unrealized loss on investments,
net of taxes of $4,369.......... -- 10,045 -- 10,045
-------- ------- ------ -------
Balance at March 31, 2001......... $(35,562) (2,523) (2,624) (40,709)
======== ======= ====== =======
F-24
AMERCO AND CONSOLIDATED SUBSIDIARIES AND
SAC HOLDING CORPORATION, SAC HOLDING II CORPORATION
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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, 2002
Earnings from operations before extraordinary
loss on early extinguishment of debt....... $ 2,721
Less: preferred stock dividends............... (12,961)
--------
Basic loss per share
Loss from operations before extraordinary loss
on early extinguishment of debt available
to common stockholders..................... (10,240) 21,022,712 $(0.49)
Extraordinary loss on early extinguishment of
debt, net.................................. -- --
-------- ------
Net loss...................................... (10,240) (0.49)
Effects of dilutive securities preferred stock
conversion................................. -- --
-------- ----------
Diluted loss per share
Net loss...................................... $(10,240) 21,022,712 $(0.49)
======== ========== ======
Year ended March 31, 2001
Earnings from operations before extraordinary
loss on early extinguishment of debt.......... $ 3,133
Less: preferred stock dividends................. (12,963)
--------
Basic earnings per share
Loss from operations before extraordinary loss
on early extinguishment of debt available
to common stockholders..................... (9,830) 21,486,370 $(0.46)
Extraordinary loss on early extinguishment of
debt, net..................................... (2,121) (0.10)
-------- ------
Net loss........................................ (11,951) (0.56)
Effects of dilutive securities preferred stock
conversion.................................... -- --
Diluted loss per share
Net loss...................................... $(11,951) 21,486,370 $(0.56)
======== ========== ======
Year ended March 31, 2000
Earnings from operations before extraordinary
loss on early extinguishment of debt.......... $ 63,518
Less: preferred stock dividends................. (13,641)
--------
Basic earnings per share
Earnings from operations before extraordinary
loss on early extinguishment of debt
available to common stockholders........... 49,877 21,934,390 $ 2.27
Extraordinary loss on early extinguishment of
debt, net..................................... (334) (0.01)
-------- ------
Net earnings.................................... 49,543 2.26
Effects of dilutive securities
Preferred stock conversion.................... 537 291,667
-------- ----------
Diluted earnings per share
Net earnings.................................. $ 50,080 22,226,057 $ 2.25
======== ========== ======
F-25
AMERCO AND CONSOLIDATED SUBSIDIARIES AND
SAC HOLDING CORPORATION, SAC HOLDING II CORPORATION
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
---------------------------
2002 2001 2000
-------- ----- ------
(IN THOUSANDS)
Current:
Federal................................................ $ 18,607 -- 1,192
State.................................................. 5,637 951 1,068
Foreign................................................ 923 1,042 --
Deferred:
Federal................................................ (20,235) 689 31,953
State.................................................. (2,674) 19 2,293
Foreign................................................ -- -- (331)
-------- ----- ------
$ 2,258 2,701 36,175
======== ===== ======
Income taxes paid in cash amounted to $4,856,000, $3,450,000 and $1,522,000
for fiscal years 2002, 2001 and 2000, 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 2002, 2001 and 2000) as follows:
YEAR ENDED
---------------------------
2002 2001 2000
------- ------ ------
(IN THOUSANDS)
Computed "expected" tax expense.......................... $ 1,876 2,220 34,956
Increases (reductions) in taxes resulting from:
Tax-exempt interest income............................. (178) (55) (145)
Dividends received deduction........................... (1) (1)
Canadian subsidiary (income) loss...................... (1,286) (402) (536)
Federal tax benefit of state and local taxes........... (814) (1,031) (1,064)
Other.................................................. (1,225) (42) (66)
------- ------ ------
Actual federal tax expense............................... (1,628) 689 33,145
State and local income tax expense....................... 3,886 2,012 3,030
------- ------ ------
Actual tax expense of operations......................... $ 2,258 2,701 36,175
======= ====== ======
F-26
AMERCO AND CONSOLIDATED SUBSIDIARIES AND
SAC HOLDING CORPORATION, SAC HOLDING II CORPORATION
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred tax assets and liabilities are comprised as follows:
MARCH 31,
-------------------
2002 2001
-------- -------
(IN THOUSANDS)
Deferred tax assets
Benefit of tax net operating loss and credit
carryforwards............................................. $ 42,349 72,452
Accrued expenses............................................ 16,018 22,728
Deferred revenue from sale/leaseback........................ 8,348 9,001
Policy benefits and losses, claims and loss expenses
payable, net.............................................. 7,215 7,807
Other....................................................... 1,549 1,550
-------- -------
Sub-total deferred tax assets............................... 75,479 113,538
Less valuation allowance.................................... (14,048) (8,927)
Total deferred tax assets.............................. 61,431 104,611
-------- -------
Deferred tax liabilities
Property, plant and equipment............................... 156,274 179,580
Deferred policy acquisition costs........................... 8,432 7,574
-------- -------
Total deferred tax liabilities......................... 164,706 187,154
-------- -------
Net deferred tax liability............................. $103,275 82,543
======== =======
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, 2002 and 2001. 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, 2001, 2000 and 1999.
The Company is currently under IRS examination for the years 1996 and 1997.
The IRS has proposed adjustments to the 1997 and 1996 tax returns in the amount
of $233,093,000 and $99,021,000, respectively. Nearly all of the adjustments are
attributable to denials of deductions claimed by the Company for certain
payments made in resolution of the litigation with certain members of the Shoen
family and their corporations. An unfavorable result could result in substantial
cash payments, but is expected to have minimal, if any, impact on consolidated
results of operations. The Company plans to vigorously contest the IRS
adjustments. The Company estimates that if it is unsuccessful in its challenge
in all respects, the Company could incur tax liabilities totaling approximately
$90 million plus interest.
At March 31, 2002, AMERCO and RepWest have non-life net operating loss
carryforwards available to offset federal taxable income in future years of
$89,005,000 for tax purposes. These carryforwards expire in 2011 through 2012.
AMERCO has alternative minimum tax credit carryforwards of $20,327,000 which do
not have an expiration date, but may only be utilized in years in which regular
tax exceeds alternative minimum
F-27
AMERCO AND CONSOLIDATED SUBSIDIARIES AND
SAC HOLDING CORPORATION, SAC HOLDING II CORPORATION
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 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.
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 1,363 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 $17,800,000,
$17,300,000 and $22,700,000 during the years ended December 31, 2001, 2000 and
1999, respectively.
11. EMPLOYEE BENEFIT PLANS
AMERCO employees participate 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 2002,
2001, or 2000.
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
AS OF INTEREST PAYMENTS
MARCH 31, -----------------------
FINANCING DATE 2002 2002 2001 2000
-------------- ----------- ----- ----- -----
(IN THOUSANDS)
May 1990......................................... -- -- 8 16
June 1991........................................ 13,022 1,210 1,113 1,192
March 1999....................................... 163 14 16 --
February 2000.................................... 967 74 -- --
F-28
AMERCO AND CONSOLIDATED SUBSIDIARIES AND
SAC HOLDING CORPORATION, SAC HOLDING II CORPORATION
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 $1,535,000, $1,627,000 and $1,771,000 for fiscal
years 2002, 2001 and 2000, 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
----------------- ------------------
2002 2001 2002 2001
------- ------ ------- -------
(IN THOUSANDS)
Allocated shares................................. 1,397 1,467 277 239
Shares committed to be released.................. -- -- 11 12
Unreleased shares................................ 258 293 588 628
Fair value of unreleased shares.................. $3,581 3,812 10,237 13,341
====== ===== ====== ======
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 2002 and 2001.
Oxford insures various group life and group disability insurance plans
covering employees of the consolidated group. Premiums earned were $1,600,000,
$1,424,000 and $1,276,000 during the years ended December 31, 2001, 2000 and
1999, 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 2002, 2001
and 2000 are as follows:
2002 2001 2000
----- ---- ----
(IN THOUSANDS)
Service cost for benefits earned during the period.......... $ 259 228 330
Interest cost on accumulated postretirement benefit......... 302 276 338
Other components............................................ (315) (340) (239)
----- ---- ----
Net periodic postretirement benefit cost.................... $ 246 164 429
===== ==== ====
F-29
AMERCO AND CONSOLIDATED SUBSIDIARIES AND
SAC HOLDING CORPORATION, SAC HOLDING II CORPORATION
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The 2002 and 2001 postretirement benefit liability included the following
components:
2002 2001
------ -----
(IN THOUSANDS)
Beginning of year........................................... $4,097 3,615
Service cost.............................................. 259 228
Interest cost............................................. 302 276
Benefit payments and expense.............................. (81) (86)
Actuarial loss............................................ 405 64
------ -----
Accumulated postretirement benefit obligation............... 4,982 4,097
Unrecognized net gain....................................... 4,107 4,827
------ -----
$9,089 8,924
====== =====
The discount rate assumptions in computing the information above were as
follows:
2002 2001 2000
---- ---- ----
Accumulated postretirement benefit obligation............... 7.25% 7.50% 7.75%
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 5.8% in 2002, declining annually to an
ultimate rate of 4.20% in 2015.
If the health care cost trend rate assumptions were increased by 1.00%, the
accumulated postretirement benefit obligation as of March 31, 2002 would be
increased by approximately $219,000 and a decrease of 1.00% would reduce the
accumulated postretirement benefit obligation by $241,000.
Postemployment benefits, other than retirement, 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.
F-30
AMERCO AND CONSOLIDATED SUBSIDIARIES AND
SAC HOLDING CORPORATION, SAC HOLDING II CORPORATION
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of reinsurance transactions by business segment follows:
CEDED ASSUMED PERCENTAGE
DIRECT TO OTHER FROM OTHER NET OF AMOUNT
AMOUNT COMPANIES COMPANIES AMOUNT ASSUMED TO NET
---------- --------- ---------- --------- --------------
(IN THOUSANDS)
Year ended December 31,
2001
Life insurance in
force................ $2,088,898 925,608 1,732,122 2,895,412 60%
========== ======= ========= =========
Premiums earned:
Life................. $ 21,437 8,889 14,083 26,631 53%
Accident and
health............. 116,445 18,265 28,051 126,231 22%
Annuity.............. 1,651 -- 3,939 5,590 70%
Property-casualty.... 237,644 55,301 91,699 274,042 33%
---------- ------- --------- ---------
Total................ $ 377,177 82,455 137,772 432,494
========== ======= ========= =========
CEDED ASSUMED PERCENTAGE
DIRECT TO OTHER FROM OTHER NET OF AMOUNT
AMOUNT COMPANIES COMPANIES AMOUNT ASSUMED TO 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
========== ======= ========= =========
CEDED ASSUMED PERCENTAGE
DIRECT TO OTHER FROM OTHER NET OF AMOUNT
AMOUNT COMPANIES COMPANIES AMOUNT ASSUMED TO 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
========== ======= ========= =========
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 as of December 31, 2001 and 2000, respectively.
F-31
AMERCO AND CONSOLIDATED SUBSIDIARIES AND
SAC HOLDING CORPORATION, SAC HOLDING II CORPORATION
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
RepWest's share of case loss reserves related to this coverage was insignificant
at December 31, 2001. RepWest's aggregate exposure for Class 1 municipal bond
insurance was $849,000,000 as of December 31, 2001.
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 $8,400,000 from reinsurers. RepWest has issued letters of
credit of approximately $18,000,000 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 $12,829,000, $6,091,000 and
$6,878,000 during the years ended December 31, 2001, 2000 and 1999,
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
$174,973,000, $178,458,000 and $136,044,000 for the years ended 2002, 2001 and
2000, respectively. During the year ended March 31, 2002, a subsidiary of U-Haul
entered into six transactions, whereby AMERCO sold rental trucks, which were
subsequently leased back. AMERCO has guaranteed $203,013,000 of residual values
at March 31, 2002, 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. See
also Note 13.
Following are the lease commitments for leases having terms of more than
one year:
MARCH 31, 2002
------------------------------
PROPERTY, PLANT RENTAL
YEAR ENDED AND OTHER EQUIPMENT FLEET TOTAL
---------- ------------------- ------- -------
(IN THOUSANDS)
2003......................................... $1,231 151,585 152,816
2004......................................... 982 62,316 63,298
2005......................................... 928 50,864 51,792
2006......................................... 917 88,690 89,607
2007......................................... 771 71,798 72,569
Thereafter................................... 524 33,690 34,214
------ ------- -------
$5,353 458,943 464,296
====== ======= =======
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, 2002, U-Haul exercised one purchase option
totaling $972,000.
The Company maintains credit facilities and leasing agreements,
collectively the Lease Facilities. Under these Lease Facilities, the lessor
acquires land to be developed for storage locations with advances of funds (the
Advances) made by certain parties to the facilities. AMERCO separately leases
the land and improvements, including completed locations (the Properties) under
the facilities and respective lease supplements.
F-32
AMERCO AND CONSOLIDATED SUBSIDIARIES AND
SAC HOLDING CORPORATION, SAC HOLDING II CORPORATION
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In December of 1996, AMERCO executed a $100,000,000 Lease Facility with a
number of financial institutions, which was amended and restated in July 1999 to
$170,000,000. This credit facility related to this Lease Facility terminated in
July of 2001, however the leasing agreement under which AMERCO leases the
Properties does not terminate until July of 2004. In September 1999, and April
of 2001, AMERCO entered into additional Lease Facilities for available credit of
$115,500,000 and $45,130,000, respectively. Both the Credit Facility and the
Leasing Agreement for the respective facilities expire in September 2004 and
April 2004, respectively. Available credit under the Lease Facilities totaled
$54,661,000 and $63,334,000 at March 31, 2002 and 2001 respectively.
As of March 31, 2002 the Company leased property valued at $255,032,000
under the Lease Facilities, of this, $118,002,000 represents properties
qualifying as operating leases and $137,030,000 has been financed by the Company
through the Lease Facility.
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,
with options for successive one-year renewal terms subject to consent of other
parties.
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.
Compliance with environmental requirements of federal, state and local
governments significantly affects AREC'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. AREC is
aware of issues regarding hazardous substances on some of its properties. AREC
regularly makes capital and operating expenditures to stay in compliance with
environmental laws and has put in place a remedial plan at each site where it
believes such a plan is necessary. Since 1988, AREC has managed a testing and
removal program for underground storage tanks. Under this program, over 3,000
tanks have been removed at a cost of $43.7 million.
A subsidiary of U-Haul, INW Company (INW), owns one property located within
two different state hazardous substance sites in the State of Washington. The
sites are referred to as the "Yakima Valley Spray Site" and the "Yakima Railroad
Area." INW has been named as a "potentially liable party" under state law with
respect to this property as it relates to both sites. As a result of the cleanup
costs of approximately $5.5 to $10.0 million required by the State of
Washington, INW filed for reorganization under the federal bankruptcy laws in
May of 2001. The potential liability to INW could be in the range of $2.0
million to $5.5 million.
Based upon the information currently available to AREC, 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.
F-33
AMERCO AND CONSOLIDATED SUBSIDIARIES AND
SAC HOLDING CORPORATION, SAC HOLDING II CORPORATION
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. 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. See Note 9.
Pursuant to the $7.5 million settlement of a class action lawsuit relating
to overtime compensation and brought on behalf of current and former Moving
Center General Managers in California, Sarah Saunders, et al. vs. U-Haul Company
of California, Inc., final payment was made on April 5, 2002.
On July 20, 2000, Charles Kocher ("Kocher") filed suit in Wetzel County,
West Virginia, Civil Action No. 00-C-51-K, entitled Charles Kocher v. Oxford
Life Insurance Co. ("Oxford") seeking compensatory and punitive damages for
breach of contract, bad faith and unfair claims settlement practices arising
from an alleged failure of Oxford to properly and timely pay a claim under a
disability and dismemberment policy. Kocher purchased the policy in conjunction
with the purchase of a $7,800 used pick-up truck. Although Oxford violated no
pretrial discovery order and had never been on notice of the possibility of
sanctions for its pretrial conduct, immediately prior to trial, the court
sanctioned Oxford by directing a verdict against Oxford on liability for
compensatory and punitive damages. Therefore, the only issue presented to the
jury was the amount of compensatory and punitive damages. On March 22, 2002, the
jury returned a verdict of $5 million in compensatory damages and $34 million in
punitive damages. On June 10, 2002, the trial court heard argument on Oxford's
"Motion for New Trial Or, in The Alternative, Remittitur." On June 28, 2002 the
parties submitted proposed draft orders from which the trial court will fashion
its Final Judgment. Management does not believe that the sanction imposed
against Oxford is sustainable and expects the sanction to be overturned.
Accordingly, no amounts have been recorded related to this matter. Moreover,
Management does not believe that the jury award has any reasonable nexus to the
actual harm suffered by Kocher and, therefore, is not sustainable.
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
F-34
AMERCO AND CONSOLIDATED SUBSIDIARIES AND
SAC HOLDING CORPORATION, SAC HOLDING II CORPORATION
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
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 and below. Management
believes that the transactions described in the related notes and below were
consummated on terms equivalent to those that would prevail in arm's-length
transactions.
During the year ended 2001, AMERCO sold $10,510,000 of remanufactured
engines and small automotive parts and purchased $53,671,000 of automotive parts
and tools from a company wherein a major stockholder, director and officer of
AMERCO formerly had a beneficial minority ownership interest. The related party
interest ceased to exist as of December 31, 2000.
During the year ended 2001, AMERCO purchased $1,090,000 of rebuilt torque
converters and other related transmission parts from a company wherein an owner
was a family member of a major stockholder, director and officer of AMERCO. The
related party interest ceased to exist as of December 31, 2000.
F-35
AMERCO AND CONSOLIDATED SUBSIDIARIES AND
SAC HOLDING CORPORATION, SAC HOLDING II CORPORATION
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
During the years ended 2002, 2001 and 2000, AMERCO purchased $3,238,000,
$3,460,000 and $3,371,000, respectively, of printing services from a company
wherein an owner is related to a major stockholder, director and officer of
AMERCO.
19. SUPPLEMENTAL CASH FLOW INFORMATION
The (increase) decrease in receivables, and inventories and increase
(decrease) in accounts payable and accrued expenses net of other operating and
investing activities follows: Year ended
YEAR ENDED
------------------------------
2002 2001 2000
-------- ------- -------
(IN THOUSANDS)
Receivables........................................... $ 27,899 (54,369) (24,769)
======== ======= =======
Inventories........................................... $ 7,723 (289) (3,794)
======== ======= =======
Accounts payable and accrued expenses................. $(17,763) (9,479) (19,109)
======== ======= =======
20. SUMMARIZED CONSOLIDATED FINANCIAL INFORMATION OF INSURANCE SUBSIDIARIES
A summarized consolidated balance sheet for RepWest is presented below:
DECEMBER 31,
-------------------
2001 2000
-------- -------
(IN THOUSANDS)
Investments, securities..................................... $362,569 409,535
Investments, other.......................................... 95,918 34,062
Receivables................................................. 230,228 200,651
Deferred policy acquisition costs........................... 16,209 21,637
Due from affiliate.......................................... 89,939 43,121
Deferred federal income taxes............................... 12,048 13,167
Other assets................................................ 12,909 11,961
-------- -------
Total assets........................................... $819,820 734,134
======== =======
Policy liabilities and accruals............................. $459,867 372,328
Unearned premiums........................................... 91,725 107,768
Other policyholders' funds and liabilities.................. 54,203 61,952
-------- -------
Total liabilities...................................... 605,795 542,048
Stockholder's equity........................................ 214,025 192,086
-------- -------
Total liabilities and stockholder's equity............. $819,820 734,134
======== =======
F-36
AMERCO AND CONSOLIDATED SUBSIDIARIES AND
SAC HOLDING CORPORATION, SAC HOLDING II CORPORATION
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summarized consolidated income statement for RepWest is presented below:
YEAR ENDED DECEMBER 31,
------------------------------
2001 2000 1999
-------- ------- -------
(IN THOUSANDS)
Premiums............................................. $274,042 218,097 173,803
Net investment income................................ 27,614 29,103 33,004
-------- ------- -------
Total revenue................................... 301,656 247,200 206,807
-------- ------- -------
Benefits and losses.................................. 269,115 204,133 150,543
Amortization of deferred policy acquisition costs.... 22,068 16,308 13,358
Operating expenses................................... 78,656 56,653 34,972
-------- ------- -------
Total expenses.................................. 369,839 277,094 198,873
Income from operations.......................... (68,183) (29,894) 7,934
Income tax benefit (expense)......................... 23,802 10,494 (2,611)
-------- ------- -------
Net income (loss)............................... $(44,381) (19,400) 5,323
======== ======= =======
A summarized consolidated balance sheet for Oxford is presented below:
DECEMBER 31,
-------------------
2001 2000
-------- -------
(IN THOUSANDS)
Investments, fixed maturities............................... $632,306 542,947
Investments, other.......................................... 172,281 171,684
Receivables................................................. 26,689 27,430
Deferred policy acquisition costs........................... 85,099 78,170
Deferred federal income taxes............................... -- 304
Other assets................................................ 12,996 29,776
-------- -------
Total assets........................................... $929,371 850,311
======== =======
Policy liabilities and accruals............................. $177,751 185,038
Premium deposits............................................ 572,793 522,207
Other policyholders' funds and liabilities.................. 27,718 21,525
Due to affiliate............................................ 10,660 10,942
Deferred federal income taxes............................... 11,642 10,793
-------- -------
Total liabilities...................................... 800,564 750,505
Stockholder's equity........................................ 128,807 99,806
-------- -------
Total liabilities and stockholder's equity............. $929,371 850,311
======== =======
F-37
AMERCO AND CONSOLIDATED SUBSIDIARIES AND
SAC HOLDING CORPORATION, SAC HOLDING II CORPORATION
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summarized consolidated income statement for Oxford is presented below:
YEAR ENDED DECEMBER 31,
------------------------------
2001 2000 1999
-------- ------- -------
(IN THOUSANDS)
Premiums............................................. $160,052 112,616 96,406
Net investment income................................ 26,980 22,166 21,540
-------- ------- -------
Total revenue................................... 187,032 134,782 117,946
-------- ------- -------
Benefits and losses.................................. 120,407 79,233 59,049
Amortization of deferred policy acquisition costs.... 18,583 19,638 21,629
Operating expenses................................... 36,992 28,962 23,078
-------- ------- -------
Total expenses.................................. 175,982 127,833 103,756
Income from operations.......................... 11,050 6,949 14,190
Income tax expense................................... (3,847) (2,298) (4,117)
-------- ------- -------
Net income...................................... $ 7,203 4,651 10,073
======== ======= =======
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 $82,000 for Oxford and $15,200,000 for RepWest at
December 31, 2001.
The regulatory authorities impose minimum risk-based capital ("RBC")
requirements that were developed by the NAIC, on insurance enterprises. The
formulas for determining the amount of RBC specify various weighting factors
that are applied to financial balances or various levels of activity based on
perceived degree of risk. Regulatory compliance is determined by a ratio of the
enterprise's regulatory total adjusted capital, as defined by the NAIC, to its
authorized control level RBC, as defined by the NAIC. Enterprises below specific
trigger points or ratios are classified within certain levels, each of which
requires specified corrective action. The RBC measures of the Company, NAI and
CFLIC as of December 31, 2001 were all above the minimum standards.
Audited statutory net income (loss) for RepWest for the years ended
December 31, 2001, 2000 and 1999 was $(36,615,000), $(28,116,000) and
$9,907,000, respectively; audited statutory capital and surplus was $151,604,000
and $117,430,000 at December 31, 2001 and 2000, respectively.
Audited statutory net income (loss) for Oxford for the years ended December
31, 2001, 2000 and 1999 was $(1,289,000), $6,626,000 and $1,599,000,
respectively; audited statutory capital and surplus was $77,956,000 and
$53,473,000 at December 31, 2001 and 2000, 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.
F-38
AMERCO AND CONSOLIDATED SUBSIDIARIES AND
SAC HOLDING CORPORATION, SAC HOLDING II CORPORATION
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
21. INDUSTRY SEGMENT AND GEOGRAPHIC AREA DATA
Information concerning operations by industry segment follows:
MOVING PROPERTY/ ADJUSTMENTS
AND STORAGE REAL CASUALTY LIFE AND
OPERATIONS(1) ESTATE INSURANCE INSURANCE ELIMINATIONS CONSOLIDATED
------------- ------- --------- --------- ------------ ------------
(IN THOUSANDS)
Fiscal year 2002
Revenues:
Outside................. $1,575,448 8,800 288,826 185,432 -- 2,058,506
Intersegment............ -- 78,649 12,830 1,600 (93,079) --
---------- ------- ------- ------- -------- ---------
Total revenue........... $1,575,448 87,449 301,656 187,032 (93,079) 2,058,506
Depreciation/amortization... $ 117,784 10,822 22,068 18,766 -- 169,440
Interest expense.......... $ 106,841 34,299 -- -- (34,299) 106,841
Pretax earnings........... $ 24,220 37,892 (68,183) 11,050 -- 4,979
Income tax benefit
(expense)............... $ (8,919) (13,294) 23,802 (3,847) -- (2,258)
Identifiable assets at
March 31, 2002.......... $1,881,800 597,295 817,480 929,371 (452,491) 3,773,455
Fiscal year 2001
Revenues:
Outside................. $1,494,321 13,659 241,109 133,358 -- 1,882,447
Intersegment............ -- 69,379 6,091 1,424 (76,894) --
---------- ------- ------- ------- -------- ---------
Total revenue........... $1,494,321 83,038 247,200 134,782 (76,894) 1,882,447
Depreciation/amortization... $ 108,088 11,005 17,588 20,120 -- 156,801
Interest expense.......... $ 108,981 44,265 -- -- (44,265) 108,981
Pretax earnings........... $ 7,235 21,544 (29,894) 6,949 -- 5,834
Income tax benefit
(expense)............... $ (3,357) (7,540) 10,494 (2,298) -- (2,701)
Extraordinary loss on
early extinguishment of
debt, net............... $ (2,121) -- -- -- -- (2,121)
Identifiable assets at
March 31, 2002.......... $1,676,477 735,999 734,134 850,311 (358,482) 3,638,439
Fiscal year 2000
Revenues:
Outside................. $1,407,480 9,365 199,929 116,425 -- 1,733,199
Intersegment............ -- 71,021 6,878 1,274 (79,173) --
---------- ------- ------- ------- -------- ---------
Total revenue........... $1,407,480 80,386 206,807 117,699 (79,173) 1,733,199
Depreciation/amortization... $ 96,536 10,512 14,819 21,787 -- 143,654
Interest expense.......... $ 97,187 39,257 -- -- (39,257) 97,187
Pretax earnings........... $ 52,115 25,454 7,934 14,190 -- 99,693
Income tax expense........ $ 20,517 8,930 2,611 4,117 -- 36,175
Extraordinary loss on
early extinguishment of
debt, net............... $ (334) -- -- -- -- (334)
Identifiable assets at
March 31, 2001.......... $1,554,706 687,855 664,787 721,311 (337,367) 3,291,292
---------------
(1) Includes SAC Holdings Corporations.
F-39
AMERCO AND CONSOLIDATED SUBSIDIARIES AND
SAC HOLDING CORPORATION, SAC HOLDING II CORPORATION
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
GEOGRAPHIC AREA DATA -- UNITED STATES CANADA CONSOLIDATED
----------------------- ------------- ------- ------------
(ALL AMOUNTS ARE IN U.S. $'S) (IN THOUSANDS)
Fiscal year 2002
Total revenues................................... $2,006,171 52,335 2,058,506
Depreciation/amortization........................ $ 164,210 5,230 169,440
Interest expense................................. $ 102,649 4,192 106,841
Pretax earnings.................................. $ (350) 5,329 4,979
Income tax expense............................... $ (2,403) 145 (2,258)
Identifiable assets at March 31, 2002............ $3,655,852 117,603 3,773,455
Fiscal year 2001
Total revenues................................... $1,836,237 46,210 1,882,447
Depreciation/amortization........................ $ 151,591 5,210 156,801
Interest expense................................. $ 106,269 2,712 108,981
Pretax earnings (loss)........................... $ 3,683 2,151 5,834
Income tax expense............................... $ (2,695) (6) (2,701)
Identifiable assets at March 31, 2001............ $3,534,344 104,095 3,638,439
Fiscal year 2000
Total revenues................................... $1,695,052 38,147 1,733,199
Depreciation/amortization........................ $ 139,479 4,175 143,654
Interest expense................................. $ 96,260 927 97,187
Pretax earnings.................................. $ 97,355 2,338 99,693
Income tax expense............................... $ (36,175) -- (36,175)
Extraordinary loss............................... $ (334) -- (334)
Identifiable assets at March 31, 2000............ $3,229,254 62,038 3,291,292
22. SUBSEQUENT EVENTS
On May 7, 2002, 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 17,
2002.
In May 2002, AMERCO entered into an agreement with various insurance
lenders for $100,000,000 with maturities ranging from 4 to 10 years and fixed
interest rates of 7.85% to 9.03%.
On June 28, 2002, AMERCO entered into an agreement replacing an existing
revolver agreement with a 3 year revolver for $205,000,000. The interest rate is
based on a spread over LIBOR that will be determined over the term of the
agreement. Such agreement, as amended, requires that the Company obtain an
additional $150 million in financings by October 8, 2002. Management is in the
process of obtaining such financings and believes that funding will occur on or
before October 8, 2002.
On September 24, 2002, Paul F. Shoen filed a derivative action in the
Second Judicial District Court of the State of Nevada, Washoe County, captioned
Paul F. Shoen vs. SAC Holding Corporation et al, CV02-05602, seeking damages and
equitable relief and naming AMERCO as a nominal defendant. The complaint alleges
breach of fiduciary duty, self-dealing, usurpation of corporate opportunities,
wrongful interference with prospective economic advantage and unjust enrichment
and seeks the unwinding of sales of self-storage properties by the Company to
SAC Holdings over the last several years. The complaint seeks a declaration that
such transfers are void as well as unspecified damages. Based upon a preliminary
review of the complaint (which, as of the date hereof, has not been served), the
Company believes that the allegations contained in the complaint are baseless
and the Company will aggressively and vigorously respond to these frivolous
claims, and does not believe that the resolution of this matter will have a
material adverse effect on the Company's financial condition or results of
operations. However, as with any litigation, no assurances can be given as to
the outcome.
F-40
ADDITIONAL INFORMATION
CONSOLIDATING BALANCE SHEETS AND STATEMENTS OF EARNINGS SCHEDULE
Presented below are the consolidating balance sheets and statements of
earnings of AMERCO and consolidated subsidiaries and SAC Holdings and
consolidated subsidiaries, which are presented for purposes of analysis and are
not a required part of the basic financial statements.
ADJUSTMENTS AND
AMERCO SAC HOLDINGS ELIMINATIONS CONSOLIDATED
---------------------- ------------------- ------------------- ---------------------
2002 2001 2002 2001 2002 2001 2002 2001
---------- --------- --------- ------- -------- -------- --------- ---------
(IN THOUSANDS)
Cash and cash
equivalents........... $ 47,641 52,778 10 10 -- -- 47,651 52,788
Trade receivables,
net................... 279,914 252,015 -- -- -- -- 279,914 252,015
Notes and mortgage
receivables, net...... 29,374 38,315 -- -- (13,467) (9,161) 15,907 29,154
Inventories, net........ 72,327 82,917 4,192 1,325 -- -- 76,519 84,242
Prepaid expenses........ 44,584 26,888 -- -- (13,515) (3,549) 31,069 23,339
Investments, fixed
maturities............ 994,875 952,482 -- -- -- -- 994,875 952,482
Investments, other...... 613,573 431,333 30,091 3,910 (393,206) (232,364) 250,458 202,879
Deferred policy
acquisition costs..... 101,308 99,807 -- -- -- -- 101,308 99,807
Other assets............ 35,158 33,467 25,693 9,639 -- -- 60,851 43,106
---------- --------- --------- ------- -------- -------- --------- ---------
2,218,754 1,970,002 59,986 14,884 (420,188) (245,074) 1,858,552 1,739,812
Property, plant and
equipment, at cost:
Land.................. 160,898 197,281 264,410 173,403 -- -- 425,308 370,684
Buildings and
improvements........ 703,841 864,710 713,107 475,393 (255,030) (118,946) 1,161,918 1,221,157
Furniture and
equipment........... 288,707 282,362 1,763 258 -- -- 290,470 282,620
Rental trailers and
other rental
equipment........... 176,785 181,159 -- -- -- -- 176,785 181,159
Rental trucks......... 1,071,604 1,037,653 -- -- -- -- 1,071,604 1,037,653
---------- --------- --------- ------- -------- -------- --------- ---------
2,401,835 2,563,165 979,280 649,054 (255,030) (118,946) 3,126,085 3,093,273
Less accumulated
depreciation........ 1,172,509 1,168,183 37,541 25,009 1,132 1,454 1,211,182 1,194,646
---------- --------- --------- ------- -------- -------- --------- ---------
Total property, plant
and equipment....... 1,229,326 1,394,982 941,739 624,045 (256,162) (120,400) 1,914,903 1,898,627
---------- --------- --------- ------- -------- -------- --------- ---------
Total assets............ $3,448,080 3,364,984 1,001,725 638,929 (676,350) (365,474) 3,773,455 3,638,439
========== ========= ========= ======= ======== ======== ========= =========
F-41
ADDITIONAL INFORMATION
CONSOLIDATING BALANCE SHEETS AND STATEMENTS OF EARNINGS SCHEDULE -- (CONTINUED)
ADJUSTMENTS AND
AMERCO SAC HOLDINGS ELIMINATIONS CONSOLIDATED
---------------------- ------------------- ------------------- ---------------------
2002 2001 2002 2001 2002 2001 2002 2001
---------- --------- --------- ------- -------- -------- --------- ---------
(IN THOUSANDS)
Liabilities and
stockholders' equity
Liabilities:
Accounts payable and
accrued expenses.... $ 107,852 149,074 54,953 27,188 (13,467) (9,160) 149,338 167,102
AMERCO'S notes and
loans payable....... 1,045,802 1,170,041 -- -- -- -- 1,045,802 1,170,041
SAC Holdings' notes
and loans payable,
non-recourse to
AMERCO.............. -- -- 957,379 624,989 (399,618) (251,663) 557,761 373,326
Policy benefits and
losses, claims and
loss expenses
payable............. 729,343 668,830 -- -- -- -- 729,343 668,830
Liabilities from
investment
contracts........... 572,793 522,207 -- -- -- -- 572,793 522,207
Cash overdraft........ 34,629 26,484 -- -- -- -- 34,629 26,484
Other policyholders'
funds and
liabilities......... 74,048 79,172 -- -- -- -- 74,048 79,172
Deferred income....... 22,449 32,346 -- 8,047 (15,089) (3,923) 7,360 36,470
Deferred income
taxes............... 191,942 128,703 -- -- (88,667) (46,160) 103,275 82,543
---------- --------- --------- ------- -------- -------- --------- ---------
Total liabilities... 2,778,858 2,776,857 1,012,332 660,224 (516,841) (310,906) 3,274,349 3,126,175
Minority interests...... -- -- 8,913 10,416 (8,913) (10,416) -- --
Stockholders' equity:
Serial preferred
stock............... -- -- -- -- -- -- -- --
Series B preferred
stock............... -- -- -- -- -- -- -- --
Serial common stock --
Series A common
stock............... 1,441 1,441 -- -- -- -- 1,441 1,441
Common stock.......... 9,122 9,122 -- -- -- -- 9,122 9,122
Additional paid-in
capital............. 405,794 312,128 28,281 3,312 (166,363) (72,786) 267,712 242,654
Accumulated other
comprehensive
income.............. (32,384) (40,709) (2,385) (1,398) 2,385 1,398 (32,384) (40,709)
Retained earnings..... 716,172 727,935 (45,416) (33,625) 45,858 32,544 716,614 726,854
Cost of common shares
in treasury, net.... (416,771) (406,617) -- -- (32,476) (5,308) (449,247) (411,925)
Unearned employee
stock ownership plan
shares.............. (14,152) (15,173) -- -- -- -- (14,152) (15,173)
---------- --------- --------- ------- -------- -------- --------- ---------
Total stockholders'
equity............ 669,222 588,127 (19,520) (31,711) (150,596) (44,152) 499,106 512,264
Contingent liabilities
and commitments....... -- -- -- -- -- -- -- --
---------- --------- --------- ------- -------- -------- --------- ---------
Total liabilities and
stockholders'
equity................ $3,448,080 3,364,984 1,001,725 638,929 (676,350) (365,474) 3,773,455 3,638,439
========== ========= ========= ======= ======== ======== ========= =========
F-42
ADDITIONAL INFORMATION
CONSOLIDATING BALANCE SHEETS AND STATEMENTS OF EARNINGS SCHEDULE -- (CONTINUED)
ADJUSTMENTS AND
AMERCO SAC HOLDINGS ELIMINATIONS
---------------------------------- ---------------------------- -----------------------------
2002 2001 2000 2002 2001 2000 2002 2001 2000
---------- --------- --------- --------- ------- ------ -------- -------- -------
(IN THOUSANDS)
Revenues
Rental revenue............ $1,247,065 1,204,959 1,150,532 111,116 88,558 64,910 (14,159) (7,985) (6,676)
Net sales................. 198,367 194,320 188,816 24,449 17,922 12,539 -- -- --
Premiums.................. 433,593 323,198 262,057 -- -- 0 -- -- --
Net investment and
interest income......... 73,542 71,956 76,172 -- -- 0 (15,467) (10,481) (15,151)
---------- --------- --------- --------- ------- ------ -------- -------- -------
Total revenues.......... 1,952,567 1,794,433 1,677,577 135,565 106,480 77,449 (29,626) (18,466) (21,827)
---------- --------- --------- --------- ------- ------ -------- -------- -------
Costs and expenses
Operating expenses........ 1,055,100 1,001,943 919,574 62,227 51,468 34,217 (7,881) (6,243) (4,482)
Cost of sales............. 111,539 116,690 110,567 11,321 9,877 4,823 -- -- --
Benefits and losses....... 389,522 283,366 209,592 -- -- 0 -- -- --
Amortization of deferred
acquisition costs....... 40,674 35,946 34,987 -- -- 0 -- -- --
Lease expense............. 182,979 176,554 131,784 -- -- 0 (7,478) (3,477) (833)
Depreciation, net......... 94,786 88,892 87,917 14,219 11,708 7,934 (322) 908 239
---------- --------- --------- --------- ------- ------ -------- -------- -------
Total costs and
expenses.............. 1,874,600 1,703,391 1,494,421 87,767 73,053 46,974 (15,681) (8,812) (5,076)
---------- --------- --------- --------- ------- ------ -------- -------- -------
Earnings from operations.... 77,967 91,042 183,156 47,798 33,427 30,475 (13,945) (9,654) (16,751)
Interest expense.......... 76,070 87,378 81,532 61,093 51,289 36,846 (30,322) (29,686) (21,191)
---------- --------- --------- --------- ------- ------ -------- -------- -------
Pretax earnings (loss)...... 1,897 3,664 101,624 (13,295) (17,862) (6,371) 16,377 20,032 4,440
Income tax (expense)
benefit................. (698) (1,358) (36,506) (1,560) (1,343) 331 -- -- --
---------- --------- --------- --------- ------- ------ -------- -------- -------
Earnings before
extraordinary loss on
early extinguishment of
debt...................... 1,199 2,306 65,118 (14,855) (19,205) (6,040) 16,377 20,032 4,440
Extraordinary loss on early
extinguishment of debt.... -- (2,121) (334) -- -- -- -- -- --
Net earnings (loss)..... $ 1,199 185 64,784 (14,855) (19,205) (6,040) 16,377 20,032 4,440
========== ========= ========= ========= ======= ====== ======== ======== =======
CONSOLIDATED
---------------------------------
2002 2001 2000
--------- --------- ---------
(IN THOUSANDS)
Revenues
Rental revenue............ 1,344,022 1,285,532 1,208,766
Net sales................. 222,816 212,242 201,355
Premiums.................. 433,593 323,198 262,057
Net investment and
interest income......... 58,075 61,475 61,021
--------- --------- ---------
Total revenues.......... 2,058,506 1,882,447 1,733,199
--------- --------- ---------
Costs and expenses
Operating expenses........ 1,109,446 1,047,168 949,309
Cost of sales............. 122,860 126,567 115,390
Benefits and losses....... 389,522 283,366 209,592
Amortization of deferred
acquisition costs....... 40,674 35,946 34,987
Lease expense............. 175,501 173,077 130,951
Depreciation, net......... 108,683 101,508 96,090
--------- --------- ---------
Total costs and
expenses.............. 1,946,686 1,767,632 1,536,319
--------- --------- ---------
Earnings from operations.... 111,820 114,815 196,880
Interest expense.......... 106,841 108,981 97,187
--------- --------- ---------
Pretax earnings (loss)...... 4,979 5,834 99,693
Income tax (expense)
benefit................. (2,258) (2,701) (36,175)
--------- --------- ---------
Earnings before
extraordinary loss on
early extinguishment of
debt...................... 2,721 3,133 63,518
Extraordinary loss on early
extinguishment of debt.... -- (2,121) (334)
Net earnings (loss)..... 2,721 1,012 63,184
========= ========= =========
F-43
ADDITIONAL INFORMATION
SUMMARY OF EARNINGS OF INDEPENDENT TRAILER FLEETS
The following Summary of Earnings of Independent Trailer Fleets is
presented for purposes of analysis and is not a required part of the basic
financial statements.
YEARS ENDED MARCH 31,
----------------------------------------------------
2002 2001 2000 1999 1998
-------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT EARNINGS PER $100 OF AVERAGE
INVESTMENT)
Earnings data (Note A):
Fleet owner income:
Credited to fleet owner gross rental
income..................................... $1,028 1,350 1,977 2,191 2,317
Credited to trailer accident fund (Notes D
and E)..................................... 61 79 114 144 183
------ ----- ----- ----- -----
Total fleet owner income................ 1,089 1,429 2,091 2,335 2,500
------ ----- ----- ----- -----
Fleet owner operation expenses:
Charged to fleet owner (Note C).............. 532 719 999 873 1,144
Charged to trailer accident fund (Notes D and
F)......................................... 15 18 23 27 20
------ ----- ----- ----- -----
Total fleet owner operation expenses.... 547 737 1,022 900 1,164
------ ----- ----- ----- -----
Fleet owner earnings before trailer
accident fund credit, depreciation and
income taxes............................ 496 631 978 1,318 1,173
Trailer accident fund credit (Note D)........... 46 61 91 117 163
------ ----- ----- ----- -----
Net fleet owner earnings before
depreciation and income taxes........... $ 542 692 1,069 1,435 1,336
====== ===== ===== ===== =====
Investment data (Note A):
Amount at end of year........................... $1,663 2,046 2,654 3,272 3,875
====== ===== ===== ===== =====
Average amount during year...................... $1,855 2,350 2,963 3,574 4,639
====== ===== ===== ===== =====
Net fleet owner earnings before
depreciation and income taxes per $100
of average investment (Note B)
(unaudited)............................. $20.06 23.38 28.12 29.56 28.79
====== ===== ===== ===== =====
The accompanying notes are an integral part of this Summary of Earnings of
Independent Trailer Fleets.
F-44
ADDITIONAL INFORMATION
NOTES TO SUMMARY OF EARNINGS OF INDEPENDENT TRAILER FLEETS
(A) The accompanying Summary of Earnings of Independent Trailer Fleets
includes the operations of trailers under the brand name of "U-Haul" owned by
independent fleet owners. Earnings data represent the aggregate results of
operations before depreciation and taxes. Investment data represent the cost of
trailers and investments before accumulated depreciation.
Fleet owner income is based on Independent Rental Dealer reports of rentals
transacted through the day preceding the last Monday of each month and received
by U-Haul International, Inc. by the end of the month and U-Haul Center reports
of rentals transacted through the last day of each month. Payments to fleet
owners for trailers lost or retired from rental service as a result of damage by
accident have not been reflected in this summary because such payments do not
relate to earnings before depreciation and income taxes but, rather, investment
(depreciation).
The investment data is based upon the cost of trailers to the fleet owners
as reflected by sales records of the U-Haul manufacturing facilities.
(B) The summary of earnings data stated in terms of amount per $100 of
average investment represents the aggregate results of operations (earnings
data) divided by the average amount of investment during the periods. The
average amount of investment is based upon a simple average of the month-end
investment during each period. Average earnings data is not necessarily
representative of an individual fleet owner's earnings.
(C) A summary of operations expenses charged directly to independent fleet
owners follows:
YEAR ENDED MARCH 31,
-------------------------------------
2002 2001 2000 1999 1998
---- ---- ---- ---- -----
(IN THOUSANDS)
Licenses...................................... $ 86 124 150 159 285
Public liability insurance.................... 65 87 126 134 156
Repairs and maintenance....................... 381 508 723 580 703
---- --- --- --- -----
$532 719 999 873 1,144
==== === === === =====
(D) The fleet owners and subsidiary U-Haul Rental Companies forego normal
commissions on a portion of gross rental fees designated for transfer to the
Trailer Accident Fund. Trailer accident repair expenses, otherwise chargeable to
fleet owners, are paid from this Fund to the extent of the financial resources
of the Fund. The amounts designated "Trailer Accident Fund credit" in the
accompanying summary of earnings represent independent fleet owner commissions
foregone, which exceed expenses borne by the Fund.
(E) Commissions foregone for transfer to the Trailer Accident Fund follows:
FLEET OWNERS
------------------------------------------------
SUBSIDIARY
U-HAUL SUBSIDIARY
COMPANIES COMPANIES INDEPENDENT TOTAL
---------- ---------- ----------- -----
(IN THOUSANDS)
Year ended:
March 31, 2002......................... $6,385 3,377 61 9,823
March 31, 2001......................... 6,073 3,191 79 9,343
March 31, 2000......................... 6,061 3,150 114 9,325
March 31, 1999......................... 6,081 3,131 144 9,356
March 31, 1998......................... 6,299 3,208 183 9,690
F-45
ADDITIONAL INFORMATION
NOTES TO SUMMARY OF EARNINGS OF INDEPENDENT TRAILER FLEETS -- (CONTINUED)
(F) A summary of independent fleet owner expenses borne by the Trailer
Accident Fund follows:
FLEET OWNERS
---------------------------------------------------------------------------
TOTAL
TRAILER
SUBSIDIARY TRAILER ACCIDENT
U-HAUL SUBSIDIARY SUB ACCIDENT REPAIR
COMPANIES COMPANIES INDEPENDENT TOTAL RETIREMENTS EXPENSES
---------- ---------- ----------- ----- ----------- --------
(IN THOUSANDS)
Year ended:
March 31, 2002....... $1,225 647 12 1,884 455 2,339
March 31, 2001....... 1,067 561 18 1,646 498 2,144
March 31, 2000....... 1,233 641 23 1,897 354 2,251
March 31, 1999....... 1,148 591 27 1,766 342 2,108
March 31, 1998....... 682 347 20 1,049 408 1,457
(G) Certain reclassifications have been made to the Summary of Earnings of
Independent Trailer Fleets for the fiscal years ended 1999 and 1998 to conform
with the current year's presentation.
F-46
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF AMERCO
BALANCE SHEETS
MARCH 31,
-----------------------
2002 2001
---------- ---------
(IN THOUSANDS)
Assets
Cash...................................................... $ 71 114
Investment in subsidiaries................................ 1,121,630 894,831
Due from unconsolidated subsidiaries...................... 890,880 1,092,274
Other assets.............................................. 15,088 15,061
---------- ---------
$2,027,669 2,002,280
========== =========
Liabilities and stockholders' equity
Liabilities:
Notes and loans payable................................... $1,030,042 1,156,613
Other liabilities......................................... 311,227 239,340
---------- ---------
Stockholders' equity:
Preferred stock........................................... -- --
Common stock.............................................. 10,563 10,563
Additional paid-in capital................................ 405,794 312,128
Accumulated other comprehensive income.................... (32,384) (40,709)
Retained earnings:
Beginning of year...................................... 730,942 743,720
Net earnings........................................... 1,199 185
Dividends paid......................................... (12,963) (12,963)
---------- ---------
719,178 730,942
Less:
Cost of common shares in treasury......................... 416,771 406,617
Unearned employee stock ownership plan shares............. (20) (20)
---------- ---------
Total stockholders' equity............................. 686,400 606,327
---------- ---------
$2,027,669 2,002,280
========== =========
The accompanying notes are an integral part of these consolidated financial
statements.
F-47
CONDENSED FINANCIAL INFORMATION OF AMERCO
STATEMENTS OF EARNINGS
YEARS ENDED MARCH 31,
------------------------------------------------
2002 2001 2000
-------------- ------------- -------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Revenues
Net interest income from subsidiaries............... $ 61,424 61,509 53,504
Expenses
Interest expense.................................... 90,644 86,963 77,561
Other expenses...................................... 7,562 5,750 5,823
----------- ---------- ----------
Total expenses...................................... 98,206 92,713 83,384
----------- ---------- ----------
Operating loss...................................... (36,782) (31,204) (29,880)
Equity in earnings of unconsolidated subsidiaries... 63,698 61,181 126,159
Income tax expense.................................. (25,717) (27,669) (31,173)
Extraordinary loss on early extinguishment of debt,
net.............................................. -- (2,121) (334)
----------- ---------- ----------
Net earnings..................................... $ 1,199 187 64,772
=========== ========== ==========
Earnings per common share (both basic and diluted):
Earnings from operations before extraordinary loss
on early extinguishment of debt.................. $ (0.56) (0.50) 2.35
Extraordinary loss on early extinguishment of debt,
net.............................................. -- (0.10) (0.02)
----------- ---------- ----------
Net earnings..................................... $ (0.56) (0.60) 2.33
=========== ========== ==========
Weighted average common shares outstanding.......... 21,022,712 21,486,370 21,934,390
=========== ========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
F-48
CONDENSED FINANCIAL INFORMATION OF AMERCO
STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31,
---------------------------------
2002 2001 2000
--------- -------- --------
(IN THOUSANDS)
Cash flows from operating activities:
Net earnings............................................. $ 1,199 185 64,772
Amortization, net........................................ 956 826 569
Gain on sale............................................. 101,994 38,494 --
Equity in earnings of subsidiaries....................... (226,799) (74,948) (58,499)
(Increase) decrease in amounts due from unconsolidated
subsidiaries.......................................... 201,394 (62,951) (21,846)
Net change in operating assets and liabilities........... 70,528 104,392 68,551
--------- -------- --------
Net cash provided by operating activities............. 149,272 5,998 53,547
--------- -------- --------
Cash flows from financing activities:
Net change in short term borrowings...................... (23,295) 156,070 (146,500)
Proceeds from notes...................................... -- -- 350,000
Leveraged Employee Stock Ownership Plan-repayments from
loan.................................................. -- 137 118
Principal payments on notes.............................. (102,513) (137,010) (180,010)
Debt issuance costs...................................... (390) (488) (6,024)
Repurchase of preferred stock............................ -- -- (24,663)
Preferred stock dividends paid........................... (12,963) (12,963) (13,641)
Treasury stock purchase, net............................. (10,154) (9,617) (33,467)
Extraordinary loss on early extinguishment of debt,
net................................................... -- (2,121) (334)
--------- -------- --------
Net cash used by financing activities................. (149,315) (5,992) (54,521)
--------- -------- --------
Increase (decrease) in cash and cash equivalents........... (43) 6 (974)
Cash and cash equivalents at beginning of year........... 114 108 1,082
--------- -------- --------
Cash and cash equivalents at end of year.............. $ 71 114 108
========= ======== ========
Income taxes paid in cash amounted to $5,662,000, $3,450,000 and $1,522,000
for 2002, 2001 and 2000, respectively. Interest paid in cash amounted to
$77,902,000, $92,622,000 and $77,529,000 for 2002, 2001 and 2000, respectively.
The accompanying notes are an integral part of these consolidated financial
statements.
F-49
CONDENSED FINANCIAL INFORMATION OF AMERCO
NOTES TO CONDENSED FINANCIAL INFORMATION
MARCH 31, 2002, 2001, AND 2000
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 AMERCO 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
(excluding SAC Holdings). The debt and related interest expense of AMERCO 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,
-----------------------
2002 2001
---------- ---------
(IN THOUSANDS)
Medium-term notes payable, unsecured, 7.23% to 8.08%
interest rates, due through 2027.......................... $ 109,500 212,000
Notes payable under Bond Backed Asset Trust, unsecured,
7.14% interest rates, due through 2032.................... 100,000 100,000
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 42
Notes payable to banks under revolving lines of credit,
unsecured, 2.00% to 4.75% interest rates.................. 283,000 185,000
Other short-term promissory notes, 2.88% interest rate...... 12,500 15,000
---------- ---------
$1,030,042 1,156,612
========== =========
For additional information, see Note 5 of Notes to Consolidated Financial
Statements.
F-50
SCHEDULE V
AMERCO AND CONSOLIDATED SUBSIDIARIES
SUPPLEMENTAL INFORMATION (FOR PROPERTY-CASUALTY INSURANCE UNDERWRITERS)
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
CLAIM AND CLAIM
ADJUSTMENT
RESERVES EXPENSES
FOR UNPAID INCURRED
DEFERRED CLAIMS RELATED TO
AFFILIATION POLICY AND CLAIM DISCOUNT NET NET ----------------
FISCAL WITH ACQUISITION ADJUSTMENT IF ANY, UNEARNED EARNED INVESTMENT CURRENT PRIOR
YEAR REGISTRANT COSTS EXPENSES DEDUCTED PREMIUMS PREMIUMS(1) INCOME(3) YEAR YEAR
------ --------------- ----------- ---------- -------- -------- ----------- ---------- ------- ------
(IN THOUSANDS)
2002 Consolidated $16,209 448,984 N/A 91,725 261,213 31,757 232,984 36,132
property --
casualty entity
2001 Consolidated $21,637 369,292 N/A 107,768 212,005 32,030 155,073 35,387
property --
casualty entity
2000 Consolidated 15,130 334,857 N/A 64,755 166,925 32,527 121,861 16,052
property --
casualty entity
AMORTIZATION PAID
OF DEFERRED CLAIMS
POLICY AND CLAIM NET
FISCAL ACQUISITION ADJUSTMENT PREMIUMS
YEAR COSTS EXPENSES WRITTEN(2)
------ ------------ ---------- ----------
(IN THOUSANDS)
2002 22,067 236,866 234,793
2001 16,309 178,221 251,924
2000 13,358 138,072 176,604
---------------
(1) The earned premiums are reported net of intersegment transactions. Earned
premiums eliminated in consolidation amount to $12,829,000, $6,091,000 and
$6,878,000 for the years ended 2001, 2000 and 1999, respectively.
(2) The premiums written are reported net of intersegment transactions. Premiums
written eliminated in consolidation amount to $12,829,000, $6,091,000 and
$6,878,000 for the years ended 2001, 2000 and 1999, respectively.
(3) Net Investment Income excludes net realized gains(losses) on investments of
($4,143,000), ($2,926,000) and $477,000 for the years 2001, 2000 and 1999,
respectively.
F-51
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this amendment to its
Annual Report on Form 10-K for the fiscal year ended March 31, 2002, 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 and President
Dated: September 25, 2002
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this amendment to its
Annual Report on Form 10-K for the fiscal year ended March 31, 2002, to be
signed on its behalf by the undersigned, thereunto duly authorized.
U-Haul International, Inc.
By: /S/ EDWARD J. SHOEN
---------------------------------------
Edward J. Shoen
President
Dated: September 25, 2002
CERTIFICATIONS
I, Edward J. Shoen, certify that:
1. I have reviewed this annual report on Form 10-K/A of AMERCO and U-Haul
International, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
[Items 4, 5 and 6 omitted pursuant to the transition provisions of Release No.
34-46427.]
Date: September 25, 2002
/s/ EDWARD J. SHOEN
----------------------------
Edward J. Shoen
Chairman of the Board
and President of AMERCO
and President of U-Haul International, Inc.
I, Gary B. Horton, certify that:
1. I have reviewed this annual report on Form 10-K/A of AMERCO and U-Haul
International, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
[Items 4, 5 and 6 omitted pursuant to the transition provisions of Release No.
34-46427.]
Date: September 25, 2002
/s/ GARY B. HORTON
----------------------------
Gary B. Horton
Treasurer of AMERCO and
Assistant Treasurer of
U-Haul International, Inc.
Index to Exhibits
Exhibit No. Description
----------- -----------
23 Consent of Independent Accountants
99.1 Certificate of Edward J. Shoen, Chairman of the Board and President of
AMERCO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.2 Certificate of Gary B. Horton, Treasurer of AMERCO pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
99.3 Certificate of Edward J. Shoen, President of U-Haul International, Inc.
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.4 Certificate of Gary B. Horton, Assistant Treasurer of U-Haul International, Inc.
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002