-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RJCXYb9utN1SkT08QuQsp7+kqwx6MKS06iTOTH0LqVMQejQrsA4DKhMhwur+us2b dVv6H4zVQkQnjxU3PziXeQ== 0000004457-02-000059.txt : 20020508 0000004457-02-000059.hdr.sgml : 20020508 ACCESSION NUMBER: 0000004457-02-000059 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20020508 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERCO /NV/ CENTRAL INDEX KEY: 0000004457 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-AUTO RENTAL & LEASING (NO DRIVERS) [7510] IRS NUMBER: 880106815 STATE OF INCORPORATION: NV FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-11255 FILM NUMBER: 02637947 BUSINESS ADDRESS: STREET 1: 1325 AIRMOTIVE WAY STE 100 CITY: RENO STATE: NV ZIP: 89502 BUSINESS PHONE: 7756886300 MAIL ADDRESS: STREET 1: 1325 AIRMOTIVE WAY STREET 2: SUITE 100 CITY: RENO STATE: NV ZIP: 89502 FORMER COMPANY: FORMER CONFORMED NAME: AMERCO DATE OF NAME CHANGE: 19770926 10-Q/A 1 ajun01qa.txt AMENDED FORM 10-Q 06-30-2001 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q/A (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________________ to __________________ Commission Registrant, State of Incorporation, I.R.S. Employer File Number Address and Telephone Number Identification No. ________________________________________________________________________________ 1-11255 AMERCO 88-0106815 (A Nevada Corporation) 1325 Airmotive Way, Ste. 100 Reno, Nevada 89502-3239 Telephone (775) 688-6300 2-38498 U-Haul International, Inc. 86-0663060 (A Nevada Corporation) 2727 N. Central Avenue Phoenix, Arizona 85004 Telephone (602) 263-6645 Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]. 21,396,237 shares of AMERCO Common Stock, $0.25 par value were outstanding at May 03, 2002. 5,385 shares of U-Haul International, Inc. Common Stock, $0.01 par value, were outstanding at May 03, 2002. U-Haul International, Inc. meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format. 2 TABLE OF CONTENTS PART I. FINANCIAL INFORMATION Item 1. Financial Statements a) Condensed Consolidated Balance Sheets as of June 30, 2001 (unaudited) and March 31, 2001 (unaudited)................... 4 b) Condensed Consolidated Statements of Earnings for the Quarters ended June 30, 2001 and 2000 (unaudited)..................... 6 c) Condensed Consolidated Statements of Comprehensive Income for the Quarters ended June 30, 2001 and 2000 (unaudited).... 7 d) Condensed Consolidated Statements of Cash Flows for the Quarters ended June 30, 2001 and 2000 (unaudited)............ 8 e) Notes to Condensed Consolidated Financial Statements - June 30, 2001 (unaudited), March 31, 2001 (unaudited) and June 30, 2000 (unaudited).................................... 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........................................ 24 Item 3. Quantitative and Qualitative Disclosures About Market Risk....... 31 PART II. OTHER INFORMATION Item 1. Legal Proceedings................................................ 32 Item 6. Exhibits and Reports on Form 8-K................................. 33 3 INTRODUCTORY NOTE This amendment to Form 10-Q is being filed to restate the interim financial statements previously filed for the quarter ended June 30, 2001 to reflect the consolidation of SAC Holding Corporation and its consolidated subsidiaries (SAC Holdings or SAC) with AMERCO and its consolidated subsidiaries (AMERCO or the Company) due to a revised interpretation of EITF 90-15 by the Company's independent public accountants. The Company concurs with this revised interpretation. AMERCO has no ownership interest in SAC, nor does it guarantee the debt of SAC. Further, the holders of such SAC notes have no recourse to the assets of AMERCO. The condensed consolidated financial statements presented herein include the accounts of AMERCO and SAC Holdings. All material intercompany accounts and transactions have been eliminated in consolidation. 4 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS AMERCO AND CONSOLIDATED SUBSIDIARIES AND SAC HOLDING CORPORATION AND CONSOLIDATED SUBSIDIARIES Condensed Consolidated Balance Sheets June 30, March 31, Assets 2001 2001 -------------------------- (Unaudited) (in thousands) Cash and cash equivalents $ 44,077 52,788 Inventories, net 79,992 85,330 Prepaid expenses 17,753 14,416 Investments, fixed maturities 950,660 952,482 Investments, other 193,773 207,494 Other assets 465,717 449,380 Minority interest assets 17,667 17,907 ----------------------- Property, plant and equipment, at cost: Buildings and improvements 1,119,713 1,068,956 Rental trucks 1,081,395 1,037,653 Other property, plant, and equipment 816,153 834,463 ----------------------- 3,017,261 2,941,072 Less accumulated depreciation 1,213,029 1,187,103 ----------------------- Total property, plant and equipment 1,804,232 1,753,969 ----------------------- Total Assets $ 3,573,871 3,533,766 ======================= The accompanying notes are an integral part of these consolidated financial statements. 5 AMERCO AND CONSOLIDATED SUBSIDIARIES AND SAC HOLDING CORPORATION AND CONSOLIDATED SUBSIDIARIES Condensed Consolidated Balance Sheets, Continued Liabilities and June 30, March 31, Stockholders' Equity 2001 2001 -------------------------- (Unaudited) (in thousands) Liabilities: AMERCO's notes and loans payable $ 1,143,271 1,156,848 SAC Holdings' notes and loans payable, non-recourse to AMERCO 275,024 257,109 Policy benefits and losses, claims and loss expenses payable 677,915 668,830 Liabilities from premium deposits 523,772 522,207 Other liabilities 386,807 393,442 ----------------------- Total liabilities 3,006,789 2,998,436 Contingent liabilities and commitments Stockholders' equity: Serial preferred stock - Series A preferred stock - - Series B preferred stock - - Serial common stock - Series A common stock 1,441 1,441 Common stock 9,122 9,122 Additional paid-in capital 236,002 236,002 Accumulated other comprehensive income (30,066) (40,709) Retained earnings 776,937 755,174 Cost of common shares in treasury, net (411,435) (410,527) Unearned ESOP shares (14,919) (15,173) ----------------------- Total stockholders' equity 567,082 535,330 ----------------------- Total Liabilities and Stockholders' Equity $ 3,573,871 3,533,766 ======================= The accompanying notes are an integral part of these consolidated financial statements. 6 AMERCO AND CONSOLIDATED SUBSIDIARIES AND SAC HOLDING CORPORATION AND CONSOLIDATED SUBSIDIARIES Condensed Consolidated Statements of Earnings Quarters ended June 30, (Unaudited) 2001 2000 -------------------------- (in thousands, except share and per share data) Revenues Rental revenue $ 358,071 337,939 Net sales 68,789 63,295 Premiums 100,330 54,987 Net investment and interest income 15,363 16,129 ----------------------- Total revenues 542,553 472,350 Costs and expenses Operating expenses 262,200 239,828 Cost of sales 36,409 34,495 Benefits and losses 91,432 42,235 Amortization of deferred policy acquisition costs 9,794 7,869 Lease expense 46,342 40,434 Depreciation, net 31,470 23,418 ----------------------- Total costs and expenses 477,647 388,279 Earnings from operations 64,906 84,071 Interest expense 26,097 27,053 ----------------------- Pretax earnings 38,809 57,018 Income tax expense (13,485) (21,142) ----------------------- Earnings before minority interest 25,324 35,876 Minority interest (321) 1,736 ----------------------- Net earnings $ 25,003 37,612 ======================= Basic and diluted earnings per common share: $ 1.02 1.58 ======================= Basic and diluted average common shares outstanding: 21,280,361 21,718,988 ======================= The accompanying notes are an integral part of these Consolidated financial statements. 7 AMERCO AND CONSOLIDATED SUBSIDIARIES AND SAC HOLDING CORPORATION AND CONSOLIDATED SUBSIDIARIES Condensed Consolidated Statements of Comprehensive Income Quarters ended June 30, (Unaudited) 2001 2000 ----------------------- (in thousands) Comprehensive income: Net earnings $ 25,003 37,612 Changes in other comprehensive income: Foreign currency translation 1,497 (465) Fair market value of cash flow hedge 357 24 Unrealized gain on investments 8,789 (2,258) ----------------------- Total comprehensive income $ 35,646 34,913 ======================= The accompanying notes are an integral part of these Consolidated financial statements. 8 AMERCO AND CONSOLIDATED SUBSIDIARIES AND SAC HOLDING CORPORATION AND CONSOLIDATED SUBSIDIARIES Condensed Consolidated Statements of Cash Flows Quarters ended June 30, (Unaudited) 2001 2000 ------------------------ (in thousands) Net cash provided by operating activities $ 45,409 37,402 Cash flows from investing activities: Purchases of investments: Property, plant and equipment (95,305) (201,487) Fixed maturities (18,652) (23,504) Real estate - - Mortgage loans (561) (4,055) Proceeds from sale of investments: Property, plant and equipment 13,887 69,248 Fixed maturities 31,696 24,341 Mortgage loans 3,817 6,215 Changes in other investments 4,806 (36,217) ----------------------- Net cash used by investing activities (60,312) (165,459) ----------------------- Cash flows from financing activities: Net change in short-term borrowings (13,578) (14,258) Principal payments on notes 23,731 105,061 Investment contract deposits 37,477 20,495 Investment contract withdrawals (35,713) (17,368) Proceeds from minority interest - - Changes in other financing activities (5,725) (5,252) ----------------------- Net cash provided by financing activities 6,192 88,678 Decrease in cash and cash equivalents (8,711) (39,379) Cash and cash equivalents at beginning of period 52,788 48,445 ----------------------- Cash and cash equivalents at end of period $ 44,077 9,066 ======================= The accompanying notes are an integral part of these Consolidated financial statements. 9 AMERCO AND CONSOLIDATED SUBSIDIARIES AND SAC HOLDING CORPORATION AND CONSOLIDATED SUBSIDIARIES Notes to Condensed Consolidated Financial Statements June 30, 2001, March 31, 2001 and June 30, 2000 (Unaudited) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION AMERCO, a Nevada corporation (AMERCO), is the parent company for U-Haul International, Inc. (U-Haul), which conducts moving and storage operations; Amerco Real Estate Company (Real Estate), which conducts real estate operations; Republic Western Insurance Company (RepWest), which conducts property and casualty insurance operations; and Oxford Life Insurance Company (Oxford), which conducts life insurance operations. As of June 30, 2001, SAC Holding Corporation (SAC Holdings), a Nevada corporation, is owned by Mark V. Shoen. Mark V. Shoen is the beneficial owner of 15.6% of AMERCO's common stock and is an executive officer of U-Haul. This amendment is being filed and 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 condensed consolidated financial statements as of and for the periods ending March 31, 2001 and June 30, 2001 have been restated to reflect such consolidation. The following table presents the impact of such consolidation on the dates presented:
June 30, 2001 March 31, 2001 ------------------------- ------------------------- As reported(1)As restated As reported(1)As restated (Unaudited) (Unaudited) (in thousands) (in thousands) Assets 3,403,994 3,573,871 3,384,064 3,533,766 Liabilities 2,756,876 3,006,789 2,768,698 2,998,436 Stockholders' equity 647,118 567,082 615,366 535,330
(1) As reported in the Company's June 30, 2001 Form 10-Q filed on August 10, 2001 and March 31, 2001 Form 10-K, filed on July 2, 2001, respectively, prior to the consolidation of SAC Holdings described above. The consolidation of AMERCO with SAC Holdings had no impact on the consolidated net earnings. 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 11. During fiscal year 2002, based on in-depth market analysis, U-Haul increased the estimated salvage value of certain rental trucks. The effect of the changes increased net earnings by $678,021 ($0.03 per share) for the quarter ended June 30, 2001. The adjustment reflects management's best estimate, based on information available, of the estimated salvage value of the related rental trucks. PRINCIPLES OF CONSOLIDATION The condensed consolidated financial statements presented here include the accounts of AMERCO and its wholly-owned subsidiaries and SAC Holdings and its consolidated subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation. AMERCO has not, and has never had any, ownership interest in SAC Holdings or any of SAC Holdings' subsidiaries, nor does it guarantee any of the debt of SAC Holdings. The condensed consolidated financial statements and notes are presented as permitted by Form 10-Q/A and do not contain certain information included in AMERCO's annual financial statements and notes. For a more detailed breakout of the accounts of AMERCO, refer to AMERCO's Form 10-K. The condensed consolidated balance sheet as of June 30, 2001 and the related condensed consolidated statements of earnings and the condensed consolidated statements of comprehensive income for the quarters ended June 30, 2001 and 2000 and the condensed consolidated cash flows for the quarters ended June 30, 2001 and 2000 are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of such condensed consolidated financial statements have been included. Such adjustments consisted only of 10 normal recurring items. Interim results are not necessarily indicative of results for a full year. The operating results and financial position of RepWest and Oxford have been consolidated on the basis of a calendar year, and accordingly, are determined on a one quarter lag for financial reporting purposes. There were no effects related to intervening events, which would materially affect the consolidated financial position or results of operations for the financial statements presented herein. Certain reclassifications have been made to the financial statements for the quarter ended June 30, 2000 to conform with the current year's presentation. 11 AMERCO AND CONSOLIDATED SUBSIDIARIES AND SAC HOLDING CORPORATION AND CONSOLIDATED SUBSIDIARIES Notes to Condensed Consolidated Financial Statements, Continued (Unaudited) 2. INVESTMENTS A comparison of amortized cost to market for fixed maturities is as follows: March 31, 2001 -------------- Par Value Gross Gross Estimated Consolidated or number Amortized unrealized unrealized market Held-to-Maturity of shares cost gains losses value ------------------------------------------------------ (in thousands) U.S. treasury securities and government obligations $ 4,150 $ 3,643 194 - 3,837 U.S. government agency mortgage- backed securities $ 13,202 13,140 270 (49) 13,361 Corporate securities $ 51,763 50,259 1,640 (97) 51,802 Mortgage-backed securities $ 38,349 37,823 876 (77) 38,622 Redeemable preferred stocks $ 114,772 114,674 219 (3,793) 111,100 ---------------------------------------- 219,539 3,199 (4,016) 218,722 ---------------------------------------- March 31, 2001 -------------- Par Value Gross Gross Estimated Consolidated or number Amortized unrealized unrealized market Available-for-Sale of shares cost gains losses value ------------------------------------------------------ (in thousands) U.S. treasury securities and government obligations $ 41,710 $ 43,386 2,091 (100) 45,377 U.S. government agency mortgage- backed securities $ 32,157 32,588 836 (18) 33,406 Obligations of states and political subdivisions $ 16,490 16,646 580 (127) 17,099 Corporate securities $ 565,653 558,332 17,459 (13,053) 562,738 Mortgage-backed securities $ 32,910 32,674 1,410 (637) 33,447 Redeemable preferred stocks $ 1,280 32,283 280 (567) 31,996 Redeemable common stocks $ 633 6,554 878 (374) 7,058 ---------------------------------------- 722,463 23,534 (14,876) 731,121 ---------------------------------------- Total $ 942,002 26,733 (18,892) 949,843 ======================================== 12 AMERCO AND CONSOLIDATED SUBSIDIARIES AND SAC HOLDING CORPORATION AND CONSOLIDATED SUBSIDIARIES Notes to Condensed Consolidated Financial Statements, Continued (Unaudited) 3. SUMMARIZED CONSOLIDATED FINANCIAL INFORMATION OF INSURANCE SUBSIDIARIES A summarized condensed consolidated balance sheet for RepWest is presented below: March 31, ------------------- 2001 2000 ------------------- (in thousands) Investments, fixed maturities $ 409,210 404,079 Receivables 210,051 162,398 Due from affiliate 51,361 22,559 Other assets 71,169 70,230 ------------------- Total assets $ 741,791 659,266 =================== Policy liabilities and accruals $ 384,635 338,443 Unearned premiums 106,203 69,713 Other policyholders' funds and liabilities 58,539 40,951 ------------------- Total liabilities 549,377 449,107 Stockholder's equity 192,414 210,159 ------------------- Total liabilities and stockholder's equity $ 741,791 659,266 =================== A summarized condensed consolidated income statement for RepWest is presented below: Quarters ended March 31, ------------------- 2001 2000 ------------------- (in thousands) Premiums $ 62,178 30,407 Net investment income 8,416 8,008 ------------------- Total revenue 70,594 38,415 Benefits and losses 60,267 24,582 Amortization of deferred policy acquisition costs 5,040 3,174 Operating expenses 10,870 8,318 ------------------- Total expenses 76,177 36,074 Income (loss) from operations (5,583) 2,341 Income tax benefit (expense) 1,979 (863) ------------------- Net income (loss) $ (3,604) 1,478 =================== 13 AMERCO AND CONSOLIDATED SUBSIDIARIES AND SAC HOLDING CORPORATION AND CONSOLIDATED SUBSIDIARIES Notes to Condensed Consolidated Financial Statements, Continued (Unaudited) 3. SUMMARIZED CONSOLIDATED FINANCIAL INFORMATION OF INSURANCE SUBSIDIARIES, continued A summarized condensed consolidated balance sheet for Oxford is presented below: March 31, ------------------- 2001 2000 ------------------- (in thousands) Investments, fixed maturities $ 541,450 483,705 Investments, other 190,048 154,124 Receivables 28,200 15,283 Deferred policy acquisition costs 81,231 73,911 Due from affiliate (10,079) (10,909) Other assets 16,189 5,084 ------------------- Total assets $ 847,039 721,198 =================== Policy liabilities and accruals $ 183,936 145,290 Premium deposits 523,772 464,179 Other policyholders' funds and liabilities 18,522 12,880 Deferred federal income taxes 14,423 11,006 ------------------- Total liabilities 740,653 633,355 Stockholder's equity 106,386 87,843 ------------------- Total liabilities and stockholder's equity $ 847,039 721,198 =================== A summarized condensed consolidated income statement for Oxford is presented below: Quarters ended March 31, ------------------- 2001 2000 ------------------- (in thousands) Premiums $ 39,633 25,504 Net investment income 6,208 5,829 ------------------- Total revenue 45,841 31,333 Benefits and losses 31,165 17,653 Amortization of deferred policy acquisition costs 4,754 4,695 Operating expenses 7,239 5,730 ------------------- Total expenses 43,158 28,078 Income from operations 2,683 3,255 Income tax expense (960) (1,069) ------------------- Net income $ 1,723 2,186 =================== 14 AMERCO AND CONSOLIDATED SUBSIDIARIES AND SAC HOLDING CORPORATION AND CONSOLIDATED SUBSIDIARIES Notes to Condensed Consolidated Financial Statements, Continued (Unaudited) 4. CONTINGENT LIABILITIES AND COMMITMENTS During the quarter ended June 30, 2001, a subsidiary of U-Haul entered into two transactions whereby the subsidiary sold rental trucks and trailers to an unrelated third party, which were subsequently leased back. AMERCO has guaranteed $9,139,000 of residual values at June 30, 2001 for these assets at the end of the respective lease terms. Following are the lease commitments for the leases executed during the quarter ended June 30, 2001, and subsequently which have a term of more than one year (in thousands): Net activity Year ended Lease subsequent to March 31, Commitments period end Total -------------------------------------------------------- 2002 $ 777 - 777 2003 976 - 976 2004 976 - 976 2005 651 - 651 2006 642 - 642 Thereafter 2,098 - 2,098 ------------------------------------ $ 6,120 - 6,120 ==================================== In the normal course of business, AMERCO is a defendant in a number of suits and claims. AMERCO is also a party to several administrative proceedings arising from state and local provisions that regulate the removal and/or clean- up of underground fuel storage tanks. It is the opinion of management that none of such suits, claims or proceedings involving AMERCO, individually, or in the aggregate, are expected to result in a material loss. 5. SUPPLEMENTAL CASH FLOWS INFORMATION The (increase) decrease in cash flow for receivables, inventories and accounts payable and accrued liabilities net of other operating and investing activities follows: Quarters ended June 30, 2001 2000 --------------------- (in thousands) Receivables $ (15,178) (46) ====================== Inventories $ 5,338 (2,917) ====================== Accounts payable and accrued expenses $ (16,520) (3,561) ====================== Income taxes paid in cash amounted to $78,000 and $262,000 for the quarters ended June 30, 2001 and 2000, respectively. Interest paid in cash amounted to $26,273,000 and $33,124,000 for the quarters ended June 30, 2001 and 2000, respectively. 15 AMERCO AND CONSOLIDATED SUBSIDIARIES AND SAC HOLDING CORPORATION AND CONSOLIDATED SUBSIDIARIES Notes to Condensed Consolidated Financial Statements, Continued (Unaudited) 6. EARNINGS PER SHARE OF AMERCO The following table reflects the calculation of the earnings per share:
Weighted Average Common Shares Income Outstanding Per Share (Numerator) (Denominator) Amount -------------- --------------- --------- (in thousands, except share and per share data) Quarter ended June 30, 2001: Net earnings $ 25,003 Less: preferred stock dividends 3,241 ------ Basic and diluted earnings per common share 21,762 21,280,361 $ 1.02 ====== ========== ==== Quarter ended June 30, 2000: Net earnings $ 37,612 Less: preferred stock dividends 3,241 ------ Basic and diluted earnings per common share 34,371 21,718,988 $ 1.58 ====== ========== ====
7. RELATED PARTY TRANSACTIONS Sales of properties from AMERCO to SAC Holdings have been eliminated in consolidation, as presented in note 11. 16 AMERCO AND CONSOLIDATED SUBSIDIARIES AND SAC HOLDING CORPORATION AND CONSOLIDATED SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (Unaudited) 8. NEW ACCOUNTING STANDARDS In July 2001, the Financial Accounting Standards Board ("FASB") issued Statements of Financial Accounting Standards No. 141 (SFAS 141), "Business Combinations", and No. 142 (SFAS 142), "Goodwill and Other Intangible Assets". SFAS 141 supercedes Accounting Principles Board Opinion No. 16 (APB 16), "Business Combinations". The most significant changes made by SFAS 141 are: (1) requiring that the purchase method of accounting be used for all business combinations initiated after June 30, 2001, (2) establishing specific criteria for the recognition of intangible assets separately from goodwill, and (3) requiring unallocated negative goodwill to be written off immediately as an extraordinary gain (instead of being deferred and amortized). SFAS 142 supercedes APB 17, "Intangible Assets". SFAS 142 primarily addresses the accounting for goodwill and intangible assets subsequent to their acquisition (i.e., the post-acquisition accounting). The provisions of SFAS 142 will be effective for fiscal years beginning after December 15, 2001. The most significant changes made by SFAS 142 are: (1) goodwill and indefinite lived intangible assets will no longer be amortized, (2) goodwill will be tested for impairment at least annually at the reporting unit level, (3) intangible assets deemed to have an indefinite life will be tested for impairment at least annually, and (4) the amortization period of intangible assets with finite lives will no longer be limited to forty years. SFAS No. 141 and 142 are not expected to affect the consolidated financial position or results of operations. SFAS No. 143, Accounting for Asset Retirement Obligations, requires recognition of the fair value of liabilities associated with the retirement of long-lived assets when a legal obligation to incur such costs arises as a result of the acquisition, construction, development and/or the normal operation of a long-lived asset. Upon recognition of the liability, a corresponding asset is recorded 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. 17 AMERCO AND CONSOLIDATED SUBSIDIARIES AND SAC HOLDING CORPORATION AND CONSOLIDATED SUBSIDIARIES Notes to Condensed Consolidated Financial Statements, Continued (Unaudited) 9. INDUSTRY SEGMENT AND GEOGRAPHIC AREA DATA Information concerning operations by industry segment follows:
Moving and Property/ Adjustments AMERCO Storage Real Casualty Life and and Operations Estate Insurance Insurance Eliminations SAC Holdings --------------------------------------------------------------------- (in thousands) Quarter ended June 30, 2001 ------------- Revenues: Outside $ 425,184 2,415 69,485 45,469 - 542,553 Intersegment - 17,329 1,109 372 (18,810) - --------- ------- ------- ------- -------- --------- Total revenues $ 425,184 19,744 70,594 45,841 (18,810) 542,553 Depreciation/ amortization $ 31,171 2,815 5,286 4,794 - 44,066 Interest expense $ 26,097 10,207 - - (10,207) 26,097 Pretax earnings (loss) $ 37,101 4,608 (5,583) 2,683 - 38,809 Income tax benefit (expense) $ (12,891) (1,613) 1,979 (960) - (13,485) Identifiable assets $1,634,954 713,085 741,791 847,039 (362,998) 3,573,871 Quarter ended June 30, 2000 ------------- Revenues: Outside $ 401,010 2,516 37,828 30,996 - 472,350 Intersegment - 17,743 587 337 (18,667) - --------- ------- ------- ------- -------- --------- Total revenues $ 401,010 20,259 38,415 31,333 (18,667) 472,350 Depreciation/ amortization $ 24,914 2,752 3,457 5,069 - 36,192 Interest expense $ 27,053 11,333 - - (11,333) 27,053 Pretax earnings $ 47,512 3,910 2,341 3,255 - 57,018 Income tax expense $ (17,834) (1,376) (863) (1,069) - (21,142) Identifiable assets $1,447,832 744,519 659,266 721,198 (331,713) 3,241,102
18 AMERCO AND CONSOLIDATED SUBSIDIARIES AND SAC HOLDING CORPORATION AND CONSOLIDATED SUBSIDIARIES Notes to Condensed Consolidated Financial Statements, Continued (Unaudited) 9. INDUSTRY SEGMENT AND GEOGRAPHIC AREA DATA, continued Geographic Area Data AMERCO (All amounts are in U.S. $'s) United and States Canada SAC Holdings --------------------------------- (in thousands) Quarter ended June 30, 2001 ------------- Total revenues $ 531,411 11,142 542,553 Depreciation/amortization $ 43,053 1,013 44,066 Interest expense $ 26,045 52 26,097 Pretax earnings $ 36,303 2,506 38,809 Income tax expense $ (13,485) - (13,485) Identifiable assets $3,517,948 55,923 3,573,871 Quarter ended June 30, 2000 ------------- Total revenues $ 461,763 10,587 472,350 Depreciation/amortization $ 35,124 1,068 36,192 Interest expense $ 27,047 6 27,053 Pretax earnings $ 54,717 2,301 57,018 Income tax expense $ (21,142) - (21,142) Identifiable assets $3,191,921 49,181 3,241,102 10. SUBSEQUENT EVENTS OF AMERCO In January 2002, Real Estate completed the sale of thirty-seven storage properties to Twenty SAC Self-Storage Corporation, Twenty-One SAC Self-Storage Corporation, Twenty-Two SAC Self-Storage Corporation and Twenty-Three SAC Self- Storage Corporation, subsidiaries of SAC Holdings, for $93,679,000. The Company received cash and notes from the sale. The gain on sale will be eliminated in consolidation. In March 2002, Real Estate completed the sale of sixty-two storage properties to Twenty-Four SAC Self-Storage Corporation, Twenty-Five SAC Self-Storage Corporation, Twenty-Six SAC Self-Storage Corporation and Twenty-Seven SAC Self-Storage Corporation, subsidiaries of SAC Holdings, for $146,852,000. The Company received cash and notes from the sale. The gain on sale will be eliminated in consolidation. On August 7, 2001, AMERCO declared a cash dividend of $3,241,000 ($0.53125 per preferred share) to preferred stockholders of record as of August 17, 2001. On November 5, 2001, AMERCO declared a cash dividend of $3,241,000 ($0.53215) per preferred share) to preferred stockholders of record as of November 15, 2001. On February 6, 2002, AMERCO declared a cash dividend of $3,241,000 ($0.53125 per preferred share) to preferred stockholders of record as of February 18, 2002. 19
NOTE 11 - CONDENSED CONSOLIDATING BALANCE SHEETS (UNAUDITED) - -------------------------------------------------------------------------------------------------------------------------------- SAC HOLDING AMERCO AND CORPORATION AND CONSOLIDATED CONSOLIDATED SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS AND (AMERCO) (SAC HOLDINGS) ELIMINATIONS ---------------------- -------------------- ------------------------ JUNE 30, MARCH 31, JUNE 30, MARCH 31, JUNE 30, MARCH 31, JUNE 30, MARCH 31, 2001 2001 2001 2001 2001 2001 2001 2001 ---------- ---------- --------- --------- ----------- ----------- ---------- ---------- (IN THOUSANDS) (IN THOUSANDS) (IN THOUSANDS) (IN THOUSANDS) Assets Cash and cash equivalents $ 44,067 $ 52,778 $ 10 $ 10 $ - $ - $ 44,077 $ 52,788 Inventories, net 78,667 84,005 1,325 1,325 - - 79,992 85,330 Prepaid Expenses 17,753 14,416 - - - - 17,753 14,416 Investments, fixed maturities 950,660 952,482 - - - - 950,660 952,482 Investments, other 457,199 464,958 3,910 3,910 (267,336)a) (261,374)a) 193,773 207,494 b) b) c) c) Other assets 465,088 452,781 12,593 8,991 (11,964)b) (12,392)b) 465,717 449,380 Minority interest assets - - - - 17,667 c) 17,907 c) 17,667 17,907 g) g) ---------- ---------- --------- --------- --------- --------- ---------- ---------- Property, plant and equipment, at cost: Buildings and improvements 842,867 832,372 395,793 355,531 (118,947)d) (118,947)d) 1,119,713 1,068,956 Rental trucks 1,081,395 1,037,653 - - - - 1,081,395 1,037,653 Other property, plant and 659,613 660,802 156,540 173,661 - - 816,153 834,463 equipment ---------- ---------- --------- --------- --------- --------- ---------- ---------- 2,583,875 2,530,827 552,333 529,192 (118,947) (118,947) 3,017,261 2,941,072 ---------- ---------- --------- --------- --------- --------- ---------- ---------- Less accumulated depreciation 1,193,315 1,168,183 25,043 23,320 (5,329)d) (4,400)d) 1,213,029 1,187,103 ---------- ---------- --------- --------- --------- --------- ---------- ---------- Total property, plant and equipment 1,390,560 1,362,644 527,290 505,872 (113,618) (114,547) 1,804,232 1,753,969 ---------- ---------- --------- --------- --------- --------- ---------- ---------- Total assets $3,403,994 $3,384,064 $ 545,128 $ 520,108 $(375,251) $(370,406) $3,573,871 $3,533,766 ========== ========== ========= ========= ========= ========= ========== ========== See accompanying notes.
20
NOTE 11 - CONDENSED CONSOLIDATING BALANCE SHEETS (UNAUDITED), CONTINUED - -------------------------------------------------------------------------------------------------------------------------------- SAC HOLDING AMERCO AND CORPORATION AND CONSOLIDATED CONSOLIDATED SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS AND (AMERCO) (SAC HOLDINGS) ELIMINATIONS ------------------------ -------------------- -------------------------- JUNE 30, MARCH 31, JUNE 30, MARCH 31, JUNE 30, MARCH 31, JUNE 30, MARCH 31, 2001 2001 2001 2001 2001 2001 2001 2001 ----------- ----------- ---------- -------- ------------- ----------- ----------- ----------- (IN THOUSANDS) (IN THOUSANDS) (IN THOUSANDS) (IN THOUSANDS) Liabilities and Stockholders' Equity AMERCO's notes and loans payable $1,143,271 $1,156,848 $ - $ - $ - $ - $1,143,271 $1,156,848 SAC Holdings' notes and loans payable, non-recourse to AMERCO - - 527,887 504,157 (252,863)b) (247,048)b) 275,024 257,109 Policy benefits and losses, claims and loss expenses payable 677,915 668,830 - - - - 677,915 668,830 Liabilities from premium 523,772 522,207 - - - - 523,772 522,207 deposits Other liabilities 411,918 420,813 29,674 27,842 (54,785)b) (55,213)b) 386,807 393,442 d) d) ---------- ---------- --------- --------- --------- --------- ---------- ---------- Total liabilities 2,756,876 2,768,698 557,561 531,999 (307,648) (302,261) 3,006,789 2,998,436 Minority interest - - 10,563 10,416 (10,563)c) (10,416)c) - - Stockholders' equity: Serial preferred stock - Series A 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 312,128 312,128 3,312 3,312 (79,438)d) (79,438)d) 236,002 236,002 g) g) Accumulated other (30,066) (40,709) (1,913) (1,398) 1,913 g) 1,398 g) (30,066) (40,709) comprehensive income Retained earnings 776,937 755,174 (24,395) (24,221) 24,395 g) 24,221 g) 776,937 755,174 Cost of common shares in (407,525) (406,617) - - (3,910)a) (3,910)a) (411,435) (410,527) treasury, net Unearned ESOP shares (14,919) (15,173) - - - - (14,919) (15,173) ---------- --------- --------- --------- --------- --------- ---------- ----------- Total stockholders' equity 647,118 615,366 (22,996) (22,307) (57,040) (57,729) 567,082 535,330 Contingent liabilities and commitments ---------- --------- --------- -------- --------- --------- ---------- ---------- Total liabilities and stock stockholders' equity $3,403,994 $3,384,064 $ 545,128 $ 520,108 $(375,251) $(370,406) $3,573,871 $3,533,766 ========== ========== ========== ========= ========= ========= ========== ========== See accompanying notes.
21
NOTE 11 - CONDENSED CONSOLIDATING STATEMENTS OF EARNINGS QUARTERS ENDED JUNE 30 (UNAUDITED) - ---------------------------------------------------------------------------------------------------------------------------------- SAC HOLDING AMERCO AND CORPORATION AND CONSOLIDATED CONSOLIDATED SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS AND (AMERCO) (SAC HOLDINGS) ELIMINATIONS -------------------- ------------------ -------------------- 2001 2000 2001 2000 2001 2000 2001 2000 -------------------- ------------------ -------------------- ------------------------- (IN THOUSANDS) (IN THOUSANDS) (IN THOUSANDS) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) Revenues: Rental revenue $334,543 $322,748 $25,437 $16,361 $(1,909)e) $(1,170)e) $ 358,071 $337,939 Net sales 62,423 60,146 6,366 3,149 - - 68,789 63,295 Premiums 100,330 54,987 - - - - 100,330 54,987 Net investment and interest income 22,586 21,681 - - (7,223)f) (5,552)f) 15,363 16,129 -------- -------- ------- ------- ------- ------ ------------- -------- Total revenues 519,882 459,562 31,803 19,510 (9,132) (6,722) 542,553 472,350 -------- -------- ------- ------- -------- ------- ------------- -------- Costs and expenses: Operating expenses 248,967 231,775 15,142 9,223 (1,909)e) (1,170)e) 262,200 239,828 Cost of sales 33,768 33,197 2,641 1,298 - - 36,409 34,495 Benefits and losses 91,432 42,235 - - - - 91,432 42,235 Amortization of deferred policy acquisition costs 9,794 7,869 - - - - 9,794 7,869 Lease expense 46,342 40,434 - - - - 46,342 40,434 Depreciation, net 30,250 22,810 1,982 1,116 (762)d) (508)d) 31,470 23,418 -------- -------- ------- ------- ------- ------- ------------- -------- Total costs and expenses 460,553 378,320 19,765 11,637 (2,671) (1,678) 477,647 388,279 --------- -------- ------- ------- ------- ------- ------------- -------- Earnings from operations 59,329 81,242 12,038 7,873 (6,461) (5,044) 64,906 84,071 -------- -------- -------- ------- ------- ------- ------------- -------- Interest expense 21,120 22,810 12,200 9,795 (7,223)f) (5,552)f) 26,097 27,053 -------- -------- ------- ------- ------- ------- ------------- -------- Pretax earnings (loss) 38,209 58,432 (162) (1,922) 762 508 38,809 57,018 -------- -------- ------- ------- ------- ------- ------------- ------- Income tax expense (13,206) (20,820) (12) (144) (267) (178) (13,485) (21,142) Earnings (loss) from operations before minority interest 25,003 37,612 (174) (2,066) 495 330 25,324 35,876 See accompanying notes.
22
NOTE 11 - CONDENSED CONSOLIDATING STATEMENTS OF EARNINGS, CONTINUED QUARTERS ENDED JUNE 30 (UNAUDITED) - ---------------------------------------------------------------------------------------------------------------------------------- SAC HOLDING AMERCO AND CORPORATION AND CONSOLIDATED CONSOLIDATED SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS AND (AMERCO) (SAC HOLDINGS) ELIMINATIONS -------------------- ------------------ -------------------- 2001 2000 2001 2000 2001 2000 2001 2000 -------------------- ------------------ -------------------- ------------------------- (IN THOUSANDS) (IN THOUSANDS) (IN THOUSANDS) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) Minority interest - - - - (321) 1,736 (321) 1,736 -------- -------- ------- ------- ------- ------- ------------- -------- Net earnings (loss) $ 25,003 $ 37,612 $ (174) $(2,066) $ 174 $ 2,066 $ 25,003 $ 37,612 ======== ======== ======= ======== ======== ======= ============= ======== Basic and diluted earnings per common share: $ 1.02 $ 1.58 ============= ======== Basic and diluted average common shares outstanding 21,280,361 21,718,988 ============= ========== See accompanying notes.
23 AMERCO AND CONSOLIDATED SUBSIDIARIES AND SAC HOLDING CORPORATION AND CONSOLIDATED SUBSIDIARIES Note 11 - Notes to Consolidating Information June 30, 2001 and 2000 a) To eliminate the investment of AMERCO stock held by SAC Holdings. b) To eliminate notes payable and other liabilities payable to AMERCO from SAC Holdings. c) To eliminate minority interest investment held by RepWest and Oxford. d) To eliminate the gain on sale of assets and related deferred taxes from AMERCO to SAC Holdings. e) To eliminate management fees received by AMERCO from SAC Holdings. f) To eliminate interest income received by AMERCO from SAC Holdings. g) To eliminate SAC equity. 24 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q/A contains forward-looking statements. Additional written or oral forward-looking statements may be made by AMERCO or the consolidated group 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, the anticipated results of legal proceedings against the Company, plans for future operations, products or services and financing needs or plans, as well as assumptions relating to the foregoing. The words "believe", "expect", "anticipate", "estimate", "project" and similar expressions identify forward-looking statements, which speak only as of the date the statement was made. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Future events and actual results could differ materially from those set forth in, contemplated by or underlying the forward-looking statements. Some of the important factors that could cause our actual results, performance or financial condition to differ materially from our expectations are: fluctuations in our costs to maintain and update our fleet and facilities; changes in government regulations, particularly environmental regulations; our credit ratings; changes in demand for our products; changes in the general domestic economy; degree and nature of our competition; and other factors described in this Quarterly Report on Form 10-Q/A or the other documents we file with the Securities and Exchange Commission. As a result of these factors AMERCO's stock price may fluctuate dramatically. GENERAL Information on industry segments is incorporated by reference from "Item 1. Financial Statements - Notes 1, 3 and 9 of Notes to Condensed Consolidated Financial Statements". The notes discuss the principles of combination and consolidation, summarized consolidated financial information and industry segment and geographical area data, respectively. In consolidation, all intersegment premiums are eliminated and the benefits, losses and expenses are retained by the insurance companies. 25 RESULTS OF OPERATIONS QUARTER ENDED JUNE 30, 2001 VERSUS QUARTER ENDED JUNE 30, 2000 Moving and Storage Operations Adjustments and AMERCO SAC Holdings Eliminations Total ------------------------------------------------ (in thousands) Quarter ended June 30, 2001 - ------------- Revenues: Outside $ 402,513 31,803 (9,132) 425,184 Intersegment - - - - ------------------------------------------------ Total revenues $ 402,513 31,803 (9,132) 425,184 Depreciation/amortization $ 29,951 1,982 (762) 31,171 Interest expense $ 21,120 12,200 (7,223) 26,097 Pretax earnings (loss) $ 36,501 (162) 762 37,101 Income tax expense $ (12,612) (12) (267) (12,891) Identifiable assets $ 1,465,077 545,128 (375,251) 1,634,954 Adjustments and AMERCO SAC Holdings Eliminations Total ------------------------------------------------ (in thousands) Quarter ended June 30, 2000 - ------------- Revenues: Outside $ 388,222 19,510 (6,722) 401,010 Intersegment - - - - ------------------------------------------------ Total revenues $ 388,222 19,510 (6,722) 401,010 Depreciation/amortization $ 24,306 1,116 (508) 24,914 Interest expense $ 22,810 9,795 (5,552) 27,053 Pretax earnings (loss) $ 48,926 (1,922) 508 47,512 Income tax expense $ (17,512) (144) (178) (17,834) Identifiable assets $ 1,420,411 437,434 (410,013) 1,447,832 AMERCO Revenues consist of rental revenues and net sales. Total rental revenue was $335.4 million and $322.3 million for the quarters ended June 30, 2001 and 2000, respectively. Net revenues from the rental of moving related equipment increased by $10.0 million. This increase is primarily attributable to higher truck rental revenues. The growth in truck rental revenue primarily reflects higher truck rental inventory. Storage revenues increased $1.0 million due to increases in rates and in the number of storage rooms rented. Net sales revenues were $62.4 million and $60.1 million for the quarters ended June 30, 2001 and 2000, respectively. Revenue growth resulted from a 3.9% increase in the sale of moving support items and a 15.7% increase in the sale of propane. Cost of sales was $33.8 million and $33.2 million for the quarters ended June 30, 2001 and 2000, respectively. A higher sales volume contributed to the increase. Operating expenses before intercompany eliminations were $252.1 million and $235.6 million for the quarters ended June 30, 2001 and 2000, respectively. Increased expenditure levels for personnel and rental equipment maintenance, due to an increase in truck rental transactions and in fleet size, were primarily responsible. Lease expense was $42.1 million and $37.7 million for the quarters ended June 30, 2001 and 2000, respectively. This increase reflects additional leasing activity over the past twelve months. Net depreciation expense was $27.0 million and $20.1 million for the quarters ended June 30, 2001 and 2000, respectively. The increase reflects an increase in depreciation recognized on the rental truck fleet. Operating profit before tax and intercompany elimination was $48.8 million and $61.4 million for the quarters ended June 30, 2001 and 2000, respectively. The decrease reflects increases in operating expenses over increases in revenues. 26 SAC Holdings Net Rental revenue was $25.4 million and $16.4 million for the quarters ended June 30, 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. Net sales revenue was $6.4 million and $3.1 million for the quarters ended June 30, 2001 and 2000, respectively. The growth is related to the acquisition of new locations. Operating expenses were $15.1 million and $9.2 million for the quarters ended June 30, 2001 and 2000, respectively. Personnel costs, liability insurance, property taxes and utility expenses all increased proportionately in relation to the increased revenues from the acquisition of new locations. Net depreciation expense was $2.0 million and $1.1 million for the quarter ended June 30, 2001 and 2000, respectively. The increase is attributed to acquisition of new locations. Operating profit before interest and tax were $12.0 million and $7.9 million for the quarters ended June 30, 2001 and 2000, respectively. AMERCO's Real Estate Operations Rental revenue before intercompany eliminations was $17.9 million and $18.2 million for the quarters ended June 30, 2001 and 2000, respectively. Intercompany revenue was $17.3 million and $17.7 million for the quarters ended June 30, 2001 and 2000, respectively. Net investment and interest income was $1.9 million and $2.1 million for the quarters ended June 30, 2001 and 2000, respectively. This decrease correlates to a reduction in Real Estate's average note and mortgage receivables balance outstanding. Lease expense was $4.1 million and $2.6 million for the quarters ended June 30, 2001 and 2000, respectively. The increase reflects payments under a synthetic lease facility being utilized to develop storage properties. These expenses are reimbursed by the Moving and Storage Operations through intercompany rent. Net depreciation expense was $3.2 million and $2.6 million for the quarters ended June 30, 2001 and 2000, respectively. The increase primarily reflects a $0.5 million decrease in gains from the disposition of property. Operating profit before tax and intercompany elimination was $14.8 million and $15.2 million for the quarters ended June 30, 2001 and 2000, respectively. The decrease reflects increases in lease expenses. Property and Casualty RepWest's premiums were $62.2 million and $30.4 million for the quarters ended March 31, 2001 and 2000, respectively. General agency premiums were $29.6 million and $7.6 million for the quarters ended March 31, 2001 and 2000, respectively. The increase from 2000 to 2001 was the result of two agency programs that grew significantly in the second half of 2000. Assumed treaty reinsurance premium was $15.7 million and $9.8 million for the quarters ended March 31, 2001 and 2000, respectively. Rental industry earnings were $8.5 million and $7.4 million for the quarters ended March 31, 2001 and 2000, respectively. Net investment income was $8.4 million and $8.0 million for the quarters ended March 31, 2001 and 2000, respectively. The increase is attributed to increased invested assets and increased gains. Benefits and losses incurred were $60.3 million from $24.6 million for the quarters ended March 31, 2001 and 2000, respectively. This increase is due to agency programs in non standard auto and transportation that grew significantly in the second half of 2000, as well as assumed treaty reinsurance, direct multiple peril business and rental industry. The amortization of deferred acquisition costs (DAC) was $5.0 million and $3.2 million for the quarters ended March 31, 2001 and 2000, respectively. The increase from 2000 to 2001 is mainly due to the premium growth and resulting deferral of acquisition expenses in 2000 for the assumed treaty and general agency programs. Operating expenses were $10.9 million and $8.3 million for the quarters ended March 31, 2001 and 2000, respectively. The increase is a result of commissions on new agency business premium writings as well as assumed reinsurance treaties and taxes resulting from increased premium writings. 27 Operating (loss)/profit before tax and intercompany elimination was $(5.6) million and $2.3 million for the quarters ended March 31, 2001 and 2000, respectively. The decrease is the result of additional incurred losses and operating expenses, offset by an increase in earned premiums. Life Insurance Net premiums were $39.6 million from $25.5 million for the quarters ended March 31, 2001 and 2000, respectively. Oxford increased Medicare supplement premiums by $14.6 million through direct writings and the acquisition of Christian Fidelity Life Insurance Company (CFLIC). Other business segments had premium decreases totaling $0.5 million. Net investment income before intercompany eliminations increased $0.4 million to $6.2 million from $5.8 million for the quarters ended March 31, 2001 and 2000, respectively, due to a larger invested asset base. Benefits incurred were $31.2 million and $17.7 million for the quarters ended March 31, 2001 and 2000, respectively. This increase is primarily due to a greater volume of Medicare supplement business in force after the acquisition of CFLIC, which accounts for $13.0 million. Credit insurance and health benefits increased $1.4 million from 2000 as loss ratios were higher quarter over quarter. Life insurance and annuity benefits decreased $0.8 million for the quarter. Amortization of DAC and the value of business acquired (VOBA) was $4.8 million and $4.7 million for the quarters ended March 31, 2001 and 2000, respectively. Operating expenses were $7.2 million and $5.7 million for the quarters ended March 31, 2001 and 2000, respectively. Commissions have increased $0.6 million from 2000 primarily due to the increase in Medicare supplement premiums. General and administrative expenses net of fees collected increased $1.0 million from 2000 primarily due to the acquisition of CFLIC. Operating profit before tax and intercompany eliminations was $2.7 million and $3.3 million for the quarters ended March 31, 2001 and 2000, respectively. The decrease from 2000 is due primarily to loss experience in the health and credit insurance segments. Interest Expense AMERCO Interest expense was $21.1 million and $22.8 million for the quarters ended June 30, 2001 and 2000, respectively. The decrease can be attributed to a reduction in average cost of funds. SAC Holdings Interest expense was $12.2 million and $9.8 million for the quarters ended June 30, 2001 and 2000, respectively. The increase is due to higher borrowings. Consolidated Group As a result of the foregoing, pretax earnings were $38.8 million and $57.0 million for the quarters ended June 30, 2001 and 2000, respectively. After providing for income taxes, net earnings were $25.3 million and $35.9 million for the quarters ended June 30, 2001 and 2000, respectively. After the elimination of SAC Holdings, the net earnings were $25.0 million and $37.6 million for the quarters ended June 30, 2001 and 2000, respectively. The net earnings of SAC Holdings are completely eliminated because AMERCO does not have an equity interest in SAC Holdings. The presentation of consolidated statements is due to a revised interpretation of ETIF 90-15 by the AMERCO's independent public accountants. AMERCO agrees with this interpretation. 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. At June 30, 2001, net property, plant and equipment represented approximately 63.8% of total assets from non-insurance operations and approximately 40.9% of consolidated assets. In the quarters ended June 30, 2001 and 2000, capital expenditures were $46.5 million and $143.0 million, respectively. These expenditures primarily reflect the expansion of the rental truck fleet. Cash provided by operating activities was $71.0 million and $21.1 million for the quarters ended June 30, 2001 and 2000, respectively. The increase resulted primarily from a decrease in notes and mortgage receivable partially offset by decreases in the accounts payable and intercompany payable balances along with decreased earnings. 28 At June 30, 2001, total outstanding notes and loans payable was $1,143.3 million as compared to $1,156.8 million at March 31, 2001. AMERCO's Real Estate Operations Cash provided (used) by operating activities was $(20.8) million and $3.2 million for the quarters ended June 30, 2001 and 2000, respectively. The decrease mainly resulted from a decrease in the intercompany payable balance. Property and Casualty Cash used by operating activities was $17.8 million and $5.8 million for quarters ended March 31, 2001 and 2000, respectively. This change resulted from increased accounts receivable and decreased unearned premium, net income and funds withheld from December 2000 to March 2001, offset by an increase in loss and loss adjusting expense reserves and reinsurance losses payable from December 2000 to March 2001. RepWest's cash and cash equivalents and short-term investment portfolio were $4.3 million and $1.2 million at March 31, 2001 and 2000, respectively. The increase is a result of increased cash and cash equivalents on hand to fund claim payments generated by new business. RepWest maintains a diversified securities investment portfolio, primarily in bonds, at varying maturity levels with 88.0% of the fixed-income securities consisting of investment grade securities. The maturity distribution is designed to provide sufficient liquidity to meet future cash needs. Current liquidity remains strong with current invested assets equal to 78.4% of total liabilities. The liability for reported and unreported losses are based upon company historical and industry averages. Unpaid loss adjustment expenses are based on historical ratios of loss adjustment expenses paid to losses paid. Unpaid loss and loss expenses are not discounted. Life Insurance Oxford's primary sources of cash are premiums, receipts from interest- sensitive products and investment income. The primary uses of cash are operating costs and benefit payments to policyholders. Matching the investment portfolio to the cash flow demands of the types of insurance being written is an important consideration. Benefit and claim statistics are continually monitored to provide projections of future cash requirements. Cash provided (used) by operating activities was $(5.6) million and $1.5 million for the quarters ended March 31, 2001 and 2000, respectively. The decrease in cash flows from operating activities in 2001 relates to paid loss experience. Cash flows provided by financing activities were $1.8 million and $3.1 million for the quarters ended March 31, 2001 and 2000, respectively. Cash flows from deferred annuity sales increase investment contract deposits, which are a component of financing activities. The decrease in 2001 from 2000 is due to a higher ratio of annuity withdrawals versus deposits on our CFLIC annuity contracts. In addition to cash flows from operating and financing activities, a substantial amount of liquid funds is available through Oxford's short-term portfolio. At March 31, 2001 and 2000, short-term investments were $67.0 million and $65.1 million, respectively. Management believes that the overall sources of liquidity will continue to meet foreseeable cash needs. SAC Holdings Cash used by operating activities was $1.3 million and $1.2 million for the quarter ended June 30, 2001 and 2000, respectively. At June 30, 2001, total outstanding notes and mortgages payable were $527.9 million compared to $504.2 million at March 31, 2001. SAC Holdings intends to meet its current debt obligations through cash flows generated from its operating activities. Consolidated group At June 30, 2001, total outstanding notes and mortgages payable for AMERCO and consolidated subsidiaries was $1,143.3 million compared to $1,156.8 million at March 31, 2001. At June 30, 2001, total outstanding notes and mortgages payable for SAC Holdings and consolidated subsidiaries was $527.9 million compared to $504.2 million at March 31, 2001. SAC Holdings' loan agreements have no guarantees, or triggers that could create a guarantee, from AMERCO. 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. 29 AMERCO has no (and has never had any) ownership interest in SAC Holidngs or its subsidiaries. The presentation of the consolidated statements has no bearing on the credit agreements or the operations of AMERCO and SAC Holdings. The accounts of AMERCO and SAC Holdings are presented as consolidated due to a revised interpretation of EITF 90-15 by the Company's independent public accountants. During each of the fiscal years ended March 31, 2002, 2003 and 2004, AMERCO estimates gross capital expenditures will average approximately $200 million primarily reflecting rental fleet rotation. This level of capital expenditures, combined with a potential range of $150 - $300 million in annual long-term debt maturities during this same period, are expected to create annual average funding needs of approximately $350 - $500 million. The Company plans to meet these needs through cash flows, asset sales and various current and future sources of credit (See Credit Agreements discussion below). AMERCO has historically enjoyed a substantial and predictable level of cashflow (EBITDAR) from its non-insurance subsidiaries. These cashflows are dependent on revenues and expenses that can be impacted by economic trends. In the past, the Company has not been as affected by these economic trends as other businesses. Cashflow (defined as EBITDAR) is anticipated to range approximately from $400 million to $425 million annually. The sale of assets is less predictable and substantially lower than the cashflows. The sale of assets is dependant upon economic conditions, the amount and nature of sale and leaseback transactions and AMERCO's fleet rotation program. In many cases, a decline in asset sales is accompanied by a decrease in capital expenditures. The Company intends to meet these needs through cash flows, existing lines of credit, additional borrowings and sale of assets. We may be unable to secure such additional borrowings on satisfactory terms or in a timely manner. Depending on the results of our operations, and general and economic competitive conditions, many of which we cannot control, we may take certain actions, including delaying or reducing capital expenditures. From time to time, Real Estate sells storage properties to SAC Holdings. These sales have in the past provided significant cash flows to the Company. The ability of the Company to engage in similar transactions in the future is dependent to a large degree on the ability of SAC Holdings to obtain third party financing for its acquisition of the properties from Real Estate and in general, its willingness to engage in such transactions. Credit Agreements AMERCO's operations are funded by various credit and financing arrangements, including unsecured long-term borrowings, unsecured medium-term notes, revolving lines of credit with banks and operating leases. The operating leases are primarily used to finance the Company's fleet of trucks and trailers. As of June 30, 2001, AMERCO had $1,143.3 million in total notes and loans payable outstanding and total unutilized lines of credit of approximately $96.4 million. In addition to the economic pressures, there has been a reduction in the number of leasing companies and banks, which has had a negative impact on the financial markets. This has led to less availability and higher prices. Management of AMERCO believes there are enough leasing companies and banks to meet the Company's financing needs. Certain of AMERCO's credit agreements contain restrictive financial and other covenants, including, among others, covenants with respect to incurring additional indebtedness, making third party guarantees, entering into contingent obligations, maintaining certain financial ratios and placing certain additional liens on its properties, assets and restricting the issuance of certain types of preferred stock. At June 30, 2001, AMERCO was in compliance with these covenants. AMERCO's various credit and financing arrangements are affected by its credit ratings such that were AMERCO to experience a credit downgrade, the interest rates that it is charged might be increased, which would result in an increase in the Company's interest expense and hinder its ability to obtain additional financing. SAC Holdings' operations are funded by various mortgage loans and unsecured notes, with interest rates ranging from 8.0% to 13.0%. SAC does not utilize revolving lines of credit or leasing facilities to finance its operations or acquisitions. Certain of SAC's agreements contain restrictive covenants including coverage ratios and restrictions on incurring additional subsidiary indebtedness. At June 30, 2001, SAC Holdings was in compliance with all of these covenants. Reference is made to Note 5 of Notes to Consolidated Financial Statements in AMERCO's Annual Report on Form 10-K for the fiscal year ended March 31, 2001 for additional information about AMERCO's credit agreements. 30 CRITICAL ACCOUNTING POLICIES PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are carried at cost and are depreciated on the straight-line and accelerated methods over the estimated useful lives of the assets. Building and non-rental equipment have estimated lives ranging from three to fifty-five years, while rental equipment have estimated lives ranging from one to twenty years. Maintenance is charged to operating expenses as incurred, while renewals and betterments are capitalized. Major overhaul costs are amortized over the estimated period benefited. Gains and losses on dispositions are netted against depreciation expense when realized. Interest costs incurred as part of the initial construction of assets are capitalized. During fiscal year 2002, based on an in-depth market analysis, U-Haul increased the estimated salvage value of certain rental truck. The effect of the changes increased net earnings by $678,021 ($0.03 per share) for the quarter ended June 30, 2001. The adjustment reflects management's best estimate, based on information available, of the estimated salvage value 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, 2001 and 2000, was approximately $27,691,000 and $27,732,000, respectively. Such properties available for sale are carried at cost, less accumulated depreciation, which is less than fair market value. 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. The liability for annuity contracts, which are accounted for as investment contract deposits, consists of contract account balances that accrue to the benefit of the policyholders, excluding surrender charges. Carrying value of investment contract deposits were $522,207,000 and $461,673,000 at December 31, 2000 and 1999, respectively. Liabilities for health and disability and other policy claims and benefits payable represent estimates of payments to be made on insurance claims for reported losses and estimates of losses incurred but not yet reported. These estimates are based on past claims experience and consider current claim trends as well as social and economic conditions. RepWest's liability for reported and unreported losses 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. LEASE EXPENSE AMERCO uses certain equipment and occupies certain facilities under operating lease commitments. The majority of the equipment leases are "sale and leaseback transactions". Certain leases contain renewal and fair market value purchase options. The leases contain various restrictions similar to the Company's notes payable and loan agreements. The treatment of these leases is governed by various accounting pronouncements that include FAS 13, FAS 66 and FAS 98. Any changes in the treatment of operating leases could have a material impact on the financial statements AMERCO. At March 31, 2001 the total lease commitments were approximately $691.7 million. 31 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Reference is made to Part II, Item 7A, Quantitative and Qualitative Disclosure About Market Risk, in AMERCO's Annual Report on Form 10-K for the fiscal year ended March 31, 2001. 32 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In the normal course of business, AMERCO is a defendant in a number of suits and claims. AMERCO is also a party to several administrative proceedings arising from state and local provisions that regulate the removal and/or cleanup of underground fuel storage tanks. It is the opinion of management that none of the suits, claims or proceedings involving AMERCO, individually or in the aggregate, are expected to result in a material loss. 33 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit No. Description ----------- ----------- 3.1 Restated Articles of Incorporation (1) 3.2 Restated By-Laws of AMERCO as of August 27, 1997 (2) 10.1 Management Agreement between Eighteen SAC Self Storage Corporation and subsidiaries of AMERCO(1) 10.2 Management Agreement between Twenty SAC Self Storage Corporation and subsidiaries of AMERCO(1) 10.3 Management Agreement between Twenty-One SAC Self Storage Corporation and subsidiaries of AMERCO(1) 10.4 Management Agreement between Twenty-Two SAC Self Storage Corporation and subsidiaries of AMERCO(1) 10.5 Management Agreement between Twenty-Three SAC Self Storage Corporation and subsidiaries of AMERCO(1) 10.6 Promissory note between SAC Holding Corporation and a subsidiary of AMERCO(3) 10.7 Promissory note between SAC Holding Corporation and a subsidiary of AMERCO(3) 10.8 Promissory note between SAC Holding Corporation and Oxford Life Insurance Company(3) 10.9 Promissory note between SAC Holding Corporation and a subsidiary of AMERCO(3) 10.10 Promissory note between SAC Holding Corporation and a subsidiary of AMERCO(3) 10.11 Promissory note between SAC Holding Corporation and a subsidiary of AMERCO(3) 10.12 Promissory note between SAC Holding Corporation and a subsidiary of AMERCO(3) 10.13 Promissory note between SAC Holding Corporation and a subsidiary of AMERCO(3) 10.14 Management Agreement between Securespace Limited Partnership and a subsidiary of AMERCO(3) 10.15 Purchase and sale agreement between Eighteen SAC Self-Storage Corporation subsidiaries of AMERCO(3) 10.16 Purchase and sale agreement between Twenty SAC Self-Storage Corporation, Twenty-One SAC Self-Storage Corporation, Twenty-Two SAC Self-Storage Corporation, Twenty-Three SAC Self-Storage Corporation and subsidiaries of AMERCO(3) (b) Reports on Form 8-K. No report on Form 8-K was filed during the quarter ended June 30, 2001. _________________ (1) Incorporated by reference to AMERCO's Quarterly Report on Form 10-Q for the quarter ended December 31, 2001, file no. 1-11255. (2) Incorporated by reference to AMERCO's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997, file no. 1-11255. (3) Incorporated by reference to AMERCO's Quarterly Report on Form 10-Q/A for the quarter ended December 31, 2001, file no. 1-11255. 34 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AMERCO ____________________________________ (Registrant) Dated: May 08, 2002 By: /S/ GARY B. HORTON ____________________________________ Gary B. Horton, Treasurer (Principal Financial Officer) -----END PRIVACY-ENHANCED MESSAGE-----