body10-k.htm
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
(Mark
One)
R
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ANNUAL
REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934.
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For the
fiscal year ended March 31, 2008
or
£
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TRANSITION
REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934.
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For the
transition period from __________________ to __________________
Commission
File Number
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Registrant,
State of Incorporation
Address and Telephone
Number
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I.R.S.
Employer
Identification No.
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1-11255
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AMERCO
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88-0106815
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(A
Nevada Corporation)
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1325
Airmotive Way, Ste. 100
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Reno,
Nevada 89502-3239
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Telephone
(775) 688-6300
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Securities
registered pursuant to Section 12(b) of the Act:
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Registrant
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Title of Class
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Name
of Each Exchange on Which
Registered
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AMERCO
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Series
A 8 ½% Preferred Stock
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New
York Stock Exchange
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AMERCO
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Common
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NASDAQ
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Securities
registered pursuant to Section 12(g) of the Act:
None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes £ No
R
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Securities Act. Yes £ No
R
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 R 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. £
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
definition of a “large accelerated filer”, “accelerated filer” ,
“non-accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):
Large
Accelerated filer £ Accelerated
filer R Non-accelerated
filer £ Smaller
reporting company £
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes £ No
R
The
aggregate market value of AMERCO common stock held by non-affiliates on
September 30, 2007 was $284,291,154. The aggregate market value was computed
using the closing price for the common stock trading on NASDAQ on such date.
Shares held by executive officers, directors and persons owning directly or
indirectly more than 5% of the outstanding common stock have been excluded from
the preceding number because such persons may be deemed to be affiliates of the
registrant. This determination of affiliate status is not necessarily a
conclusive determination for other purposes.
Indicate
by check mark whether the registrant has filed all documents and reports
required to be filed by Section 12, 13, or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court. Yes R No
£
19,631,314
shares of AMERCO Common Stock, $0.25 par value were outstanding at June 1,
2008.
Documents
incorporated by reference: Portions of AMERCO’s definitive Proxy Statement for
the 2008 Annual Meeting of Stockholders, to be filed within 120 days after
AMERCO’s fiscal year ended March 31, 2008, are incorporated by reference into
Part III of this report.
TABLE
OF CONTENTS
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Page No.
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PART
I
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Item
1.
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2 –
7
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Item
1A.
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7 –
10
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Item
1B.
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10
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Item
2.
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10
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Item
3.
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11
- 12
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Item
4.
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12
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PART
II
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Item
5.
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12
– 14
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Item
6.
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15
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Item
7.
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16
– 37
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Item
7A.
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38
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38
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Item
9.
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38
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Item
9A.
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39
– 40
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Item
9B.
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40
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PART
III
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Item
10.
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42
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Item
11.
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42
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Item
12.
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42
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Item
13.
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42
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Item
14.
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42
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PART
IV
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Item
15.
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43
– 52
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Company
Overview
We are
North America’s largest “do-it-yourself” moving and storage operator through our
subsidiary U-Haul International, Inc. (“U-Haul”). U-Haul is synonymous with
“do-it-yourself” moving and storage and is a leader in supplying products and
services to help people move and store their household and commercial goods. Our
primary service objective is to provide the best product and service to the most
people at the lowest cost.
We rent
our distinctive orange and white U-Haul trucks and trailers as well as offer
self-storage rooms through a network of nearly 1,450 Company operated retail
moving centers and approximately 14,200 independent U-Haul
dealers. In addition, we have an independent storage facility network
with over 3,300 active affiliates. We also sell U-Haul brand boxes,
tape and other moving and self-storage products and services to “do-it-yourself”
moving and storage customers at all of our distribution outlets and through our
eMove web site.
U-Haul is
the most convenient supplier of products and services meeting the needs of North
America’s “do-it-yourself” moving and storage market. Our broad geographic
coverage throughout the United States and Canada and our extensive selection of
U-Haul brand moving equipment rentals, self-storage rooms and related moving and
storage products and services provide our customers with convenient “one-stop”
shopping.
For more
than sixty years, U-Haul has incorporated sustainable practices into its
everyday operations. Our basic business premise of truck-sharing helps reduce
greenhouse gas emissions and reduces the need for total large-capacity vehicles.
Today, we remain focused on reducing waste and are dedicated to manufacturing
reusable components and recyclable products. The commitment to sustainability,
through our products and services, has helped us to reduce our impact on the
environment.
Through
Republic Western Insurance Company (“RepWest”), our property and casualty
insurance subsidiary, we manage the property, liability and related insurance
claims processing for U-Haul. Oxford Life Insurance Company
(“Oxford”), our life insurance subsidiary, sells Medicare supplement, life
insurance, annuities and other related products to non U-Haul customers and also
administers the self-insured employee health and dental plans
for Arizona employees of the Company.
We were
founded in 1945 under the name “U-Haul Trailer Rental Company.” Since 1945, we
have rented trailers. Starting in 1959, we rented trucks on a one-way and
in-town basis exclusively through independent U-Haul dealers. Since 1974, we
have developed a network of U-Haul managed retail centers, through which we rent
our trucks and trailers and sell moving and self-storage products and services
to complement our independent dealer network.
Available
Information
AMERCO
and U-Haul are each incorporated in Nevada. U-Haul’s internet address is
www.uhaul.com. On AMERCO’s investor relations web site, www.amerco.com, we post
the following filings as soon as practicable after they are electronically filed
with or furnished to the United States Securities and Exchange Commission
(“SEC”): our annual report on Form 10-K, our quarterly reports on Form 10-Q, our
current reports on Form 8-K, our proxy statement related to our annual meeting
of stockholders, and any amendments to those reports or statements filed or
furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934. All such filings on our web site are available free of charge.
Additionally, you will find these materials on the SEC’s website at
www.sec.gov.
Products
and Rental Equipment
Our
customers are primarily “do-it-yourself” household movers. U-Haul moving
equipment is specifically designed, engineered and manufactured for the
“do-it-yourself” household mover. These “do-it-yourself” movers
include individuals and families moving their belongings from one home to
another, college students moving their belongings, vacationers and sports
enthusiasts needing extra space or having special towing needs, people trying to
save on home furniture and home appliance delivery costs, and “do-it-yourself”
home remodeling and gardening enthusiasts who need to transport
materials.
As of
March 31, 2008, our rental fleet consisted of approximately 96,000 trucks,
75,000 trailers and 35,000 towing devices. This equipment and our U-Haul brand
of self-moving products and services are available through our network of
managed retail moving centers and independent U-Haul dealers. Independent U-Haul
dealers receive rental equipment from the Company, act as a rental agent and are
paid a commission based on gross revenues generated from their U-Haul
rentals.
Our
rental truck chassis are manufactured by domestic and foreign truck
manufacturers. These chassis are joined with the U-Haul designed and
manufactured van boxes primarily at U-Haul operated manufacturing and assembly
facilities strategically located throughout the United States. U-Haul rental
trucks feature our proprietary Lowest DeckSM, which
provides our customers with extra ease of loading. The loading ramps on our
trucks are the widest in the industry, which reduce the effort needed to move
belongings. Our trucks are fitted with convenient, padded rub rails with tie
downs on every interior wall. Our Gentle Ride SuspensionSM helps
our customers safely move delicate and prized possessions. Also, the engineers
at our U-Haul Technical Center determined that the softest ride in our trucks
was at the front of the van box. Consequently, they designed the part of the van
box that hangs over the front cab of the truck to be the location for our
customers to place their most fragile items during their move. We call this area
Mom’s AtticSM.
Our
distinctive orange trailers are also manufactured at these same U-Haul operated
manufacturing and assembly facilities. These trailers are well suited to the low
profile of many of today’s newly manufactured automobiles. Our engineering staff
is committed to making our trailers easy to tow, aerodynamic and fuel
efficient.
To
provide our self-move customers with added value, our rental trucks and trailers
are designed with fuel efficiency in mind. Many of our newer trucks are fitted
with fuel economy gauges, another tool that assists our customers in conserving
fuel. To help make our rental equipment more trouble free, we perform extensive
preventive maintenance and repairs.
We also
provide customers with equipment to transport their vehicle. We provide three
towing options, including: auto transport, in which all four wheels are off the
ground, tow dolly, in which the front wheels of the towed vehicle are off the
ground, and tow bar, where all four wheels are on the ground.
To help
our customers load their boxes and larger household appliances and furniture, we
offer several accessory rental items. Our utility dolly has a lightweight design
and is easy to maneuver. Another rental accessory is our four wheel dolly, which
provides a large, flat surface for moving dressers, wall units, pianos and other
large household items. U-Haul appliance dollies provide the leverage needed to
move refrigerators, freezers, washers and dryers easily and safely. These
utility, furniture and appliance dollies, along with the low decks and the wide
loading ramps on U-Haul trucks and trailers, are designed for easy loading and
unloading of our customers’ belongings.
The total
package U-Haul offers the “do-it-yourself” household mover doesn’t end with
trucks, trailers and accessory rental items. Our moving supplies include a wide
array of affordably priced U-Haul brand boxes, tape and packing materials. We
also provide specialty boxes for dishes, computers and sensitive electronic
equipment, carton sealing tape, security locks, and packing supplies, like
wrapping paper and cushioning foam. U-Haul brand boxes are specifically sized to
make loading easier.
U-Haul is
North America’s largest seller and installer of hitches and towing systems. In
addition to towing U-Haul equipment, these hitching and towing systems can tow
jet skis, motorcycles, boats, campers and horse trailers. Our hitches, ball
mounts, and hitch balls undergo stringent testing requirements. Each
year, more than one million customers visit our locations for expertise on
complete towing systems, trailer rentals and the latest in towing
accessories.
U-Haul
has one of North America’s largest propane barbeque-refilling networks, with
over 1,000 locations providing this convenient service. We employ trained,
certified personnel to refill all propane cylinders. Our network of propane
dispensing locations is the largest automobile alternative refueling network in
North America.
Self-storage
is a natural outgrowth of the self-moving industry. Conveniently located U-Haul
self-storage rental facilities provide clean, dry and secure space for storage
of household and commercial goods, with storage units ranging in size from 6
square feet to 845 square feet. We operate nearly 1,075 self-storage locations
in North America, with more than 387,000 rentable rooms comprising approximately
34.2 million square feet of rentable storage space. Our self-storage centers
feature a wide array of security measures, ranging from electronic property
access control gates to individually alarmed storage units. At many centers, we
offer climate controlled storage rooms to protect temperature sensitive goods
such as video tapes, albums, photographs and precious wood
furniture.
Additionally,
we offer moving and storage protection packages such as Safemove and Safetow,
protecting moving and towing customers with a damage waiver, cargo protection
and medical and life coverage, and Safestor, protecting storage customers from
loss on their goods in storage. For our customers who desire additional coverage
over and above the standard Safemove protection, we also offer our Super
Safemove product. This package provides the rental customer with a layer of
primary liability protection.
Our eMove
web site, www.eMove.com, is the largest network of customers and independent
businesses in the self-moving and self-storage industry. The eMove network
consists of channels where customers, businesses and service providers transact
business. The eMove Moving Help marketplace connects “do-it-yourself” movers
with independent service providers to assist movers pack, load, unload, clean,
drive and other services. Thousands of independent service providers already
participate in the eMove network.
Through
the eMove Storage Affiliate Program, independent storage businesses can join the
world’s largest storage reservation system. Self-storage customers making a
reservation through eMove can access all of the U-Haul self-storage centers and
all of our independent storage affiliate partners for even greater convenience
to meet their self-storage needs.
Description
of Operating Segments
AMERCO
has four reportable segments. They are Moving and Storage (AMERCO, U-Haul and
Amerco Real Estate Company (“Real Estate”)), Property and Casualty Insurance,
Life Insurance and SAC Holding II Corporation and its subsidiaries (“SAC Holding
II”). Refer to Note 2 Principles of Consolidation of the Notes to Consolidated
Financial Statements.
Financial
information for each of our Operating Segments is included in the Notes to
Consolidated Financial Statements as part of “Item 8: Financial Statements and
Supplementary Data” of this report.
Moving
and Storage Operating Segment
Our
“do-it-yourself” moving business consists of U-Haul truck and trailer rentals
and U-Haul moving supply and service sales. Our Moving and Storage Operating
Segment consists of the rental of trucks, trailers, specialty rental items and
self-storage spaces primarily to the household mover as well as sales of moving
supplies, towing accessories and propane. Operations are conducted under the
registered trade name U-Haul® throughout the United States and
Canada.
Net
revenue from our Moving and Storage operating segment was approximately 90.6%,
89.9% and 90.3% of consolidated net revenue in fiscal 2008, 2007 and 2006,
respectively.
During
fiscal 2008, the Company placed over 21,000 new trucks in service. These
replacements were a combination of U-Haul manufactured vehicles and purchases.
As new trucks were added to the fleet, the Company rotated out of the fleet
older trucks. The size of the total rental truck fleet decreased from the end of
fiscal 2007 primarily due to an increased focus on sales of older
trucks.
Within
our truck and trailer rental operation we are focused on expanding our
independent dealer network to provide added convenience for our
customers. U-Haul has approximately 14,200 dealers which are
independent businesses, and are exclusive to U-Haul International, Inc. U-Haul
maximizes vehicle utilization by effective distribution of the truck and trailer
fleets among the nearly 1,450 Company operated centers and approximately 14,200
independent dealers. Utilizing its sophisticated reservations management system,
the Company’s centers and dealers electronically report their inventory in
real-time, which facilitates matching equipment to customer demand.
Approximately 55% of all U-Move rental revenue originates from the Company
operated centers.
At our
owned and operated retail centers we have implemented several customer service
initiatives. These initiatives include improving management of our rental
equipment to provide our retail centers with the right type of rental equipment,
at the right time and at the most convenient location for our customers,
effective marketing of our broad line of self-moving related products and
services, maintaining longer hours of operation to provide more convenience to
our customers, and increasing staff by attracting and retaining “moonlighters”
(part-time U-Haul employees with full-time jobs elsewhere) during our peak hours
of operation.
Effective
marketing of our self-moving related products and services, such as boxes, pads
and insurance, helps our customers have a better moving experience and helps
them protect their belongings from potential damage during the moving process.
We are committed to providing a complete line of products selected with the
“do-it-yourself” moving and storage customer in mind.
Our
self-storage business consists of the rental of self-storage rooms,
sales of self-storage related products, the facilitation of sales of services,
and the management of self-storage facilities owned by others.
U-Haul is one of the largest
North American operators of self-storage and has been a leader in the
self-storage industry since 1974. U-Haul operates over 387,000
storage rooms, comprising approximately 34.2 million square feet of storage
space with locations in 49 states and 10 Canadian provinces. U-Haul’s owned and
managed self-storage facility locations range in size up to 171,500 square feet
of storage space, with individual storage units in sizes ranging from 6 square
feet to 845 square feet.
The
primary market for storage rooms is the storage of household goods. We believe
that our self-storage services provide a competitive advantage through such
things as Maximum Security (“MAX”), an electronic system that monitors the
storage facility 24 hours a day; climate control; individually alarmed rooms;
extended hour access; and an internet-based customer reservation and account
management system.
eMove is
an online marketplace that connects consumers to over 3,700 independent Moving
Help™ service providers and over 3,300 independent Self-Storage Affiliates. Our
network of customer-rated affiliates provides pack and load help, cleaning help,
self-storage and similar services, all over North America.
An
individual or a company can connect to the eMove network by becoming an eMove
Moving Help® Affiliate or an eMove Storage Affiliate™. Moving Helpers
assist customers with packing, loading, cleaning and unloading their truck or
storage unit. The Storage Affiliate program enables independent self-storage
facilities to expand their reach by connecting into a centralized 1-800 and
internet reservation system and for a fee, receive an array of services
including web-based management software, Secured Online Affiliated Rentals
(S.O.A.R®), co-branded rental trucks, savings on insurance, credit card
processing and more.
The
marketplace includes unedited reviews of independent affiliates, and has
facilitated thousands of Moving Help® and Self-Storage transactions all over
North America. We believe that acting as an intermediary, with little added
investment, serves the customer in a cost effective manner. Our goal is to
further utilize our web-based technology platform to increase service to
consumers and businesses in the moving and storage market.
Property
and Casualty Insurance Operating Segment
RepWest
provides loss adjusting and claims handling for U-Haul through regional offices
across North America. Through the Company’s affiliation with RepWest, U-Haul
offers its customers moving and storage contents insurance products, branded
Safemove and Safestor, respectively. The Safemove policy provides moving
customers with a damage waiver, cargo protection and medical and life coverage.
Management believes that its Safemove product is competitive, as competing
policies contain deductibles, higher premiums and more confusing layers of
coverage. We continue to focus on increasing the penetration of these products.
The business plan for RepWest includes offering property and casualty products
for other U-Haul related programs.
Net
revenue from our Property and Casualty Insurance operating segment was
approximately 1.9%, 1.8% and 1.6% of consolidated net revenue in fiscal 2008,
2007 and 2006, respectively.
Life
Insurance Operating Segment
Oxford
provides life and health insurance products primarily to the senior market
through the direct writing or reinsuring of life insurance, Medicare supplement
and annuity policies. Additionally, Oxford administers the self-insured employee
health and dental plans for Arizona employees of the Company.
Net
revenue from our Life Insurance operating segment was approximately 6.7%, 7.0%
and 6.8% of consolidated net revenue in fiscal 2008, 2007 and 2006,
respectively.
SAC
Holding II Operating Segment
SAC
Holding Corporation and its subsidiaries, and SAC Holding II Corporation and its
subsidiaries, collectively referred to as “SAC Holdings”, own self-storage
properties that are managed by U-Haul under property management agreements and
act as independent U-Haul rental equipment dealers. AMERCO, through its
subsidiaries, has contractual interests in certain of SAC Holdings’ properties
entitling AMERCO to potential future income based on the financial performance
of these properties. With respect to SAC Holding II, AMERCO was considered the
primary beneficiary of these contractual interests prior to November 2007.
Consequently, for those reporting periods prior to November 2007, we included
the results of SAC Holding II in the consolidated financial statements of
AMERCO, as required by Financial Accounting Standards Board Interpretation No.
46(R) (“FIN 46(R)”). While the deconsolidation affects AMERCO’s financial
reporting, it has no operational or financial impact on the Company’s
relationship with SAC Holding II.
Substantially
all of the equity interest of SAC Holdings is controlled by Blackwater
Investments Inc. (“Blackwater”), wholly-owned by Mark V. Shoen, a significant
shareholder and executive officer of AMERCO. In November 2007, Blackwater
contributed additional capital to its wholly-owned subsidiary, SAC Holding II.
This contribution was determined by us to be material with respect to the
capitalization of SAC Holding II; therefore, triggering a requirement under FIN
46(R) for us to reassess the Company’s involvement with those subsidiaries. This
required reassessment led to the conclusion that the Company was no longer the
primary beneficiary of SAC Holding II as of the date of Blackwater’s
contribution. Accordingly, the Company deconsolidated this entity. The
deconsolidation, effective October 31, 2007 was accounted for as a distribution
of the Company’s interests to Blackwater, the sole shareholder of SAC Holding
II. Because of the Company’s continuing involvement with SAC Holding II, the
distributions do not qualify as discontinued operations as defined by Statement
of Financial Accounting Standards (“SFAS”) 144. It is possible that SAC Holdings
could take future actions that would require us to re-determine whether SAC
Holdings has become a variable interest entity (“VIE”) or whether we have become
the primary beneficiary of SAC Holdings. Should this occur, we could be required
to consolidate some or all of SAC Holdings with our financial
statements.
Net
revenue from our SAC Holding II operating segment was approximately 0.8%, 1.3%
and 1.3% of consolidated net revenue in fiscal 2008, 2007 and 2006,
respectively.
Employees
As of
March 31, 2008, we employed approximately 18,500 people throughout North America
with approximately 98% of these employees working within our Moving and Storage
operating segment. Approximately 40% of these employees work on a part-time
status.
Sales
and Marketing
We
promote U-Haul brand awareness through direct and co-marketing arrangements. Our
direct marketing activities consist of yellow pages, print and web based
advertising as well as trade events, movie cameos of our rental fleet and boxes,
and industry and consumer communications. Our rental equipment is our best form
of advertisement. We support our independent U-Haul dealers through
advertising of U-Haul moving and self-storage rentals, products and
services.
Our
marketing plan includes maintaining our leadership position with U-Haul being
synonymous with “do-it-yourself” moving and storage. We accomplish this by
continually improving the ease of use and efficiency of our rental equipment, by
providing added convenience to our retail centers through independent U-Haul
dealers, and by expanding the capabilities of our eMove web sites.
A
significant driver of U-Haul’s rental transaction volume is our utilization of
an online reservation and sales system, through www.uhaul.com, www.eMove.com and
our 24-hour 1-800-GO-U-HAUL telephone reservations system. The Company’s
1-800-GO-U-HAUL telephone reservation line is prominently featured on nationwide
yellow page advertising, its websites and on the outside of its vehicles, and is
a major driver of customer lead sources. Of our customers who made reservations
in advance of their U-Move rental, nearly 30% of these reservations were
completed through the Company’s websites.
Competition
Moving
and Storage Operating Segment
The
moving truck and trailer rental industry is large and highly competitive.
Generally speaking, we consider there to be two distinct users of rental trucks:
commercial and “do-it-yourself” residential users. We focus primarily on the
“do-it-yourself” residential user. Within this segment, we believe the principal
competitive factors are convenience of rental locations, availability of quality
rental moving equipment, breadth of essential products and services, and total
cost. Our major competitors in the moving equipment rental market are Avis
Budget Group, Inc. and Penske Truck Leasing.
The
self-storage market is large and highly fragmented. We believe the principal
competitive factors in this industry are convenience of storage rental
locations, cleanliness, security and price. Our primary competitors in the
self-storage market are Public Storage Inc., Extra Space Storage, Inc., and
Sovran Self-Storage Inc.
Insurance
Operating Segments
The
highly competitive insurance industry includes a large number of life insurance
companies and property and casualty insurance companies. In addition, the
marketplace includes financial services 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
and broader product portfolios than our insurance companies. We compete in the
insurance business based upon price, product design, and services rendered to
agents and policyholders.
Recent
Developments
Preferred
Stock Dividends
On May 2,
2008, the Board of Directors of AMERCO (the “Board”) declared a regular
quarterly cash dividend of $0.53125 per share on the Company’s Series A 8½ %
Preferred Stock. The dividend was paid on June 2, 2008 to holders of record on
May 15, 2008.
Cautionary
Statement Regarding Forward-Looking Statements
This
Annual Report on Form 10-K, contains “forward-looking statements” regarding
future events and our future results. We may make additional written or oral
forward-looking statements from time to time in filings with the SEC or
otherwise. We believe such forward-looking statements are within the meaning of
the safe-harbor provisions of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Such statements may include, but are not limited to, projections of revenues,
earnings or loss; estimates of capital expenditures, plans for future
operations, products or services; financing needs and plans; our perceptions of
our legal positions and anticipated outcomes of government investigations and
pending litigation against us; liquidity; goals and strategies; plans for new
business; growth rate assumptions, pricing, costs, and access to capital and
leasing markets 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. Factors that could significantly affect
results include, without limitation, the risk factors enumerated at the end of
this section, as well as the following: the Company’s ability to operate
pursuant to the terms of its credit facilities; the Company’s ability to
maintain contracts that are critical to its operations; the costs and
availability of financing; the Company’s ability to execute its business plan;
the Company’s ability to attract, motivate and retain key employees; general
economic conditions; fluctuations in our costs to maintain and update our fleet
and facilities; our ability to refinance our debt; changes in government
regulations, particularly environmental regulations; our credit ratings; the
availability of credit; changes in demand for our products; changes in the
general domestic economy; the degree and nature of our competition; the
resolution of pending litigation against the Company; changes in accounting
standards and other factors described in this report or the other documents we
file with the SEC. The above factors, the following disclosures, as well as
other statements in this report and in the Notes to Consolidated Financial
Statements, could contribute to or cause such risks or uncertainties, or could
cause our stock price to fluctuate dramatically. Consequently, the
forward-looking statements should not be regarded as representations or
warranties by the Company that such matters will be realized. The Company
assumes no obligation to update or revise any of the forward-looking statements,
whether in response to new information, unforeseen events, changed circumstances
or otherwise.
The
following discussion of risk factors should be read in conjunction with
Management’s Discussion and Analysis of Financial Condition and Results of
Operations (“MD&A”), the Consolidated Financial Statements and related
notes. These risk factors may be important in understanding this
Annual Report on Form 10-K or elsewhere.
We
operate in a highly competitive industry.
The truck
rental industry is highly competitive and includes a number of significant
national, regional and local competitors. Competition is generally based on
convenience of rental locations, availability of quality rental moving
equipment, breadth of essential services and price. Financial results for the
Company can be adversely impacted by aggressive pricing from our competitors.
Some of our competitors may have greater financial resources than we have. We
can not assure you that we will be able to maintain existing rental prices or
implement price increases. Moreover, if our competitors reduce prices and we are
not able or willing to do so as well, we may lose rental volume, which would
likely have a materially adverse affect on our results of
operations.
The
self-storage industry is large and highly fragmented. We believe the principle
competitive factors in this industry are convenience of storage rental
locations, cleanliness, security and price. Competition in the market areas in
which we operate is significant and affects the occupancy levels, rental sales
and operating expenses of our facilities. Competition might cause us to
experience a decrease in occupancy levels, limit our ability to raise rental
sales and require us to offer discounted rates that would have a material affect
on operating results.
Entry
into the self-storage business through acquisition of existing facilities is
possible for persons or institutions with the required initial capital.
Development of new self-storage facilities is more difficult however, due to
land use, environmental and other regulatory requirements. The self-storage
industry has in the past experienced overbuilding in response to perceived
increases in demand. We cannot assure you that we will be able to successfully
compete in existing markets or expand into new markets.
We
are controlled by a small contingent of stockholders.
As of
March 31, 2008, Edward J. Shoen, Chairman of the Board of Directors and
President of AMERCO, James P. Shoen, a director of AMERCO, and Mark V. Shoen, an
executive officer of AMERCO, collectively are the owners of 8,968,079 shares
(approximately 45.7%) of the outstanding common shares of AMERCO. In addition,
on June 30, 2006, Edward J. Shoen, James P. Shoen, Mark V. Shoen, Rosmarie T.
Donovan (Trustee of the Shoen Irrevocable Trusts) and Southwest Fiduciary, Inc.
(Trustee of the Irrevocable “C” Trusts) (collectively, the “Reporting Persons”)
entered into a Stockholder Agreement in which the Reporting Persons agreed to
vote as one as provided in the Stockholder Agreement. As of March 1, 2007,
Adagio Trust Company replaced Southwest Fiduciary, Inc. as the trustee of the
Irrevocable “C” Trusts, and became a signatory to the Stockholder Agreement.
Pursuant to the Stockholder Agreement, the Reporting Persons appointed James P.
Shoen as proxy to vote their collective 10,642,802 shares (approximately 54.2%)
of the Company’s common stock as provided for in the agreement. For
additional information, refer to the Schedule 13D’s filed on July 13, 2006 and
on March 9, 2007 with the SEC. In addition, 1,802,702 shares (approximately
9.2%) of the outstanding common shares of AMERCO are held by our Employee
Savings and Employee Stock Ownership Trust.
As a
result of their stock ownership and the Stockholder Agreement, Edward J. Shoen,
Mark V. Shoen and James P. Shoen are in a position to significantly influence
the business affairs and policies of the Company, including the approval of
significant transactions, the election of the members of the Board and other
matters submitted to our stockholders. There can be no assurance that
the interests of the Reporting Persons will not conflict with the interest of
our other stockholders. Furthermore, as a result of the Reporting
Persons’ voting power, the Company is a “controlled company” as defined in the
Nasdaq listing rules and, therefore, may avail itself of certain exemptions
under Nasdaq Marketplace Rules, including rules that require the Company to have
(i) a majority of independent directors on the Board; (ii) a compensation
committee composed solely of independent directors; (iii) a nominating committee
composed solely of independent directors; (iv) compensation of our executive
officers determined by a majority of the independent directors or a compensation
committee composed solely of independent directors; and (v) director nominees
selected, or recommended for the Board’s selection, either by a majority of the
independent directors or a nominating committee composed solely of independent
directors. The Company currently exercises its right to an exemption from the
Nasdaq rule requiring compensation of other executive officers, aside from the
President, be determined by a majority of the independent directors or the
compensation committee.
Our
operations subject us to numerous environmental regulations and the possibility
that environmental liability in the future could adversely affect our
operations.
Compliance
with environmental requirements of federal, state and local governments
significantly affects our business. 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. Under environmental laws or common law
principles, we can be held liable for hazardous substances that are found on
real property we have owned or operated. We are aware of issues regarding
hazardous substances on some of our real estate and we have put in place a
remedial plan at each site where we believe such a plan is necessary, refer to
Note 17 Contingencies of the Notes to Consolidated Financial Statements. We
regularly make capital and operating expenditures to stay in compliance with
environmental laws. In particular, we have managed a testing and removal program
since 1988 for our underground storage tanks. Despite these
compliance efforts, we believe that risk of environmental liability is part of
the nature of our business.
Environmental
laws and regulations are complex, change frequently and could become more
stringent in the future. We cannot assure you that future compliance with these
regulations, future environmental liabilities, the cost of defending
environmental claims, conducting any environmental remediation or generally
resolving liabilities caused by us or related third parties will not have a
material adverse effect on our business, financial condition or results of
operations.
Our
quarterly results of operations fluctuate due to seasonality and other factors
associated with our industry.
Our
business is seasonal and our results of operations and cash flows fluctuate
significantly from quarter to quarter. Historically, revenues have been stronger
in the first and second fiscal quarters due to the overall increase in moving
activity during the spring and summer months. The fourth fiscal quarter is
generally weakest, due to a greater potential for adverse weather conditions and
other factors that are not necessarily seasonal. As a result, our operating
results for a given quarterly period are not necessarily indicative of operating
results for an entire year.
We
obtain our rental trucks from a limited number of manufacturers.
In the
last ten years, we purchased most of our rental trucks from Ford Motor Company
and General Motors Corporation. Although we believe that we could obtain
alternative sources of supply for our rental trucks, termination of one or both
of our relationships with these suppliers could have a material adverse effect
on our business, financial condition or results of operations for an indefinite
period of time or we may not be able to obtain rental trucks under similar
terms, if at all. Additionally, our fleet rotation can be negatively affected by
issues our manufacturers face within their own supply chain. Such issues may
impair their ability to fulfill our orders in a timely fashion.
A.M
Best financial strength ratings are crucial to our life insurance
business.
A.M. Best
downgraded Oxford and its subsidiaries during AMERCO’s restructuring to C+. Upon
AMERCO’s emergence from bankruptcy in March 2004, Oxford and its subsidiaries
were upgraded to B-. The ratings were again upgraded in October 2004 to B, in
October 2005 to B+, and in November 2006 Oxford and Christian Fidelity Life
Insurance Company (“CFLIC”), a subsidiary of Oxford, were upgraded to B++ with a
stable outlook. In January 2008, A.M. Best affirmed the financial strength
rating for Oxford and CFLIC of B++ with a stable outlook and assigned Dallas
General Life Insurance Company (“DGLIC”), a subsidiary of CFLIC, with the same
rating. Prior to AMERCO’s restructuring, Oxford was rated B++. Financial
strength ratings are important external factors that can affect the success of
Oxford’s business plans. Accordingly, if Oxford’s ratings, relative to its
competitors, are not maintained or do not continue to improve, Oxford may not be
able to retain and attract business as currently planned.
We
bear certain risks related to our notes receivable from SAC
Holdings.
At March
31, 2008, we held approximately $198.1 million of notes receivable from SAC
Holdings, which consist of junior unsecured notes. SAC Holdings is highly
leveraged with significant indebtedness to others. If SAC Holdings is unable to
meet its obligations to its senior lenders, it could trigger a default of its
obligations to us. In such an event of default, we could suffer a loss to the
extent the value of the underlying collateral of SAC Holdings is inadequate to
repay SAC Holding’s senior lenders and our junior unsecured notes. We
cannot assure you that SAC Holdings will not default on its loans to its senior
lenders or that the value of SAC Holdings assets upon liquidation would be
sufficient to repay us in full.
We
are highly leveraged.
As of
March 31, 2008, we had total debt outstanding of $1,504.7 million and total
undiscounted lease commitments of $490.8 million. Although we believe that
additional leverage can be supported by the Company’s operations, our existing
debt could impact us in the following ways:
·
|
require
us to allocate a considerable portion of cash flows from operations to
debt service payments;
|
·
|
limit
our ability to obtain additional financing;
and
|
·
|
place
us at a disadvantage compared to our competitors who may have less
debt.
|
Our
ability to make payments on our debt depends upon our ability to maintain and
improve our operating performance and generate cash flow. To some extent, this
is subject to prevailing economic and competitive conditions and to certain
financial, business and other factors, some of which are beyond our control. If
we are unable to generate sufficient cash flow from operations to service our
debt and meet our other cash needs, we may be forced to reduce or delay capital
expenditures, sell assets, seek additional capital or restructure or refinance
our indebtedness. If we must sell our assets, it may negatively affect our
ability to generate revenue. In addition, we may incur additional debt that
would exacerbate the risks associated with our indebtedness.
In
certain instances the Company seeks to manage its exposure to interest rate risk
through the use of hedging instruments including interest rate swap agreements,
interest rate cap agreements and forward swaps. The Company enters into these
arrangements with counterparties that are significant financial institutions
with whom we generally have other financial arrangements. We are exposed to
credit risk should these counterparties not be able to perform on their
obligations. Additionally, a failure on our part to effectively hedge against
interest rate changes may adversely affect our financial condition and results
of operations.
Our
fleet rotation program can be adversely affected by financial market
conditions.
To meet
the needs of our customers, U-Haul maintains a large fleet of rental equipment.
Our rental truck fleet rotation program is funded internally through operations
and externally from debt and lease financing. Our ability to fund our routine
fleet rotation program could be adversely affected if financial market
conditions limit the general availability of external financing. This could lead
to the Company operating trucks longer than initially planned and reducing the
size of the fleet, either of which could materially and negatively affect our
results of operations.
We
operate in a highly regulated industry and changes in existing regulations or
violations of existing or future regulations could have a material adverse
effect on our operations and profitability.
Our truck
and trailer rental business is subject to regulation by various federal, state
and foreign governmental entities. Specifically, the U.S. Department of
Transportation and various state and federal agencies exercise broad powers over
our motor carrier operations, safety, and the generation, handling, storage,
treatment and disposal of waste materials. In addition, our storage business is
also subject to federal, state and local laws and regulations relating to
environmental protection and human health and safety. The failure to adhere to
these laws and regulations may adversely affect our ability to sell or rent such
property or to use the property as collateral for future borrowings. Compliance
with changing regulations could substantially impair real property and equipment
productivity and increase our costs.
We have
no unresolved staff comments at March 31, 2008.
The
Company, through its legal subsidiaries, owns property, plant and equipment that
are utilized in the manufacture, repair and rental of U-Haul equipment and storage
space, as well as providing office space for the Company. Such facilities exist
throughout the United States and Canada. The Company also manages storage
facilities owned by others. The Company operates nearly 1,450 U-Haul retail centers of which
495 are managed for other owners, and operates 13 manufacturing and assembly
facilities. We also operate over 250 fixed-site repair facilities located
throughout the United States and Canada. These facilities are used primarily for
the benefit of our Moving and Storage segment.
SAC
Holdings owns property, plant and equipment that are utilized in the sale of
moving supplies, rental of self-storage rooms and U-Haul equipment. Such
facilities exist throughout the United States and Canada. We manage the storage
facilities under property management agreements whereby the management fees are
consistent with management fees received by U-Haul for other properties owned by
unrelated parties and previously managed by us.
Shoen
In
September 2002, Paul F. Shoen filed a shareholder derivative lawsuit 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 on behalf of AMERCO from SAC Holdings and certain current and former
members of the AMERCO Board of Directors, including Edward J. Shoen, Mark V.
Shoen and James P. Shoen as Defendants. AMERCO is named as a nominal Defendant
in the case. 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 subsidiaries of AMERCO to SAC prior to the filing of
the complaint. The complaint seeks a declaration that such transfers are void as
well as unspecified damages. In October 2002, the Defendants filed motions to
dismiss the complaint. In October 2002, Ron Belec filed a derivative action in
the Second Judicial District Court of the State of Nevada, Washoe County,
captioned Ron Belec
vs. William E. Carty, et al., CV 02-06331 and in January 2003, M.S.
Management Company, Inc. filed a derivative action in the Second Judicial
District Court of the State of Nevada, Washoe County, captioned M.S. Management Company,
Inc. vs. William E. Carty, et al., CV 03-00386. Two additional derivative
suits were also filed against these parties. Each of these suits is
substantially similar to the Paul F. Shoen case. The Court consolidated the five
cases and thereafter dismissed these actions in May 2003, concluding that the
AMERCO Board of Directors had the requisite level of independence required in
order to have these claims resolved by the Board. Plaintiffs appealed this
decision and, in July 2006, the Nevada Supreme Court reviewed and remanded the
case to the trial court for proceedings consistent with its ruling, allowing the
Plaintiffs to file an amended complaint and plead in addition to substantive
claims, demand futility.
In
November 2006, the Plaintiffs filed an amended complaint. In December 2006, the
Defendants filed motions to dismiss, based on various legal theories. In March
2007, the Court denied AMERCO’s motion to dismiss regarding the issue of demand
futility, stating that “Plaintiffs have satisfied the heightened pleading
requirements of demand futility by showing a majority of the members of the
AMERCO Board of Directors were interested parties in the SAC transactions.” The
Court heard oral argument on the remainder of the Defendants’ motions to
dismiss, including the motion (“Goldwasser Motion”) based on the fact that the
subject matter of the lawsuit had been settled and dismissed in earlier
litigation known as Goldwasser v. Shoen,
CV 0205602, Washoe County, Nevada. In addition, in September and October 2007,
the Defendants filed Motions for Judgment on the Pleadings or in the Alternative
Summary Judgment, based on the fact that the stockholders of the Company had
ratified the underlying transactions at the 2007 annual meeting of stockholders
of AMERCO. In December 2007, the Court denied this motion. This ruling does not
preclude a renewed motion for summary judgment after discovery and further
proceedings on these issues. On April 7, 2008, the litigation was dismissed, on
the basis of the Goldwasser Motion. On May 8, 2008, the Plaintiffs filed a
notice of appeal of such dismissal to the Nevada Supreme Court. On May 20, 2008,
AMERCO filed a cross appeal relating to the denial of its Motion to Dismiss in
regards to Demand Futility. The appeals are currently pending.
Environmental
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
these suits, claims or proceedings involving AMERCO, individually or in the
aggregate, are expected to result in a material adverse effect on AMERCO’s
financial position or results of operations.
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.
Based
upon the information currently available to Real Estate, compliance with the
environmental laws and its share of the costs of investigation and cleanup of
known hazardous waste sites are not expected to result in a material adverse
effect on AMERCO’s financial position or results of operations. Real Estate
expects to spend approximately $5.7 million in total through 2011 to remediate
these properties.
Other
The
Company is named as a defendant in various other litigation and claims arising
out of the normal course of business. In management’s opinion, none of these
other matters will have a material effect on the Company’s financial position
and results of operations.
Item 4. Submission of Matters to a Vote of
Security Holders
No matter
was submitted to a vote of the security holders of AMERCO during the fourth
quarter of the fiscal year covered by this report, through the solicitation of
proxies or otherwise.
PART
II
Item 5. Market for the Registrant’s Common
Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
As of
March 31, 2008, there were approximately 3,600 holders of record of the common
stock. AMERCO’s common stock is listed on NASDAQ Global Select Market under the
trading symbol “UHAL”. The number of shareholders is derived using internal
stock ledgers and utilizing Mellon Investor Services Stockholder
listings.
The
following table sets forth the high and the low sales price of the common stock
of AMERCO for the periods indicated:
|
|
Year Ended March
31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
First
quarter
|
|
$ |
83.87 |
|
|
$ |
67.29 |
|
|
$ |
106.95 |
|
|
$ |
79.71 |
|
Second
quarter
|
|
$ |
78.78 |
|
|
$ |
57.03 |
|
|
$ |
105.35 |
|
|
$ |
66.22 |
|
Third
quarter
|
|
$ |
79.86 |
|
|
$ |
58.82 |
|
|
$ |
96.89 |
|
|
$ |
71.81 |
|
Fourth
quarter
|
|
$ |
71.98 |
|
|
$ |
47.53 |
|
|
$ |
89.96 |
|
|
$ |
59.83 |
|
Dividends
AMERCO
does not have a formal dividend policy. The Board periodically considers the
advisability of declaring and paying dividends to common stockholders in light
of existing circumstances.
Refer to
Note 20 Statutory Financial Information of Insurance Subsidiaries of the Notes
to Consolidated Financial Statements for a discussion of certain statutory
restrictions on the ability of the insurance subsidiaries to pay dividends to
AMERCO.
Refer to
Note 11 Stockholders Equity of the Notes to Consolidated Financial Statements
for a discussion of AMERCO’s preferred stock.
Performance
Graph
The
following graph compares the cumulative total stockholder return on the
Company’s Common Stock for the period March 31, 2003 through March 31, 2008 with
the cumulative total return on the Dow Jones US Equity Market and the Dow Jones
US Transportation Average. The comparison assumes that $100 was
invested on March 31, 2003 in the Company’s Common Stock and in each of
comparison indices. The graph reflects the closing price of the
Common stock trading on NASDAQ on March 31, 2004, 2005, 2006, 2007, and
2008.
Fiscal
year ending March 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMERCO
|
|
$ |
100 |
|
|
$ |
584 |
|
|
$ |
1,146 |
|
|
$ |
2,449 |
|
|
$ |
1,732 |
|
|
$ |
1,413 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dow
Jones US Total Market
|
|
|
100 |
|
|
|
138 |
|
|
|
148 |
|
|
|
169 |
|
|
|
188 |
|
|
|
178 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dow
Jones US Transportation Average
|
|
|
100 |
|
|
|
137 |
|
|
|
178 |
|
|
|
222 |
|
|
|
236 |
|
|
|
238 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
$100 invested on 3/31/03 in stock or index-including reinvestment of
dividends.
|
|
|
|
|
|
|
|
|
|
Issuer
Purchases of Equity Securities
On
September 13, 2006, we announced that our Board of Directors (the “Board”) had
authorized us to repurchase up to $50.0 million of our common stock from time to
time on the open market between September 13, 2006 and October 31, 2007. On
March 9, 2007, the Board authorized an increase in the Company’s common stock
repurchase program to a total aggregate amount, net of brokerage commissions, of
$115.0 million (which amount is inclusive of the $50.0 million common stock
repurchase program approved by the Board in 2006). During the first quarter of
fiscal 2008, we repurchased 485,999 shares at the cost of $34.0 million. This
program terminated on October 31, 2007.
The
repurchases made by the Company under this plan were as follows:
Period
|
|
Total
# of Shares Repurchased
|
|
|
Average
Price Paid per Share (1)
|
|
|
Total
# of Shares Repurchased as Part of Publicly Announced Plan
|
|
|
Total
$ of Shares Repurchased as Part of Publicly Announced Plan
|
|
|
Maximum
$ of Shares That May Yet be Repurchased Under the Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April
1 - 30, 2007
|
|
|
196,232 |
|
|
$ |
69.94 |
|
|
|
196,232 |
|
|
$ |
13,723,504 |
|
|
$ |
52,170,394 |
|
May
1 - 31, 2007
|
|
|
218,090 |
|
|
|
69.85 |
|
|
|
218,090 |
|
|
|
15,234,536 |
|
|
|
36,935,858 |
|
June
1 - 30, 2007
|
|
|
71,677 |
|
|
|
69.87 |
|
|
|
71,677 |
|
|
|
5,008,018 |
|
|
|
31,927,840 |
|
First
Quarter Total
|
|
|
485,999 |
|
|
$ |
69.89 |
|
|
|
485,999 |
|
|
$ |
33,966,058 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative
Plan Total
|
|
|
1,225,290 |
|
|
$ |
67.80 |
|
|
|
1,225,290 |
|
|
$ |
83,072,160 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Represents weighted average purchase price for the periods
presented.
|
|
|
|
|
|
|
|
|
|
On
December 5, 2007, we announced that the Board had authorized us to repurchase up
to $50.0 million of our common stock. The stock may be repurchased by the
Company from time to time on the open market between December 5, 2007 and
December 31, 2008. The extent to which the Company repurchases its shares and
the timing of such purchases will depend upon market conditions and other
corporate considerations. The purchases will be funded from available working
capital. During the fourth quarter of fiscal 2008, the Company repurchased
428,000 shares at a cost of $23.5 million.
The
repurchases made by the Company under this plan were as follows:
Period
|
|
Total
# of Shares Repurchased
|
|
|
Average
Price Paid per Share (1)
|
|
|
Total
# of Shares Repurchased as Part of Publicly Announced Plan
|
|
|
Total
$ of Shares Repurchased as Part of Publicly Announced Plan
|
|
|
Maximum
$ of Shares That May Yet be Repurchased Under the Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January
1 - 31, 2008
|
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
|
$ |
- |
|
|
$ |
50,000,000 |
|
February
1 - 29, 2008
|
|
|
428,000 |
|
|
$ |
54.94 |
|
|
|
428,000 |
|
|
$ |
23,512,380 |
|
|
$ |
26,487,620 |
|
March
1 - 31, 2008
|
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
|
$ |
- |
|
|
$ |
26,487,620 |
|
Fourth
Quarter Total
|
|
|
428,000 |
|
|
$ |
54.94 |
|
|
|
428,000 |
|
|
$ |
23,512,380 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Represents weighted average purchase price for the periods
presented.
|
|
|
|
|
|
|
|
|
|
The
following selected financial data should be read in conjunction with the
MD&A, and the Consolidated Financial Statements and related notes in this
Annual Report on Form 10-K.
Listed
below is selected financial data for AMERCO and consolidated entities for each
of the last five years ended March 31:
|
|
Year
Ended March 31,
|
|
|
|
|
2008(b),
(c) |
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In
thousands, except share and per share data)
|
|
Summary
of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Self-moving
equipment rentals
|
|
$ |
1,451,292 |
|
|
$ |
1,462,470 |
|
|
$ |
1,489,429 |
|
|
$ |
1,424,841 |
|
|
$ |
1,368,814 |
|
Self-storage
revenues
|
|
|
122,248 |
|
|
|
126,424 |
|
|
|
119,742 |
|
|
|
114,155 |
|
|
|
247,640 |
|
Self-moving
and self-storage products and service sales
|
|
|
217,798 |
|
|
|
224,722 |
|
|
|
223,721 |
|
|
|
206,098 |
|
|
|
232,965 |
|
Property
management fees
|
|
|
22,820 |
|
|
|
21,154 |
|
|
|
21,195 |
|
|
|
11,839 |
|
|
|
259 |
|
Life
insurance premiums
|
|
|
111,996 |
|
|
|
120,399 |
|
|
|
118,833 |
|
|
|
126,236 |
|
|
|
145,082 |
|
Property
and casualty insurance premiums
|
|
|
28,388 |
|
|
|
24,335 |
|
|
|
26,001 |
|
|
|
24,987 |
|
|
|
92,036 |
|
Net
investment and interest income
|
|
|
62,110 |
|
|
|
59,696 |
|
|
|
48,279 |
|
|
|
49,171 |
|
|
|
31,992 |
|
Other
revenue
|
|
|
32,522 |
|
|
|
30,098 |
|
|
|
40,325 |
|
|
|
30,172 |
|
|
|
38,523 |
|
Total
revenues
|
|
|
2,049,174 |
|
|
|
2,069,298 |
|
|
|
2,087,525 |
|
|
|
1,987,499 |
|
|
|
2,157,311 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
1,077,108 |
|
|
|
1,080,412 |
|
|
|
1,082,158 |
|
|
|
1,123,975 |
|
|
|
1,181,313 |
|
Commission
expenses
|
|
|
167,945 |
|
|
|
162,899 |
|
|
|
165,961 |
|
|
|
159,253 |
|
|
|
134,616 |
|
Cost
of sales
|
|
|
120,210 |
|
|
|
117,648 |
|
|
|
113,135 |
|
|
|
105,309 |
|
|
|
111,906 |
|
Benefits
and losses
|
|
|
111,195 |
|
|
|
118,725 |
|
|
|
117,160 |
|
|
|
140,343 |
|
|
|
217,447 |
|
Amortization
of deferred policy acquisition costs
|
|
|
13,181 |
|
|
|
17,138 |
|
|
|
24,261 |
|
|
|
28,512 |
|
|
|
39,083 |
|
Lease
expense
|
|
|
133,931 |
|
|
|
147,659 |
|
|
|
136,652 |
|
|
|
142,008 |
|
|
|
153,121 |
|
Depreciation,
net of (gains) losses on disposal
|
|
|
221,882 |
|
|
|
189,589 |
|
|
|
142,817 |
|
|
|
121,103 |
|
|
|
148,813 |
|
Restructuring
expense
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
44,097 |
|
Total
costs and expenses
|
|
|
1,845,452 |
|
|
|
1,834,070 |
|
|
|
1,782,144 |
|
|
|
1,820,503 |
|
|
|
2,030,396 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
from operations
|
|
|
203,722 |
|
|
|
235,228 |
|
|
|
305,381 |
|
|
|
166,996 |
|
|
|
126,915 |
|
Interest
expense
|
|
|
(101,420 |
) |
|
|
(82,436 |
) |
|
|
(69,481 |
) |
|
|
(73,205 |
) |
|
|
(121,690 |
) |
Fees
and amortization on early extinguishment of debt (a)
|
|
|
- |
|
|
|
(6,969 |
) |
|
|
(35,627 |
) |
|
|
- |
|
|
|
- |
|
Litigation
settlement, net of costs, fees and expenses
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
51,341 |
|
|
|
- |
|
Pretax
earnings
|
|
|
102,302 |
|
|
|
145,823 |
|
|
|
200,273 |
|
|
|
145,132 |
|
|
|
5,225 |
|
Income
tax expense
|
|
|
(34,518 |
) |
|
|
(55,270 |
) |
|
|
(79,119 |
) |
|
|
(55,708 |
) |
|
|
(8,077 |
) |
Net
earnings (loss)
|
|
|
67,784 |
|
|
|
90,553 |
|
|
|
121,154 |
|
|
|
89,424 |
|
|
|
(2,852 |
) |
Less: Preferred
stock dividends
|
|
|
(12,963 |
) |
|
|
(12,963 |
) |
|
|
(12,963 |
) |
|
|
(12,963 |
) |
|
|
(12,963 |
) |
Earnings
(loss) available to common shareholders
|
|
$ |
54,821 |
|
|
$ |
77,590 |
|
|
$ |
108,191 |
|
|
$ |
76,461 |
|
|
$ |
(15,815 |
) |
Net
earnings (loss) per common share basic and diluted
|
|
$ |
2.78 |
|
|
$ |
3.72 |
|
|
$ |
5.19 |
|
|
$ |
3.68 |
|
|
$ |
(0.76 |
) |
Weighted
average common shares outstanding: Basic and diluted
|
|
|
19,740,571 |
|
|
|
20,838,570 |
|
|
|
20,857,108 |
|
|
|
20,804,773 |
|
|
|
20,749,998 |
|
Cash
dividends declared and accrued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock
|
|
$ |
12,963 |
|
|
$ |
12,963 |
|
|
$ |
12,963 |
|
|
$ |
12,963 |
|
|
$ |
12,963 |
|
Balance
Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property,
plant and equipment, net
|
|
|
2,011,176 |
|
|
|
1,897,071 |
|
|
|
1,535,165 |
|
|
|
1,354,468 |
|
|
|
1,451,805 |
|
Total
assets
|
|
|
3,832,487 |
|
|
|
3,523,048 |
|
|
|
3,367,218 |
|
|
|
3,116,173 |
|
|
|
3,394,748 |
|
Capital
leases
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
99,607 |
|
AMERCO's
notes and loans payable
|
|
|
1,504,677 |
|
|
|
1,181,165 |
|
|
|
965,634 |
|
|
|
780,008 |
|
|
|
862,703 |
|
SAC
Holdings II notes and loans payable, non re-course to
AMERCO
|
|
|
- |
|
|
|
74,887 |
|
|
|
76,232 |
|
|
|
77,474 |
|
|
|
78,637 |
|
Stockholders'
equity
|
|
|
758,431 |
|
|
|
718,098 |
|
|
|
695,604 |
|
|
|
572,839 |
|
|
|
503,846 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
Includes the write-off of debt issuance costs of $7.0 million in fiscal
2007 and $14.4 million in fiscal 2006.
|
|
|
|
|
|
(b)
Fiscal 2008 summary of operations includes 7 months of activity for SAC
Holding II which was deconsolidated effective October 31,
2007.
|
|
(c)
Fiscal 2008 balance sheet data does not include SAC Holding II which was
deconsolidated effective October 31, 2007
|
|
|
|
|
|
Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
General
We begin
this MD&A with the overall strategy of AMERCO, followed by a description of
our operating segments and the strategy of our operating segments to give the
reader an overview of the goals of our business and the direction in which our
businesses and products are moving. This is followed by a section entitled
“Critical Accounting Policies and Estimates” that we believe is important to
understanding the assumptions and judgments incorporated in our reported
financial results. In the next section, we discuss our results of operations for
fiscal 2008 compared with fiscal 2007, and for fiscal 2007 compared with fiscal
2006 beginning with an overview. We then provide an analysis of changes in our
balance sheet and cash flows and discuss our financial commitments in the
sections entitled “Liquidity and Capital Resources” and “Disclosures about
Contractual Obligations and Commercial Commitments.” We conclude this MD&A
by discussing our outlook for fiscal 2009.
This
MD&A should be read in conjunction with the other sections of this Annual
Report on Form 10-K, including “Item 1: Business”, “Item 6: Selected Financial
Data” and “Item 8: Financial Statements and Supplementary Data.” The various
sections of this MD&A contain a number of forward-looking statements, as
discussed under the caption “Cautionary Statements Regarding Forward-Looking
Statements,” all of which are based on our current expectations and could be
affected by the uncertainties and risk factors described throughout this filing
and particularly under the section “Item 1A: Risk Factors.” Our actual results
may differ materially from these forward-looking statements.
AMERCO
has a fiscal year that ends on the 31st of
March for each year that is referenced. Our insurance company subsidiaries have
fiscal years that end on the 31st of
December for each year that is referenced. They have been consolidated on that
basis. Our insurance companies’ financial reporting processes conform to
calendar year reporting as required by state insurance departments. Management
believes that consolidating their calendar year into our fiscal year financial
statements does not materially affect the financial position or results of
operations. The Company discloses any material events occurring during the
intervening period. Consequently, all references to our insurance subsidiaries’
years 2007, 2006 and 2005 correspond to fiscal 2008, 2007 and 2006 for
AMERCO.
Overall
Strategy
Our
overall strategy is to maintain our leadership position in the North American
“do-it-yourself” moving and storage industry. We accomplish this by providing a
seamless and integrated supply chain to the “do-it-yourself” moving and storage
market. As part of executing this strategy, we leverage the brand recognition of
U-Haul with our
full line of moving and self-storage related products and services and the
convenience of our broad geographic presence.
Our
primary focus is to provide our customers with a wide selection of moving rental
equipment, convenient self-storage rental facilities and related moving and
self-storage products and services. We are able to expand our distribution and
improve customer service by increasing the amount of moving equipment and
storage rooms available for rent, expanding the number of independent dealers in
our network and expanding and taking advantage of our growing eMove
capabilities.
RepWest
is focused on providing and administering property and casualty insurance to
U-Haul, its customers, its independent dealers and affiliates.
Oxford is
focused on long-term capital growth through direct writing and reinsuring of
life, Medicare supplement and annuity products in the senior
marketplace.
Description
of Operating Segments
AMERCO’s
four reportable segments are:
(a)
|
Moving
and Storage, comprised of AMERCO, U-Haul and Real Estate and the
subsidiaries of U-Haul and Real
Estate
|
(b)
|
Property
and Casualty Insurance, comprised of RepWest and its wholly-owned
subsidiaries
|
(c)
|
Life
Insurance, comprised of Oxford and its wholly-owned
subsidiaries
|
(d)
|
SAC
Holding II and its subsidiaries (through October
2007)
|
Refer to
Note 1 Basis of Presentation, Note 21 Financial Information by Geographic Area
and Note 21A Consolidating Financial Information by Industry Segment of the
Notes to Consolidated Financial Statements included in this Form
10-K.
Moving
and Storage Operating Segment
Our
Moving and Storage Operating Segment consists of the rental of trucks, trailers,
specialty rental items and self-storage spaces primarily to the household mover
as well as sales of moving supplies, towing accessories and propane. Operations
are conducted under the registered trade name U-Haul®
throughout the United States and Canada.
With
respect to our truck, trailer, specialty rental items and self-storage rental
business, we are focused on expanding our dealer network, which provides added
convenience for our customers and expanding the selection and availability of
rental equipment to satisfy the needs of our customers.
U-Haul
brand self-moving related products and services, such as boxes, pads and tape
allow our customers to, among other things, protect their belongings from
potential damage during the moving process. We are committed to providing a
complete line of products selected with the “do-it-yourself” moving and storage
customer in mind.
eMove is
an online marketplace that connects consumers to over 3,700 independent Moving
Help™ service providers and over 3,300 independent Self-Storage Affiliates. Our
network of customer-rated affiliates provides pack and load help, cleaning help,
self-storage and similar services, all over North America. Our goal is to
further utilize our web-based technology platform to increase service to
consumers and businesses in the moving and storage market.
Property
and Casualty Insurance Operating Segment
RepWest
provides loss adjusting and claims handling for U-Haul through regional offices
across North America. RepWest also underwrites components of the Safemove,
Safetow and Safestor protection packages to
U-Haul customers. We continue to focus on increasing the penetration of these
products. The business plan for RepWest includes offering property and casualty
products in other U-Haul related
programs.
Life
Insurance Operating Segment
Oxford
provides life and health insurance products primarily to the senior market
through the direct writing or reinsuring of life insurance, Medicare supplement
and annuity policies. Additionally, Oxford administers the self-insured employee
health and dental plans for Arizona employees of the Company.
SAC
Holding II Operating Segment
SAC
Holding Corporation and its subsidiaries, and SAC Holding II Corporation and its
subsidiaries, collectively referred to as “SAC Holdings”, own self-storage
properties that are managed by U-Haul under property management agreements and
act as independent U-Haul rental equipment dealers. AMERCO, through its
subsidiaries, has contractual interests in certain SAC Holdings’ properties
entitling AMERCO to potential future income based on the financial performance
of these properties. With respect to SAC Holding II, AMERCO was considered the
primary beneficiary of these contractual interests prior to November 2007.
Consequently, for those reporting periods prior to November 2007 we included the
results of SAC Holding II in the consolidated financial statements of AMERCO, as
required by FIN 46(R).
Substantially
all of the equity interest of SAC Holdings is controlled by Blackwater. In
November 2007, Blackwater contributed additional capital to its wholly-owned
subsidiary, SAC Holding II. This contribution was determined by us to be
material with respect to the capitalization of SAC Holding II; therefore,
triggering a requirement under FIN 46(R) for us to reassess the Company’s
involvement with those subsidiaries. This required reassessment led to the
conclusion that the Company was no longer the primary beneficiary of SAC Holding
II as of the date of Blackwater’s contribution. Accordingly, the Company
deconsolidated this entity. While the deconsolidation affects AMERCO’s financial
reporting, it has no operational or financial impact on the Company’s
relationship with SAC Holding II. The deconsolidation, effective October 31,
2007 was accounted for as a distribution of SAC Holding II interests to
Blackwater, the sole shareholder of SAC Holding II. Because of the Company’s
continuing involvement with SAC Holding II, the distributions do not qualify as
discontinued operations as defined by SFAS 144.
Critical
Accounting Policies and Estimates
The
Company’s financial statements have been prepared in accordance with the
generally accepted accounting principles (“GAAP”) in the United States. The
methods, estimates and judgments we use in applying our accounting policies can
have a significant impact on the results we report in our financial statements.
Note 3 Accounting Policies of the Notes to Consolidated Financial Statements in
“Item 8: Financial Statements and Supplementary Data” of this Form 10-K
summarizes the significant accounting policies and methods used in the
preparation of our consolidated financial statements and related disclosures.
Certain accounting policies require us to make difficult and subjective
judgments and assumptions, often as a result of the need to make estimates of
matters that are inherently uncertain.
Below we
have set forth, with a detailed description, the accounting policies that we
deem most critical to us and that require management’s most difficult and
subjective judgments. These estimates are based on historical experience,
observance of trends in particular areas, information and 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; such differences may be
material.
We also
have other policies that we consider key accounting policies, such as revenue
recognition; however, these policies do not meet the definition of critical
accounting estimates, because they do not generally require us to make estimates
or judgments that are difficult or subjective. The accounting policies that we
deem most critical to us, and involve the most difficult, subjective or complex
judgments include the following:
Principles
of Consolidation
The
Company applies FIN 46(R), “Consolidation of Variable Interest
Entities” and ARB 51, “Consolidated Financial
Statements” in its principles of consolidation. FIN 46(R) addresses
arrangements where a company does not hold a majority of the voting or similar
interests of a VIE. A company is required to consolidate a VIE if it
has determined it is the primary beneficiary. ARB 51 addresses the policy when a
company owns a majority of the voting or similar rights and exercises effective
control.
As
promulgated by FIN 46(R), a VIE is not self-supportive due to having one or both
of the following conditions: a) it has an insufficient amount of equity for it
to finance its activities without receiving additional subordinated financial
support or b) its owners do not hold the typical risks and rights of equity
owners. This determination is made upon the creation of a variable
interest and can be re-assessed should certain changes in the operations of a
VIE, or its relationship with the primary beneficiary trigger a reconsideration
under the provisions of FIN 46(R). After a triggering event occurs
the most recent facts and circumstances are utilized in determining whether or
not a company is a VIE, which other company(s) have a variable interest in the
entity, and whether or not the company’s interest is such that it is the primary
beneficiary.
In fiscal
2003 and fiscal 2002, SAC Holdings were considered special purpose entities and
were consolidated based on the provisions of Emerging Issues Task Force (“EITF”)
Issue No. 90-15. In fiscal 2004 the Company evaluated its interests in SAC
Holdings utilizing the guidance promulgated in FIN 46(R). The Company concluded
that SAC Holdings were VIE’s and that the Company was the primary beneficiary.
Accordingly, the Company continued to include SAC Holdings in its consolidated
financial statements.
In
February and March 2004 SAC Holding Corporation triggered a requirement to
reassess AMERCO’s involvement in it, which led to the conclusion SAC Holding
Corporation was not a VIE and AMERCO ceased to be the primary
beneficiary.
In
November 2007, Blackwater contributed additional capital to its wholly-owned
subsidiary, SAC Holding II. This contribution was determined by us to be
material with respect to the capitalization of SAC Holding II; therefore,
triggering a requirement under FIN 46(R) for us to reassess the Company’s
involvement with those subsidiaries. This required reassessment led to the
conclusion that SAC Holding II has the ability to fund its own operations and
execute its business plan without any future subordinated financial support;
therefore, the Company was no longer the primary beneficiary of SAC Holding II
as of the date of Blackwater’s contribution.
Accordingly,
at the date AMERCO ceased to have a variable interest and ceased to be the
primary beneficiary of SAC Holding II and its current subsidiaries, it
deconsolidated these entities. The deconsolidation was accounted for as a
distribution of SAC Holding II’s interests to the sole shareholder of the SAC
entities. Because of AMERCO’s continuing involvement with SAC Holding II and its
subsidiaries, the distribution does not qualify as discontinued operations as
defined by SFAS 144.
It is
possible that SAC Holdings could take actions that would require us to
re-determine whether SAC Holdings has become a VIE or whether we have become the
primary beneficiary of SAC Holdings. Should this occur, we could be required to
consolidate some or all of SAC Holdings with our financial
statements.
The
consolidated balance sheet as of March 31, 2008 includes the accounts of AMERCO
and its wholly-owned subsidiaries. The consolidated balance sheet as of March
31, 2007 includes the accounts of AMERCO and its wholly-owned subsidiaries and
SAC Holding II and its subsidiaries. The March 31, 2008 statements of operations
and cash flows include AMERCO and its wholly-owned subsidiaries for the entire
year, and reflect SAC Holding II and its subsidiaries for the seven months ended
October 31, 2007. The March 31, 2007 and 2006 statements of operations and cash
flows include the accounts of AMERCO and its wholly-owned subsidiaries and SAC
Holding II and its subsidiaries.
Recoverability
of Property, Plant and Equipment
Property,
plant and equipment are stated at cost. Interest expense incurred during the
initial construction of buildings and rental equipment is considered part of
cost. Depreciation is computed for financial reporting purposes using the
straight-line or an accelerated method based on a declining balance formula over
the following estimated useful lives: rental equipment 2-20 years and buildings
and non-rental equipment 3-55 years. The Company follows the deferral method of
accounting based in the AICPA’s Airline Guide for major overhauls in which
engine overhauls are capitalized and amortized over five years and transmission
overhauls are capitalized and amortized over three years. Routine maintenance
costs are charged to operating expense as they are incurred. Gains and losses on
dispositions of property, plant and equipment are netted against depreciation
expense when realized. Equipment depreciation is recognized in amounts expected
to result in the recovery of estimated residual values upon disposal, i.e.,
minimize gains or losses. In determining the depreciation rate, historical
disposal experience, holding periods and trends in the market for vehicles are
reviewed.
We
regularly perform reviews to determine whether facts and circumstances exist
which indicate that the carrying amount of assets, including estimates of
residual value, may not be recoverable or that the useful life of assets are
shorter or longer than originally estimated. Reductions in residual values
(i.e., the price at which we ultimately expect to dispose of revenue earning
equipment) or useful lives will result in an increase in depreciation expense
over the life of the equipment. Reviews are performed based on vehicle class,
generally subcategories of trucks and trailers. We assess the recoverability of
our assets by comparing the projected undiscounted net cash flows associated
with the related asset or group of assets over their estimated remaining lives
against their respective carrying amounts. We consider factors such as current
and expected future market price trends on used vehicles and the expected life
of vehicles included in the fleet. Impairment, if any, is based on the excess of
the carrying amount over the fair value of those assets. If asset residual
values are determined to be recoverable, but the useful lives are shorter or
longer than originally estimated, the net book value of the assets is
depreciated over the newly determined remaining useful lives.
Since
fiscal 2006, the Company has been acquiring a significant number of moving
trucks via purchase rather than lease. Management performed an analysis of the
expected economic value of new rental trucks and determined that additions to
the fleet resulting from purchase should be depreciated on an accelerated method
based upon a declining formula. The salvage value and useful life assumptions of
the rental truck fleet remain unchanged. Under the declining balances
method (2.4 times declining balance) the book value of a rental truck is reduced
16%, 13%, 11%, 9%, 8%, 7%, and 6% during years one through seven, respectively
and then reduced on a straight line basis an additional 10% by the end of year
fifteen. Whereas, a standard straight line approach would reduce the book value
by approximately 5.3% per year over the life of the truck. For the affected
equipment, the accelerated depreciation was $56.7 million, $33.2 million and
$4.0 million greater than what it would have been if calculated under a straight
line approach for fiscal 2008, 2007 and 2006, respectively.
We typically sell our used vehicles at
our sales centers throughout North America, on our web site at
trucksales.uhaul.com or by phone at 1-866-404-0355. Although we intend to sell
our used vehicles for prices approximating book value, the extent to which we
realize a gain or loss on the sale of used vehicles is dependent upon various
factors including the general state of the used vehicle market, the age and
condition of the vehicle at the time of its disposal and depreciation rates with
respect to the vehicle.
Insurance
Reserves
Liabilities
for life insurance and certain annuity and health policies are established to
meet the estimated future obligations of policies in force, and are based on
mortality, morbidity and withdrawal assumptions from recognized actuarial tables
which contain margins for adverse deviation. In addition, liabilities for
health, disability and other policies include estimates of payments to be made
on insurance claims for reported losses and estimates of losses incurred, but
not yet reported. Liabilities for annuity contracts consist of contract account
balances that accrue to the benefit of the policyholders.
Insurance
reserves for RepWest and U-Haul take into account losses incurred based upon
actuarial estimates. 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.
Due to
the long tailed nature of the assumed reinsurance and the excess workers
compensation lines of insurance written by RepWest it may take a number of years
for claims to be fully developed and finally settled.
Impairment
of Investments
For
investments accounted for under SFAS 115, in determining if and when a decline
in market value below amortized cost is other-than-temporary, management makes
certain assumptions or judgments in its assessment including but not limited to:
ability and intent to hold the security, quoted market prices, dealer quotes or
discounted cash flows, industry factors, financial factors, and issuer specific
information such as credit strength. Other-than-temporary impairment in value is
recognized in the current period operating results. The Company’s insurance
subsidiaries recognized $0.5 million in other-than-temporary impairments for
fiscal 2008, $1.4 million for fiscal 2007 and $5.3 million for fiscal
2006.
Income
Taxes
The
Company’s tax returns are periodically reviewed by various taxing authorities.
The final outcome of these audits may cause changes that could materially impact
our financial results.
AMERCO
files a consolidated tax return with all of its legal subsidiaries, except for
DGLIC, a subsidiary of Oxford, which will file on a stand alone basis until
2012. SAC Holding Corporation and its legal subsidiaries and SAC Holding II
Corporation and its legal subsidiaries file separate consolidated tax returns,
which are in no way associated with AMERCO’s consolidated returns.
Recent
Accounting Pronouncements
In
September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS
157, Fair Value
Measurements which establishes how companies should measure fair value
when they are required to use a fair value measure for recognition or disclosure
purposes under GAAP. This statement is effective for financial statements issued
for fiscal years beginning after November 15, 2007 and interim periods
within those years. The provisions of SFAS 157 which have not been deferred by
the FASB are effective for us in April 2008. The Company does not believe that
the adoption of this statement will have a material impact on our financial
statements.
In
February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial
Assets and Liabilities, including an amendment of SFAS 115. This
statement allows for a company to irrevocably elect fair value as the
measurement attribute for certain financial assets and financial liabilities.
Changes in the fair value of such assets are recognized in earnings. SFAS 159 is
effective for fiscal years beginning after November 15, 2007. The provisions of
SFAS 159 are effective for us in April 2008. The Company does not believe that
the adoption of this statement will have a material impact on our financial
statements.
In
December 2007, the FASB issued SFAS 141(R), Business Combinations. SFAS
141(R) provides companies with principles and requirements on how an acquirer
recognizes and measures in its financial statements the identifiable assets
acquired, liabilities assumed, and any noncontrolling interest in the acquiree
as well as the recognition and measurement of goodwill acquired in a business
combination. SFAS 141(R) also requires certain disclosures to enable users of
the financial statements to evaluate the nature and financial effects of the
business combination. Acquisition costs associated with the business combination
will generally be expensed as incurred. SFAS 141(R) is effective for business
combinations occurring in fiscal years beginning after December 15, 2008,
which will require us to adopt these provisions for business combinations
occurring in fiscal 2010 and thereafter. Early adoption of SFAS 141(R) is not
permitted.
In
December 2007, the FASB issued SFAS 160, Noncontrolling Interests in
Consolidated Financial Statements — an amendment of ARB No. 51.
This Statement clarifies that a noncontrolling interest in a subsidiary is an
ownership interest in the consolidated entity that should be reported as equity
in the consolidated financial statements. This Statement changes the way the
consolidated income statement is presented by requiring net income to be
reported at amounts that include the amounts attributable to both the parent and
the noncontrolling interest and to disclose those amounts on the face of the
income statement. SFAS 160 is effective for fiscal years beginning after
December 15, 2008. Early adoption of SFAS 160 is not permitted. The Company does
not believe that the adoption of this statement will have a material impact on
our financial statements.
In March
2008, the FASB issued SFAS 161, Disclosures about Derivative
Instruments and Hedging Activities which amends SFAS 133 to require expanded disclosures about derivative
instruments and hedging activities regarding (1) the ways in which an entity
uses derivatives, (2) the accounting for derivatives and hedging activities, and
(3) the impact that derivatives have (or could have) on an entity's financial
position, financial performance, and cash flows. SFAS 161 is effective for
financial statements of fiscal years and interim periods beginning after
November 15, 2008, with early application encouraged. While disclosures for
earlier comparative periods presented at initial adoption are not required, they
are encouraged; following initial adoption, comparative disclosures are required
only for periods after
such adoption. The Company is currently evaluating the impact that SFAS 161 will
have on our financial statements and disclosures.
Results
of Operations
AMERCO
and Consolidated Entities
Fiscal
2008 Compared with Fiscal 2007
Listed
below on a consolidated basis are revenues for our major product lines for
fiscal 2008 and fiscal 2007:
|
|
Year
Ended March 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(In
thousands)
|
|
Self-moving
equipment rentals
|
|
$ |
1,451,292 |
|
|
$ |
1,462,470 |
|
Self-storage
revenues
|
|
|
122,248 |
|
|
|
126,424 |
|
Self-moving
and self-storage product and service sales
|
|
|
217,798 |
|
|
|
224,722 |
|
Property
management fees
|
|
|
22,820 |
|
|
|
21,154 |
|
Life
insurance premiums
|
|
|
111,996 |
|
|
|
120,399 |
|
Property
and casualty insurance premiums
|
|
|
28,388 |
|
|
|
24,335 |
|
Net
investment and interest income
|
|
|
62,110 |
|
|
|
59,696 |
|
Other
revenue
|
|
|
32,522 |
|
|
|
30,098 |
|
Consolidated
revenue
|
|
$ |
2,049,174 |
|
|
$ |
2,069,298 |
|
Self-moving
equipment rental revenues decreased $11.2 million in fiscal 2008 compared with
fiscal 2007. The majority of the year over year decline occurred during the
first half of fiscal 2008 driven primarily by negative trends in average one-way
revenue per transaction. During the second half of fiscal 2008 we experienced
incremental improvements in pricing; however, we still finished the full year
behind fiscal 2007 as it relates to average revenue per transaction. Partially
offsetting the negative pricing environment was the extra business day in
February 2008 and a marginal increase in total moving transactions compared with
fiscal 2007.
Self-storage
revenues decreased $4.2 million in fiscal 2008, compared with fiscal 2007 due to
the deconsolidation of SAC Holding II which was effective as of October 31, 2007
and which accounted for an $8.5 million decrease in reported self-storage
revenues in fiscal 2008 as compared with fiscal 2007. Self-storage revenues for
AMERCO owned locations increased $4.3 million in fiscal 2008 as compared with
fiscal 2007 driven primarily by favorable pricing. While average room occupancy
rates at AMERCO owned locations for fiscal 2008 declined 2.6% from fiscal 2007
to 84.0%, the Company increased the total number of rooms rented, rooms
available and square footage available in the same time period. The
deconsolidation of SAC Holding II for GAAP reporting purposes reduces
consolidated self-storage revenues; however, there has been no change in the
economics of our operational or financial relationship with SAC Holding
II.
Sales of
self-moving and self-storage products and services decreased $6.9 million in
fiscal 2008 as compared with fiscal 2007 with $6.0 million of the decrease
related to the deconsolidation of SAC Holding II. The remainder of
the decline is related primarily to lower sales of hitch and towing accessories
during the second half of fiscal 2008.
Premiums
at Oxford decreased $8.4 million driven by the termination of the credit life
and disability program and declining Medicare supplement premiums. During fiscal
2008, Oxford increased sales of its new life insurance products.
Premiums
at RepWest increased $4.1 million due to U-Haul related business.
Net
investment and interest income increased $2.4 million in fiscal 2008 as compared
with fiscal 2007. The Company receives interest income from SAC Holdings for
junior notes the Company holds. Prior to the deconsolidation of SAC Holding II
in October 2007, the amounts earned from junior notes related to SAC Holding II
were eliminated. After October 2007, this interest income is no longer
eliminated resulting in an increase of $2.9 million. This was offset by
decreases of the insurance companies’ investment income due to lower investment
yields and a smaller invested asset base.
As a
result of the items mentioned above, revenues for AMERCO and its consolidated
entities were $2,049.2 million for fiscal 2008, compared with $2,069.3 million
for fiscal 2007.
Listed
below are revenues and earnings from operations at each of our four operating
segments for fiscal 2008 and fiscal 2007, the insurance companies years ended
are December 31, 2007 and 2006.
|
|
Year
Ended March 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(In
thousands)
|
|
Moving
and storage
|
|
|
|
|
|
|
Revenues
|
|
$ |
1,858,230 |
|
|
$ |
1,861,751 |
|
Earnings
from operations
|
|
|
192,970 |
|
|
|
217,937 |
|
Property
and casualty insurance
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
40,478 |
|
|
|
38,486 |
|
Earnings
from operations
|
|
|
9,244 |
|
|
|
5,741 |
|
Life
insurance
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
137,448 |
|
|
|
148,820 |
|
Earnings
from operations
|
|
|
17,202 |
|
|
|
14,521 |
|
SAC
Holding II (a)
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
28,102 |
|
|
|
46,603 |
|
Earnings
from operations
|
|
|
7,926 |
|
|
|
13,854 |
|
Eliminations
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
(15,084 |
) |
|
|
(26,362 |
) |
Earnings
from operations
|
|
|
(23,620 |
) |
|
|
(16,825 |
) |
Consolidated
Results
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
2,049,174 |
|
|
|
2,069,298 |
|
Earnings
from operations
|
|
|
203,722 |
|
|
|
235,228 |
|
|
|
|
|
|
|
|
|
|
(a)
Fiscal 2008 includes 7 months of activity for SAC Holding II which was
deconsolidated effective October 31, 2007.
|
|
Total
costs and expenses increased $11.4 million in fiscal 2008 as compared with
fiscal 2007. The largest increase was in depreciation expense associated with
the rotation of our fleet. Conversely, with the shift in focus from operating
leases to purchases of new rental trucks, lease expense decreased in fiscal 2008
as compared with fiscal 2007. The Company nets gains and losses from the
disposal of property and equipment against depreciation. Included in
depreciation are gains on the sale of real estate of $12.7 million and $4.4
million in fiscal 2008 and fiscal 2007, respectively. Repair and maintenance
costs included in operating expenses declined for the year due to the rotation
of older trucks out of the active rental fleet. Benefits and operating expenses
decreased at each of the insurance companies as business volumes decline. Other
operating costs including personnel, property tax and certain legal-related
expenses increased in fiscal 2008 as compared with fiscal 2007.
As a
result of the aforementioned changes in revenues and expenses, earnings from
operations decreased to $203.7 million for fiscal 2008, compared with $235.2
million for fiscal 2007.
Interest
expense for fiscal 2008 was $101.4 million, compared with $89.4 million in
fiscal 2007. Fiscal 2007 results included a one-time, non-recurring charge of
$7.0 million, before taxes, of deferred debt issuance costs related to a loan
that was amended. The refinancing costs had the effect of decreasing on a
non-recurring basis, earnings for the year ended March 31, 2007 by $0.33 per
share before taxes, in which the tax effect was approximately $0.13 per share.
Absent this charge, the increase in interest expense in fiscal 2008 is related
to increased debt associated with the fleet rotation.
Income
tax expense was $34.5 million in fiscal 2008, compared with $55.3 million in
fiscal 2007.
Dividends
accrued on our Series A preferred stock were $13.0 million in both fiscal 2008
and 2007, respectively.
As a
result of the above mentioned items, net earnings available to common
shareholders were $54.8 million in fiscal 2008, compared with $77.6 million in
fiscal 2007.
The
weighted average common shares outstanding: basic and diluted were 19,740,571 in
fiscal 2008 and 20,838,570 in fiscal 2007.
Basic and
diluted earnings per share in fiscal 2008 were $2.78, compared with $3.72 in
fiscal 2007.
Fiscal
2007 Compared with Fiscal 2006
Listed
below on a consolidated basis are revenues for our major product lines for
fiscal 2007 and fiscal 2006:
|
|
Year
Ended March 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In
thousands)
|
|
Self-moving
equipment rentals
|
|
$ |
1,462,470 |
|
|
$ |
1,489,429 |
|
Self-storage
revenues
|
|
|
126,424 |
|
|
|
119,742 |
|
Self-moving
and self-storage product and service sales
|
|
|
224,722 |
|
|
|
223,721 |
|
Property
management fees
|
|
|
21,154 |
|
|
|
21,195 |
|
Life
insurance premiums
|
|
|
120,399 |
|
|
|
118,833 |
|
Property
and casualty insurance premiums
|
|
|
24,335 |
|
|
|
26,001 |
|
Net
investment and interest income
|
|
|
59,696 |
|
|
|
48,279 |
|
Other
revenue
|
|
|
30,098 |
|
|
|
40,325 |
|
Consolidated
revenue
|
|
$ |
2,069,298 |
|
|
$ |
2,087,525 |
|
During
fiscal 2007, self-moving equipment rental revenues decreased $27.0 million,
compared with fiscal 2006 with the majority of the variance occurring during the
second half of the year. The Company finished fiscal 2007 with increases in
one-way transactions along with increases in the average inventory of the truck
fleet. However, offsetting these factors were a decrease in average revenue per
transaction primarily due to one-way pricing, the lack of certain mid-size
trucks during the spring and summer months of fiscal 2007 and decreased fleet
utilization. The Company’s response to competitive pricing issues further
lowered self-moving rental revenues.
Self-storage
revenues increased $6.7 million in fiscal 2007, compared with fiscal 2006
largely due to improved pricing. During fiscal 2007, the Company increased rooms
and square footage available primarily through build-outs at existing
facilities.
Sales of
self-moving and self-storage products and services revenues increased $1.0
million in fiscal 2007, compared with fiscal 2006. The Company continues to
improve its visibility as a leading provider of propane, moving supplies and
towing accessories and offer new products and services in an effort to increase
sales results.
Other
revenues decreased $10.2 million in fiscal 2007, compared with fiscal 2006.
Fiscal 2006 included several non-recurring items.
Premiums
at RepWest decreased $1.7 million with increases in U-Haul related premiums
offset by reductions in other lines.
Oxford’s
premium revenues increased approximately $1.6 million primarily due to an
increase in Medicare supplement premiums resulting from the acquisition of
DGLIC.
As a
result of the items mentioned above, revenues for AMERCO and its consolidated
entities were $2,069.3 million for fiscal 2007, compared with $2,087.5 million
for fiscal 2006.
Listed
below are revenues and earnings from operations at each of our four operating
segments for fiscal 2007 and fiscal 2006; for the insurance companies years
ended are December 31, 2006 and 2005:
|
|
Year
Ended March 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In
thousands)
|
|
Moving
and storage
|
|
|
|
|
|
|
Revenues
|
|
$ |
1,861,751 |
|
|
$ |
1,886,328 |
|
Earnings
from operations
|
|
|
217,937 |
|
|
|
292,774 |
|
Property
and casualty insurance
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
38,486 |
|
|
|
37,358 |
|
Earnings
from operations
|
|
|
5,741 |
|
|
|
1,144 |
|
Life
insurance
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
148,820 |
|
|
|
148,080 |
|
Earnings
from operations
|
|
|
14,521 |
|
|
|
13,933 |
|
SAC
Holding II
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
46,603 |
|
|
|
46,239 |
|
Earnings
from operations
|
|
|
13,854 |
|
|
|
13,643 |
|
Eliminations
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
(26,362 |
) |
|
|
(30,480 |
) |
Earnings
from operations
|
|
|
(16,825 |
) |
|
|
(16,113 |
) |
Consolidated
Results
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
2,069,298 |
|
|
|
2,087,525 |
|
Earnings
from operations
|
|
|
235,228 |
|
|
|
305,381 |
|
Total
costs and expenses increased $51.9 million in fiscal 2007, compared with fiscal
2006. This is due primarily to increases in depreciation expense associated with
the acquisition of new trucks and the fleet rotation. Beginning in the second
half of fiscal 2006, the Company began utilizing debt to finance the majority of
new truck purchases rather than operating lease arrangements which were used
primarily during the previous ten years. While the Company generates a cash flow
benefit from utilizing the depreciation deduction for income taxes, as compared
to what the lease expense would have been, the consolidated statement of
operations reflects an increase in depreciation expense greater than what the
corresponding lease expense would have been had we leased this equipment
instead. For additional information on the Company’s depreciation policy refer
to “Critical Accounting Policies and Estimates”.
As a
result of the aforementioned changes in revenues and expenses, earnings from
operations decreased to $235.2 million for fiscal 2007, compared with $305.4
million for fiscal 2006.
Interest
expense for fiscal 2007 was $89.4 million, compared with $105.1 million in
fiscal 2006. The interest expense related to the increase in average borrowings
was partially offset by a reduction in the average borrowing rate resulting from
the refinancing activities in fiscal 2006. Fiscal 2007 results included a
one-time, non-recurring charge of $7.0 million before taxes related to the full
amortization of deferred debt issuance costs related to a loan that was
amended. The refinancing related charge had the effect of decreasing
on a non-recurring basis, earnings for the year ended March 31, 2007 by $0.33
per share before taxes, in which the tax effect was approximately $0.13 per
share. Fiscal 2006 results included a one-time, non-recurring charge of $35.6
million before taxes which includes fees for early extinguishment of debt of
$21.2 million and the write-off of $14.4 million of debt issuance
costs. The refinancing costs had the effect of decreasing, on a
non-recurring basis, earnings for the year ended March 31, 2006 by $1.71 per
share before taxes, in which the tax effect was approximately $0.63 per
share.
Income
tax expense was $55.3 million in fiscal 2007, compared with $79.1 million in
fiscal 2006.
Dividends
accrued on our Series A preferred stock were $13.0 million in both fiscal 2007
and 2006, respectively.
As a
result of the above mentioned items, net earnings available to common
shareholders were $77.6 million in fiscal 2007, compared with $108.2 million in
fiscal 2006.
The
weighted average common shares outstanding: basic and diluted were 20,838,570 in
fiscal 2007 and 20,857,108 in fiscal 2006.
Basic and
diluted earnings per share in fiscal 2007 were $3.72, compared with $5.19 in
fiscal 2006.
Moving
and Storage
Fiscal
2008 Compared with Fiscal 2007
Listed
below are revenues for the major product lines at our Moving and Storage
Operating Segment for fiscal 2008 and fiscal 2007:
|
|
Year
Ended March 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(In
thousands)
|
|
Self-moving
equipment rentals
|
|
$ |
1,451,292 |
|
|
$ |
1,462,470 |
|
Self-storage
revenues
|
|
|
110,779 |
|
|
|
106,498 |
|
Self-moving
and self-storage product and service sales
|
|
|
207,759 |
|
|
|
208,677 |
|
Property
management fees
|
|
|
24,520 |
|
|
|
23,951 |
|
Net
investment and interest income
|
|
|
34,906 |
|
|
|
34,161 |
|
Other
revenue
|
|
|
28,974 |
|
|
|
25,994 |
|
Moving
and Storage revenue
|
|
$ |
1,858,230 |
|
|
$ |
1,861,751 |
|
Self-moving
equipment rental revenues decreased $11.2 million in fiscal 2008 compared with
fiscal 2007. The majority of the year over year decline occurred during the
first half of fiscal 2008 driven primarily by negative trends in average one-way
revenue per transaction. During the second half of fiscal 2008 we experienced
incremental improvements in pricing; however, we still finished the full year
behind fiscal 2007 as it relates to revenue per transaction. Partially
offsetting the negative pricing environment was the extra business day in
February 2008 and a marginal increase in total moving transactions compared to
fiscal 2007.
Self-storage
revenues increased $4.3 million in fiscal 2008 compared with fiscal 2007
primarily due to favorable pricing. While average room occupancy rates for
fiscal 2008 declined 2.6% from fiscal 2007 to 84.0%, the Company increased the
total number of rooms rented, rooms available and square footage available in
the same time period.
Sales of
self-moving and self-storage products and services decreased $0.9 million in
fiscal 2008 as compared with fiscal 2007 primarily due to lower sales of hitch
and towing accessories during the second half of fiscal 2008.
Other
revenue increased $3.0 million for fiscal 2008, compared with fiscal 2007. Other
revenue includes new programs that have not yet achieved a significant volume of
reportable revenues and other revenues not directly related to any other
reported line item.
The
Company owns and manages self-storage facilities. Self-storage revenues reported
in the consolidated financial statements for Moving and Storage represent
Company-owned locations only. Self-storage data for our owned storage locations
was as follows:
|
|
Year
Ended March 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(In
thousands, except occupancy rate)
|
|
Room
count as of March 31
|
|
|
131 |
|
|
|
127 |
|
Square
footage as of March 31
|
|
|
10,533 |
|
|
|
10,062 |
|
Average
number of rooms occupied
|
|
|
109 |
|
|
|
108 |
|
Average
occupancy rate based on room count
|
|
|
84.0 |
% |
|
|
86.6 |
% |
Average
square footage occupied
|
|
|
8,767 |
|
|
|
8,653 |
|
Total
costs and expenses increased $31.2 million in fiscal 2008 as compared with
fiscal 2007. The largest increase is in depreciation expense associated with the
rotation of our fleet. Conversely, with the shift in focus from operating leases
to purchases of new rental trucks lease expense decreased in fiscal 2008 as
compared with fiscal 2007. The Company nets gains and losses from the disposal
of property and equipment against depreciation. Included in depreciation are
gains on the sale of real estate of $12.7 million and $4.4 million in fiscal
2008 and fiscal 2007, respectively. Repair and maintenance costs included in
operating expenses declined for the year due to the rotation of older trucks out
of the active rental fleet. These declines were offset by other operating costs
including personnel, property tax and certain legal-related
expenses.
Equity in
the earnings of AMERCO’s insurance subsidiaries increased $10.0 million in
fiscal 2008 as compared with fiscal 2007 primarily due to reduced operating
expenses and benefits and losses.
As a
result of the above mentioned changes in revenues and expenses, earnings from
operations decreased to $193.0 million in fiscal 2008, compared with $217.9
million for fiscal 2007.
Fiscal
2007 Compared with Fiscal 2006
Listed
below are revenues for our major product lines at our Moving and Storage
Operating Segment for fiscal 2007 and fiscal 2006:
|
|
Year
Ended March 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In
thousands)
|
|
Self-moving
equipment rentals
|
|
$ |
1,462,470 |
|
|
$ |
1,489,429 |
|
Self-storage
revenues
|
|
|
106,498 |
|
|
|
100,873 |
|
Self-moving
and self-storage product and service sales
|
|
|
208,677 |
|
|
|
207,119 |
|
Property
management fees
|
|
|
23,951 |
|
|
|
23,988 |
|
Net
investment and interest income
|
|
|
34,161 |
|
|
|
30,025 |
|
Other
revenue
|
|
|
25,994 |
|
|
|
34,894 |
|
Moving
and Storage revenue
|
|
$ |
1,861,751 |
|
|
$ |
1,886,328 |
|
During
fiscal 2007, self-moving equipment rental revenues decreased $27.0 million,
compared with fiscal 2006 with the majority of the variance occurring during the
second half of the year. The Company finished fiscal 2007 with increases in
one-way transactions along with increases in the average inventory of the entire
fleet. However, offsetting these factors were a decrease in average revenue per
transaction primarily due to one-way pricing, the lack of certain mid-size
trucks during the spring and summer months of fiscal 2007 and decreased fleet
utilization. The Company’s response to competitive pricing issues further
lowered self-moving rental revenues.
Self-storage
revenues increased $5.6 million for fiscal 2007, compared with fiscal 2006
primarily due to improved pricing. The Company has increased the
number of rooms and square footage available period over period through the
expansion of existing facilities and the acquisition of new
facilities.
Net
investment and interest income increased $4.1 million primarily due to larger
average invested cash balances combined with higher interest rates.
Other
revenues decreased $8.9 million for fiscal 2007, compared with fiscal
2006. Fiscal 2006 included several non-recurring items.
The
Company owns and manages self-storage facilities. Self-storage revenues reported
in the consolidated financial statements for Moving and Storage represent
Company-owned locations only. Self-storage data for our owned storage
locations was as follows:
|
|
Year
Ended March 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In
thousands, except occupancy rate)
|
|
Room
count as of March 31
|
|
|
127 |
|
|
|
123 |
|
Square
footage as of March 31
|
|
|
10,062 |
|
|
|
9,592 |
|
Average
number of rooms occupied
|
|
|
108 |
|
|
|
107 |
|
Average
occupancy rate based on room count
|
|
|
86.6 |
% |
|
|
87.9 |
% |
Average
square footage occupied
|
|
|
8,653 |
|
|
|
8,516 |
|
Total
costs and expenses increased $50.3 million for fiscal 2007, compared with fiscal
2006. Increases in depreciation, lease, licensing and freight costs
resulting from the acquisition of new trucks and the rotation of the fleet were
partially offset by reductions in maintenance and repair.
As a
result of the above mentioned changes in revenues and expenses, earnings from
operations decreased to $217.9 million in fiscal 2007, compared with $292.8
million for fiscal 2006.
Republic
Western Insurance Company
2007
Compared with 2006
Net
premiums were $28.4 million and $24.3 million for the years ended December 31,
2007 and 2006, respectively. U-Haul related premiums were $26.4 million and
$22.0 million for the years ended December 31, 2007 and 2006, respectively.
Other lines of business were $2.0 million and $2.3 million for the years ended
December 31, 2007 and 2006, respectively.
Net
investment income was $12.1 million and $14.2 million for the years ended
December 31, 2007 and 2006, respectively. The decrease is due to the sale of
real estate in 2006, which resulted in gains in 2006.
Net
operating expenses were $12.0 million and $8.8 million for the years ended
December 31, 2007 and 2006, respectively. The increase is due to a $2.7 million
increase in commissions on the additional liability program.
Benefits
and losses incurred were $19.0 million and $21.9 million for the years ended
December 31, 2007 and 2006, respectively.
Amortization
of deferred acquisition costs were $0.2 million and $2.1 million for the years
ended December 31, 2007 and 2006, respectively. The decrease is due to the
termination of credit property business in March of 2006.
Earnings
from operations were $9.2 million and $5.7 million for the years ended December
31, 2007 and 2006, respectively.
2006
Compared with 2005
Net
premiums were $24.3 million and $26.0 million for the years ended December 31,
2006 and 2005, respectively. U-Haul related premiums were $22.0 million and
$20.2 million for the years ended December 31, 2006 and 2005, respectively.
Other lines of business were $2.3 million and $5.8 million for the years ended
December 31, 2006 and 2005, respectively.
Net
investment income was $14.2 million and $11.4 million for the years ended
December 31, 2006 and 2005, respectively. The increase is due to an increase in
short-term rates and sale of real estate.
Net
operating expenses were $8.8 million and $10.8 million for years ended December
31, 2006 and 2005, respectively. The decrease is due to a reduction of general
administrative expenses due to the exit of the non U-Haul lines of
business.
Benefits
and losses incurred were $21.9 million and $22.6 million for the years ended
December 31, 2006 and 2005, respectively.
Amortization
of deferred acquisition costs were $2.1 million and $2.9 million for the years
ended December 31, 2006 and 2005, respectively. The decrease is due to decreased
premium writings.
Earnings
from operations were $5.7 million and $1.1 million for years ended December 31,
2006 and 2005, respectively.
The
following table illustrates the change in unpaid loss and loss adjustment
expenses on a gross basis. The first line represents gross reserves (reserves
prior to the effects of reinsurance) as originally reported at the end of the
stated year. The second section, reading down, represents cumulative amounts
paid as of the end of successive years with respect to that reserve. The third
section, reading down, represents revised estimates of the original recorded
gross reserve as of the end of successive years. The last section compares the
latest revised estimate of gross reserves to the reserve amount as originally
established for that year-end. The last section is cumulative and should not be
totaled.
|
|
Unpaid
Loss and Loss Adjustment Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31,
|
|
|
|
1997
|
|
|
1998
|
|
|
1999
|
|
|
2000
|
|
|
2001
|
|
|
2002
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
(In
thousands)
|
|
Unpaid
Loss and Loss Adjustment Expenses
|
|
$ |
384,816 |
|
|
$ |
344,748 |
|
|
$ |
334,858 |
|
|
$ |
382,651 |
|
|
$ |
448,987 |
|
|
$ |
399,447 |
|
|
$ |
416,259 |
|
|
$ |
380,875 |
|
|
$ |
346,928 |
|
|
$ |
288,783 |
|
|
$ |
288,410 |
|
Paid
(Cumulative) as of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One
year later
|
|
|
103,752 |
|
|
|
82,936 |
|
|
|
117,025 |
|
|
|
130,471 |
|
|
|
130,070 |
|
|
|
100,851 |
|
|
|
73,384 |
|
|
|
44,677 |
|
|
|
40,116 |
|
|
|
35,297 |
|
|
|
- |
|
Two
years later
|
|
|
174,867 |
|
|
|
164,318 |
|
|
|
186,193 |
|
|
|
203,605 |
|
|
|
209,525 |
|
|
|
164,255 |
|
|
|
114,246 |
|
|
|
83,230 |
|
|
|
73,235 |
|
|
|
- |
|
|
|
- |
|
Three
years later
|
|
|
216,966 |
|
|
|
218,819 |
|
|
|
232,883 |
|
|
|
255,996 |
|
|
|
266,483 |
|
|
|
201,346 |
|
|
|
151,840 |
|
|
|
115,955 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Four
years later
|
|
|
246,819 |
|
|
|
255,134 |
|
|
|
264,517 |
|
|
|
299,681 |
|
|
|
295,268 |
|
|
|
233,898 |
|
|
|
184,219 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Five
years later
|
|
|
269,425 |
|
|
|
274,819 |
|
|
|
295,997 |
|
|
|
320,629 |
|
|
|
322,191 |
|
|
|
263,654 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Six
years later
|
|
|
282,598 |
|
|
|
297,354 |
|
|
|
314,281 |
|
|
|
341,543 |
|
|
|
346,733 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Seven
years later
|
|
|
300,814 |
|
|
|
311,963 |
|
|
|
331,385 |
|
|
|
358,882 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Eight
years later
|
|
|
314,322 |
|
|
|
327,141 |
|
|
|
346,270 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Nine
years later
|
|
|
326,805 |
|
|
|
340,190 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Ten
years later
|
|
|
337,163 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserved
Re-estimated as of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One
year later
|
|
|
357,733 |
|
|
|
339,602 |
|
|
|
383,264 |
|
|
|
433,222 |
|
|
|
454,510 |
|
|
|
471,029 |
|
|
|
447,524 |
|
|
|
388,859 |
|
|
|
326,386 |
|
|
|
319,951 |
|
|
|
|
|
Two
years later
|
|
|
361,306 |
|
|
|
371,431 |
|
|
|
432,714 |
|
|
|
454,926 |
|
|
|
523,624 |
|
|
|
480,713 |
|
|
|
456,171 |
|
|
|
368,756 |
|
|
|
357,135 |
|
|
|
- |
|
|
|
|
|
Three
years later
|
|
|
369,598 |
|
|
|
429,160 |
|
|
|
437,712 |
|
|
|
517,361 |
|
|
|
500,566 |
|
|
|
521,319 |
|
|
|
435,549 |
|
|
|
399,693 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Four
years later
|
|
|
398,899 |
|
|
|
413,476 |
|
|
|
480,200 |
|
|
|
543,554 |
|
|
|
571,045 |
|
|
|
502,922 |
|
|
|
466,709 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Five
years later
|
|
|
398,184 |
|
|
|
443,696 |
|
|
|
524,548 |
|
|
|
558,765 |
|
|
|
569,104 |
|
|
|
537,610 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Six
years later
|
|
|
428,031 |
|
|
|
477,975 |
|
|
|
520,675 |
|
|
|
559,873 |
|
|
|
608,159 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Seven
years later
|
|
|
450,728 |
|
|
|
485,228 |
|
|
|
527,187 |
|
|
|
583,904 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Eight
years later
|
|
|
461,082 |
|
|
|
496,484 |
|
|
|
550,333 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Nine
years later
|
|
|
469,869 |
|
|
|
521,403 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Ten
years later
|
|
|
497,251 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Cumulative
Redundancy (Deficiency)
|
|
$ |
(112,435 |
) |
|
$ |
(176,655 |
) |
|
$ |
(215,475 |
) |
|
$ |
(201,253 |
) |
|
$ |
(159,172 |
) |
|
$ |
(138,163 |
) |
|
$ |
(50,450 |
) |
|
$ |
(18,818 |
) |
|
$ |
(10,207 |
) |
|
$ |
(31,168 |
) |
|
|
|
|
Retro
Premium Recoverable
|
|
|
3,037 |
|
|
|
(1,879 |
) |
|
|
6,797 |
|
|
|
5,613 |
|
|
|
21,756 |
|
|
|
7,036 |
|
|
|
374 |
|
|
|
2,233 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Re-estimated
Reserve: Amount (Cumulative)
|
|
$ |
(109,398 |
) |
|
$ |
(178,534 |
) |
|
$ |
(208,678 |
) |
|
$ |
(195,640 |
) |
|
$ |
(137,416 |
) |
|
$ |
(131,127 |
) |
|
$ |
(50,076 |
) |
|
$ |
(16,585 |
) |
|
$ |
(10,207 |
) |
|
$ |
(31,168 |
) |
|
|
|
|
Activity
in the liability for unpaid losses and loss adjustment expenses for RepWest is
summarized as follows:
|
|
Year
Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(In
thousands)
|
|
Balance
at January 1
|
|
$ |
288,783 |
|
|
$ |
346,928 |
|
|
$ |
380,875 |
|
Less:
reinsurance recoverable
|
|
|
144,950 |
|
|
|
181,388 |
|
|
|
189,472 |
|
Net
balance at January 1
|
|
|
143,833 |
|
|
|
165,540 |
|
|
|
191,403 |
|
Incurred
related to:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
year
|
|
|
7,094 |
|
|
|
6,006 |
|
|
|
6,429 |
|
Prior
years
|
|
|
11,894 |
|
|
|
15,895 |
|
|
|
16,161 |
|
Total
incurred
|
|
|
18,988 |
|
|
|
21,901 |
|
|
|
22,590 |
|
Paid
related to:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
year
|
|
|
3,289 |
|
|
|
3,492 |
|
|
|
3,774 |
|
Prior
years
|
|
|
35,303 |
|
|
|
40,116 |
|
|
|
44,679 |
|
Total
paid
|
|
|
38,592 |
|
|
|
43,608 |
|
|
|
48,453 |
|
Net
balance at December 31
|
|
|
124,229 |
|
|
|
143,833 |
|
|
|
165,540 |
|
Plus:
reinsurance recoverable
|
|
|
164,181 |
|
|
|
144,950 |
|
|
|
181,388 |
|
Balance
at December 31
|
|
$ |
288,410 |
|
|
$ |
288,783 |
|
|
$ |
346,928 |
|
The
liability for incurred losses and loss adjustment expenses (net of reinsurance
recoverable of $164.2 million) decreased by $19.6 million in 2007. The decrease
is a result of resolving claims associated with terminated unprofitable
programs.
Oxford
Life Insurance Company
2007
Compared with 2006
Net
premiums were $112.0 million and $121.6 million for the years ended December 31,
2007 and 2006, respectively. Medicare supplement premiums decreased by $4.1
million due to policy lapses and lower first year sales offset by an increase in
life insurance premiums of $2.9 million due to increased sales. Oxford stopped
writing new credit insurance business in 2006 and as a result, credit insurance
premiums decreased by $5.9 million.
Net
investment income was $20.9 million and $22.5 million for the years ended
December 31, 2007 and 2006, respectively. The decrease was due to a net
reduction in invested assets and lower investment yields.
Net
operating expenses were $23.8 million and $30.9 million for the years ended
December 31, 2007 and 2006, respectively. The decrease was primarily
attributable to the reduction of expenses on credit insurance due to business
discontinuance and additional costs in 2006 related to the acquisition of
DGLIC.
Benefits
incurred were $83.4 million and $88.3 million, for the years ended December 31,
2007 and 2006, respectively. This decrease was the result of a $2.0 million
decrease in Medicare supplement due to policy decrements and a decrease of $1.7
million in credit insurance due to decreased exposure, offset by life insurance
benefits of $1.5 million due to increased sales.
Amortization
of deferred acquisition costs (“DAC”) and the value of business acquired
(“VOBA”) was $13.0 million and $15.1 million for the years ended December 31,
2007 and 2006, respectively. The credit business had a decrease of amortization
of $3.9 million due to decreased business, offset by an increase of $2.3 million
in annuities due to an update of DAC assumptions.
Earnings
from operations were $17.2 million and $14.5 million for the years ended
December 31, 2007 and 2006, respectively.
2006
Compared with 2005
Net
premiums were $121.6 million and $120.4 million for the years ended December 31,
2006 and 2005, respectively. Medicare supplement premiums increased by $10.6
million primarily due to the acquisition of DGLIC. The Company stopped writing
new credit insurance business in 2006 and as a result, credit insurance premiums
decreased by $9.1 million.
Net
investment income was $22.5 million and $22.0 million for the years ended
December 31, 2006 and 2005, respectively. The increase was primarily due to a
reduction in realized losses on disposals from 2005, offset by a net reduction
in invested assets. Investment yields were consistent between the two
years.
Other
income was $4.7 million and $5.8 million for the years ended December 31, 2006
and 2005, respectively. This decrease was the result of decreased surrender
charge income of $0.5 million and a decrease in administrative income of $0.6
million.
Net
operating expenses were $30.9 million and $27.0 million for the years ended
December 31, 2006 and 2005, respectively. The increase is primarily due to the
acquisition of DGLIC.
Benefits
incurred were $88.3 million and $85.7 million, for the years ended December 31,
2006 and 2005, respectively. This increase was primarily a result of a $3.8
million increase in Medicare supplement benefits due to the acquisition of
DGLIC, partially offset by a slightly improved loss ratio. Credit insurance
benefits decreased $4.4 million due to decreased exposure. Other health benefits
increased $1.1 million during the current period due to an adjustment for
current claim trends. Life insurance benefits increased $1.4 million due to
increased sales.
Amortization
of DAC and VOBA was $15.1 million and $21.4 million for the years ended December
31, 2006 and 2005, respectively. During the fourth quarter of 2005 and 2006, the
Company made adjustments to the assumptions for expected future profits for the
annuity business. These included changes to the assumptions for lapse rates,
interest crediting and investment returns. Amortization expense was reduced by
$4.7 million during 2006 as a result of these changes, including $1.3 million in
the fourth quarter of 2006. The credit business had a decrease of amortization
of $3.2 million due to decreased business. VOBA amortization increased $0.7
million due to the acquisition of DGLIC. DAC amortization in the life segment
increased due to increased new business.
Earnings
from operations were $14.5 million and $13.9 million for the years ended
December 31, 2006 and 2005, respectively.
SAC
Holding II
Fiscal
2008 Compared with Fiscal 2007
Listed
below are revenues for the major product lines at SAC Holding II for fiscal 2008
and fiscal 2007:
|
|
Year
Ended March 31,
|
|
|
|
2008
(a)
|
|
|
2007
|
|
|
|
(In
thousands)
|
|
Self-moving
equipment rentals
|
|
$ |
5,846 |
|
|
$ |
9,225 |
|
Self-storage
revenues
|
|
|
11,469 |
|
|
|
19,926 |
|
Self-moving
and self-storage product and service sales
|
|
|
10,039 |
|
|
|
16,045 |
|
Other
revenue
|
|
|
748 |
|
|
|
1,407 |
|
Segment
revenue
|
|
$ |
28,102 |
|
|
$ |
46,603 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Activity for the
seven months ended October 2007, prior to
deconsolidation.
|
|
|
|
|
|
Revenues
in fiscal 2008 decreased $18.5 million, compared with fiscal 2007. Total costs
and expenses were $20.2 million in fiscal 2008, compared with $32.7 million in
fiscal 2007. Earnings from operations were $7.9 million in fiscal 2008, compared
with $13.9 million in fiscal 2007. Each of these decreases was due to the
deconsolidation of SAC Holding II effective October 31, 2007.
Fiscal
2007 Compared with Fiscal 2006
Listed
below are revenues for the major product lines at SAC Holding II for fiscal 2007
and fiscal 2006:
|
|
Year
Ended March 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In
thousands)
|
|
Self-moving
equipment rentals
|
|
$ |
9,225 |
|
|
$ |
9,498 |
|
Self-storage
revenues
|
|
|
19,926 |
|
|
|
18,869 |
|
Self-moving
and self-storage product and service sales
|
|
|
16,045 |
|
|
|
16,602 |
|
Other
revenue
|
|
|
1,407 |
|
|
|
1,270 |
|
Segment
revenue
|
|
$ |
46,603 |
|
|
$ |
46,239 |
|
Total
revenues were $46.6 million in fiscal 2007, compared with $46.2 million in
fiscal 2006 due primarily to increases in self-storage revenues.
Total
costs and expenses were $32.7 million in fiscal 2007, compared with $32.6
million in fiscal 2006.
Earnings
from operations were $13.9 million in fiscal 2007, compared with $13.6 million
in fiscal 2006.
Liquidity and Capital Resources
We
believe our current capital structure is a positive factor that will enable us
to pursue our operational plans and goals, and provide us with sufficient
liquidity for the next three to five years. The majority of our obligations
currently in place mature at the end of fiscal years 2014, 2015 or 2018. As a
result, we believe that our liquidity is sufficient for our current and
foreseeable needs. However, there is no assurance that future cash flows will be
sufficient to meet our outstanding debt obligations and our other future capital
needs.
At March
31, 2008, cash and cash equivalents totaled $206.6 million, compared with $75.3
million on March 31, 2007. The assets of our insurance subsidiaries are
generally unavailable to fulfill the obligations of non-insurance operations
(AMERCO, U-Haul and Real Estate). As of March 31, 2008 (or as otherwise
indicated), cash and cash equivalents, other financial assets (receivables,
short-term investments, other investments, fixed maturities, and related party
assets) and obligations of each operating segment were:
|
|
Moving
& Storage
|
|
|
RepWest
(a)
|
|
|
Oxford
(a)
|
|
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
& cash equivalents
|
|
$ |
191,250 |
|
|
$ |
6,848 |
|
|
$ |
8,524 |
|
Other
financial assets
|
|
|
343,358 |
|
|
|
402,329 |
|
|
|
590,320 |
|
Debt
obligations
|
|
|
1,504,677 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
As of December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
At March
31, 2008, our Moving and Storage operations (AMERCO, U-Haul and Real Estate) had
cash available under existing credit facilities of $164.2 million and were
comprised of:
|
|
March
31, 2008
|
|
|
|
(In
millions)
|
|
|
|
|
|
Real
estate loan (revolving credit)
|
|
$ |
100.0 |
|
Construction
loan (revolving credit)
|
|
|
9.2 |
|
Working
capital loan (revolving credit)
|
|
|
35.0 |
|
Fleet
loan (amortizing loan)
|
|
|
20.0 |
|
|
|
$ |
164.2 |
|
A summary
of our consolidated cash flows for fiscal 2008, 2007 and 2006 is shown in the
table below:
|
|
Year
Ended March 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In
thousands)
|
|
Net
cash provided by operating activities
|
|
$ |
329,287 |
|
|
$ |
350,721 |
|
|
$ |
270,508 |
|
Net
cash used by investing activities
|
|
|
(357,962 |
) |
|
|
(517,619 |
) |
|
|
(258,836 |
) |
Net
cash provided by financing activities
|
|
|
159,929 |
|
|
|
|