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, 2009
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
the definitions of a “large accelerated filer,” “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, 2008 was $235,669,452. 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.
19,607,788
shares of AMERCO Common Stock, $0.25 par value were outstanding at June 1,
2009.
Documents
incorporated by reference: Portions of AMERCO’s definitive Proxy Statement for
the 2009 Annual Meeting of Stockholders, to be filed within 120 days after
AMERCO’s fiscal year ended March 31, 2009, 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 –
11
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Item
1B.
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11
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Item
2.
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11
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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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13
– 15
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Item
6.
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16
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Item
7.
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17
– 38
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Item
7A.
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39
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Item
8.
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40
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Item
9.
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40
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Item
9A.
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40
– 41
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Item
9B.
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41
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PART
III
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Item
10.
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43
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Item
11.
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43
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Item
12.
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43
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Item
13.
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43
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Item
14.
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43
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PART
IV
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Item
15.
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44
– 51
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PART
I
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 a better and better product or service
to more and more people at a lower and lower cost. Unless the context otherwise
requires, the term “Company,” “we,” “us,” or “our” refers to AMERCO and all of
its legal subsidiaries.
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, self storage rooms and sell moving and self-storage
products and services to complement our independent dealer network.
We rent
our distinctive orange and white U-Haul trucks and trailers as well as offer
self-storage rooms through a network of over 1,400 Company operated retail
moving centers and approximately 14,400 independent U-Haul dealers. In addition,
we have an independent storage facility network with over 4,200 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 within our business model and are
dedicated to manufacturing reusable components and recyclable products. This
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 administered the self-insured employee health and dental plans
for Arizona employees of the Company through December 31,
2008.
Available
Information
AMERCO
and U-Haul are each incorporated in Nevada. U-Haul’s internet address is
uhaul.com. On AMERCO’s investor relations web site, 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, as amended (the “Exchange Act”). 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, 2009, our rental fleet consisted of approximately 101,000 trucks,
76,000 trailers and 34,000 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, we 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 two
towing options; auto transport, in which all four wheels are off the ground and
a tow dolly, in which the front wheels of the towed vehicle are off 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.
We
estimate that 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 refilling networks, with over 1,000
locations providing this convenient service. We employ trained, certified
personnel to refill all propane cylinders and alternative fuel vehicles. Our
network of propane dispensing locations is one of the largest automobile
alternative refueling networks 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 over 1,000 square feet. We operate nearly 1,090 self-storage
locations in North America, with more than 395,000 rentable rooms
comprising approximately 35 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.
Another
extension of our strategy to make do-it-yourself moving and storage easier is
our recently launched “U-Box”TM
program. We deliver a storage container to a location of our
customer’s choosing. Once the container is filled it can be stored at
the customer’s location, or picked up by us and taken to one of our storage
facilities or moved to a location of the customer’s choice within our expanding
delivery area.
Additionally,
we offer moving and storage protection packages such as Safemove and Safetow,
providing 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, 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 self 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
currently has three reportable segments. They are Moving and Storage (AMERCO,
U-Haul and Amerco Real Estate Company (“Real Estate”)), Property and Casualty
Insurance and Life Insurance. SAC Holding II Corporation and its subsidiaries
(“SAC Holding II”) was a reportable segment through October 2007. 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
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 91.4%,
90.6% and 89.9% of consolidated net revenue in fiscal 2009, 2008 and 2007,
respectively.
During
fiscal 2009, the Company placed over 21,000 new trucks in service. These
replacements were a combination of U-Haul manufactured vehicles and purchases.
Typically as new trucks are added to the fleet, the Company removes older trucks
from the fleet. The total number of rental trucks in the fleet increased during
fiscal 2009 as we reduced the number of trucks removed from the fleet for
retirement and sale.
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 14,400 dealers which are independent businesses, and
are exclusive to U-Haul. U-Haul maximizes vehicle utilization by effective
distribution of the truck and trailer fleets among the over 1,400 Company
operated centers and approximately 14,400 independent dealers. Utilizing its
proprietary reservations management system, the Company’s centers and dealers
electronically report their inventory in real-time, which facilitates matching
equipment to customer demand. Approximately 56% 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.
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 395,000
storage rooms, comprising approximately 35 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 over 1,000 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 Max Security, 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 3,900 independent Moving
Help™ service providers and over 4,200 independent Self-Storage Affiliates. Our
network of customer-rated affiliates provides pack and load help, cleaning help,
self-storage and similar services. Our goal is to further utilize our web based
technology platform to increase service to consumers and businesses with needs
in the moving and storage market.
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. This commitment to sustainability,
through our products and services, has helped us to reduce negative impacts on
the environment.
Property
and Casualty Insurance Operating Segment
Our
Property and Casualty Insurance provides loss adjusting and claims handling for
U-Haul through regional offices across North America. Property and Casualty
Insurance 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 Property and Casualty
Insurance includes offering property and casualty products in other U-Haul
related programs.
Net
revenue from our Property and Casualty Insurance operating segment was
approximately 1.8%, 1.9% and 1.8% of consolidated net revenue in fiscal 2009,
2008 and 2007, respectively.
Life
Insurance Operating Segment
Our Life
Insurance 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 administered the
self-insured employee health and dental plans for Arizona employees of the
Company through December 31, 2008.
Net
revenue from our Life Insurance operating segment was approximately 6.8%, 6.7%
and 7.0% of consolidated net revenue in fiscal 2009, 2008 and 2007,
respectively.
SAC
Holding II Operating Segment
SAC
Holding II owns self-storage properties that are managed by U-Haul under
property management agreements and also act as independent U-Haul rental
equipment dealers. AMERCO, through its subsidiaries, has contractual interests
in certain SAC Holding II properties entitling AMERCO to potential future income
based on the financial performance of these properties. Prior to November 2007,
AMERCO was considered the primary beneficiary of these contractual interests.
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 (“FASB”)
Interpretation No. 46(R) (“FIN 46(R)”), Consolidation of Variable Interest
Entities. While the deconsolidation affects AMERCO’s financial reporting,
it has no operational or financial impact on the Company’s relationship with SAC
Holding II.
Net
revenue from our SAC Holding II operating segment was approximately 0.8% and
1.3% of consolidated net revenue in fiscal 2008 and 2007, respectively. Refer to
Principles of Consolidation within Item 7 Management’s Discussion and Analysis
of Financial Condition and Results of Operations for more information related to
the deconsolidation of SAC Holding II.
Employees
As of
March 31, 2009, we employed approximately 17,700 people throughout North America
with approximately 98% of these employees working within our Moving and
Storage operating segment. Approximately 45% 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 uhaul.com, 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, websites and on the outside of our vehicles, and is a
major driver of customer lead sources.
Competition
Moving
and Storage Operating Segment
The
moving truck and trailer rental industry is large and extremely 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 national competitors in both the In-Town and One-Way moving
equipment rental market are Avis Budget Group, Inc. and Penske Truck Leasing.
Additionally, we have numerous small local competitors throughout North America
who compete with us in the In-Town market.
The
self-storage market is large and very 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 1,
2009, 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 1, 2009 to holders of record on
May 18, 2009.
Financial
Strength Ratings
On May
21, 2009, A.M. Best upgraded the financial strength ratings of RepWest to B+
(Good), a secure rating with a stable outlook.
Cautionary
Statement Regarding Forward-Looking Statements
This
Annual Report on Form 10-K, contains “forward-looking statements” regarding
future events and our future results of operations. 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. 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 products, 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 principal
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 rates
and operating expenses of our facilities. Competition might cause us to
experience a decrease in occupancy levels, limit our ability to raise rental
rates or require us to offer discounted rates that would have a material affect
on operating results.
Entry
into the self-storage business may be accomplished through acquisition of
existing facilities and 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 highly leveraged.
As of
March 31, 2009, we had total debt outstanding of $1,546.5 million and total
undiscounted lease commitments of $625.2 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, among other
considerations:
·
|
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.
Current
economic conditions, including those related to the credit markets, may
adversely affect our industry, business and results of operations.
The
United States economy is currently undergoing a period of slowdown and
unprecedented volatility, which has resulted in a recession. The future
economic environment may continue to exhibit weakness for an extended period.
This slowdown has and could further lead to reduced consumer and commercial
spending in the foreseeable future. Our industries although not as
traditionally cyclical as some, could experience significant downturns in
connection with, or in anticipation of, declines in general economic
conditions. Declines in consumer spending may drive us and our competitors
to reduce pricing further, which would have a negative impact on gross
profit. A continued softening in the economy may adversely and
materially affect our industry, business and results of operations and we
can not accurately predict how severe and prolonged this downturn
might be. Moreover, reduced revenues as a result of the softening
of the economy may also reduce our working capital and interfere
with our long term business strategy.
The
United States credit markets are continuing to experience a contraction. As a
result of the tightening credit markets, we may not be able to obtain additional
financing on favorable terms, or at all. If one or more of the financial
institutions that support our existing credit facilities fails, we may not be
able to find a replacement, which would negatively impact our ability to borrow
under credit facilities. In addition, if the current pressures on credit
continue or worsen, we may not be able to refinance, if necessary, our
outstanding debt when due, which could have a material adverse effect on our
business. While we believe we have adequate sources of liquidity to meet our
anticipated requirements for working capital, debt servicing and capital
expenditures through fiscal year 2010, if our operating results worsen
significantly and our cash flow or capital resources prove inadequate, or
if interest rates increase significantly, we could face liquidity problems that
could materially and adversely affect our results of operations and financial
condition.
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.
Another
important aspect of our fleet rotation program is the sale of used rental
equipment. The sale of used equipment provides the organization with funds that
can be used to purchase new equipment. Conditions may arise that could lead to
the decrease in resale values for our used equipment, this could have a material
adverse effect on our financial results, which would result in increases in
depreciation expense and losses on the sale of equipment and decreases in cash
flows from the sales of equipment.
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. Our fleet rotation can be negatively affected by
issues our manufacturers face within their own supply chain. Also, it is
possible that our suppliers may face financial difficulties or organizational
changes which could negatively impact their ability to accept future orders or
fulfill existing orders. General Motors could lead to shortages of new trucks
and repair parts for existing trucks. Although we believe that we could obtain
alternative manufacturers for our rental trucks, we cannot guarantee or predict
how long that would take and termination our relationship with this supplier
could have a material adverse effect on our business, financial condition or
results of operations for an indefinite period of time.
We
seek to effectively hedge against interest rate changes in our variable
debt.
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
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.
We are required to record these financial instruments at their fair value while
not affecting cash flow. Changes in interest rates can significantly impact this
valuation resulting in non-cash changes to our financial position.
We
are controlled by a small contingent of stockholders.
As of
March 31, 2009, 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 9,342,598 shares
(approximately 47.7%) 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 this agreement (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 11,017,321 shares
(approximately 56.2%) of the Company’s common stock as provided for in the
Stockholder 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, 1,750,262
shares (approximately 8.9%) 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 exemptions from the 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. Of the above available exemptions, 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.
We
bear certain risks related to our notes receivable from SAC
Holdings.
At March
31, 2009, we held approximately $197.6 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.
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.
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 19 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.
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.
The
Federal government likely will institute some sort of carbon
cap. This will likely affect everyone who uses fossil fuels and
disproportionately affect users in the highway transportation industries. There
are too many variables at this time to assess the impact of the various proposed
federal and state regulations.
Our
ability to attract and retain qualified employees, and changes in laws or other
labor issues could adversely affect our business and our results of
operations.
The
success of our business is predicated upon our workforce providing excellent
customer service. Our ability to attract and retain this employee base may be
inhibited due to prevailing wage rates, benefit costs and the adoption of new or
revised employment and labor laws and regulations. Should this occur we may be
unable to provide service in certain areas or we may experience significantly
increased costs of labor that could adversely affect our results of operations
and financial condition.
We
are highly dependent upon our automated systems and the Internet for managing
our business.
Our
information systems are largely internet-based, including our point-of-sale
reservation system and telephone system. While our reliance on this technology
lowers our cost of providing service and expands our abilities to serve, it
exposes the Company to various risks including natural disasters and man-made
disasters. We have put into place backup systems and alternative procedures to
mitigate this risk. However, disruptions or breaches in any portion
of these systems could adversely affect our results of operations and financial
condition.
A.M.
Best financial strength ratings are crucial to our life insurance
business.
In March
2009, A.M. Best affirmed the financial strength rating for Oxford, Christian
Fidelity Life Insurance Company (“CFLIC”) and Dallas General Life Insurance
Company (“DGLIC”) of B++ with a stable outlook. 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, which could adversely affect our results
of operations and financial condition.
We have
no unresolved staff comments at March 31, 2009.
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 over 1,400 U-Haul retail centers of which
487 are managed for other owners, and operates 12 manufacturing and assembly
facilities. We also operate over 200 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., CV 02-05602, seeking damages and equitable
relief on behalf of AMERCO from SAC Holdings and certain current and former
members of the Board, 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 Holdings 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. Also 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
Board 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 reversed the ruling of the trial court 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,
C.V.N.-94-00810-ECR (D.Nev), 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 regard to demand futility. The appeals are currently pending and the
issues will be fully briefed before the Nevada Supreme Court by September 13,
2009.
Environmental
AMERCO is 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 may
significantly affect 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 $5.2 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 or 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, 2009, there were approximately 3,200 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,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
First
quarter
|
|
$ |
60.00 |
|
|
$ |
46.17 |
|
|
$ |
83.87 |
|
|
$ |
67.29 |
|
Second
quarter
|
|
$ |
51.52 |
|
|
$ |
33.51 |
|
|
$ |
78.78 |
|
|
$ |
57.03 |
|
Third
quarter
|
|
$ |
45.91 |
|
|
$ |
28.93 |
|
|
$ |
79.86 |
|
|
$ |
58.82 |
|
Fourth
quarter
|
|
$ |
35.29 |
|
|
$ |
21.89 |
|
|
$ |
71.98 |
|
|
$ |
47.53 |
|
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 21 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 12 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, 2004 through March 31, 2009 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, 2004 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, 2005, 2006, 2007, 2008, and 2009.
Fiscal
year ending March 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMERCO
|
|
$ |
100 |
|
|
$ |
196 |
|
|
$ |
419 |
|
|
$ |
297 |
|
|
$ |
242 |
|
|
$ |
142 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dow
Jones US Total Market
|
|
|
100 |
|
|
|
107 |
|
|
|
122 |
|
|
|
137 |
|
|
|
129 |
|
|
|
80 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dow
Jones US Transportation Average
|
|
|
100 |
|
|
|
130 |
|
|
|
161 |
|
|
|
172 |
|
|
|
173 |
|
|
|
99 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
$100 invested on 3/31/04 in stock or index-including reinvestment of
dividends.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuer
Purchases of Equity Securities
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 was
repurchased by the Company from time to time on the open market
through December 31, 2008. The extent to which the Company repurchased its
shares and the timing of such purchases were dependent upon market conditions
and other corporate considerations. The purchases were funded from available
working capital. During fiscal 2009, no shares of our common stock were
repurchased, with the exception of the shares repurchased under our Odd Lot
Repurchase Program detailed below.
On August
8, 2008, we announced the Board had authorized us to initiate a no-fee Odd Lot
Repurchase Program (the “Program”) to purchase AMERCO common stock held by
persons who own less than 100 shares of AMERCO common stock. The Program offer
expired on December 31, 2008. The following table details the shares purchased
as part of the Program.
Period
|
|
Total
# of Shares Repurchased
|
|
|
Weighted
Average Price Paid per Share
|
|
|
Total
$ of Shares Repurchased as Part of Odd Lot Program
|
|
|
|
|
|
Cumulative
Plan Total
|
|
|
23,526 |
|
|
$ |
41.47 |
|
|
$ |
975,722 |
|
On
December 3, 2008, the Board authorized and directed us to amend the Employee
Stock Ownership Plan (“ESOP”) to provide that distributions under the ESOP with
respect to accounts valued at no more than $1,000 shall be in the form of cash
at the sole discretion of the advisory committee, subject to a participant’s or
beneficiary’s right to elect a distribution of AMERCO common stock. The Board
also authorized us, using management’s discretion, to buy back shares of former
employee ESOP participants whose respective ESOP account balances are valued at
more than $1,000 but who own less than 100 shares, at the then-prevailing market
prices. No such shares have been purchased.
In March
2009, RepWest purchased shares of AMERCO Series A 8 ½% Preferred Stock on the
open market for $0.9 million. RepWest may continue to make investments in
AMERCO’s Preferred Shares in the future.
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:
|
|
Years
Ended March 31,
|
|
|
|
2009
|
|
|
|
2008 (b),
(c) |
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(In
thousands, except share and per share data)
|
|
Summary
of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Self-moving
equipment rentals
|
|
$ |
1,423,022 |
|
|
$ |
1,451,292 |
|
$ |
1,462,470 |
|
|
$ |
1,489,429 |
|
|
$ |
1,424,841 |
|
Self-storage
revenues
|
|
|
110,548 |
|
|
|
122,248 |
|
|
126,424 |
|
|
|
119,742 |
|
|
|
114,155 |
|
Self-moving
and self-storage products and service sales
|
|
|
199,394 |
|
|
|
217,798 |
|
|
224,722 |
|
|
|
223,721 |
|
|
|
206,098 |
|
Property
management fees
|
|
|
23,192 |
|
|
|
22,820 |
|
|
21,154 |
|
|
|
21,195 |
|
|
|
11,839 |
|
Life
insurance premiums
|
|
|
109,572 |
|
|
|
111,996 |
|
|
120,399 |
|
|
|
118,833 |
|
|
|
126,236 |
|
Property
and casualty insurance premiums
|
|
|
28,337 |
|
|
|
28,388 |
|
|
24,335 |
|
|
|
26,001 |
|
|
|
24,987 |
|
Net
investment and interest income
|
|
|
58,021 |
|
|
|
62,110 |
|
|
59,696 |
|
|
|
48,279 |
|
|
|
49,171 |
|
Other
revenue
|
|
|
40,180 |
|
|
|
32,522 |
|
|
30,098 |
|
|
|
40,325 |
|
|
|
30,172 |
|
Total
revenues
|
|
|
1,992,266 |
|
|
|
2,049,174 |
|
|
2,069,298 |
|
|
|
2,087,525 |
|
|
|
1,987,499 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
1,047,238 |
|
|
|
1,079,486 |
|
|
1,082,178 |
|
|
|
1,083,887 |
|
|
|
1,125,663 |
|
Commission
expenses
|
|
|
171,303 |
|
|
|
167,945 |
|
|
162,899 |
|
|
|
165,961 |
|
|
|
159,253 |
|
Cost
of sales
|
|
|
114,387 |
|
|
|
120,210 |
|
|
117,648 |
|
|
|
113,135 |
|
|
|
105,309 |
|
Benefits
and losses
|
|
|
108,259 |
|
|
|
108,817 |
|
|
116,959 |
|
|
|
115,431 |
|
|
|
138,655 |
|
Amortization
of deferred policy acquisition costs
|
|
|
12,394 |
|
|
|
13,181 |
|
|
17,138 |
|
|
|
24,261 |
|
|
|
28,512 |
|
Lease
expense
|
|
|
152,424 |
|
|
|
133,931 |
|
|
147,659 |
|
|
|
136,652 |
|
|
|
142,008 |
|
Depreciation,
net of (gains) losses on disposal
|
|
|
265,213 |
|
|
|
221,882 |
|
|
189,589 |
|
|
|
142,817 |
|
|
|
121,103 |
|
Total
costs and expenses
|
|
|
1,871,218 |
|
|
|
1,845,452 |
|
|
1,834,070 |
|
|
|
1,782,144 |
|
|
|
1,820,503 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
from operations
|
|
|
121,048 |
|
|
|
203,722 |
|
|
235,228 |
|
|
|
305,381 |
|
|
|
166,996 |
|
Interest
expense
|
|
|
(98,470 |
) |
|
|
(101,420) |
|
|
(82,436 |
) |
|
|
(69,481 |
) |
|
|
(73,205 |
) |
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
|
|
|
22,578 |
|
|
|
102,302 |
|
|
145,823 |
|
|
|
200,273 |
|
|
|
145,132 |
|
Income
tax expense
|
|
|
(9,168 |
) |
|
|
(34,518) |
|
|
(55,270 |
) |
|
|
(79,119 |
) |
|
|
(55,708 |
) |
Net
earnings
|
|
|
13,410 |
|
|
|
67,784 |
|
|
90,553 |
|
|
|
121,154 |
|
|
|
89,424 |
|
Less: Preferred
stock dividends
|
|
|
(12,963 |
) |
|
|
(12,963) |
|
|
(12,963 |
) |
|
|
(12,963 |
) |
|
|
(12,963 |
) |
Earnings
available to common shareholders
|
|
$ |
447 |
|
|
$ |
54,821 |
|
$ |
77,590 |
|
|
$ |
108,191 |
|
|
$ |
76,461 |
|
Net
earnings per common share basic and diluted
|
|
$ |
0.02 |
|
|
$ |
2.78 |
|
$ |
3.72 |
|
|
$ |
5.19 |
|
|
$ |
3.68 |
|
Weighted
average common shares outstanding: Basic and diluted
|
|
|
19,350,041 |
|
|
|
19,740,571 |
|
|
20,838,570 |
|
|
|
20,857,108 |
|
|
|
20,804,773 |
|
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
|
|
|
2,013,928 |
|
|
|
2,011,176 |
|
|
1,897,071 |
|
|
|
1,535,165 |
|
|
|
1,354,468 |
|
Total
assets
|
|
|
3,825,073 |
|
|
|
3,832,487 |
|
|
3,523,048 |
|
|
|
3,367,218 |
|
|
|
3,116,173 |
|
AMERCO's
notes, loans and leases payable
|
|
|
1,546,490 |
|
|
|
1,504,677 |
|
|
1,181,165 |
|
|
|
965,634 |
|
|
|
780,008 |
|
SAC
Holding II notes and loans payable, non re-course to
AMERCO
|
|
|
- |
|
|
|
- |
|
|
74,887 |
|
|
|
76,232 |
|
|
|
77,474 |
|
Stockholders'
equity
|
|
|
717,629 |
|
|
|
758,431 |
|
|
718,098 |
|
|
|
695,604 |
|
|
|
572,839 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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
and strategy related to, 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. We then discuss our “Critical Accounting Policies and
Estimates” that we believe are important to understanding the assumptions and
judgments incorporated in our reported financial results. We then discuss our
results of operations for fiscal 2009 compared with fiscal 2008, and for fiscal
2008 compared with fiscal 2007 which are followed by an analysis of changes in
our balance sheets and cash flows, and a discussion of 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 2010.
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 2008, 2007 and 2006 correspond to fiscal 2009, 2008 and 2007 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.
Property
and Casualty Insurance is focused on providing and administering property and
casualty insurance to U-Haul and its customers, its independent dealers and
affiliates.
Life
Insurance 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
three current reportable segments are (and former reportable segment
was):
Moving
and Storage, comprised of AMERCO, U-Haul and Real Estate and the subsidiaries of
U-Haul and Real Estate,
Property
and Casualty Insurance, comprised of RepWest and its subsidiaries and
ARCOA,
Life
Insurance, comprised of Oxford and its subsidiaries, and
SAC
Holding II and its subsidiaries (through October 2007).
Refer to
Note 1 Basis of Presentation, Note 22 Financial Information by Geographic Area
and Note 22A 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 3,900 independent Moving
Help™ service providers and over 4,200 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.
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. This commitment to sustainability,
through our products and services, has helped us to reduce any negative impact
on the environment.
Property
and Casualty Insurance Operating Segment
Our
Property and Casualty Insurance provides loss adjusting and claims handling for
U-Haul through regional offices across North America. Property and Casualty
Insurance 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 into the market. The business plan for Property and Casualty Insurance
includes offering property and casualty products in other U-Haul related
programs.
Life
Insurance Operating Segment
Our Life
Insurance 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 administered the
self-insured employee health and dental plans for Arizona employees of the
Company through December 31, 2008.
SAC
Holding II Operating Segment
SAC
Holding II owns 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 Holding II properties entitling AMERCO to potential future income based on
the financial performance of these properties. 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). While the deconsolidation affects AMERCO’s financial
reporting, it has no operational or financial impact on the Company’s
relationship with SAC Holding II. Refer to Principles of Consolidation
within Item 7 Management’s Discussion and Analysis of Financial Condition and
Results of Operations.
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 estimate 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) and ARB 51, Consolidated Financial
Statements (“ARB 51”), 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 variable interest entity (“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 Holding Corporation and its subsidiaries (“SAC Holding
Corporation”) and SAC Holding II Corporation and its subsidiaries (collectively,
“SAC Holdings”) were considered special purpose entities and were consolidated
based on the provisions of Emerging Issues Task Force 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 that SAC
Holding Corporation was not a VIE and AMERCO ceased to be the primary
beneficiary. Accordingly, the Company no longer includes SAC Holding Corporation
in its consolidated financial statements.
In
November 2007, Blackwater Investments, Inc. (“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 had 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, it deconsolidated those entities. The
deconsolidation was accounted for as a distribution of SAC Holding II’s
interests to the sole shareholder of SAC Holdings. Because of AMERCO’s
continuing involvement with SAC Holding II the distribution does not qualify as
discontinued operations as defined by Statement of Financial Accounting
Standards (“SFAS”) 144, Accounting for the Impairment or
Disposal of Long-Lived Assets.
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 sheets as of March 31, 2009 and 2008 include the accounts
of AMERCO and its wholly-owned subsidiaries. The March 31, 2009 statements of
operations and cash flows include AMERCO and its wholly-owned 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 for
the seven months ended October 31, 2007. The March 31, 2007 statements of
operations and cash flows include the accounts of AMERCO and its wholly-owned
subsidiaries and SAC Holding II.
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. During fiscal 2009, based on an
economic market analysis, the Company decreased the estimated residual value of
certain rental trucks. The effect of the change decreased earnings from
operations for fiscal 2009 by $19.8 million or $1.02 per share before taxes, in
which the tax effect was approximately $0.38 per share. 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.
In fiscal
2006, 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 approximately 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 $56.0 million, $56.7
million and $33.2 million greater than what it would have been if calculated
under a straight line approach for fiscal 2009, 2008 and 2007,
respectively.
We typically sell our used vehicles at
our sales centers throughout North America, on our web site at uhaul.com/trucksales or by phone at
1-866-404-0355.
Additionally, we sell a
large portion of our pick-up and cargo van fleet at automobile dealer auctions.
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 Property and Casualty Insurance 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 that were written by RepWest it may take a
number of years for claims to be fully reported and finally
settled.
During
the third quarter of fiscal 2009, the Company entered into an excess of loss
reinsurance agreement with a third-party reinsurer covering a portion of
expected accident liability losses for policy years 2001 through 2005. The
Company recorded $15.0 million of projected recoveries as an Other Asset and
deferred this gain until actual recoveries, if any, are collected in the
future.
Impairment
of Investments
For
investments accounted for under SFAS 115, Accounting for Certain Investments
in Debt and Equity Securities 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 $0.4 million in other-than-temporary impairments for
fiscal 2009, $0.5 million for fiscal 2008 and $1.4 million for fiscal
2007.
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 SAC Holding II Corporation file separate
consolidated tax returns, which are in no way associated with AMERCO’s
consolidated returns.
Adoption
of New Accounting Pronouncements
Fair
Value of Financial Instruments
The
Company adopted SFAS 157, Fair
Value Measurements (“SFAS 157”) effective April 1, 2008, its required
effective date for AMERCO. SFAS 157 defines fair value, establishes a framework
for measuring fair value and expands disclosures about fair value measurements;
however, it does not change existing guidance about whether an asset or
liability is carried at fair value. The definition of fair value according to
SFAS 157 is the price that would be received for selling an asset or paid to
transfer a liability in an orderly transaction between market participants as of
the measurement date. The items primarily affected by the adoption of SFAS 157
at the Company include the interest rate swaps held by U-Haul to fix interest
rates on its variable rate debt and the available for sale investment portfolios
at Life Insurance and RepWest. For more information please see Note 16 Fair
Value Measurements of the Notes to Consolidated Financial Statements. The
adoption of SFAS 157 did not have a material impact on the Company’s
consolidated financial statements.
FASB
Staff Position FAS 157-1, Application of FASB Statement No.
157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address
Fair Value Measurements for Purposes of Lease Classification or Measurement
under Statement 13. This FASB Staff Position (FSP) amends SFAS 157 to
exclude FASB Statement No. 13, Accounting for Leases, and
other accounting pronouncements that address fair value measurements for
purposes of lease classification or measurement under Statement 13. However,
this scope exception does not apply to assets acquired and liabilities assumed
in a business combination that are required to be measured at fair value under
FASB Statement No. 141, Business Combinations, or No.
141 (revised 2007), Business
Combinations, regardless of whether those assets and liabilities are
related to leases.
FASB
Staff Position FAS 157-2, Effective Date of FASB Statement No.
157. This FASB Staff Position (FSP) delays the effective date of
SFAS 157 for nonfinancial assets and nonfinancial liabilities, except for items
that are recognized or disclosed at fair value in the financial statements
on a recurring basis (at least annually). The delay is intended to allow the
Board and constituents additional time to consider the effect of various
implementation issues that have arisen, or that may arise, from the application
of Statement 157.
FASB
Staff Position FAS 157-3,
Determining the Fair Value of a Financial Asset When the Market for That Asset
Is Not Active.
This FSP applies to financial assets within the scope of
accounting pronouncements that require or permit fair value measurements in
accordance with SFAS 157. This FSP clarifies the application of SFAS 157 in a
market that is not active and provides an example to illustrate key
considerations in determining the fair value of a financial asset when the
market for that financial asset is not active.
The
Company adopted SFAS 159, The
Fair Value Option for Financial Assets and Financial Liabilities (“SFAS
159”) effective April 1, 2008, its required effective date for AMERCO. SFAS 159
provides the option to measure certain financial assets and liabilities at fair
value with any changes in fair value recognized in earnings. SFAS 159
allows for the application of these rules on an instrument-by-instrument basis
upon the initial recognition of the asset or liability, or upon an event that
gives rise to a new basis of accounting for that instrument. The Company did not
elect to measure any additional financial assets or liabilities at fair value;
therefore, the adoption of SFAS 159 had no effect on the Company’s consolidated
financial statements.
In March
2008, the FASB issued SFAS 161, Disclosures about Derivative
Instruments and Hedging Activities (“SFAS 161”) 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 adoption of SFAS 161 required the Company to expand its
disclosures in Note 11 Interest on Borrowings of the Notes to Consolidated
Financial Statements.
Recent
Accounting Pronouncements
In
December 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS
141(R), Business
Combinations (“SFAS 141(R)”). 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
(“SFAS 160”). 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 April
2009, the FASB issued (FSP) FAS 115-2 and FAS 124-2, Recognition and Presentation of
Other-Than-Temporary Impairments, which segregates
credit and noncredit components of impaired debt securities that are not
expected to be sold. Impairments will still have to be measured at fair value in
other comprehensive income. The FSP also requires some additional disclosures
regarding expected cash flows, credit losses, and an aging of securities with
unrealized losses. Effective for interim and annual periods ending after June
15, 2009, but entities may early adopt the FSP for the interim and annual
periods ending after March 15, 2009. The Company does not believe that the
adoption of this statement will have a material impact on our financial
statements.
In April
2009, the FASB issued (FSP) FAS 107-1 and APB
28-1, Disclosures about Fair Value of
Financial Instruments, which increases the
frequency of fair value disclosures to a quarterly instead of annual basis. The
guidance relates to fair value disclosures for any financial instruments that
are not currently reflected on the balance sheet at fair value. Effective for
interim and annual periods ending after June 15, 2009, but entities may early
adopt the FSP for the interim and annual periods ending after March 15, 2009.
The Company does not believe that the adoption of this statement will have a
material impact on our financial statements.
In April
2009, the FASB issued (FSP) FAS 157-4, Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly, which
provides guidelines for a broad interpretation of when to apply market-based
fair value measurements. The FSP reaffirms management's need to use judgment to
determine when a market that was once active has become inactive and in
determining fair values in markets that are no longer active. Effective for
interim and annual periods ending after June 15, 2009, but entities may early
adopt the FSP for the interim and annual periods ending after March 15,
2009.
Results
of Operations
AMERCO
and Consolidated Entities
Fiscal
2009 Compared with Fiscal 2008
Listed
below on a consolidated basis are revenues for our major product lines for
fiscal 2009 and fiscal 2008:
|
|
Year
Ended March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In
thousands)
|
|
Self-moving
equipment rentals
|
|
$ |
1,423,022 |
|
|
$ |
1,451,292 |
|
Self-storage
revenues
|
|
|
110,548 |
|
|
|
122,248 |
|
Self-moving
and self-storage product and service sales
|
|
|
199,394 |
|
|
|
217,798 |
|
Property
management fees
|
|
|
23,192 |
|
|
|
22,820 |
|
Life
insurance premiums
|
|
|
109,572 |
|
|
|
111,996 |
|
Property
and casualty insurance premiums
|
|
|
28,337 |
|
|
|
28,388 |
|
Net
investment and interest income
|
|
|
58,021 |
|
|
|
62,110 |
|
Other
revenue
|
|
|
40,180 |
|
|
|
32,522 |
|
Consolidated
revenue
|
|
$ |
1,992,266 |
|
|
$ |
2,049,174 |
|
Self-moving
equipment rental revenues decreased $28.3 million in fiscal 2009, compared with
fiscal 2008. The majority of the decrease occurred in the third and
fourth quarters of fiscal 2009. Several factors led to the decline in
revenues including a decrease in total rental equipment transactions, foreign
currency exchange rates, reduced revenue per transaction for In-Town moves and
the extra day in fiscal 2008. Total rental equipment transactions
decreased less than one percent during the year. Foreign currency
exchange rates between the United States and Canada negatively affected our
translated U.S. dollar results during the second half of fiscal
2009. During fiscal 2009 our average revenue per one-way transactions
increased while In-Town experienced decreases primarily due to reduced
mileage.
Self-storage
revenues decreased $11.7 million in fiscal 2009, compared with fiscal
2008. The deconsolidation of SAC Holding II, which was effective
October 31, 2007, accounted for $11.5 million of the decrease. At
Company-owned locations during fiscal 2009 we saw a decrease in our occupancy
rate of approximately 5% compared to fiscal 2008. The decrease was a
result of the addition of approximately seven thousand new rooms into the
portfolio combined with a 2% decrease in rooms rented. We were able
to largely offset the occupancy declines with rate actions.
Sales of
self-moving and self-storage products and services decreased $18.4 million in
fiscal 2009, compared with fiscal 2008. The deconsolidation of SAC Holding II
accounted for $10.0 million of the decrease. The remaining decrease
was related to reduced sales of hitches, towing accessories and rental support
items.
Life
Insurance premiums decreased $2.4 million primarily as a result of
decreases in Medicare supplement premiums.
Property
and Casualty Insurance premiums decreased $0.1 million due to a
decline in U-Haul related business.
Net
investment and interest income decreased $4.1 million in fiscal 2009, compared
with fiscal 2008. This decline was due primarily to smaller invested
asset portfolios at the insurance companies combined with reduced investment
yields for both the insurance companies and U-Haul’s invested short-term
balances.
As a
result of the items mentioned above, revenues for AMERCO and its consolidated
entities were $1,992.3 million for fiscal 2009, compared with $2,049.2 million
for fiscal 2008.
Listed
below are revenues and earnings from operations at each of our four operating
segments for fiscal 2009 and fiscal 2008, the insurance companies years ended
are December 31, 2008 and 2007.
|
|
Year
Ended March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In
thousands)
|
|
Moving
and storage
|
|
|
|
|
|
|
Revenues
|
|
$ |
1,823,049 |
|
|
$ |
1,858,230 |
|
Earnings
from operations
|
|
|
112,080 |
|
|
|
192,970 |
|
Property
and casualty insurance
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
37,419 |
|
|
|
40,478 |
|
Earnings
from operations
|
|
|
7,505 |
|
|
|
9,244 |
|
Life
insurance
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
135,056 |
|
|
|
137,448 |
|
Earnings
from operations
|
|
|
17,748 |
|
|
|
17,202 |
|
SAC
Holding II (a)
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
- |
|
|
|
28,102 |
|
Earnings
from operations
|
|
|
- |
|
|
|
7,926 |
|
Eliminations
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
(3,258 |
) |
|
|
(15,084 |
) |
Earnings
from operations
|
|
|
(16,285 |
) |
|
|
(23,620 |
) |
Consolidated
Results
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
1,992,266 |
|
|
|
2,049,174 |
|
Earnings
from operations
|
|
|
121,048 |
|
|
|
203,722 |
|
|
|
|
|
|
|
|
|
|
(a)
Fiscal 2008 includes 7 months of activity for SAC Holding II which was
deconsolidated effective October 31, 2007.
|
|
Total
costs and expenses increased $25.8 million in fiscal 2009, compared with fiscal
2008. The largest contributing factors to the increase were equipment
related costs including $18.2 million of additional equipment depreciation,
$17.8 of additional equipment lease costs, and $12.1 million of additional
losses from the disposal of equipment. Gains related to the disposal
of real estate decreased $10.3 million in fiscal 2009, compared with fiscal
2008. Commission and cost of sales expenses decreased in relation to
their associated revenues. Total costs and expenses at the insurance
companies decreased $4.3 through a combination of lower benefits and reduced
operating costs resulting from less business. In fiscal 2009, the
Company recognized approximately $12.0 million of positive prior year experience
on its portion of the self-insured liability risk related to the rental
fleet. The deconsolidation of SAC Holding II accounted for an $11.9
million decrease.
As a
result of the aforementioned changes in revenues and expenses, earnings from
operations decreased to $121.0 million for fiscal 2009, compared with $203.7
million for fiscal 2008.
Interest
expense for fiscal 2009 was $98.5 million, compared with $101.4 million in
fiscal 2008. The decrease in interest expense in fiscal 2009 was primarily
related to the deconsolidation of SAC Holding II which accounted for $3.5
million of the decline.
Income
tax expense was $9.2 million in fiscal 2009, compared with $34.5 million in
fiscal 2008.
Dividends
accrued on our Series A preferred stock were $13.0 million in both fiscal 2009
and 2008, respectively.
As a
result of the above mentioned items, net earnings available to common
shareholders were $0.4 million in fiscal 2009, compared with $54.8 million in
fiscal 2008.
The
weighted average common shares outstanding: basic and diluted were 19,350,041 in
fiscal 2009 and 19,740,571 in fiscal 2008.
Basic and
diluted earnings per share in fiscal 2009 were $0.02, compared with $2.78 in
fiscal 2008.
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 reduced
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 was related primarily to lower sales of hitch and towing accessories
during the second half of fiscal 2008.
Life
Insurance premiums decreased $8.4 million driven by the termination of the
credit life and disability program and declining Medicare supplement premiums.
During fiscal 2008, Life Insurance increased sales of its new life insurance
products.
Property
and Casualty Insurance premiums increased $4.1 million due to an increase in
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 was 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 netted 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 declined. 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 was 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.
Moving
and Storage
Fiscal
2009 Compared with Fiscal 2008
Listed
below are revenues for the major product lines at our Moving and Storage
Operating Segment for fiscal 2009 and fiscal 2008:
|
|
Year
Ended March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In
thousands)
|
|
Self-moving
equipment rentals
|
|
$ |
1,423,330 |
|
|
$ |
1,451,292 |
|
Self-storage
revenues
|
|
|
110,548 |
|
|
|
110,779 |
|
Self-moving
and self-storage product and service sales
|
|
|
199,394 |
|
|
|
207,759 |
|
Property
management fees
|
|
|
23,192 |
|
|
|
24,520 |
|
Net
investment and interest income
|
|
|
29,865 |
|
|
|
34,906 |
|
Other
revenue
|
|
|
36,720 |
|
|
|
28,974 |
|
Moving
and Storage revenue
|
|
$ |
1,823,049 |
|
|
$ |
1,858,230 |
|
Self-moving
equipment rental revenues decreased $28.0 million in fiscal 2009, compared with
fiscal 2008. The majority of the decrease occurred in the third and
fourth quarters of fiscal 2009. Several factors led to the decline in
revenues including a decrease in total rental equipment transactions, foreign
currency exchange rates, reduced revenue per transaction for In-Town moves and
the extra day in fiscal 2008. Total rental equipment transactions decreased less
than one percent during the year. Foreign currency exchange rates
between the United States and Canada negatively affected our translated U.S.
dollar results during the second half of fiscal 2009. During fiscal
2009 our average revenue per one-way transactions increased while In-Town
experienced decreases primarily due to reduced mileage.
Self-storage
revenues decreased $0.2 million in fiscal 2009, compared with fiscal
2008. At Company-owned locations during fiscal 2009 we saw a decrease
in our occupancy rate of approximately 5% compared to fiscal
2008. The decrease was a result of the addition of approximately
seven thousand new rooms into the portfolio combined with a 2% decrease in rooms
rented. We were able to largely offset the occupancy declines with
rate actions.
Sales of
self-moving and self-storage products and services decreased $8.4 million in
fiscal 2009, compared with fiscal 2008 with the decrease primarily related to
reduced sales of hitches, towing accessories and rental support
items.
Net
investment and interest income decreased $5.0 million in fiscal 2009, compared
with fiscal 2008 due to lower investment yields on the Company’s invested
short-term cash balances.
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,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In
thousands, except occupancy rate)
|
|
Room
count as of March 31
|
|
|
138 |
|
|
|
131 |
|
Square
footage as of March 31
|
|
|
11,131 |
|
|
|
10,533 |
|
Average
number of rooms occupied
|
|
|
106 |
|
|
|
109 |
|
Average
occupancy rate based on room count
|
|
|
78.9 |
% |
|
|
84.0 |
% |
Average
square footage occupied
|
|
|
8,745 |
|
|
|
8,767 |
|
Total
costs and expenses increased $42.2 million in fiscal 2009, compared with fiscal
2008. The largest contributing factors to the increase were equipment related
costs including $18.2 million of additional equipment depreciation, $17.8 of
additional equipment lease costs, and $12.1 million of additional losses from
the disposal of equipment. Gains related to the disposal of real
estate decreased $10.3 million in fiscal 2009, compared with fiscal 2008.
Commission and cost of sales expenses decreased in relation to their associated
revenues. In fiscal 2009 the Moving and Storage segment recognized
approximately $12.0 million of positive prior year experience on its portion of
the self-insured liability risk related to the rental fleet.
Equity in
the earnings of AMERCO’s insurance subsidiaries decreased $3.3 million in fiscal
2009, compared with fiscal 2008.
As a
result of the above mentioned changes in revenues and expenses, earnings from
operations decreased to $112.1 million in fiscal 2009, compared with $193.0
million for fiscal 2008.
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 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 netted 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.
Property
and Casualty Insurance
2008
Compared with 2007
Net
premiums were $28.3 million and $28.4 million for the years ended December 31,
2008 and 2007, respectively.
Net
investment income was $9.1 million and $12.1 million for the years ended
December 31, 2008 and 2007, respectively. The decrease was a result of lower
returns on bonds and short-term investments and a decrease in the overall size
of the investment portfolio.
Net
operating expenses were $12.0 million for both of the years ended December 31,
2008 and 2007, respectively.
Benefits
and losses incurred were $17.9 million and $19.0 million for the years ended
December 31, 2008 and 2007, respectively.
As a
result of the above mentioned changes in revenues and expenses, pretax earnings
from operations were $7.5 million and $9.2 million for the years ended December
31, 2008 and 2007, respectively.
2007
Compared with 2006
Net
premiums were $28.4 million and $24.3 million for the years ended December 31,
2007 and 2006, respectively. The increased premiums were the result of U-Haul
customer related programs.
Net
investment income was $12.1 million and $14.2 million for the years ended
December 31, 2007 and 2006, respectively. The decrease was due to the sale
of real estate in 2006, which resulted in gains before consolidation 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 was 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 was due to the
termination of credit property business in March of 2006.
As a
result of the above mentioned changes in revenues and expenses, pretax earnings
from operations were $9.2 million and $5.7 million for the years ended December
31, 2007 and 2006, 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31,
|
|
|
|
1998
|
|
|
1999
|
|
|
2000
|
|
|
2001
|
|
|
2002
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
|
(In
thousands)
|
|
Unpaid
Loss and Loss Adjustment Expenses
|
|
$ |
344,748 |
|
|
$ |
334,858 |
|
|
$ |
382,651 |
|
|
$ |
448,987 |
|
|
$ |
399,447 |
|
|
$ |
416,259 |
|
|
$ |
380,875 |
|
|
$ |
346,928 |
|
|
$ |
288,783 |
|
|
$ |
288,410 |
|
|
$ |
287,501 |
|
Paid
(Cumulative) as of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One
year later
|
|
|
82,936 |
|
|
|
117,025 |
|
|
|
130,471 |
|
|
|
130,070 |
|
|
|
100,851 |
|
|
|
73,384 |
|
|
|
44,677 |
|
|
|
40,116 |
|
|
|
35,297 |
|
|
|
22,701 |
|
|
|
- |
|
Two
years later
|
|
|
164,318 |
|
|
|
186,193 |
|
|
|
203,605 |
|
|
|
209,525 |
|
|
|
164,255 |
|
|
|
114,246 |
|
|
|
83,230 |
|
|
|
73,235 |
|
|
|
56,566 |
|
|
|
- |
|
|
|
- |
|
Three
years later
|
|
|
218,819 |
|
|
|
232,883 |
|
|
|
255,996 |
|
|
|
266,483 |
|
|
|
201,346 |
|
|
|
151,840 |
|
|
|
115,955 |
|
|
|
94,320 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Four
years later
|
|
|
255,134 |
|
|
|
264,517 |
|
|
|
299,681 |
|
|
|
295,268 |
|
|
|
233,898 |
|
|
|
184,219 |
|
|
|
136,940 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Five
years later
|
|
|
274,819 |
|
|
|
295,997 |
|
|
|
320,629 |
|
|
|
322,191 |
|
|
|
263,654 |
|
|
|
204,752 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Six
years later
|
|
|
297,354 |
|
|
|
314,281 |
|
|
|
341,543 |
|
|
|
346,733 |
|
|
|
282,552 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Seven
years later
|
|
|
311,963 |
|
|
|
331,385 |
|
|
|
358,882 |
|
|
|
364,696 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Eight
years later
|
|
|
327,141 |
|
|
|
346,270 |
|
|
|
371,277 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Nine
years later
|
|
|
340,190 |
|
|
|
357,731 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Ten
years later
|
|
|
350,202 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserved
Re-estimated as of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One
year later
|
|
|
339,602 |
|
|
|
383,264 |
|
|
|
433,222 |
|
|
|
454,510 |
|
|
|
471,029 |
|
|
|
447,524 |
|
|
|
388,859 |
|
|
|
326,386 |
|
|
|
319,951 |
|
|
|
307,200 |
|
|
|
|
|
Two
years later
|
|
|
371,431 |
|
|
|
432,714 |
|
|
|
454,926 |
|
|
|
523,624 |
|
|
|
480,713 |
|
|
|
456,171 |
|
|
|
368,756 |
|
|
|
357,135 |
|
|
|
339,113 |
|
|
|
- |
|
|
|
|
|
Three
years later
|
|
|
429,160 |
|
|
|
437,712 |
|
|
|
517,361 |
|
|
|
500,566 |
|
|
|
521,319 |
|
|
|
435,549 |
|
|
|
399,693 |
|
|
|
376,357 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Four
years later
|
|
|
413,476 |
|
|
|
480,200 |
|
|
|
543,554 |
|
|
|
571,045 |
|
|
|
502,922 |
|
|
|
466,709 |
|
|
|
418,873 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Five
years later
|
|
|
443,696 |
|
|
|
524,548 |
|
|
|
558,765 |
|
|
|
569,104 |
|
|
|
537,610 |
|
|
|
485,304 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Six
years later
|
|
|
477,975 |
|
|
|
520,675 |
|
|
|
559,873 |
|
|
|
608,159 |
|
|
|
560,668 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Seven
years later
|
|
|
485,228 |
|
|
|
527,187 |
|
|
|
583,904 |
|
|
|
636,221 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Eight
years later
|
|
|
496,484 |
|
|
|
550,333 |
|
|
|
614,171 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Nine
years later
|
|
|
521,403 |
|
|
|
567,307 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Ten
years later
|
|
|
543,875 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Cumulative
Redundancy (Deficiency)
|
|
$ |
(199,127 |
) |
|
$ |
(232,449 |
) |
|
$ |
(231,520 |
) |
|
$ |
(187,234 |
) |
|
$ |
(161,221 |
) |
|
$ |
(69,045 |
) |
|
$ |
(37,998 |
) |
|
$ |
(29,429 |
) |
|
$ |
(50,330 |
) |
|
$ |
(18,790 |
) |
|
|
|
|
Retro
Premium Recoverable
|
|
|
(1,879 |
) |
|
|
6,797 |
|
|
|
5,613 |
|
|
|
21,756 |
|
|
|
7,036 |
|
|
|
374 |
|
|
|
2,233 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Re-estimated
Reserve: Amount (Cumulative)
|
|
$ |
(201,006 |
) |
|
$ |
(225,652 |
) |
|
$ |
(225,907 |
) |
|
$ |
(165,478 |
) |
|
$ |
(154,185 |
) |
|
$ |
(68,671 |
) |
|
$ |
(35,765 |
) |
|
$ |
(29,429 |
) |
|
|
(50,330 |
) |
|
$ |
(18,790 |
) |
|
|
|
|
Life
Insurance
2008
Compared with 2007
Net
premiums were $109.6 million and $112.0 million for the years ended December 31,
2008 and 2007, respectively. Medicare supplement premiums decreased by $6.0
million due to policy lapses and lower first year sales offset by an increase in
life insurance premiums of $6.8 million due to increased sales. Oxford stopped
writing new credit insurance business in 2006 and as a result, credit insurance
premiums decreased by $2.0 million. Other premiums decreased $1.2
million.
Net
investment income was $20.4 million and $20.9 million for the years ended
December 31, 2008 and 2007, respectively. The decrease was due to a net
reduction in invested assets and lower investment yields.
Net
operating expenses were $21.3 million and $23.8 million for the years ended
December 31, 2008 and 2007, respectively. The decrease was primarily
attributable to the reduction of expenses on credit insurance due to business
discontinuance and capitalization of life insurance acquisition
expenses.
Benefits
incurred were $83.6 million and $83.4 million, for the years ended December 31,
2008 and 2007, respectively. This increase was the result of a $3.2 million
decrease in Medicare supplement due to policy decrements, offset by life
insurance benefits of $6.0 million due to increased sales. Other benefits
decreased $2.6 million.
Amortization
of deferred acquisition costs (“DAC”) and the value of business acquired
(“VOBA”) was $12.4 million and $13.0 million for the years ended December 31,
2008 and 2007, respectively. Amortization of DAC for the credit business
decreased $1.4 million as a result of the runoff status of this program.
Amortization of DAC for the life business increased $1.9 million due to
increased sales. Medicare supplement decreased by $1.3 million due to the full
amortization of VOBA associated with the CFLIC acquisition.
As a
result of the above mentioned changes in revenues and expenses, pretax earnings
from operations were $17.7 million and $17.2 million for the years ended
December 31, 2008 and 2007, respectively.
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.
DAC and
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.
As a
result of the above mentioned changes in revenues and expenses, pretax earnings
from operations were $17.2 million and $14.5 million for the years ended
December 31, 2007 and 2006, 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.
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, 2009, cash and cash equivalents totaled $240.6 million, compared with $206.6
million on March 31, 2008. 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, 2009 (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
|
|
|
Property
and Casualty Insurance (a)
|
|
|
Life
Insurance (a)
|
|
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
213,078 |
|
|
$ |
19,197 |
|
|
$ |
8,312 |
|
Other
financial assets
|
|
|
341,427 |
|
|
|