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U-Haul Holding Co /NV/ - Quarter Report: 2012 December (Form 10-Q)


UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended December 31, 2012

 

or

 

£ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from __________________ to __________________

 

 

 

 

Commission

File Number

Registrant, State of Incorporation,

Address and Telephone Number

I.R.S. Employer

Identification No.

 

 

 

 

AMERCOlogo

 

 

 

 

1-11255

AMERCO

88-0106815

 

(A Nevada Corporation)

 

 

1325 Airmotive Way, Ste. 100

 

 

Reno, Nevada 89502-3239

 

 

Telephone (775) 688-6300

 

 

 

 

 

 

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 þ  No £

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  þ No  £

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 “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  

 

Large accelerated filer £   Accelerated filer þ  

 

Non-accelerated filer £ (Do not check if a smaller reporting company)       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 þ

19,607,788 shares of AMERCO Common Stock, $0.25 par value, were outstanding at February 1, 2013.

 

 



 


TABLE OF CONTENTS

 

 

 

Page 

 

PART I FINANCIAL INFORMATION

 

Item 1.

Financial Statements

 

 

a)Condensed Consolidated Balance Sheets as of December 31, 2012 (unaudited) and March 31, 2012

1

 

b)Condensed Consolidated Statements of Operations for the Quarters ended December 31, 2012 and 2011 (unaudited)

2

 

c)Condensed Consolidated Statements of Operations for the Nine Months ended December 31, 2012 and 2011 (unaudited)

3

 

d)Condensed Consolidated Statements of Comprehensive Income for the Quarters and the Nine Months ended December 31, 2012 and 2011 (unaudited)

4

 

e)Condensed Consolidated Statements of Cash Flows for the Nine Months ended December 31, 2012 and 2011 (unaudited)

5

 

f)Notes to Condensed Consolidated Financial Statements (unaudited)

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

38

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

58

Item 4.

Controls and Procedures

59

 

 

 

 

PART II OTHER INFORMATION

 

Item 1.

Legal Proceedings

59

Item 1A.

Risk Factors

59

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

60

Item 3.

Defaults Upon Senior Securities

60

Item 4.

Mine Safety Disclosures

60

Item 5.

Other Information

60

Item 6.

Exhibits

60

 

 


 


Part i Financial information

ITEM 1. Financial Statements
 

AMERCO AND CONSOLIDATED ENTITIES

CONDENSED CONSOLIDATED balance sheets

 

 

December 31,

 

March 31,

 

 

2012

 

2012

 

 

(Unaudited)

 

 

 

 

(In thousands, except share data)

ASSETS

 

 

 

 

Cash and cash equivalents

$

586,124

$

357,180

Reinsurance recoverables and trade receivables, net

 

226,340

 

297,974

Inventories, net

 

55,989

 

58,735

Prepaid expenses

 

55,148

 

41,858

Investments, fixed maturities and marketable equities

 

1,019,968

 

766,792

Investments, other

 

270,191

 

258,551

Deferred policy acquisition costs, net

 

93,533

 

63,914

Other assets

 

101,889

 

120,525

Related party assets

 

175,175

 

316,157

 

 

2,584,357

 

2,281,686

Property, plant and equipment, at cost:

 

 

 

 

Land

 

338,598

 

281,140

Buildings and improvements

 

1,155,754

 

1,087,119

Furniture and equipment

 

316,772

 

308,120

Rental trailers and other rental equipment

 

303,379

 

255,010

Rental trucks

 

2,044,639

 

1,856,433

 

 

4,159,142

 

3,787,822

Less: Accumulated depreciation

 

(1,524,194)

 

(1,415,457)

Total property, plant and equipment

 

2,634,948

 

2,372,365

Total assets

$

5,219,305

$

4,654,051

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

Liabilities:

 

 

 

 

Accounts payable and accrued expenses

$

326,182

$

335,326

Notes, loans and leases payable

 

1,667,008

 

1,486,211

Policy benefits and losses, claims and loss expenses payable

 

1,115,823

 

1,145,943

Liabilities from investment contracts

 

486,502

 

240,961

Other policyholders' funds and liabilities

 

6,348

 

7,273

Deferred income

 

27,840

 

31,525

Deferred income taxes

 

399,103

 

370,992

Total liabilities

 

4,028,806

 

3,618,231

 

 

 

 

 

Commitments and contingencies (notes 4, 8, 9 and 10)

 

 

Stockholders' equity:

 

 

 

 

Series preferred stock, with or without par value, 50,000,000 shares authorized:

 

 

 

 

Series A preferred stock, with no par value, 6,100,000 shares authorized;

 

 

 

 

6,100,000 shares issued and none outstanding as of December 31 and March 31, 2012

 

 

Series B preferred stock, with no par value, 100,000 shares authorized; none

 

 

 

 

issued and outstanding as of December 31 and March 31, 2012

 

 

Series common stock, with or without par value, 150,000,000 shares authorized:

 

 

 

 

Series A common stock of $0.25 par value, 10,000,000 shares authorized;

 

 

 

 

none issued and outstanding as of December 31 and March 31, 2012

 

 

Common stock of $0.25 par value, 150,000,000 shares authorized; 41,985,700

 

 

 

 

issued and 19,607,788 outstanding as of December 31 and March 31, 2012

 

10,497

 

10,497

Additional paid-in capital

 

436,926

 

433,743

Accumulated other comprehensive loss

 

(22,192)

 

(45,436)

Retained earnings

 

1,444,757

 

1,317,064

Cost of common shares in treasury, net (22,377,912 shares as of December 31 and March 31, 2012)

 

(525,653)

 

(525,653)

Cost of preferred shares in treasury, net (6,100,000 shares as of December 31 and March 31, 2012)

 

(151,997)

 

(151,997)

Unearned employee stock ownership plan shares

 

(1,839)

 

(2,398)

Total stockholders' equity

 

1,190,499

 

1,035,820

Total liabilities and stockholders' equity

$

5,219,305

$

4,654,051

 

 

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 


AMERCO AND CONSOLIDATED ENTITIES

CONDENSED CONSOLIDATED Statements of operations

 

 

Quarter Ended December 31,

 

 

2012

 

2011

 

 

(Unaudited)

 

 

(In thousands, except share and per share amounts)

Revenues:

 

 

 

 

Self-moving equipment rentals

$

394,945

$

375,744

Self-storage revenues

 

39,111

 

33,846

Self-moving and self-storage products and service sales

 

44,491

 

43,206

Property management fees

 

6,085

 

5,368

Life insurance premiums

 

43,248

 

132,643

Property and casualty insurance premiums

 

9,816

 

9,429

Net investment and interest income

 

18,927

 

15,234

Other revenue

 

22,188

 

17,619

Total revenues

 

578,811

 

633,089

 

 

 

 

 

Costs and expenses:

 

 

 

 

Operating expenses

 

290,285

 

269,834

Commission expenses

 

51,130

 

47,864

Cost of sales

 

23,153

 

24,505

Benefits and losses

 

38,932

 

173,748

Amortization of deferred policy acquisition costs

 

3,391

 

3,666

Lease expense

 

27,575

 

32,325

Depreciation, net of (gains) on disposals of (($1,831) and ($699), respectively)

 

62,399

 

56,274

Total costs and expenses

 

496,865

 

608,216

 

 

 

 

 

Earnings from operations

 

81,946

 

24,873

Interest expense

 

(22,076)

 

(22,744)

Pretax earnings

 

59,870

 

2,129

Income tax expense

 

(23,024)

 

(1,401)

Earnings available to common shareholders

$

36,846

$

728

Basic and diluted earnings per common share

$

1.89

$

0.04

Weighted average common shares outstanding: Basic and diluted

 

19,523,794

 

19,481,614

 

 

 

 

 

 

Related party revenues for the third quarter of fiscal 2013 and 2012, net of eliminations, were $9,422 thousand and $11,595 thousand, respectively.

 

Related party costs and expenses for the third quarter of fiscal 2013 and 2012, net of eliminations, were $10,372 thousand and $10,992 thousand, respectively.

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 


AMERCO AND CONSOLIDATED ENTITIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

Nine Months Ended December 31,

 

 

2012

 

2011

 

 

(Unaudited)

 

 

(In thousands, except share and per share amounts)

Revenues:

 

 

 

 

Self-moving equipment rentals

$

1,400,300

$

1,333,918

Self-storage revenues

 

111,825

 

99,682

Self-moving and self-storage products and service sales

 

173,399

 

167,352

Property management fees

 

15,847

 

14,929

Life insurance premiums

 

137,341

 

229,839

Property and casualty insurance premiums

 

26,006

 

25,076

Net investment and interest income

 

44,237

 

48,398

Other revenue

 

76,589

 

60,041

Total revenues

 

1,985,544

 

1,979,235

 

 

 

 

 

Costs and expenses:

 

 

 

 

Operating expenses

 

883,892

 

836,149

Commission expenses

 

180,801

 

168,865

Cost of sales

 

86,292

 

89,729

Benefits and losses

 

130,682

 

268,140

Amortization of deferred policy acquisition costs

 

9,290

 

10,716

Lease expense

 

89,962

 

99,271

Depreciation, net of (gains) on disposals of (($14,879) and ($18,326), respectively)

 

177,478

 

148,696

Total costs and expenses

 

1,558,397

 

1,621,566

 

 

 

 

 

Earnings from operations

 

427,147

 

357,669

Interest expense

 

(67,680)

 

(68,340)

Pretax earnings

 

359,467

 

289,329

Income tax expense

 

(132,632)

 

(109,367)

Net earnings

 

226,835

 

179,962

Less: Excess of redemption value over carrying value of preferred shares redeemed

 

 

(5,908)

Less: Preferred stock dividends

 

 

(2,913)

Earnings available to common shareholders

$

226,835

$

171,141

Basic and diluted earnings per common share

$

11.62

$

8.79

Weighted average common shares outstanding: Basic and diluted

 

19,512,974

 

19,470,886

 

 

 

 

 

 

Related party revenues for the first nine months of fiscal 2013 and 2012, net of eliminations, were $26,344 thousand and $33,549 thousand, respectively.

 

Related party costs and expenses for the first nine months of fiscal 2013 and 2012, net of eliminations, were $36,584 thousand and $34,906 thousand, respectively.

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 


AMERCO AND CONSOLIDATED ENTITIES

Condensed consolidatED statements of COMPREHENSIVE INCOME (loss)

Quarter Ended December 31, 2012

 

Pre-tax

 

Tax

 

Net

 

 

(Unaudited)

 

 

(In thousands)

Comprehensive income:

 

 

 

 

 

 

Net earnings

$

59,870

$

(23,024)

$

36,846

Other comprehensive income (loss):

 

 

 

 

 

 

Foreign currency translation

 

(1,068)

 

 

(1,068)

Unrealized net gain on investments

 

18,368

 

(6,574)

 

11,794

Change in fair value of cash flow hedges

 

4,248

 

(1,614)

 

2,634

Total comprehensive income

$

81,418

$

(31,212)

$

50,206

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended December 31, 2011

 

Pre-tax

 

Tax

 

Net

 

 

(Unaudited)

 

 

(In thousands)

Comprehensive income:

 

 

 

 

 

 

Net earnings

$

2,129

$

(1,401)

$

728

Other comprehensive income (loss):

 

 

 

 

 

 

Foreign currency translation

 

1,578

 

 

1,578

Unrealized net gain on investments

 

14,079

 

(4,901)

 

9,178

Change in fair value of cash flow hedges

 

2,977

 

(1,131)

 

1,846

Total comprehensive income

$

20,763

$

(7,433)

$

13,330

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended December 31, 2012

 

Pre-tax

 

Tax

 

Net

 

 

(Unaudited)

 

 

(In thousands)

Comprehensive income:

 

 

 

 

 

 

Net earnings

$

359,467

$

(132,632)

$

226,835

Other comprehensive income (loss):

 

 

 

 

 

 

Foreign currency translation

 

462

 

 

462

Unrealized net gain on investments

 

30,914

 

(10,923)

 

19,991

Change in fair value of cash flow hedges

 

4,501

 

(1,710)

 

2,791

Total comprehensive income

$

395,344

$

(145,265)

$

250,079

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended December 31, 2011

 

Pre-tax

 

Tax

 

Net

 

 

(Unaudited)

 

 

(In thousands)

Comprehensive income:

 

 

 

 

 

 

Net earnings

$

289,329

$

(109,367)

$

179,962

Other comprehensive income (loss):

 

 

 

 

 

 

Foreign currency translation

 

(4,179)

 

 

(4,179)

Unrealized net gain on investments

 

7,328

 

(2,159)

 

5,169

Change in fair value of cash flow hedges

 

(13,133)

 

4,991

 

(8,142)

Total comprehensive income

$

279,345

$

(106,535)

$

172,810

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 


AMERCO AND CONSOLIDATED ENTITIES

Condensed consolidatED statements of cash flows

 

 

Nine Months Ended December 31,

 

 

2012

 

2011

 

 

(Unaudited)

 

 

(In thousands)

Cash flow from operating activities:

 

 

 

 

Net earnings

$

226,835

$

179,962

Adjustments to reconcile net earnings to cash provided by operations:

 

 

 

 

Depreciation

 

192,357

 

167,022

Amortization of deferred policy acquisition costs

 

9,290

 

10,716

Change in allowance for losses on trade receivables

 

(73)

 

(89)

Change in allowance for inventory reserves

 

2,050

 

3,005

Net gain on sale of real and personal property

 

(14,879)

 

(18,326)

Net gain on sale of investments

 

(1,050)

 

(5,454)

Deferred income taxes

 

17,757

 

94,581

Net change in other operating assets and liabilities:

 

 

 

 

Reinsurance recoverables and trade receivables

 

71,709

 

(145,727)

Inventories

 

696

 

173

Prepaid expenses

 

(13,283)

 

2,666

Capitalization of deferred policy acquisition costs

 

(43,085)

 

(19,072)

Other assets

 

22,712

 

3,623

Related party assets

 

138,042

 

(5,357)

Accounts payable and accrued expenses

 

(872)

 

7,428

Policy benefits and losses, claims and loss expenses payable

 

(30,226)

 

221,797

Other policyholders' funds and liabilities

 

(925)

 

(3,333)

Deferred income

 

(3,704)

 

1,070

Related party liabilities

 

2,970

 

2,965

Net cash provided by operating activities

 

576,321

 

497,650

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

Purchases of:

 

 

 

 

Property, plant and equipment

 

(422,840)

 

(421,743)

Short term investments

 

(289,773)

 

(169,313)

Fixed maturities investments

 

(308,290)

 

(172,570)

Equity securities

 

(3,130)

 

(9,048)

Preferred stock

 

(2,761)

 

(1,617)

Real estate

 

(1,053)

 

(5,201)

Mortgage loans

 

(50,583)

 

(94,111)

Proceeds from sale of:

 

 

 

 

Property, plant and equipment

 

166,904

 

139,852

Short term investments

 

280,856

 

186,941

Fixed maturities investments

 

85,132

 

116,609

Equity securities

 

 

10,210

Preferred stock

 

5,728

 

1,252

Real estate

 

671

 

146

Mortgage loans

 

49,215

 

40,883

Net cash used by investing activities

 

(489,924)

 

(377,710)

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Borrowings from credit facilities

 

251,319

 

234,562

Principal repayments on credit facilities

 

(234,698)

 

(166,615)

Debt issuance costs

 

(2,352)

 

(1,788)

Capital lease payments

 

(18,310)

 

(5,962)

Leveraged Employee Stock Ownership Plan - repayments from loan

 

559

 

827

Securitization deposits

 

(1,729)

 

40,500

Preferred stock redemption paid

 

 

(144,289)

Preferred stock dividends paid

 

 

(2,913)

Common stock dividends paid

 

(97,421)

 

Contribution to related party

 

 

(518)

Investment contract deposits

 

268,478

 

10,810

Investment contract withdrawals

 

(22,937)

 

(21,419)

Net cash provided (used) by financing activities

 

142,909

 

(56,805)

 

 

 

 

 

Effects of exchange rate on cash

 

(362)

 

(306)

 

 

 

 

 

Increase in cash and cash equivalents

 

228,944

 

62,829

Cash and cash equivalents at the beginning of period

 

357,180

 

382,514

Cash and cash equivalents at the end of period

$

586,124

$

445,343

 

 

 

 

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 


AMERCO AND CONSOLIDATED ENTITIES

notes to Condensed consolidatED financial statements

1.Basis of Presentation

AMERCO, a Nevada corporation (“AMERCO”), has a third fiscal quarter that ends on the 31st of December for each year that is referenced. Our insurance company subsidiaries have a third quarter that ends on the 30th of September 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 2012 and 2011 correspond to fiscal 2013 and 2012 for AMERCO.

Accounts denominated in non-U.S. currencies have been translated into U.S. dollars. Certain amounts reported in previous years have been reclassified to conform to the current presentation.

The condensed consolidated balance sheet as of December 31, 2012 and the related condensed consolidated statements of operations and comprehensive income for the third quarter and the first nine months and the cash flows for the first nine months ended fiscal 2013 and 2012 are unaudited.

In our opinion, all adjustments necessary for the fair presentation of such condensed consolidated financial statements have been included. Such adjustments consist only of normal recurring items. Interim results are not necessarily indicative of results for a full year. The information in this Quarterly Report on Form 10-Q (“Quarterly Report”) should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2012.

Intercompany accounts and transactions have been eliminated.

Description of Legal Entities

AMERCO is the holding company for:

U-Haul International, Inc. (“U-Haul”),

Amerco Real Estate Company (“Real Estate”),

Repwest Insurance Company (“Repwest”), and

Oxford Life Insurance Company (“Oxford”).

Unless the context otherwise requires, the term “Company,” “we,” “us” or “our” refers to AMERCO and all of its legal subsidiaries.

Description of Operating Segments

AMERCO has three reportable segments. They are Moving and Storage, Property and Casualty Insurance and Life Insurance.

The Moving and Storage operating segment includes AMERCO, U-Haul, and Real Estate and the wholly-owned subsidiaries of U-Haul and Real Estate. Operations consist of the rental of trucks and trailers, sales of moving supplies, sales of towing accessories, sales of propane, and the rental of fixed and mobile self-storage spaces to the “do-it-yourself” mover and management of self-storage properties owned by others. Operations are conducted under the registered trade name U-Haul® throughout the United States and Canada.


 


The Property and Casualty Insurance operating segment includes Repwest and its wholly-owned subsidiaries and ARCOA risk retention group (“ARCOA”). The Property and Casualty Insurance operating segment provides loss adjusting and claims handling for U-Haul through regional offices across North America. The Property and Casualty Insurance operating segment also underwrites components of the Safemove, Safetow, Super Safemove and Safestor protection packages to U-Haul customers. The business plan for the Property and Casualty Insurance operating segment includes offering property and casualty products in other U-Haul related programs. ARCOA is a group captive insurer owned by us and our wholly-owned subsidiaries whose purpose is to provide insurance products related to the moving and storage business.

The Life Insurance operating segment includes Oxford and its wholly-owned subsidiaries. Oxford provides life and health insurance products primarily to the senior market through the direct writing or reinsuring of life insurance, Medicare supplement and annuity policies.

2. Earnings per Share

Net earnings for purposes of computing earnings per common share for the third quarter and first nine months of fiscal 2012 are net earnings less preferred stock dividends paid, adjusted for the price paid by us for the redemption of our preferred stock less its carrying value on our balance sheet at that time. Preferred stock dividends include accrued dividends of AMERCO. Preferred stock dividends paid to or accrued for entities that are part of the consolidated group are eliminated in consolidation.

The weighted average common shares outstanding exclude post-1992 shares of the employee stock ownership plan that have not been committed to be released. The unreleased shares, net of shares committed to be released, were 75,657 and 120,725 as of December 31, 2012 and December 31, 2011, respectively.

On June 1, 2011, we redeemed all 6,100,000 shares of our issued and outstanding Series A 8½% Preferred Stock (“Series A Preferred”) at a redemption price of $25 per share plus accrued dividends through that date.  Pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 260 – Earnings Per Share (“ASC 260”), for earnings per share purposes, we recognize the deficit of the carrying amount of the Series A Preferred over the consideration paid to redeem the shares. 

The Series A Preferred was recorded in our Additional Paid-In Capital account, net of original issue costs at $146.3 million prior to the redemption.  We paid $152.5 million to redeem the shares on June 1, 2011 of which $7.7 million was paid to our insurance subsidiaries in exchange for their holdings.  The difference between what was paid to redeem the shares less their carrying amount on our balance sheet, reduced by our insurance subsidiaries holdings was $5.9 million. This amount was recognized as a reduction to our earnings available to our common shareholders for the purposes of computing earnings per share for the first nine months of fiscal 2012.

3. Investments

Expected maturities may differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

We deposit bonds with insurance regulatory authorities to meet statutory requirements. The adjusted cost of bonds on deposit with insurance regulatory authorities was $16.3 million at December 31, 2012.

 


Available-for-Sale Investments

Available-for-sale investments at December 31, 2012 were as follows:

 

 

Amortized

Cost

 

Gross

Unrealized

Gains

 

Gross

Unrealized

Losses More than 12 Months

 

Gross

Unrealized

Losses Less than 12 Months

 

Estimated

Market

Value

 

 

(Unaudited)

 

 

(In thousands)

U.S. treasury securities and government obligations

$

21,201

$

2,910

$

(3)

$

$

24,108

U.S. government agency mortgage-backed securities

 

41,010

 

4,427

 

(7)

 

(1)

 

45,429

Obligations of states and political subdivisions

 

149,644

 

16,073

 

(2)

 

(54)

 

165,661

Corporate securities

 

662,087

 

52,067

 

(650)

 

(1,131)

 

712,373

Mortgage-backed securities

 

24,597

 

774

 

(25)

 

(30)

 

25,316

Redeemable preferred stocks

 

21,353

 

1,208

 

(342)

 

(11)

 

22,208

Common stocks

 

30,866

 

99

 

(6,092)

 

 

24,873

 

$

950,758

$

77,558

$

(7,121)

$

(1,227)

$

1,019,968

 

 

 

 

 

 

 

 

 

 

 

 

The table above includes gross unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position.

We sold available-for-sale securities with a fair value of $90.7 million during the first nine months of fiscal 2013. The gross realized gains on these sales totaled $1.9 million. The gross realized losses on these sales totaled $0.6 million.

The unrealized losses of more than twelve months in the available-for-sale table are considered temporary declines. The majority of this unrealized loss is related to our long term investments in 1.8 million shares of Bank of America common stock. We track each investment with an unrealized loss and evaluate them on an individual basis for other-than-temporary impairments including obtaining corroborating opinions from third party sources, performing trend analysis and reviewing management’s future plans. Certain of these investments may have declines determined by management to be other-than-temporary and we recognized these write-downs through earnings. Our insurance subsidiaries recognized $0.1 million in other-than-temporary impairments for the first nine months of fiscal 2012. There were no write downs in the third quarter of fiscal 2013 and 2012 or for the first nine months of fiscal 2013.

The investment portfolio primarily consists of corporate securities and U.S. government securities. We believe we monitor our investments as appropriate. Our methodology of assessing other-than-temporary impairments is based on security-specific analysis as of the balance sheet date and considers various factors including the length of time to maturity, the extent to which the fair value has been less than the cost, the financial condition and the near-term prospects of the issuer, and whether the debtor is current on its contractually obligated interest and principal payments. Nothing has come to management’s attention that would lead to the belief that each issuer would not have the ability to meet the remaining contractual obligations of the security, including payment at maturity. We have the ability and intent not to sell our fixed maturity and common stock investments for a period of time sufficient to allow us to recover our costs.

The portion of other-than-temporary impairment related to a credit loss is recognized in earnings. The significant inputs utilized in the evaluation of mortgage backed securities credit losses include ratings, delinquency rates, and prepayment activity. The significant inputs utilized in the evaluation of asset backed securities credit losses include the time frame for principal recovery and the subordination and value of the underlying collateral.

 


Credit losses recognized in earnings for which a portion of an other-than-temporary impairment was recognized in other comprehensive income were as follows:

 

 

Credit Loss

 

 

(Unaudited)

 

 

(In thousands)

Balance at March 31, 2012

$

552

Additions:

 

 

Other-than-temporary impairment not previously recognized

 

Balance at December 31, 2012

$

552

 

 

 

 

The adjusted cost and estimated market value of available-for-sale investments at December 31, 2012, by contractual maturity, were as follows:

 

 

Amortized

Cost

 

Estimated

Market

Value

 

 

(Unaudited)

 

 

(In thousands)

Due in one year or less

$

48,841

$

49,768

Due after one year through five years

 

168,987

 

180,963

Due after five years through ten years

 

243,324

 

263,840

Due after ten years

 

412,790

 

453,000

 

 

873,942

 

947,571

 

 

 

 

 

Mortgage backed securities

 

24,597

 

25,316

Redeemable preferred stocks

 

21,353

 

22,208

Common stocks

 

30,866

 

24,873

 

$

950,758

$

1,019,968

 

 

 

 

 

 

 


4. Borrowings

Long-Term Debt

Long-term debt was as follows:

 

 

 

 

 

December 31,

 

March 31,

 

2013 Rate (a)

 

Maturities

 

2012

 

2012

 

 

 

 

 

(Unaudited)

 

 

 

 

 

 

 

(In thousands)

Real estate loan (amortizing term)

6.93%

 

2018

$

237,500

$

245,000

Real estate loan (revolving credit)

 

2018

 

 

Real estate loan (amortizing term)

2.11%

 

2016

 

24,779

 

25,451

Real estate loan (revolving credit)

 

2013

 

 

23,920

Senior mortgages

4.90% - 5.75%

 

2015 - 2038

 

560,775

 

459,822

Working capital loan (revolving credit)

 

2013

 

 

Fleet loans (amortizing term)

1.75% - 6.92%

 

2012 - 2020

 

360,690

 

384,888

Fleet loans (securitization)

4.90% - 5.56%

 

2014 - 2017

 

196,179

 

228,655

Capital leases (rental equipment)

2.37% - 9.57%

 

2015 - 2019

 

274,394

 

109,689

Other obligations

3.00% - 8.00%

 

2013 - 2042

 

12,691

 

8,786

Total notes, loans and leases payable

 

 

 

$

1,667,008

$

1,486,211

 

 

 

 

 

 

 

 

(a) Interest rate as of December 31, 2012, including the effect of applicable hedging instruments.

 

 

 

 

 

Real Estate Backed Loans

Real Estate Loan

Amerco Real Estate Company and certain of its subsidiaries and U-Haul Company of Florida are borrowers under a Real Estate Loan. The loan has a final maturity date of August 2018. The loan is comprised of a term loan facility with initial availability of $300.0 million and a revolving credit facility with current availability of $177.7 million. As of December 31, 2012, the outstanding balance on the Real Estate Loan was $237.5 million and we had the full $177.7 million available to be drawn. U-Haul International, Inc. is a guarantor of this loan. 

The amortizing term portion of the Real Estate Loan requires monthly principal and interest payments, with the unpaid loan balance and accrued and unpaid interest due at maturity. The revolving credit portion of the Real Estate Loan requires monthly interest payments when drawn, with the unpaid loan balance and any accrued and unpaid interest due at maturity. The Real Estate Loan is secured by various properties owned by the borrowers. 

The interest rate for the amortizing term portion, per the provisions of the amended loan agreement, is the applicable London Inter-Bank Offer Rate (“LIBOR”) plus the applicable margin. At December 31, 2012, the applicable LIBOR was 0.22% and the applicable margin was 1.50%, the sum of which was 1.72%. The rate on the term facility portion of the Real Estate Loan is hedged with an interest rate swap fixing the rate at 6.93% based on current margin.

The interest rate for the revolving credit facility, per the provision of the amended loan agreement, is the applicable LIBOR plus the applicable margin. The margin ranges from 1.50% to 2.00%.

The default provisions of the Real Estate Loan include non-payment of principal or interest and other standard reporting and change-in-control covenants. There are limited restrictions regarding our use of the funds.

Amerco Real Estate Company and a subsidiary of U-Haul International, Inc. entered into a revolving credit construction loan effective June 29, 2006. This loan was modified and extended on June 27, 2011. This loan is now comprised of a term loan facility with an initial availability of $26.1 million and a final maturity of

 


June 2016. As of December 31, 2012, the outstanding balance was $24.8 million.

This Real Estate Loan requires monthly principal and interest payments, with the unpaid loan balance and any accrued and unpaid interest due at maturity. The interest rate, per the provision of this loan agreement, is the applicable LIBOR plus a margin of 1.90%. At December 31, 2012, the applicable LIBOR was 0.21% and the margin was 1.90%, the sum of which was 2.11%. U-Haul International, Inc. and AMERCO are guarantors of this loan. The default provisions of the loan include non-payment of principal or interest and other standard reporting and change-in-control covenants.

On April 29, 2011, Amerco Real Estate Company and U-Haul Company of Florida entered into a revolving credit agreement for $100.0 million. This agreement was amended in March 2012 and the maturity extended to April 2013 with an option for a one year extension. As of December 31, 2012, we had the full $100.0 million available to be drawn. The interest rate is the applicable LIBOR plus a margin of 1.25%. AMERCO and U-Haul International, Inc. are guarantors of this facility. The default provisions of the loan include non-payment of principal or interest and other standard reporting and change-in-control covenants.

Senior Mortgages

Various subsidiaries of Amerco Real Estate Company and U-Haul International, Inc. are borrowers under certain senior mortgages. These senior mortgage loan balances as of December 31, 2012 were in the aggregate amount of $560.8 million and mature between 2015 and 2038. The senior mortgages require average monthly principal and interest payments with the unpaid loan balance and accrued and unpaid interest due at maturity. The senior mortgages are secured by certain properties owned by the borrowers. The interest rates, per the provisions of the senior mortgages, range between 4.90% and 5.75%. Amerco Real Estate Company and U-Haul International, Inc. have provided limited guarantees of the senior mortgages. The default provisions of the senior mortgages include non-payment of principal or interest and other standard reporting and change-in-control covenants. There are limited restrictions regarding our use of the funds. 

Working Capital Loans

Amerco Real Estate Company is a borrower under an asset backed working capital loan. The maximum amount that can be drawn at any one time is $25.0 million. At December 31, 2012, we had the full $25.0 million available to be drawn. This loan is secured by certain properties owned by the borrower. This loan agreement provides for revolving loans, subject to the terms of the loan agreement. This agreement was amended in March 2012 and the maturity extended to November 2013 with an option for a one year extension. This loan requires monthly interest payments with the unpaid loan balance and accrued and unpaid interest due at maturity. U-Haul International, Inc. and AMERCO are the guarantors of this loan. The default provisions of the loan include non-payment of principal or interest and other standard reporting and change-in-control covenants. The interest rate, per the provision of this loan agreement, is the applicable LIBOR plus a margin of 1.25%.

Fleet Loans

Rental Truck Amortizing Loans

U-Haul International, Inc. and several of its subsidiaries are borrowers under amortizing term loans. The balance of the loans as of December 31, 2012 was $245.7 million with the final maturities between July 2013 and January 2020.

The Amortizing Loans require monthly principal and interest payments, with the unpaid loan balance and accrued and unpaid interest due at maturity. These loans were used to purchase new trucks. The interest rates, per the provision of the Loan Agreements, are the applicable LIBOR plus a margin between 0.90% and 2.63%. At December 31, 2012, the applicable LIBOR was between 0.21% and 0.22% and applicable margins were between 0.90% and 2.63%. The interest rates are hedged with interest rate swaps fixing the rates between 1.75% and 6.92% based on current margins. Additionally, $31.1 million of these loans are carried at fixed rates between 2.59% to 3.94%.

 


AMERCO and U-Haul International, Inc. are guarantors of these loans. The default provisions of these loans include non-payment of principal or interest and other standard reporting and change-in-control covenants.

On December 31, 2009, a subsidiary of U-Haul International, Inc. entered into an $85.0 million term note that was used to fund cargo van and pickup acquisitions for the past two years. This term note was amended on August 26, 2011. The amount of the term note was increased to $95.0 million. On December 22, 2011, we entered into another term loan for $20.0 million. The final maturity date of these notes is August 2016.  The agreements contain options to extend the maturity through May 2017. These notes are secured by the purchased equipment and the corresponding operating cash flows associated with their operation.  These notes have fixed interest rates between 3.52% and 3.53%. At December 31, 2012, the outstanding balance was $115.0 million.

AMERCO and U-Haul International, Inc. are guarantors of these loans. The default provisions of these loans include non-payment of principal or interest and other standard reporting and change-in-control covenants.

Rental Truck Securitizations

U-Haul S Fleet and its subsidiaries (collectively, “USF”) issued a $217.0 million asset-backed note (“2007 Box Truck Note”) on June 1, 2007. USF is a bankruptcy-remote special purpose entity wholly-owned by U-Haul International, Inc. The net proceeds from the securitized transaction were used to finance new box truck purchases throughout fiscal 2008. U.S. Bank, NA acts as the trustee for this securitization.

The 2007 Box Truck Note has a fixed interest rate of 5.56% with an expected final maturity of February 2014. At December 31, 2012, the outstanding balance was $84.6 million. The note is secured by the box trucks that were purchased and the corresponding operating cash flows associated with their operation.

The 2007 Box Truck Note has the benefit of a financial guaranty insurance policy which guarantees the timely payment of interest on and the ultimate payment of the principal of this note.

2010 U-Haul S Fleet and its subsidiaries (collectively, “2010 USF”) issued a $155.0 million asset-backed note (“2010 Box Truck Note”) on October 28, 2010. 2010 USF is a bankruptcy-remote special purpose entity wholly-owned by U-Haul International, Inc. The net proceeds from the securitized transaction were used to finance new box truck purchases. U.S. Bank, NA acts as the trustee for this securitization.

The 2010 Box Truck Note has a fixed interest rate of 4.90% with an expected final maturity of October 2017. At December 31, 2012, the outstanding balance was $111.6 million. The note is secured by the box trucks being purchased and the corresponding operating cash flows associated with their operation.

The 2007 Box Truck Note and 2010 Box Truck Note are subject to certain covenants with respect to liens, additional indebtedness of the special purpose entities, the disposition of assets and other customary covenants of bankruptcy-remote special purpose entities. The default provisions of these notes include non-payment of principal or interest and other standard reporting and change-in-control covenants.

Capital Leases

We entered into capital leases for new equipment between April 2008 and December 2012, with terms of the leases between 5 and 7 years. At December 31, 2012, the outstanding balance of these leases was $274.4 million.

Other Obligations

In February 2011, the Company and US Bank, National Association (the “Trustee”) entered into the U-Haul Investors Club Indenture.  The Company and the Trustee entered into this indenture to provide for the issuance of notes (“U-Notes”) by us directly to investors over our proprietary website, uhaulinvestorsclub.com. The U-Notes are secured by various types of collateral including rental equipment and real estate.  U-Notes are issued in smaller series that vary as to principal amount, interest rate and maturity.  U-Notes are obligations of the Company and secured by the associated collateral; they are not guaranteed by any of the Company’s affiliates or subsidiaries.

 


At December 31, 2012, the aggregate outstanding principal balance of the U-Notes issued was $19.0 million of which $6.3 million is with our insurance subsidiaries with interest rates between 3.00% and 8.00% and maturity dates between 2013 and 2042.

Annual Maturities of Notes, Loans and Leases Payable

The annual maturities of long-term debt as of December 31, 2012 for the next five years and thereafter are as follows:

 

 

Year Ending December 31,

 

 

2013

 

2014

 

2015

 

2016

 

2017

 

Thereafter

 

 

(Unaudited)

 

 

(In thousands)

Notes, loans and leases payable, secured

$

128,987

$

203,900

$

530,297

$

282,227

$

172,932

$

348,665

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest on Borrowings

Interest Expense

Components of interest expense include the following:

 

 

 

Quarter Ended December 31,

 

 

2012

 

2011

 

 

(Unaudited)

 

 

(In thousands)

Interest expense

$

16,540

$

16,009

Capitalized interest

 

(119)

 

(76)

Amortization of transaction costs

 

1,014

 

1,198

Interest expense resulting from derivatives

 

4,641

 

5,613

Total interest expense

$

22,076

$

22,744

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended December 31,

 

 

2012

 

2011

 

 

(Unaudited)

 

 

(In thousands)

Interest expense

$

48,715

$

47,888

Capitalized interest

 

(290)

 

(154)

Amortization of transaction costs

 

3,149

 

3,292

Interest expense resulting from derivatives

 

16,106

 

17,314

Total interest expense

$

67,680

$

68,340

 

 

 

 

 

 

Interest paid in cash including payments related to derivative contracts, amounted to $20.8 million and $21.7 million for the third quarter of fiscal 2013 and 2012, respectively and $63.3 million and $66.0 million for the first nine months of fiscal 2013 and 2012, respectively.

 


Interest Rates

Interest rates and Company borrowings were as follows:

 

 

Revolving Credit Activity

 

 

Quarter Ended December 31,

 

 

2012

 

2011

 

 

(Unaudited)

 

 

(In thousands, except interest rates)

Weighted average interest rate during the quarter

 

1.57%

 

1.80%

Interest rate at the end of the quarter

 

1.61%

 

1.77%

Maximum amount outstanding during the quarter

$

25,000

$

38,920

Average amount outstanding during the quarter

$

24,185

$

37,779

Facility fees

$

115

$

109

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revolving Credit Activity

 

 

Nine Months Ended December 31,

 

 

2012

 

2011

 

 

(Unaudited)

 

 

(In thousands, except interest rates)

Weighted average interest rate during the first nine months

 

1.67%

 

1.72%

Interest rate at the end of the first nine months

 

1.61%

 

1.77%

Maximum amount outstanding during the first nine months

$

48,920

$

38,920

Average amount outstanding during the first nine months

$

24,830

$

24,685

Facility fees

$

399

$

416

 

 

 

 

 

 

5. Derivatives

We manage exposure to changes in market interest rates. Our use of derivative instruments is limited to highly effective interest rate swaps to hedge the risk of changes in cash flows (future interest payments) attributable to changes in LIBOR swap rates, the designated benchmark interest rate being hedged on certain of our LIBOR indexed variable rate debt and a variable rate operating lease. The interest rate swaps effectively fix our interest payments on certain LIBOR indexed variable rate debt. We monitor our positions and the credit ratings of our counterparties and do not currently anticipate non-performance by the counterparties. Interest rate swap agreements are not entered into for trading purposes.


 


 

Original variable rate debt amount

 

Agreement Date

 

Effective Date

 

Expiration Date

 

Designated cash flow hedge date

 

(Unaudited)

 

(In millions)

$

50.0

 

 

6/21/2006

 

7/10/2006

 

7/10/2013

 

6/9/2006

 

300.0

 

 

8/16/2006

 

8/18/2006

 

8/10/2018

 

8/4/2006

 

30.0

 

 

2/9/2007

 

2/12/2007

 

2/10/2014

 

2/9/2007

 

20.0

 

 

3/8/2007

 

3/12/2007

 

3/10/2014

 

3/8/2007

 

20.0

 

 

3/8/2007

 

3/12/2007

 

3/10/2014

 

3/8/2007

 

19.3

(a)

 

4/8/2008

 

8/15/2008

 

6/15/2015

 

3/31/2008

 

19.0

 

 

8/27/2008

 

8/29/2008

 

7/10/2015

 

4/10/2008

 

30.0

 

 

9/24/2008

 

9/30/2008

 

9/10/2015

 

9/24/2008

 

15.0

(a)

 

3/24/2009

 

3/30/2009

 

3/30/2016

 

3/25/2009

 

14.7

(a)

 

7/6/2010

 

8/15/2010

 

7/15/2017

 

7/6/2010

 

25.0

(a)

 

4/26/2011

 

6/1/2011

 

6/1/2018

 

7/1/2011

 

50.0

(a)

 

7/29/2011

 

8/15/2011

 

8/15/2018

 

7/29/2011

 

20.0

(a)

 

8/3/2011

 

9/12/2011

 

9/10/2018

 

8/3/2011

 

15.1

(b)

 

3/27/2012

 

3/28/2012

 

3/28/2019

 

3/26/2012

 

25.0

 

 

4/13/2012

 

4/16/2012

 

4/1/2019

 

4/12/2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) forward swap

 

 

 

 

 

 

 

 

 

 

(b) operating lease

 

 

 

 

 

 

 

 

 

 

As of December 31, 2012, the total notional amount of our variable interest rate swaps on debt and an operating lease was $417.3 million and $14.1 million, respectively.

The derivative fair values located in accounts payable and accrued expenses in the balance sheets were as follows:

 

 

Liability Derivatives Fair Values as of

 

 

December 31, 2012

 

March 31, 2012

 

 

(Unaudited)

 

 

 

 

(In thousands)

Interest rate contracts designated as hedging instruments

$

56,089

$

59,313

 

 

 

 

 

 

 

 

The Effect of Interest Rate Contracts on the Statements of Operations

 

 

December 31, 2012

 

December 31, 2011

 

 

(Unaudited)

 

 

(In thousands)

Loss recognized in income on interest rate contracts

$

16,106

$

17,314

(Gain) loss recognized in AOCI on interest rate contracts (effective portion)

$

(4,501)

$

13,133

Loss reclassified from AOCI into income (effective portion)

$

14,828

$

17,984

(Gain) loss recognized in income on interest rate contracts (ineffective portion and amount excluded from effectiveness testing)

$

1,277

$

(670)

 

 

 


Gains or losses recognized in income on derivatives are recorded as interest expense in the statements of operations. At December 31, 2012, we expect to reclassify $16.6 million of net losses on interest rate contracts from accumulated other comprehensive income to earnings as interest expense over the next twelve months.

6. Stockholders Equity

On June 1, 2011, we redeemed all 6,100,000 shares of our issued and outstanding Series A Preferred at a redemption price of $25 per share plus accrued dividends through that date.  Pursuant to ASC 260, for earnings per share purposes, we recognized the deficit of the carrying amount of the Series A Preferred over the consideration paid to redeem the shares.

The Series A Preferred was recorded in our Additional Paid-In Capital account, net of original issue costs at $146.3 million prior to the redemption. We paid $152.5 million to redeem the shares on June 1, 2011 of which $7.7 million was paid to our insurance subsidiaries in exchange for their holdings. The difference between what was paid to redeem the shares less their carrying amount on our balance sheet, reduced by our insurance subsidiaries holdings was $5.9 million. This amount was recognized as a reduction to our earnings available to our common shareholders for the purposes of computing earnings per share for the first nine months of fiscal 2012.

On November 7, 2012, we declared a special cash dividend on our Common Stock of $5.00 per share to holders of record on November 19, 2012. The dividend was paid on November 30, 2012.

7. Comprehensive Income (Loss)

A summary of accumulated other comprehensive income (loss) components, net of tax, were as follows:

 

 

Foreign Currency Translation

 

Unrealized Net Gain on Investments

 

Fair Market Value of Cash Flow Hedges

 

Postretirement Benefit Obligation Gain

 

Accumulated Other Comprehensive Income (Loss)

 

 

(Unaudited)

 

 

(In thousands)

Balance at March 31, 2012

$

(28,882)

$

20,866

$

(38,129)

$

709

$

(45,436)

Foreign currency translation

 

462

 

 

 

 

462

Unrealized net gain on investments

 

 

19,991

 

 

 

19,991

Change in fair value of cash flow hedges

 

 

 

2,791

 

 

2,791

Balance at December 31, 2012

$

(28,420)

$

40,857

$

(35,338)

$

709

$

(22,192)

 

 

 

 

 

 

 

 

 

 

 

 

8. Contingent Liabilities and Commitments

We lease a portion of our rental equipment and certain of our facilities under operating leases with terms that expire at various dates substantially through 2019. As of December 31, 2012, AMERCO has guaranteed $124.3 million of residual values for these rental equipment assets at the end of the respective lease terms. Certain leases contain renewal and fair market value purchase options as well as mileage and other restrictions. At the expiration of the lease, we have the option to renew the lease, purchase the asset for fair market value, or sell the asset to a third party on behalf of the lessor. AMERCO has been leasing equipment since 1987 and has experienced no material losses relating to these types of residual value guarantees.

 


Lease commitments for leases having terms of more than one year were as follows:

 

 

Property,

Plant and

Equipment

 

Rental

Equipment

 

Total

 

 

(Unaudited)

 

 

 

 

(In thousands)

 

 

Year-ended December 31:

 

 

 

 

 

 

2013

$

13,930

$

88,539

$

102,469

2014

 

6,061

 

65,177

 

71,238

2015

 

894

 

41,182

 

42,076

2016

 

748

 

16,638

 

17,386

2017

 

629

 

11,308

 

11,937

Thereafter

 

5,170

 

13,115

 

18,285

Total

$

27,432

$

235,959

$

263,391

 

 

 

 

 

 

 

 

9. Contingencies

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 AMERCO Board of Directors, including Edward J. Shoen, Mark V. Shoen and James P. Shoen as Defendants. AMERCO is named as a nominal Defendant in the case. The complaint alleges breach of fiduciary duty, self-dealing, usurpation of corporate opportunities, wrongful interference with prospective economic advantage and unjust enrichment and seeks the unwinding of sales of self-storage properties by subsidiaries of AMERCO to SAC prior to the filing of the complaint. The complaint seeks a declaration that such transfers are void as well as unspecified damages. In October 2002, the Defendants filed motions to dismiss the complaint. 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 AMERCO Board of Directors had the requisite level of independence required in order to have these claims resolved by the Board. Plaintiffs appealed this decision and, in July 2006, the Nevada Supreme Court 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 (the “Court”). On May 20, 2008, AMERCO filed a cross appeal relating to the denial of its Motion to Dismiss in regard to demand futility.

On May 12, 2011, the Nevada Supreme Court affirmed in part, reversed in part, and remanded the case for further proceedings.  First, the Court ruled that the Goldwasser settlement did not release claims that arose after the agreement and, therefore, reversed the trial court’s dismissal of the Complaint on that ground. Second, the Court affirmed the district court’s determination that the in pari delicto defense is available in a derivative suit and reversed and remanded to the district court to determine if the defense applies to this matter.  Third, the Court remanded to the district court to conduct an evidentiary hearing to determine whether demand upon the AMERCO Board was, in fact, futile.  Fourth, the Court invited AMERCO to seek a ruling from the district court as to the legal effect of the AMERCO Shareholders’ 2008 ratification of the underlying AMERCO/SAC transactions. 

Last, as to individual claims for relief, the Court affirmed the district court’s dismissal of the breach of fiduciary duty of loyalty claims as to all defendants except Mark Shoen.  The Court affirmed the district court’s dismissal of the breach of fiduciary duty: ultra vires Acts claim as to all defendants. The Court reversed the district court’s dismissal of aiding and abetting a breach of fiduciary duty and unjust enrichment claims against the SAC entities.  The Court reversed the trial court’s dismissal of the claim for wrongful interference with prospective economic advantage as to all defendants.

On remand, on July 22, 2011, AMERCO filed a Motion for Summary Judgment based upon the Shareholder’s Ratification of the SAC transactions. In addition, on August 29, 2011, certain defendants filed a Motion to Dismiss Plaintiffs’ Claim for Wrongful Interference with Prospective Economic Advantage. On August 31, 2011, the trial court held a status conference and entered an order setting forth the briefing schedule for the two motions. On December 23, 2011, the trial court denied AMERCO’s motion for summary judgment and certain defendants’ motion to dismiss. The court set a discovery schedule on the limited issue of demand futility.  A four day evidentiary hearing on demand futility was scheduled to begin on August 20, 2012.

On August 6, 2012, Max Belec and Glenbrook Capital Limited Partnership, voluntarily dismissed their complaint with prejudice. On August 20, 2012, the remaining plaintiffs, Paul Shoen and Alan Kahn, dismissed their complaint with prejudice. AMERCO paid none of plaintiffs attorneys’ fees or costs. In return, AMERCO released plaintiffs from further related litigation based on plaintiffs’ conduct in this litigation. Moreover, Paul Shoen, Alan Kahn, Grover Wickersham and numerous individuals and entities related to Paul Shoen and Grover Wickersham agreed to sell all of their AMERCO securities in the open market and not sue AMERCO or any of the other defendants for 20 years. If the plaintiffs or the related parties breach this agreement, Paul Shoen will be responsible for $5,000,000 in liquidated damages. The parties filed a final Mutual Release Agreement with the Court on October 16, 2012, thereby terminating the case in its entirety, with prejudice.

Environmental

Compliance with environmental requirements of federal, state and local governments has the potential to significantly affect Real Estate’s business operations. Among other things, these requirements regulate the discharge of materials into the air, land and water 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.

Other

The Company is named as a defendant in various other litigation and claims arising out of the normal course of business. In management’s opinion, none of these other matters will have a material effect on the Company’s financial position and results of operations.

 


10. Related Party Transactions

As set forth in the Audit Committee Charter and consistent with Nasdaq Listing Rules, our Audit Committee (the “Audit Committee”) reviews and maintains oversight over related party transactions which are required to be disclosed under the Securities and Exchange Commission (“SEC”) rules and regulations. Accordingly, all such related party transactions are submitted to the Audit Committee for ongoing review and oversight. We believe that our internal processes ensure that our legal and finance departments identify and monitor potential related party transactions which may require disclosure and Audit Committee oversight.

AMERCO has engaged in related party transactions and has continuing related party interests with certain major stockholders, directors and officers of the consolidated group as disclosed below. Management believes that the transactions described below and in the related notes were completed on terms substantially equivalent to those that would prevail in arm’s-length transactions.

SAC Holding Corporation and SAC Holding II Corporation, (collectively “SAC Holdings”) were established in order to acquire self-storage properties. These properties are being managed by us pursuant to management agreements. In the past, we have sold various self-storage properties to SAC Holdings, and such sales provided significant cash flows to us.

Management believes that the sales of self-storage properties to SAC Holdings has provided a unique structure for the Company to earn moving equipment rental revenues and property management fee revenues from the SAC Holdings self-storage properties that the Company manages.

Related Party Revenue

 

 

Quarter Ended December 31,

 

 

2012

 

2011

 

 

(Unaudited)

 

 

(In thousands)

U-Haul interest income revenue from SAC Holdings

$

1,981

$

4,863

U-Haul interest income revenue from Private Mini

 

1,356

 

1,364

U-Haul management fee revenue from SAC Holdings

 

3,585

 

3,440

U-Haul management fee revenue from Private Mini

 

580

 

558

U-Haul management fee revenue from Mercury

 

1,920

 

1,370

 

$

9,422

$

11,595

 

 

 

 

 

 

 

 

Nine Months Ended December 31,

 

 

2012

 

2011

 

 

(Unaudited)

 

 

(In thousands)

U-Haul interest income revenue from SAC Holdings

$

6,438

$

14,537

U-Haul interest income revenue from Private Mini

 

4,059

 

4,083

U-Haul management fee revenue from SAC Holdings

 

11,271

 

10,990

U-Haul management fee revenue from Private Mini

 

1,720

 

1,664

U-Haul management fee revenue from Mercury

 

2,856

 

2,275

 

$

26,344

$

33,549

 

 

 

 

 

During the first nine months of fiscal 2013, subsidiaries of the Company held various junior unsecured notes of SAC Holdings. Substantially all of the equity interest of SAC Holdings is controlled by Blackwater Investments, Inc. (“Blackwater”). Blackwater is wholly-owned by Mark V. Shoen, a significant shareholder of AMERCO. We do not have an equity ownership interest in SAC Holdings. We received cash interest payments of $10.7 million and $13.4 million, from SAC Holdings during the first nine months of fiscal 2013

 


and 2012, respectively. The largest aggregate amount of notes receivable outstanding during the first nine months of fiscal 2012 was $195.4 million and the aggregate notes receivable balance at December 31, 2012 was $72.6 million. In accordance with the terms of these notes, SAC Holdings may prepay the notes without penalty or premium at any time. The scheduled maturities of these notes are between 2019 and 2024. We received repayments of $127.3 million during the first quarter of fiscal 2013 on these notes and interest receivables.

During the first nine months of fiscal 2013, AMERCO and U-Haul held various junior notes issued by Private Mini Storage Realty, L.P. (“Private Mini”). The equity interests of Private Mini are ultimately controlled by Blackwater. We received cash interest payments of $4.1 million and $4.0 million from Private Mini during the first nine months of fiscal 2013 and 2012, respectively. The largest aggregate amount outstanding during the first nine months of fiscal 2013 was $66.3 million and the aggregate notes receivable balance at December 31, 2012 was $66.0 million.

We currently manage the self-storage properties owned or leased by SAC Holdings, Mercury Partners, L.P. (“Mercury”), Four SAC Self-Storage Corporation (“4 SAC”), Five SAC Self-Storage Corporation (“5 SAC”), Galaxy Investments, L.P. (“Galaxy”) and Private Mini pursuant to a standard form of management agreement, under which we receive a management fee of between 4% and 10% of the gross receipts plus reimbursement for certain expenses. We received management fees, exclusive of reimbursed expenses, of $19.1 million and $18.0 million from the above mentioned entities during the first nine months of fiscal 2013 and 2012. This management fee is consistent with the fee received for other properties we previously managed for third parties. SAC Holdings, 4 SAC, 5 SAC, Galaxy and Private Mini are substantially controlled by Blackwater. Mercury is substantially controlled by Mark V. Shoen. James P. Shoen, a significant shareholder and director of AMERCO, has an interest in Mercury.

Related Party Costs and Expenses

 

 

Quarter Ended December 31,

 

 

2012

 

2011

 

 

(Unaudited)

 

 

(In thousands)

U-Haul lease expenses to SAC Holdings

$

655

$

636

U-Haul commission expenses to SAC Holdings

 

9,142

 

9,764

U-Haul commission expenses to Private Mini

 

575

 

592

 

$

10,372

$

10,992

 

 

 

 

 

 

 

 

Nine Months Ended December 31,

 

 

2012

 

2011

 

 

(Unaudited)

 

 

(In thousands)

U-Haul lease expenses to SAC Holdings

$

1,971

$

1,762

U-Haul commission expenses to SAC Holdings

 

32,531

 

31,146

U-Haul commission expenses to Private Mini

 

2,082

 

1,998

 

$

36,584

$

34,906

 

 

 

 

 

We lease space for marketing company offices, vehicle repair shops and hitch installation centers from subsidiaries of SAC Holdings, 5 SAC and Galaxy. The terms of the leases are similar to the terms of leases for other properties owned by unrelated parties that are leased to us.

At December 31, 2012, subsidiaries of SAC Holdings, 4 SAC, 5 SAC, Galaxy and Private Mini acted as U-Haul independent dealers. The financial and other terms of the dealership contracts with the aforementioned companies and their subsidiaries are substantially identical to the terms of those with our other independent dealers whereby commissions are paid by us based upon equipment rental revenues

 


These agreements and notes with subsidiaries of SAC Holdings, 4 SAC, 5 SAC, Galaxy and Private Mini, excluding Dealer Agreements, provided revenues of $23.5 million, expenses of $2.0 million and cash flows of $152.7 million during the first nine months of fiscal 2013. Revenues and commission expenses related to the Dealer Agreements were $158.4 million and $34.6 million, respectively during the first nine months of fiscal 2013.

Pursuant to the variable interest entity model under ASC 810 - Consolidation (“ASC 810”), Management determined that the junior notes of SAC Holdings and Private Mini as well as the management agreements with SAC Holdings, Mercury, 4 SAC, 5 SAC, Galaxy, and Private Mini represent potential variable interests for us.  Management evaluated whether it should be identified as the primary beneficiary of one or more of these variable interest entities (“VIE’s”) using a two-step approach in which management (i) identified all other parties that hold interests in the VIE’s, and (ii) determined if any variable interest holder has the power to direct the activities of the VIE’s that most significantly impact their economic performance.

Management determined that they do not have a variable interest in the holding entities Mercury, 4 SAC, 5 SAC, or Galaxy based upon management agreements which are with the individual operating entities or through the issuance of junior debt; therefore, we are precluded from consolidating these entities. Additionally, after a redetermination caused by the SAC Holding II repayment of the outstanding principal on its junior notes with AMERCO during the first quarter of fiscal 2013, Management has determined that the Company does not have a variable interest in the SAC Holding II holding entity.

We have junior debt with the holding entities SAC Holding Corporation and Private Mini which represents a variable interest in each individual entity. Though we have certain protective rights within these debt agreements, we have no present influence or control over these holding entities unless their protective rights become exercisable, which management considers unlikely based on their payment history.  As a result, we have no basis under ASC 810 to consolidate these entities.

We do not have the power to direct the activities that most significantly impact the economic performance of the individual operating entities which have management agreements with U-Haul. There are no fees or penalties disclosed in the management agreement for termination of the agreement. Through control of the holding entities assets, and its ability and history of making key decisions relating to the entity and its assets, Blackwater, and its owner, are the variable interest holder with the power to direct the activities that most significantly impact each of the individual holding entities and the individual operating entities’ performance.  As a result, we have no basis under ASC 810 to consolidate these entities.

We have not provided financial or other support explicitly or implicitly during the first nine months ended December 31, 2012 to any of these entities that we were not previously contractually required to provide. In addition, we currently have no plan to provide any financial support to any of these entities in the future. The carrying amount and classification of the assets and liabilities in our balance sheets that relates to our variable interests in the aforementioned entities are as follows, which approximate the maximum exposure to loss as a result of our involvement with these related party entities:

Related Party Assets

 

 

December 31,

 

March 31,

 

 

2012

 

2012

 

 

(Unaudited)

 

 

 

 

(In thousands)

U-Haul notes, receivables and interest from Private Mini

$

70,706

$

68,798

U-Haul notes receivable from SAC Holdings

 

72,634

 

195,426

U-Haul interest receivable from SAC Holdings

 

14,407

 

18,667

U-Haul receivable from SAC Holdings

 

14,753

 

30,297

U-Haul receivable from Mercury

 

3,601

 

3,195

Other (a)

 

(926)

 

(226)

 

$

175,175

$

316,157

 

 

 

 

 

 

 

 

 

 

(a) Timing difference for intercompany balances with insurance subsidiaries

 

 

 

 

 


11. Consolidating Financial Information by Industry Segment

AMERCO’s three reportable segments are:

         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, and

         Life Insurance, comprised of Oxford and its subsidiaries.

Management tracks revenues separately, but does not report any separate measure of the profitability for rental vehicles, rentals of self-storage spaces and sales of products that are required to be classified as a separate operating segment and accordingly does not present these as separate reportable segments. Deferred income taxes are shown as liabilities on the condensed consolidating statements.

The information includes elimination entries necessary to consolidate AMERCO, the parent, with its subsidiaries.

Investments in subsidiaries are accounted for by the parent using the equity method of accounting.

 


 


11. Financial Information by Consolidating Industry Segment:

Consolidating balance sheets by industry segment as of December 31, 2012 are as follows:

 

 

Moving & Storage

 

 

 

 

AMERCO Legal Group

 

 

 

 

 

AMERCO

 

U-Haul

 

Real Estate

 

Eliminations

 

 

Moving & Storage

Consolidated

 

Property & Casualty Insurance (a)

 

Life

Insurance (a)

 

Eliminations

 

 

AMERCO

Consolidated

 

 

(Unaudited)

 

 

(In thousands)

Assets:

 

 

Cash and cash equivalents

$

351,755

$

185,624

$

1,504

$

 

$

538,883

$

14,490

$

32,751

$

 

$

586,124

Reinsurance recoverables and trade receivables, net

 

 

24,882

 

 

 

 

24,882

 

172,370

 

29,088

 

 

 

226,340

Inventories, net

 

 

55,989

 

 

 

 

55,989

 

 

 

 

 

55,989

Prepaid expenses

 

12,578

 

42,030

 

540

 

 

 

55,148

 

 

 

 

 

55,148

Investments, fixed maturities and marketable equities

 

20,472

 

 

 

 

 

20,472

 

123,777

 

875,719

 

 

 

1,019,968

Investments, other

 

 

 

43,125

 

 

 

43,125

 

101,495

 

125,571

 

 

 

270,191

Deferred policy acquisition costs, net

 

 

 

 

 

 

 

 

93,533

 

 

 

93,533

Other assets

 

480

 

71,517

 

29,191

 

 

 

101,188

 

487

 

214

 

 

 

101,889

Related party assets

 

1,008,820

 

121,303

 

7

 

(951,978)

(c)

 

178,152

 

8,738

 

516

 

(12,231)

(c)

 

175,175

 

 

1,394,105

 

501,345

 

74,367

 

(951,978)

 

 

1,017,839

 

421,357

 

1,157,392

 

(12,231)

 

 

2,584,357

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment in subsidiaries

 

217,615

 

 

 

152,561

(b)

 

370,176

 

 

 

(370,176)

(b)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, at cost:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Land

 

 

106,859

 

231,739

 

 

 

338,598

 

 

 

 

 

338,598

Buildings and improvements

 

 

182,051

 

973,703

 

 

 

1,155,754

 

 

 

 

 

1,155,754

Furniture and equipment

 

140

 

298,282

 

18,350

 

 

 

316,772

 

 

 

 

 

316,772

Rental trailers and other rental equipment

 

 

303,379

 

 

 

 

303,379

 

 

 

 

 

303,379

Rental trucks

 

 

2,044,639

 

 

 

 

2,044,639

 

 

 

 

 

2,044,639

 

 

140

 

2,935,210

 

1,223,792

 

 

 

4,159,142

 

 

 

 

 

4,159,142

Less:  Accumulated depreciation

 

(119)

 

(1,154,751)

 

(369,324)

 

 

 

(1,524,194)

 

 

 

 

 

(1,524,194)

Total property, plant and equipment

 

21

 

1,780,459

 

854,468

 

 

 

2,634,948

 

 

 

 

 

2,634,948

Total assets

$

1,611,741

$

2,281,804

$

928,835

$

(799,417)

 

$

4,022,963

$

421,357

$

1,157,392

$

(382,407)

 

$

5,219,305

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) Balances as of September 30, 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(b) Eliminate investment in subsidiaries

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(c) Eliminate intercompany receivables and payables

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 


Consolidating balance sheets by industry segment as of December 31, 2012 are as follows:

 

 

Moving & Storage

 

 

 

 

AMERCO Legal Group

 

 

 

 

 

AMERCO

 

U-Haul

 

Real Estate

 

Eliminations

 

 

Moving & Storage

Consolidated

 

Property & Casualty Insurance (a)

 

Life

Insurance (a)

 

Eliminations

 

 

AMERCO

Consolidated

 

 

(Unaudited)

 

 

(In thousands)

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

$

511

$

315,935

$

4,157

$

 

$

320,603

$

$

5,579

$

 

$

326,182

Notes, loans and leases payable

 

 

880,542

 

786,466

 

 

 

1,667,008

 

 

 

 

 

1,667,008

Policy benefits and losses, claims and loss expenses payable

 

 

388,726

 

 

 

 

388,726

 

322,548

 

404,549

 

 

 

1,115,823

Liabilities from investment contracts

 

 

 

 

 

 

 

 

486,502

 

 

 

486,502

Other policyholders' funds and liabilities

 

 

 

 

 

 

 

2,853

 

3,495

 

 

 

6,348

Deferred income

 

 

27,840

 

 

 

 

27,840

 

 

 

 

 

27,840

Deferred income taxes

 

418,892

 

 

 

 

 

418,892

 

(39,054)

 

19,265

 

 

 

399,103

Related party liabilities

 

 

679,544

 

281,829

 

(951,978)

(c)

 

9,395

 

2,181

 

655

 

(12,231)

(c)

 

Total liabilities

 

419,403

 

2,292,587

 

1,072,452

 

(951,978)

 

 

2,832,464

 

288,528

 

920,045

 

(12,231)

 

 

4,028,806

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series preferred stock:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series A preferred stock

 

 

 

 

 

 

 

 

 

 

 

Series B preferred stock

 

 

 

 

 

 

 

 

 

 

 

Series A common stock

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

10,497

 

540

 

1

 

(541)

(b)

 

10,497

 

3,301

 

2,500

 

(5,801)

(b)

 

10,497

Additional paid-in capital

 

437,136

 

121,230

 

147,941

 

(269,171)

(b)

 

437,136

 

91,120

 

26,271

 

(117,601)

(b)

 

436,926

Accumulated other comprehensive income (loss)

 

(22,192)

 

(63,049)

 

 

63,049

(b)

 

(22,192)

 

5,198

 

38,801

 

(43,999)

(b)

 

(22,192)

Retained earnings (deficit)

 

1,444,547

 

(67,665)

 

(291,559)

 

359,224

(b)

 

1,444,547

 

33,210

 

169,775

 

(202,775)

(b)

 

1,444,757

Cost of common shares in treasury, net

 

(525,653)

 

 

 

 

 

(525,653)

 

 

 

 

 

(525,653)

Cost of preferred shares in treasury, net

 

(151,997)

 

 

 

 

 

(151,997)

 

 

 

 

 

(151,997)

Unearned employee stock ownership plan shares

 

 

(1,839)

 

 

 

 

(1,839)

 

 

 

 

 

(1,839)

Total stockholders' equity (deficit)

 

1,192,338

 

(10,783)

 

(143,617)

 

152,561

 

 

1,190,499

 

132,829

 

237,347

 

(370,176)

 

 

1,190,499

Total liabilities and stockholders' equity

$

1,611,741

$

2,281,804

$

928,835

$

(799,417)

 

$

4,022,963

$

421,357

$

1,157,392

$

(382,407)

 

$

5,219,305

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) Balances as of September 30, 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(b) Eliminate investment in subsidiaries

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(c) Eliminate intercompany receivables and payables

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Consolidating balance sheets by industry segment as of March 31, 2012 are as follows:

 

 

Moving & Storage

 

 

 

 

AMERCO Legal Group

 

 

 

 

 

AMERCO

 

U-Haul

 

Real Estate

 

Eliminations

 

 

Moving & Storage

Consolidated

 

Property & Casualty Insurance (a)

 

Life

Insurance (a)

 

Eliminations

 

 

AMERCO

Consolidated

 

 

 

 

 

(In thousands)

Assets:

 

 

Cash and cash equivalents

$

201,502

$

106,951

$

775

$

 

$

309,228

$

22,542

$

25,410

$

 

$

357,180

Reinsurance recoverables and trade receivables, net

 

 

37,103

 

 

 

 

37,103

 

231,211

 

29,660

 

 

 

297,974

Inventories, net

 

 

58,735

 

 

 

 

58,735

 

 

 

 

 

58,735

Prepaid expenses

 

9,496

 

32,051

 

311

 

 

 

41,858

 

 

 

 

 

41,858

Investments, fixed maturities and marketable equities

 

17,028

 

 

 

 

 

17,028

 

132,270

 

617,494

 

 

 

766,792

Investments, other

 

 

9,880

 

42,453

 

 

 

52,333

 

74,757

 

131,461

 

 

 

258,551

Deferred policy acquisition costs, net

 

 

 

 

 

 

 

 

63,914

 

 

 

63,914

Other assets

 

483

 

91,761

 

26,571

 

 

 

118,815

 

1,507

 

203

 

 

 

120,525

Related party assets

 

1,201,385

 

261,341

 

9

 

(1,144,545)

(c)

 

318,190

 

7,542

 

482

 

(10,057)

(c)

 

316,157

 

 

1,429,894

 

597,822

 

70,119

 

(1,144,545)

 

 

953,290

 

469,829

 

868,624

 

(10,057)

 

 

2,281,686

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment in subsidiaries

 

8,168

 

 

 

331,461

(b)

 

339,629

 

 

 

(339,629)

(b)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, at cost:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Land

 

 

67,558

 

213,582

 

 

 

281,140

 

 

 

 

 

281,140

Buildings and improvements

 

 

162,351

 

924,768

 

 

 

1,087,119

 

 

 

 

 

1,087,119

Furniture and equipment

 

138

 

289,601

 

18,381

 

 

 

308,120

 

 

 

 

 

308,120

Rental trailers and other rental equipment

 

 

255,010

 

 

 

 

255,010

 

 

 

 

 

255,010

Rental trucks

 

 

1,856,433

 

 

 

 

1,856,433

 

 

 

 

 

1,856,433

 

 

138

 

2,630,953

 

1,156,731

 

 

 

3,787,822

 

 

 

 

 

3,787,822

Less:  Accumulated depreciation

 

(115)

 

(1,056,854)

 

(358,488)

 

 

 

(1,415,457)

 

 

 

 

 

(1,415,457)

Total property, plant and equipment

 

23

 

1,574,099

 

798,243

 

 

 

2,372,365

 

 

 

 

 

2,372,365

Total assets

$

1,438,085

$

2,171,921

$

868,362

$

(813,084)

 

$

3,665,284

$

469,829

$

868,624

$

(349,686)

 

$

4,654,051

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) Balances as of December 31, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(b) Eliminate investment in subsidiaries

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(c) Eliminate intercompany receivables and payables

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 


Consolidating balance sheets by industry segment as of March 31, 2012 are as follows:

 

 

Moving & Storage

 

 

 

 

AMERCO Legal Group

 

 

 

 

 

AMERCO

 

U-Haul

 

Real Estate

 

Eliminations

 

 

Moving & Storage

Consolidated

 

Property & Casualty Insurance (a)

 

Life

Insurance (a)

 

Eliminations

 

 

AMERCO

Consolidated

 

 

 

 

 

(In thousands)

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

$

1,875

$

319,780

$

3,611

$

 

$

325,266

$

$

10,060

$

 

$

335,326

Notes, loans and leases payable

 

 

769,497

 

716,714

 

 

 

1,486,211

 

 

 

 

 

1,486,211

Policy benefits and losses, claims and loss expenses payable

 

 

380,140

 

 

 

 

380,140

 

382,939

 

382,864

 

 

 

1,145,943

Liabilities from investment contracts

 

 

 

 

 

 

 

 

240,961

 

 

 

240,961

Other policyholders' funds and liabilities

 

 

 

 

 

 

 

3,438

 

3,835

 

 

 

7,273

Deferred income

 

 

31,525

 

 

 

 

31,525

 

 

 

 

 

31,525

Deferred income taxes

 

397,992

 

 

 

 

 

397,992

 

(41,945)

 

14,945

 

 

 

370,992

Related party liabilities

 

 

855,016

 

297,859

 

(1,144,545)

(c)

 

8,330

 

1,555

 

172

 

(10,057)

(c)

 

Total liabilities

 

399,867

 

2,355,958

 

1,018,184

 

(1,144,545)

 

 

2,629,464

 

345,987

 

652,837

 

(10,057)

 

 

3,618,231

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series preferred stock:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series A preferred stock

 

 

 

 

 

 

 

 

 

 

 

Series B preferred stock

 

 

 

 

 

 

 

 

 

 

 

Series A common stock

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

10,497

 

540

 

1

 

(541)

(b)

 

10,497

 

3,301

 

2,500

 

(5,801)

(b)

 

10,497

Additional paid-in capital

 

433,953

 

121,230

 

147,941

 

(269,171)

(b)

 

433,953

 

89,620

 

26,271

 

(116,101)

(b)

 

433,743

Accumulated other comprehensive income (loss)

 

(45,436)

 

(66,302)

 

 

66,302

(b)

 

(45,436)

 

2,255

 

23,888

 

(26,143)

(b)

 

(45,436)

Retained earnings (deficit)

 

1,316,854

 

(237,107)

 

(297,764)

 

534,871

(b)

 

1,316,854

 

28,666

 

163,128

 

(191,584)

(b)

 

1,317,064

Cost of common shares in treasury, net

 

(525,653)

 

 

 

 

 

(525,653)

 

 

 

 

 

(525,653)

Cost of preferred shares in treasury, net

 

(151,997)

 

 

 

 

 

(151,997)

 

 

 

 

 

(151,997)

Unearned employee stock ownership plan shares

 

 

(2,398)

 

 

 

 

(2,398)

 

 

 

 

 

(2,398)

Total stockholders' equity (deficit)

 

1,038,218

 

(184,037)

 

(149,822)

 

331,461

 

 

1,035,820

 

123,842

 

215,787

 

(339,629)

 

 

1,035,820

Total liabilities and stockholders' equity

$

1,438,085

$

2,171,921

$

868,362

$

(813,084)

 

$

3,665,284

$

469,829

$

868,624

$

(349,686)

 

$

4,654,051

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) Balances as of December 31, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(b) Eliminate investment in subsidiaries

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(c) Eliminate intercompany receivables and payables

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Consolidating statement of operations by industry segment for the quarter ended December 31, 2012 are as follows:

 

 

Moving & Storage

 

 

 

 

AMERCO Legal Group

 

 

 

 

 

AMERCO

 

U-Haul

 

Real Estate

 

Eliminations

 

 

Moving & Storage

Consolidated

 

Property & Casualty Insurance (a)

 

Life

Insurance (a)

 

Eliminations

 

 

AMERCO

Consolidated

 

 

(Unaudited)

 

 

(In thousands)

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Self-moving equipment rentals

$

$

395,401

$

$

 

$

395,401

$

$

$

(456)

(c)

$

394,945

Self-storage revenues

 

 

38,813

 

298

 

 

 

39,111

 

 

 

 

 

39,111

Self-moving and self-storage products and service sales

 

 

44,491

 

 

 

 

44,491

 

 

 

 

 

44,491

Property management fees

 

 

6,085

 

 

 

 

6,085

 

 

 

 

 

6,085

Life insurance premiums

 

 

 

 

 

 

 

 

43,248

 

 

 

43,248

Property and casualty insurance premiums

 

 

 

 

 

 

 

9,816

 

 

 

 

9,816

Net investment and interest income

 

1,338

 

2,260

 

4,405

 

 

 

8,003

 

2,049

 

8,990

 

(115)

(b)

 

18,927

Other revenue

 

 

23,255

 

22,605

 

(24,145)

(b)

 

21,715

 

 

852

 

(379)

(b)

 

22,188

Total revenues

 

1,338

 

510,305

 

27,308

 

(24,145)

 

 

514,806

 

11,865

 

53,090

 

(950)

 

 

578,811

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

2,684

 

295,759

 

3,424

 

(24,145)

(b)

 

277,722

 

6,937

 

6,452

 

(826)

(b,c)

 

290,285

Commission expenses

 

 

51,130

 

 

 

 

51,130

 

 

 

 

 

51,130

Cost of sales

 

 

23,153

 

 

 

 

23,153

 

 

 

 

 

23,153

Benefits and losses

 

 

 

 

 

 

 

2,866

 

36,066

 

 

 

38,932

Amortization of deferred policy acquisition costs

 

 

 

 

 

 

 

 

3,391

 

 

 

3,391

Lease expense

 

24

 

27,594

 

3

 

 

 

27,621

 

 

 

(46)

(b)

 

27,575

Depreciation, net of (gains) losses on disposals

 

1

 

60,129

 

2,269

 

 

 

62,399

 

 

 

 

 

62,399

Total costs and expenses

 

2,709

 

457,765

 

5,696

 

(24,145)

 

 

442,025

 

9,803

 

45,909

 

(872)

 

 

496,865

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) from operations before equity in earnings of subsidiaries

 

(1,371)

 

52,540

 

21,612

 

 

 

72,781

 

2,062

 

7,181

 

(78)

 

 

81,946

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity in earnings of subsidiaries

 

24,435

 

 

 

(18,790)

(d)

 

5,645

 

 

 

(5,645)

(d)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings from operations

 

23,064

 

52,540

 

21,612

 

(18,790)

 

 

78,426

 

2,062

 

7,181

 

(5,723)

 

 

81,946

Interest income (expense)

 

21,387

 

(28,837)

 

(14,704)

 

 

 

(22,154)

 

 

 

78

(b)

 

(22,076)

Pretax earnings

 

44,451

 

23,703

 

6,908

 

(18,790)

 

 

56,272

 

2,062

 

7,181

 

(5,645)

 

 

59,870

Income tax expense

 

(7,605)

 

(9,174)

 

(2,647)

 

 

 

(19,426)

 

(722)

 

(2,876)

 

 

 

(23,024)

Earnings available to common shareholders

$

36,846

$

14,529

$

4,261

$

(18,790)

 

$

36,846

$

1,340

$

4,305

$

(5,645)

 

$

36,846

(a) Balances for the quarter ended September 30, 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(b) Eliminate intercompany lease / interest income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(c) Eliminate intercompany premiums

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(d) Eliminate equity in earnings of subsidiaries

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Consolidating statements of operations by industry for the quarter ended December 31, 2011 are as follows:

 

 

Moving & Storage

 

 

 

 

AMERCO Legal Group

 

 

 

 

 

AMERCO

 

U-Haul

 

Real Estate

 

Eliminations

 

 

Moving & Storage

Consolidated

 

Property & Casualty Insurance (a)

 

Life

Insurance (a)

 

Eliminations

 

 

AMERCO

Consolidated

 

 

(Unaudited)

 

 

(In thousands)

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Self-moving equipment rentals

$

$

376,271

$

$

 

$

376,271

$

$

$

(527)

(c)

$

375,744

Self-storage revenues

 

 

33,523

 

323

 

 

 

33,846

 

 

 

 

 

33,846

Self-moving and self-storage products and service sales

 

 

43,206

 

 

 

 

43,206

 

 

 

 

 

43,206

Property management fees

 

 

5,368

 

 

 

 

5,368

 

 

 

 

 

5,368

Life insurance premiums

 

 

 

 

 

 

 

 

132,643

 

 

 

132,643

Property and casualty insurance premiums

 

 

 

 

 

 

 

9,429

 

 

 

 

9,429

Net investment and interest income

 

1,317

 

5,166

 

296

 

 

 

6,779

 

2,237

 

6,593

 

(375)

(b)

 

15,234

Other revenue

 

 

19,063

 

20,144

 

(21,611)

(b)

 

17,596

 

 

407

 

(384)

(b)

 

17,619

Total revenues

 

1,317

 

482,597

 

20,763

 

(21,611)

 

 

483,066

 

11,666

 

139,643

 

(1,286)

 

 

633,089

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

2,176

 

277,229

 

2,231

 

(21,611)

(b)

 

260,025

 

3,477

 

7,263

 

(931)

(b,c)

 

269,834

Commission expenses

 

 

47,864

 

 

 

 

47,864

 

 

 

 

 

47,864

Cost of sales

 

 

24,505

 

 

 

 

24,505

 

 

 

 

 

24,505

Benefits and losses

 

 

 

 

 

 

 

51,633

 

122,115

 

 

 

173,748

Amortization of deferred policy acquisition costs

 

 

 

 

 

 

 

 

3,666

 

 

 

3,666

Lease expense

 

26

 

32,601

 

5

 

 

 

32,632

 

 

 

(307)

(b)

 

32,325

Depreciation, net of (gains) losses on disposals

 

1

 

52,846

 

3,427

 

 

 

56,274

 

 

 

 

 

56,274

Total costs and expenses

 

2,203

 

435,045

 

5,663

 

(21,611)

 

 

421,300

 

55,110

 

133,044

 

(1,238)

 

 

608,216

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) from operations before equity in earnings of subsidiaries

 

(886)

 

47,552

 

15,100

 

 

 

61,766

 

(43,444)

 

6,599

 

(48)

 

 

24,873

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity in earnings of subsidiaries

 

(12,577)

 

 

 

(11,376)

(d)

 

(23,953)

 

 

 

23,953

(d)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) from operations

 

(13,463)

 

47,552

 

15,100

 

(11,376)

 

 

37,813

 

(43,444)

 

6,599

 

23,905

 

 

24,873

Interest income (expense)

 

22,345

 

(32,214)

 

(12,923)

 

 

 

(22,792)

 

 

 

48

(b)

 

(22,744)

Pretax earnings (loss)

 

8,882

 

15,338

 

2,177

 

(11,376)

 

 

15,021

 

(43,444)

 

6,599

 

23,953

 

 

2,129

Income tax benefit (expense)

 

(8,154)

 

(5,156)

 

(983)

 

 

 

(14,293)

 

15,206

 

(2,314)

 

 

 

(1,401)

Earnings (loss) available to common shareholders

$

728

$

10,182

$

1,194

$

(11,376)

 

$

728

$

(28,238)

$

4,285

$

23,953

 

$

728

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) Balances for the quarter ended September 30, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(b) Eliminate intercompany lease / interest income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(c) Eliminate intercompany premiums

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(d) Eliminate equity in earnings of subsidiaries

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 


Consolidating statements of operations by industry for the nine months ended December 31, 2012 are as follows:

 

 

Moving & Storage

 

 

 

 

AMERCO Legal Group

 

 

 

 

 

AMERCO

 

U-Haul

 

Real Estate

 

Eliminations

 

 

Moving & Storage

Consolidated

 

Property & Casualty Insurance (a)

 

Life

Insurance (a)

 

Eliminations

 

 

AMERCO

Consolidated

 

 

(Unaudited)

 

 

(In thousands)

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Self-moving equipment rentals

$

$

1,401,483

$

$

 

$

1,401,483

$

$

$

(1,183)

(c)

$

1,400,300

Self-storage revenues

 

 

110,963

 

862

 

 

 

111,825

 

 

 

 

 

111,825

Self-moving and self-storage products and service sales

 

 

173,399

 

 

 

 

173,399

 

 

 

 

 

173,399

Property management fees

 

 

15,847

 

 

 

 

15,847

 

 

 

 

 

15,847

Life insurance premiums

 

 

 

 

 

 

 

 

137,341

 

 

 

137,341

Property and casualty insurance premiums

 

 

 

 

 

 

 

26,006

 

 

 

 

26,006

Net investment and interest income

 

3,930

 

6,265

 

4,843

 

 

 

15,038

 

6,515

 

22,999

 

(315)

(b)

 

44,237

Other revenue

 

81

 

80,311

 

65,306

 

(70,066)

(b)

 

75,632

 

 

2,056

 

(1,099)

(b)

 

76,589

Total revenues

 

4,011

 

1,788,268

 

71,011

 

(70,066)

 

 

1,793,224

 

32,521

 

162,396

 

(2,597)

 

 

1,985,544

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

11,431

 

901,337

 

8,300

 

(70,066)

(b)

 

851,002

 

14,709

 

20,438

 

(2,257)

(b,c)

 

883,892

Commission expenses

 

 

180,801

 

 

 

 

180,801

 

 

 

 

 

180,801

Cost of sales

 

 

86,292

 

 

 

 

86,292

 

 

 

 

 

86,292

Benefits and losses

 

 

 

 

 

 

 

10,821

 

119,861

 

 

 

130,682

Amortization of deferred policy acquisition costs

 

 

 

 

 

 

 

 

9,290

 

 

 

9,290

Lease expense

 

70

 

90,000

 

14

 

 

 

90,084

 

 

 

(122)

(b)

 

89,962

Depreciation, net of (gains) losses on disposals

 

4

 

168,009

 

9,465

 

 

 

177,478

 

 

 

 

 

177,478

Total costs and expenses

 

11,505

 

1,426,439

 

17,779

 

(70,066)

 

 

1,385,657

 

25,530

 

149,589

 

(2,379)

 

 

1,558,397

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) from operations before equity in earnings of subsidiaries

 

(7,494)

 

361,829

 

53,232

 

 

 

407,567

 

6,991

 

12,807

 

(218)

 

 

427,147

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity in earnings of subsidiaries

 

188,559

 

 

 

(175,647)

(d)

 

12,912

 

 

 

(12,912)

(d)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings from operations

 

181,065

 

361,829

 

53,232

 

(175,647)

 

 

420,479

 

6,991

 

12,807

 

(13,130)

 

 

427,147

Interest income (expense)

 

69,228

 

(93,956)

 

(43,170)

 

 

 

(67,898)

 

 

 

218

(b)

 

(67,680)

Pretax earnings

 

250,293

 

267,873

 

10,062

 

(175,647)

 

 

352,581

 

6,991

 

12,807

 

(12,912)

 

 

359,467

Income tax expense

 

(23,458)

 

(98,431)

 

(3,857)

 

 

 

(125,746)

 

(2,447)

 

(4,439)

 

 

 

(132,632)

Earnings available to common shareholders

$

226,835

$

169,442

$

6,205

$

(175,647)

 

$

226,835

$

4,544

$

8,368

$

(12,912)

 

$

226,835

(a) Balances for the nine months ended September 30, 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(b) Eliminate intercompany lease / interest income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(c) Eliminate intercompany premiums

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(d) Eliminate equity in earnings of subsidiaries

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 


Consolidating statements of operations by industry for the nine months ended December 31, 2011 are as follows:

 

 

Moving & Storage

 

 

 

 

AMERCO Legal Group

 

 

 

 

 

AMERCO

 

U-Haul

 

Real Estate

 

Eliminations

 

 

Moving & Storage

Consolidated

 

Property & Casualty Insurance (a)

 

Life

Insurance (a)

 

Eliminations

 

 

AMERCO

Consolidated

 

 

(Unaudited)

 

 

(In thousands)

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Self-moving equipment rentals

$

$

1,335,229

$

$

 

$

1,335,229

$

$

$

(1,311)

(c)

$

1,333,918

Self-storage revenues

 

 

98,745

 

937

 

 

 

99,682

 

 

 

 

 

99,682

Self-moving and self-storage products and service sales

 

 

167,352

 

 

 

 

167,352

 

 

 

 

 

167,352

Property management fees

 

 

14,929

 

 

 

 

14,929

 

 

 

 

 

14,929

Life insurance premiums

 

 

 

 

 

 

 

 

229,839

 

 

 

229,839

Property and casualty insurance premiums

 

 

 

 

 

 

 

25,076

 

 

 

 

25,076

Net investment and interest income

 

4,585

 

15,476

 

556

 

 

 

20,617

 

7,395

 

21,793

 

(1,407)

(b,e)

 

48,398

Other revenue

 

 

64,111

 

59,785

 

(64,022)

(b)

 

59,874

 

 

1,202

 

(1,035)

(b)

 

60,041

Total revenues

 

4,585

 

1,695,842

 

61,278

 

(64,022)

 

 

1,697,683

 

32,471

 

252,834

 

(3,753)

 

 

1,979,235

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

6,766

 

857,438

 

6,949

 

(64,022)

(b)

 

807,131

 

9,871

 

21,496

 

(2,349)

(b,c)

 

836,149

Commission expenses

 

 

168,865

 

 

 

 

168,865

 

 

 

 

 

168,865

Cost of sales

 

 

89,729

 

 

 

 

89,729

 

 

 

 

 

89,729

Benefits and losses

 

 

 

 

 

 

 

61,948

 

206,192

 

 

 

268,140

Amortization of deferred policy acquisition costs

 

 

 

 

 

 

 

 

10,716

 

 

 

10,716

Lease expense

 

69

 

100,102

 

19

 

 

 

100,190

 

 

 

(919)

(b)

 

99,271

Depreciation, net of (gains) losses on disposals

 

4

 

138,867

 

9,825

 

 

 

148,696

 

 

 

 

 

148,696

Total costs and expenses

 

6,839

 

1,355,001

 

16,793

 

(64,022)

 

 

1,314,611

 

71,819

 

238,404

 

(3,268)

 

 

1,621,566

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) from operations before equity in earnings of subsidiaries

 

(2,254)

 

340,841

 

44,485

 

 

 

383,072

 

(39,348)

 

14,430

 

(485)

 

 

357,669

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity in earnings of subsidiaries

 

137,959

 

 

 

(154,121)

(d)

 

(16,162)

 

 

 

16,162

(d)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) from operations

 

135,705

 

340,841

 

44,485

 

(154,121)

 

 

366,910

 

(39,348)

 

14,430

 

15,677

 

 

357,669

Interest income (expense)

 

70,528

 

(100,627)

 

(38,398)

 

 

 

(68,497)

 

 

 

157

(b)

 

(68,340)

Pretax earnings (loss)

 

206,233

 

240,214

 

6,087

 

(154,121)

 

 

298,413

 

(39,348)

 

14,430

 

15,834

 

 

289,329

Income tax benefit (expense)

 

(25,943)

 

(89,402)

 

(2,778)

 

 

 

(118,123)

 

13,772

 

(5,016)

 

 

 

(109,367)

Net earnings (loss)

 

180,290

 

150,812

 

3,309

 

(154,121)

 

 

180,290

 

(25,576)

 

9,414

 

15,834

 

 

179,962

Less: Excess of redemption value over carrying value of preferred shares redeemed

 

(5,908)

 

 

 

 

 

(5,908)

 

 

 

 

 

(5,908)

Less: Preferred stock dividends

 

(3,241)

 

 

 

 

 

(3,241)

 

 

 

328

(e)

 

(2,913)

Earnings (loss) available to common shareholders

$

171,141

$

150,812

$

3,309

$

(154,121)

 

$

171,141

$

(25,576)

$

9,414

$

16,162

 

$

171,141

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) Balances for the nine months ended September 30, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(b) Eliminate intercompany lease / interest income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(c) Eliminate intercompany premiums

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(d) Eliminate equity in earnings of subsidiaries

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(e) Eliminate preferred stock dividends paid to affiliate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Consolidating cash flow statements by industry segment for the nine months ended December 31, 2012 are as follows:

 

 

Moving & Storage

 

 

 

 

AMERCO Legal Group

 

 

 

 

 

AMERCO

 

U-Haul

 

Real Estate

 

Elimination

 

 

Moving & Storage

Consolidated

 

Property &

Casualty

Insurance (a)

 

Life

Insurance (a)

 

Elimination

 

 

AMERCO

Consolidated

 

 

(Unaudited)

Cash flows from operating activities:

 

(In thousands)

Net earnings

$

226,835

$

169,442

$

6,205

$

(175,647)

 

$

226,835

$

4,544

$

8,368

$

(12,912)

 

$

226,835

Earnings from consolidated entities

 

(188,559)

 

 

 

175,647

 

 

(12,912)

 

 

 

12,912

 

 

Adjustments to reconcile net earnings to the cash provided by operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation

 

4

 

181,084

 

11,269

 

 

 

192,357

 

 

 

 

 

192,357

Amortization of deferred policy acquisition costs

 

 

 

 

 

 

 

 

9,290

 

 

 

9,290

Change in allowance for losses on trade receivables

 

 

(73)

 

 

 

 

(73)

 

 

 

 

 

(73)

Change in allowance for inventory reserve

 

 

2,050

 

 

 

 

2,050

 

 

 

 

 

2,050

Net gain on sale of real and personal property

 

 

(13,075)

 

(1,804)

 

 

 

(14,879)

 

 

 

 

 

(14,879)

Net (gain) loss on sale of investments

 

 

 

 

 

 

 

28

 

(1,078)

 

 

 

(1,050)

Deferred income taxes

 

17,882

 

 

 

 

 

17,882

 

1,306

 

(1,431)

 

 

 

17,757

Net change in other operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reinsurance recoverables and trade receivables

 

 

12,293

 

 

 

 

12,293

 

58,841

 

575

 

 

 

71,709

Inventories

 

 

696

 

 

 

 

696

 

 

 

 

 

696

Prepaid expenses

 

(3,082)

 

(9,972)

 

(229)

 

 

 

(13,283)

 

 

 

 

 

(13,283)

Capitalization of deferred policy acquisition costs

 

 

 

 

 

 

 

 

(43,085)

 

 

 

(43,085)

Other assets

 

3

 

22,271

 

(569)

 

 

 

21,705

 

1,018

 

(11)

 

 

 

22,712

Related party assets

 

(2)

 

140,035

 

2

 

 

 

140,035

 

(1,202)

 

 

(791)

(b)

 

138,042

Accounts payable and accrued expenses

 

1,818

 

(32)

 

538

 

 

 

2,324

 

 

(3,196)

 

 

 

(872)

Policy benefits and losses, claims and loss expenses payable

 

 

8,481

 

 

 

 

8,481

 

(60,391)

 

21,684

 

 

 

(30,226)

Other policyholders' funds and liabilities

 

 

 

 

 

 

 

(585)

 

(340)

 

 

 

(925)

Deferred income

 

 

(3,704)

 

 

 

 

(3,704)

 

 

 

 

 

(3,704)

Related party liabilities

 

 

1,064

 

 

 

 

1,064

 

632

 

483

 

791

(b)

 

2,970

Net cash provided (used) by operating activities

 

54,899

 

510,560

 

15,412

 

 

 

580,871

 

4,191

 

(8,741)

 

 

 

576,321

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchases of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment

 

(2)

 

(351,914)

 

(70,924)

 

 

 

(422,840)

 

 

 

 

 

(422,840)

Short term investments

 

 

 

 

 

 

 

(58,775)

 

(230,998)

 

 

 

(289,773)

Fixed maturities investments

 

 

 

 

 

 

 

(17,141)

 

(291,149)

 

 

 

(308,290)

Equity securities

 

 

 

 

 

 

 

(3,130)

 

 

 

 

(3,130)

Preferred stock

 

 

 

 

 

 

 

(2,761)

 

 

 

 

(2,761)

Real estate

 

 

 

(243)

 

 

 

(243)

 

 

(810)

 

 

 

(1,053)

Mortgage loans

 

 

(4,968)

 

(30,590)

 

 

 

(35,558)

 

(1,821)

 

(13,204)

 

 

 

(50,583)

Proceeds from sales of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment

 

 

161,668

 

5,236

 

 

 

166,904

 

 

 

 

 

166,904

Short term investments

 

 

 

 

 

 

 

32,548

 

248,308

 

 

 

280,856

Fixed maturities investments

 

 

 

 

 

 

 

30,298

 

54,834

 

 

 

85,132

Equity securities

 

 

 

 

 

 

 

 

 

 

 

Preferred stock

 

 

 

 

 

 

 

5,728

 

 

 

 

5,728

Real estate

 

 

 

667

 

 

 

667

 

 

4

 

 

 

671

Mortgage loans

 

 

14,848

 

29,500

 

 

 

44,348

 

1,311

 

3,556

 

 

 

49,215

Net cash provided (used) by investing activities

 

(2)

 

(180,366)

 

(66,354)

 

 

 

(246,722)

 

(13,743)

 

(229,459)

 

 

 

(489,924)

 

 

(page 1 of 2)

(a) Balance for the nine months ended September 30, 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(b) Elimination of intercompany investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Continuation of consolidating cash flow statements by industry segment for the nine months ended December 31, 2012 are as follows:

 

 

Moving & Storage

 

 

 

 

AMERCO Legal Group

 

 

 

 

 

AMERCO

 

U-Haul

 

Real Estate

 

Elimination

 

 

Moving & Storage

Consolidated

 

Property &

Casualty

Insurance (a)

 

Life

Insurance (a)

 

Elimination

 

 

AMERCO

Consolidated

 

 

(Unaudited)

Cash flows from financing activities:

 

(In thousands)

Borrowings from credit facilities

 

 

89,619

 

161,700

 

 

 

251,319

 

 

 

 

 

251,319

Principal repayments on credit facilities

 

 

(142,750)

 

(91,948)

 

 

 

(234,698)

 

 

 

 

 

(234,698)

Debt issuance costs

 

 

(301)

 

(2,051)

 

 

 

(2,352)

 

 

 

 

 

(2,352)

Capital lease payments

 

 

(18,310)

 

 

 

 

(18,310)

 

 

 

 

 

(18,310)

Leveraged Employee Stock Ownership Plan - repayments from loan

 

 

559

 

 

 

 

559

 

 

 

 

 

559

Proceeds from (repayment of) intercompany loans

 

194,277

 

(178,247)

 

(16,030)

 

 

 

 

 

 

 

 

Securitization deposits

 

 

(1,729)

 

 

 

 

(1,729)

 

 

 

 

 

(1,729)

Common stock dividends paid

 

(97,421)

 

 

 

 

 

(97,421)

 

 

 

 

 

(97,421)

Net contribution from (to) related party

 

(1,500)

 

 

 

 

 

(1,500)

 

1,500

 

 

 

 

Investment contract deposits

 

 

 

 

 

 

 

 

268,478

 

 

 

268,478

Investment contract withdrawals

 

 

 

 

 

 

 

 

(22,937)

 

 

 

(22,937)

Net cash provided (used) by financing activities

 

95,356

 

(251,159)

 

51,671

 

 

 

(104,132)

 

1,500

 

245,541

 

 

 

142,909

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effects of exchange rate on cash

 

 

(362)

 

 

 

 

(362)

 

 

 

 

 

(362)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

150,253

 

78,673

 

729

 

 

 

229,655

 

(8,052)

 

7,341

 

 

 

228,944

Cash and cash equivalents at beginning of period

 

201,502

 

106,951

 

775

 

 

 

309,228

 

22,542

 

25,410

 

 

 

357,180

Cash and cash equivalents at end of period

$

351,755

$

185,624

$

1,504

$

 

$

538,883

$

14,490

$

32,751

$

 

$

586,124

 

 

(page 2 of 2)

(a) Balance for the nine months ended September 30, 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Consolidating cash flow statements by industry segment for the nine months ended December 31, 2011 are as follows:

 

 

Moving & Storage

 

 

 

 

AMERCO Legal Group

 

 

 

 

 

AMERCO

 

U-Haul

 

Real Estate

 

Elimination

 

 

Moving & Storage

Consolidated

 

Property &

Casualty

Insurance (a)

 

Life

Insurance (a)

 

Elimination

 

 

AMERCO

Consolidated

 

 

(Unaudited)

Cash flows from operating activities:

 

(In thousands)

Net earnings (loss)

$

180,290

$

150,812

$

3,309

$

(154,121)

 

$

180,290

$

(25,576)

$

9,414

$

15,834

 

$

179,962

Earnings from consolidated entities

 

(137,959)

 

 

 

154,121

 

 

16,162

 

 

 

(16,162)

 

 

Adjustments to reconcile net earnings to cash provided by operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation

 

4

 

156,952

 

10,066

 

 

 

167,022

 

 

 

 

 

167,022

Amortization of deferred policy acquisition costs

 

 

 

 

 

 

 

 

10,716

 

 

 

10,716

Change in allowance for losses on trade receivables

 

 

(91)

 

 

 

 

(91)

 

 

2

 

 

 

(89)

Change in allowance for inventory reserve

 

 

3,005

 

 

 

 

3,005

 

 

 

 

 

3,005

Net gain on sale of real and personal property

 

 

(18,085)

 

(241)

 

 

 

(18,326)

 

 

 

 

 

(18,326)

Net gain on sale of investments

 

(488)

 

 

 

 

 

(488)

 

(674)

 

(4,292)

 

 

 

(5,454)

Deferred income taxes

 

103,901

 

 

 

 

 

103,901

 

(14,232)

 

4,912

 

 

 

94,581

Net change in other operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reinsurance recoverables and trade receivables

 

 

(12,391)

 

 

 

 

(12,391)

 

(64,802)

 

(68,534)

 

 

 

(145,727)

Inventories

 

 

173

 

 

 

 

173

 

 

 

 

 

173

Prepaid expenses

 

3,067

 

(134)

 

(267)

 

 

 

2,666

 

 

 

 

 

2,666

Capitalization of deferred policy acquisition costs

 

 

 

 

 

 

 

 

(19,072)

 

 

 

(19,072)

Other assets

 

2,543

 

7,740

 

(7,291)

 

 

 

2,992

 

521

 

110

 

 

 

3,623

Related party assets

 

(101)

 

(4,837)

 

(24)

 

 

 

(4,962)

 

(1,898)

 

(502)

 

2,005

(b)

 

(5,357)

Accounts payable and accrued expenses

 

2,032

 

4,755

 

382

 

 

 

7,169

 

 

259

 

 

 

7,428

Policy benefits and losses, claims and loss expenses payable

 

 

(11,752)

 

 

 

 

(11,752)

 

118,921

 

114,628

 

 

 

221,797

Other policyholders' funds and liabilities

 

 

 

 

 

 

 

(1,716)

 

(1,617)

 

 

 

(3,333)

Deferred income

 

 

1,070

 

 

 

 

1,070

 

 

 

 

 

1,070

Related party liabilities

 

 

5,215

 

 

 

 

5,215

 

(227)

 

(18)

 

(2,005)

(b)

 

2,965

Net cash provided (used) by operating activities

 

153,289

 

282,432

 

5,934

 

 

 

441,655

 

10,317

 

46,006

 

(328)

 

 

497,650

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchases of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment

 

 

(380,205)

 

(41,538)

 

 

 

(421,743)

 

 

 

 

 

(421,743)

Short term investments

 

 

 

 

 

 

 

(46,100)

 

(123,213)

 

 

 

(169,313)

Fixed maturities investments

 

 

 

 

 

 

 

(27,047)

 

(145,523)

 

 

 

(172,570)

Equity securities

 

(8,855)

 

 

 

 

 

(8,855)

 

(193)

 

 

 

 

(9,048)

Preferred stock

 

 

 

 

 

 

 

(1,617)

 

 

 

 

(1,617)

Real estate

 

 

 

(5,064)

 

 

 

(5,064)

 

(137)

 

 

 

 

(5,201)

Mortgage loans

 

 

(8,476)

 

(58,284)

 

 

 

(66,760)

 

(34,275)

 

(17,734)

 

24,658

(b)

 

(94,111)

Proceeds from sales of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment

 

 

139,344

 

508

 

 

 

139,852

 

 

 

 

 

139,852

Short term investments

 

 

 

 

 

 

 

64,029

 

122,912

 

 

 

186,941

Fixed maturities investments

 

 

 

 

 

 

 

19,271

 

97,338

 

 

 

116,609

Equity securities

 

8,800

 

 

 

 

 

8,800

 

1,410

 

 

 

 

10,210

Preferred stock

 

 

 

 

 

 

 

6,252

 

2,708

 

(7,708)

(b)

 

1,252

Real estate

 

 

 

 

 

 

 

106

 

40

 

 

 

146

Mortgage loans

 

 

9,241

 

40,180

 

 

 

49,421

 

12,617

 

3,503

 

(24,658)

(b)

 

40,883

Net cash provided (used) by investing activities

 

(55)

 

(240,096)

 

(64,198)

 

 

 

(304,349)

 

(5,684)

 

(59,969)

 

(7,708)

 

 

(377,710)

 

 

(page 1 of 2)

(a) Balance for the nine months ended September 30, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(b) Elimination of intercompany investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 


 

Continuation of consolidating cash flow statements by industry segment for the nine months ended December 31, 2011 are as follows:

 

 

Moving & Storage

 

 

 

 

AMERCO Legal Group

 

 

 

 

 

AMERCO

 

U-Haul

 

Real Estate

 

Elimination

 

 

Moving & Storage

Consolidated

 

Property &

Casualty

Insurance (a)

 

Life

Insurance (a)

 

Elimination

 

 

AMERCO

Consolidated

 

 

(Unaudited)

Cash flows from financing activities:

 

(In thousands)

Borrowings from credit facilities

 

 

150,642

 

83,920

 

 

 

234,562

 

 

 

 

 

234,562

Principal repayments on credit facilities

 

 

(101,275)

 

(65,340)

 

 

 

(166,615)

 

 

 

 

 

(166,615)

Debt issuance costs

 

 

(1,380)

 

(408)

 

 

 

(1,788)

 

 

 

 

 

(1,788)

Capital lease payments

 

 

(5,962)

 

 

 

 

(5,962)

 

 

 

 

 

(5,962)

Leveraged Employee Stock Ownership Plan - repayments from loan

 

 

827

 

 

 

 

827

 

 

 

 

 

827

Proceeds from (repayment of) intercompany loans

 

41,915

 

(82,017)

 

40,102

 

 

 

 

 

 

 

 

Securitization deposits

 

 

40,500

 

 

 

 

40,500

 

 

 

 

 

40,500

Preferred stock redemption paid

 

(151,997)

 

 

 

 

 

(151,997)

 

 

 

7,708

(b)

 

(144,289)

Preferred stock dividends paid

 

(3,241)

 

 

 

 

 

(3,241)

 

 

 

328

(c)

 

(2,913)

Contribution to related party

 

(518)

 

 

 

 

 

(518)

 

 

 

 

 

(518)

Investment contract deposits

 

 

 

 

 

 

 

 

10,810

 

 

 

10,810

Investment contract withdrawals

 

 

 

 

 

 

 

 

(21,419)

 

 

 

(21,419)

Net cash provided (used) by financing activities

 

(113,841)

 

1,335

 

58,274

 

 

 

(54,232)

 

 

(10,609)

 

8,036

 

 

(56,805)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effects of exchange rate on cash

 

 

(306)

 

 

 

 

(306)

 

 

 

 

 

(306)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

39,393

 

43,365

 

10

 

 

 

82,768

 

4,633

 

(24,572)

 

 

 

62,829

Cash and cash equivalents at beginning of period

 

250,104

 

72,634

 

757

 

 

 

323,495

 

21,718

 

37,301

 

 

 

382,514

Cash and cash equivalents at end of period

$

289,497

$

115,999

$

767

$

 

$

406,263

$

26,351

$

12,729

$

 

$

445,343

 

 

(page 2 of 2)

(a) Balance for the nine months ended September 30, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(b) Elimination of intercompany investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(c) Eliminate preferred stock dividends paid to affiliate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 


12. Industry Segment and Geographic Area Data

 

 

 

United States

 

Canada

 

Consolidated

 

 

(Unaudited)

 

 

(All amounts are in thousands of U.S. $'s)

Quarter ended December 31, 2012

 

 

 

 

 

 

Total revenues

$

545,935

$

32,876

$

578,811

Depreciation and amortization, net of (gains) losses on disposals

 

63,801

 

1,989

 

65,790

Interest expense

 

21,926

 

150

 

22,076

Pretax earnings

 

58,669

 

1,201

 

59,870

Income tax expense

 

22,706

 

318

 

23,024

Identifiable assets

 

5,077,479

 

141,826

 

5,219,305

 

 

 

 

 

 

 

Quarter ended December 31, 2011

 

 

 

 

 

 

Total revenues

$

600,609

$

32,480

$

633,089

Depreciation and amortization, net of (gains) losses on disposals

 

57,983

 

1,957

 

59,940

Interest expense

 

22,579

 

165

 

22,744

Pretax earnings (loss)

 

(2,567)

 

4,696

 

2,129

Income tax expense

 

17

 

1,384

 

1,401

Identifiable assets

 

4,499,251

 

134,751

 

4,634,002

 

 

 

 

 

 

 

 

 

 

United States

 

Canada

 

Consolidated

 

 

(Unaudited)

 

 

(All amounts are in thousands of U.S. $'s)

Nine months ended December 31, 2012

 

 

 

 

 

 

Total revenues

$

1,862,680

$

122,864

$

1,985,544

Depreciation and amortization, net of (gains) losses on disposals

 

180,736

 

6,032

 

186,768

Interest expense

 

67,226

 

454

 

67,680

Pretax earnings

 

340,746

 

18,721

 

359,467

Income tax expense

 

127,671

 

4,961

 

132,632

Identifiable assets

 

5,077,479

 

141,826

 

5,219,305

 

 

 

 

 

 

 

Nine months ended December 31, 2011

 

 

 

 

 

 

Total revenues

$

1,857,795

$

121,440

$

1,979,235

Depreciation and amortization, net of (gains) losses on disposals

 

153,536

 

5,876

 

159,412

Interest expense

 

67,851

 

489

 

68,340

Pretax earnings

 

267,811

 

21,518

 

289,329

Income tax expense

 

103,027

 

6,340

 

109,367

Identifiable assets

 

4,499,251

 

134,751

 

4,634,002

 

 

 

 

 

 

 

 


13. Employee Benefit Plans

The components of the net periodic benefit costs with respect to postretirement benefits were as follows:

 

 

 

Quarter Ended December 31,

 

 

2012

 

2011

 

 

(Unaudited)

 

 

(In thousands)

 

 

 

 

 

Service cost for benefits earned during the period

$

155

$

129

Interest cost on accumulated postretirement benefit

 

139

 

142

Other components

 

1

 

(4)

Net periodic postretirement benefit cost

$

295

$

267

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended December 31,

 

 

2012

 

2011

 

 

(Unaudited)

 

 

(In thousands)

 

 

 

 

 

Service cost for benefits earned during the period

$

466

$

386

Interest cost on accumulated postretirement benefit

 

416

 

426

Other components

 

3

 

(12)

Net periodic postretirement benefit cost

$

885

$

800

 

 

 

 

 

 

14. Fair Value Measurements

Fair values of cash equivalents approximate carrying value due to the short period of time to maturity. Fair values of short term investments, investments available-for-sale, long term investments, mortgage loans and notes on real estate, and interest rate swap contracts are based on quoted market prices, dealer quotes or discounted cash flows. Fair values of trade receivables approximate their recorded value.

Our financial instruments that are exposed to concentrations of credit risk consist primarily of temporary cash investments, trade receivables, reinsurance recoverables and notes receivable. Limited credit risk exists on trade receivables due to the diversity of our customer base and their dispersion across broad geographic markets. We place our temporary cash investments with financial institutions and limit the amount of credit exposure to any one financial institution.

We have mortgage receivables, which potentially expose us to credit risk. The portfolio of notes is principally collateralized by self-storage facilities and commercial properties. We have not experienced any material losses related to the notes from individual or groups of notes in any particular industry or geographic area. The estimated fair values were determined using the discounted cash flow method and using interest rates currently offered for similar loans to borrowers with similar credit ratings.

The carrying amount of long term debt and short term borrowings are estimated to approximate fair value as the actual interest rate is consistent with the rate estimated to be currently available for debt of similar term and remaining maturity.

Other investments including short term investments are substantially current or bear reasonable interest rates. As a result, the carrying values of these financial instruments approximate fair value.

Assets and liabilities are recorded at fair value on the condensed consolidated balance sheets and are measured and classified based upon a three tiered approach to valuation. ASC 820 - Fair Value Measurements and Disclosure (“ASC 820”) requires that financial assets and liabilities recorded at fair value be classified and disclosed in one of the following three categories:

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; 

 


Level 2 – Quoted prices for identical or similar financial instruments in markets that are not considered to be active, or similar financial instruments for which all significant inputs are observable, either directly or indirectly, or inputs other than quoted prices that are observable, or inputs that are derived principally from or corroborated by observable market data through correlation or other means; and

Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and are unobservable. These reflect management’s assumptions about the assumptions a market participant would use in pricing the asset or liability.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The following table represents the financial assets and liabilities on the condensed consolidated balance sheet at December 31, 2012, that are subject to ASC 820 and the valuation approach applied to each of these items.

 

 

Total

 

Level 1

 

Level 2

 

Level 3

 

 

(Unaudited)

 

 

(In thousands)

Assets

 

 

 

 

 

 

 

 

Short-term investments

$

561,798

$

561,798

$

$

Fixed maturities - available for sale

 

972,887

 

894,395

 

77,298

 

1,194

Preferred stock

 

22,208

 

22,208

 

 

Common stock

 

24,873

 

24,873

 

 

Derivatives

 

984

 

 

984

 

Total

$

1,582,750

$

1,503,274

$

78,282

$

1,194

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Guaranteed residual values of TRAC leases

$

$

$

$

Derivatives

 

56,089

 

 

56,089

 

Total

$

56,089

$

$

56,089

$

 

 

 

 

 

 

 

 

 

 

Our fair value measurements take place at the end of each quarter. At the end of the first quarter of fiscal 2013, we transferred $2.3 million of fixed maturities – available for sale from Level 1 to Level 2 due to a reduction in the pricing source available.

The following table represents the fair value measurements for our assets at December 31, 2012 using significant unobservable inputs (Level 3).

 

 

 

 

 

Fixed Maturities - Asset Backed Securities

 

 

(Unaudited)

 

 

(In thousands)

Balance at March 31, 2012

$

1,205

 

 

 

Fixed Maturities - Asset Backed Securities - redemption

 

(19)

Fixed Maturities - Asset Backed Securities - gain (realized)

 

8

Balance at December 31, 2012

$

1,194

 

 

 

 

 


 


ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

We begin Management’s Discussion and Analysis of Financial Condition and Results of Operations (“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 businesses 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. Next, we discuss our results of operations for the third quarter and first nine months of fiscal 2013, compared with the third quarter and first nine months of fiscal 2012, which is 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 and a discussion of off-balance sheet arrangements. We conclude this MD&A by discussing our outlook for the remainder of fiscal 2013.

This MD&A should be read in conjunction with the other sections of this Quarterly Report, including the Notes to Condensed Consolidated Financial Statements. 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 risks described throughout this filing or in our most recent Annual Report on Form 10-K for the year ended March 31, 2012. Many of these risks and uncertainties are beyond our control and our actual results may differ materially from these forward-looking statements.

The third fiscal quarter for AMERCO ends on the 31st of December for each year that is referenced. Our insurance company subsidiaries have a third quarter that ends on the 30th of September 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. We disclose all material events occurring during the intervening period. Consequently, all references to our insurance subsidiaries’ years 2012 and 2011 correspond to fiscal 2013 and 2012 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 continue to 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, storage rooms and portable storage boxes available for rent, expanding the number of independent dealers in our network and expanding and taking advantage of our growing eMove® capabilities.

Our Property and Casualty Insurance operating segment is focused on providing and administering property and casualty insurance to U-Haul and its customers, its independent dealers and affiliates. 

Our Life Insurance operating segment 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 reportable segments are:

         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, and

         Life Insurance, comprised of Oxford and its subsidiaries.

 


Moving and Storage Operating Segment

Our Moving and Storage operating segment consists of the rental of trucks, trailers, portable storage boxes, 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 independent Moving Help® service providers and thousands of independent Self-Storage Affiliates. Our network of customer rated affiliates and service providers furnish 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.

Since 1945 U-Haul has incorporated sustainable practices into its everyday operations. We believe that our basic business premise of equipment sharing helps reduce greenhouse gas emissions and reduces the need for total large capacity vehicles. We continue to look for ways to reduce waste within our business and are dedicated to manufacturing reusable components and recyclable products. We believe that our commitment to sustainability, through our products and services and everyday operations has helped us to reduce our impact on the environment.

Property and Casualty Insurance Operating Segment

Our Property and Casualty Insurance operating segment provides loss adjusting and claims handling for U-Haul through regional offices across North America. Our Property and Casualty Insurance operating segment also underwrites components of the Safemove, Safetow, Super Safemove and Safestor protection packages to U-Haul customers. We continue to focus on increasing the penetration of these products into the moving and storage market. The business plan for our Property and Casualty Insurance operating segment includes offering property and casualty products in other U-Haul related programs.

Life Insurance Operating Segment

Our Life Insurance operating segment provides life and health insurance products primarily to the senior market through the direct writing and reinsuring of life insurance, Medicare supplement and annuity policies.

Critical Accounting Policies and Estimates

Our 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. 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.

In the following pages 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

We apply ASC 810 in our principles of consolidation. ASC 810 addresses arrangements where a company does not hold a majority of the voting or similar interests of a VIE. A company is required to consolidate a VIE if it has determined it is the primary beneficiary. ASC 810 also addresses the policy when a company owns a majority of the voting or similar rights and exercises effective control.

As promulgated by ASC 810, a VIE is not self-supportive due to having one or both of the following conditions: (i) it has an insufficient amount of equity for it to finance its activities without receiving additional subordinated financial support or (ii) 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 is re-assessed on an on-going basis should certain changes in the operations of a VIE, or its relationship with the primary beneficiary trigger a reconsideration under the provisions of ASC 810. After a triggering event occurs the 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.

We will continue to monitor our relationships with the other entities regarding who is the primary beneficiary, which could change based on facts and circumstances of any reconsideration events.

During the first quarter of fiscal 2013 SAC Holding II fully repaid the $75.0 million outstanding principal balance on its junior note with AMERCO. Pursuant to ASC 810-10-35-4, we considered this a redetermination event which resulted in AMERCO no longer having a variable interest in SAC Holding II. Further, we determined that the repayment of the junior note had no impact on the existing individual operating entity management agreements thereby affirming our finding that these agreements do not constitute variable interests due to the presence of contractual ‘kick-out’ rights. As a result, the reconsideration event had no effect on the consolidation analysis, and thus we have no basis under ASC 810 to consolidate SAC Holding II.

The condensed consolidated balance sheets as of December 31, 2012 and March 31, 2012 include the accounts of AMERCO and its wholly-owned subsidiaries. The December 31, 2012 and 2011 condensed consolidated statements of operations, comprehensive income and cash flows include the accounts of AMERCO and its wholly-owned subsidiaries.

Recoverability of Property, Plant and Equipment

Property, plant and equipment are stated at cost. Interest expense incurred during the initial construction of buildings and rental equipment is considered part of cost. Depreciation is computed for financial reporting purposes using the straight-line or an accelerated method based on a declining balance formula over the following estimated useful lives: rental equipment 2-20 years and buildings and non-rental equipment 3-55 years. We follow the deferral method of accounting based on ASC 908 - Airlines for major overhauls in which engine and transmission overhauls are currently capitalized and amortized over three years. Routine maintenance costs are charged to operating expense as they are incurred. Gains and losses on dispositions of property, plant and equipment are netted against depreciation expense when realized. Equipment depreciation is recognized in amounts expected to result in the recovery of estimated residual values upon disposal, i.e., minimize gains or losses. In determining the depreciation rate, historical disposal experience, holding periods and trends in the market for vehicles are reviewed.

We regularly perform reviews to determine whether facts and circumstances exist which indicate that the carrying amount of assets, including estimates of residual value, may not be recoverable or that the useful life of assets are shorter or longer than originally estimated. Reductions in residual values (i.e., the price at which we ultimately expect to dispose of revenue earning equipment) or useful lives will result in an increase in depreciation expense over the life of the equipment. Reviews are performed based on vehicle class, generally subcategories of trucks and trailers. We assess the recoverability of our assets by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their estimated remaining lives against their respective carrying amounts. We consider factors such as current and expected future market price trends on used vehicles and the expected life of vehicles included in the fleet. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. If asset residual values are determined to be recoverable, but the useful lives are shorter or longer than originally estimated, the net book value of the assets is depreciated over the newly determined remaining useful lives.

 


Management determined that additions to the fleet resulting from purchase should be depreciated on an accelerated method based upon a declining formula. The useful life assumptions of this rental truck fleet remain unchanged. Beginning in October 2012 rental equipment subject to this depreciation schedule will be depreciated to a salvage value of 15%. This change had an immaterial effect on our current financial statements. 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 to a salvage value of 15% by the end of year fifteen. Whereas, a standard straight line approach would reduce the book value by approximately 5.7% per year over the life of the truck. For the affected equipment, the accelerated depreciation was $13.8 million and $14.1 million greater than what it would have been if calculated under a straight line approach for the third quarter of fiscal 2013 and 2012, respectively and $43.4 million and $40.4 million for the first nine months of fiscal 2013 and 2012, respectively.

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 but not limited to, the general state of the used vehicle market, the age and condition of the vehicle at the time of its disposal and the depreciation rates with respect to the vehicle. 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 pickup and cargo van fleet at automobile dealer auctions.

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 deferred annuity contracts consist of contract account balances that accrue to the benefit of the policyholders.

Insurance reserves for our Property and Casualty Insurance operating segment and U-Haul take into account losses incurred based upon actuarial estimates and are management’s best approximation of future payments.  These estimates are based upon past claims experience and current claim trends as well as social and economic conditions such as changes in legal theories and inflation.  These reserves consist of case reserves for reported losses and a provision for losses incurred but not reported (“IBNR”), both reduced by applicable reinsurance recoverables, resulting in a net liability.   

Due to the nature of the underlying risks and 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 these liabilities cannot be precisely determined and may vary significantly from the estimated liability, especially for long-tailed casualty lines of business such as excess workers’ compensation.  As a result of the long-tailed nature of the excess workers compensation policies written by Repwest during 1983 through 2002, and similar policies assumed by Repwest during 2001 through 2003, it may take a number of years for claims to be fully reported and finally settled.

On a regular basis insurance reserve adequacy is reviewed by management to determine if existing assumptions need to be updated. While management is continually monitoring the status of expected losses through a rolling review of the claim inventory and regularly reviews the adequacy of the established liability for unpaid claims and claims adjustment expense, there can be no assurance that our loss reserves will not develop adversely and have a material adverse effect on our results of operations   

In determining the assumptions for calculating workers compensation reserves, management considers multiple factors including the following:

         Claimant longevity

         Cost trends associated with claimant treatments

         Changes in ceding entity and third party administrator reporting practices

         Changes in environmental factors including legal and regulatory

         Current conditions affecting claim settlements

         Future economic conditions including inflation

 


We have reserved each claim based upon the accumulation of current claim costs projected through the claimants’ life expectancy, then adjusted for applicable reinsurance arrangements.  Management reviews each claim bi-annually to determine if the estimated life-time claim costs have increased and then adjusts the reserve estimate accordingly at that time.  We have factored in an estimate of what the potential cost increases could be in our IBNR liability.  We have not assumed settlement of the existing claims in calculating the reserve amount, unless it is in the final stages of completion.

Increases in claim costs, including medical inflation and new treatments and medications could lead to future adverse development resulting in additional reserve strengthening.  Conversely, settlement of existing claims or if injured workers return to work or expire prematurely, could lead to future positive development.

Impairment of Investments

Investments are evaluated pursuant to guidance contained in ASC 320 - Investments - Debt and Equity Securities to determine 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. Our insurance subsidiaries recognized $0.1 million in other-than-temporary impairments for the first nine months of fiscal 2012. There were no write downs for the third quarter of fiscal 2013 and 2012 or for the first nine months of fiscal 2013.

Income Taxes

Our 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.

Fair Values

Fair values of cash equivalents approximate carrying value due to the short period of time to maturity. Fair values of short term investments, investments available-for-sale, long term investments, mortgage loans and notes on real estate, and interest rate swap contracts are based on quoted market prices, dealer quotes or discounted cash flows. Fair values of trade receivables approximate their recorded value.

Our financial instruments that are exposed to concentrations of credit risk consist primarily of temporary cash investments, trade receivables, reinsurance recoverables and notes receivable. Limited credit risk exists on trade receivables due to the diversity of our customer base and their dispersion across broad geographic markets. We place our temporary cash investments with financial institutions and limit the amount of credit exposure to any one financial institution.

We have mortgage receivables, which potentially expose us to credit risk. The portfolio of notes is principally collateralized by self-storage facilities and commercial properties. We have not experienced any material losses related to the notes from individual or groups of notes in any particular industry or geographic area. The estimated fair values were determined using the discounted cash flow method and using interest rates currently offered for similar loans to borrowers with similar credit ratings.

The carrying amount of long term debt and short term borrowings are estimated to approximate fair value as the actual interest rate is consistent with the rate estimated to be currently available for debt of similar term and remaining maturity.

Other investments including short term investments are substantially current or bear reasonable interest rates. As a result, the carrying values of these financial instruments approximate fair value.

Subsequent Events

Our management has evaluated subsequent events occurring after December 31, 2012, the date of our most recent balance sheet through the date our financial statements were issued. We do not believe any other subsequent events have occurred that would require further disclosure or adjustment to our financial statements.

 


Recent Accounting Pronouncements

In July 2012, the FASB issued ASU 2012-02, Intangibles – Goodwill and Others (Topic 350) (“ASU 2012-02”) which allows an entity to first assess qualitative factors to determine whether it is necessary to perform a quantitative impairment test of an indefinite-lived intangible asset.  Per the terms of ASU 2012-02, an entity would not be required to calculate the fair value of an indefinite-lived intangible asset unless the entity determines, based on qualitative assessment, that it is not more likely than not, the indefinite-lived intangible asset is impaired.  The revised standard is effective for fiscal years beginning after September 15, 2012; however, early adoption is permitted. We do not believe the adoption of this will have a material impact on our financial statements.

Adoption of New Accounting Pronouncements

In October 2010, the FASB issued ASU 2010-26, Financial Services – Insurance (Topic 944) (“ASU 2010-26”) which amended FASB ASC 944-30 to provide further guidance regarding the capitalization of costs relating to the acquisition or renewal of insurance contracts. Specifically, only qualifying costs associated with successful contract acquisitions are permitted to be deferred. We adopted ASU 2010-26 in the first quarter of fiscal 2013 and it resulted in a $1.7 million reduction in beginning retained earnings on our financial statements.

In May 2011, the FASB issued ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (“IFRS”) (“ASU 2011-04”). This pronouncement was issued to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and IFRS. ASU 2011-04 changes certain fair value measurement principles and enhances the disclosure requirements particularly for Level 3 fair value measurements. We adopted ASU 2011-04 in the first quarter of fiscal 2013 and it did not have a material impact on our financial statements.

From time to time, new accounting pronouncements are issued by the FASB or the SEC that are adopted by us as of the specified effective date. Unless otherwise discussed, these ASU’s entail technical corrections to existing guidance or affect guidance related to specialized industries or entities and therefore will have minimal, if any, impact on our financial position or results of operations upon adoption.

Results of Operations

AMERCO and Consolidated Entities

Quarter Ended December 31, 2012 compared with the Quarter Ended December 31, 2011

Listed below on a consolidated basis are revenues for our major product lines for the third quarter of fiscal 2013 and the third quarter of fiscal 2012:

 

 

Quarter Ended December 31,

 

 

2012

 

2011

 

 

(Unaudited)

 

 

(In thousands)

Self-moving equipment rentals

$

394,945

$

375,744

Self-storage revenues

 

39,111

 

33,846

Self-moving and self-storage products and service sales

 

44,491

 

43,206

Property management fees

 

6,085

 

5,368

Life insurance premiums

 

43,248

 

132,643

Property and casualty insurance premiums

 

9,816

 

9,429

Net investment and interest income

 

18,927

 

15,234

Other revenue

 

22,188

 

17,619

Consolidated revenue

$

578,811

$

633,089

 

 

 

 

 

Self-moving equipment rental revenues increased $19.2 million during the third quarter of fiscal 2013, compared with the third quarter of fiscal 2012. Both our In-Town and one-way moving transactions experienced growth during the third quarter of fiscal 2013 compared to the same period last year.  While Hurricane Sandy affected portions of our operations in the Northeast United States, we believe the overall effect on our consolidated revenues was immaterial.   

 


Self-storage revenues increased $5.3 million during the third quarter of fiscal 2013, compared with the third quarter of fiscal 2012 due primarily to an increase in the number of rooms rented.  Average monthly occupancy during the third quarter of fiscal 2013 increased by 1.8 million square feet compared to the same period last year.  These occupancy gains have come from a combination of improvements at existing locations as well as the acquisition of new facilities.  Over the last twelve months we have added approximately 2.1 million net rentable square feet with nearly 0.8 million of that during the third quarter of fiscal 2013.   

Sales of self-moving and self-storage products and services increased $1.3 million during the third quarter of fiscal 2013, compared with the third quarter of fiscal 2012.  Increases were recognized in the sale of moving supplies and towing accessories and installation.   

Property management fees increased $0.7 million during the third quarter of fiscal 2013, compared with the third quarter of fiscal 2012.  The calculation of these fees is largely based upon revenues collected at the facilities managed by the Company.  As these underlying revenues increase, the fees we collect for management services increase as well.

Life insurance premiums decreased $89.4 million during the third quarter of fiscal 2013, compared with the third quarter of fiscal 2012 primarily from a decrease in life premiums of $84.9 million.  During the third quarter of fiscal 2012 we acquired a block of life insurance policies resulting in a $83.4 million one-time increase; the third quarter of fiscal 2013 did not include a similar acquisition.

Property and casualty insurance premiums increased $0.4 million during the third quarter of fiscal 2013, compared with the third quarter of fiscal 2012 due to increases in sales of our affiliated Safestor and Safetow protection packages.

Net investment and interest income increased $3.7 million during the third quarter of fiscal 2013, compared with the third quarter of fiscal 2012 due to a larger invested asset base at the Life Insurance operating segment combined with gains from mortgage loan holdings at the Moving and Storage operating segment.

Other revenue increased $4.6 million during the third quarter of fiscal 2013, compared with the third quarter of fiscal 2012 primarily from the expansion of new business initiatives including our U-Box® program.

As a result of the items mentioned above, revenues for AMERCO and its consolidated entities were $578.8 million for the third quarter of fiscal 2013, compared with $633.1 million for the third quarter of fiscal 2012.

Listed below are revenues and earnings from operations at each of our operating segments for the third quarter of fiscal 2013 and the third quarter of fiscal 2012. The insurance companies third quarters ended September 30, 2012 and 2011.

 

 

 

Quarter Ended December 31,

 

 

2012

 

2011

 

 

(Unaudited)

 

 

(In thousands)

Moving and storage

 

 

 

 

Revenues

$

514,806

$

483,066

Earnings from operations before equity in earnings of subsidiaries

 

72,781

 

61,766

Property and casualty insurance 

 

 

 

 

Revenues

 

11,865

 

11,666

Earnings (loss) from operations

 

2,062

 

(43,444)

Life insurance  

 

 

 

 

Revenues

 

53,090

 

139,643

Earnings from operations

 

7,181

 

6,599

Eliminations

 

 

 

 

Revenues

 

(950)

 

(1,286)

Earnings from operations before equity in earnings of subsidiaries

 

(78)

 

(48)

Consolidated results

 

 

 

 

Revenues

 

578,811

 

633,089

Earnings from operations

 

81,946

 

24,873

 

 

 

 

 

 

 


Total costs and expenses decreased $111.4 million during the third quarter of fiscal 2013, compared with the third quarter of fiscal 2012. Our Life Insurance operating segment accounted for $87.1 million of the decrease primarily due to the decline in premiums from acquisitions.  Our Property and Casualty Insurance operating segment accounted for $45.3 million of the decrease.  The third quarter of fiscal 2012 included $48.0 million of charges related to excess workers’ compensation reserves and reinsurance contracts; these charges did not recur in fiscal 2013.

At the Moving and Storage segment, total costs and expenses increased $20.7 million.  Operating expenses accounted for $17.7 million of the increase.  Personnel, liability costs and expenses associated with U-Box growth contributed to this increase. Cost of sales declined due to a reduction in the price of propane combined with a reduction in the volume purchased. Depreciation expense, net, increased $6.1 million while lease expense decreased $5.0 million as a result of the Company’s shift in financing new equipment on the balance sheet versus through operating leases.

During the third quarter of fiscal 2013 Hurricane Sandy struck the Northeastern portion of the United States interrupting business at approximately 100 stores. All of these stores were operational within a few days, but for the most part, required some additional time to reach full operational strength. We estimated losses related to destroyed rental equipment of approximately $0.8 million and has been recorded as an expense in the third quarter. We maintain property and business interruption insurance coverage with independent third parties to mitigate the financial impact of these types of catastrophic events. Our insurance deductible is $0.3 million and has been recorded as an expense in the third quarter.

As a result of the above mentioned changes in revenues and expenses, earnings from operations increased to $81.9 for the third quarter of fiscal 2013, compared with $24.9 million for the third quarter of fiscal 2012.

Interest expense for the third quarter of fiscal 2013 was $22.1 million, compared with $22.7 million for the third quarter of fiscal 2012 due to reduced borrowing costs partially offset by an increase in outstanding debt.

Income tax expense was $23.0 million for the third quarter of fiscal 2013, compared with $1.4 million for the third quarter of fiscal 2012 due to higher pretax earnings for the third quarter of fiscal 2013.

As a result of the above mentioned items, earnings available to common shareholders were $36.8 million for the third quarter of fiscal 2013, compared with $0.7 million for the third quarter of fiscal 2012.

Basic and diluted earnings per share for the third quarter of fiscal 2013 were $1.89, compared with $0.04 for the third quarter of fiscal 2012.

The weighted average common shares outstanding basic and diluted were 19,523,794 for the third quarter of fiscal 2013, compared with 19,481,614 for the third quarter of fiscal 2012.

Moving and Storage

Quarter Ended December 31, 2012 compared with the Quarter Ended December 31, 2011

Listed below are revenues for the major product lines at our Moving and Storage operating segment for the third quarter of fiscal 2013 and the third quarter of fiscal 2012:

 

 

Quarter Ended December 31,

 

 

2012

 

2011

 

 

(Unaudited)

 

 

(In thousands)

Self-moving equipment rentals

$

395,401

$

376,271

Self-storage revenues

 

39,111

 

33,846

Self-moving and self-storage products and service sales

 

44,491

 

43,206

Property management fees

 

6,085

 

5,368

Net investment and interest income

 

8,003

 

6,779

Other revenue

 

21,715

 

17,596

Moving and Storage revenue

$

514,806

$

483,066

 

 

 

 

 

Self-moving equipment rental revenues increased $19.1 million during the third quarter of fiscal 2013, compared with the third quarter of fiscal 2012. Both our In-Town and one-way moving transactions experienced growth during the quarter compared to the same period last year.  While Hurricane Sandy affected portions of our operations in the Northeast United States, we believe the overall effect on our consolidated revenues was immaterial.

 


Self-storage revenues increased $5.3 million during the third quarter of fiscal 2013, compared with the third quarter of fiscal 2012 due primarily to an increase in the number of rooms rented.  Average monthly occupancy during the third quarter of fiscal 2013 increased by 1.8 million square feet compared to the same period last year.  These occupancy gains have come from a combination of improvements at existing locations as well as the acquisition of new facilities.  Over the last twelve months we have added approximately 2.1 million net rentable square feet with nearly 0.8 million of that during the third quarter of fiscal 2013.

Sales of self-moving and self-storage products and services increased $1.3 million during the third quarter of fiscal 2013, compared the third quarter of fiscal 2012Increases were recognized in the sale of moving supplies and towing accessories and installation.     

Property management fees increased $0.7 million during the third quarter of fiscal 2013, compared with the third quarter of fiscal 2012.  The calculation of these fees is largely based upon revenues collected at the facilities managed by the Company.  As these underlying revenues increase, the fees we collect for management services increase as well.

Net investment and interest income increased $1.2 million during the third quarter of fiscal 2013, compared with the third quarter of fiscal 2012. During the first quarter of fiscal 2013, SAC Holdings repaid AMERCO $127.3 million for notes and interest outstanding. These notes carried interest rates of 9%. This loss of yield resulted in a $2.9 million decline in interest income for the third quarter which was more than offset by gains generated by mortgage loans held by the Company for investment.

Other revenue increased $4.1 million during the third quarter of fiscal 2013, compared with in the third quarter of fiscal 2012 due primarily from the expansion of new business initiatives including our U-Box program.

The Company owns and manages self-storage facilities. Self-storage revenues reported in the consolidated financial statements represent Company-owned locations only. Self-storage data for our owned storage locations follows:

 

 

 

Quarter Ended December 31,

 

 

2012

 

2011

 

 

(Unaudited)

 

 

(In thousands, except occupancy rate)

Room count as of December 31

 

183

 

163

Square footage as of December 31

 

15,648

 

13,589

Average number of rooms occupied

 

141

 

123

Average occupancy rate based on room count

 

78.1%

 

76.4%

Average square footage occupied

 

12,249

 

10,438

Total costs and expenses increased $20.7 million during the third quarter of fiscal 2013, compared with the third quarter of fiscal 2012. Operating expenses accounted for $17.7 million of the increase.  Personnel, liability costs and expenses associated with U-Box growth contributed to this increase. Cost of sales declined due to a reduction in the price of propane combined with a reduction in the volume purchased. Depreciation expense, net, increased $6.1 million while lease expense decreased $5.0 million as a result of the Company’s shift in financing new equipment on the balance sheet versus through operating leases.

During the third quarter of fiscal 2013 Hurricane Sandy struck the Northeastern portion of the United States interrupting business at approximately 100 stores. All of these stores were operational within a few days, but for the most part, required some additional time to reach full operational strength. We estimated losses related to destroyed rental equipment of approximately $0.8 million and has been recorded as an expense in the third quarter. We maintain property and business interruption insurance coverage with independent third parties to mitigate the financial impact of these types of catastrophic events. Our insurance deductible is $0.3 million and has been recorded as an expense in the third quarter.

As a result of the above mentioned changes in revenues and expenses, earnings from operations for the Moving and Storage operating segment before consolidation of the equity in the earnings of the insurance subsidiaries, increased to $72.8 million for the third quarter of fiscal 2013, compared with $61.8 million for the third quarter of fiscal 2012.

Equity in the earnings of AMERCO’s insurance subsidiaries increased $29.6 million for the third quarter of fiscal 2013, compared with the third quarter of fiscal 2012 primarily due to the reserve strengthening at our Property and Casualty operating segment in the prior year’s third quarter.

 


As a result of the above mentioned changes in revenues and expenses, earnings from operations increased to $78.4 million for the third quarter of fiscal 2013, compared with $37.8 million for the third quarter of fiscal 2012.

Property and Casualty Insurance

Quarter Ended September 30, 2012 compared with the Quarter Ended September 30, 2011

Net premiums were $9.8 million and $9.4 million for the third quarters ended September 30, 2012 and 2011, respectively. A significant portion of Repwest’s premiums are from policies sold in conjunction with U-Haul rental transactions. The premium increase corresponded with increased moving and storage transactions at U-Haul during the same time period.

Net investment income was $2.0 million and $2.2 million for the third quarters ended September 30, 2012 and 2011, respectively.

Net operating expenses were $6.9 million and $3.5 million for third quarters ended September 30, 2012 and 2011, respectively. The increase was a result of a $3.9 million write off for reinsurance deemed uncollectible during the quarter. 

Benefits and losses incurred were $2.9 million and $51.6 million for the third quarters ended September 30, 2012 and 2011, respectively. The improvement was due to reserve strengthening recognized in 2011 on terminated workers’ compensation programs originally written or reinsured between 1983 and 2003. The third quarter of last year included approximately $20.0 million of reserve strengthening for reinsurance assumed by Repwest, $22.8 million for business written directly by Repwest and $5.2 million related to uncertainty regarding the collection of reinsurance receivables. The Company had determined that claims had been developing much more adversely than previously anticipated.  A combination of issues including medical inflation, additional treatments, longer claim terms and underestimation of claims costs by third party administrators and reinsurers contributed to these adjustments. These updated assumptions led to the revision in the Company’s loss assumptions for this business.

As a result of the above mentioned changes in revenues and expenses, pretax earnings (loss) from operations were $2.1 million and ($43.4) million for the third quarters ended September 30, 2012 and 2011, respectively.

Life Insurance

Quarter Ended September 30, 2012 compared with the Quarter Ended September 30, 2011

Net premiums were $43.2 million and $132.6 million for the third quarters ended September 30, 2012 and 2011, respectively. Life premiums decreased by $84.9 million. During the third quarter of 2011 Oxford entered into a coinsurance arrangement for a block of whole life insurance policies resulting in a one-time increase in premiums of $83.5 million due to the transfer of liabilities.  Additionally, new business activity has shifted more towards annuity policies with sales of these products accounted for as deposits on the balance sheet instead of premium income. Annuity deposits increased by $81.1 million compared to the same quarter last year.

Net investment income was $9.0 million and $6.6 million for the third quarters ended September 30, 2012 and 2011, respectively. There was an increase of $2.4 million of investment income due to a larger invested asset base and an increase in realized gains of $0.5 million compared to the same period last year.

Net operating expenses were $6.4 million and $7.3 million for the third quarters ended September 30, 2012 and 2011, respectively. The variance was primarily due to a reduction in Life and Medicare supplement commissions.

Benefits and losses incurred were $36.1 million and $122.1 million for the third quarters ended September 30, 2012 and 2011, respectively. During the third quarter of 2011 Oxford entered into a coinsurance arrangement for a block of whole life insurance policies resulting in a one-time increase in benefits of $83.5 million due to the transfer of liabilities.  Single premium whole life and Medicare supplement incurred benefits also decreased by $2.3 million and $1.8 million, respectively.

Amortization of deferred acquisition costs (“DAC”) and the value of business acquired (“VOBA”) was $3.4 million and $3.7 million for the third quarters ended September 30, 2012 and 2011, respectively.  The primary variance was a result of decreased annuity amortization due to the prior year write-off of an aged block of assumed annuity business, partially offset by increased amortization of DAC due to new sales.

 


As a result of the above mentioned changes in revenues and expenses, pretax earnings from operations were $7.2 million and $6.6 million for the third quarters ended September 30, 2012 and 2011, respectively.

AMERCO and Consolidated Entities

Nine Months Ended December 31, 2012 compared with the Nine Months Ended December 31, 2011

Listed below on a consolidated basis are revenues for our major product lines for the first nine months of fiscal 2013 and the first nine months of fiscal 2012:

 

 

Nine Months Ended December 31,

 

 

2012

 

2011

 

 

(Unaudited)

 

 

(In thousands)

Self-moving equipment rentals

$

1,400,300

$

1,333,918

Self-storage revenues

 

111,825

 

99,682

Self-moving and self-storage products and service sales

 

173,399

 

167,352

Property management fees

 

15,847

 

14,929

Life insurance premiums

 

137,341

 

229,839

Property and casualty insurance premiums

 

26,006

 

25,076

Net investment and interest income

 

44,237

 

48,398

Other revenue

 

76,589

 

60,041

Consolidated revenue

$

1,985,544

$

1,979,235

 

 

 

 

 

Self-moving equipment rental revenues increased $66.4 million during the first nine months of fiscal 2013, compared with the first nine months of fiscal 2012The revenue growth was largely from an increase in In-Town and one-way moving transactions.  Our focus continues to be on improving the rental experience for our customers through the availability of equipment, convenient access to rental locations and ease of the rental process.  We believe that these efforts along with a larger rental fleet has supported the increase in transactions and associated revenue.  

Self-storage revenues increased $12.1 million during the first nine months of fiscal 2013, compared with the first nine months of fiscal 2012 due primarily to an increase in the number of rooms rented.  Average monthly occupancy during the first nine months of fiscal 2013 increased by 1.4 million square feet compared to the same period last year.  These occupancy gains have come from a combination of improvements at existing locations as well as the acquisition of new facilities.  Over the last twelve months we have added approximately 2.1 million net rentable square feet with nearly 1.8 million of that during the first nine months of fiscal 2013.

Sales of self-moving and self-storage products and services increased $6.0 million during the first nine months of fiscal 2013, compared with the first nine months of fiscal 2012We earned increases from the sale of moving supplies as well as towing accessories and installation.

Property management fees increased $0.9 million during the first nine months of fiscal 2013, compared with the first nine months of fiscal 2012.  The calculation of these fees is largely based upon revenues collected at the facilities managed by the Company.  As these underlying revenues increase, the fees we collect for management services increase as well.

Life insurance premiums decreased $92.5 million during the first nine months of fiscal 2013, compared with the first nine months of fiscal 2012 primarily from a reinsurance agreement on life insurance policies entered into during the prior year.

Property and casualty insurance premiums increased $0.9 million during the first nine months of fiscal 2013, compared with the first nine months of fiscal 2012 primarily from policies sold in conjunction with U-Haul rental transactions. As moving transactions have increased this year so have the related premiums.

Net investment and interest income decreased $4.2 million during the first nine months of fiscal 2013, compared with the first nine months of fiscal 2012 primarily due to declines at the Moving and Storage operating segment. During the first quarter of fiscal 2013, SAC Holdings repaid AMERCO $127.3 million for notes and interest outstanding. These notes carried interest rates of 9% and the loss of this yield caused an $8.1 million decline in interest income for the first nine months of fiscal 2013.  This decline was partially offset by increased investment income at the Life Insurance operating segment as well as gains from mortgage loans held for investment at the Moving and Storage operating segment.

 


Other revenue increased $16.5 million during the first nine months of fiscal 2013, compared with the first nine months of fiscal 2012 primarily from the expansion of new business initiatives including our U-Box program.

As a result of the items mentioned above, revenues for AMERCO and its consolidated entities were $1,985.5 million for the first nine months of fiscal 2013, as compared with $1,979.2 million for the first nine months of fiscal 2012.

Listed below are revenues and earnings (loss) from operations at each of our operating segments for the first nine months of fiscal 2013 and the first nine months of fiscal 2012. The insurance companies first nine months ended September 30, 2012 and 2011.

 

 

Nine Months Ended December 31,

 

 

2012

 

2011

 

 

(Unaudited)

 

 

(In thousands)

Moving and storage

 

 

 

 

Revenues

$

1,793,224

$

1,697,683

Earnings from operations before equity in earnings of subsidiaries

 

407,567

 

383,072

Property and casualty insurance 

 

 

 

 

Revenues

 

32,521

 

32,471

Earnings (loss) from operations

 

6,991

 

(39,348)

Life insurance  

 

 

 

 

Revenues

 

162,396

 

252,834

Earnings from operations

 

12,807

 

14,430

Eliminations

 

 

 

 

Revenues

 

(2,597)

 

(3,753)

Earnings from operations before equity in earnings of subsidiaries

 

(218)

 

(485)

Consolidated results

 

 

 

 

Revenues

 

1,985,544

 

1,979,235

Earnings from operations

 

427,147

 

357,669

 

 

 

 

 

Total costs and expenses decreased $63.2 million during the first nine months of fiscal 2013, compared with the first nine months of fiscal 2012. Our Life Insurance operating segment accounted for $88.8 million of the decrease primarily due to the decline in business acquisitions.  Our Property and Casualty Insurance operating segment accounted for $46.3 million of the decrease.  The third quarter of fiscal 2012 included a $48.0 million of charges related to excess workers’ compensation reserves and reinsurance contracts; these charges did not recur in fiscal 2013.

Total costs and expenses at the Moving and Storage operating segment increased $71.0 million during the first nine months of fiscal 2013.  Operating expenses increased $43.9 million primarily from spending on personnel, accruals for liability costs, legal expense and operating costs associated with the U-Box program. Commission expenses increased in relation to the associated revenues. Cost of sales declined due to a reduction in the price of propane combined with a reduction in the volume purchased. Depreciation expense, net, increased $28.8 million while lease expense decreased $10.1 million as a result of the Company’s shift in financing new equipment on the balance sheet versus through operating leases.

During the third quarter of fiscal 2013 Hurricane Sandy struck the Northeastern portion of the United States interrupting business at approximately 100 stores. All of these stores were operational within a few days, but for the most part, required some additional time to reach full operational strength. We estimated losses related to destroyed rental equipment of approximately $0.8 million and has been recorded as an expense in the third quarter. We maintain property and business interruption insurance coverage with independent third parties to mitigate the financial impact of these types of catastrophic events. Our insurance deductible is $0.3 million and has been recorded as an expense in the third quarter.

As a result of the above mentioned changes in revenues and expenses, earnings from operations increased to $427.1 million for the first nine months of fiscal 2013, as compared with $357.7 million for the first nine months of fiscal 2012.

Interest expense for the first nine months of fiscal 2013 was $67.7 million and $68.3 million for the first nine months of fiscal 2012 due to an increase in average borrowings partially offset by a decrease in average borrowing costs.

 


Income tax expense was $132.6 million for the first nine months of fiscal 2013, compared with $109.4 million for the first nine months of fiscal 2012 due to higher pretax earnings for the first nine months of fiscal   2013.

Dividends accrued or paid on our Series A Preferred were $2.9 million for the first nine months of fiscal 2012. There were no payments made or accrued in fiscal 2013. All of the Series A Preferred stock was redeemed on June 1, 2011; therefore, no dividends were accrued for the third quarter of fiscal 2012. The first nine months of fiscal 2012 included a $5.9 million non-recurring charge related to the redemption of the Series A Preferred Stock.

As a result of the above mentioned items, earnings available to common shareholders were $226.8 million for the first nine months of fiscal 2013, compared with $171.1 million for the first nine months of fiscal 2012.

Basic and diluted earnings per common share for the first nine months of fiscal 2013 were $11.62, compared with $8.79 for the first nine months of fiscal 2012.

The weighted average common shares outstanding basic and diluted were 19,512,974 for the first nine months of fiscal 2013, compared with 19,470,886 for the first nine months of fiscal 2012.

Moving and Storage

Nine Months Ended December 31, 2012 compared with the Nine Months Ended December 31, 2011

Listed below are revenues for the major product lines at our Moving and Storage operating segment for the first nine months of fiscal 2013 and the first nine months of fiscal 2012:

 

 

Nine Months Ended December 31,

 

 

2012

 

2011

 

 

(Unaudited)

 

 

(In thousands)

Self-moving equipment rentals

$

1,401,483

$

1,335,229

Self-storage revenues

 

111,825

 

99,682

Self-moving and self-storage products and service sales

 

173,399

 

167,352

Property management fees

 

15,847

 

14,929

Net investment and interest income

 

15,038

 

20,617

Other revenue

 

75,632

 

59,874

Moving and Storage revenue

$

1,793,224

$

1,697,683

 

 

 

 

 

Self-moving equipment rental revenues increased $66.3 million during the first nine months of fiscal 2013, compared with the first nine months of fiscal 2012. The revenue growth was largely from an increase in In-Town and one-way moving transactions.  Our focus continues to be on improving the rental experience for our customers through the availability of equipment, convenient access to rental locations and ease of the rental process.  We believe that these efforts along with a larger rental fleet has supported the increase in transactions and associated revenue.

Self-storage revenues increased $12.1 million during the first nine months of fiscal 2013, compared with the first nine months of fiscal 2012 due primarily to an increase in the number of rooms rented.  Average monthly occupancy during the first nine months of fiscal 2013 increased by 1.4 million square feet compared to the same period last year.  These occupancy gains have come from a combination of improvements at existing locations as well as the acquisition of new facilities.  Over the last twelve months we have added approximately 2.1 million net rentable square feet with nearly 1.8 million of that during the first nine months of fiscal 2013.

Sales of self-moving and self-storage products and services increased $6.0 million during the first nine months of fiscal 2013, compared with the first nine months of fiscal 2012We earned increases from the sale of moving supplies as well as towing accessories and installation.

Property management fees increased $0.9 million during the first nine months of fiscal 2013, compared with the first nine months of fiscal 2012.  The calculation of these fees is largely based upon revenues collected at the facilities managed by the Company.  As these underlying revenues increase, the fees we collect for management services increase as well.

 


Net investment and interest income decreased $5.6 million during the first nine months of fiscal 2013, compared with the first nine months of fiscal 2012. During the first quarter of fiscal 2013, SAC Holdings repaid AMERCO $127.3 million for notes and interest outstanding. These notes carried interest rates of 9% and the loss of this yield caused a $8.1 million decline in interest income for the first nine months of fiscal 2013.  This decline was partially offset by gains from mortgage loans held for investment at the Moving and Storage operating segment.

Other revenue increased $15.8 million during the first nine months of fiscal 2013, compared with the first nine months of fiscal 2012 primarily from the expansion of new business initiatives including our U-Box program.

The Company owns and manages self-storage facilities. Self-storage revenues reported in the consolidated financial statements represent Company-owned locations only. Self-storage data for our owned storage locations follows:

 

 

Nine Months Ended December 31,

 

 

2012

 

2011

 

 

(Unaudited)

 

 

(In thousands, except occupancy rate)

Room count as of December 31

 

183

 

163

Square footage as of December 31

 

15,648

 

13,589

Average number of rooms occupied

 

138

 

123

Average occupancy rate based on room count

 

79.1%

 

77.5%

Average square footage occupied

 

11,795

 

10,353

Total costs and expenses at the Moving and Storage operating segment increased $71.0 million during the first nine months of fiscal 2013.  Operating expenses increased $43.9 million primarily from spending on personnel, accruals for liability costs, legal expense and operating costs associated with the U-Box program. Commission expenses increased in relation to the associated revenues. Cost of sales declined due to a reduction in the price of propane combined with a reduction in the volume purchased. Depreciation expense, net, increased $28.8 million while lease expense decreased $10.1 million as a result of the Company’s shift in financing new equipment on the balance sheet versus through operating leases.

During the third quarter of fiscal 2013 Hurricane Sandy struck the Northeastern portion of the United States interrupting business at approximately 100 stores. All of these stores were operational within a few days, but for the most part, required some additional time to reach full operational strength. We estimated losses related to destroyed rental equipment of approximately $0.8 million and has been recorded as an expense in the third quarter. We maintain property and business interruption insurance coverage with independent third parties to mitigate the financial impact of these types of catastrophic events. Our insurance deductible is $0.3 million and has been recorded as an expense in the third quarter.

As a result of the above mentioned changes in revenues and expenses, earnings from operations for the Moving and Storage operating segment before consolidation of the equity in the earnings of the insurance subsidiaries increased to $407.6 million for the first nine months of fiscal 2013, compared with $383.1 million for the first nine months of fiscal 2012.

Equity in the earnings of AMERCO’s insurance subsidiaries increased $29.1 million for the first nine months of fiscal 2013, compared with the first nine months of fiscal 2012 as a result of the reserve strengthening at the Property and Casualty Insurance segment in the prior year.

As a result of the above mentioned changes in revenues and expenses, earnings from operations increased to $420.5 million for the first nine months of fiscal 2013, compared with $366.9 million for the first nine months of fiscal 2012.

Property and Casualty Insurance

Nine Months Ended September 30, 2012 compared with the Nine Months Ended September 30, 2011

Net premiums were $26.0 million and $25.1 million for the nine months ended September 30, 2012 and 2011, respectively. A significant portion of Repwest’s premiums are from policies sold in conjunction with U-Haul rental transactions. The premium increase corresponded with increased moving and storage transactions at U-Haul during the same time period.

 


Net investment income was $6.5 million and $7.4 million for the nine months ended September 30, 2012 and 2011, respectively. The decrease was due to a $1.3 million decrease in bond, preferred stock and real estate income, offset by a $1.0 million increase in mortgage loan income. The prior year also had a $0.7 million gain on asset disposals.

Net operating expenses were $14.7 million and $9.9 million for the nine months ended September 30, 2012 and 2011, respectively. The increase was a result of a $3.9 million write off for reinsurance deemed uncollectible combined with a $1.0 million increase in payroll expenses.

Benefits and losses incurred were $10.8 million and $61.9 million for the nine months ended September 30, 2012 and 2011, respectively. The decrease was primarily due to reserve strengthening recognized in 2011 related to terminated workers’ compensation programs originally written or reinsured between 1983 and 2003. For the nine months ended September 30, 2011, losses in this line of business increased $52.5 million of which $48.0 million was recognized in the third quarter of fiscal year 2012. The Company determined that claims had been developing much more adversely than previously anticipated. A combination of issues including medical inflation, additional treatments, longer claim terms and underestimation of claims costs by third party administrators and reinsurers contributed to these adjustments. These updated assumptions led to the revision in the Company’s loss assumptions for this business.

As a result of the above mentioned changes in revenues and expenses, pretax earnings (loss) from operations were $7.0 million and ($39.3) million for the nine months ended September 30, 2012 and 2011, respectively.

Life Insurance

Nine Months Ended September 30, 2012 compared with the Nine Months Ended September 30, 2011

Net premiums were $137.3 million and $229.8 million for the nine months ended September 30, 2012 and 2011, respectively. During the third quarter of fiscal 2011 Oxford entered into a coinsurance arrangement for a block of whole life insurance policies resulting in a one-time increase in premiums of $83.5 million due to the transfer of liabilities.  Additionally, there was a $7.0 million decrease in Medicare supplement premiums compared to the prior year. Annuity deposits increased by $233.2 million; which are accounted for on the balance sheet as deposits rather than premiums.

Net investment income was $23.0 million and $21.8 million for the nine months ended September 30, 2012 and 2011, respectively. There was an increase of $1.2 million of investment income due to a larger invested asset base offset by a decrease in realized gains recognized on investments of $3.4 million.

Net operating expenses were $20.4 million and $21.5 million for the nine months ended September 30, 2012 and 2011, respectively. The variance was due to reduced Medicare supplement and single premium whole life commissions resulting from policy decrements in Medicare supplement and lower sales of the life product.

Benefits and losses incurred were $119.9 million and $206.2 million for the quarter ended September 30, 2012 and 2011, respectively. During the third quarter of 2011 Oxford entered into the coinsurance arrangement for the block of whole life insurance policies resulting in a one-time increase in benefits of $83.5 million due to the transfer of liabilities.  A $7.4 million decrease in Medicare supplement benefits which came from a reduction of policies in-force and lower benefit ratios was offset by an increase in life insurance and other benefits.

DAC and VOBA was $9.3 million and $10.7 million for the nine months ended September 30, 2012 and 2011, respectively.  A decrease of $1.6 million was due to additional DAC amortization in the prior year resulting from realized capital gains, offset by an increase in the current year stemming from increased life and annuity sales.

As a result of the above mentioned changes in revenues and expenses, pretax earnings from operations were $12.8 million and $14.4 million for the nine months ended September 30, 2012 and 2011, respectively.

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 foreseeable future. The majority of our obligations currently in place mature at the end of fiscal years 2016 or 2019. However, since there are many factors which could affect our liquidity, including some which are beyond our control, there is no assurance that future cash flows will be sufficient to meet our outstanding debt obligations and our other future capital needs.

 


At December 31, 2012, cash and cash equivalents totaled $586.1 million, compared with $357.2 million on March 31, 2012. 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 December 31, 2012 (or as otherwise indicated), cash and cash equivalents, other financial assets (receivables, short-term investments, other investments, fixed maturities, and related party assets) and debt obligations of each operating segment were:

 

 

Moving & Storage

 

Property and Casualty Insurance (a)

 

Life Insurance (a)

 

 

(Unaudited)

 

 

(In thousands)

Cash and cash equivalents

$

538,883

$

14,490

$

32,751

Other financial assets

 

266,631

 

406,380

 

1,030,894

Debt obligations

 

1,667,008

 

 

 

 

 

 

 

 

 

(a) As of September 30, 2012

 

 

 

 

 

 

At December 31, 2012, our Moving and Storage operating segment had additional cash available under existing credit facilities of $302.7 million.

Net cash provided by operating activities increased $78.7 million in the first nine months of fiscal 2013 compared with fiscal 2012 primarily due to repayments of $127.3 million of the notes and interest receivables with SAC Holdings and from increased revenues.  Payments related to federal income taxes increased $104.3 million for the first nine months of fiscal 2013 compared to the same period in fiscal 2012. 

Net cash used in investing activities increased $112.2 million in the first nine months of fiscal 2013, compared with fiscal 2012. Cash received from entering into new equipment leases is reported net of the cash used for purchases of property, plant and equipment.  New equipment leases funded in fiscal 2013 compared to fiscal 2012 increased $137.3 million, while cash used to purchase new rental equipment for fiscal 2013 increased $86.9 million compared to the same period last year. Cash provided from the sales of property, plant and equipment increased $27.1 million. Cash used for investing activities at the insurance companies increased $177.6 million primarily due to investments in their fixed maturity portfolios resulting from new annuity deposits.

Net cash provided by financing activities increased $199.7 million in the first nine months of fiscal 2013, as compared with fiscal 2012. Net annuity deposits at the Life Insurance operating segment increased $256.2 million in the first nine months of fiscal 2013 compared to the same period last year.  This was reduced by an increase in debt repayments compared to new borrowings at the Moving and Storage operating segment. Fiscal 2013 included $97.4 million of cash used to pay the Common Stock dividend, while fiscal 2012 included $152.0 million of cash used to redeem the Series A Preferred.

Liquidity and Capital Resources and Requirements of Our Operating Segments

Moving and Storage

To meet the needs of our customers, U-Haul maintains a large fleet of rental equipment. Capital expenditures have primarily reflected new rental equipment acquisitions and the buyouts of existing fleet from leases. The capital to fund these expenditures has historically been obtained internally from operations and the sale of used equipment and externally from debt and lease financing. In the future, we anticipate that our internally generated funds will be used to service the existing debt and fund operations. U-Haul estimates that during fiscal 2013, we will reinvest in our truck and trailer rental fleet approximately $380 million, net of equipment sales excluding any lease buyouts. Through the first nine months of this year we have reinvested $262.5 million of this projected amount. Fleet investments in fiscal 2013 and beyond will be dependent upon several factors including availability of capital, the truck rental environment and the used-truck sales market. We anticipate that the fiscal 2013 investments will be funded largely through debt financing, external lease financing and cash from operations. Management considers several factors including cost and tax consequences when selecting a method to fund capital expenditures. Our allocation between debt and lease financing can change from year to year based upon financial market conditions which may alter the cost or availability of financing options.

 


Real Estate has traditionally financed the acquisition of self-storage properties to support U-Haul's growth through debt financing and funds from operations and sales. Our plan for the expansion of owned storage properties includes the acquisition of existing self-storage locations from third parties, the acquisition and development of bare land, and the acquisition and redevelopment of existing buildings not currently used for self-storage. We are funding these development projects through construction loans and internally generated funds. For the first nine months of fiscal 2013, the Company invested approximately $130.3 million in real estate acquisitions, new construction and renovation and repair. For fiscal 2013, the timing of new projects will be dependent upon several factors including the entitlement process, availability of capital, weather, and the identification and successful acquisition of target properties. U-Haul's growth plan in self-storage also includes the expansion of the eMove program, which does not require significant capital.

Net capital expenditures (purchases of property, plant and equipment less proceeds from the sale of property, plant and equipment and lease proceeds) were $255.9 million and $281.9 million for the first nine months of fiscal 2013 and 2012, respectively. The components of our net capital expenditures are provided in the following table:

 

 

Nine Months Ended December 31,

 

 

2012

 

2011

 

 

(Unaudited)

 

 

(In thousands)

Purchases of rental equipment

$

421,912

$

335,031

Equipment lease buyouts

 

49,874

 

52,340

Purchases of real estate, construction and renovations

 

130,331

 

75,075

Other capital expenditures

 

33,058

 

34,299

Gross capital expenditures

 

635,175

 

496,745

Less: Lease proceeds

 

(212,335)

 

(75,002)

Less: Sales of property, plant and equipment

 

(166,904)

 

(139,852)

Net capital expenditures

 

255,936

 

281,891

The Moving and Storage operating segment continues to hold significant cash and has access to additional liquidity. Management may invest these funds in our existing operations, expand our product lines or pursue external opportunities in the self-moving and storage market place or reduce existing indebtedness where possible.

Property and Casualty Insurance

State insurance regulations restrict the amount of dividends that can be paid to stockholders of insurance companies. As a result, Property and Casualty Insurance’s assets are generally not available to satisfy the claims of AMERCO or its legal subsidiaries.

Stockholder’s equity was $132.8 million and $123.8 million at September 30, 2012 and December 31, 2011, respectively. The increase resulted from earnings of $4.5 million, increase in other comprehensive income of $3.0 million and an increase in additional paid-in capital of $1.5 million. The Property and Casualty Insurance operating segment does not use debt or equity issues to increase capital and therefore has no direct exposure to capital market conditions other than through its investment portfolio.

Life Insurance

The Life Insurance operating segment manages its financial assets to meet policyholder and other obligations including investment contract withdrawals and deposits. Life Insurance’s net deposits for the nine months ended September 30, 2012 were $245.5 million. State insurance regulations restrict the amount of dividends that can be paid to stockholders of insurance companies. As a result, Life Insurance’s funds are generally not available to satisfy the claims of AMERCO or its legal subsidiaries.

Life Insurance’s stockholder’s equity was $237.3 million and $215.8 million at September 30, 2012 and December 31, 2011, respectively. The increase resulted from earnings of $8.4 million and an increase in other comprehensive income of $14.8 million and a decrease to beginning retained earnings of $1.7 million in relation to the adoption of ASU 2010-26. The Life Insurance operating segment does not use debt or equity issues to increase capital and therefore has no direct exposure to capital market conditions other than through its investment portfolio.

 


Net Cash Provided (Used) from Operating Activities by Operating Segments

Moving and Storage

Net cash provided from operating activities were $580.9 million and $441.7 million for the first nine months of fiscal 2013 and 2012, respectively. The increase was primarily due to repayments of $127.3 million of the notes and interest receivables in the first quarter with SAC Holdings and from increased revenues partially offset by a $104.3 million increase in federal income tax deposits paid.

Property and Casualty Insurance

Net cash provided by operating activities were $4.2 million and $10.3 million for the first nine months ended September 30, 2012 and 2011, respectively. The decrease in cash provided by operations was due to the $4.9 million increase in operating expense previously mentioned and a decrease in investment income.

The Property and Casualty Insurance operating segments cash and cash equivalents and short-term investment portfolio amounted to $62.2 million and $44.1 million at September 30, 2012 and December 31, 2011, respectively. This balance reflects funds in transition from maturity proceeds to long term investments. Management believes this level of liquid assets, combined with budgeted cash flow, is adequate to meet foreseeable cash needs. Capital and operating budgets allow the Property and Casualty Insurance operating segment to schedule cash needs in accordance with investment and underwriting proceeds.

Life Insurance

Net cash provided (used) by operating activities were ($8.7) million and $46.0 million for the first nine months ended September 30, 2012 and 2011, respectively. The decrease was attributable to a cash settlement on the assumption reinsurance transaction as of September 30, 2011.  Increased commissions on higher sales of new annuity products in 2012 caused an additional decrease in cash flow from operations.

In addition to cash flows from operating activities and financing activities, a substantial amount of liquid funds are available through the Life Insurance operating segment’s short-term portfolio. At September 30, 2012 and December 31, 2011, cash and cash equivalents and short-term investments amounted to $43.6 million and $54.1 million, respectively. Management believes that the overall sources of liquidity are adequate to meet foreseeable cash needs.

Liquidity and Capital Resources - Summary

We believe we have the financial resources needed to meet our business plans, including our working capital needs. We continue to hold significant cash and have access to existing credit facilities and additional liquidity to meet our anticipated capital expenditure requirements for investment in our rental fleet, rental equipment and storage acquisitions and build outs.

Our borrowing strategy is primarily focused on asset-backed financing and rental equipment leases. As part of this strategy, we seek to ladder maturities and hedge floating rate loans through the use of interest rate swaps. While each of these loans typically contains provisions governing the amount that can be borrowed in relation to specific assets, the overall structure is flexible with no limits on overall Company borrowings. Management feels it has adequate liquidity between cash and cash equivalents and unused borrowing capacity in existing credit facilities to meet the current and expected needs of the Company over the next several years. At December 31, 2012, we had cash availability under existing credit facilities of $302.7 million. It is possible that circumstances beyond our control or other factors resulting from changes in our operations could alter the ability of the financial institutions to lend us the unused lines of credit. We believe that there are additional opportunities for leverage in our existing capital structure. For a more detailed discussion of our long-term debt and borrowing capacity, please see Note 4, Borrowings of the Notes to Condensed Consolidated Financial Statements.

Fair Value of Financial Instruments

Assets and liabilities recorded at fair value on the condensed consolidated balance sheets and are measured and classified based upon a three tiered approach to valuation. ASC 820 requires that financial assets and liabilities recorded at fair value be classified and disclosed in a Level 1, Level 2 or Level 3 category. For more information, please see Note 14, Fair Value Measurements of the Notes to Condensed Consolidated Financial Statements.

 


The available-for-sale securities held by us are recorded at fair value. These values are determined primarily from actively traded markets where prices are based either on direct market quotes or observed transactions. Liquidity is a factor considered during the determination of the fair value of these securities. Market price quotes may not be readily available for certain securities or the market for them has slowed or ceased. In situations where the market is determined to be illiquid, fair value is determined based upon limited available information and other factors including expected cash flows. At December 31, 2012, we had $1.2 million of available-for-sale assets classified in Level 3.

The interest rate swaps held by us as hedges against interest rate risk for our variable rate debt are recorded at fair value. These values are determined using pricing valuation models which include broker quotes for which significant inputs are observable. They include adjustments for counterparty credit quality and other deal-specific factors, where appropriate and are classified as Level 2.

Disclosures about Contractual Obligations and Commercial Commitments

Our estimates as to future contractual obligations have not materially changed from the disclosure included under the subheading Contractual Obligations in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the fiscal year ended March 31, 2012.

Off-Balance Sheet Arrangements

We use off-balance sheet arrangements in situations where management believes that the economics and sound business principles warrant their use.

We utilize operating leases for certain rental equipment and facilities with terms expiring substantially through 2019. In the event of a shortfall in proceeds from the sales of the underlying rental equipment assets, we have guaranteed approximately $124.3 million of residual values at December 31, 2012 for these assets at the end of their respective lease terms. AMERCO has been leasing rental equipment since 1987. To date, we have not experienced residual value shortfalls related to these leasing arrangements. Using the average cost of fleet related debt as the discount rate, the present value of AMERCO’s minimum lease payments and residual value guarantees were $327.7 million at December 31, 2012.

Historically, we have used off-balance sheet arrangements in connection with the expansion of our self-storage business. For more information please see Note 10, Related Party Transactions of the Notes to Condensed Consolidated Financial Statements. These arrangements were primarily used when our overall borrowing structure was more limited. We do not face similar limitations currently and off-balance sheet arrangements have not been utilized in our self-storage expansion in recent years. In the future, we will continue to identify and consider off-balance sheet opportunities to the extent such arrangements would be economically advantageous to us and our stockholders.

We currently manage the self-storage properties owned or leased by SAC Holdings, Mercury, 4 SAC, 5 SAC, Galaxy, and Private Mini pursuant to a standard form of management agreement, under which we receive a management fee of between 4% and 10% of the gross receipts plus reimbursement for certain expenses. We received management fees, exclusive of reimbursed expenses, of $19.1 million and $18.0 million from the above mentioned entities during the first nine months of fiscal 2013 and 2012. This management fee is consistent with the fee received for other properties we previously managed for third parties. SAC Holdings, 4 SAC, 5 SAC, Galaxy and Private Mini are substantially controlled by Blackwater. Blackwater is wholly-owned by Mark V. Shoen, a significant shareholder of AMERCO. Mercury is substantially controlled by Mark V. Shoen. James P. Shoen, a significant shareholder and director of AMERCO, has an interest in Mercury.

We lease space for marketing company offices, vehicle repair shops and hitch installation centers from subsidiaries of SAC Holdings, 5 SAC and Galaxy. Total lease payments pursuant to such leases were $2.0 million and $1.8 million in the first nine months of fiscal 2013 and 2012, respectively. The terms of the leases are similar to the terms of leases for other properties owned by unrelated parties that are leased to us.

At December 31, 2012, subsidiaries of SAC Holdings, 4 SAC, 5 SAC, Galaxy and Private Mini acted as U-Haul independent dealers. The financial and other terms of the dealership contracts with the aforementioned companies and their subsidiaries are substantially identical to the terms of those with our other independent dealers whereby commissions are paid by us based on equipment rental revenues. We paid the above mentioned entities $34.6 million and $33.1 million in commissions pursuant to such dealership contracts during the first nine months of fiscal 2013 and 2012, respectively.

 


During the first nine months of fiscal 2013, our subsidiaries held various junior unsecured notes of SAC Holdings. Substantially all of the equity interest of SAC Holdings is controlled by Blackwater. We do not have an equity ownership interest in SAC Holdings. We recorded interest income of $6.4 million and $14.5 million, and received cash interest payments of $10.7 million and $13.4 million, from SAC Holdings during the first nine months of fiscal 2013 and 2012, respectively. The largest aggregate amount of notes receivable outstanding during the first nine months of fiscal 2013 was $195.4 million and the aggregate notes receivable balance at December 31, 2012 was $72.6 million. In accordance with the terms of these notes, SAC Holdings may prepay the notes without penalty or premium at any time. The scheduled maturities of these notes are between 2019 and 2024. During the first quarter we received $127.3 million in repayments on the notes and interest receivables.

These agreements along with notes with subsidiaries of SAC Holdings, 4 SAC, 5 SAC, Galaxy and Private Mini, excluding Dealer Agreements, provided revenues of $23.5 million, expenses of $2.0 million and cash flows of $152.7 million during the first nine months of fiscal 2013. Revenues and commission expenses related to the Dealer Agreements were $158.4 million and $34.6 million, respectively during the first nine months of fiscal 2013.

Fiscal 2013 Outlook

We will continue to focus our attention on increasing transaction volume and improving pricing, product and utilization for self-moving equipment rentals. Maintaining an adequate level of new investment in our truck fleet is an important component of our plan to meet our operational goals. Revenue in the U-Move program could be adversely impacted should we fail to execute in any of these areas. Even if we execute our plans, we could see declines in revenues primarily due to the continuing adverse economic conditions that are beyond our control.

We have added new storage locations and expanded at existing locations. In fiscal 2013, we are looking to continue to acquire new locations, complete current projects and increase occupancy in our existing portfolio of locations. New projects and acquisitions will be considered and pursued if they fit our long-term plans and meet our financial objectives. In the current environment, we have focused fewer resources on new construction than we have traditionally done and we do not currently expect to alter this approach. We will continue to invest capital and resources in the U-Box storage container program throughout fiscal 2013.

Our Property and Casualty Insurance operating segment will continue to provide loss adjusting and claims handling for U-Haul and underwrite components of the Safemove, Safetow, Super Safemove and Safestor protection packages to U-Haul customers.

Our Life Insurance operating segment is pursuing its goal of expanding its presence in the senior market through the sales of its Medicare supplement, life and annuity policies. This strategy includes growing its agency force, expanding its new product offerings, and pursuing business acquisition opportunities.

Cautionary Statements Regarding Forward-Looking Statements

This Quarterly Report 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, as amended (the “Exchange Act”). 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, storage occupancy, 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 set forth in the section entitled Item 1A. Risk Factors contained in our Annual Report on Form 10-K for the fiscal year ended March 31, 2012, as well as the following: our ability to operate pursuant to the terms of its credit facilities; our ability to maintain contracts that are critical to our operations; the costs and availability of financing; our ability to execute our business plan; our 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 us; changes in accounting standards and other factors described in this Quarterly Report or the other documents we file with the SEC. The above factors, the following disclosures, as well as other statements in this Quarterly Report and in the Notes to Condensed 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 us that such matters will be realized. We assume no obligation to update or revise any of the forward-looking statements, whether in response to new information, unforeseen events, changed circumstances or otherwise.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to financial market risks, including changes in interest rates and currency exchange rates. To mitigate these risks, we may utilize derivative financial instruments, among other strategies. We do not use derivative financial instruments for speculative purposes.

Interest Rate Risk

The exposure to market risk for changes in interest rates relates primarily to our variable rate debt obligations and one variable rate operating lease.  We have used interest rate swap agreements and forward swaps to reduce our exposure to changes in interest rates. We enter 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.

 

Notional Amount

 

 

Fair Value

 

Effective Date

 

Expiration Date

 

Fixed Rate

 

Floating Rate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

16,157

 

$

(446)

 

7/10/2006

 

7/10/2013

 

5.67%

 

1 Month LIBOR

 

236,666

 

 

(47,475)

 

8/18/2006

 

8/10/2018

 

5.43%

 

1 Month LIBOR

 

10,700

 

 

(556)

 

2/12/2007

 

2/10/2014

 

5.24%

 

1 Month LIBOR

 

7,045

 

 

(371)

 

3/12/2007

 

3/10/2014

 

4.99%

 

1 Month LIBOR

 

7,050

 

 

(353)

 

3/12/2007

 

3/10/2014

 

4.99%

 

1 Month LIBOR

 

8,300

(a)

 

(588)

 

8/15/2008

 

6/15/2015

 

3.62%

 

1 Month LIBOR

 

8,235

 

 

(636)

 

8/29/2008

 

7/10/2015

 

4.04%

 

1 Month LIBOR

 

12,816

 

 

(1,121)

 

9/30/2008

 

9/10/2015

 

4.16%

 

1 Month LIBOR

 

6,900

(a)

 

(339)

 

3/30/2009

 

4/15/2016

 

2.24%

 

1 Month LIBOR

 

8,813

(a)

 

(437)

 

8/15/2010

 

7/15/2017

 

2.15%

 

1 Month LIBOR

 

19,375

(a)

 

(1,082)

 

6/1/2011

 

6/1/2018

 

2.38%

 

1 Month LIBOR

 

37,500

(a)

 

(1,424)

 

8/15/2011

 

8/15/2018

 

1.86%

 

1 Month LIBOR

 

15,250

(a)

 

(530)

 

9/12/2011

 

9/10/2018

 

1.75%

 

1 Month LIBOR

 

14,072

(b)

 

(349)

 

3/28/2012

 

3/28/2019

 

1.42%

 

1 Month LIBOR

 

22,500

 

 

(382)

 

4/16/2012

 

4/1/2019

 

1.28%

 

1 Month LIBOR

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) forward swap

 

 

 

 

 

 

 

 

 

 

 

(b) operating lease

 

 

 

 

 

 

 

 

 

 

As of December 31, 2012, we had approximately $476.9 million of variable rate debt obligations and $14.1 million of a variable rate operating lease. If LIBOR were to increase 100 basis points, the increase in interest expense on the variable rate debt would decrease future earnings and cash flows by $0.6 million annually (after consideration of the effect of the above derivative contracts.)

Additionally, our insurance subsidiaries’ fixed income investment portfolios expose us to interest rate risk. This interest rate risk is the price sensitivity of a fixed income security to changes in interest rates. As part of our insurance companies’ asset and liability management, actuaries estimate the cash flow patterns of our existing liabilities to determine their duration. These outcomes are compared to the characteristics of the assets that are currently supporting these liabilities assisting management in determining an asset allocation strategy for future investments that management believes will mitigate the overall effect of interest rates.

 


Foreign Currency Exchange Rate Risk

The exposure to market risk for changes in foreign currency exchange rates relates primarily to our Canadian business. Approximately 6.2% and 6.1% of our revenue was generated in Canada during the first nine months of fiscal 2013 and 2012, respectively. The result of a 10.0% change in the value of the U.S. dollar relative to the Canadian dollar would not be material to net income. We typically do not hedge any foreign currency risk since the exposure is not considered material.

Item 4. Controls and Procedures

Attached as exhibits to this Quarterly Report are certifications of our Chief Executive Officer (“CEO”) and Chief Accounting Officer (“CAO”), which are required in accordance with Rule 13a-14 of the Exchange Act. This "Controls and Procedures" section includes information concerning the controls and procedures evaluation referred to in the certifications and it should be read in conjunction with the certifications for a more complete understanding of the topics presented in the section, Evaluation of Disclosure Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of the CEO and CAO, conducted an evaluation of the effectiveness of the design and operation of the Company’s "disclosure controls and procedures" (as such term is defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)) (“Disclosure Controls”) as of the end of the period covered by this Quarterly Report. Our Disclosure Controls are designed to reasonably assure that information required to be disclosed in our reports filed under the Exchange Act, such as this Quarterly Report, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Our Disclosure Controls are also designed to reasonably assure that such information is accumulated and communicated to our management, including our CEO and CAO, as appropriate to allow timely decisions regarding required disclosure. Based upon the controls evaluation, our CEO and CAO have concluded that as of the end of the period covered by this Quarterly Report, our Disclosure Controls were effective related to the above stated design purposes.

Inherent Limitations on the Effectiveness of Controls

The Company's management, including our CEO and CAO, does not expect that our Disclosure Controls or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

Changes in Internal Control over Financial Reporting

There have not been any changes in our internal control over financial reporting as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II Other information

Item 1. Legal Proceedings

For information regarding our legal proceedings please see Note 9, Contingencies of the Notes to Condensed Consolidated Financial Statements.

Item 1A. Risk Factors

We are not aware of any material updates to the risk factors described in our previously filed Annual Report on Form 10-K for the fiscal year ended March 31, 2012.

 


Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On December 3, 2008, the Board authorized us, using management’s discretion, to buy back shares from former employees who were participants in our Employee Stock Ownership Plan (“ESOP”). To be eligible for consideration, the employees’ respective ESOP account balances must be valued at more than $1,000 at the then-prevailing market prices but have less than 100 shares. No such shares have been purchased.

Item 3. Defaults upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosure

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

The following documents are filed as part of this report:

Exhibit Number

Description

Page or Method of Filing

3.1

Restated Articles of Incorporation of AMERCO

Incorporated by reference to AMERCO’s Registration Statement on form S-4, filed March 30, 2004, file no. 1-11255

 

3.2

Restated Bylaws of AMERCO

Incorporated by reference to AMERCO’s Current Report on Form 8-K, filed on September 10, 2010, file no. 1-11255

 

31.1

Rule 13a-14(a)/15d-14(a) Certificate of Edward J. Shoen, President and Chairman of the Board of AMERCO

 

Filed herewith

31.2

Rule 13a-14(a)/15d-14(a) Certificate of Jason A. Berg, Principal Financial Officer and Chief Accounting Officer of AMERCO

 

Filed herewith

32.1

Certificate of Edward J. Shoen, President and Chairman of the Board of AMERCO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

Furnished herewith

32.2

Certificate of Jason A. Berg, Principal Financial Officer and Chief Accounting Officer of AMERCO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

Furnished herewith

10.1

Amendment to the Amended and Restated AMERCO Employee Savings and Profit and Sharing Plan *

Filed herewith

101.INS

XBRL Instance Document

 

Furnished herewith

101.SCH

XBRL Taxonomy Extension Schema

 

Furnished herewith

101.CAL

XBRL Taxonomy Extension Calculation Linkbase

 

Furnished herewith

101.LAB

XBRL Taxonomy Extension Label Linkbase

 

Furnished herewith

101.PRE

XBRL Taxonomy Extension Presentation Linkbase

 

Furnished herewith

101.DEF

XBRL Taxonomy Extension Definition Linkbase

 

Furnished herewith

 

* Indicating compensating plan arrangement