U-Haul 2004 Annual Report Download - page 41

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Our business is seasonal.
Our business is seasonal and our results of operations and cash Öows Öuctuate signiÑcantly from quarter
to quarter. Historically, revenues have been stronger in the Ñrst and second Ñscal quarters due to the overall
increase in moving activity during the spring and summer months. The fourth Ñscal quarter is generally
weakest, when there is a greater potential for adverse weather conditions.
We obtain our rental trucks from a limited number of manufacturers.
In the last ten years, we purchased all of our rental trucks from Ford and General Motors. Although we
believe that we have alternative sources of supply for our rental trucks, termination of one or both of our
relationships with these suppliers could have a material adverse eÅect on our business, Ñnancial condition or
results of operations.
Our property and casualty insurance business has suÅered extensive losses.
Since January 2000, our property and casualty insurance business, RepWest, reported losses totaling
approximately $149 million. These losses are primarily attributable to business lines that were unproÑtable as
underwritten. To restore proÑtability in RepWest, we have exited all non-U-Haul related lines and have
strengthened the reserves on the lines being eliminated. Although we believe the terminated lines are
adequately reserved, we cannot assure you that there will not be future adverse reserve development.
Our life insurance business was downgraded by A.M. Best during restructuring
A.M. Best downgraded Oxford and its subsidiaries during the restructuring to C°. Upon emergence from
bankruptcy in March 2004, Oxford and its subsidiaries were upgraded to B¿. A.M. Best has indicated the
rating outlook for our life insurance business is positive. Prior to AMERCO's restructuring Oxford was rated
B°°. Financial strength ratings are important external factors that can aÅect the success of Oxford's business
plans. Accordingly, if Oxford's ratings, relative to its competitors, do not continue to improve, Oxford may not
be able to retain and attract business as currently planned.
Notes receivable from SAC Holdings are a signiÑcant portion of AMERCO'S total assets.
At March 31, 2004, we held approximately $203.8 million of notes due from SAC Holdings. Although
these assets have been eliminated in the consolidated Ñnancial statements, we have signiÑcant economic
exposure to SAC Holdings. SAC Holdings is highly leveraged with signiÑcant indebtedness to others. We hold
various junior unsecured notes of SAC Holdings. If SAC Holdings is unable to meet its obligations to its
senior lenders, it could trigger a default on its obligations to us. In such an event of default, we could suÅer a
signiÑcant loss to the extent the value of the underlying collateral on our loans to SAC Holdings is inadequate
to repay SAC Holdings' senior lenders and us. We cannot assure you that SAC Holdings will not default on its
loans to their senior lenders or that the value of SAC Holdings' assets upon liquidation would be suÇcient to
repay us in full.
We face risks related to an SEC investigation and securities litigation.
The SEC has issued a formal order of investigation to determine whether we have violated the Federal
securities laws. Although we have cooperated with the SEC in this matter and intend to continue to cooperate,
the SEC may determine that we have violated Federal securities laws. We cannot predict when this
investigation will be completed or its outcome. If the SEC makes a determination that we have violated
Federal securities laws, we may face sanctions, including, but not limited to, signiÑcant monetary penalties and
injunctive relief.
In addition, the Company has been named a defendant in a number of class action and related lawsuits.
The Ñndings and outcome of the SEC investigation may aÅect the class-action lawsuits that are pending. We
are generally obliged, to the extent permitted by law, to indemnify our directors and oÇcers who are named
defendants in some of these lawsuits. We are unable to estimate what our liability in these matters may be,
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