U-Haul 2005 Annual Report Download - page 38

37 I AMERCO ANNUAL REPORT
Management’s Discussion and Analysis
of Financial Condition and Results of Operations
Liquidity฀and฀Capital฀Resources
Our฀ financial฀ condition฀ remains฀ strong.฀ At฀ March฀ 31,฀
2005,฀ cash฀ and฀ short-term฀ investments฀ totaled฀ $56.0฀
million,฀compared฀with฀$81.6฀million฀at฀March฀31,฀2004.฀
Total฀ short-term฀ and฀ long-term฀ debt,฀ plus฀ capital฀ lease฀
obligations฀ were฀ $780.0฀ million฀ at฀ March฀ 31,฀ 2005,฀
compared฀ with฀ $962.3฀ million฀ at฀ March฀ 31,฀ 2004,฀ and฀
represented฀1.4฀times฀ stockholders’฀ equity฀ at฀ March฀ 31,฀
2005,฀ compared฀ with฀ 1.9฀ times฀ stockholders’฀ equity฀ at฀
March฀31,฀2004.
During March 2004, SAC Holding Corporation ceased to be a variable interest entity and AMERCO
ceased being the primary beneficiary of SAC Holding Corporation. As a result of this, AMERCO
deconsolidated its interests in SAC Holding Corporation at that time. AMERCO remains the primary
beneficiary of its contractual variable interests in SAC Holding II Corporation for fiscal 2005 and 2004.
Revenues for fiscal 2005 fell $175.8 million, primarily as a result of the above mentioned deconsolidation.
Total costs and expenses were $32.7 million in fiscal 2005, compared with $154.3 million in fiscal 2004.
Total costs and expenses fell $121.6 million, primarily as a result of the above mentioned deconsolidation.
Earnings from operations were $10.5 million in fiscal 2005 compared with $64.7 million in fiscal 2004.
Earnings from operations fell $54.2 million in fiscal 2005 compared with fiscal 2004, primarily as a result of
the above mentioned deconsolidation.
Fiscal 2004 Compared with Fiscal 2003
Listed below are revenues for our major product lines at SAC Holdings for fiscal 2004 and fiscal 2003:
Year Ended March 31,
2004 2003
(In thousands)
Self-moving equipment rentals ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 29,155 $ 27,680
Self-storage revenues ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 126,436 126,183
Self-moving and self-storage product and service sales ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 50,577 48,768
Other revenueÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 12,787 14,164
Segment revenue ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $218,955 $216,795
During fiscal 2004 we built our moving equipment rentals through steady transaction volume, price
increases and improved mix. Storage revenues were driven by an increase in the number of rooms available for
rent, higher occupancy rates and modest price increases. Sales of moving and self-storage related products and
services followed our growth in moving equipment rentals.
Total costs and expenses increased as a result of wage and benefit inflation and higher property taxes, cost
of sales, utilities and insurance costs.
As a result of the above mentioned changes in revenues and expenses, earnings from operations were
$64.7 million in fiscal 2004, compared with $68.8 million in fiscal 2003.
Liquidity and Capital Resources
Our financial condition remains strong. At March 31, 2005, cash and short-term investments totaled
$56.0 million, compared with $81.6 million at March 31, 2004. Total short-term and long-term debt, plus
capital lease obligations were $780.0 million at March 31, 2005, compared with $962.3 million at March 31,
2004, and represented 1.4 times stockholders' equity at March 31, 2005, compared with 1.9 times
stockholders' equity at March 31, 2004.
A summary of our cash flows for fiscal 2005, fiscal 2004 and fiscal 2003 is shown in the table below:
Year Ended March 31,
2005 2004 2003
(In thousands)
Cash flow from operating activitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 220,719 $(62,833) $118,133
Cash flow from investing activities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 36,176 60,187 (81,113)
Cash flow from financing activitiesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (282,497) 17,369 (11,632)
Net cash flow ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (25,602) 14,723 25,388
Cash at the beginning of the period ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 81,557 66,834 41,446
Cash at the end of the period ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 55,955 $ 81,557 $ 66,834
29
A฀summary฀of฀our฀cash฀flows฀for฀fiscal฀2005,฀fiscal฀2004฀and฀fiscal฀2003฀is฀shown฀in฀the฀table฀below:
Cash฀from฀operating฀activities฀in฀fiscal฀2005฀was฀provided฀
by฀ net฀ income฀ of฀ $89.4฀ million฀ plus฀ non-cash฀ related฀
items฀of฀$209.8฀million.฀Cash฀from฀operating฀activities฀in฀
fiscal฀2005฀was฀used฀in฀the฀reduction฀of฀insurance฀policy฀
liabilities฀and฀deferred฀insurance฀policy฀acquisition฀costs฀
and฀to฀fund฀increases฀in฀working฀capital.฀This฀compares฀
with฀ fiscal฀ 2004฀ when฀ cash฀ from฀ operating฀ activities฀
was฀used฀by฀a฀net฀loss฀of฀$2.9฀million฀plus฀the฀reduction฀
of฀ insurance฀ policy฀ liabilities฀ and฀ deferred฀ insurance฀
policy฀acquisition฀costs฀and฀to฀fund฀increases฀in฀working฀
capital.฀ Cash฀from฀ operating฀activities฀was฀provided฀by฀
non-cash฀related฀items฀of฀$281.4฀million.฀This฀compares฀
with฀fiscal฀2003฀when฀cash฀from฀operating฀activities฀was฀
used฀ by฀ a฀ net฀ loss฀ of฀ $25.0฀ million฀ plus฀ the฀ reduction฀
of฀ insurance฀ policy฀ liabilities฀ and฀ deferred฀ insurance฀
policy฀acquisition฀costs฀and฀to฀fund฀increases฀in฀working฀
capital.฀ Cash฀from฀ operating฀activities฀was฀provided฀by฀
non-cash฀related฀items฀of฀$149.2฀million.
We฀ provided฀ $36.2฀ million฀ of฀ net฀ cash฀ from฀ investing฀
activities฀in฀fiscal฀2005฀primarily฀as฀a฀result฀of฀the฀W.P.฀
Carey฀Transactions,฀net฀of฀investments฀in฀property,฀plant฀
and฀ equipment.฀ We฀ provided฀ $60.2฀ million฀ in฀ fiscal฀
2004,฀ primarily฀ as฀ a฀ result฀ of฀ real฀ estate฀ and฀ property฀
and฀equipment฀sales,฀net฀of฀other฀investments฀in฀property,฀
plant฀and฀equipment.฀We฀used฀$81.1฀million฀of฀net฀cash฀
from฀ investing฀ activities฀ in฀ fiscal฀ 2003,฀ primarily฀ as฀ a฀
result฀ of฀ investments฀ in฀ property,฀ plant฀ and฀ equipment.฀
Investments฀ in฀ property,฀ plant฀ and฀ equipment฀ were฀
$285.0฀ million฀ in฀ fiscal฀ 2005,฀ $198.4฀ million฀ in฀ fiscal฀
2004฀and฀$243.2฀million฀in฀fiscal฀2003,฀as฀we฀continue฀
to฀invest฀in฀rental฀equipment.
We฀ borrowed฀ $129.4฀ million฀ in฀ fiscal฀ 2005,฀ compared฀
with฀$997.0฀million฀in฀fiscal฀2004,฀and฀$371.7฀million฀in฀
fiscal฀2003.฀We฀paid฀down฀financing฀by฀$313.0฀million฀
(including฀$99.6฀million฀for฀the฀W.P.฀Carey฀Transactions)฀
in฀ fiscal฀ 2005,฀ compared฀ with฀ $888.2฀ million฀ in฀ fiscal฀
2004฀ and฀ $442.1฀ million฀ in฀ fiscal฀ 2003.฀ Additional฀
financing฀ uses฀ of฀ cash฀ included฀ payment฀ of฀ dividends.฀
In฀November฀2004,฀our฀Board฀of฀Directors฀approved฀the฀
payment฀ of฀ all฀ dividend฀ arrearages฀ on฀ our฀ Series฀ A฀ 8฀
1/2%฀Preferred฀Stock.฀Regular฀quarterly฀cash฀dividends฀
have฀been฀paid฀on฀a฀current฀basis฀since฀February฀2004.฀As฀
a฀result,฀our฀dividend฀payments฀were฀$25.9฀million฀higher฀
in฀ fiscal฀ 2005฀ compared฀ with฀ fiscal฀ 2004.฀ There฀ were฀
dividend฀ payments฀ of฀ $6.5฀ million฀ during฀ fiscal฀ 2003.฀
Financing฀ sources฀ of฀ cash฀ were฀ primarily฀ borrowings฀
under฀our฀revolving฀credit฀agreements฀($129.4฀million฀in฀
fiscal฀2005,฀compared฀with฀$164.1฀million฀in฀fiscal฀2004฀
and฀$205.0฀million฀in฀fiscal฀2003).
The฀capital฀structure฀in฀place฀at฀March฀31,฀2005฀allowed฀
us฀to฀ achieve฀ our฀near-term฀operational฀plans฀and฀goals฀
and฀ support฀ our฀ preferred฀ stock฀ dividend฀ program.฀ We฀
believe฀ the฀ new฀ capital฀ structure฀ that฀ is฀ in฀ place฀ as฀ of฀
June฀ 8,฀ 2005฀ will฀ allow฀ us฀ to฀ achieve฀ our฀ longer-term฀
operational฀plans฀and฀goals฀and฀provide฀us฀with฀sufficient฀
liquidity฀for฀the฀next฀three฀to฀five฀years.฀We฀believe฀this฀
will฀allow฀us฀to฀focus฀on฀our฀operations฀and฀business฀to฀
further฀improve฀our฀liquidity฀in฀the฀long-term.฀We฀believe฀
these฀ improvements฀ will฀ enhance฀ our฀ access฀ to฀ capital฀
markets.฀However,฀there฀can฀be฀no฀assurance฀that฀future฀
cash฀ flows฀ will฀ be฀ sufficient฀ to฀ meet฀ our฀ outstanding฀
obligations฀or฀our฀future฀capital฀needs.