U-Haul 2005 Annual Report Download - page 39

Download and view the complete annual report

Please find page 39 of the 2005 U-Haul annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 103

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103

38 I AMERCO ANNUAL REPORT
Management’s Discussion and Analysis
of Financial Condition and Results of Operations
Liquidity and Capital Resources and Requirements
of Our Operating Segments
Moving and Self-Storage
To฀ meet฀ the฀ needs฀ of฀ its฀ customers,฀ U-Haul฀ maintains฀
a฀ large฀ fleet฀ of฀ rental฀ equipment.฀ Historically,฀ capital฀
expenditures฀ have฀ primarily฀ reflected฀ rental฀ equipment฀
acquisitions.฀ The฀ capital฀ required฀ to฀ fund฀ these฀
expenditures฀ has฀ historically฀ been฀ obtained฀ through฀
internally฀ generated฀ funds฀ from฀ operations,฀ lease฀
financing฀ and฀ sales฀ of฀ used฀ equipment.฀ Going฀ forward,฀
we฀anticipate฀that฀a฀substantial฀portion฀of฀our฀internally฀
generated฀ funds฀ will฀ be฀ used฀ to฀ enhance฀ liquidity฀ by฀
paying฀ down฀ existing฀ indebtedness.฀ During฀ each฀ of฀ the฀
fiscal฀ years฀ ended฀ March฀ 31,฀ 2006,฀ 2007฀ and฀ 2008,฀฀
U-Haul฀ estimates฀ that฀ net฀ capital฀ expenditures฀ will฀
average฀approximately฀$150฀million฀to฀maintain฀its฀fleet฀
at฀ current฀ levels.฀ Financial฀ covenants฀ contained฀ in฀ our฀
loan฀ agreements฀ at฀ March฀ 31,฀ 2005฀ limit฀ the฀ amount฀
of฀ capital฀ expenditures฀ we฀ can฀ make฀ in฀ 2006,฀ 2007฀
and฀ 2008,฀ net฀ of฀ dispositions,฀ to฀ $245฀ million,฀ $195฀
million฀ and฀ $195฀ million,฀ respectively.฀ We฀ intend฀ to฀
focus฀ our฀ growth฀ on฀ expanding฀ our฀ independent฀ dealer฀
network,฀which฀does฀not฀require฀a฀substantial฀amount฀of฀฀
capital฀resources.
In฀ the฀ past฀ our฀ real฀ estate฀ requirements฀ were฀ for฀ the฀
acquisition฀of฀self-storage฀properties฀to฀support฀U-Haul’s฀
growth,฀and฀were฀primarily฀financed฀ through฀lease฀ and฀
debt฀financing.฀Going฀forward,฀U-Haul’s฀growth฀plan฀in฀
self-storage฀is฀focused฀on฀eMove,฀which฀does฀not฀require฀
the฀acquisition฀or฀construction฀of฀self-storage฀properties฀
by฀the฀Company.฀Therefore,฀we฀do฀not฀anticipate฀that฀our฀
real฀estate฀needs฀will฀not฀require฀substantial฀capital.
Property and Casualty Insurance
At฀ December฀ 31,฀ 2004,฀ RepWest฀ had฀ no฀ notes฀฀
and฀ loans฀ due฀ in฀ less฀ than฀ one฀ year฀ and฀ its฀ accounts฀
payable฀ and฀ accrued฀ expenses฀ and฀ other฀ policyholders’฀
funds฀ and฀ liabilities฀ were฀ $8.7฀ million.฀ RepWest฀฀
financial฀ assets฀ (cash,฀ receivables,฀ inventories,฀ and฀
short-term฀ investments)฀ at฀ December฀ 31,฀ 2004,฀ were฀฀
$401.1฀million.
Stockholder’s฀equity฀was฀$154.8฀million,฀$169.0฀million,฀
and฀ $199.1฀ million฀ at฀ December฀ 31,฀ 2004,฀ 2003,฀ and฀
2002฀respectively.฀Republic฀does฀not฀use฀ debt฀ or฀ equity฀
issues฀to฀increase฀capital฀and฀therefore฀has฀no฀exposure฀to฀
capital฀market฀conditions.฀RepWest฀did฀not฀pay฀dividends฀
to฀its฀parent฀during฀2004,฀2003฀or฀2002.
Life Insurance
As฀of฀December฀31,฀2004,฀Oxford฀had฀no฀notes฀and฀loans฀
payable฀ in฀ less฀ than฀ one฀ year฀ and฀ its฀ accounts฀ payable฀
and฀ accrued฀ expenses฀ and฀ other฀ policyholders’฀ funds฀
and฀ liabilities฀ were฀ $21.3฀ million.฀ Oxford’s฀ financial฀
assets฀ (cash,฀ receivables,฀ short-term฀ investments,฀ other฀
investments฀and฀fixed฀maturities)฀at฀December฀31,฀2004฀
were฀ approximately฀ $777.4฀ million.฀ State฀ insurance฀
regulations฀restrict฀the฀ amount฀of฀dividends฀that฀can฀ be฀
paid฀to฀stockholders฀of฀insurance฀companies.฀As฀a฀result,฀
Oxford’s฀funds฀are฀generally฀not฀available฀to฀satisfy฀the฀
claims฀of฀AMERCO฀or฀its฀legal฀subsidiaries.
Oxford’s฀stockholder’s฀equity฀was฀$115.0฀million,฀$121.0฀
million,฀ and฀ $111.1฀ million฀ in฀ at฀ December฀ 31,฀ 2004,฀
2003฀ and฀ 2002,฀ respectively.฀ Increases฀ from฀ earnings฀
were฀ offset฀ by฀ decreases฀ in฀ unrealized฀ gains฀ resulting฀
from฀the฀change฀in฀interest฀rates.
SAC Holdings
SAC฀Holdings฀operations฀are฀funded฀by฀various฀mortgage฀
loans฀and฀unsecured฀notes.฀SAC฀Holdings฀does฀not฀utilize฀
revolving฀ lines฀ of฀ credit฀ to฀ finance฀ its฀ operations฀ or฀
acquisitions.฀ Certain฀ of฀ SAC฀ Holdings฀ loan฀ agreements฀
contain฀restrictive฀covenants฀and฀restrictions฀on฀incurring฀
additional฀subsidiary฀indebtedness.
Cash Provided from Operating Activities
by
Operating Segments
Moving and Self-Storage
Cash฀provided฀by฀operating฀activities฀was฀$226.5฀million,฀
$60.7฀million฀and฀$201.1฀million฀in฀fiscal฀2005,฀2004฀and฀
2003,฀respectively.฀Fiscal฀2005฀results฀were฀primarily฀the฀
result฀ of฀ net฀ earnings฀ plus฀ non-cash฀ items.฀ Fiscal฀ 2004฀
was฀ primarily฀ the฀ result฀ of฀ non-cash฀ items,฀ partially฀
offset฀ by฀ increases฀ in฀ working฀ capital฀ and฀ net฀ losses.฀
Fiscal฀2003฀results฀were฀primarily฀the฀result฀of฀non-cash฀
items฀plus฀reductions฀in฀working฀capital,฀partially฀offset฀
by฀net฀losses.
Property and Casualty Insurance
Cash฀ used฀ by฀ operating฀ activities฀ were฀ $31.6฀ million,฀
$86.1฀ million,฀ and฀ $75.1฀ million฀ for฀ 2004,฀ 2003,฀ and฀
2002,฀respectively.฀The฀cash฀used฀by฀operating฀activities฀
was฀the฀result฀of฀RepWest’s฀exiting฀its฀non฀Self-Storage฀
and฀ Self-Moving฀ lines฀ and฀ the฀ associated฀ reduction฀ of฀
reserves฀in฀the฀lines฀exited.
RepWest’s฀ cash฀ and฀ cash฀ equivalents฀ and฀ short-term฀
investment฀ portfolio฀ were฀ $90.3฀ million,฀ $62.1฀ million,฀
and฀$35.1฀million฀at฀December฀31,฀2004,฀2003,฀and฀2002,฀
respectively.฀ This฀ balance฀ includes฀ funds฀ in฀ transition฀
from฀ maturity฀ proceeds฀ until฀ reinvested฀ in฀ long฀ term฀
investments.฀ We฀ believe฀ that฀ this฀ level฀ of฀ liquid฀ assets,฀
combined฀ with฀ budgeted฀ cash฀ flow,฀ is฀ adequate฀ to฀
meet฀ periodic฀ needs฀ for฀ the฀ foreseeable฀ future.฀ Capital฀
and฀ operating฀ budgets฀ allow฀ RepWest฀ to฀ schedule฀฀
cash฀ needs฀ in฀ accordance฀ with฀ investment฀ and฀
underwriting฀proceeds.