body10q.htm
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q

(Mark One)
 
R
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2009

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.
     
 
amerco logo
 
     
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 R  No £
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, 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  o No  o
 
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 definition of a “large accelerated filer,” “accelerated filer,” “non-accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Larger accelerated filer £                                                                Accelerated filer R                                           Non-accelerated filer £    Smaller reporting company £
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes £  No R
 
19,607,788 shares of AMERCO Common Stock, $0.25 par value, were outstanding at August 1, 2009.
 


 
 

 

TABLE OF CONTENTS

   
Page No.
 
PART I FINANCIAL INFORMATION
 
Item 1.
Financial Statements
 
 
1
 
2
 
3
 
4
 
5 - 32
Item 2.
33 - 47
Item 3.
Quantitative and Qualitative Disclosures About Market Risk                                                                                                                
48
Item 4.
Controls and Procedures                                                                                                                
49
     
 
PART II OTHER INFORMATION
 
Item 1.
Legal Proceedings                                                                                                                
50
Item 1A.
Risk Factors                                                                                                                
50
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds                                                                                                                 
50
Item 3.
Defaults Upon Senior Securities                                                                                                                
50
Item 4.
Submission of Matters to a Vote of Security Holders                                                                                                                
50
Item 5.
Other Information                                                                                                                
50
Item 6.
Exhibits                                                                                                                 
50


 
 

 

PART I FINANCIAL INFORMATION
 
ITEM 1.     Financial Statements
 

AMERCO AND CONSOLIDATED ENTITIES
 
CONDENSED CONSOLIDATED BALANCE SHEETS
 
   
June 30,
   
March 31,
 
   
2009
   
2009
 
   
(Unaudited)
       
   
(In thousands)
 
ASSETS
           
Cash and cash equivalents
  $ 226,717     $ 240,587  
Reinsurance recoverables and trade receivables, net
    225,717       213,853  
Notes and mortgage receivables, net
    2,728       2,931  
Inventories, net
    64,188       70,749  
Prepaid expenses
    61,415       54,201  
Investments, fixed maturities and marketable equities
    508,587       519,631  
Investments, other
    217,338       227,022  
Deferred policy acquisition costs, net
    45,432       44,993  
Other assets
    135,091       133,644  
Related party assets
    296,177       303,534  
      1,783,390       1,811,145  
Property, plant and equipment, at cost:
               
Land
    214,377       212,744  
Buildings and improvements
    939,264       920,294  
Furniture and equipment
    336,620       333,314  
Rental trailers and other rental equipment
    223,685       214,988  
Rental trucks
    1,678,102       1,666,151  
      3,392,048       3,347,491  
Less: Accumulated depreciation
    (1,335,989 )     (1,333,563 )
Total property, plant and equipment
    2,056,059       2,013,928  
Total assets
  $ 3,839,449     $ 3,825,073  
LIABILITIES AND STOCKHOLDERS' EQUITY
               
Liabilities:
               
Accounts payable and accrued expenses
  $ 305,543     $ 329,227  
AMERCO's notes, loans and leases payable
    1,534,320       1,546,490  
Policy benefits and losses, claims and loss expenses payable
    786,754       779,309  
Liabilities from investment contracts
    292,662       303,332  
Other policyholders' funds and liabilities
    9,943       11,961  
Deferred income
    28,730       24,612  
Deferred income taxes
    130,349       112,513  
Total liabilities
    3,088,301       3,107,444  
                 
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;
               
6,049,800 and 6,100,000 shares issued and outstanding as of June 30 and March 31, 2009
    -       -  
Series B preferred stock, with no par value, 100,000 shares authorized; none
               
issued and outstanding as of June 30 and March 31, 2009
    -       -  
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 June 30 and March 31, 2009
    -       -  
Common stock of $0.25 par value, 150,000,000 shares authorized; 41,985,700
               
issued as of June 30 and March 31, 2009
    10,497       10,497  
Additional paid-in capital
    419,604       420,588  
Accumulated other comprehensive loss
    (83,275 )     (98,000 )
Retained earnings
    935,376       915,862  
Cost of common shares in treasury, net (22,377,912 shares as of June 30 and March 31, 2009)
    (525,653 )     (525,653 )
Unearned employee stock ownership plan shares
    (5,401 )     (5,665 )
Total stockholders' equity
    751,148       717,629  
Total liabilities and stockholders' equity
  $ 3,839,449     $ 3,825,073  
 

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

 
1

 

 

AMERCO AND CONSOLIDATED ENTITIES
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 



   
Quarter Ended June 30,
 
   
2009
   
2008
 
   
(Unaudited)
 
   
(In thousands, except share and per share amounts)
 
Revenues:
           
Self-moving equipment rentals
  $ 372,941     $ 390,029  
Self-storage revenues
    27,004       27,551  
Self-moving and self-storage products and service sales
    57,822       62,556  
Property management fees
    4,450       4,716  
Life insurance premiums
    27,604       26,917  
Property and casualty insurance premiums
    6,215       6,124  
Net investment and interest income
    13,680       14,596  
Other revenue
    10,943       10,305  
Total revenues
    520,659       542,794  
                 
Costs and expenses:
               
Operating expenses
    258,501       261,713  
Commission expenses
    44,411       47,965  
Cost of sales
    30,450       34,985  
Benefits and losses
    27,694       24,875  
Amortization of deferred policy acquisition costs
    1,917       2,088  
Lease expense
    39,273       34,568  
Depreciation, net of (gains) losses on disposals
    59,217       64,938  
Total costs and expenses
    461,463       471,132  
                 
Earnings from operations
    59,196       71,662  
Interest expense
    (23,221 )     (23,844 )
Pretax earnings
    35,975       47,818  
Income tax expense
    (13,543 )     (17,992 )
Net earnings
    22,432       29,826  
Excess carrying amount of preferred stock over consideration paid
    323       -  
Less: Preferred stock dividends
    (3,241 )     (3,241 )
Earnings available to common shareholders
  $ 19,514     $ 26,585  
Basic and diluted earnings per common share
  $ 1.01     $ 1.37  
Weighted average common shares outstanding: Basic and diluted
    19,369,591       19,343,184  


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



 
2

 

AMERCO AND CONSOLIDATED ENTITIES
 
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 


   
Quarter Ended June 30,
 
   
2009
   
2008
 
   
(Unaudited)
 
   
(In thousands)
 
Comprehensive income:
           
Net earnings
  $ 22,432     $ 29,826  
Other comprehensive income (loss), net of tax:
               
Foreign currency translation
    4,229       1,182  
Unrealized gain (loss) on investments
    (3,373 )     478  
Fair market value of cash flow hedges
    13,869       13,395  
Total comprehensive income
  $ 37,157     $ 44,881  


 
3

 


 
AMERCO AND CONSOLIDATED ENTITIES
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
   
Quarter Ended June 30,
 
   
2009
   
2008
 
   
(Unaudited)
 
   
(In thousands)
 
 Cash flow from operating activities:
           
 Net earnings
  $ 22,432     $ 29,826  
 Adjustments to reconcile net earnings to the cash provided by operations:
               
 Depreciation
    57,879       60,253  
 Amortization of deferred policy acquisition costs
    1,917       2,088  
 Change in allowance for losses on trade receivables
    13       (76 )
 Change in allowance for losses on mortgage notes
    (6 )     (10 )
 Change in allowance for inventory reserves
    754       624  
 Net loss on sale of real and personal property
    1,338       4,685  
 Net gain on sale of investments
    (625 )     (138 )
 Deferred income taxes
    5,328       13,878  
 Net change in other operating assets and liabilities:
               
Reinsurance recoverables and trade receivables
    (11,890 )     (5,889 )
Inventories
    5,807       (6,350 )
Prepaid expenses
    (7,214 )     (6,770 )
Capitalization of deferred policy acquisition costs
    (3,063 )     (2,282 )
Other assets
    (1,162 )     252  
Related party assets
    7,792       8,270  
Accounts payable and accrued expenses
    6,869       25,188  
Policy benefits and losses, claims and loss expenses payable
    6,367       (4,110 )
Other policyholders' funds and liabilities
    (2,021 )     (1,404 )
Deferred income
    4,050       5,013  
Related party liabilities
    (343 )     (1,335 )
 Net cash provided by operating activities
    94,222       121,713  
                 
 Cash flows from investing activities:
               
 Purchases of:
               
Property, plant and equipment
    (123,546 )     (96,257 )
Short term investments
    (51,535 )     (146,434 )
Fixed maturities investments
    (33,647 )     (59,796 )
Preferred stock
    (882 )     (1,895 )
Real estate
    (293 )     (26 )
Mortgage loans
    (288 )     (4,920 )
 Proceeds from sale of:
               
Property, plant and equipment
    38,088       36,304  
Short term investments
    60,778       86,726  
Fixed maturities investments
    40,572       130,919  
Equity securities
    -       27  
Real estate
    12       15  
Mortgage loans
    735       2,039  
Payments from notes and mortgage receivables
    497       -  
 Net cash used by investing activities
    (69,509 )     (53,298 )
                 
 Cash flows from financing activities:
               
Borrowings from credit facilities
    13,478       15,330  
Principal repayments on credit facilities
    (37,757 )     (37,197 )
Debt issuance costs
    (277 )     (360 )
Capital lease payments
    (329 )     (138 )
Leveraged Employee Stock Ownership Plan - repayments from loan
    264       315  
Preferred stock dividends paid
    (3,241 )     (3,241 )
Investment contract deposits
    2,829       4,703  
Investment contract withdrawals
    (13,500 )     (15,273 )
 Net cash used by financing activities
    (38,533 )     (35,861 )
                 
 Effects of exchange rate on cash
    (50 )     616  
                 
 Increase (decrease) in cash and cash equivalents
    (13,870 )     33,170  
 Cash and cash equivalents at the beginning of period
    240,587       206,622  
 Cash and cash equivalents at the end of period
  $ 226,717     $ 239,792  


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

 
4

 

AMERCO AND CONSOLIDATED ENTITIES
 
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
 
 
1.      Basis of Presentation
 
The first fiscal quarter for AMERCO ends on the 30th of June for each year that is referenced. Our insurance company subsidiaries have a first quarter that ends on the 31st of March 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 2009 and 2008 correspond to the Company’s fiscal years 2010 and 2009.
 
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 June 30, 2009 and the related condensed consolidated statements of operations and cash flows for the first quarter of fiscal 2010 and 2009 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 10-Q should be read in conjunction with Management’s Discussion and Analysis and financial statements and notes thereto included in the AMERCO 2009 Form 10-K.
 
Intercompany accounts and transactions have been eliminated.
 
Description of Legal Entities
 
AMERCO, a Nevada corporation (“AMERCO”), is the holding company for:
 
U-Haul International, Inc. (“U-Haul”),
 
Amerco Real Estate Company (“Real Estate”),
 
Republic Western 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.
 

 


 
5

 

AMERCO AND CONSOLIDATED ENTITIES
 
NOTES TO CONDENSED CONSOLIDATED STATEMENTS – (CONTINUED)
 
 
Description of Operating Segments
 
AMERCO has three reportable segments. They are Moving and Storage, Property and Casualty Insurance and Life Insurance.
 
Moving and Storage operations include AMERCO, U-Haul, and Real Estate and the wholly-owned subsidiaries of U-Haul and Real Estate and consist of the rental of trucks and trailers, sales of moving supplies, sales of towing accessories, sales of propane, the rental of 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.
 
Property and Casualty Insurance includes RepWest and its wholly-owned subsidiaries and ARCOA risk retention group. Property and Casualty Insurance provides loss adjusting and claims handling for U-Haul through regional offices across North America. Property and Casualty Insurance also underwrites components of the Safemove, Safetow and Safestor protection packages to U-Haul customers. We continue to focus on increasing market penetration of these products. The business plan for Property and Casualty Insurance includes offering property and casualty products in other U-Haul related programs. The ARCOA risk retention group is a captive insurer owned by the Company whose purpose is to provide insurance products related to the moving and storage business.
 
Life Insurance 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 are net earnings less preferred stock dividends. Preferred stock dividends include accrued dividends of AMERCO.
 
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 231,942 and 281,892 as of June 30, 2009 and June 30, 2008, respectively.
 
6,049,800 shares of preferred stock have been excluded from the weighted average shares outstanding calculation because they are not common stock and they are not convertible into common stock.
 
Between January 1, 2009 and March 31, 2009, RepWest purchased 50,200 shares of our AMERCO Series A 8 ½% Preferred Stock (NYSE-AO-PA) (“Series A Preferred”) on the open market at an average price of $17.57 per share. Under the Emerging Issues Task Force (“EITF”) Issue D-42, The Effect on the Calculation of Earnings of Earnings Per Share for Redemption or Induced Conversion of Preferred Stock (“EITF Issue D-42”), for earnings per share purposes, the excess of the carrying amount of the Series A Preferred over the fair value of the consideration paid of $0.3 million, net of a prorated portion of original issue costs, was added to net earnings available to common shareholders.
 
In the future, should RepWest sell these preferred stock units to an unaffiliated entity, a proportionate share of this gain would be reversed at that time for earnings per share purposes.

 
6

 

AMERCO AND CONSOLIDATED ENTITIES
 
NOTES TO CONDENSED CONSOLIDATED STATEMENTS – (CONTINUED)
 
 
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.
 
The Company deposits bonds with insurance regulatory authorities to meet statutory requirements. The adjusted cost of bonds on deposit with insurance regulatory authorities was $15.4 million at March 31, 2009.
 
Available-for-Sale Investments
 
Available-for-sale investments at March 31, 2009 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
  $ 71,628     $ 3,181     $ -     $ (28 )   $ 74,781  
U.S. government agency mortgage-backed securities
    97,874       4,792       (37 )     (10 )     102,619  
Obligations of states and political subdivisions
    10,568       121       (76 )     (764 )     9,849  
Corporate securities
    325,120       3,410       (14,751 )     (9,752 )     304,027  
Mortgage-backed securities
    12,074       142       (1,522 )     (292 )     10,402  
Redeemable preferred stocks
    15,391       28       (5,050 )     (2,563 )     7,806  
Common stocks
    70       -       -       (63 )     7  
Less: Preferred stock of AMERCO held by RepWest
    (882 )     (22 )     -       -       (904 )
    $ 531,843     $ 11,652     $ (21,436 )   $ (13,472 )   $ 508,587  
 

 
The above table 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.
 
The Company sold available-for-sale securities with a fair value of $40.5 million during the first quarter of fiscal 2010. The gross realized gains on these sales totaled $0.8 million. The Company realized gross losses on these sales of $0.1 million.
 
The unrealized losses of more than twelve months in the available-for-sale table are considered temporary declines. The Company tracks each investment with an unrealized loss and evaluates 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 had declines determined by management to be other-than-temporary and the Company recognized these write-downs through earnings in the amount of approximately $0.1 million for the first quarters of fiscal 2010 and 2009.
 
The investment portfolio primarily consists of corporate securities and U.S. government securities. The Company believes it monitors its investments as appropriate. The Company’s 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. The Company has the ability and intent to hold its fixed maturity investments for a period of time sufficient to allow the Company to recover its costs.

 
7

 

AMERCO AND CONSOLIDATED ENTITIES
 
NOTES TO CONDENSED CONSOLIDATED STATEMENTS – (CONTINUED)
 
 
The adjusted cost and estimated market value of available-for-sale investments at March 31, 2009, by contractual maturity, were as follows:
 

   
March 31, 2009
 
   
Amortized
Cost
   
Estimated
Market
Value
 
   
(Unaudited)
 
   
(In thousands)
 
Due in one year or less
  $ 46,174     $ 45,493  
Due after one year through five years
    145,024       141,220  
Due after five years through ten years
    84,684       83,844  
After ten years
    229,308       220,719  
      505,190       491,276  
                 
Mortgage backed securities
    12,074       10,402  
Redeemable preferred stocks
    15,391       7,806  
Equity securities
    70       7  
Less: Preferred stock of AMERCO held by RepWest
    (882 )     (904 )
    $ 531,843     $ 508,587  
 

 
4. Borrowings
 
Long-Term Debt
 
Long-term debt was as follows:
 

               
June 30,
   
March 31,
 
   
2010 Rate (a)
   
Maturities
   
2009
   
2009
 
               
(Unaudited)
       
               
(In thousands)
 
Real estate loan (amortizing term)
    6.93 %  
2018
    $ 272,500     $ 275,000  
Real estate loan (revolving credit)
    1.83 %  
2018
      170,000       170,000  
Real estate loan (amortizing term) (b)
    3.32 %  
2010
      32,682       37,280  
Senior mortgages
    5.47% - 5.75 %  
2015
      493,954       496,156  
Working capital loan (revolving credit)
    -    
2010
      -       -  
Fleet loans (amortizing term)
    4.87% - 7.95 %     2012-2016       287,403       299,505  
Fleet loans (securitization)
    5.40% - 5.56 %     2010-2014       248,993       256,690  
Other obligations
    5.64% - 7.39 %     2010-2016       28,788       11,859  
Total AMERCO notes, loans and leases payable
                  $ 1,534,320     $ 1,546,490  
                                 
(a) Interest rate as of June 30, 2009, including the effect of applicable hedging instruments.
                 
(b) Revolving credit loan for March 31, 2009 was modified to an amortizing term loan in June 2009.
         
 


 
8

 

AMERCO AND CONSOLIDATED ENTITIES
 
NOTES TO CONDENSED CONSOLIDATED STATEMENTS – (CONTINUED)
 
 
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 an availability of $200.0 million. As of June 30, 2009, the outstanding balance on the Real Estate Loan was $272.5 million and $170.0 million had been drawn down on the revolving credit facility. 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 June 30, 2009, the applicable LIBOR was 0.33% and the applicable margin was 1.50%, the sum of which was 1.83%. The rate on the term facility portion of the 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%. At June 30, 2009, the applicable LIBOR was 0.33% and the applicable margin was 1.50%, the sum of which was 1.83%.
 
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 25, 2009 into a term loan with a final maturity of June 2010. As of June 30, 2009, the outstanding balance was $32.7 million.
 
This Real Estate Loan requires monthly principal and interest payments with the unpaid principal and any accrued and unpaid interest due at maturity. The loan was used to develop new or existing storage properties. The loan is secured by these properties. The interest rate, per the provision of the Loan Agreement, is the applicable LIBOR plus a margin of 3.00%. At June 30, 2009, the applicable LIBOR was 0.32% and the margin was 3.00%, the sum of which was 3.32%. 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.
 
Senior Mortgages
 
Various subsidiaries of Amerco Real Estate Company and U-Haul International, Inc. are borrowers under certain senior mortgages. These senior mortgages loan balances as of June 30, 2009 were in the aggregate amount of $440.6 million and are due July 2015. The Senior Mortgages require average monthly principal and interest payments of $3.0 million with the unpaid loan balance and accrued and unpaid interest due at maturity. These senior mortgages are secured by certain properties owned by the borrowers. The interest rates, per the provisions of these senior mortgages, are 5.68% and 5.52% per annum. Amerco Real Estate Company and U-Haul International, Inc. have provided limited guarantees of these senior mortgages. The default provisions of these 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.
 
Various subsidiaries of the Company are borrowers under the mortgage backed loans that we also classify as senior mortgages. These loans are secured by certain properties owned by the borrowers. The loan balance of these notes totals $53.4 million as of June 30, 2009. These loans mature in 2015. Rates for these loans range from 5.47% to 5.75%. The loans require monthly principal and interest payments with the balances due upon maturity. The default provisions of the loans 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.

 
9

 

AMERCO AND CONSOLIDATED ENTITIES
 
NOTES TO CONDENSED CONSOLIDATED STATEMENTS – (CONTINUED)
 
 
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 $35.0 million. The loan is secured by certain properties owned by the borrower. The interest rate, per the provision of the Loan Agreement, is the applicable LIBOR plus a margin of 1.50%. The loan agreement provides for revolving loans, subject to the terms of the loan agreement with final maturity in November 2010. The 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. At June 30, 2009, the Company had $35.0 million of available credit.
 
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 June 30, 2009 were $287.4 million with the final maturities between April 2012 and April 2016.
 
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 June 30, 2009, the applicable LIBOR was 0.32% to 0.33% and applicable margins were between 1.125% and 2.63%. The interest rates are hedged with interest rate swaps fixing the rates between 4.87% and 7.42% based on current margins other than one loan with a fixed rate of 7.95%.
 
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 (“Box Truck Note”) and an $86.6 million asset-backed note (“Cargo Van/Pickup Note”) on June 1, 2007. USF is a bankruptcy-remote special purpose entity wholly-owned by U-Haul International, Inc. The net proceeds from these securitized transactions were used to finance new box truck, cargo van and pickup truck purchases throughout fiscal 2008. U.S. Bank, NA acts as the trustee for this securitization.
 
The Box Truck Note has a fixed interest rate of 5.56% with an estimated final maturity of February 2014. At June 30, 2009, the outstanding balance was $162.4 million. The note is secured by the box trucks that were purchased and operating cash flows associated with their operation.
 
The Cargo Van/Pickup Note has a fixed interest rate of 5.40% with an estimated final maturity of May 2010. At June 30, 2009, the outstanding balance was $86.6 million. The note is secured by the cargo vans and pickup trucks that were purchased and the operating cash flows associated with their operation.
 
The Box Truck Note and the Cargo Van/Pickup Note have the benefit of financial guaranty insurance policies that guarantee the timely payment of interest on and the ultimate payment of the principal of the notes.
 
The Box Truck Note and the Cargo Van/Pickup 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 the notes include non-payment of principal or interest and other standard reporting and change in control covenants.

 
10

 

AMERCO AND CONSOLIDATED ENTITIES
 
NOTES TO CONDENSED CONSOLIDATED STATEMENTS – (CONTINUED)
 
 
Other Obligations
 
In April 2008, the Company entered into a $10.0 million capital lease for new rental equipment. The term of the lease is seven years and the Company has the option to purchase the equipment at a predetermined amount after the fifth year of the lease. In March 2009, the Company entered into a $2.6 million capital lease for new rental equipment. The term of the lease is seven years. In June 2009, the Company entered into a $12.9 million capital lease for new rental equipment. The term of the lease is seven years. At June 30, 2009, the balances on these leases were $23.2 million.
 
In April 2009, the Company entered into a $7.0 million premium financing arrangement for one year expiring in March 2010 at a rate of 5.85%. At June 30, 2009, the outstanding balance of this arrangement was $5.6 million.
 
Annual Maturities of AMERCO Consolidated Notes, Loans and Leases Payable
 
The annual maturities of AMERCO consolidated long-term debt as of June 30, 2009 for the next five years and thereafter is as follows:
 

   
Year Ending June 30,
 
   
2010
   
2011
   
2012
   
2013
   
2014
   
Thereafter
 
   
(Unaudited)
 
   
(In thousands)
 
Notes, loans and leases payable, secured
  $ 207,840     $ 80,865     $ 122,396     $ 106,826     $ 157,662     $ 858,731  
 

 
5. Interest on Borrowings
 
Interest Expense
 
Expenses associated with loans outstanding were as follows:
 

   
Quarter Ended June 30,
 
   
2009
   
2008
 
   
(Unaudited)
 
   
(In thousands)
 
Interest expense
  $ 16,059     $ 19,587  
Capitalized interest
    (151 )     (110 )
Amortization of transaction costs
    1,185       1,279  
Interest expense resulting from derivatives
    6,128       3,088  
Total interest expense
   $ 23,221      $ 23,844  
 

 
Interest paid in cash by AMERCO amounted to $14.9 million and $19.2 million for the first quarter of fiscal 2010 and 2009, respectively.

 
11

 

AMERCO AND CONSOLIDATED ENTITIES
 
NOTES TO CONDENSED CONSOLIDATED STATEMENTS – (CONTINUED)
 
 
The Company manages exposure to changes in market interest rates. The Company’s 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. The interest rate swaps effectively fix the Company’s interest payments on certain LIBOR-indexed variable-rate debt. The Company monitors its positions and the credit ratings of its counterparties and does not currently anticipate non-performance by the counterparties. Interest rate swap agreements are not entered into for trading purposes.


Variable rate debt amount
 
Agreement Date
 
Effective Date
 
Expiration Date
 
Designated cash flow hedge date
(Unaudited)
(In millions)
$ 100.0  
(a), (c )
 
6/8/2005
 
6/8/2005
 
6/8/2010
 
7/1/2005
  142.3  
(a), (b)
 
11/15/2005
 
5/10/2006
 
4/10/2012
 
5/31/2006
  50.0  
(a)
 
6/21/2006
 
7/10/2006
 
7/10/2013
 
6/9/2006
  144.9  
(a), (b)
 
6/29/2006
 
10/10/2006
 
10/10/2012
 
6/9/2006
  300.0  
(a)
 
8/16/2006
 
8/18/2006
 
8/10/2018
 
8/4/2006
  30.0  
(a)
 
2/9/2007
 
2/12/2007
 
2/10/2014
 
2/9/2007
  20.0  
(a)
 
3/8/2007
 
3/12/2007
 
3/10/2014
 
3/8/2007
  20.0  
(a)
 
3/8/2007
 
3/12/2007
 
3/10/2014
 
3/8/2007
  19.3  
(a), (b)
 
4/8/2008
 
8/15/2008
 
6/15/2015
 
3/31/2008
  19.0  
(a)
 
8/27/2008
 
8/29/2008
 
7/10/2015
 
4/10/2008
  30.0  
(a)
 
9/24/2008
 
9/30/2008
 
9/10/2015
 
9/24/2008
  15.0  
(a), (b)
 
3/26/2009
 
3/30/2009
 
4/15/2016
 
3/25/2009
                       
(a) interest rate swap agreement
           
(b) forward swap
                   
(c ) terminated swap on August 18, 2006
           

As of August 18, 2006, a net gain of approximately $6.0 million related to the two cancelled swaps was included in other comprehensive income (loss). As the variable-rate debt is replaced, it is probable that the original forecasted transaction (future interest payments) will continue to occur. Therefore, the net derivative gain related to the two cancelled swaps shall continue to be reported in other comprehensive income (loss) and be reclassified into earnings when the original forecasted transaction affects earnings consistent with the term of the original designated hedging relationship. For the quarter ended June 30, 2009, the Company reclassified $0.2 million of the net derivative gain to interest income. The Company estimates that $1.0 million of the existing net gains will be reclassified into earnings within the next twelve months.

 
12

 

AMERCO AND CONSOLIDATED ENTITIES
 
NOTES TO CONDENSED CONSOLIDATED STATEMENTS – (CONTINUED)
 
 
As of June 30, 2009, the total notional amount of the Company’s variable interest rate swaps was $561.5 million.
 
The derivative fair values located in Accounts payable and accrued expenses in the balance sheets were as follows:


 
   
Liability Derivatives
 
   
Fair Value as of
 
   
June 30, 2009
   
March 31, 2009
 
   
(Unaudited)
       
   
(In thousands)
 
             
Interest rate contracts designated as hedging instruments under Statement 133
  $ 56,095     $ 79,118  
                 



       
The Effect of Interest Rate Contracts on the Statement of Operations
 
June 30, 2009
 
   
(Unaudited)
 
   
(In thousands)
 
       
Amount of loss recognized in income on interest rate contracts
  $ 6,128  
Amount of gain recognized in AOCI on interest rate contracts (effective portion)
  $ 22,368  
Amount of loss reclassified from AOCI into income (effective portion)
  $ 6,783  
Amount of gain recognized in income on interest rate contracts (ineffective portion and amount excluded from effectiveness testing)
  $ 655  
 

 
Amounts of gains or (losses) recognized in income on derivatives are located in interest expense in the statement of operations.
 
Interest Rates
 
Interest rates and Company borrowings were as follows:
 

   
Revolving Credit Activity
 
   
Quarter Ended June 30,
 
   
2009
   
2008
 
   
(Unaudited)
 
   
(In thousands, except interest rates)
 
Weighted average interest rate during the quarter
    1.90 %     4.25 %
Interest rate at the end of the quarter
    1.83 %     4.10 %
Maximum amount outstanding during the quarter
  $ 207,280     $ 132,280  
Average amount outstanding during the quarter
  $ 205,232     $ 128,134  
Facility fees
  $ 242     $ 74  
 


 
13

 

AMERCO AND CONSOLIDATED ENTITIES
 
NOTES TO CONDENSED CONSOLIDATED STATEMENTS – (CONTINUED)
 
 
6. Stockholders Equity
 
On December 3, 2008, the AMERCO Board of Directors (the “Board”) authorized and directed us to amend the Employee Stock Ownership Plan (“ESOP”) to provide that distributions under the ESOP with respect to accounts valued at no more than $1,000 may be in the form of cash at the sole discretion of the advisory committee, subject to a participant’s or beneficiary’s right to elect a distribution of AMERCO common stock. The Board also authorized us, using management’s discretion, to buy back shares of former employee ESOP participants whose respective ESOP account balances are valued at more than $1,000 but who own less than 100 shares, at the then-prevailing market prices. No such shares have been purchased.
 
From January 1, 2009 through March 31, 2009, RepWest purchased 50,200 shares of Series A Preferred on the open market for $0.9 million. RepWest purchased an additional 15,900 shares on the open market for $0.3 million in the second quarter of fiscal 2010. RepWest may continue to make investments in AMERCO’s Preferred Shares in the future.
 
7. Comprehensive Income (Loss)
 
A summary of accumulated other comprehensive income (loss) components, net of tax, were as follows:
 

   
Foreign Currency Translation
   
Unrealized Loss on Investments
   
Fair Market Value of Cash Flow Hedge
   
Postretirement Benefit Obligation Gain
   
Accumulated Other Comprehensive Income (Loss)
 
   
(Unaudited)
 
   
(In thousands)
 
                               
Balance at March 31, 2009
  $ (43,613 )   $ (7,323 )   $ (48,411 )   $ 1,347     $ (98,000 )
Foreign currency translation
    4,229       -       -       -       4,229  
Unrealized loss on investments
    -       (3,373 )     -       -       (3,373 )
Change in fair value of cash flow hedge
    -       -       13,869       -       13,869  
Balance at June 30, 2009
  $ (39,384 )   $ (10,696 )   $ (34,542 )   $ 1,347     $ (83,275 )
 


 
14

 

AMERCO AND CONSOLIDATED ENTITIES
 
NOTES TO CONDENSED CONSOLIDATED STATEMENTS – (CONTINUED)
 
 
8. Contingent Liabilities and Commitments
 
The Company leases a portion of its rental equipment and certain of its facilities under operating leases with terms that expire at various dates substantially through 2016, with the exception of one land lease expiring in 2034. At June 30, 2009, AMERCO has guaranteed $184.2 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, the Company has 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 June 30:
                 
2010
  $ 14,499     $ 129,135     $ 143,634  
2011
    14,253       111,117       125,370  
2012
    13,961       96,432       110,393  
2013
    13,469       79,580       93,049  
2014
    11,672       62,358       74,030  
Thereafter
    5,922       46,942       52,864  
Total
  $ 73,776     $ 525,564     $ 599,340  


 
15

 

AMERCO AND CONSOLIDATED ENTITIES
 
NOTES TO CONDENSED CONSOLIDATED STATEMENTS – (CONTINUED)
 
 
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. On May 20, 2008, AMERCO filed a cross appeal relating to the denial of its Motion to Dismiss in regard to demand futility. The appeals are currently pending and the issues will be fully briefed before the Nevada Supreme Court by September 13, 2009.
 
Environmental
 
AMERCO is a party to several administrative proceedings arising from state and local provisions that regulate the removal and/or cleanup of underground fuel storage tanks. It is the opinion of management, that none of these suits, claims or proceedings involving AMERCO, individually or in the aggregate, are expected to result in a material adverse effect on AMERCO’s financial position or results of operations.
 
Compliance with environmental requirements of federal, state and local governments may significantly affect Real Estate’s business operations. Among other things, these requirements regulate the discharge of materials into the water, air and land and govern the use and disposal of hazardous substances. Real Estate is aware of issues regarding hazardous substances on some of its properties. Real Estate regularly makes capital and operating expenditures to stay in compliance with environmental laws and has put in place a remedial plan at each site where it believes such a plan is necessary. Since 1988, Real Estate has managed a testing and removal program for underground storage tanks.

 
16

 

AMERCO AND CONSOLIDATED ENTITIES
 
NOTES TO CONDENSED CONSOLIDATED STATEMENTS – (CONTINUED)
 
 
Based upon the information currently available to Real Estate, compliance with the environmental laws and its share of the costs of investigation and cleanup of known hazardous waste sites are not expected to result in a material adverse effect on AMERCO’s financial position or results of operations. Real Estate expects to spend approximately $5.2 million in total through 2011 to remediate these properties.
 
Other
 
The Company is named as a defendant in various other litigation and claims arising out of the normal course of business. In management’s opinion, none of these other matters will have a material effect on the Company’s financial position and results of operations.
 
10. Related Party Transactions
 
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 consummated on terms equivalent to those that would prevail in arm’s-length transactions.
 
SAC Holding Corporation and its subsidiaries (“SAC Holding Corporation”) and SAC Holding II Corporation and its subsidiaries (“SAC Holding II”), collectively referred to as “SAC Holdings” were established in order to acquire self-storage properties. These properties are being managed by the Company pursuant to management agreements. The sale of self-storage properties by the Company to SAC Holdings has in the past provided significant cash flows to the Company.
 
Management believes that its 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.
 
During the first quarter of fiscal 2010, 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 and executive officer of AMERCO. The Company does not have an equity ownership interest in SAC Holdings. The Company recorded interest income of $4.7 million and $4.6 million, and received cash interest payments of $2.8 million and $4.9 million, from SAC Holdings during the first quarter of fiscal 2010 and 2009, respectively. The largest aggregate amount of notes receivable outstanding during the first quarter of fiscal 2010 was $197.6 million and the aggregate notes receivable balance at June 30, 2009 was $197.4 million. In accordance with the terms of these notes, SAC Holdings may repay the notes without penalty or premium at any time.
 
Interest accrues on the outstanding principal balance of junior notes of SAC Holdings that the Company holds at a 9.0% rate per annum. A fixed portion of that basic interest is paid on a monthly basis. Additional interest can be earned on notes totaling $122.2 million of principal depending upon the amount of remaining basic interest and the cash flow generated by the underlying property. This amount is referred to as the “cash flow-based calculation.”
 
To the extent that this cash flow-based calculation exceeds the amount of remaining basic interest, contingent interest would be paid on the same monthly date as the fixed portion of basic interest. To the extent that the cash flow-based calculation is less than the amount of remaining basic interest, the additional interest payable on the applicable monthly date is limited to the amount of that cash flow-based calculation. In such a case, the excess of the remaining basic interest over the cash flow-based calculation is deferred. In addition, subject to certain contingencies, the junior notes provide that the holder of the note is entitled to receive a portion of the appreciation realized upon, among other things, the sale of such property by SAC Holdings. To date, no excess cash flows related to these arrangements have been earned or paid.
 
During the first quarter of fiscal 2010, AMERCO and U-Haul held various junior notes with Private Mini Storage Realty L.P. (“Private Mini”). The equity interests of Private Mini are ultimately controlled by Blackwater. The Company recorded interest income of $1.3 million for the first quarter of fiscal 2010 and 2009 and received cash interest payments of $1.3 million from Private Mini for the first quarter of fiscal 2010 and 2009. The balance of notes receivable from Private Mini at June 30, 2009 was $68.0 million. The largest aggregate amount of notes receivable outstanding during the first quarter of fiscal 2010 was $68.2 million.

 
17

 

AMERCO AND CONSOLIDATED ENTITIES
 
NOTES TO CONDENSED CONSOLIDATED STATEMENTS – (CONTINUED)
 
 
The Company currently manages 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 the Company receives a management fee of between 4% and 10% of the gross receipts plus reimbursement for certain expenses. The Company received management fees, exclusive of reimbursed expenses, of $9.7 million and $10.9 million from the above mentioned entities during the first quarter of fiscal 2010 and 2009, respectively. This management fee is consistent with the fee received for other properties the Company 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.
 
The Company leases 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 $0.6 million during the first quarter of fiscal 2010 and 2009. The terms of the leases are similar to the terms of leases for other properties owned by unrelated parties that are leased to the Company.
 
At June 30, 2009, 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 the Company’s other independent dealers whereby commissions are paid by the Company based upon equipment rental revenues. The Company paid the above mentioned entities $9.2 million and $9.5 million in commissions pursuant to such dealership contracts during the first quarter of fiscal 2010 and 2009, respectively.
 
These agreements and notes with subsidiaries of SAC Holdings, 4 SAC, 5 SAC, Galaxy and Private Mini, excluding Dealer Agreements, provided revenues of $10.0 million, expenses of $0.6 million and cash flows of $11.3 million during the first quarter of fiscal 2010. Revenues and commission expenses related to the Dealer Agreements were $43.8 million and $9.2 million, respectively.
 
From January 1, 2009 through March 31, 2009, RepWest purchased 50,200 shares of Series A Preferred on the open market for $0.9 million. RepWest purchased an additional 15,900 shares on the open market for $0.3 million in the second quarter of fiscal 2010. RepWest may continue to make investments in AMERCO’s Preferred Shares in the future.
 
Related Party Assets
 

   
June 30,
   
March 31,
 
   
2009
   
2009
 
   
(Unaudited)
       
   
(In thousands)
 
U-Haul notes, receivables and interest from Private Mini
  $ 70,230     $ 70,584  
U-Haul notes receivable from SAC Holdings Corporation
    197,405       197,552  
U-Haul interest receivable from SAC Holdings Corporation
    10,724       8,815  
U-Haul receivable from SAC Holdings Corporation
    13,427       20,517  
U-Haul receivable from Mercury
    4,411       6,264  
Other
    (20 )     (198 )
    $ 296,177     $ 303,534  
 


 
18

 

AMERCO AND CONSOLIDATED ENTITIES
 
NOTES TO CONDENSED CONSOLIDATED STATEMENTS – (CONTINUED)
 
 
11. Consolidating Financial Information by Industry Segment
 
AMERCO has three reportable segments. They are Moving and Storage, Property and Casualty Insurance and Life Insurance. 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.
 
AMERCO’s three reportable segments are:
 
 
(a)
Moving and Storage, comprised of AMERCO, U-Haul, and Real Estate and the subsidiaries of U-Haul and Real Estate,
 
 
(b)
Property and Casualty Insurance, comprised of RepWest and its subsidiaries and ARCOA, and
 
 
(c)
Life Insurance, comprised of Oxford and its subsidiaries.
 
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.
 


 
19

 

AMERCO AND CONSOLIDATED ENTITIES
 
NOTES TO CONDENSED CONSOLIDATED STATEMENTS – (CONTINUED)
 
 
11.              Financial Information by Consolidating Industry Segment:
 
Consolidating balance sheets by industry segment as of June 30, 2009 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
  $ 38     $ 203,260     $ -     $ -       $ 203,298     $ 19,610     $ 3,809     $ -       $ 226,717  
Reinsurance recoverables and trade receivables, net
    -       27,528       25       -         27,553       186,308       11,856       -         225,717  
Notes and mortgage receivables, net
    -       2,086       642       -         2,728       -       -       -         2,728  
Inventories, net
    -       64,188       -       -         64,188       -       -       -         64,188  
Prepaid expenses
    210       61,038       167       -         61,415       -       -       -         61,415  
Investments, fixed maturities and marketable equities
    -       -       -       -         -       86,395       423,096       (904 )
(d)
    508,587  
Investments, other
    -       874       13,990       -         14,864       111,715       90,759       -         217,338  
Deferred policy acquisition costs, net
    -       -       -       -         -       -       45,432       -         45,432  
Other assets
    9       105,325       28,600       -         133,934       764       393       -         135,091  
Related party assets
    1,236,569       240,620       43,377       (1,222,290 )
(c)
    298,276       2,795       -       (4,894 )
(c)
    296,177  
      1,236,826       704,919       86,801       (1,222,290 )       806,256       407,587       575,345       (5,798 )       1,783,390  
                                                                             
Investment in subsidiaries
    (297,699 )     -       -       601,574  
(b)
    303,875       -       -       (303,875 )
(b)
    -  
                                                                             
Property, plant and equipment, at cost:
                                                                           
Land
    -       41,319       173,058       -         214,377       -       -       -         214,377  
Buildings and improvements
    -       143,433       795,831       -         939,264       -       -       -         939,264  
Furniture and equipment
    263       318,214       18,143       -         336,620       -       -       -         336,620  
Rental trailers and other rental equipment
    -       223,685       -       -         223,685       -       -       -         223,685  
Rental trucks
    -       1,678,102       -       -         1,678,102       -       -       -         1,678,102  
      263       2,404,753       987,032       -         3,392,048       -       -       -         3,392,048  
Less:  Accumulated depreciation
    (223 )     (1,012,956 )     (322,810 )     -         (1,335,989 )     -       -       -         (1,335,989 )
Total property, plant and equipment
    40       1,391,797       664,222       -         2,056,059       -       -       -         2,056,059  
Total assets
  $ 939,167     $ 2,096,716     $ 751,023     $ (620,716 )     $ 3,166,190     $ 407,587     $ 575,345     $ (309,673 )     $ 3,839,449  
                                                                             
(a) Balances as of March 31, 2009
                                                                           
(b) Eliminate investment in subsidiaries
                                                                           
(c) Eliminate intercompany receivables and payables
                                                                     
(d) Eliminate intercompany preferred stock investment
                                                                     
 


 
20

 

AMERCO AND CONSOLIDATED ENTITIES
 
NOTES TO CONDENSED CONSOLIDATED STATEMENTS – (CONTINUED)
 
 
Consolidating balance sheets by industry segment as of June 30, 2009 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
  $ 1,471     $ 296,221     $ 4,553     $ -       $ 302,245     $ -     $ 3,298     $ -           $ 305,543  
AMERCO's notes, loans and leases payable
    -       616,833       917,487       -         1,534,320       -       -       -             1,534,320  
Policy benefits and losses, claims and loss expenses payable
    -       365,608       -       -         365,608       286,568       134,578       -             786,754  
Liabilities from investment contracts
    -       -       -       -         -       -       292,662       -             292,662  
Other policyholders' funds and liabilities
    -       -       -       -         -       7,901       2,042       -             9,943  
Deferred income
    -       28,730       -       -         28,730       -       -       -             28,730  
Deferred income taxes
    180,251       -       -       -         180,251       (36,846 )     (13,048 )     (8 )  
(d)
      130,349</