As filed with the Securities and Exchange Commission on June 24, 1994
REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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AMERCO
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA 88-0106815
(STATE OR OTHER (I.R.S. EMPLOYER
JURISDICTION OF INCORPORATION IDENTIFICATION NUMBER)
OR ORGANIZATION)
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1325 AIRMOTIVE WAY, SUITE 100
RENO, NEVADA 89502-3239
(702) 688-6300
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
--------------
GARY V. KLINEFELTER, ESQ.
GENERAL COUNSEL
AMERCO
1325 AIRMOTIVE WAY, SUITE 100
RENO, NEVADA 89502-3239
(702) 688-6300
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
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COPIES TO:
JON S. COHEN, ESQ. GROVER T. WICKERSHAM, ESQ.
SNELL & WILMER 430 CAMBRIDGE AVENUE, SUITE 100
ONE ARIZONA CENTER PALO ALTO, CALIFORNIA 94306
PHOENIX, ARIZONA 85004 (415) 323-6400
(602) 382-6247
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE OFFERED ON A
DELAYED OR CONTINUOUS BASIS PURSUANT TO RULE 415 UNDER THE SECURITIES ACT OF
1933, CHECK THE FOLLOWING BOX. _
IF THE REGISTRANT ELECTS TO DELIVER ITS LATEST ANNUAL REPORT TO SECURITY
HOLDERS, OR A COMPLETE AND LEGIBLE FACSIMILE THEREOF PURSUANT TO ITEM 11(A)(1)
OF THIS FORM, CHECK THE FOLLOWING BOX. [X]
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CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Maximum Maximum
Title of Each Class Amount Offering Aggregate Amount of
of Securities to be Price Per Offering Registration
to be Registered Registered Unit Price Fee (Total)
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Common Stock,
$.25 par value.............. 500,000 $45.00 $22,500,000 $7,031.25
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Total................... 500,000 $22,500,000 $7,031.25
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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission acting pursuant to
Section 8(a) may determine.
CROSS REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS
OF INFORMATION REQUIRED BY FORM S-2
FILED AS PART OF REGISTRATION STATEMENT
ITEM
NUMBER
IN FORM
S-2 ITEM CAPTION IN FORM S-2 CAPTION IN PROSPECTUS
- ------- ------------------------ ---------------------
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus... Facing Page;
Cross Reference Sheet;
Cover Page
2. Inside Front and Outside Back Cover
Pages of Prospectus .................... Inside Front Cover Page;
Table of Contents; Available
Information; Incorporation by
Reference
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges ..... The Company; Investment
Considerations; Selected
Consolidated Financial Data
4. Use of Proceeds ........................ Use of Proceeds
5. Determination of Offering Price ........ Cover Page
6. Dilution ................................ Inapplicable
7. Selling Security Holders ................ Selling Security Holder
8. Plan of Distribution .................... Underwriting
9. Description of Securities to be
Registered .............................. Description of Securities
10. Interests of Named Experts and Counsel .. Legal Opinions; Experts
11. Information with Respect to Registrant .. The Company; Capitalization;
Investment Considerations;
Stockholder Matters; Business;
Selected Consolidated Financial
Data; Management's Discussion
and Analysis; Selling Security
Holder
12. Incorporation of Certain Information by
Reference ............................... Information Incorporated by
Reference
13. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities ............................. Indemnification for Securities
Act Liabilities
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JUNE 24, 1994
PROSPECTUS
500,000 SHARES
AMERCO
[U-HAUL LOGO]
COMMON STOCK
--------------
AMERCO, a holding company for U-Haul International, Inc. and other
companies, is offering hereby 500,000 shares of common stock (the
"Securities") on behalf of and for the account of Sophia M. Shoen ("Shoen" or
"Selling Stockholder"). The Company will not receive any portion of the
proceeds from the sale of the Securities hereby.
SEE "INVESTMENT CONSIDERATIONS" FOR A DISCUSSION OF CERTAIN FACTS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SECURITIES OFFERED
HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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UNDERWRITING
Price to DISCOUNTS AND PROCEEDS TO
Public(1) COMMISSIONS(2) SOPHIA M. SHOEN(3)
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Per Share of
Common Stock.......... $ $ $
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TOTAL............. $ $ $
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(1) The Offering Price is based upon negotiations between Shoen and the
Underwriters.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933 as
amended (the "Securities Act"). See "Underwriting."
(3) Before deducting expense payable by the Company estimated at approximately
$ and expenses payable by Shoen, estimated at $ .
The common stock offered by this Prospectus is offered by the Underwriters
subject to various prior conditions, including their right to reject orders in
whole or in part. It is expected that delivery of the common stock will be
made at the offices of Paulson Investment Company Inc. or through the
facilities of , on or about .
PAULSON INVESTMENT COMPANY INC.
THE DATE OF THIS PROSPECTUS IS JUNE , 1994.
THE COMPANY
AMERCO, a Nevada corporation ("AMERCO" or the "Company"), is the holding
company for U-Haul International, Inc. ("U-Haul"), Ponderosa Holdings, Inc.
("Ponderosa"), and Amerco Real Estate Company ("AREC"). Throughout this
Prospectus, unless the context otherwise requires, the term "Company" includes
all of the Company's subsidiaries. The Company's principal executive offices
are located at 1325 Airmotive Way, Suite 100, Reno, Nevada 89502-3239, and the
telephone number of the Company is (702) 688-6300. As used in this Prospectus,
all references to a fiscal year refer to the Company's fiscal year ended March
31 of that year.
U-Haul is primarily engaged, through subsidiaries, in the rental of
trucks, automobile-type trailers, and support rental items to the do-it-
yourself moving customer, all under the registered trade name U-Haul(R).
Additionally, U-Haul sells related products and services and rents self-
storage facilities and various kinds of equipment. AREC manages the real
estate used in connection with the foregoing businesses.
Ponderosa serves as the holding company for the Company's insurance
businesses. Ponderosa's two principal subsidiaries are Oxford Life Insurance
Company ("Oxford") and Republic Western Insurance Company ("RWIC"). Oxford
primarily reinsures life, health, and annuity type insurance products and
administers the Company's self-insured employee health plan. RWIC originates
and reinsures property and casualty type insurance products for various market
participants, including independent third parties, the Company's customers,
and the Company.
The following chart represents the corporate structure of the Company
effective June 30, 1994.
CHART REPRESENTING THE CORPORATE STRUCTURE OF THE COMPANY
- ---------------------------------------------------------
See Appendix A.
INVESTMENT CONSIDERATIONS
EXISTING MANAGEMENT -- POTENTIAL CHANGE IN CONTROL
At the date of this Prospectus, members of a stockholder group (the
"Stockholder Group"), which includes the Trust (the "ESOP Trust") under the
AMERCO Employee Savings, Profit Sharing and Employee Stock Ownership Plan (the
"ESOP"), Oxford (acting as a trustee), Shoen, certain members of the Company's
management, and certain other shareholders vote approximately 47.6% of the
Company's common stock. Approximately 2.8% of the Company's voting stock
is allocated to participants' ESOP Trust accounts and voted in accordance with
the participants' direction. The ESOP Trust votes 4.5% of the Company's voting
stock in its discretion as part of the Stockholder Group. Oxford acts as
trustee for various trusts that own approximately 4.2% of the Company's voting
stock. At the completion of the offering of common stock made hereby,
the Stockholder Group will vote approximately 46.3% of the Company's
common stock. As a result of the foregoing and the existence of a second
shareholder group controlling 47.2% of the Company's common stock that is
currently opposed to existing Company management, there can be no assurance
that the Company's current management or its current operating strategy
will remain in place. In addition, Shoen and Paul Shoen have claimed that
the Company has defaulted in its obligations to register their common stock
under separate Share Repurchase and Registration Rights Agreements. Shoen and
Paul Shoen have further claimed that as a result of such defaults they have
the right to give notice of their release from the Stockholder Group. The
matter is the subject of an arbitration proceeding described in "Business --
Litigation." See "Principal Shareholders -- Stockholder Group." If Shoen and
Paul Shoen are released from the Stockholder Group, the Stockholder Group
would control only 32.6% of the Company's common stock. Edward J. Shoen, the
Company's Chairman and President, and Mark V. Shoen, Executive Vice President
of Product for U-Haul International, Inc., who have been instrumental in the
Company's performance since 1987, are standing for re-election at the
Company's July 21, 1994 Annual Meeting of Shareholders. There is no assurance
that these individuals will be re-elected. See "Principal Shareholders"
and "Business -- Litigation."
DEPENDENCE UPON KEY PERSONNEL
The success and growth of the Company since 1987 has been dependent upon
the performance of its senior management team, the loss of whose services
could have an adverse effect on the Company. There is no assurance that the
senior management will remain employed by the Company. The Company has not
entered into employment contracts with anyone on the senior management team
and has not granted restricted stock or stock option awards to any employee
pursuant to the Company's Stock Option and Incentive Plan. However, several
members of the Company's senior management already have substantial common
stock holdings in the Company. See "Principal Shareholders."
NO PRIOR MARKET FOR COMMON STOCK
Prior to the initial offering of common stock under this Prospectus, there
has been no public market for the Company's common stock. Although the Company
will apply to have the common stock offered hereby approved for quotation on
the NASDAQ National Market System, there can be no assurance that an active
trading market will develop or be maintained following such offering.
OTHER SHARES OF COMMON STOCK -- MARKET OVERHANG
In addition to the common stock offered hereby, the Company has 38,164,063
other shares of common stock outstanding. Those shares could potentially be
sold by the holders thereof. However, the Company's Bylaws provide for a right
of first refusal in favor of the Company with respect to all of the common
stock, except for the common stock offered hereby, which will be released from
the right of first refusal. If holders of common stock other than the
Securities wish to sell any of their shares, they are required to offer such
shares to the Company by sending a notice to the Secretary of the Company,
designating the terms of any proposed sale. The Company then can accept the
offer stated in the notice or permit the shareholder to dispose of all or part
of such shares. There is no assurance that the right of first refusal will be
exercised by the Company with respect to any sale of common stock or that the
Bylaws will continue to provide for a right of first refusal. In addition, the
Company has received a shareholder proposal to be acted upon at the Company's
Annual Meeting of Shareholders on July 21, 1994 to eliminate the right of
first refusal from the Company's Bylaws, and the Selling Stockholder and Paul
Shoen are asserting in arbitration proceedings described in "Business --
Litigation" that the Company has an obligation to remove the right of first
refusal. See "Principal Shareholders -- Stockholder Group -- Registration
Rights; Release of Shares from Stockholder Agreement."
USE OF PROCEEDS
The Company will not receive any portion of the proceeds of the sale of
the Securities by Shoen.
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company at December 31, 1993:
December 31, 1993
---------------------
(in thousands)
Long-term debt, less current maturities......................... $ 574,271
Stockholders' equity:
Serial preferred stock with or without par value,
50,000,000 shares authorized, 6,100,000 issued,
without par value............................................. --
Serial common stock, with or without par value,
150,000,000 shares authorized, none issued.................... --
Common stock, $.25 par value, 150,000,000 shares
authorized, 40,000,000 issued................................. 10,000
Additional Paid in Capital...................................... 165,789
Foreign Currency Translation.................................... (9,003)
Retained Earnings............................................... 527,337
Less:
Cost of common shares in treasury 1,335,937 shares............ 10,461
Loan to leveraged employee stock ownership plan............... 17,451
---------
Total Stockholders' Equity:................................. $ 666,211
=========
STOCKHOLDER MATTERS
As of March 31, 1994, there were 161 holders of record of the Company's
common stock. No established public trading market exists for the purchase and
sale of the Company's common stock, and to the best knowledge of the Company
there is no one engaged in making a market for the Company's common stock.
Cash dividends declared to the Company's stockholders of record for the
two most recent fiscal years are as follows:
RECORD DATE CASH DIVIDEND PER COMMON SHARE
----------------------- ----------------------------------
August 4, 1992 $ .0258
October 6, 1992 $ .0258
August 3, 1993 $ .0814
The Company does not have a formal dividend policy. The Company's Board of
Directors periodically considers the advisability of declaring and paying
dividends in light of the existing circumstances. The dividends received
during fiscal 1993 and fiscal 1994 are not indicative of future dividends and
there is no assurance that dividends on the common stock will be declared in
the future.
SELECTED CONSOLIDATED FINANCIAL DATA
The following summary financial information was derived from and is
qualified by reference to the financial statements and other information and
data contained in the Company's Annual Report on Form 10-K for the year ended
March 31, 1993, as amended, and in the Company's Quarterly Report on Form
10-Q for the quarter ending December 31, 1993, all of which are incorporated
by reference. Oxford and RWIC have been consolidated on the basis of fiscal
years ended December 31. To give effect to Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," the Company has restated
its financial statements beginning in fiscal 1989. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Other."
<TABLE>
<CAPTION>
For the Nine Months
For the Years Ended March 31, Ended December 31,
------------------------------------------------------------------------ --------------------------
1993 1992 1991 1990 1989 1993 1992
------------ ------------ ---------------- ------------ ------------ ------------ ------------
in thousands, except per share data and ratios)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS:
Rental, net sales, and other
revenues.................. $ 901,446 $ 845,128 $ 860,044 $ 830,998 $ 816,238 $ 762,844 $ 714,267
Premiums and net investment
income.................... 139,465 126,756 126,620 119,641 112,207 120,920 107,269
------------ ------------ ------------ ------------ ------------ ------------ ------------
1,040,911 971,884 986,664 950,639 928,445 883,764 821,536
------------ ------------ ------------ ------------ ------------ ------------ ------------
Operating expenses and cost
of sales.................. 697,730 661,251 668,149 627,396 581,602 553,353 526,706
Benefits, losses, and
amortization of deferred
acquisition costs......... 115,939 99,069 126,626 121,602 135,876 101,162 92,147
Depreciation................ 110,105 109,641 114,589 105,437 92,732 96,580 82,382
Interest expense............ 67,958 76,189 80,815 74,657 68,691 52,530 51,139
------------ ------------ ------------ ------------ ------------ ------------ ------------
991,732 946,150 990,179 929,092 878,901 803,625 752,374
------------ ------------ ------------ ------------ ------------ ------------ ------------
Pretax earnings (loss) from
operations................ 49,179 25,734 (3,515) 21,547 49,544 80,139 69,162
Income tax expense.......... (17,270) (4,940) (6,354) (3,516) (7,433) (25,211) (24,287)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Earnings (loss) before
cumulative effect of
change in accounting
principle and
extraordinary item........ 31,909 20,794 (9,869) 18,031 42,111 54,928 44,875
Extraordinary loss on early
extinguishment of debt.... -- -- -- -- -- (1,897) --
Cumulative effect of change
in accounting principle... -- -- -- -- -- (3,272) --
------------ ------------ ------------ ------------ ------------ ------------ ------------
Net earnings (loss)......... $ 31,909 $ 20,794 $ (9,869) $ 18,031 $ 42,111 $ 49,759 $ 44,875
============ ============ ============ ============ ============ ============ ============
Earnings (loss) from
operations per common
share before cumulative
effect of change in
accounting principle
and extraordinary item.... $ .83 $ .53 $ (.25) $ .46 $ 1.08 $ 1.38 $ 1.16
Net earnings (loss) per
common share.............. .83 .53 (.25) .46 1.08 1.24 1.16
Weighted average common
shares outstanding........ 38,664,063 38,880,069 39,312,080 39,483,960 38,960,567 38,664,063 38,664,063
Cash dividends declared..... $ 1,994 $ -- $ 1,176 $ 2,575 $ 2,841 $ 4,659 $ 1,994
Ratio of earnings to fixed
charges<F1>............... 1.45 1.21 -- <F1> 1.20 1.55 2.04 1.84
BALANCE SHEET DATA:
Total property, plant, and
equipment, net............ $ 989,603 $ 987,095 $ 1,040,342 $ 975,675 $ 927,756 1,113,490 967,262
Total assets................ 2,024,023 1,979,324 1,822,977 1,725,660 1,568,366 2,223,560 2,011,696
Notes and loans payable..... 697,121 733,322 804,826 749,113 687,610 666,063 686,181
Stockholders' equity........ 479,958 451,888 435,180 446,294 429,666 666,211 492,765
<FN>
<F1> For purposes of computing the ratio of earnings to fixed charges, "earnings" consists of pretax earnings from
operations plus total fixed charges excluding interest capitalized during the period, and "fixed charges"
consists of interest expense, capitalized interest, amortization of debt expense and discounts and one-third of
the Company's annual rental expense (which the Company believes is a reasonable approximation of the interest
factor of such rentals). For the year ended March 31, 1991, earnings were not sufficient to cover fixed charges
by an amount of $4.2 million.
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
For financial statement preparation, the Company's insurance subsidiaries
report on a calendar year basis, while the Company reports on a fiscal year
basis ending March 31. Accordingly, with respect to the Company's insurance
subsidiaries, any reference to the years 1993, 1992, and 1991 corresponds to
the Company's fiscal years 1994, 1993, and 1992, respectively. There have been
no events as to such subsidiaries between January 1 and March 31 of each of
1993, 1992, and 1991 that would materially affect the Company's consolidated
financial position or results of operations as of and for the fiscal years
ended March 31, 1993, 1992, and 1991, respectively.
The following management discussion and analysis should be read in
conjunction with Notes 1, 18, and 19 of the Notes to Consolidated Financial
Statements, incorporated by reference herein from Part IV, Item 8 of the
Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1993,
as amended, which discuss the principles of consolidation, condensed
consolidated financial information, and industry segment and geographic data,
respectively. In consolidation, all intersegment premiums are eliminated and
the benefits, losses, and expenses are retained by the insurance companies.
RESULTS OF OPERATIONS (UNAUDITED)
Nine Months Ended December 31, 1993 and 1992
The following table shows industry segment data from the Company's three
industry segments, rental operations, life insurance, and property and
casualty insurance, for the nine months ended December 31, 1993 and 1992.
Rental operations is composed of the operations of U-Haul and Amerco Real
Estate Company. Life insurance is composed of the operations of Oxford.
Property and casualty insurance is composed of the operations of RWIC.
<TABLE>
<CAPTION>
Property/ Adjustments
Rental Life Casualty and
Operations Insurance Insurance Eliminations Consolidated
---------- --------- ------------ ------------ ------------
(in thousands)
<S> <C> <C> <C> <C> <C>
1993
Revenues:
Outside........................... $ 757,221 $ 23,987 $ 102,556 $ -- $ 883,764
Intersegment...................... (357) 1,638 15,403 (16,684) --
---------- --------- --------- -------------- ------------
Total revenue................... $ 756,864 $ 25,625 $ 117,959 $ (16,684) $ 883,764
========== ========= ========= -------------- ------------
Operating profit.................... $ 110,222 $ 8,532 $ 14,613 $ (698) $ 132,669
========== ========= ========= ==============
Interest expense.................... 52,530
------------
Pretax earnings from operations..... $ 80,139
============
1992
Revenues:
Outside........................... $ 706,294 $ 27,648 $ 87,594 $ -- $ 821,536
Intersegment...................... -- 1,644 15,798 (17,442) --
---------- --------- --------- -------------- -------------
Total revenue................... $ 706,294 $ 29,292 $ 103,392 $ (17,442) $ 821,536
========== ========= ========= ============== -------------
Operating profit.................... $ 98,115 $ 11,048 $ 11,138 $ -- $ 120,301
========== ========= ========= ==============
Interest expense.................... 51,139
-------------
Pretax earnings from operations..... $ 69,162
=============
</TABLE>
RESULTS OF OPERATIONS
Years Ended March 31, 1993, 1992, and 1991
The following table shows industry segment data from the Company's three
industry segments, rental operations, life insurance, and property and
casualty insurance, for the fiscal years ended March 31, 1993, 1992, and 1991.
Rental operations is composed of the operations of U-Haul and AREC. Life
insurance is composed of the operations of Oxford. Property and casualty
insurance is composed of the operations of RWIC.
<TABLE>
<CAPTION>
Property/ Adjustments
Rental Life Casualty and
Operations Insurance Insurance Eliminations Consolidated
---------- --------- ---------- ------------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C>
1993
Revenues:
Outside.......................... $ 891,599 $ 33,619 $ 115,693 $ -- $ 1,040,911
Intersegment..................... -- 2,630 18,402 (21,032) --
---------- --------- ---------- ------------ ------------
Total revenue.................. $ 891,599 36,249 $ 134,095 $ (21,032) $ 1,040,911
========== ========= ========== ============ ------------
Operating profit................... $ 88,581 12,325 $ 16,231 $ -- $ 117,137
========== ========= ========== ============
Interest expense................... 67,958
-----------
Pretax earnings from operations.... $ 49,179
============
1992
Revenues:
Outside.......................... $ 844,492 $ 31,391 $ 96,001 $ -- $ 971,884
Intersegment..................... -- 1,158 21,991 (23,149) --
---------- --------- ---------- ------------ ------------
Total revenue.................. $ 844,492 32,549 $ 117,992 $ (23,149) $ 971,884
========== ========= ========== ============ ============
Operating profit................... $ 69,628 11,056 $ 21,239 $ -- $ 101,923
========== ========= ========== ============
Interest expense................... 76,189
------------
Pretax earnings from operations.... $ 25,734
============
1991
Revenues:
Outside.......................... $ 860,480 $ 35,352 $ 90,832 $ -- $ 986,664
Intersegment..................... -- 15,556 31,229 (46,785) --
---------- -------- ---------- ------------ ------------
Total revenue.................. $ 860,480 50,908 $ 122,061 $ (46,785) $ 986,664
========== ======== ========== ============ ============
Operating profit................... $ 50,793 10,430 $ 16,077 $ -- $ 77,300
========== ======== ========== ============
Interest expense................... 80,815
------------
Pretax loss from operations........ $ (3,515)
============
</TABLE>
NINE MONTHS ENDED DECEMBER 31, 1993 VERSUS NINE MONTHS ENDED DECEMBER 31, 1992
U-Haul Operations
U-Haul revenues consist of (i) total rental and other revenue and (ii) net
sales. Total rental and other revenue increased by $43.7 million,
approximately 7.4%, to $633.3 million in the first nine months of fiscal 1994.
The increase in the first nine months of fiscal 1994 is primarily attributable
to a $35.4 million increase in net revenues from the rental of moving related
equipment, which rose to $580.9 million, as compared to $545.5 million in the
first nine months of fiscal 1993. Moving related revenues benefited from
transactional growth within the truck and trailer fleets. Revenues from the
rental of self-storage facilities increased by $4.4 million to $52.2 million
in the first nine months of fiscal 1994, an increase of approximately 9.3%.
Storage revenues were positively impacted by additional rentable square
footage, higher average occupancy levels, and higher average rental rates.
Net sales revenues were $123.6 million in the first nine months of fiscal
1994, which represented an increase of approximately 5.9% from the first nine
months of fiscal 1993 net sales of $116.7 million. Revenue growth from the
sale of hitches, moving support items (i.e. boxes, etc.), and propane resulted
in a $6.7 million increase during the nine month period, which was offset by a
$.6 million decrease in revenue associated with the sale of recreational
vehicles, such vehicle inventory being completely liquidated during the first
and second quarters of fiscal 1993.
Cost of sales was $74.1 million in the first nine months of fiscal 1994,
which represented a decrease of approximately .4% from $74.4 million for the
same period in fiscal 1993. The decrease in cost of sales reflects a reduction
in labor costs and the absence of recreational vehicle sales which offset
increased material costs corresponding to the increase in retail sales.
Operating expenses increased to $476.0 million in the first nine months of
fiscal 1994 from $451.0 million in the first nine months of fiscal 1993, an
increase of approximately 5.4%. The change from the prior year primarily
reflects a $22.4 million increase in rental equipment maintenance costs.
Increased emphasis on maximizing rental equipment available to rent by
reducing downtime and a marginal increase in the age of the truck fleet are
primarily responsible for the increase. Equipment lease expense declined by
$22.8 million to $65.7 million reflecting lease terminations, lease
restructuring, and lower finance costs on new leases originated during the
current fiscal year. Management anticipates that lease expense will continue
to decline further in the last quarter of fiscal 1994 when the full impact of
these programs is realized. All other operating expense categories increased
in aggregate by $25.0 million, approximately 9.9%, to $278.9 million.
Depreciation expense for the nine month period was $96.6 million, as
compared to $82.4 million in the same period of the prior year, reflecting the
addition of new trucks and the acquisition of trucks that were previously
leased.
Oxford -- Life Insurance
Premiums from Oxford's reinsurance lines before intercompany eliminations
were $11.9 million for the nine months ended September 30, 1993, an increase
of $.2 million, approximately 1.7%, from September 30, 1992 and accounted for
88.7% of Oxford's premiums in the current year. The types of business
reinsured include term life insurance, single and flexible premium deferred
annuities, excess loss medical coverage, and short-term travel accident
coverage.
Premiums from Oxford's direct lines before intercompany eliminations were
$1.5 million for the nine months ended September 30, 1993, a decrease of $.1
million (5.9%) from the prior year. Oxford's direct lines are principally
related to the underwriting of group life and disability income. Insurance on
the lives of the employees of AMERCO and its subsidiaries accounted for
approximately 3.5% of Oxford's premiums during this period ended September 30,
1993. Other direct lines include individual life insurance acquired from other
insurers and a small volume of individual deferred annuities written through
independent agents, which together accounted for approximately .2% of Oxford's
premiums during the nine months ended September 30, 1993.
Net investment income before intercompany eliminations was $9.4 million
and $9.6 million for the nine months ended September 30, 1993 and 1992,
respectively. Oxford's gain on the sale of investments was $1.5 million and
$4.8 million and, Oxford had $1.4 million and $1.6 million of other income,
for each of the respective periods.
Benefits and expenses incurred were $17.1 million for the nine months
ended September 30, 1993, a decrease of 6.0% from September 30, 1992.
Comparable benefits and expenses incurred for September 30, 1992 were $18.2
million. This decrease is primarily due to a decrease in death benefits
incurred. Benefits and expenses incurred were $5.2 million for the quarter
ended September 30, 1993, a decrease of 28.8% over the same period in 1992.
Comparable benefits and expenses incurred in the quarter ended September 30,
1992 were $7.3 million.
Operating profit decreased by $2.5 million, approximately 22.8%, for the
nine months ended September 30, 1993, to $8.5 million, primarily due to a
decrease in gain on sale of investments.
RWIC -- Property and Casualty
RWIC gross premium writings continued to grow in the first nine months of
1993, to $131.5 million, as compared to $114.6 million in the first half of
1992. This represents an increase of $16.9 million, or 14.7%. The rental
industry market accounts for a significant share of these premiums,
approximately 40.1% and 42.6% in 1993 and 1992, respectively. These writings
include U-Haul customers, fleetowners, and U-Haul, as well as other rental
industry insureds with similar characteristics. Growth is occurring in
selected general agency lines, principally excess workers' compensation. These
premiums accounted for approximately 14.0% of gross written premiums for the
first nine months of 1993, compared to 12.9% in the first nine months of 1992.
RWIC continues underwriting professional reinsurance via broker markets, and
premiums in this area increased in the first nine months of 1993 to $44.6
million, or 33.9% of total premium from the comparable 1992 period of $28.6
million, or 25.0% of total premium.
Net earned premiums increased $14.5 million, or 18.3%, to $93.9 million
for the nine months ended September 30, 1993, compared with premiums of $79.4
million for the nine months ended September 30, 1992. The premium increase was
primarily due to increased writings in the reinsurance area, along with growth
in the excess workers' compensation lines of RWIC's general agency business.
Net investment income was $20.7 million during the first nine months of
1993, a decrease of 5.0% from 1992 net investment income of $21.8 million. The
decrease is attributable to lower rates available in the fixed income market.
Underwriting expenses incurred were $103.3 million for the nine months
ended September 30, 1993, an increase of $11.0 million, or 11.9%, over 1992.
Comparable underwriting expenses incurred for 1992 were $92.3 million. The
increase in underwriting expenses is due to the larger premium volume being
written in 1993, which increased acquisition costs and commensurate reserves.
RWIC completed the first nine months of 1993 with net after tax income of
$11.4 million as compared to $8.9 million for the comparable period ended
September 1992. This represents an increase of $2.5 million, or 28.1% from
1992. This increase was due to a combination of slightly better underwriting
results and unexpected realized gains on bond calls.
Interest Expense
Interest expense increased by $1.4 million to $52.5 million for the nine
months ended December 31, 1993, as compared to $51.1 million for the nine
months ended December 31, 1992. This increase reflects higher average levels
of debt outstanding which was largely offset by lower average cost of funds.
Consolidated Group
As a result of the foregoing, pretax earnings of $80.1 million were
realized in the nine months ended December 31, 1993, as compared to $69.2
million for the same period in 1992. During the three months ended December
31, 1993, pretax earnings were $15.1 million higher than during the same
period in 1992. After providing for income taxes, extraordinary loss
pertaining to the early extinguishment of debts and the cumulative effect of a
change in accounting principle, net earnings for the nine months ended
December 31, 1993, were $49.8 million, as compared to $44.9 million for the
same period of the prior year. The consolidated results reflect a cumulative
effect adjustment resulting from adoption of Statement of Financial Accounting
Standards No. 106 "Accounting for Post-Retirement Benefits Other Than
Pensions." See "Business -- U-Haul Operations -- General" for a discussion of
seasonality.
FISCAL YEAR ENDED MARCH 31, 1993 VERSUS FISCAL YEAR ENDED MARCH 31, 1992
U-Haul Operations
U-Haul revenues consist of (i) total rental and other revenue and (ii) net
sales. Total rental and other revenue increased by $57.6 million,
approximately 8.4%, to $746.1 million in fiscal 1993. The increase from fiscal
1992 is primarily attributable to a $54.7 million increase in net revenues
from the rental of moving related equipment, which rose to $684.1 million, as
compared to $629.4 million, in fiscal 1992. Improved utilization within the
truck rental fleet accounted for the majority of the revenue growth, with one-
way rental transactions increasing by 6.1% and local rental transactions
increasing by 16.5%. Also contributing to the increased revenues was an
increase in the number of available rental trailers and trucks. Revenues from
the rental of self-storage facilities increased $5.3 million to $63.9 million
in fiscal 1993, an increase of approximately 9.2%. Storage revenues were
positively impacted by additional rentable square footage, higher average
occupancy levels, and higher average rental rates. The increases in revenues
from the rental of moving-related equipment and self-storage facilities were
partially offset by an aggregate decrease of $2.4 million in general rental
item revenues, gains on the sale of property, plant, and equipment, and other
miscellaneous revenues.
Net sales were $145.5 million in fiscal 1993, which represented a decrease
of approximately 6.7% from fiscal 1992 net sales of $156.0 million. Moderate
revenue growth from the sale of hitches, moving support items (i.e. boxes,
etc.), and propane was offset by reduced sales of recreational vehicles due to
the liquidation of inventory as well as a reduction in outside repair income
due to a reduction in rental trucks owned by a third party, which were
previously under a managed equipment agreement.
Cost of sales was $93.1 million in fiscal 1993, which represented a
decrease of approximately 9.5% from fiscal 1992. The reduction in fiscal 1993
reflects reductions in recreational vehicle sales and outside repair income.
Operating expenses increased to $599.8 million in fiscal 1993 from $562.3
million in fiscal 1992, an increase of approximately 6.7%. The change from the
prior year primarily reflects increased rental equipment maintenance costs and
higher personnel costs. The higher maintenance costs reflect a slight increase
in the age of the truck fleet due to no new units being added in fiscal 1992
and a relatively small number of new units being added in fiscal 1993. Also
contributing to higher maintenance costs were U-Haul's repurchase of rental
trucks owned by a third party, which were previously under a managed equipment
agreement, and higher utilization. Lease expense for the fleet replacement
cycle initiated in 1987 peaked in fiscal 1992 at $121.9 million and
subsequently declined to $117.6 million in fiscal 1993, a decrease of
approximately 3.5%, and is expected to decline further in fiscal 1994 due to
upcoming lease terminations, lease restructurings initiated by U-Haul, and
lower finance costs associated with new leases originating in fiscal 1994 to
finance additions to the truck fleet.
Oxford -- Life Insurance
Premiums from Oxford's reinsurance lines before intercompany eliminations
were $14.9 million for the year ended December 31, 1992, a decrease of $4.1
million, approximately 21.6%, from 1991 and accounted for 87.1% of Oxford's
premiums in 1992. The types of business reinsured include term life insurance,
single and flexible premium deferred annuities, excess loss medical coverage,
and short-term travel accident coverage. Reductions in premiums reflect the
anticipated decrease in renewal premiums as a result of normal attrition and
mortality, coupled with the fact that during 1992 Oxford reduced its
activities in the reinsurance market compared to 1991 because of unfavorable
pricing.
Premiums from Oxford's direct lines before intercompany eliminations were
$3.0 million in 1992, an increase of $1.5 million (100%) over the prior year.
Oxford's direct lines are principally related to the underwriting of group
life and disability income. Insurance on the lives of the employees of AMERCO
and its subsidiary companies accounted for approximately 10.8% of Oxford's
premiums in 1992. Other direct lines include individual life insurance
acquired from other insurers and a small volume of individual deferred
annuities written through independent agents, which together accounted for
approximately 1.6% of Oxford's premiums in 1992.
Net investment income before intercompany eliminations was $11.5 million
and $10.2 million for the years ended December 31, 1992 and 1991,
respectively. Oxford's gain on the sale of investments was $4.7 million and
$0.1 million, and Oxford had $2.2 million and $1.6 million of other income,
for 1992 and 1991, respectively.
Benefits and expenses incurred were $23.2 million for the year ended
December 31, 1992, an increase of 7.9% over 1991. Comparable benefits and
expenses incurred for 1991 were $21.5 million. This increase is primarily due
to the increase in deferred acquisition cost amortization discussed below.
Operating profit increased by $1.3 million, approximately 11.5%, in 1992
to $12.3 million, primarily due to increased margins on interest-sensitive
business and gains on the sale and mandatory redemptions of fixed maturity
investments. As required by generally accepted accounting principles, the
amortization of deferred policy acquisition costs was accelerated due to gains
on the sale of investments associated with interest-sensitive products,
resulting in a decrease in operating profit of approximately $2.0 million.
RWIC -- Property and Casualty
RWIC gross premium writings for the year ended December 31, 1992 were
$155.2 million, compared to $133.7 million in 1991, an increase of
approximately 16.1%. The rental industry market accounted for a significant
share of these premiums, approximately 40% and 53% in 1992 and 1991,
respectively. These writings include U-Haul customers, fleet owners, and
U-Haul, as well as other rental industry insureds with similar
characteristics. Selected general agency lines, principally commercial
multiple peril, surety and excess workers' compensation and casualty accounted
for approximately 15.4%, 2.8%, and 11.9% respectively, of gross premium
writings in 1992, compared to approximately 12.8%, 1.8%, and 14.8%
respectively, in 1991. RWIC also underwrites reinsurance via broker markets,
and premiums in this area increased from $23.1 million in 1991 to $47.1
million in 1992 due to favorable market conditions.
Net earned premiums increased $12.3 million, approximately 13.9%, to
$101.1 million for the year ended December 31, 1992. This compares with net
earned premiums of $88.8 million for the year ended December 31, 1991. The
premium increase was primarily due to increased writings in the reinsurance
area, along with growth in the commercial multiple peril lines of RWIC's
general agency business.
Underwriting expenses incurred were $117.8 million for the year ended
December 31, 1992, an increase of $21.1 million, approximately 21.8%, over
1991. Comparable underwriting expenses incurred for 1991 were $96.7 million.
Higher underwriting expenses due to Hurricane Andrew-related losses
(approximately $12 million on a pre-tax basis) incurred in the reinsurance
area were the largest contributors to this increase, and accounted for
approximately 57% of the increase.
Net investment income was $29.3 million in 1992, a decrease of
approximately 0.7%, as compared to 1991 net investment income of $29.5
million. The slight decrease in net investment income is due largely to the
lower rates currently available in the high quality fixed income market.
RWIC's gain on the sale of investments was $0.7 million and $0.6 million, and
RWIC had $2.9 million of other income for 1992 and other expense of $0.9
million for 1991.
RWIC's operating profit in 1992 decreased $5.0 million, approximately
23.6%, to $16.2 million from $21.2 million for the year ended December 31,
1991.
Interest Expense
Interest expense was $68.0 million in fiscal 1993, as compared to $76.2
million in fiscal 1992. The decline in interest expense in the current period
reflects lower average debt levels outstanding and favorable refinance costs
on maturing debt.
FISCAL YEAR ENDED MARCH 31, 1992 VERSUS FISCAL YEAR ENDED MARCH 31, 1991
U-Haul Operations
Total rental and other revenue declined to $688.5 million in fiscal 1992,
reflecting a decrease of $11.5 million (1.6%) from fiscal 1991 revenues of
$700.0 million. The decrease from fiscal 1991 can be primarily attributed to a
$31.4 million reduction in the gain realized from the disposition of property,
plant, and equipment. The fiscal 1992 gain on disposition of $3.7 million as
compared to $35.1 million in fiscal 1991 reflects a significant reduction in
the sale of older rental trucks during fiscal 1992 as compared to fiscal 1991
(from $51.4 million to $4.0 million). During fiscal 1992, net revenues from
the rental of moving related equipment increased to $629.4 million as compared
to $600.6 million in fiscal 1991, an increase of approximately 4.8%. The
increase versus fiscal 1991 resulted from improved market conditions during
the final six months of fiscal 1992, a greater retention of Safemove(R)
insurance premiums, and the repurchase of units from a third party, which had
previously been operated under a managed equipment agreement. Revenues from
the rental of self-storage facilities were $58.6 million in fiscal 1992
compared to $54.1 million in fiscal 1991, an increase of approximately 8.3%.
Storage revenues during fiscal 1992 were positively impacted by improved
pricing, additional rentable square footage, higher occupancy levels, and
reduced delinquency rates. Various other revenues declined by an aggregate
$13.4 million due principally to a reduction in the types of general rental
items offered and the phase-out of recreational vehicle rentals.
Net sales were $156.0 million in fiscal 1992, as compared to $160.5
million in fiscal 1991, a decrease of approximately 2.8%. Moderate revenue
growth from the sale of moving support items (i.e. boxes, etc.), propane, and
repair parts was partially offset by reduced sales of recreational vehicles
and gasoline and a reduction in outside repair income. Revenue trends for
hitch sales and moving support items improved during the last three months of
fiscal 1992.
Cost of sales was $102.9 million in fiscal 1992 versus $113.2 million in
fiscal 1991, a decrease of approximately 9.1%. The reduction in fiscal 1992
reflects improved margins and lower sales levels of gasoline and recreational
vehicles and a $5.4 million reduction in inventory adjustments associated with
shrinkage and loss reserves.
Operating expenses were reduced to $562.3 million in fiscal 1992 from
$581.9 million in fiscal 1991, a decrease of approximately 3.4%. The decrease
from the prior year reflects the benefits of numerous cost reduction and
containment programs implemented by management subsequent to September 1990.
The most significant savings realized were in personnel expense, which
declined by $37.0 million, approximately 18.1%, to $167.2 million. The
reduction in personnel expense and savings realized in various other expense
categories were offset by increases in truck lease expense, which increased
from $113.2 million, approximately 7.7%, to $121.9 million due to a full year
of expense for leases originated in fiscal 1991, and an increase in equipment
maintenance due largely to U-Haul's repurchase of rental trucks owned by a
third party, which were previously operated under a managed equipment
agreement.
Depreciation expense was $109.6 million in fiscal 1992 as compared to
$114.6 million in fiscal 1991, a decrease of approximately 4.4%. The reduction
from the prior year reflects lower depreciation on non-rental equipment and
reduced capital expenditures in fiscal 1992.
Oxford -- Life Insurance
Premiums from Oxford's reinsurance lines before intercompany eliminations
were $19.0 million and $22.4 million for the years ended December 31, 1991 and
1990, respectively. Receipts from interest-sensitive business reinsured were
$186.9 million and $43.5 million in 1991 and 1990, respectively.
Effective January 1, 1991, AMERCO elected to self-fund the employee health
insurance plan previously insured by Oxford. The effect on Oxford's financial
statements in 1991 was a reduction in premium revenues, benefit expenses, and
claim liabilities. Oxford remains the administrator of the AMERCO account for
which it receives an administrative fee. Premiums from direct lines, including
accident and health, before intercompany eliminations were $1.5 million and
$17.0 million in 1991 and 1990, respectively. The decrease in 1991 from 1990
in direct lines is primarily attributable to AMERCO's election to self-fund
its employee health insurance plan previously insured by Oxford.
Net investment income before intercompany eliminations was $10.2 million
and $10.4 million for the years ended December 31, 1991 and 1990,
respectively. Oxford's gain on the sale of investments was $0.1 million and
$0.4 million, and Oxford had $1.6 million and $0.6 million of other income,
for 1991 and 1990, respectively.
Benefits and expenses incurred were $21.5 million for the year ended
December 31, 1991, a decrease of 46.8% from 1990, reflecting AMERCO's decision
to self-insure its employee health insurance plan. Comparable benefits and
expenses incurred for 1990 were $40.4 million.
Operating profit for the year ended December 31, 1991 increased by $0.7
million, approximately 6.7%, to $11.0 million. The increase in operating
profit was principally due to increased margins on interest-sensitive business
and reduced operating expenses, which were partially offset by lower margins
on short-term travel accident business.
RWIC -- Property and Casualty
RWIC's gross premium writings in 1991 were $133.7 million, as compared to
$123.9 million in 1990, an increase of approximately 7.9%. This increase was
due to increased writings in the reinsurance markets and general agency
markets.
Net earned premiums were $88.8 million for the year ended December 31,
1991, which represented a decrease of $6.9 million, approximately 7.2%, from
1990 net earned premiums of $95.7 million. This decrease was due primarily to
a larger deductible amount on policies issued in connection with U-Haul rental
programs.
Underwriting expenses incurred were $96.7 million for the year ended
December 31, 1991, a decrease of $9.3 million, approximately 8.8%, from 1990.
Comparable underwriting expenses incurred for 1990 were $106.0 million. This
resulted from favorable loss and loss adjustment expense experience.
Net investment income was $29.5 million in 1991, an increase of $1.7
million, approximately 6.1%, over 1990 net investment income of $27.8 million.
This increase in investment income was related to the increase in invested
assets that occurred throughout this period, which was attributable to
increases in cash flow associated with higher premiums. RWIC's gain on the
sale of investments was $0.6 million and $1.0 million, and RWIC had other
expense of $0.9 million and $2.5 million, for 1991 and 1990, respectively.
RWIC's operating profit in 1991 increased $5.2 million, approximately
32.3%, from $16.1 million for the year ended December 31, 1990, as a result of
a reduction in underwriting expenses discussed above.
Interest Expense
Interest expense was $76.2 million in fiscal 1992 as compared to $80.8
million in fiscal 1991, a decrease of approximately 5.7%. The decline in
interest expense in fiscal 1992 reflects lower average debt levels outstanding
and favorable short term borrowing costs.
Consolidated Group
As a result of the foregoing, pre-tax earnings of $49.2 million were
realized in fiscal 1993 as compared to $25.7 million in fiscal 1992 and a pre-
tax loss of $3.5 million in fiscal 1991. After providing for income taxes and
accounting for the utilization of operating loss carryforwards, net earnings
for fiscal 1993 were $31.9 million as compared to $20.8 million in fiscal 1992
and a net loss of $9.9 million in fiscal 1991.
LIQUIDITY AND CAPITAL RESOURCES
U-Haul
To meet the needs of its customers, U-Haul must maintain a large inventory
of fixed asset rental items. At December 31, 1993, net property, plant, and
equipment represented approximately 71.2% of total U-Haul assets and
approximately 50.1% of consolidated assets. In the first nine months of fiscal
1994, capital expenditures for property, plant, and equipment increased to
$395.2 million, as compared to $74.6 million in the first nine months of
fiscal 1993, due to expansion of the rental truck fleet, purchase of trucks
previously leased, and increases in the available square footage in the self-
storage segment. The capital needs required to fund these acquisitions were
funded with internally generated funds from operations, debt and lease
financings.
Cash flow from operations was $171.2 million in the first nine months of
fiscal 1994, as compared to $120.0 million in the first nine months of fiscal
1993. The principal components of the net increase in cash flow from
operations when compared to last fiscal year are increases in accounts payable
and accrued liabilities, depreciation and amortization and receivables.
At December 31, 1993, total notes and loans payable outstanding was $666.1
million as compared to $697.1 million at March 31, 1993 and $686.2 million at
December 31, 1992. This decrease reflects the issuance of preferred stock by
the Company in October 1993 which offset the impact of higher levels of
capital additions and premature lease terminations initiated by the Company.
During each of the fiscal years ending March 31, 1994, 1995, and 1996,
U-Haul estimates gross capital expenditures will average approximately $390
million as a result of the expansion of the rental truck fleet. This level of
capital expenditures, combined with an average of approximately $100 million
in annual long-term debt maturities during this same period, are expected to
create annual average funding needs of approximately $490 million. Management
estimates that U-Haul will fund approximately 50% of these requirements with
internally generated funds, including proceeds from the disposition of older
trucks and other asset sales. The remainder of the required capital
expenditures are expected to be financed through existing credit facilities,
new debt placements, lease fundings, and equity offerings. During the first
nine months of fiscal 1994, the Company arranged approximately $637 million in
debt, lease, and equity financing which has significantly increased liquidity
available to the Company in the form of short-term investments, and unutilized
committed and uncommitted facilities. In October 1993, the Company placed
$152.5 million in preferred stock through a public offering.
Oxford -- Life Insurance
Oxford's primary sources of cash are premiums, receipts from interest-
sensitive products, and investment income. The primary uses of cash are
operating costs and benefit payments to policyholders. Matching the investment
portfolio to the cash flow demands of the types of insurance being written is
an important consideration. Benefit and claim statistics are continually
monitored to provide projections of future cash requirements.
Cash provided by operations and financing activities amounted to $6.3
million and $3.9 million for the three months ended September 30, 1993 and
1992, respectively, and amounted to $13.8 million and $26.4 million for the
nine months ended September 30, 1993 and 1992, respectively. In addition to
cash flow from operations and financing activities, a substantial amount of
liquid funds is available through Oxford's short-term portfolio. At September
30, 1993 and 1992, short-term investments amounted to $22.8 million and $63.5
million, respectively. Management believes that the overall sources of
liquidity will continue to meet foreseeable cash needs.
Stockholder's equity of Oxford, excluding investment in RWIC, decreased to
$86.3 million at September 30, 1993 from $90.6 million at September 30, 1992.
During 1993, Oxford paid dividends of $10.0 million to Ponderosa.
Applicable laws and regulations of the State of Arizona require the
Company's insurance subsidiaries to maintain minimum capital determined in
accordance with statutory accounting practices in the amount of $600,000. In
addition, the amount of dividends that can be paid to shareholders by
insurance companies domiciled in the State of Arizona is limited. Any dividend
in excess of the limit requires prior approval of the Insurance Commissioner.
Statutory surplus that can be distributed as dividends is $17,076,000 at
September 30, 1993. These restrictions are not expected to have a material
adverse effect on the ability of the Company to meet its cash obligations.
RWIC -- Property and Casualty
RWIC's short-term investment portfolio was $6.3 million at September 30,
1993. This level of liquid assets, combined with budgeted cash flow, is
adequate to meet periodic needs. This balance also reflects funds in
transition from maturity proceeds to long-term investments. The structure of
the long-term portfolio is designed to match future cash needs. Capital and
operating budgets allow RWIC to schedule cash needs in accordance with
investment and underwriting proceeds. RWIC does not have plans for any near
term large capital outlays.
RWIC maintains a diversified investment portfolio, primarily in bonds at
varying maturity levels. Approximately 99.1% of the portfolio consists of
investment grade securities. The maturity distribution is designed to provide
sufficient liquidity to meet future cash needs. Current liquidity remains
strong, with RWIC having 26% more invested assets than total liabilities.
A liability for unpaid losses is recognized based on the estimated
ultimate cost of settling claims reported prior to the end of the accounting
period, estimates received from ceding reinsures, and estimates for unreported
losses based on the historical experience of RWIC, supplemented by insurance
industry historical experience. Unpaid loss adjustment expenses are based on
historical ratios of loss adjustment expenses paid to losses paid. Unpaid loss
and loss expenses are not discounted.
Shareholder equity increased 6.7% to $150.9 million at December 31, 1992
to $161.0 million at September 30, 1993. RWIC considers current shareholder's
equity to be adequate to support future growth and absorb unforeseen risk
events. RWIC does not use debt or equity issues to increase capital and
therefore has no exposure to capital market conditions. During the first six
months of 1993, RWIC paid no shareholder dividends.
Credit Agreements
The Company's operations are funded by various credit and financing
arrangements, including unsecured long-term borrowings, unsecured medium-term
notes, and revolving lines of credit with domestic and foreign banks.
As of December 31, 1993, the Company had $666.1 million in total notes and
loans payable outstanding and unutilized committed lines of credit of
approximately $303.0 million.
Certain of the Company's credit agreements contain restrictive financial
and other covenants, including, among others, covenants with respect to
incurring additional indebtedness, maintaining certain financial ratios, and
placing certain additional liens on its properties and assets. At December 31,
1993, the Company was in compliance with these covenants. In addition, these
credit agreements contain provisions that could result in a required
prepayment upon a "change in control" of the Company.
Under certain of the Company's credit agreements, a "change in control" is
deemed to occur if (a) any transfer of any shares of any class of capital
stock results in the Company's ESOP and members of the Shoen family owning in
the aggregate less than the amount of capital stock as may be necessary to
enable them to cast in excess of 50% of the votes for the election of
directors of the Company or (b) during any period of two consecutive years,
persons who at the beginning of such period constituted the Board of Directors
of the Company (including any director approved by a vote of not less than 66
2/3% of such board) cease for any reason to constitute greater than 50% of the
then acting Board. See "Investment Considerations -- Existing Management --
Potential Change in Control."
The Company is further restricted in the type and amount of dividends and
distributions that it may issue or pay, and in the issuance of certain types
of preferred stock. The Company is prohibited from issuing shares of preferred
stock that provide for any mandatory redemption, sinking fund payment, or
mandatory prepayment, or that allow the holders thereof to require the Company
or any subsidiary of the Company to repurchase such preferred stock at the
option of such holders or upon the occurrence of any event or events without
the consent of its lenders.
OTHER
Statement of Financial Accounting Standards No. 106, "Accounting for Post-
Retirement Benefits Other Than Pensions," was issued by the Financial
Accounting Standards Board in December 1990. The statement requires that the
expected costs of health care and life insurance provided to retired employees
be recognized as expense during the years employees render service. The
Company adopted the provisions of this statement effective April 1, 1993. The
accumulated postretirement benefit obligation of the Company resulted in a
$3.5 million cumulative effect adjustment in the first quarter of fiscal 1994.
Further, during the first quarter of fiscal 1994, the Company adopted
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes." This statement requires a change from the deferred to the liability
method of computing deferred income taxes. The adoption of the provisions of
this statement resulted in a cumulative net increase in deferred income taxes
payable of $11.1 million. The Company adopted this change retroactively to
April 1, 1988.
In November 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 112, "Employers" Accounting
for Postemployment Benefits.'' The statement applies to employers who provide
certain benefits to former or inactive employees after employment but before
retirement. It requires that the cost of such benefits be recognized over the
service period of employees as these benefits vest or accumulate. The
provisions of this statement must be adopted for fiscal years beginning after
December 15, 1993. The Company has not completed an evaluation of the effect
of this statement on the Company's financial position or results of
operations, or the timing of adoption, however, management does not believe
the impact will be material.
In December 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 113, "Accounting and Reporting
for Reinsurance of Short-Duration and Long-Duration Contracts." The statement
applies to insurance enterprises and establishes the conditions required for a
contract with a reinsurer to be accounted for as reinsurance and prescribes
accounting and reporting standards for those contracts. Implementation is
required for fiscal years beginning after December 15, 1992. The Company has
evaluated the effect of this statement to determine that implementation will
not have a material effect on the Company's consolidated financial position,
results of operations, or cash flows.
Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," was issued by the
Financial Accounting Standards Board in May 1993. The statement establishes
standards of financial accounting and reporting for investments in equity
securities that have readily determinable fair values and for all investments
in debt securities. Implementation is required for fiscal years beginning
after December 15, 1994. This new statement would require the Company to
classify certain investments into three categories: held-to-maturity
securities, trading securities, and available-for-sale securities.
Substantially all of the Company's investments are held to maturity and, as
such, are recorded at amortized cost. Consequently, although the Company has
not completed an evaluation of the effect of this statement, the Company does
not believe the impact of adoption will be material.
IMPACT OF INFLATION
Inflation has had no material financial effect on the Company's results of
operations in the years discussed.
BUSINESS
HISTORY
The Company was founded in 1945 under the name "U-Haul Trailer Rental
Company." From 1945 to 1975, the Company rented trailers and trucks on a one-
way and local round-trip basis through independent dealers (at that time
principally independent gasoline service stations). Since 1974, the Company
has developed a network of Company-owned rental centers ("U-Haul Centers")
(through which U-Haul rents its trucks and trailers and provides a number of
other related products and services) and has expanded the number and
geographic diversity of its independent dealers. At December 31, 1993, the
Company's distribution network included approximately 1,031 U-Haul Centers and
approximately 10,943 independent dealers.
In March 1974, in conjunction with the acquisition and construction of
U-Haul Centers, the Company entered the self-storage business. As of December
31, 1993 such self-storage facilities were located at or near approximately
60% of the Company's U-Haul Centers. Beginning in 1974, the Company introduced
the sale and installation of hitches and towing systems, as well as the sale
of support items such as packing and moving aids. During 1983, the Company
expanded its range of do-it-yourself rental products to include tools and
equipment for the homeowner and small contractor and other general rental
items.
In 1969, the Company acquired Oxford to provide employee health and life
insurance for the Company in a cost-effective manner. In 1973, the Company
formed RWIC to provide automobile liability insurance for the U-Haul truck and
trailer rental customers.
In 1987, the Company experienced a substantial change in the composition
of its Board of Directors which resulted in the election of the current
management team. Thereafter, the Company began the implementation of a
strategic plan designed to emphasize reinvestment in its core do-it-yourself
rental, moving, and storage business. The plan included a fleet renewal
program (see "Business -- U-Haul Operations -- Rental Equipment Fleet"), and
provided for the discontinuation of certain unprofitable and unrelated
operations. As part of its plan, the Company discontinued the operation of its
full-service moving van lines, initiated the phase out of its recreational
vehicle rental operations, and began the disposition of its recreational
vehicle rental fleet. The disposition of the moving van lines' assets and the
recreational vehicle rental fleet were completed in 1988 and 1992,
respectively. The Company also eliminated various types of rental equipment
and closed certain warehouses and repair facilities. As a result, the Company
was able to reduce its non-seasonal work force by approximately 40% between
1987 and 1992. The Company believes that its refocused business strategy
enabled U-Haul to generate higher revenues and to achieve significant cost
savings. See "Investment Considerations -- Existing Management -- Potential
Change in Control" and "Investment Considerations -- Dependence Upon Key
Personnel."
Since 1987, the Company has sold surplus real estate assets with a book
value of approximately $37.4 million for total proceeds of approximately $75.3
million. At December 31, 1993, the book value of the Company's real estate
assets deemed to be surplus was approximately $21.6 million.
In 1990, the Company reorganized its operations into separate legal
entities, each with its own operating, financial, and investment strategies.
The reorganization separated the Company into three parts: U-Haul rental
operations, insurance, and real estate. The purpose of the reorganization was
to increase management accountability and to allow the allocation of capital
based on defined performance measurements.
BUSINESS STRATEGY
U-Haul Operations
The Company's present business strategy remains focused on the do-it-
yourself moving customer. The objective of this strategy is to offer, in an
integrated manner over a diverse geographical area, a wide range of products
and services to the do-it-yourself moving customer.
Integrated Approach to Moving. Through its "Moving Made Easier(R)"
program, the Company strives to offer its customers a high quality, reliable,
and convenient fleet of trucks and trailers at reasonable prices while
simultaneously offering other related products and services, including moving
accessories, self-storage facilities, and other items often desired by the do-
it-yourself mover. The rental trucks purchased in the fleet renewal program
have been designed with the do-it-yourself customer in mind to include
features such as low decks, air conditioning, power steering, automatic
transmissions, soft suspensions, AM/FM cassette stereo systems, and over-the-
cab storage. The Company has introduced certain insurance products, including
"Safemove(R)" and "Safestor(R)," to provide the do-it-yourself mover with
certain moving-related insurance coverage. In addition, the Company provides
rental customers the option of storing their possessions at either their
points of departure or destination.
Wide Geographic Distribution. The Company believes that customer access,
in terms of truck or trailer availability and proximity of rental location, is
critical to its success. Since 1987, the Company has more than doubled the
number of U-Haul rental locations, with a net addition of approximately 5,400
independent dealers.
High Quality Fleet. To effectively service the U-Haul customer at these
additional rental locations with equipment commensurate with the Company's
commitment to product excellence, the Company, as part of the fleet renewal
program, purchased approximately 59,000 new trucks between March 1987 and
December 31, 1993 and reduced the overall average age of its truck fleet from
approximately 11 years at March 1987 to approximately 5 years at December 31,
1993. During this period, approximately 60,000 trucks were retired or sold.
Since 1990, U-Haul has replaced approximately 46% of its trailer fleet
with new, more aerodynamically designed trailers better suited to the low
height profile of many newly manufactured automobiles. Given the mechanical
simplicity of a trailer relative to a truck and a trailer's longer useful
life, the Company expects to replace trailers only as necessary.
Network Management System. Beginning in 1983, the Company implemented a
point-of-sale computer system for all of its Company-owned locations. The
system was designed primarily to handle the Company's reservations, traffic,
and reporting of rental transactions. The Company believes that the
implementation of the system has been a significant factor in allowing the
Company to increase its fleet utilization. Since the initial implementation,
the Company has added several additional enhancements to the system, including
full budgeting and financial reporting systems.
Insurance Operations
Oxford -- Life Insurance. Oxford's business strategy emphasizes long-term
capital growth funded through earnings from reinsurance and investment
activities. In the past, Oxford has selectively reinsured life, health, and
annuity-type insurance products. Oxford anticipates pursuing its growth
strategy by providing reinsurance facilities to well-managed insurance or
reinsurance companies offering similar type products who are desirous of
additional capital either as a result of rapid growth or regulatory demands or
who are divesting non-core business lines.
RWIC -- Property and Casualty. RWIC's principal business strategy is to
capitalize on its knowledge of insurance products aimed at the moving and
rental markets. RWIC believes that providing U-Haul and U-Haul customers with
property and casualty insurance coverage has enabled it to develop expertise
in the areas of rental vehicle lessee insurance, self-storage property
coverage, motor home insurance coverage, and general rental equipment
coverage. RWIC has used and plans to continue to use this knowledge to expand
its customer base by offering similar products to customers other than U-Haul.
In addition, RWIC plans to expand its involvement in specialized areas by
offering commercial multi-peril and surety coverage and by assuming
reinsurance business.
U-HAUL OPERATIONS
General
The Company's do-it-yourself moving business operates under the U-Haul
name through an extensive and geographically diverse distribution network of
Company-owned U-Haul Centers and independent dealers throughout the United
States and Canada.
Substantially all of the Company's rental revenue is derived from
do-it-yourself moving customers. The remaining business comes from
commercial/industrial customers. Moving rentals include: (i) local
(round-trip) rentals, where the equipment is returned to the originating
U-Haul Center or independent dealer and (ii) one-way rentals, where the
equipment is returned to a U-Haul Center or independent dealer in another
city. Typically, the number of local rental transactions in any given year is
substantially greater than the number of one-way rental transactions. However,
total revenues generated by one-way transactions in any given year typically
exceed total revenues from local rental transactions.
As part of the Company's integrated approach to the do-it-yourself moving
market, U-Haul has a variety of product offerings. U-Haul's "Moving Made
Easier(R) program is designed to offer safe, well-equipped rental trucks and
trailers at a reasonable price and to provide support items such as furniture
pads, hand trucks, appliance and utility dollies, mirrors, tow bars, tow
dollies, and bumper hitches. The Company also sells boxes, tape, and packaging
materials and rents additional items such as floor polishers and carpet
cleaning equipment at its U-Haul Center locations. U-Haul Centers also install
hitches and sell propane, and some of them sell gasoline. U-Haul sells
insurance packages such as (i) "Safemove(R)," which provides moving customers
with a damage waiver, cargo protection, and medical and life coverage, and
(ii) "Safestor(R)," which provides self-storage rental customers with various
insurance coverages.
The U-Haul truck and trailer rental business tends to be seasonal with
more transactions and revenues generated in the spring and summer months than
during the balance of the year. The Company attributes this seasonality to the
preference of do-it-yourself movers to move during this time. Also, consistent
with do-it-yourself mover preferences, the number of rental transactions tends
to be higher on weekends than on weekdays.
Rental Equipment Fleet
As of December 31, 1993, U-Haul's rental equipment fleet consisted of
approximately 69,000 trucks and approximately 89,000 trailers. Rental trucks
are offered in five sizes and range in size from the ten-foot "Mini-Mover(R)"
to the twenty-six-foot "Super-Mover(R)." In addition, U-Haul offers pick-up
trucks and cargo vans at many of its locations. Trailers range between six
feet and twelve feet in length and are offered in both open and closed box
configurations.
Distribution Network
The Company's U-Haul products and services are marketed across the United
States and Canada through, as of December 31, 1993, approximately 1,031
Company-owned U-Haul Centers and approximately 10,943 independent dealers. The
independent dealers, which include gasoline station operators, general
equipment rental operators, and others, rent U-Haul trucks and trailers in
addition to carrying on their principal lines of business. U-Haul Centers,
however, are dedicated to the U-Haul line of products and services and offer
those and related products and services. Independent dealers are commonly
located in suburban and rural markets, while U-Haul Centers are concentrated
in urban and suburban markets.
Independent dealers receive U-Haul equipment on a consignment basis and
are paid a commission on gross revenues generated from their rentals.
Independent dealers also may earn referral commissions on U-Haul products and
services provided at other U-Haul locations. The Company maintains contracts
with its independent dealers that can be cancelled upon thirty days" written
notice by either party.
In addition, the Company has sought to improve the productivity of its
rental locations by installing computerized reservations and network
management systems in each U-Haul Center and a limited number of independent
dealers. The Company believes that these systems have been a major factor in
enabling the Company to deploy equipment more effectively throughout its
network of locations and anticipates expanding these systems to cover
additional independent dealers.
The Company's U-Haul Center and independent dealer network in the United
States and Canada is divided into 12 districts, each supervised by an area
district vice president. Within the districts, the Company has established
local marketing companies, each of which, guided by a marketing company
president, is responsible for retail marketing at all U-Haul Centers and
independent dealers within its respective geographic area.
Although rental dealers are independent, U-Haul area field managers
oversee the dealer network by inspecting each independent dealer's facilities
and auditing their activities on a regular basis. In addition, the area field
managers recruit new independent dealers for expansion or replacement
purposes. U-Haul has instituted performance compensation programs that focus
on accomplishment and reward strong performers.
Self-Storage Business
U-Haul entered the self-storage business in 1974 and since that time has
increased the rentable square footage of its storage locations through the
acquisition of existing facilities and new construction. In addition, the
Company has entered into management agreements to manage self-storage
properties owned by other companies and is exploring the possibility of
expanding this type of operation as well as expanding its ownership of self-
storage facilities.
Through approximately 600 Company-owned locations in the United States and
Canada, the Company offers for rent more than 10 million square feet of self-
storage space. The Company's self-storage facility locations have an average
of 16,800 square feet of storage space, with individual storage spaces ranging
in size from 16 square feet to 200 square feet.
Units are rented to individuals and businesses for temporary storage on a
monthly basis. In fiscal 1993, occupancy rates increased to approximately 85%
from approximately 83% in the prior year. During fiscal 1993 and fiscal 1992,
delinquent rentals as a percentage of total storage rentals were approximately
5% in each year, which rate the Company considers to be satisfactory.
The Company also provides financing and management services for
independent self-storage businesses. As of December 31, 1993, the Company has
loaned approximately $38.5 million to approximately 70 different self-storage
businesses. Thirty-eight of these businesses have retained the Company to
provide management services.
Equipment Design, Manufacture, and Maintenance
The Company designs and manufactures its truck van boxes, trailers, and
various other support rental equipment items. With the needs of the do-it-
yourself moving customer in mind, the Company's equipment is designed to
achieve high safety standards, simplicity of operation, reliability,
convenience, durability, and fuel economy. Truck chassis are manufactured to
Company specifications by both foreign and domestic truck manufacturers. These
chassis receive certain post-delivery modifications and are joined with van
boxes at 7 Company-owned manufacturing and assembly facilities in the United
States.
The Company services and maintains its trucks and trailers through a
periodic maintenance program. Regular vehicle maintenance is generally
performed at Company-owned facilities located throughout the United States and
Canada. Major repairs are performed either by the chassis manufacturers'
dealers or by Company-owned repair shops. To the extent available, the Company
takes advantage of manufacturers' warranties.
Since the fleet renewal program began in fiscal 1987, the number of repair
locations has been reduced significantly. Maintenance costs declined from a
high of $163.0 million in fiscal 1987 to a low of $80.5 million in fiscal
1989. However, due to a reduction both in new truck purchases and older truck
retirements in fiscal 1992 and fiscal 1993, maintenance expense increased to
$150.3 million in fiscal 1993. Commencing in fiscal 1994, the Company has, as
part of its fleet renewal program, resumed the purchase of new trucks and the
retirement of older trucks with the objective of increasing the size of the
truck fleet, stabilizing maintenance costs and attaining an average fleet age
of approximately four years. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
Competition
The do-it-yourself moving truck and trailer rental market is highly
competitive and dominated by national operators in both the local and one-way
markets. These competitors include the truck rental divisions of Ryder System,
Penske Truck Leasing, and Budget Rent-A-Car. Management believes that there
are two distinct users of rental trucks: commercial users and do-it-yourself
users. As noted above, the Company focuses on the do-it-yourself mover. The
Company believes that the principal competitive factors are price, convenience
of rental locations, and availability of quality rental equipment.
The self-storage industry is also highly competitive. In addition to the
Company, there are two other national firms, Public Storage and Shurgard, and
numerous regional and local operators. Efficient management of occupancy and
delinquency rates, as well as price and convenience, are key competitive
factors.
Employees
As of December 31, 1993, the Company's non-seasonal work force consisted
of approximately 11,300 employees comprised of approximately equal numbers of
part-time and full-time employees. During the summer months, the Company
increases its work force by approximately 2,300 employees and the percentage
of part-time employees increases to approximately 54% of the total work force.
The Company's employees are non-unionized, and management believes that its
relations with its employees are satisfactory.
INSURANCE OPERATIONS
Oxford -- Life Insurance
Oxford underwrites life, health, and annuity insurance, both as a direct
writer and as an assuming reinsurer. In the past, many of Oxford's direct
lines were related to group life, health, and disability coverage issued to
employees of AMERCO and its subsidiaries. Since January 1991, AMERCO has self
insured its employee health insurance plan, and Oxford now acts as an
administrator for that plan. For the year ended December 31, 1993,
approximately 6.3% of Oxford's premium revenues resulted from business with
AMERCO and its subsidiaries. Oxford's other direct businesses include
individual life insurance acquired from other insurers and a small volume of
individual annuity products written through independent agents, which together
accounted for approximately 5.0% of Oxford's premium revenues for the year
ended December 31, 1993.
Oxford's reinsurance lines, which accounted for approximately 88.7% of
Oxford's premium revenues for the year ended December 31, 1993, include
individual life insurance coverage, individual annuity coverage, single and
flexible premium deferred annuity coverages, excess loss health insurance
coverage, and short-term travel accident coverage. These reinsurance
arrangements are entered into with unaffiliated insurers, except for travel
accident products assumed from RWIC.
RWIC -- Property and Casualty
RWIC's underwriting activities consist of three basic areas: U-Haul and
U-Haul affiliated underwriting; direct underwriting; and assumed reinsurance
underwriting. U-Haul underwritings include coverage for U-Haul and U-Haul
employees, and U-Haul affiliated underwritings consist primarily of coverage
for U-Haul customers. For the year ended December 31, 1993, approximately 45%
of RWIC's written premiums resulted from U-Haul and U-Haul affiliated
underwriting activities. RWIC's direct underwriting is done through home
office underwriters and selected general agents. The products provided include
liability coverage for rental vehicle lessees and storage rental properties,
and coverage for commercial multiple peril, surety, and excess workers
compensation. RWIC's assumed reinsurance underwriting is done via broker
markets and includes, among other things, reinsurance of municipal bond
insurance written through MBIA, Inc.
Risks of the Property and Casualty Insurance Industry. The operating
results of the property and casualty insurance industry, including RWIC, are
subject to significant fluctuations due to numerous factors, including premium
rate competition, catastrophic and unpredictable events (including man-made
and natural disasters), general economic and social conditions, interest
rates, investment returns, changes in tax laws, regulatory developments, and
the ability to accurately estimate loss reserves.
Investments
Oxford's and RWIC's investments must comply with the insurance laws of the
State of Arizona where the companies are domiciled. These laws prescribe the
type, quality, and concentration of investments that may be made. In general,
these laws permit investments in federal, state, and municipal obligations,
corporate bonds, preferred and common stocks, real estate mortgages, and real
estate, within specified limits and subject to certain qualifications.
Moreover, in order to be considered an acceptable reinsurer by cedents and
intermediaries, a reinsurer must offer financial security. The quality and
liquidity of invested assets are important considerations in determining such
security.
The investment philosophies of Oxford and RWIC emphasize protection of
principal through the purchase of investment grade fixed income securities.
Approximately 99% of their respective portfolios consist of investment grade
securities. The maturity distributions are designed to provide sufficient
liquidity to meet future cash needs.
Reinsurance
The Company's insurance operations assume and cede insurance from and to
other insurers and members of various reinsurance pools and associations.
Reinsurance arrangements are utilized to provide greater diversification of
risk and to minimize exposure on large risks. However, the original insurer
remains liable should the assuming insurer not be able to meet its obligations
under the reinsurance agreements.
Regulation
The Company's insurance subsidiaries are subject to considerable
regulation and supervision in the states in which they transact business. The
purpose of such regulation and supervision is primarily to provide safeguards
for policyholders, rather than to protect the interests of the security
holders, including holders of the Securities. As a result of federal
legislation, the primary regulation of the insurance industry is performed by
the states. State regulation extends to such matters as licensing companies;
restricting the types or quality of investments; regulating capital and
surplus and actuarial reserve maintenance; setting solvency standards;
requiring triennial financial examinations, market conduct surveys, and the
filing of reports on financial condition; licensing agents; regulating aspects
of the insurance companies' relationship with their agents; restricting
expenses, commissions, and new business issued; imposing requirements relating
to policy contents; restricting use of some underwriting criteria; regulating
rates, forms, and advertising; limiting the grounds for cancellations or non-
renewal of policies; regulating solicitation and replacement practices; and
specifying what might constitute unfair practices. State laws also regulate
transactions and dividends between an insurance company and its parent or
affiliates, and generally require prior approval or notification for any
change in control of the insurance subsidiary.
In the past few years, the insurance and reinsurance regulatory framework
has been subjected to increased scrutiny by the National Association of
Insurance Commissioners (the "NAIC"), state legislatures, insurance
regulators, and the United States Congress. State legislatures have considered
or enacted legislative proposals that alter, and in many cases increase, state
authority to regulate insurance companies and holding company systems. The
NAIC and state insurance regulators have been examining existing laws and
regulations with an emphasis on insurance company investment and solvency
issues. Legislation has been introduced in Congress that could result in the
federal government assuming some role in the regulation of the insurance
industry. It is not possible to predict the future impact of changing state
and federal regulation on the operations of Oxford and RWIC.
Beginning in 1993, the NAIC adopted and implemented minimum risk-based
capitalization requirements for life insurance companies, including Oxford. As
of the date of this Prospectus, Oxford is in compliance with these
requirements. The NAIC is testing a model for establishing minimum risk-based
capitalization requirements for property and casualty insurance and
reinsurance companies. The NAIC's stated objective in developing such risk-
based capital standards is to improve solvency monitoring. Testing of the
property and casualty risk-based capitalization model was completed during
1993, with formal implementation occurring in 1994. RWIC believes that its
capital and surplus are adequate to meet the risk-based capital requirements
contained in the NAIC's current proposal.
Competition
The insurance industry is competitive. Competitors include a large number
of life insurance companies and property and casualty insurance companies,
some of which are owned by stockholders and others of which are owned by
policyholders (mutual). Many companies in competition with Oxford and RWIC
have been in business for a longer period of time or possess substantially
greater financial resources. Competition in the insurance business is based
upon price, product design, and services rendered to producers and
policyholders.
AMERCO REAL ESTATE COMPANY
AREC owns and manages most of the Company's real estate assets, including
the Company's U-Haul Center locations. AREC has responsibility for acquiring
and developing properties suitable for new U-Haul Centers and self-storage
locations. In addition to the U-Haul operations, AREC actively seeks to lease
or dispose of surplus properties. See "Business -- History."
LITIGATION
The Company and certain members of the Company's Board of Directors are
defendants in an action currently pending in the Superior Court of the State
of Arizona in and for the County of Maricopa entitled Samuel W. Shoen, M.D.,
et al. v. Edward J. Shoen, et al., No. CV88-20139, instituted August 2, 1988.
The plaintiffs, certain stockholders of the Company, who are part of a
stockholder group that is currently opposed to existing Company management
(see "Principal Shareholders"), filed a Fourth Amended Complaint in February
1992 and have alleged, among other things, that certain of the individual
plaintiffs were wrongfully excluded from sitting on the Company's Board of
Directors in 1988 through the sale of Company common stock to certain key
employees. That sale allegedly prevented such stockholder group from gaining a
majority position in the Company's voting stock and control of the Company's
Board of Directors. The plaintiffs allege various breaches of fiduciary duty
and other unlawful conduct by the individual defendants and seek equitable
relief, compensatory damages, and punitive damages. The Court has dismissed
all claims for equitable relief that would have allowed the plaintiffs to sit
on the Board of Directors, subject only to the right, to the extent that any
exists, of the plaintiffs to appeal such dismissal. The Court has also
dismissed all claims by all but two of the plaintiffs, except for certain
derivative claims for attorney's fees and costs. The Court has scheduled a
trial of the case on August 17, 1994. Management of the Company does not
expect the plaintiffs' damage claims to result in a material loss to the
Company.
Private arbitration proceedings commenced by Selling Stockholder and Paul
Shoen against the Company were convened on June 19, 1994. In the
arbitration, the Selling Stockholder asserts that the Company has breached
its obligations to her by failing to timely register the sale of her shares
pursuant to this Prospectus and by failing to remove the right of first
refusal on all Company common stock. Paul Shoen asserts that the Company
has breached its obligations to him by failing to consummate the purchase
from him of 58,824 shares of Company common stock for an aggregate purchase
price of $1,000,000 and, on an anticipatory basis, by failing to remove the
right of first refusal on all of the Company's outstanding common stock.
See "Selling Security Holder." Selling Stockholder and Paul Shoen assert
that, as a consequence of these alleged breaches, they are released from the
Stockholder Agreement described under "Principal Shareholders." The Company
disagrees with the above assertions. An arbitration hearing on these issues is
presently scheduled for July 26, 1994.
In addition, the Company is a party to various litigation incident to its
business operations, the ultimate disposition of which the Company believes
will not have a material adverse effect on its financial condition or
operating results.
ENVIRONMENTAL MATTERS
Underground Storage Tanks
The Company owns properties that, as of December 31, 1993, contained a
total of approximately 1,800 underground storage tanks ("USTs"). The USTs are
used to store various petroleum products, including gasoline, fuel oil, and
waste oil. The USTs are subject to various federal, state, and local laws and
regulations that require testing and removal of leaking USTs, and remediation
of polluted soils and groundwater under certain circumstances. In addition, if
leakage from USTs has migrated, the Company may be subject to civil liability
to third parties. In fiscal years 1990 through 1993, the Company incurred
expenditures totalling approximately $12.5 million for removal and remediation
of approximately 755 USTs, a portion of which may be recovered from insurance
and certain states' funds for the removal of USTs. Expenditures incurred
through the end of fiscal 1993 may not be representative of future experience.
However, the Company believes that compliance with laws and regulations, and
cleanup and liability costs related to USTs will not have a material adverse
effect on the Company's financial condition or operating results.
In fiscal 1989, the Company instituted a program to test its USTs for
leakage and to remove all but approximately 100 of the approximately 2,755
USTs then existing by the year 2000. The approximately 100 USTs expected to
remain at the conclusion of the Company's testing and removal program are
currently anticipated to consist primarily of waste oil tanks not required to
be removed under current laws and regulations and gasoline tanks located at
its remote rental locations where their use is deemed necessary to service the
Company's moving customers. The Company currently budgets $3 million annually
for UST testing, removal, and remediation. The Company treats these costs as
capital costs to the extent that they improve the safety or efficiency of the
associated properties as compared to when the properties were originally
acquired or if the costs are incurred in preparing the properties for sale.
Federal Superfund Sites
The Company has been named as a "potentially responsible party" ("PRP")
with respect to the disposal of hazardous wastes at twelve federal superfund
hazardous waste sites located in nine states. Under applicable federal laws
and regulations the Company could be held jointly and severally liable for the
costs to clean up these sites. The process of site assessment is in its early
stages and has not progressed sufficiently to enable the Company to make a
definitive estimate of the clean-up costs. However, based upon the information
currently available to the Company regarding the size of these twelve sites,
the current anticipated magnitude of the clean-up, the number of PRPs, and the
volumes of hazardous waste currently anticipated to be attributed to the
Company and other PRPs, the Company believes its share of the cost of
investigation and clean-up at the twelve federal superfund sites will not have
a material adverse effect on the Company's financial condition or operating
results. In addition, the Company believes that insurance coverage may be
available to cover all or some of the cost with respect to these federal
superfund sites.
Washington State Hazardous Waste Sites
The Company owns property within two state hazardous waste sites in the
State of Washington. The Company owns a parcel of property in Yakima,
Washington that is believed to contain elevated levels of pesticide and other
contaminant residue as a result of on-site operations conducted by one or more
former owners. The State of Washington has designated the property as a state
hazardous waste site known as the "Yakima Valley Spray Site." The Company has
been named by the State of Washington as a "potentially liable party" ("PLP")
under state law with respect to this site. The Company, together with eight
other companies and persons, has formed a committee that has retained an
environmental consultant. The process of site assessment on the Yakima Valley
Spray Site is in its early stages and, based upon the information currently
available to the Company regarding the volume and nature of wastes present,
the Company is unable to accurately assess the potential investigation and
clean-up costs, but the costs could be substantial. Although the Company has
entered into an agreement with such other companies and persons under which
the Company has assumed responsibility for 20% of the costs to investigate the
site, no agreement among the parties with respect to clean-up costs has been
entered into at the date of this Prospectus.
In addition, the Company has been named by the State of Washington as a
PLP along with 12 other PLPs with respect to another state-listed hazardous
waste site known as the "Yakima Railroad Site." The Yakima Valley Spray Site
is located within the Yakima Railroad Site. The Company has been notified that
the Yakima Railroad Site involves potential groundwater contamination in an
area of approximately two square miles. The Company has contested its
designation as a PLP at this site, but, at the date of this Prospectus, no
formal ruling has been issued in this matter.
In February 1992, the State of Washington issued an enforcement order to
the Company and eight other parties requiring conduct of an interim remedial
action involving the provision of bottled water to households that obtain
drinking water from wells within the Yakima Railroad Site. Without conceding
any liability, the Company and several of the other PLPs have implemented the
bottled water program. The State of Washington has stated its intention to
expand the existing municipal water system to supply municipal water to those
households currently receiving bottled water, and it is estimated that the
cost thereof will be approximately $6 million, with such cost being allocated
among the PLPs.
In addition, there will be costs associated with remedial measures to
address the regional groundwater contamination issue. The process of site
assessment on the Yakima Railroad Site is in its early stages and, based upon
the information currently available to the Company regarding the volume and
nature of wastes present, the Company is unable to accurately assess the
potential investigation and clean-up costs, but the costs could be
substantial. Moreover, the investigative and remedial costs incurred by the
State can be imposed upon the Company and any other PLP as a joint and several
liability. At the date of this Prospectus, other than the indication of the
expansion of the municipal water system, there has been no formal indication
from the State of Washington of its intentions regarding future cost
recoveries at the Yakima Railroad Site.
Other
The Company owns 7 facilities that manufacture and assemble various
components of the Company's equipment. In addition, the Company owns various
facilities engaged in the maintenance and servicing of its equipment. Various
individual properties owned and operated by the Company are subject to various
state and local laws and regulations relating to the methods of disposal of
solvents, tires, batteries, antifreeze, waste oils, and other materials.
Compliance with these requirements is monitored and enforced at the local
level. Based upon information currently available to the Company, compliance
with these local laws and regulations has not had, and is not expected to
have, a material adverse effect on the Company's financial condition or
operating results.
The Company currently leases approximately 179 properties to various
businesses. The Company has a policy of leasing properties subject to an
environmental indemnification from the lessee for operations conducted by the
lessee. It should be recognized, however, that such indemnifications do not
cover pre-existing conditions and may be limited by the lessee's financial
capabilities. In any event, to the extent that any lessee does not perform any
of its obligations under applicable environmental laws and regulations, the
Company may remain potentially liable to governmental authorities and other
third parties for environmental conditions at the leased properties.
Furthermore, as between the Company and its lessees, disputes may arise as to
allocations of liability with respect to environmental conditions at the
leased properties.
Finally, it should be recognized that the Company's present and past
facilities have been in operation for many years and, over that time in the
course of those operations, some of the Company's facilities have generated,
used, stored, or disposed of substances or wastes that are or might be
considered hazardous. Therefore, it is possible that additional environmental
issues may arise in the future, the precise nature of which the Company cannot
now predict.
SELLING SECURITY HOLDER
The common stock offered hereunder is held by Sophia M. Shoen ("Shoen").
Shoen currently owns 2,301,707 shares of common stock directly and 108,891
shares of common stock indirectly through Oxford Life Insurance Company,
Trustee under that certain Irrevocable Trust dated December 20, 1982 (Sophia
M. Shoen, Grantor). Five Hundred Thousand shares of common stock are offered
hereunder. After the sale of the Securities, Shoen will own 1,801,707 shares
directly (4.66%) and 108,891 shares indirectly (0.28%).
In recent years, Shoen has been involved in several transactions with the
Company, both individually and through affiliates. A tow dolly fleet owned by
Samlo, a partnership in which Shoen is a partner, generated net operating
revenues from the Company of $65,000, $78,000, and $109,000 for the years
ended March 31, 1994, 1993, and 1992.
On September 1, 1993, the Company, Sophmar, Inc., a corporation controlled
by Shoen, and Sophmar Acquisition, Inc., a subsidiary of the Company ("S.A.")
entered into an Agreement and Plan of Merger pursuant to which S.A. merged
into Sophmar, Inc., and became a wholly-owned subsidiary of the Company. In
exchange for Sophmar, Inc.'s capital stock, the stockholders of Sophmar, Inc.
(Shoen and a certain irrevocable trust established by Shoen) collectively
received 2,500,920 shares of common stock, the same number of shares of common
stock held by Sophmar, Inc. Shoen received 2,392,029 of these shares and the
trust received 108,891 of the shares.
The merger described in the preceding paragraph was effected in accordance
with the terms of Merger Option Agreement, dated as of May 1, 1992, among
Shoen, Sophmar, Inc. and the Company (the "Sophmar Merger Option Agreement").
The Sophmar Merger Option Agreement required the Company to cause a subsidiary
of the Company to be merged with or into Sophmar, Inc. at its request. The
Company conditioned these merger rights on Shoen and Sophmar, Inc. entering
into an agreement that, among other things prohibits Shoen and Sophmar, Inc.
directly or indirectly from offering, selling, pledging, or otherwise
disposing of any shares of common stock or securities convertible into or
exchangeable for common stock prior to March 1, 1999. This prohibition does
not apply, however, to sales of securities pursuant to a registered offering
and limited sales of securities that are designed not to disrupt a public
offering of securities by the Company. With certain limitations, the Company
has agreed to indemnify Sophmar, Inc. and Shoen for liabilities arising out of
the merger.
Pursuant to a Share Repurchase and Registration Rights Agreement, dated as
of May 1, 1992 (the "Registration Rights Agreement"), among Shoen, Sophmar,
Inc., and the Company, Shoen may elect to require the Company to repurchase,
with certain limitations, (i) a number of shares of common stock determined by
dividing $375,000 by the "Share Price" (as defined) during the period from May
11, 1992 to and including September 30, 1992 (the "Initial Period"), (ii) a
number of shares of common stock determined by dividing $1,500,000 (less the
aggregate dollar amount of shares repurchased during the Initial Period) by
the Share Price during the period from October 1, 1992 to and including
September 30, 1993, and (iii) a number of shares of common stock determined by
dividing $1,500,000 by the Share Price during the period from October 1, 1993
to and including September 30, 1994. The Registration Rights Agreement
provides that the Company's obligations to repurchase any shares from Shoen
shall be satisfied if such shares are purchased by the ESOP Trust. The
Registration Rights Agreement restricts the disposition of common stock held
by Shoen. Pursuant to the Registration Rights Agreement, on May 15, 1992 Shoen
sold 9,260 shares of common stock to the ESOP Trust at the then appraised
value of $10.80 per share for an aggregate sales price of approximately
$100,000 and on September 29, 1993, Shoen sold 90,322 shares of common stock
to the ESOP Trust at the then appraised value of $15.50 per share for an
aggregate sales price of approximately $1,400,000. Shoen, subject to certain
limitations and restrictions, may elect to cause the Company to effect a
registration under the Securities Act of 1933, as amended and applicable state
securities laws of shares of common stock held by her. Shoen gave notice of
exercise of her registration right to register the 500,000 shares of common
stock registered hereunder in October, 1993. On June 16, 1994 Shoen gave an
additional notice of exercise of her right to require the Company to
repurchase 88,235 shares of her common stock.
Pursuant to a Management Consulting Agreement, dated as of May 1, 1992,
Shoen agreed to provide environmental and other consulting services to the
Company. In consideration for these services, the Company paid Shoen a yearly
fee of $100,000. The Management Consulting Agreement expired May 1, 1994.
DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
The Company's Restated Articles of Incorporation authorize the issuance of
150,000,000 shares of common stock with a par value of $0.25 per share and
150,000,000 shares of serial common stock, in one or more series, and with
such voting powers, designations, preferences, limitations, restrictions, and
relative rights as the Board of Directors of the Company may determine. As of
the date of this Prospectus, there are 32,909,729 issued and outstanding
shares of the Company's common stock and 5,754,334 issued and outstanding
shares of Series A common stock. All of the Series A common stock is held by
Mark V. Shoen, Executive Vice-President of Product for U-Haul International,
Inc. and a Director of the Company, and by James P. Shoen, a Vice-President
and Director of the Company.
PREFERRED STOCK
The Company's Restated Articles of Incorporation authorize the issuance of
50,000,000 shares of preferred stock, with or without par value, in one or
more series, and with such voting powers, designations, preferences,
limitations, restrictions, and relative rights as the Board of Directors of
the Company may determine. As of the date of this Prospectus, 6,100,000 shares
of Series A 8-1/2% Preferred Stock are outstanding and 5,000 shares have been
reserved for issuance pursuant to a stockholder rights plan.
DESCRIPTION OF SECURITIES
GENERAL
The common stock sold hereunder will consist of 500,000 shares. The common
stock will not be convertible into, or exchangeable for, shares of any other
class or classes of stock of the Company. For a description of articles of
incorporation and bylaw provisions that would have the effect of delaying,
deferring or preventing a change in control of the Company see "Certain
Provisions that May Limit Changes in Control."
DIVIDENDS
Holders of shares of the common stock will be entitled to receive
dividends payable when and as declared by the Board of Directors out of funds
legally available therefor. The Company does not have a formal dividend
policy. The Company's Board of Directors periodically considers the
advisability of declaring and paying dividends in light of existing
circumstances. See "Stockholder Matters."
The Company is restricted in the amount of dividends that it may issue or
pay pursuant to covenants contained in its credit agreements. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources -- Credit Agreements." At the
date of this Prospectus, the most restrictive of such covenants provides that
the Company may pay cash dividends on its capital stock only in an amount not
exceeding, in the aggregate, computed on a cumulative basis, the sum of
(i) $15 million and (ii) 50% of consolidated net income computed on a
cumulative basis for the entire period subsequent to March 31, 1993 (or if
such consolidated net income is a deficit figure, then minus 100% of such
deficit); provided such dividend is paid within 60 days of being declared. At
December 31, 1993, the aggregate amount available for dividends on common
stock after providing for dividends on the Series A 8-1/2% Preferred Stock was
approximately $35.2 million.
VOTING
Each share of common stock entitles the holder to one vote in the election
of directors and other corporate matters. The Company's Board of Directors is
classified into four (4) classes. Voting rights are non-cumulative.
NO PRIOR MARKET FOR COMPANY'S COMMON STOCK
Prior to this offering, there has been no public market for any of the
Company's common stock. The Company expects the Securities to be approved for
quotation on the NASDAQ National Market System, but there is no assurance that
an active trading market will develop or be maintained following this
offering. The initial public offering price has been determined by
negotiations among Sophia M. Shoen and the Underwriters. There can be no
assurance as to the stability of the market price for the Securities. See
"Underwriting."
TRANSFER AGENT
The transfer agent and registrar for the common stock is Chemical Trust
Company of California.
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below, through their Representative, Paulson Investment
Company Inc., have agreed, severally, to purchase from the Selling Stockholder
the following respective number of shares of common stock at the public
offering price less the underwriting discounts and commissions set forth on
the cover of this Prospectus.
Number
Underwriter of Shares
- ----------- ------------
Paulson Investment Company Inc.................................
------------
Total...................................................... 500,000
============
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters shall purchase the total number of shares of common stock shown
above if any such shares are purchased.
The Underwriting Agreement contains covenants of indemnity and
contribution among the Underwriters, the Company and the Selling Stockholder
with respect to certain civil liabilities, including liabilities under the
Securities Act of 1933.
The Company and the Selling Stockholder have been advised by the
Representative that the Underwriters propose to offer the common stock
purchased by them directly to the public at the initial public offering price
set forth on the cover of this Prospectus and to certain dealers at a price
that represents a concession within the discretion of the Representative. The
Underwriters may allow, and such dealers may reallow, a concession within the
discretion of the Representative. The Underwriters are committed to purchase
and pay for all of the common stock if any is purchased. After the initial
public offering, the offering price and the selling terms may be changed
by the Underwriters.
The Underwriters will purchase the common stock from the Selling
Stockholder at a price per share representing a discount of 8% of the public
offering price. In addition, the Selling Stockholder has agreed to pay the
Representative a nonaccountable expense allowance of 2.5% of the aggregate
public offering price of the common stock.
The foregoing sets forth the material terms and conditions of the
Underwriting Agreement, but does not purport to be a complete statement of the
terms and conditions thereof, copies of which are on file at the offices of
the Representative, the Company and the Commission. See "Available
Information."
PRINCIPAL SHAREHOLDERS
STOCKHOLDER GROUP
Three of the Company's eight directors, Edward J. Shoen, Mark V. Shoen,
and James P. Shoen, as well as Selling Stockholder, Paul Shoen, Oxford (as
trustee) and the ESOP Trustee, are members of the Stockholder Group that on
the date of this Prospectus votes approximately 47.6% of the Company's
outstanding voting stock. Certain other shareholders are members of a voting
group that votes approximately 47.2% of the Company's outstanding voting
stock. See Item 12, Security Ownership of Certain Beneficial Owners and
Management, in the Company's Annual Report on Form 10-K, for the year ended
March 31, 1993. See "Investment Considerations -- Existing Management --
Potential Change in Control."
Term
The members of the Stockholder Group are parties to a Stockholder
Agreement, dated as of May 1, 1992, as amended (the "Stockholder Agreement"),
that restricts the disposition of the parties' shares of common stock to
certain types of permitted dispositions. The Stockholder Agreement will expire
on March 5, 1999, unless earlier terminated.
Voting of Shares
All of the shares subject to the Stockholder Agreement are voted as agreed
upon by the members holding a majority of the shares subject to the
Stockholder Agreement. As of the date of this Prospectus, Edward J. Shoen,
Mark V. Shoen, and James P. Shoen, each of whom is a director of the Company,
collectively hold a majority of the shares subject to the Stockholder
Agreement and, therefore, have the ability, if they so agree, to control the
vote of the Company's common stock that is subject to the Stockholder
Agreement.
ESOP Trust; Release of Shares from Stockholder Agreement
Three U-Haul officers collectively serve as the "ESOP Trustee" under the
ESOP Trust. The ESOP Trustee is appointed by the Company's Board of Directors,
and prior to the issuance of the Series A 8-1/2% Preferred Stock in October,
1993 had the power to vote all common stock held in the ESOP Trust in its
discretion (other than with respect to certain significant corporate
transactions such as mergers or consolidations, recapitalizations, and sales
of all or substantially all of the assets of the Company). Under the ESOP, if
the Company has outstanding a "registration-type class of securities," which
include the Series A 8-1/2% Preferred Stock, each participant (or such
participant's beneficiary) in the ESOP directs the ESOP Trustee with respect
to the voting of all common stock allocated to the participant's account. All
shares in the ESOP Trust not allocated to participants continue to be voted by
the ESOP Trustee subject to the Stockholder Agreement. As of December 31,
1993, of the 2,846,143 shares of Company common stock held by the ESOP Trust,
1,112,223 shares were allocated to participants and 1,733,920 shares remained
unallocated. Of the 1,112,223 allocated shares, approximately 6,643 shares are
allocated to members of the Stockholder Group, which shares would in such
event be voted in accordance with the terms of the Stockholder Agreement.
Therefore, as of the date of this Prospectus without giving effect to the
matters discussed in the two succeeding subsections, the Stockholder Group
controls approximately 47.6% of the Company's outstanding common stock.
Further, it should be noted that additional shares of common stock not
presently allocated to participants' accounts in the ESOP Trust will be
allocated as certain debt obligations of the ESOP Trust are repaid resulting
in a further reduction in the number of common shares subject to the
Stockholder Agreement. As a result of the foregoing, there can be no assurance
that the Stockholder Group will be able to continue to elect directors
acceptable to it to the Company's Board of Directors or that the Company's
current management will remain in place; however, the Company's four-class
Board of Directors may delay the effectiveness of any change in management.
See "Certain Provisions That May Limit Changes in Control."
Registration Rights; Release of Shares from Stockholder Agreement
Subject to certain limitations and restrictions, Paul F. Shoen and Sophia
M. Shoen, who are currently members of the Stockholder Group, may elect to
cause the Company to effect a registration under the Securities Act of 1933,
as amended (the "1933 Act"), and applicable state securities laws of all or a
part (but not less than 100,000 shares) of the shares of common stock held by
each of them. Sophia M. Shoen has elected to require the Company to register
500,000 shares of Company's common stock for public sale pursuant to this
registration statement. Paul F. Shoen may demand such registration after
September 1, 1994. No more than two such registrations may be demanded by
either of Paul F. Shoen or Sophia M. Shoen. The Stockholder Agreement permits
the disposition of any shares pursuant to a registered public offering under
the 1933 Act. All registered shares, when sold, will be released from the
Stockholder Agreement. As of the date of this Prospectus, upon the sale of
Securities offered hereby the Stockholder Group would control the vote of
approximately 46.3% of the Company's common stock. Assuming that Paul F. Shoen
and Sophia M. Shoen sold all of their respective shares pursuant to this and
subsequent registration requests, the Stockholder Group would control the vote
of approximately 32.6% of the Company's common stock. As a result, there can
be no assurance that the shares of common stock held by Paul F. Shoen and
Sophia M. Shoen will remain subject to the Stockholder Agreement. For this
reason, there can be no assurance that the Company's current management will
remain in place. See "Business -- Litigation" for a description of arbitration
proceedings whereby Shoen and Paul Shoen have asserted claims, which are
disputed by the Company that their shares should be released from the
Stockholder Group because of the Company's failure to timely register their
shares of common stock.
CERTAIN PROVISIONS THAT MAY LIMIT CHANGES IN CONTROL
Certain provisions summarized below may have the effect of delaying,
deferring, or preventing a change in control of the Company.
The Articles of Incorporation of the Company (the "Articles") provide for
the Board of Directors to be divided into four classes of directors serving
staggered four-year terms. As a result, approximately one-fourth of the Board
of Directors will be elected each year. Moreover, under the Nevada General
Corporation Law, an affirmative vote of holders of two-thirds of the then
outstanding stock entitled to vote is required to remove a director. This
provision, when coupled with the provision of the Articles authorizing only
the Board of Directors to fill vacant directorships, may hinder the removal of
incumbent directors by stockholders entitled to vote and the simultaneous
election of new directors by such stockholders to fill the vacancies created
by such removal.
Moreover, (i) the Company's Bylaws grant the Company a right of first
refusal exercisable in connection with any sale of outstanding shares of the
Company's common stock (However, the Company has received a shareholder
proposal to be acted upon at the Company's Annual Meeting of Shareholders to
eliminate the right of first refusal from the Company's Bylaws. See
"Investment Considerations -- Existing Management -- Potential Change in
Control."), (ii) the Articles require holders of two-thirds of the then
outstanding shares of common stock to amend certain provisions of the
Articles, including the classified board provision, to amend the Bylaws, and
to approve certain transactions with, among others, holders of five percent of
any class of voting stock of the Company, (iii) the Articles prohibit
stockholder action by written consent, and (iv) certain of the Company's
credit agreements contain provisions that could require the prepayment of all
monies outstanding thereunder upon a "change in control." See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources -- Credit Agreements."
In addition, the Board of Directors has adopted a stockholder rights plan.
Pursuant to the plan, rights have been distributed to the holders of the
common stock of the Company that entitle such holders to purchase from the
Company one one-hundredth of a share of the Company's Series C Preferred Stock
at an exercise price of $15,000 per share (the price per share and the
exercise price are subject to adjustment). The rights become exercisable if
any person or group of affiliated or associated persons becomes the beneficial
owner of fifty percent or more of the Company's common stock without approval
of a majority of the disinterested members of the Board of Directors (as
defined in the plan); such person being defined as an "acquiring person." Upon
the occurrence of an Affiliate Merger or Triggering Event (certain
transactions defined in the plan involving an acquiring person), each right
entitles its holder to purchase, for the exercise price, that number of shares
of common stock of the Company having a value equal to twice the exercise
price. Upon the occurrence of a Business Combination (as defined in the plan),
each right entitles its holder to purchase, for the exercise price, that
number of shares of common stock of the acquiring or surviving company having
a value equal to twice the exercise price. The rights will expire on July 29,
1998, unless earlier redeemed by the Company pursuant to authorization by a
majority of the disinterested Board.
LEGAL OPINIONS
The validity of the common stock offered hereunder will be passed upon for
the Company by Lionel, Sawyer & Collins, 300 S. 4th Street, Suite 1700, Las
Vegas, Nevada 89101 in reliance with respect to matters of law of the State of
Arizona upon Snell & Wilmer, One Arizona Center, Phoenix, Arizona 85004, and
for the Underwriters by Grover T. Wickersham, Esq., 430 Cambridge Avenue,
Suite 100, Palo Alto, California 94306.
EXPERTS
The consolidated financial statements of the Company incorporated in this
Prospectus by reference to the Company's Annual Report on Form 10-K for the
year ended March 31, 1993, as amended, have been so incorporated in reliance
on the report of Price Waterhouse, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Securities and
Exchange Commission (the "Commission"). Reports, proxy statements, and other
information filed by the Company may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, and at its regional offices located at 7
World Trade Center, 13th Floor, New York, New York 10048, and Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material may be obtained from the Public Reference Section of
the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.
The Company's Series A 8-1/2% Preferred Stock is listed on the New York
Stock Exchange. Reports, proxy statements, and other information filed by the
Company may be inspected at the New York Stock Exchange, 20 Broad Street, New
York, New York 10005.
INFORMATION INCORPORATED BY REFERENCE
The Annual Report of the Company on Form 10-K for the fiscal year ended
March 31, 1993, as amended, its Quarterly Reports on Form 10-Q for the
quarters ending June 30, September 30, and December 31, 1993, and its
definitive Notice and Proxy Statement filed with the Commission on September
1, 1993, relating to the Company's Annual Meeting of Stockholders held on
September 23, 1993, are incorporated herein by reference.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14,
or 15(d) of the Exchange Act after the date hereof and prior to the
termination of the offering of the Securities offered hereby shall be deemed
to be incorporated herein by reference.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document that is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will cause to be furnished without charge to each person,
including any beneficial owner, to whom this Prospectus is delivered, upon the
written or oral request of such person, a copy of any documents described
above, other than certain exhibits to such documents. Requests should be
addressed to: AMERCO, Investor Relations, 1325 Airmotive Way, Suite 100, Reno,
Nevada 89502; telephone: (702) 688-6300.
ADDITIONAL INFORMATION
The Company has filed with the Commission a registration statement (the
"Registration Statement") with respect to the Securities offered hereby. This
Prospectus, which constitutes part of the Registration Statement, does not
contain all of the information contained in the Registration Statement and the
exhibits thereto. For further information with respect to the Company and the
Securities offered hereby, reference is made to the Registration Statement,
including the exhibits thereto. Statements contained in this Prospectus as to
the contents of any contract or any other document are not necessarily
complete and, in each instance, reference is made to the copy of such contract
or document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference.
INDEMNIFICATION FOR SECURITIES ACT VIOLATIONS
The Nevada General Corporation Law requires the Company to indemnify
officers and directors for any expenses incurred by any officer or director in
connection with any actions or proceedings, whether civil, criminal,
administrative, or investigative, brought against such officer or director
because of his or her status as an officer or director, to the extent that the
director or officer has been successful on the merits or otherwise in defense
of the action or proceeding. The Nevada General Corporation Law permits a
corporation to indemnify an officer or director, even in the absence of an
agreement to do so, for expenses incurred in connection with any action or
proceeding if such officer or director acted in good faith and in a manner in
which he or she reasonably believed to be in or not opposed to the best
interests of the corporation and such indemnification is authorized by the
stockholders, by a quorum of disinterested directors, by independent legal
counsel in a written opinion authorized by a majority vote of a quorum of
directors consisting of disinterested directors, or by independent legal
counsel in a written opinion if a quorum of disinterested directors cannot be
obtained. The Company's Restated Articles of Incorporation eliminate personal
liability of directors and officers, to the Corporation or its stockholders,
for damages for breach of their fiduciary duties as directors or officers,
except for liability (i) for acts or omissions that involve intentional
misconduct, fraud, or a knowing violation of law, or (ii) for the unlawful
payment of dividends. In addition, the Company's Bylaws provide that the
Company shall indemnify, to the fullest extent authorized or permitted by law,
any person made, or threatened to be made, a defendant in any threatened,
pending, or completed action, suit, or proceeding by reason of the fact that
he or she was a director or officer of the Company. The Company has also
executed Indemnification Agreements that provide that certain of the Company's
directors and officers shall be indemnified and held harmless by the Company
to the fullest extent permitted by applicable law or the Restated Articles of
Incorporation or Bylaws of the Company. The Company has established a trust
fund with Harris Trust and Savings Bank as trustee in order to fund its
obligations under the Indemnification Agreements. The Company has agreed to
maintain a minimum balance in the trust fund of $1,000,000. The Nevada General
Corporation Law prohibits indemnification of a director or officer if a final
adjudication establishes that the officer's or director's acts or omissions
involved intentional misconduct, fraud, or a knowing violation of the law and
were material to the cause of action. Despite the foregoing limitations on
indemnification, the Nevada General Corporation Law may permit an officer or
director to apply to the court for approval of indemnification even if the
officer or director is adjudged to have committed intentional misconduct,
fraud, or a knowing violation of the law. The Nevada General Corporation Law
also provides that indemnification of directors is not permitted for the
unlawful payment of distributions, except for those directors registering
their dissent to the payment of the distribution.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, the registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and therefore
it is unenforceable.
- ---------------------------------- ------------------------------
- ---------------------------------- ------------------------------
- ---------------------------------- ------------------------------
- ---------------------------------- ------------------------------
NO DEALER, SALESMAN, OR
OTHER PERSON HAS BEEN
AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED
IN THIS PROSPECTUS SUPPLEMENT,
OR THE ACCOMPANYING PROSPECTUS
AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE
COMPANY, ANY OF THE
UNDERWRITERS, OR ANY OTHER
PERSON. THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS
DO NOT CONSTITUTE AN OFFER OF
ANY SECURITIES OTHER THAN
THOSE TO WHICH IT RELATES OR
AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO
BUY, TO ANY PERSON IN ANY
JURISDICTION WHERE SUCH AN
OFFER OR SOLICITATION WOULD BE
UNLAWFUL. NEITHER THE DELIVERY
OF THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER AND
THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN
IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
--------------
TABLE OF CONTENTS
Prospectus
PAGE
--------
The Company....................... 3
Investment Considerations......... 4
Use of Proceeds................... 5
Capitalization.................... 5
Stockholder Matters............... 5
Selected Consolidated Financial
Data............................ 6
Management's Discussion and
Analysis of Financial Condition
and Results of Operations....... 7
Business.......................... 18
Selling Security Holder........... 28
Description of Capital Stock...... 29
Description of Securities......... 29
Underwriting...................... 30
Principal Shareholders............ 31
Legal Opinions.................... 33
Experts........................... 33
Available Information............. 33
Information Incorporated by
Reference....................... 33
Additional Information............ 34
Indemnification for Securities Act
Violations...................... 34
500,000 Shares
AMERCO
[U-HAUL LOGO]
Common Stock
----------------
PROSPECTUS
June , 1994
----------------
Paulson Investment
Company Inc.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Securities and Exchange Commission Registration Fee............ $7,031.25
Printing and Engraving Expenses................................ *
Listing Fees................................................... *
Legal Fees and Expenses........................................ *
Accounting Fees and Expenses................................... *
Blue Sky Fees and Expenses..................................... *
Transfer Agent Fees............................................ *
Other Expenses................................................. *
-------------
Total Expenses............................................... *
-------------
-------------
*To be filed by amendment.
^To be paid by Sophia M. Shoen
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Nevada General Corporation Law requires the Company to indemnify
officers and directors for any expenses incurred by any officer or director in
connection with any actions or proceedings, whether civil, criminal,
administrative, or investigative, brought against such officer or director
because of his or her status as an officer or director, to the extent that the
director or officer has been successful on the merits or otherwise in defense
of the action or proceeding. The Nevada General Corporation Law permits a
corporation to indemnify an officer or director, even in the absence of an
agreement to do so, for expenses incurred in connection with any action or
proceeding if such officer or director acted in good faith and in a manner in
which he or she reasonably believed to be in or not opposed to the best
interests of the corporation and such indemnification is authorized by the
stockholders, by a quorum of disinterested directors, by independent legal
counsel in a written opinion authorized by a majority vote of a quorum of
directors consisting of disinterested directors, or by independent legal
counsel in a written opinion if a quorum of disinterested directors cannot be
obtained. The Company's Restated Articles of Incorporation eliminate personal
liability of directors and officers, to the Corporation or its stockholders,
for damages for breach of their fiduciary duties as directors or officers,
except for liability (i) for acts or omissions that involve intentional
misconduct, fraud, or a knowing violation of law, or (ii) for the unlawful
payment of dividends. In addition, the Company's Bylaws provide that the
Company shall indemnify, to the fullest extent authorized or permitted by law,
any person made, or threatened to be made, a defendant in any threatened,
pending, or completed action, suit, or proceeding by reason of the fact that
he or she was a director or officer of the Company. The Company has also
executed Indemnification Agreements that provide that certain of the Company's
directors and officers shall be indemnified and held harmless by the Company
to the fullest extent permitted by applicable law or the Restated Articles of
Incorporation or Bylaws of the Company. The Company has established a trust
fund with Harris Trust and Savings Bank as trustee in order to fund its
obligations under the Indemnification Agreements. The Company has agreed to
maintain a minimum balance in the trust fund of $1,000,000. The Nevada General
Corporation Law prohibits indemnification of a director or officer if a final
adjudication establishes that the officer's or director's acts or omissions
involved intentional misconduct, fraud, or a knowing violation of the law and
were material to the cause of action. Despite the foregoing limitations on
indemnification, the Nevada General Corporation Law may permit an officer or
director to apply to the court for approval of indemnification even if the
officer or director is adjudged to have committed intentional misconduct,
fraud, or a knowing violation of the law. The Nevada General Corporation Law
also provides that indemnification of directors is not permitted for the
unlawful payment of distributions, except for those directors registering
their dissent to the payment of the distribution.
ITEM 16. EXHIBITS
EXHIBIT
NUMBER EXHIBIT
- ------ -------
1 Proposed Form of Underwriting Agreement.*
4(a) Restated Articles of Incorporation.(1)
4(b) Form of Stock Certificate.*
4(c) Stockholders Rights Plan.(1)
4(d) AMERCO Stock Option and Incentive Plan.(1)
5 Opinion re Legality.*
10(a) U.S. Credit Agreement Amendment No. 1.(1)
10(b) AMERCO Employee Savings, Profit Sharing and Employee Stock Ownership
Plan.(1)
10(c) U-Haul Dealership Contract.(1)
10(d) AMERCO Guarantee.(1)
10(e) Fleet Owner Contract.(1)
10(f) Master Equipment Lease Agreement.(1)
10(g) Merger Option Agreement.(1)
10(h) Merger Option Agreement.(1)
10(i) Share Repurchase and Registration Rights Agreement.(1)
10(j) Share Repurchase and Registration Rights Agreement.(1)
10(k) Management Consulting Agreement.(1)
10(l) Management Consulting Agreement.(1)
12 Computation of Ratio of Earnings to Fixed Charges.*
13(a) Annual Report on Form 10-K for the Fiscal year ended March 31, 1993.*
13(b) Amended Annual Report on Form 10-K/A dated August 12, 1994.*
13(c) Quarterly Report on Form 10-Q for the quarter ended June 30, 1993.*
13(d) Quarterly Report on Form 10-Q for the quarter ended September 30,
1993.*
13(e) Quarterly Report on Form 10-Q for the quarter ended December 31,
1993.*
24(a) Consent of Independent Accountants.
24(b) Consent of Lionel, Sawyer & Collins (included in Exhibit 5).*
25(a) Power of Attorney (see signature page).
25(b) Certified copy of a resolution adopted by the Company's Board of
Directors authorizing execution of the Registration Statement by power
of attorney.*
29 Information from Reports Furnished to State Insurance Regulatory
Authorities.(1)
- ----------
* To be filed by amendment.
(1) Incorporated by reference to the Registrant's Annual Report on Form
10-K for the year ended March 31, 1993, file no. 0-7862.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report pursuant
to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that
is incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(2) That, for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule 424
(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declared effective.
(3) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described in Item 15 above, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Phoenix, State of Arizona, on the 24th day of June,
1994.
AMERCO
By: Edward J. Shoen
-------------------------------------------
Edward J. Shoen
Chairman of the Board and President
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated. Each person whose signature appears
below hereby authorizes Edward J. Shoen, Gary B. Horton, Rocky D. Wardrip, and
Gary V. Klinefelter and each of them, as attorney-in-fact, to sign in his name
and behalf, individually and in each capacity designated below, and to file
any amendments, including post-effective amendments to this Registration
Statement.
NAME AND SIGNATURE TITLE DATE
------------------ ----- ----
/s/ Edward J. Shoen President and Chairman June 24, 1994
- ------------------------------- of the Board (Principal
Edward J. Shoen executive officer)
/s/ Gary B. Horton Treasurer (Principal financial June 24, 1994
- ------------------------------- and accounting officer)
Gary B. Horton
/s/ Mark V. Shoen Director June 24, 1994
- -------------------------------
Mark V. Shoen
Director June 24, 1994
- -------------------------------
James P. Shoen
/s/ William E. Carty Director June 24, 1994
- -------------------------------
William E. Carty
/s/ John M. Dodds Director June 24, 1994
- -------------------------------
John M. Dodds
/s/ Charles J. Bayer Director June 24, 1994
- -------------------------------
Charles J. Bayer
/s/ Richard J. Herrera Director June 24, 1994
- -------------------------------
Richard J. Herrera
/s/ Aubrey K. Johnson Director June 24, 1994
- -------------------------------
Aubrey K. Johnson
APPENDIX A
A chart showing the corporate structure of the Company and its
subsidiaries. The chart shows the Company on top, above its three principal
subsidiaries; Ponderosa Holdings, Inc., U-Haul International, Inc., and Amerco
Real Estate Company situated horizontally beside one another. Directly below
Ponderosa Holdings, Inc. are its subsidiaries Oxford Life Insurance Company
and Republic Western Insurance Company situated horizontally beside one
another.
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-2 of our report
dated August 12, 1993 appearing on page 37 of AMERCO's Annual Report on Form
10-K, as amended, for the year ended March 31, 1993. We also consent to the
reference to us under the heading "Experts" in such Prospectus.
PRICE WATERHOUSE
June 23, 1994
Phoenix, Arizona
